4Q16 Earnings Conference Call
February 27 2017
Presentation of Financial Information amp Forward Looking Statements
Historical financial and operating data in this presentation reflect the consolidated results of Integer for the periodsindicated
This presentation includes financial information prepared in accordance with accounting principles generally accepted inthe United States or GAAP as well as other financial measures referred to as non-GAAP The non-GAAP financialmeasures in this presentation which include Adjusted Net Income Adjusted Diluted EPS Earnings Before Interest TaxesDepreciation and Amortization (EBITDA) and Adjusted EBITDA should be considered in addition to but not assubstitutes for the information prepared in accordance with GAAP For reconciliations of these non-GAAP financialmeasures to the most comparable GAAP measures please refer to the appendix to this presentation and the earningsrelease associated with this quarterly period which can be found in the investor relations section of our corporate website(wwwintegernet)
Statements made in this presentation whether written or oral may be ldquoforward-looking statementsrdquo within the meaning ofSection 27A of the Securities Act of 1933 as amended and Section 21E of Securities Exchange Act of 1934 asamended and involve a number of risks and uncertainties These statements can be identified by terminology such asldquomayrdquo ldquowillrdquo ldquoshouldrdquo ldquocouldrdquo ldquoexpectsrdquo ldquointendsrdquo ldquoplansrdquo ldquoanticipatesrdquo ldquobelievesrdquo ldquoestimatesrdquo ldquopredictsrdquo ldquopotentialrdquo orldquocontinuerdquo or ldquovariationsrdquo or the negative of these terms or other comparable terminology These statements are based onthe companyrsquos current expectations and speak only as of February 27 2017 The Companyrsquos actual results could differmaterially from those stated or implied by such forward-looking statements The Company assumes no obligation toupdate forward-looking information including information in this presentation to reflect changed assumptions theoccurrence of unanticipated events or changes in future operating results financial conditions or prospects
Integer Confidential February 27 2017 Page 2
Agenda
bull Opening Comments
bull Financial Results
bull Product Line Review
bull Strategic Growth Initiatives
bull Closing Comments
bull Question amp Answer Period
Integer Confidential February 27 2017 Page 3
Thomas J HookPresident amp CEO
Michael DinkinsExecutive Vice President amp Chief Financial Officer
Opening Comments
Quarterly Results Reflect Continued Progress
bull Business stabilization continues returning to a growth trajectory
bull New COO structure strategically aligns integrated capabilities more effectively
bull Building momentum and focused on winning new opportunities
bull Operational resultsbull Demonstrating fiscal disciplinebull Working capital initiatives driving results
bull Financial resultsbull 4Q16 revenue flat YoY and up $13M QoQbull Generating increased cash flow from operationsbull Accelerating debt repayment
bull Business well positioned for incremental growth in 2017
Integer Confidential February 27 2017 Page 5
ldquoWe had solid
performance in the
fourth quarter and
are pleased with the
continued operational
and financial
stabilization of the
businessrdquo
Financial Results
4Q16 Financial Results(1)
Integer Confidential February 27 2017 Page 7
($ in millions except per share amounts)
(1) 4Q16 Key Financial Results provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) Includes $23M of inventory step-up amortization associated with the acquisition and integration of Lake Region Medical Excluding this amount gross margin for 4Q15 and FY15 would have been 279 for both periods
4Q15 3Q16 4Q16 FY15 FY16
Sales 360$ 347$ 360$ 1443$ 1386$
Gross Margin 215 283 258 264 272
Operating Expenses 89$ 61$ 62$ 302$ 270$
of Sales 247 176 172 209 195
GAAP Net Income (47)$ 11$ 8$ (39)$ 6$
Adjusted Net Income 28$ 26$ 27$ 98$ 84$
EBITDA (7)$ 59$ 56$ 161$ 203$
Adjusted EBITDA 79$ 75$ 71$ 304$ 280$
of Sales 219 216 196 211 202
GAAP Diluted EPS (154)$ 037$ 025$ (127)$ 019$
Adjusted Diluted EPS 087$ 083$ 087$ 311$ 268$
Cash Flow from Operations -- 38$ 34$ -- 106$
(2) (2)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
$138 $145 $147 $133 $134 $144 $148 $142
$99 $109 $94 $111 $96 $92 $96 $105
$106 $109
$99 $105 $91
$104 $95 $102
$18 $17
$12 $13 $12
$10 $9 $11
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Continued Revenue Stabilization
Integer Confidential February 27 2017 Page 8
$358
Non-Medical
Cardiac amp Neuro
Cardio amp Vascular
Adv Surgical Ortho ampPortable Medical
$377 $348 $360 $331 $348 $347
Quarterly Sales(1)
4Q16 SalesQoQ YoY YTD
38 (05) (40)
28 (14) (30)
7 (3) (6)
10 (5) (6)
(4) 7 1
Total Sales(2)
(1) Sales information provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) Total sales includes the sum of sales for each of ITGRrsquos product lines as detailed on this slide and the elimination of Interproduct Line Sales for which amounts are not included on this slide
($ in millions) $360
$79
$65 $69 $75
$71
4Q15 1Q16 2Q16 3Q16 4Q16
Adjusted EBITDA
Integer Confidential February 27 2017 Page 9
Adjusted EBITDA(1)
$0
($ in millions) bull Continued focus on improving business performance to generate cash
bull Ongoing pricing pressure reinforces focus on quality to drive volume increases and efficiency
bull Improve customer satisfaction
bull Reduce costs and expand share of wallet with customers
bull Cumulative synergies of $34Mbull Realized benefits offset by sales mix
pricing pressure salary increases and warranty inventory reserve charges
bull Excludes $121M of OOE and IP related litigation expenses in 4Q16(2)
(1) Adjusted EBITDA provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) See APPENDIX for additional information regarding Other Operating Expenses (OOE) including historical data
22 of Sales 20 20 2022
DebtPayments
Strong Cash Flow Generation
Integer Confidential February 27 2017 Page 10
bull Generating significant cash flow to meet current debt obligations and accelerate debt repayment
bull FY17 Cash Flow of $106M
bull Paid down $17M of debt in 4Q16 $46M YTD
bull Focused on reducing total leverage as quickly as possible
bull Total long-term debt of $18B as of YE 2016
bull No significant maturities until 2020
bull Mitigating exposure to interest rate volatility
bull Well within covenant compliance requirements(2)
bull Successfully amended credit agreement in 4Q16
($ in millions)
(1) Free Cash Flow defined as Cash from Operations less Capital Expenditures
(2) See the APPENDIX to this presentation for further discussion regarding financial covenant calculations
($ in millions)
$31 $41 $48 $88$240
$964
$360
2017 2018 2019 2020 2021 2022 2023
$11
$(8)
$21 $22
1Q16 2Q16 3Q16 4Q16
$30
$4
$38 $34
1Q16 2Q16 3Q16 4Q16
Cash Flow From Operations Free Cash Flow($ in millions)
FY16
Debt Repayment Schedule($ in millions)
$29
$17
$46
Accelerated RepaymentRequired Repayment
$361 $318 $317 $325 $332
4Q15 1Q16 2Q16 3Q16 4Q16
4Q15 1Q16 2Q16 3Q16 4Q16
Inventory $252 $267 $276 $262 $225
Inventory Turns 4 4 4 4 5
Capital Expenditures $13 $19 $12 $17 $12
Working Capital
Integer Confidential February 27 2017 Page 11
Working Capital
$0
($ in millions)
bull Targeting continued reduction in inventory levels through FY17
bull Enhanced Sales amp Operating Plan (SampOP) process showing improved results and more accurate forecasting
bull Rationalizing vendor partners to drive synergies and extend payment terms
bull On-going process improvement programs to reduce direct materials spend and indirect expenses
($ in millions)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
FY16Actual
FY17Outlook
Revenue $1386 $1390 - $1430
Adjusted Diluted EPS $268 $270 - $310
FY 2017 Outlook
Integer Confidential February 27 2017 Page 12
bull Working Capital expected to improve $10M - $20M by YE2017
bull FY17 Adjusted Effective Tax Rate expected to be ~25
bull Cash Taxes expected to be ~$10M
bull Other Operating Expense expected to be in the range of $18M - $22M
bull Capital Expenditures expected to be in the range of $50M - $60M per year
bull Depreciation amp Amortization expected to be in the range of $95M - $100MStock
bull Stock-based compensation Expense expected to be ~$15M
($ in millions except per share amounts)
Product Line Review
Advanced Surgical Orthopedics amp Portable Medical
Integer Confidential February 27 2017 Page 14
Providing a wide range of technologies and solutions to the Advanced Surgical and Orthopedic markets
Implants Delivery Systems Reamers Laparoscopic Devices Arthroscopy Products
bull Revenue remains a solid contributor to total Company results down YOY driven by lower product launches during current quarter and accelerated demand in the prior year quarter
bull Shipped wireless prototype to first customer making good progress with additional customers
bull Steady operational performance driven by improvements in customer relationships
bull Multiple continuous improvement initiatives in place across our operations ndash early results are positive
bull Expect incremental revenue growth in 2017 driven by new product launches and acceleration in targeted areas
Cardio amp Vascular
Integer Confidential February 27 2017 Page 15
Offering a full-range of products and services for catheter-based interventional vascular devices and a suite of supply chain solutions to support the
development and manufacturing of complex components sub-assemblies and finished devices
Steerable Sheaths Catheters amp Sheaths Guidewires Stylets amp Accessories
Introducers
bull 4Q16 Revenue increased 7 YoY ndash strong demand for precious metal machining components and OEM product lines
bull Operational performance backed by strong customer relationships enabling deeper penetration and increased customer opportunities
bull First commercial shipment late in 4Q16 of previously delayed key customer program will ramp throughout 2017
bull Positive outlook for 2017 ndash several new opportunities well-positioned in sales process
Cardiac amp Neuromodulation
Integer Confidential February 27 2017 Page 16
Batteries Feedthroughs Enclosures Coated Electrodes
bull Continued positive quarterly momentum and sequential revenue improvement
bull Incremental growth opportunities within the market as OEM partners and customers seek value-added solutions as well as supply chain efficiencies
bull Leading position in the rapidly growing Neuromodulation market
bull Solid pipeline in various stages of development (generally a 2 to 5 year process)
bull Signed several new customer development agreements and manufacturing programs
Providing technology solutions for the active implantable medical device industry by partnering with customers to bring quality products to established and
emerging markets - from initial concept through to high volume manufacturing
Full System Solutions
Electrochem
Integer Confidential February 27 2017 Page 17
Enhancing lives worldwide by providing superior power solutions that enable the success and advancement of our customersrsquo critical applications
Battery Cells
Battery Packs
Battery Chargers
bull Revenues continue to trend with Oil amp Gas marketbull Oil prices begun to stabilize in 4Q16
bull North American energy customer activity coming back online
bull Military and Environmental customer volumes remain steady
bull Engaging with customers across all market segments ndash actively pursuing new customer and market opportunities
bull Growing market share within the space new opportunities driven by long history of operational and quality performance
bull Advancing competitive position through multi-year supply agreements
Strategic Growth Initiatives
Key Strategic Focus Areas
bull Laser focused on achieving strategic objectivesbull Invest to drive growth with customers across full spectrum of
product and systems capabilities
bull Deliver shareholder returns through growth in profitability and cash generation to drive accelerate debt repayment
bull Optimize the commitment and contribution of our Associates by cultivating an ethical values-driven culture
bull Current integration efforts remain on trackbull Formal activities complete mid-2017
bull Expect to achieve total synergies of $60M by YE2018
bull Creating an optimized manufacturing footprintbull Continuous improvement and productivity initiatives
bull Direct material and indirect expense savings
bull Centers of excellence around the world
bull No further plans to close or consolidate locations at this time
Integer Confidential February 27 2017 Page 19
ldquoOur vision is to
enhance the lives of
patients worldwide
by being our
customersrsquo partner of
choice for innovative
technologies and
servicesrdquo
Closing Comments
Well-Positioned for Future Growth
Integer Confidential February 27 2017 Page 21
Operating amp Manufacturing
Scalability
Strong Customer Relationships
Business Optimization
Driving Strong Cash Generation
Innovation Pipeline to Enable
Customer Success
Engineered Medical
Components
Engineered Medical Sub Assemblies
Differentiated Medical
Components amp Subassemblies
Transfer Devices
Co-Developed
Devices
IntegerDesigned Devices
Fully Branded Solutions
Medical Device
Systems
Product Solutions(More IP Focused)
Technical Solutions(Traditional CMO)
80 20
Broad Product Continuum
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1360 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||
Free Cash Flow | $11 | $11 | ($8) | $21 | $22 | |||||||||||
Days Sales Outstanding | 0 | 50 | 50 | 50 | 52 | |||||||||||
Inventory | $252 | $267 | $276 | $262 | $225 | |||||||||||
Inventory Turns | 4 | 4 | 4 | 4 | 5 | |||||||||||
Capital Expenditures | $13 | $19 | $12 | $17 | $12 | |||||||||||
Days Payables Outstanding | 0 | 32 | 36 | 32 | 27 | |||||||||||
Sales | 359634 | 331058 | 348382 | 346567 | 359591 | |||||||||||
COGS | 282377 | 240244 | 252351 | 248658 | 266700 | |||||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||||||
Net Inventory | 252166 | 267380 | 276279 | 262232 | 225151 | |||||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Presentation of Financial Information amp Forward Looking Statements
Historical financial and operating data in this presentation reflect the consolidated results of Integer for the periodsindicated
This presentation includes financial information prepared in accordance with accounting principles generally accepted inthe United States or GAAP as well as other financial measures referred to as non-GAAP The non-GAAP financialmeasures in this presentation which include Adjusted Net Income Adjusted Diluted EPS Earnings Before Interest TaxesDepreciation and Amortization (EBITDA) and Adjusted EBITDA should be considered in addition to but not assubstitutes for the information prepared in accordance with GAAP For reconciliations of these non-GAAP financialmeasures to the most comparable GAAP measures please refer to the appendix to this presentation and the earningsrelease associated with this quarterly period which can be found in the investor relations section of our corporate website(wwwintegernet)
Statements made in this presentation whether written or oral may be ldquoforward-looking statementsrdquo within the meaning ofSection 27A of the Securities Act of 1933 as amended and Section 21E of Securities Exchange Act of 1934 asamended and involve a number of risks and uncertainties These statements can be identified by terminology such asldquomayrdquo ldquowillrdquo ldquoshouldrdquo ldquocouldrdquo ldquoexpectsrdquo ldquointendsrdquo ldquoplansrdquo ldquoanticipatesrdquo ldquobelievesrdquo ldquoestimatesrdquo ldquopredictsrdquo ldquopotentialrdquo orldquocontinuerdquo or ldquovariationsrdquo or the negative of these terms or other comparable terminology These statements are based onthe companyrsquos current expectations and speak only as of February 27 2017 The Companyrsquos actual results could differmaterially from those stated or implied by such forward-looking statements The Company assumes no obligation toupdate forward-looking information including information in this presentation to reflect changed assumptions theoccurrence of unanticipated events or changes in future operating results financial conditions or prospects
Integer Confidential February 27 2017 Page 2
Agenda
bull Opening Comments
bull Financial Results
bull Product Line Review
bull Strategic Growth Initiatives
bull Closing Comments
bull Question amp Answer Period
Integer Confidential February 27 2017 Page 3
Thomas J HookPresident amp CEO
Michael DinkinsExecutive Vice President amp Chief Financial Officer
Opening Comments
Quarterly Results Reflect Continued Progress
bull Business stabilization continues returning to a growth trajectory
bull New COO structure strategically aligns integrated capabilities more effectively
bull Building momentum and focused on winning new opportunities
bull Operational resultsbull Demonstrating fiscal disciplinebull Working capital initiatives driving results
bull Financial resultsbull 4Q16 revenue flat YoY and up $13M QoQbull Generating increased cash flow from operationsbull Accelerating debt repayment
bull Business well positioned for incremental growth in 2017
Integer Confidential February 27 2017 Page 5
ldquoWe had solid
performance in the
fourth quarter and
are pleased with the
continued operational
and financial
stabilization of the
businessrdquo
Financial Results
4Q16 Financial Results(1)
Integer Confidential February 27 2017 Page 7
($ in millions except per share amounts)
(1) 4Q16 Key Financial Results provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) Includes $23M of inventory step-up amortization associated with the acquisition and integration of Lake Region Medical Excluding this amount gross margin for 4Q15 and FY15 would have been 279 for both periods
4Q15 3Q16 4Q16 FY15 FY16
Sales 360$ 347$ 360$ 1443$ 1386$
Gross Margin 215 283 258 264 272
Operating Expenses 89$ 61$ 62$ 302$ 270$
of Sales 247 176 172 209 195
GAAP Net Income (47)$ 11$ 8$ (39)$ 6$
Adjusted Net Income 28$ 26$ 27$ 98$ 84$
EBITDA (7)$ 59$ 56$ 161$ 203$
Adjusted EBITDA 79$ 75$ 71$ 304$ 280$
of Sales 219 216 196 211 202
GAAP Diluted EPS (154)$ 037$ 025$ (127)$ 019$
Adjusted Diluted EPS 087$ 083$ 087$ 311$ 268$
Cash Flow from Operations -- 38$ 34$ -- 106$
(2) (2)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
$138 $145 $147 $133 $134 $144 $148 $142
$99 $109 $94 $111 $96 $92 $96 $105
$106 $109
$99 $105 $91
$104 $95 $102
$18 $17
$12 $13 $12
$10 $9 $11
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Continued Revenue Stabilization
Integer Confidential February 27 2017 Page 8
$358
Non-Medical
Cardiac amp Neuro
Cardio amp Vascular
Adv Surgical Ortho ampPortable Medical
$377 $348 $360 $331 $348 $347
Quarterly Sales(1)
4Q16 SalesQoQ YoY YTD
38 (05) (40)
28 (14) (30)
7 (3) (6)
10 (5) (6)
(4) 7 1
Total Sales(2)
(1) Sales information provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) Total sales includes the sum of sales for each of ITGRrsquos product lines as detailed on this slide and the elimination of Interproduct Line Sales for which amounts are not included on this slide
($ in millions) $360
$79
$65 $69 $75
$71
4Q15 1Q16 2Q16 3Q16 4Q16
Adjusted EBITDA
Integer Confidential February 27 2017 Page 9
Adjusted EBITDA(1)
$0
($ in millions) bull Continued focus on improving business performance to generate cash
bull Ongoing pricing pressure reinforces focus on quality to drive volume increases and efficiency
bull Improve customer satisfaction
bull Reduce costs and expand share of wallet with customers
bull Cumulative synergies of $34Mbull Realized benefits offset by sales mix
pricing pressure salary increases and warranty inventory reserve charges
bull Excludes $121M of OOE and IP related litigation expenses in 4Q16(2)
(1) Adjusted EBITDA provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) See APPENDIX for additional information regarding Other Operating Expenses (OOE) including historical data
22 of Sales 20 20 2022
DebtPayments
Strong Cash Flow Generation
Integer Confidential February 27 2017 Page 10
bull Generating significant cash flow to meet current debt obligations and accelerate debt repayment
bull FY17 Cash Flow of $106M
bull Paid down $17M of debt in 4Q16 $46M YTD
bull Focused on reducing total leverage as quickly as possible
bull Total long-term debt of $18B as of YE 2016
bull No significant maturities until 2020
bull Mitigating exposure to interest rate volatility
bull Well within covenant compliance requirements(2)
bull Successfully amended credit agreement in 4Q16
($ in millions)
(1) Free Cash Flow defined as Cash from Operations less Capital Expenditures
(2) See the APPENDIX to this presentation for further discussion regarding financial covenant calculations
($ in millions)
$31 $41 $48 $88$240
$964
$360
2017 2018 2019 2020 2021 2022 2023
$11
$(8)
$21 $22
1Q16 2Q16 3Q16 4Q16
$30
$4
$38 $34
1Q16 2Q16 3Q16 4Q16
Cash Flow From Operations Free Cash Flow($ in millions)
FY16
Debt Repayment Schedule($ in millions)
$29
$17
$46
Accelerated RepaymentRequired Repayment
$361 $318 $317 $325 $332
4Q15 1Q16 2Q16 3Q16 4Q16
4Q15 1Q16 2Q16 3Q16 4Q16
Inventory $252 $267 $276 $262 $225
Inventory Turns 4 4 4 4 5
Capital Expenditures $13 $19 $12 $17 $12
Working Capital
Integer Confidential February 27 2017 Page 11
Working Capital
$0
($ in millions)
bull Targeting continued reduction in inventory levels through FY17
bull Enhanced Sales amp Operating Plan (SampOP) process showing improved results and more accurate forecasting
bull Rationalizing vendor partners to drive synergies and extend payment terms
bull On-going process improvement programs to reduce direct materials spend and indirect expenses
($ in millions)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
FY16Actual
FY17Outlook
Revenue $1386 $1390 - $1430
Adjusted Diluted EPS $268 $270 - $310
FY 2017 Outlook
Integer Confidential February 27 2017 Page 12
bull Working Capital expected to improve $10M - $20M by YE2017
bull FY17 Adjusted Effective Tax Rate expected to be ~25
bull Cash Taxes expected to be ~$10M
bull Other Operating Expense expected to be in the range of $18M - $22M
bull Capital Expenditures expected to be in the range of $50M - $60M per year
bull Depreciation amp Amortization expected to be in the range of $95M - $100MStock
bull Stock-based compensation Expense expected to be ~$15M
($ in millions except per share amounts)
Product Line Review
Advanced Surgical Orthopedics amp Portable Medical
Integer Confidential February 27 2017 Page 14
Providing a wide range of technologies and solutions to the Advanced Surgical and Orthopedic markets
Implants Delivery Systems Reamers Laparoscopic Devices Arthroscopy Products
bull Revenue remains a solid contributor to total Company results down YOY driven by lower product launches during current quarter and accelerated demand in the prior year quarter
bull Shipped wireless prototype to first customer making good progress with additional customers
bull Steady operational performance driven by improvements in customer relationships
bull Multiple continuous improvement initiatives in place across our operations ndash early results are positive
bull Expect incremental revenue growth in 2017 driven by new product launches and acceleration in targeted areas
Cardio amp Vascular
Integer Confidential February 27 2017 Page 15
Offering a full-range of products and services for catheter-based interventional vascular devices and a suite of supply chain solutions to support the
development and manufacturing of complex components sub-assemblies and finished devices
Steerable Sheaths Catheters amp Sheaths Guidewires Stylets amp Accessories
Introducers
bull 4Q16 Revenue increased 7 YoY ndash strong demand for precious metal machining components and OEM product lines
bull Operational performance backed by strong customer relationships enabling deeper penetration and increased customer opportunities
bull First commercial shipment late in 4Q16 of previously delayed key customer program will ramp throughout 2017
bull Positive outlook for 2017 ndash several new opportunities well-positioned in sales process
Cardiac amp Neuromodulation
Integer Confidential February 27 2017 Page 16
Batteries Feedthroughs Enclosures Coated Electrodes
bull Continued positive quarterly momentum and sequential revenue improvement
bull Incremental growth opportunities within the market as OEM partners and customers seek value-added solutions as well as supply chain efficiencies
bull Leading position in the rapidly growing Neuromodulation market
bull Solid pipeline in various stages of development (generally a 2 to 5 year process)
bull Signed several new customer development agreements and manufacturing programs
Providing technology solutions for the active implantable medical device industry by partnering with customers to bring quality products to established and
emerging markets - from initial concept through to high volume manufacturing
Full System Solutions
Electrochem
Integer Confidential February 27 2017 Page 17
Enhancing lives worldwide by providing superior power solutions that enable the success and advancement of our customersrsquo critical applications
Battery Cells
Battery Packs
Battery Chargers
bull Revenues continue to trend with Oil amp Gas marketbull Oil prices begun to stabilize in 4Q16
bull North American energy customer activity coming back online
bull Military and Environmental customer volumes remain steady
bull Engaging with customers across all market segments ndash actively pursuing new customer and market opportunities
bull Growing market share within the space new opportunities driven by long history of operational and quality performance
bull Advancing competitive position through multi-year supply agreements
Strategic Growth Initiatives
Key Strategic Focus Areas
bull Laser focused on achieving strategic objectivesbull Invest to drive growth with customers across full spectrum of
product and systems capabilities
bull Deliver shareholder returns through growth in profitability and cash generation to drive accelerate debt repayment
bull Optimize the commitment and contribution of our Associates by cultivating an ethical values-driven culture
bull Current integration efforts remain on trackbull Formal activities complete mid-2017
bull Expect to achieve total synergies of $60M by YE2018
bull Creating an optimized manufacturing footprintbull Continuous improvement and productivity initiatives
bull Direct material and indirect expense savings
bull Centers of excellence around the world
bull No further plans to close or consolidate locations at this time
Integer Confidential February 27 2017 Page 19
ldquoOur vision is to
enhance the lives of
patients worldwide
by being our
customersrsquo partner of
choice for innovative
technologies and
servicesrdquo
Closing Comments
Well-Positioned for Future Growth
Integer Confidential February 27 2017 Page 21
Operating amp Manufacturing
Scalability
Strong Customer Relationships
Business Optimization
Driving Strong Cash Generation
Innovation Pipeline to Enable
Customer Success
Engineered Medical
Components
Engineered Medical Sub Assemblies
Differentiated Medical
Components amp Subassemblies
Transfer Devices
Co-Developed
Devices
IntegerDesigned Devices
Fully Branded Solutions
Medical Device
Systems
Product Solutions(More IP Focused)
Technical Solutions(Traditional CMO)
80 20
Broad Product Continuum
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1360 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||
Free Cash Flow | $11 | $11 | ($8) | $21 | $22 | |||||||||||
Days Sales Outstanding | 0 | 50 | 50 | 50 | 52 | |||||||||||
Inventory | $252 | $267 | $276 | $262 | $225 | |||||||||||
Inventory Turns | 4 | 4 | 4 | 4 | 5 | |||||||||||
Capital Expenditures | $13 | $19 | $12 | $17 | $12 | |||||||||||
Days Payables Outstanding | 0 | 32 | 36 | 32 | 27 | |||||||||||
Sales | 359634 | 331058 | 348382 | 346567 | 359591 | |||||||||||
COGS | 282377 | 240244 | 252351 | 248658 | 266700 | |||||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||||||
Net Inventory | 252166 | 267380 | 276279 | 262232 | 225151 | |||||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Agenda
bull Opening Comments
bull Financial Results
bull Product Line Review
bull Strategic Growth Initiatives
bull Closing Comments
bull Question amp Answer Period
Integer Confidential February 27 2017 Page 3
Thomas J HookPresident amp CEO
Michael DinkinsExecutive Vice President amp Chief Financial Officer
Opening Comments
Quarterly Results Reflect Continued Progress
bull Business stabilization continues returning to a growth trajectory
bull New COO structure strategically aligns integrated capabilities more effectively
bull Building momentum and focused on winning new opportunities
bull Operational resultsbull Demonstrating fiscal disciplinebull Working capital initiatives driving results
bull Financial resultsbull 4Q16 revenue flat YoY and up $13M QoQbull Generating increased cash flow from operationsbull Accelerating debt repayment
bull Business well positioned for incremental growth in 2017
Integer Confidential February 27 2017 Page 5
ldquoWe had solid
performance in the
fourth quarter and
are pleased with the
continued operational
and financial
stabilization of the
businessrdquo
Financial Results
4Q16 Financial Results(1)
Integer Confidential February 27 2017 Page 7
($ in millions except per share amounts)
(1) 4Q16 Key Financial Results provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) Includes $23M of inventory step-up amortization associated with the acquisition and integration of Lake Region Medical Excluding this amount gross margin for 4Q15 and FY15 would have been 279 for both periods
4Q15 3Q16 4Q16 FY15 FY16
Sales 360$ 347$ 360$ 1443$ 1386$
Gross Margin 215 283 258 264 272
Operating Expenses 89$ 61$ 62$ 302$ 270$
of Sales 247 176 172 209 195
GAAP Net Income (47)$ 11$ 8$ (39)$ 6$
Adjusted Net Income 28$ 26$ 27$ 98$ 84$
EBITDA (7)$ 59$ 56$ 161$ 203$
Adjusted EBITDA 79$ 75$ 71$ 304$ 280$
of Sales 219 216 196 211 202
GAAP Diluted EPS (154)$ 037$ 025$ (127)$ 019$
Adjusted Diluted EPS 087$ 083$ 087$ 311$ 268$
Cash Flow from Operations -- 38$ 34$ -- 106$
(2) (2)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
$138 $145 $147 $133 $134 $144 $148 $142
$99 $109 $94 $111 $96 $92 $96 $105
$106 $109
$99 $105 $91
$104 $95 $102
$18 $17
$12 $13 $12
$10 $9 $11
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Continued Revenue Stabilization
Integer Confidential February 27 2017 Page 8
$358
Non-Medical
Cardiac amp Neuro
Cardio amp Vascular
Adv Surgical Ortho ampPortable Medical
$377 $348 $360 $331 $348 $347
Quarterly Sales(1)
4Q16 SalesQoQ YoY YTD
38 (05) (40)
28 (14) (30)
7 (3) (6)
10 (5) (6)
(4) 7 1
Total Sales(2)
(1) Sales information provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) Total sales includes the sum of sales for each of ITGRrsquos product lines as detailed on this slide and the elimination of Interproduct Line Sales for which amounts are not included on this slide
($ in millions) $360
$79
$65 $69 $75
$71
4Q15 1Q16 2Q16 3Q16 4Q16
Adjusted EBITDA
Integer Confidential February 27 2017 Page 9
Adjusted EBITDA(1)
$0
($ in millions) bull Continued focus on improving business performance to generate cash
bull Ongoing pricing pressure reinforces focus on quality to drive volume increases and efficiency
bull Improve customer satisfaction
bull Reduce costs and expand share of wallet with customers
bull Cumulative synergies of $34Mbull Realized benefits offset by sales mix
pricing pressure salary increases and warranty inventory reserve charges
bull Excludes $121M of OOE and IP related litigation expenses in 4Q16(2)
(1) Adjusted EBITDA provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) See APPENDIX for additional information regarding Other Operating Expenses (OOE) including historical data
22 of Sales 20 20 2022
DebtPayments
Strong Cash Flow Generation
Integer Confidential February 27 2017 Page 10
bull Generating significant cash flow to meet current debt obligations and accelerate debt repayment
bull FY17 Cash Flow of $106M
bull Paid down $17M of debt in 4Q16 $46M YTD
bull Focused on reducing total leverage as quickly as possible
bull Total long-term debt of $18B as of YE 2016
bull No significant maturities until 2020
bull Mitigating exposure to interest rate volatility
bull Well within covenant compliance requirements(2)
bull Successfully amended credit agreement in 4Q16
($ in millions)
(1) Free Cash Flow defined as Cash from Operations less Capital Expenditures
(2) See the APPENDIX to this presentation for further discussion regarding financial covenant calculations
($ in millions)
$31 $41 $48 $88$240
$964
$360
2017 2018 2019 2020 2021 2022 2023
$11
$(8)
$21 $22
1Q16 2Q16 3Q16 4Q16
$30
$4
$38 $34
1Q16 2Q16 3Q16 4Q16
Cash Flow From Operations Free Cash Flow($ in millions)
FY16
Debt Repayment Schedule($ in millions)
$29
$17
$46
Accelerated RepaymentRequired Repayment
$361 $318 $317 $325 $332
4Q15 1Q16 2Q16 3Q16 4Q16
4Q15 1Q16 2Q16 3Q16 4Q16
Inventory $252 $267 $276 $262 $225
Inventory Turns 4 4 4 4 5
Capital Expenditures $13 $19 $12 $17 $12
Working Capital
Integer Confidential February 27 2017 Page 11
Working Capital
$0
($ in millions)
bull Targeting continued reduction in inventory levels through FY17
bull Enhanced Sales amp Operating Plan (SampOP) process showing improved results and more accurate forecasting
bull Rationalizing vendor partners to drive synergies and extend payment terms
bull On-going process improvement programs to reduce direct materials spend and indirect expenses
($ in millions)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
FY16Actual
FY17Outlook
Revenue $1386 $1390 - $1430
Adjusted Diluted EPS $268 $270 - $310
FY 2017 Outlook
Integer Confidential February 27 2017 Page 12
bull Working Capital expected to improve $10M - $20M by YE2017
bull FY17 Adjusted Effective Tax Rate expected to be ~25
bull Cash Taxes expected to be ~$10M
bull Other Operating Expense expected to be in the range of $18M - $22M
bull Capital Expenditures expected to be in the range of $50M - $60M per year
bull Depreciation amp Amortization expected to be in the range of $95M - $100MStock
bull Stock-based compensation Expense expected to be ~$15M
($ in millions except per share amounts)
Product Line Review
Advanced Surgical Orthopedics amp Portable Medical
Integer Confidential February 27 2017 Page 14
Providing a wide range of technologies and solutions to the Advanced Surgical and Orthopedic markets
Implants Delivery Systems Reamers Laparoscopic Devices Arthroscopy Products
bull Revenue remains a solid contributor to total Company results down YOY driven by lower product launches during current quarter and accelerated demand in the prior year quarter
bull Shipped wireless prototype to first customer making good progress with additional customers
bull Steady operational performance driven by improvements in customer relationships
bull Multiple continuous improvement initiatives in place across our operations ndash early results are positive
bull Expect incremental revenue growth in 2017 driven by new product launches and acceleration in targeted areas
Cardio amp Vascular
Integer Confidential February 27 2017 Page 15
Offering a full-range of products and services for catheter-based interventional vascular devices and a suite of supply chain solutions to support the
development and manufacturing of complex components sub-assemblies and finished devices
Steerable Sheaths Catheters amp Sheaths Guidewires Stylets amp Accessories
Introducers
bull 4Q16 Revenue increased 7 YoY ndash strong demand for precious metal machining components and OEM product lines
bull Operational performance backed by strong customer relationships enabling deeper penetration and increased customer opportunities
bull First commercial shipment late in 4Q16 of previously delayed key customer program will ramp throughout 2017
bull Positive outlook for 2017 ndash several new opportunities well-positioned in sales process
Cardiac amp Neuromodulation
Integer Confidential February 27 2017 Page 16
Batteries Feedthroughs Enclosures Coated Electrodes
bull Continued positive quarterly momentum and sequential revenue improvement
bull Incremental growth opportunities within the market as OEM partners and customers seek value-added solutions as well as supply chain efficiencies
bull Leading position in the rapidly growing Neuromodulation market
bull Solid pipeline in various stages of development (generally a 2 to 5 year process)
bull Signed several new customer development agreements and manufacturing programs
Providing technology solutions for the active implantable medical device industry by partnering with customers to bring quality products to established and
emerging markets - from initial concept through to high volume manufacturing
Full System Solutions
Electrochem
Integer Confidential February 27 2017 Page 17
Enhancing lives worldwide by providing superior power solutions that enable the success and advancement of our customersrsquo critical applications
Battery Cells
Battery Packs
Battery Chargers
bull Revenues continue to trend with Oil amp Gas marketbull Oil prices begun to stabilize in 4Q16
bull North American energy customer activity coming back online
bull Military and Environmental customer volumes remain steady
bull Engaging with customers across all market segments ndash actively pursuing new customer and market opportunities
bull Growing market share within the space new opportunities driven by long history of operational and quality performance
bull Advancing competitive position through multi-year supply agreements
Strategic Growth Initiatives
Key Strategic Focus Areas
bull Laser focused on achieving strategic objectivesbull Invest to drive growth with customers across full spectrum of
product and systems capabilities
bull Deliver shareholder returns through growth in profitability and cash generation to drive accelerate debt repayment
bull Optimize the commitment and contribution of our Associates by cultivating an ethical values-driven culture
bull Current integration efforts remain on trackbull Formal activities complete mid-2017
bull Expect to achieve total synergies of $60M by YE2018
bull Creating an optimized manufacturing footprintbull Continuous improvement and productivity initiatives
bull Direct material and indirect expense savings
bull Centers of excellence around the world
bull No further plans to close or consolidate locations at this time
Integer Confidential February 27 2017 Page 19
ldquoOur vision is to
enhance the lives of
patients worldwide
by being our
customersrsquo partner of
choice for innovative
technologies and
servicesrdquo
Closing Comments
Well-Positioned for Future Growth
Integer Confidential February 27 2017 Page 21
Operating amp Manufacturing
Scalability
Strong Customer Relationships
Business Optimization
Driving Strong Cash Generation
Innovation Pipeline to Enable
Customer Success
Engineered Medical
Components
Engineered Medical Sub Assemblies
Differentiated Medical
Components amp Subassemblies
Transfer Devices
Co-Developed
Devices
IntegerDesigned Devices
Fully Branded Solutions
Medical Device
Systems
Product Solutions(More IP Focused)
Technical Solutions(Traditional CMO)
80 20
Broad Product Continuum
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1360 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||
Free Cash Flow | $11 | $11 | ($8) | $21 | $22 | |||||||||||
Days Sales Outstanding | 0 | 50 | 50 | 50 | 52 | |||||||||||
Inventory | $252 | $267 | $276 | $262 | $225 | |||||||||||
Inventory Turns | 4 | 4 | 4 | 4 | 5 | |||||||||||
Capital Expenditures | $13 | $19 | $12 | $17 | $12 | |||||||||||
Days Payables Outstanding | 0 | 32 | 36 | 32 | 27 | |||||||||||
Sales | 359634 | 331058 | 348382 | 346567 | 359591 | |||||||||||
COGS | 282377 | 240244 | 252351 | 248658 | 266700 | |||||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||||||
Net Inventory | 252166 | 267380 | 276279 | 262232 | 225151 | |||||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Opening Comments
Quarterly Results Reflect Continued Progress
bull Business stabilization continues returning to a growth trajectory
bull New COO structure strategically aligns integrated capabilities more effectively
bull Building momentum and focused on winning new opportunities
bull Operational resultsbull Demonstrating fiscal disciplinebull Working capital initiatives driving results
bull Financial resultsbull 4Q16 revenue flat YoY and up $13M QoQbull Generating increased cash flow from operationsbull Accelerating debt repayment
bull Business well positioned for incremental growth in 2017
Integer Confidential February 27 2017 Page 5
ldquoWe had solid
performance in the
fourth quarter and
are pleased with the
continued operational
and financial
stabilization of the
businessrdquo
Financial Results
4Q16 Financial Results(1)
Integer Confidential February 27 2017 Page 7
($ in millions except per share amounts)
(1) 4Q16 Key Financial Results provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) Includes $23M of inventory step-up amortization associated with the acquisition and integration of Lake Region Medical Excluding this amount gross margin for 4Q15 and FY15 would have been 279 for both periods
4Q15 3Q16 4Q16 FY15 FY16
Sales 360$ 347$ 360$ 1443$ 1386$
Gross Margin 215 283 258 264 272
Operating Expenses 89$ 61$ 62$ 302$ 270$
of Sales 247 176 172 209 195
GAAP Net Income (47)$ 11$ 8$ (39)$ 6$
Adjusted Net Income 28$ 26$ 27$ 98$ 84$
EBITDA (7)$ 59$ 56$ 161$ 203$
Adjusted EBITDA 79$ 75$ 71$ 304$ 280$
of Sales 219 216 196 211 202
GAAP Diluted EPS (154)$ 037$ 025$ (127)$ 019$
Adjusted Diluted EPS 087$ 083$ 087$ 311$ 268$
Cash Flow from Operations -- 38$ 34$ -- 106$
(2) (2)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
$138 $145 $147 $133 $134 $144 $148 $142
$99 $109 $94 $111 $96 $92 $96 $105
$106 $109
$99 $105 $91
$104 $95 $102
$18 $17
$12 $13 $12
$10 $9 $11
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Continued Revenue Stabilization
Integer Confidential February 27 2017 Page 8
$358
Non-Medical
Cardiac amp Neuro
Cardio amp Vascular
Adv Surgical Ortho ampPortable Medical
$377 $348 $360 $331 $348 $347
Quarterly Sales(1)
4Q16 SalesQoQ YoY YTD
38 (05) (40)
28 (14) (30)
7 (3) (6)
10 (5) (6)
(4) 7 1
Total Sales(2)
(1) Sales information provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) Total sales includes the sum of sales for each of ITGRrsquos product lines as detailed on this slide and the elimination of Interproduct Line Sales for which amounts are not included on this slide
($ in millions) $360
$79
$65 $69 $75
$71
4Q15 1Q16 2Q16 3Q16 4Q16
Adjusted EBITDA
Integer Confidential February 27 2017 Page 9
Adjusted EBITDA(1)
$0
($ in millions) bull Continued focus on improving business performance to generate cash
bull Ongoing pricing pressure reinforces focus on quality to drive volume increases and efficiency
bull Improve customer satisfaction
bull Reduce costs and expand share of wallet with customers
bull Cumulative synergies of $34Mbull Realized benefits offset by sales mix
pricing pressure salary increases and warranty inventory reserve charges
bull Excludes $121M of OOE and IP related litigation expenses in 4Q16(2)
(1) Adjusted EBITDA provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) See APPENDIX for additional information regarding Other Operating Expenses (OOE) including historical data
22 of Sales 20 20 2022
DebtPayments
Strong Cash Flow Generation
Integer Confidential February 27 2017 Page 10
bull Generating significant cash flow to meet current debt obligations and accelerate debt repayment
bull FY17 Cash Flow of $106M
bull Paid down $17M of debt in 4Q16 $46M YTD
bull Focused on reducing total leverage as quickly as possible
bull Total long-term debt of $18B as of YE 2016
bull No significant maturities until 2020
bull Mitigating exposure to interest rate volatility
bull Well within covenant compliance requirements(2)
bull Successfully amended credit agreement in 4Q16
($ in millions)
(1) Free Cash Flow defined as Cash from Operations less Capital Expenditures
(2) See the APPENDIX to this presentation for further discussion regarding financial covenant calculations
($ in millions)
$31 $41 $48 $88$240
$964
$360
2017 2018 2019 2020 2021 2022 2023
$11
$(8)
$21 $22
1Q16 2Q16 3Q16 4Q16
$30
$4
$38 $34
1Q16 2Q16 3Q16 4Q16
Cash Flow From Operations Free Cash Flow($ in millions)
FY16
Debt Repayment Schedule($ in millions)
$29
$17
$46
Accelerated RepaymentRequired Repayment
$361 $318 $317 $325 $332
4Q15 1Q16 2Q16 3Q16 4Q16
4Q15 1Q16 2Q16 3Q16 4Q16
Inventory $252 $267 $276 $262 $225
Inventory Turns 4 4 4 4 5
Capital Expenditures $13 $19 $12 $17 $12
Working Capital
Integer Confidential February 27 2017 Page 11
Working Capital
$0
($ in millions)
bull Targeting continued reduction in inventory levels through FY17
bull Enhanced Sales amp Operating Plan (SampOP) process showing improved results and more accurate forecasting
bull Rationalizing vendor partners to drive synergies and extend payment terms
bull On-going process improvement programs to reduce direct materials spend and indirect expenses
($ in millions)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
FY16Actual
FY17Outlook
Revenue $1386 $1390 - $1430
Adjusted Diluted EPS $268 $270 - $310
FY 2017 Outlook
Integer Confidential February 27 2017 Page 12
bull Working Capital expected to improve $10M - $20M by YE2017
bull FY17 Adjusted Effective Tax Rate expected to be ~25
bull Cash Taxes expected to be ~$10M
bull Other Operating Expense expected to be in the range of $18M - $22M
bull Capital Expenditures expected to be in the range of $50M - $60M per year
bull Depreciation amp Amortization expected to be in the range of $95M - $100MStock
bull Stock-based compensation Expense expected to be ~$15M
($ in millions except per share amounts)
Product Line Review
Advanced Surgical Orthopedics amp Portable Medical
Integer Confidential February 27 2017 Page 14
Providing a wide range of technologies and solutions to the Advanced Surgical and Orthopedic markets
Implants Delivery Systems Reamers Laparoscopic Devices Arthroscopy Products
bull Revenue remains a solid contributor to total Company results down YOY driven by lower product launches during current quarter and accelerated demand in the prior year quarter
bull Shipped wireless prototype to first customer making good progress with additional customers
bull Steady operational performance driven by improvements in customer relationships
bull Multiple continuous improvement initiatives in place across our operations ndash early results are positive
bull Expect incremental revenue growth in 2017 driven by new product launches and acceleration in targeted areas
Cardio amp Vascular
Integer Confidential February 27 2017 Page 15
Offering a full-range of products and services for catheter-based interventional vascular devices and a suite of supply chain solutions to support the
development and manufacturing of complex components sub-assemblies and finished devices
Steerable Sheaths Catheters amp Sheaths Guidewires Stylets amp Accessories
Introducers
bull 4Q16 Revenue increased 7 YoY ndash strong demand for precious metal machining components and OEM product lines
bull Operational performance backed by strong customer relationships enabling deeper penetration and increased customer opportunities
bull First commercial shipment late in 4Q16 of previously delayed key customer program will ramp throughout 2017
bull Positive outlook for 2017 ndash several new opportunities well-positioned in sales process
Cardiac amp Neuromodulation
Integer Confidential February 27 2017 Page 16
Batteries Feedthroughs Enclosures Coated Electrodes
bull Continued positive quarterly momentum and sequential revenue improvement
bull Incremental growth opportunities within the market as OEM partners and customers seek value-added solutions as well as supply chain efficiencies
bull Leading position in the rapidly growing Neuromodulation market
bull Solid pipeline in various stages of development (generally a 2 to 5 year process)
bull Signed several new customer development agreements and manufacturing programs
Providing technology solutions for the active implantable medical device industry by partnering with customers to bring quality products to established and
emerging markets - from initial concept through to high volume manufacturing
Full System Solutions
Electrochem
Integer Confidential February 27 2017 Page 17
Enhancing lives worldwide by providing superior power solutions that enable the success and advancement of our customersrsquo critical applications
Battery Cells
Battery Packs
Battery Chargers
bull Revenues continue to trend with Oil amp Gas marketbull Oil prices begun to stabilize in 4Q16
bull North American energy customer activity coming back online
bull Military and Environmental customer volumes remain steady
bull Engaging with customers across all market segments ndash actively pursuing new customer and market opportunities
bull Growing market share within the space new opportunities driven by long history of operational and quality performance
bull Advancing competitive position through multi-year supply agreements
Strategic Growth Initiatives
Key Strategic Focus Areas
bull Laser focused on achieving strategic objectivesbull Invest to drive growth with customers across full spectrum of
product and systems capabilities
bull Deliver shareholder returns through growth in profitability and cash generation to drive accelerate debt repayment
bull Optimize the commitment and contribution of our Associates by cultivating an ethical values-driven culture
bull Current integration efforts remain on trackbull Formal activities complete mid-2017
bull Expect to achieve total synergies of $60M by YE2018
bull Creating an optimized manufacturing footprintbull Continuous improvement and productivity initiatives
bull Direct material and indirect expense savings
bull Centers of excellence around the world
bull No further plans to close or consolidate locations at this time
Integer Confidential February 27 2017 Page 19
ldquoOur vision is to
enhance the lives of
patients worldwide
by being our
customersrsquo partner of
choice for innovative
technologies and
servicesrdquo
Closing Comments
Well-Positioned for Future Growth
Integer Confidential February 27 2017 Page 21
Operating amp Manufacturing
Scalability
Strong Customer Relationships
Business Optimization
Driving Strong Cash Generation
Innovation Pipeline to Enable
Customer Success
Engineered Medical
Components
Engineered Medical Sub Assemblies
Differentiated Medical
Components amp Subassemblies
Transfer Devices
Co-Developed
Devices
IntegerDesigned Devices
Fully Branded Solutions
Medical Device
Systems
Product Solutions(More IP Focused)
Technical Solutions(Traditional CMO)
80 20
Broad Product Continuum
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1360 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||
Free Cash Flow | $11 | $11 | ($8) | $21 | $22 | |||||||||||
Days Sales Outstanding | 0 | 50 | 50 | 50 | 52 | |||||||||||
Inventory | $252 | $267 | $276 | $262 | $225 | |||||||||||
Inventory Turns | 4 | 4 | 4 | 4 | 5 | |||||||||||
Capital Expenditures | $13 | $19 | $12 | $17 | $12 | |||||||||||
Days Payables Outstanding | 0 | 32 | 36 | 32 | 27 | |||||||||||
Sales | 359634 | 331058 | 348382 | 346567 | 359591 | |||||||||||
COGS | 282377 | 240244 | 252351 | 248658 | 266700 | |||||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||||||
Net Inventory | 252166 | 267380 | 276279 | 262232 | 225151 | |||||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Quarterly Results Reflect Continued Progress
bull Business stabilization continues returning to a growth trajectory
bull New COO structure strategically aligns integrated capabilities more effectively
bull Building momentum and focused on winning new opportunities
bull Operational resultsbull Demonstrating fiscal disciplinebull Working capital initiatives driving results
bull Financial resultsbull 4Q16 revenue flat YoY and up $13M QoQbull Generating increased cash flow from operationsbull Accelerating debt repayment
bull Business well positioned for incremental growth in 2017
Integer Confidential February 27 2017 Page 5
ldquoWe had solid
performance in the
fourth quarter and
are pleased with the
continued operational
and financial
stabilization of the
businessrdquo
Financial Results
4Q16 Financial Results(1)
Integer Confidential February 27 2017 Page 7
($ in millions except per share amounts)
(1) 4Q16 Key Financial Results provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) Includes $23M of inventory step-up amortization associated with the acquisition and integration of Lake Region Medical Excluding this amount gross margin for 4Q15 and FY15 would have been 279 for both periods
4Q15 3Q16 4Q16 FY15 FY16
Sales 360$ 347$ 360$ 1443$ 1386$
Gross Margin 215 283 258 264 272
Operating Expenses 89$ 61$ 62$ 302$ 270$
of Sales 247 176 172 209 195
GAAP Net Income (47)$ 11$ 8$ (39)$ 6$
Adjusted Net Income 28$ 26$ 27$ 98$ 84$
EBITDA (7)$ 59$ 56$ 161$ 203$
Adjusted EBITDA 79$ 75$ 71$ 304$ 280$
of Sales 219 216 196 211 202
GAAP Diluted EPS (154)$ 037$ 025$ (127)$ 019$
Adjusted Diluted EPS 087$ 083$ 087$ 311$ 268$
Cash Flow from Operations -- 38$ 34$ -- 106$
(2) (2)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
$138 $145 $147 $133 $134 $144 $148 $142
$99 $109 $94 $111 $96 $92 $96 $105
$106 $109
$99 $105 $91
$104 $95 $102
$18 $17
$12 $13 $12
$10 $9 $11
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Continued Revenue Stabilization
Integer Confidential February 27 2017 Page 8
$358
Non-Medical
Cardiac amp Neuro
Cardio amp Vascular
Adv Surgical Ortho ampPortable Medical
$377 $348 $360 $331 $348 $347
Quarterly Sales(1)
4Q16 SalesQoQ YoY YTD
38 (05) (40)
28 (14) (30)
7 (3) (6)
10 (5) (6)
(4) 7 1
Total Sales(2)
(1) Sales information provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) Total sales includes the sum of sales for each of ITGRrsquos product lines as detailed on this slide and the elimination of Interproduct Line Sales for which amounts are not included on this slide
($ in millions) $360
$79
$65 $69 $75
$71
4Q15 1Q16 2Q16 3Q16 4Q16
Adjusted EBITDA
Integer Confidential February 27 2017 Page 9
Adjusted EBITDA(1)
$0
($ in millions) bull Continued focus on improving business performance to generate cash
bull Ongoing pricing pressure reinforces focus on quality to drive volume increases and efficiency
bull Improve customer satisfaction
bull Reduce costs and expand share of wallet with customers
bull Cumulative synergies of $34Mbull Realized benefits offset by sales mix
pricing pressure salary increases and warranty inventory reserve charges
bull Excludes $121M of OOE and IP related litigation expenses in 4Q16(2)
(1) Adjusted EBITDA provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) See APPENDIX for additional information regarding Other Operating Expenses (OOE) including historical data
22 of Sales 20 20 2022
DebtPayments
Strong Cash Flow Generation
Integer Confidential February 27 2017 Page 10
bull Generating significant cash flow to meet current debt obligations and accelerate debt repayment
bull FY17 Cash Flow of $106M
bull Paid down $17M of debt in 4Q16 $46M YTD
bull Focused on reducing total leverage as quickly as possible
bull Total long-term debt of $18B as of YE 2016
bull No significant maturities until 2020
bull Mitigating exposure to interest rate volatility
bull Well within covenant compliance requirements(2)
bull Successfully amended credit agreement in 4Q16
($ in millions)
(1) Free Cash Flow defined as Cash from Operations less Capital Expenditures
(2) See the APPENDIX to this presentation for further discussion regarding financial covenant calculations
($ in millions)
$31 $41 $48 $88$240
$964
$360
2017 2018 2019 2020 2021 2022 2023
$11
$(8)
$21 $22
1Q16 2Q16 3Q16 4Q16
$30
$4
$38 $34
1Q16 2Q16 3Q16 4Q16
Cash Flow From Operations Free Cash Flow($ in millions)
FY16
Debt Repayment Schedule($ in millions)
$29
$17
$46
Accelerated RepaymentRequired Repayment
$361 $318 $317 $325 $332
4Q15 1Q16 2Q16 3Q16 4Q16
4Q15 1Q16 2Q16 3Q16 4Q16
Inventory $252 $267 $276 $262 $225
Inventory Turns 4 4 4 4 5
Capital Expenditures $13 $19 $12 $17 $12
Working Capital
Integer Confidential February 27 2017 Page 11
Working Capital
$0
($ in millions)
bull Targeting continued reduction in inventory levels through FY17
bull Enhanced Sales amp Operating Plan (SampOP) process showing improved results and more accurate forecasting
bull Rationalizing vendor partners to drive synergies and extend payment terms
bull On-going process improvement programs to reduce direct materials spend and indirect expenses
($ in millions)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
FY16Actual
FY17Outlook
Revenue $1386 $1390 - $1430
Adjusted Diluted EPS $268 $270 - $310
FY 2017 Outlook
Integer Confidential February 27 2017 Page 12
bull Working Capital expected to improve $10M - $20M by YE2017
bull FY17 Adjusted Effective Tax Rate expected to be ~25
bull Cash Taxes expected to be ~$10M
bull Other Operating Expense expected to be in the range of $18M - $22M
bull Capital Expenditures expected to be in the range of $50M - $60M per year
bull Depreciation amp Amortization expected to be in the range of $95M - $100MStock
bull Stock-based compensation Expense expected to be ~$15M
($ in millions except per share amounts)
Product Line Review
Advanced Surgical Orthopedics amp Portable Medical
Integer Confidential February 27 2017 Page 14
Providing a wide range of technologies and solutions to the Advanced Surgical and Orthopedic markets
Implants Delivery Systems Reamers Laparoscopic Devices Arthroscopy Products
bull Revenue remains a solid contributor to total Company results down YOY driven by lower product launches during current quarter and accelerated demand in the prior year quarter
bull Shipped wireless prototype to first customer making good progress with additional customers
bull Steady operational performance driven by improvements in customer relationships
bull Multiple continuous improvement initiatives in place across our operations ndash early results are positive
bull Expect incremental revenue growth in 2017 driven by new product launches and acceleration in targeted areas
Cardio amp Vascular
Integer Confidential February 27 2017 Page 15
Offering a full-range of products and services for catheter-based interventional vascular devices and a suite of supply chain solutions to support the
development and manufacturing of complex components sub-assemblies and finished devices
Steerable Sheaths Catheters amp Sheaths Guidewires Stylets amp Accessories
Introducers
bull 4Q16 Revenue increased 7 YoY ndash strong demand for precious metal machining components and OEM product lines
bull Operational performance backed by strong customer relationships enabling deeper penetration and increased customer opportunities
bull First commercial shipment late in 4Q16 of previously delayed key customer program will ramp throughout 2017
bull Positive outlook for 2017 ndash several new opportunities well-positioned in sales process
Cardiac amp Neuromodulation
Integer Confidential February 27 2017 Page 16
Batteries Feedthroughs Enclosures Coated Electrodes
bull Continued positive quarterly momentum and sequential revenue improvement
bull Incremental growth opportunities within the market as OEM partners and customers seek value-added solutions as well as supply chain efficiencies
bull Leading position in the rapidly growing Neuromodulation market
bull Solid pipeline in various stages of development (generally a 2 to 5 year process)
bull Signed several new customer development agreements and manufacturing programs
Providing technology solutions for the active implantable medical device industry by partnering with customers to bring quality products to established and
emerging markets - from initial concept through to high volume manufacturing
Full System Solutions
Electrochem
Integer Confidential February 27 2017 Page 17
Enhancing lives worldwide by providing superior power solutions that enable the success and advancement of our customersrsquo critical applications
Battery Cells
Battery Packs
Battery Chargers
bull Revenues continue to trend with Oil amp Gas marketbull Oil prices begun to stabilize in 4Q16
bull North American energy customer activity coming back online
bull Military and Environmental customer volumes remain steady
bull Engaging with customers across all market segments ndash actively pursuing new customer and market opportunities
bull Growing market share within the space new opportunities driven by long history of operational and quality performance
bull Advancing competitive position through multi-year supply agreements
Strategic Growth Initiatives
Key Strategic Focus Areas
bull Laser focused on achieving strategic objectivesbull Invest to drive growth with customers across full spectrum of
product and systems capabilities
bull Deliver shareholder returns through growth in profitability and cash generation to drive accelerate debt repayment
bull Optimize the commitment and contribution of our Associates by cultivating an ethical values-driven culture
bull Current integration efforts remain on trackbull Formal activities complete mid-2017
bull Expect to achieve total synergies of $60M by YE2018
bull Creating an optimized manufacturing footprintbull Continuous improvement and productivity initiatives
bull Direct material and indirect expense savings
bull Centers of excellence around the world
bull No further plans to close or consolidate locations at this time
Integer Confidential February 27 2017 Page 19
ldquoOur vision is to
enhance the lives of
patients worldwide
by being our
customersrsquo partner of
choice for innovative
technologies and
servicesrdquo
Closing Comments
Well-Positioned for Future Growth
Integer Confidential February 27 2017 Page 21
Operating amp Manufacturing
Scalability
Strong Customer Relationships
Business Optimization
Driving Strong Cash Generation
Innovation Pipeline to Enable
Customer Success
Engineered Medical
Components
Engineered Medical Sub Assemblies
Differentiated Medical
Components amp Subassemblies
Transfer Devices
Co-Developed
Devices
IntegerDesigned Devices
Fully Branded Solutions
Medical Device
Systems
Product Solutions(More IP Focused)
Technical Solutions(Traditional CMO)
80 20
Broad Product Continuum
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1360 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||
Free Cash Flow | $11 | $11 | ($8) | $21 | $22 | |||||||||||
Days Sales Outstanding | 0 | 50 | 50 | 50 | 52 | |||||||||||
Inventory | $252 | $267 | $276 | $262 | $225 | |||||||||||
Inventory Turns | 4 | 4 | 4 | 4 | 5 | |||||||||||
Capital Expenditures | $13 | $19 | $12 | $17 | $12 | |||||||||||
Days Payables Outstanding | 0 | 32 | 36 | 32 | 27 | |||||||||||
Sales | 359634 | 331058 | 348382 | 346567 | 359591 | |||||||||||
COGS | 282377 | 240244 | 252351 | 248658 | 266700 | |||||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||||||
Net Inventory | 252166 | 267380 | 276279 | 262232 | 225151 | |||||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Financial Results
4Q16 Financial Results(1)
Integer Confidential February 27 2017 Page 7
($ in millions except per share amounts)
(1) 4Q16 Key Financial Results provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) Includes $23M of inventory step-up amortization associated with the acquisition and integration of Lake Region Medical Excluding this amount gross margin for 4Q15 and FY15 would have been 279 for both periods
4Q15 3Q16 4Q16 FY15 FY16
Sales 360$ 347$ 360$ 1443$ 1386$
Gross Margin 215 283 258 264 272
Operating Expenses 89$ 61$ 62$ 302$ 270$
of Sales 247 176 172 209 195
GAAP Net Income (47)$ 11$ 8$ (39)$ 6$
Adjusted Net Income 28$ 26$ 27$ 98$ 84$
EBITDA (7)$ 59$ 56$ 161$ 203$
Adjusted EBITDA 79$ 75$ 71$ 304$ 280$
of Sales 219 216 196 211 202
GAAP Diluted EPS (154)$ 037$ 025$ (127)$ 019$
Adjusted Diluted EPS 087$ 083$ 087$ 311$ 268$
Cash Flow from Operations -- 38$ 34$ -- 106$
(2) (2)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
$138 $145 $147 $133 $134 $144 $148 $142
$99 $109 $94 $111 $96 $92 $96 $105
$106 $109
$99 $105 $91
$104 $95 $102
$18 $17
$12 $13 $12
$10 $9 $11
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Continued Revenue Stabilization
Integer Confidential February 27 2017 Page 8
$358
Non-Medical
Cardiac amp Neuro
Cardio amp Vascular
Adv Surgical Ortho ampPortable Medical
$377 $348 $360 $331 $348 $347
Quarterly Sales(1)
4Q16 SalesQoQ YoY YTD
38 (05) (40)
28 (14) (30)
7 (3) (6)
10 (5) (6)
(4) 7 1
Total Sales(2)
(1) Sales information provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) Total sales includes the sum of sales for each of ITGRrsquos product lines as detailed on this slide and the elimination of Interproduct Line Sales for which amounts are not included on this slide
($ in millions) $360
$79
$65 $69 $75
$71
4Q15 1Q16 2Q16 3Q16 4Q16
Adjusted EBITDA
Integer Confidential February 27 2017 Page 9
Adjusted EBITDA(1)
$0
($ in millions) bull Continued focus on improving business performance to generate cash
bull Ongoing pricing pressure reinforces focus on quality to drive volume increases and efficiency
bull Improve customer satisfaction
bull Reduce costs and expand share of wallet with customers
bull Cumulative synergies of $34Mbull Realized benefits offset by sales mix
pricing pressure salary increases and warranty inventory reserve charges
bull Excludes $121M of OOE and IP related litigation expenses in 4Q16(2)
(1) Adjusted EBITDA provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) See APPENDIX for additional information regarding Other Operating Expenses (OOE) including historical data
22 of Sales 20 20 2022
DebtPayments
Strong Cash Flow Generation
Integer Confidential February 27 2017 Page 10
bull Generating significant cash flow to meet current debt obligations and accelerate debt repayment
bull FY17 Cash Flow of $106M
bull Paid down $17M of debt in 4Q16 $46M YTD
bull Focused on reducing total leverage as quickly as possible
bull Total long-term debt of $18B as of YE 2016
bull No significant maturities until 2020
bull Mitigating exposure to interest rate volatility
bull Well within covenant compliance requirements(2)
bull Successfully amended credit agreement in 4Q16
($ in millions)
(1) Free Cash Flow defined as Cash from Operations less Capital Expenditures
(2) See the APPENDIX to this presentation for further discussion regarding financial covenant calculations
($ in millions)
$31 $41 $48 $88$240
$964
$360
2017 2018 2019 2020 2021 2022 2023
$11
$(8)
$21 $22
1Q16 2Q16 3Q16 4Q16
$30
$4
$38 $34
1Q16 2Q16 3Q16 4Q16
Cash Flow From Operations Free Cash Flow($ in millions)
FY16
Debt Repayment Schedule($ in millions)
$29
$17
$46
Accelerated RepaymentRequired Repayment
$361 $318 $317 $325 $332
4Q15 1Q16 2Q16 3Q16 4Q16
4Q15 1Q16 2Q16 3Q16 4Q16
Inventory $252 $267 $276 $262 $225
Inventory Turns 4 4 4 4 5
Capital Expenditures $13 $19 $12 $17 $12
Working Capital
Integer Confidential February 27 2017 Page 11
Working Capital
$0
($ in millions)
bull Targeting continued reduction in inventory levels through FY17
bull Enhanced Sales amp Operating Plan (SampOP) process showing improved results and more accurate forecasting
bull Rationalizing vendor partners to drive synergies and extend payment terms
bull On-going process improvement programs to reduce direct materials spend and indirect expenses
($ in millions)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
FY16Actual
FY17Outlook
Revenue $1386 $1390 - $1430
Adjusted Diluted EPS $268 $270 - $310
FY 2017 Outlook
Integer Confidential February 27 2017 Page 12
bull Working Capital expected to improve $10M - $20M by YE2017
bull FY17 Adjusted Effective Tax Rate expected to be ~25
bull Cash Taxes expected to be ~$10M
bull Other Operating Expense expected to be in the range of $18M - $22M
bull Capital Expenditures expected to be in the range of $50M - $60M per year
bull Depreciation amp Amortization expected to be in the range of $95M - $100MStock
bull Stock-based compensation Expense expected to be ~$15M
($ in millions except per share amounts)
Product Line Review
Advanced Surgical Orthopedics amp Portable Medical
Integer Confidential February 27 2017 Page 14
Providing a wide range of technologies and solutions to the Advanced Surgical and Orthopedic markets
Implants Delivery Systems Reamers Laparoscopic Devices Arthroscopy Products
bull Revenue remains a solid contributor to total Company results down YOY driven by lower product launches during current quarter and accelerated demand in the prior year quarter
bull Shipped wireless prototype to first customer making good progress with additional customers
bull Steady operational performance driven by improvements in customer relationships
bull Multiple continuous improvement initiatives in place across our operations ndash early results are positive
bull Expect incremental revenue growth in 2017 driven by new product launches and acceleration in targeted areas
Cardio amp Vascular
Integer Confidential February 27 2017 Page 15
Offering a full-range of products and services for catheter-based interventional vascular devices and a suite of supply chain solutions to support the
development and manufacturing of complex components sub-assemblies and finished devices
Steerable Sheaths Catheters amp Sheaths Guidewires Stylets amp Accessories
Introducers
bull 4Q16 Revenue increased 7 YoY ndash strong demand for precious metal machining components and OEM product lines
bull Operational performance backed by strong customer relationships enabling deeper penetration and increased customer opportunities
bull First commercial shipment late in 4Q16 of previously delayed key customer program will ramp throughout 2017
bull Positive outlook for 2017 ndash several new opportunities well-positioned in sales process
Cardiac amp Neuromodulation
Integer Confidential February 27 2017 Page 16
Batteries Feedthroughs Enclosures Coated Electrodes
bull Continued positive quarterly momentum and sequential revenue improvement
bull Incremental growth opportunities within the market as OEM partners and customers seek value-added solutions as well as supply chain efficiencies
bull Leading position in the rapidly growing Neuromodulation market
bull Solid pipeline in various stages of development (generally a 2 to 5 year process)
bull Signed several new customer development agreements and manufacturing programs
Providing technology solutions for the active implantable medical device industry by partnering with customers to bring quality products to established and
emerging markets - from initial concept through to high volume manufacturing
Full System Solutions
Electrochem
Integer Confidential February 27 2017 Page 17
Enhancing lives worldwide by providing superior power solutions that enable the success and advancement of our customersrsquo critical applications
Battery Cells
Battery Packs
Battery Chargers
bull Revenues continue to trend with Oil amp Gas marketbull Oil prices begun to stabilize in 4Q16
bull North American energy customer activity coming back online
bull Military and Environmental customer volumes remain steady
bull Engaging with customers across all market segments ndash actively pursuing new customer and market opportunities
bull Growing market share within the space new opportunities driven by long history of operational and quality performance
bull Advancing competitive position through multi-year supply agreements
Strategic Growth Initiatives
Key Strategic Focus Areas
bull Laser focused on achieving strategic objectivesbull Invest to drive growth with customers across full spectrum of
product and systems capabilities
bull Deliver shareholder returns through growth in profitability and cash generation to drive accelerate debt repayment
bull Optimize the commitment and contribution of our Associates by cultivating an ethical values-driven culture
bull Current integration efforts remain on trackbull Formal activities complete mid-2017
bull Expect to achieve total synergies of $60M by YE2018
bull Creating an optimized manufacturing footprintbull Continuous improvement and productivity initiatives
bull Direct material and indirect expense savings
bull Centers of excellence around the world
bull No further plans to close or consolidate locations at this time
Integer Confidential February 27 2017 Page 19
ldquoOur vision is to
enhance the lives of
patients worldwide
by being our
customersrsquo partner of
choice for innovative
technologies and
servicesrdquo
Closing Comments
Well-Positioned for Future Growth
Integer Confidential February 27 2017 Page 21
Operating amp Manufacturing
Scalability
Strong Customer Relationships
Business Optimization
Driving Strong Cash Generation
Innovation Pipeline to Enable
Customer Success
Engineered Medical
Components
Engineered Medical Sub Assemblies
Differentiated Medical
Components amp Subassemblies
Transfer Devices
Co-Developed
Devices
IntegerDesigned Devices
Fully Branded Solutions
Medical Device
Systems
Product Solutions(More IP Focused)
Technical Solutions(Traditional CMO)
80 20
Broad Product Continuum
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1360 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||
Free Cash Flow | $11 | $11 | ($8) | $21 | $22 | |||||||||||
Days Sales Outstanding | 0 | 50 | 50 | 50 | 52 | |||||||||||
Inventory | $252 | $267 | $276 | $262 | $225 | |||||||||||
Inventory Turns | 4 | 4 | 4 | 4 | 5 | |||||||||||
Capital Expenditures | $13 | $19 | $12 | $17 | $12 | |||||||||||
Days Payables Outstanding | 0 | 32 | 36 | 32 | 27 | |||||||||||
Sales | 359634 | 331058 | 348382 | 346567 | 359591 | |||||||||||
COGS | 282377 | 240244 | 252351 | 248658 | 266700 | |||||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||||||
Net Inventory | 252166 | 267380 | 276279 | 262232 | 225151 | |||||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
4Q16 Financial Results(1)
Integer Confidential February 27 2017 Page 7
($ in millions except per share amounts)
(1) 4Q16 Key Financial Results provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) Includes $23M of inventory step-up amortization associated with the acquisition and integration of Lake Region Medical Excluding this amount gross margin for 4Q15 and FY15 would have been 279 for both periods
4Q15 3Q16 4Q16 FY15 FY16
Sales 360$ 347$ 360$ 1443$ 1386$
Gross Margin 215 283 258 264 272
Operating Expenses 89$ 61$ 62$ 302$ 270$
of Sales 247 176 172 209 195
GAAP Net Income (47)$ 11$ 8$ (39)$ 6$
Adjusted Net Income 28$ 26$ 27$ 98$ 84$
EBITDA (7)$ 59$ 56$ 161$ 203$
Adjusted EBITDA 79$ 75$ 71$ 304$ 280$
of Sales 219 216 196 211 202
GAAP Diluted EPS (154)$ 037$ 025$ (127)$ 019$
Adjusted Diluted EPS 087$ 083$ 087$ 311$ 268$
Cash Flow from Operations -- 38$ 34$ -- 106$
(2) (2)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
$138 $145 $147 $133 $134 $144 $148 $142
$99 $109 $94 $111 $96 $92 $96 $105
$106 $109
$99 $105 $91
$104 $95 $102
$18 $17
$12 $13 $12
$10 $9 $11
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Continued Revenue Stabilization
Integer Confidential February 27 2017 Page 8
$358
Non-Medical
Cardiac amp Neuro
Cardio amp Vascular
Adv Surgical Ortho ampPortable Medical
$377 $348 $360 $331 $348 $347
Quarterly Sales(1)
4Q16 SalesQoQ YoY YTD
38 (05) (40)
28 (14) (30)
7 (3) (6)
10 (5) (6)
(4) 7 1
Total Sales(2)
(1) Sales information provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) Total sales includes the sum of sales for each of ITGRrsquos product lines as detailed on this slide and the elimination of Interproduct Line Sales for which amounts are not included on this slide
($ in millions) $360
$79
$65 $69 $75
$71
4Q15 1Q16 2Q16 3Q16 4Q16
Adjusted EBITDA
Integer Confidential February 27 2017 Page 9
Adjusted EBITDA(1)
$0
($ in millions) bull Continued focus on improving business performance to generate cash
bull Ongoing pricing pressure reinforces focus on quality to drive volume increases and efficiency
bull Improve customer satisfaction
bull Reduce costs and expand share of wallet with customers
bull Cumulative synergies of $34Mbull Realized benefits offset by sales mix
pricing pressure salary increases and warranty inventory reserve charges
bull Excludes $121M of OOE and IP related litigation expenses in 4Q16(2)
(1) Adjusted EBITDA provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) See APPENDIX for additional information regarding Other Operating Expenses (OOE) including historical data
22 of Sales 20 20 2022
DebtPayments
Strong Cash Flow Generation
Integer Confidential February 27 2017 Page 10
bull Generating significant cash flow to meet current debt obligations and accelerate debt repayment
bull FY17 Cash Flow of $106M
bull Paid down $17M of debt in 4Q16 $46M YTD
bull Focused on reducing total leverage as quickly as possible
bull Total long-term debt of $18B as of YE 2016
bull No significant maturities until 2020
bull Mitigating exposure to interest rate volatility
bull Well within covenant compliance requirements(2)
bull Successfully amended credit agreement in 4Q16
($ in millions)
(1) Free Cash Flow defined as Cash from Operations less Capital Expenditures
(2) See the APPENDIX to this presentation for further discussion regarding financial covenant calculations
($ in millions)
$31 $41 $48 $88$240
$964
$360
2017 2018 2019 2020 2021 2022 2023
$11
$(8)
$21 $22
1Q16 2Q16 3Q16 4Q16
$30
$4
$38 $34
1Q16 2Q16 3Q16 4Q16
Cash Flow From Operations Free Cash Flow($ in millions)
FY16
Debt Repayment Schedule($ in millions)
$29
$17
$46
Accelerated RepaymentRequired Repayment
$361 $318 $317 $325 $332
4Q15 1Q16 2Q16 3Q16 4Q16
4Q15 1Q16 2Q16 3Q16 4Q16
Inventory $252 $267 $276 $262 $225
Inventory Turns 4 4 4 4 5
Capital Expenditures $13 $19 $12 $17 $12
Working Capital
Integer Confidential February 27 2017 Page 11
Working Capital
$0
($ in millions)
bull Targeting continued reduction in inventory levels through FY17
bull Enhanced Sales amp Operating Plan (SampOP) process showing improved results and more accurate forecasting
bull Rationalizing vendor partners to drive synergies and extend payment terms
bull On-going process improvement programs to reduce direct materials spend and indirect expenses
($ in millions)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
FY16Actual
FY17Outlook
Revenue $1386 $1390 - $1430
Adjusted Diluted EPS $268 $270 - $310
FY 2017 Outlook
Integer Confidential February 27 2017 Page 12
bull Working Capital expected to improve $10M - $20M by YE2017
bull FY17 Adjusted Effective Tax Rate expected to be ~25
bull Cash Taxes expected to be ~$10M
bull Other Operating Expense expected to be in the range of $18M - $22M
bull Capital Expenditures expected to be in the range of $50M - $60M per year
bull Depreciation amp Amortization expected to be in the range of $95M - $100MStock
bull Stock-based compensation Expense expected to be ~$15M
($ in millions except per share amounts)
Product Line Review
Advanced Surgical Orthopedics amp Portable Medical
Integer Confidential February 27 2017 Page 14
Providing a wide range of technologies and solutions to the Advanced Surgical and Orthopedic markets
Implants Delivery Systems Reamers Laparoscopic Devices Arthroscopy Products
bull Revenue remains a solid contributor to total Company results down YOY driven by lower product launches during current quarter and accelerated demand in the prior year quarter
bull Shipped wireless prototype to first customer making good progress with additional customers
bull Steady operational performance driven by improvements in customer relationships
bull Multiple continuous improvement initiatives in place across our operations ndash early results are positive
bull Expect incremental revenue growth in 2017 driven by new product launches and acceleration in targeted areas
Cardio amp Vascular
Integer Confidential February 27 2017 Page 15
Offering a full-range of products and services for catheter-based interventional vascular devices and a suite of supply chain solutions to support the
development and manufacturing of complex components sub-assemblies and finished devices
Steerable Sheaths Catheters amp Sheaths Guidewires Stylets amp Accessories
Introducers
bull 4Q16 Revenue increased 7 YoY ndash strong demand for precious metal machining components and OEM product lines
bull Operational performance backed by strong customer relationships enabling deeper penetration and increased customer opportunities
bull First commercial shipment late in 4Q16 of previously delayed key customer program will ramp throughout 2017
bull Positive outlook for 2017 ndash several new opportunities well-positioned in sales process
Cardiac amp Neuromodulation
Integer Confidential February 27 2017 Page 16
Batteries Feedthroughs Enclosures Coated Electrodes
bull Continued positive quarterly momentum and sequential revenue improvement
bull Incremental growth opportunities within the market as OEM partners and customers seek value-added solutions as well as supply chain efficiencies
bull Leading position in the rapidly growing Neuromodulation market
bull Solid pipeline in various stages of development (generally a 2 to 5 year process)
bull Signed several new customer development agreements and manufacturing programs
Providing technology solutions for the active implantable medical device industry by partnering with customers to bring quality products to established and
emerging markets - from initial concept through to high volume manufacturing
Full System Solutions
Electrochem
Integer Confidential February 27 2017 Page 17
Enhancing lives worldwide by providing superior power solutions that enable the success and advancement of our customersrsquo critical applications
Battery Cells
Battery Packs
Battery Chargers
bull Revenues continue to trend with Oil amp Gas marketbull Oil prices begun to stabilize in 4Q16
bull North American energy customer activity coming back online
bull Military and Environmental customer volumes remain steady
bull Engaging with customers across all market segments ndash actively pursuing new customer and market opportunities
bull Growing market share within the space new opportunities driven by long history of operational and quality performance
bull Advancing competitive position through multi-year supply agreements
Strategic Growth Initiatives
Key Strategic Focus Areas
bull Laser focused on achieving strategic objectivesbull Invest to drive growth with customers across full spectrum of
product and systems capabilities
bull Deliver shareholder returns through growth in profitability and cash generation to drive accelerate debt repayment
bull Optimize the commitment and contribution of our Associates by cultivating an ethical values-driven culture
bull Current integration efforts remain on trackbull Formal activities complete mid-2017
bull Expect to achieve total synergies of $60M by YE2018
bull Creating an optimized manufacturing footprintbull Continuous improvement and productivity initiatives
bull Direct material and indirect expense savings
bull Centers of excellence around the world
bull No further plans to close or consolidate locations at this time
Integer Confidential February 27 2017 Page 19
ldquoOur vision is to
enhance the lives of
patients worldwide
by being our
customersrsquo partner of
choice for innovative
technologies and
servicesrdquo
Closing Comments
Well-Positioned for Future Growth
Integer Confidential February 27 2017 Page 21
Operating amp Manufacturing
Scalability
Strong Customer Relationships
Business Optimization
Driving Strong Cash Generation
Innovation Pipeline to Enable
Customer Success
Engineered Medical
Components
Engineered Medical Sub Assemblies
Differentiated Medical
Components amp Subassemblies
Transfer Devices
Co-Developed
Devices
IntegerDesigned Devices
Fully Branded Solutions
Medical Device
Systems
Product Solutions(More IP Focused)
Technical Solutions(Traditional CMO)
80 20
Broad Product Continuum
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1360 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||
Free Cash Flow | $11 | $11 | ($8) | $21 | $22 | |||||||||||
Days Sales Outstanding | 0 | 50 | 50 | 50 | 52 | |||||||||||
Inventory | $252 | $267 | $276 | $262 | $225 | |||||||||||
Inventory Turns | 4 | 4 | 4 | 4 | 5 | |||||||||||
Capital Expenditures | $13 | $19 | $12 | $17 | $12 | |||||||||||
Days Payables Outstanding | 0 | 32 | 36 | 32 | 27 | |||||||||||
Sales | 359634 | 331058 | 348382 | 346567 | 359591 | |||||||||||
COGS | 282377 | 240244 | 252351 | 248658 | 266700 | |||||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||||||
Net Inventory | 252166 | 267380 | 276279 | 262232 | 225151 | |||||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
$138 $145 $147 $133 $134 $144 $148 $142
$99 $109 $94 $111 $96 $92 $96 $105
$106 $109
$99 $105 $91
$104 $95 $102
$18 $17
$12 $13 $12
$10 $9 $11
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Continued Revenue Stabilization
Integer Confidential February 27 2017 Page 8
$358
Non-Medical
Cardiac amp Neuro
Cardio amp Vascular
Adv Surgical Ortho ampPortable Medical
$377 $348 $360 $331 $348 $347
Quarterly Sales(1)
4Q16 SalesQoQ YoY YTD
38 (05) (40)
28 (14) (30)
7 (3) (6)
10 (5) (6)
(4) 7 1
Total Sales(2)
(1) Sales information provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) Total sales includes the sum of sales for each of ITGRrsquos product lines as detailed on this slide and the elimination of Interproduct Line Sales for which amounts are not included on this slide
($ in millions) $360
$79
$65 $69 $75
$71
4Q15 1Q16 2Q16 3Q16 4Q16
Adjusted EBITDA
Integer Confidential February 27 2017 Page 9
Adjusted EBITDA(1)
$0
($ in millions) bull Continued focus on improving business performance to generate cash
bull Ongoing pricing pressure reinforces focus on quality to drive volume increases and efficiency
bull Improve customer satisfaction
bull Reduce costs and expand share of wallet with customers
bull Cumulative synergies of $34Mbull Realized benefits offset by sales mix
pricing pressure salary increases and warranty inventory reserve charges
bull Excludes $121M of OOE and IP related litigation expenses in 4Q16(2)
(1) Adjusted EBITDA provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) See APPENDIX for additional information regarding Other Operating Expenses (OOE) including historical data
22 of Sales 20 20 2022
DebtPayments
Strong Cash Flow Generation
Integer Confidential February 27 2017 Page 10
bull Generating significant cash flow to meet current debt obligations and accelerate debt repayment
bull FY17 Cash Flow of $106M
bull Paid down $17M of debt in 4Q16 $46M YTD
bull Focused on reducing total leverage as quickly as possible
bull Total long-term debt of $18B as of YE 2016
bull No significant maturities until 2020
bull Mitigating exposure to interest rate volatility
bull Well within covenant compliance requirements(2)
bull Successfully amended credit agreement in 4Q16
($ in millions)
(1) Free Cash Flow defined as Cash from Operations less Capital Expenditures
(2) See the APPENDIX to this presentation for further discussion regarding financial covenant calculations
($ in millions)
$31 $41 $48 $88$240
$964
$360
2017 2018 2019 2020 2021 2022 2023
$11
$(8)
$21 $22
1Q16 2Q16 3Q16 4Q16
$30
$4
$38 $34
1Q16 2Q16 3Q16 4Q16
Cash Flow From Operations Free Cash Flow($ in millions)
FY16
Debt Repayment Schedule($ in millions)
$29
$17
$46
Accelerated RepaymentRequired Repayment
$361 $318 $317 $325 $332
4Q15 1Q16 2Q16 3Q16 4Q16
4Q15 1Q16 2Q16 3Q16 4Q16
Inventory $252 $267 $276 $262 $225
Inventory Turns 4 4 4 4 5
Capital Expenditures $13 $19 $12 $17 $12
Working Capital
Integer Confidential February 27 2017 Page 11
Working Capital
$0
($ in millions)
bull Targeting continued reduction in inventory levels through FY17
bull Enhanced Sales amp Operating Plan (SampOP) process showing improved results and more accurate forecasting
bull Rationalizing vendor partners to drive synergies and extend payment terms
bull On-going process improvement programs to reduce direct materials spend and indirect expenses
($ in millions)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
FY16Actual
FY17Outlook
Revenue $1386 $1390 - $1430
Adjusted Diluted EPS $268 $270 - $310
FY 2017 Outlook
Integer Confidential February 27 2017 Page 12
bull Working Capital expected to improve $10M - $20M by YE2017
bull FY17 Adjusted Effective Tax Rate expected to be ~25
bull Cash Taxes expected to be ~$10M
bull Other Operating Expense expected to be in the range of $18M - $22M
bull Capital Expenditures expected to be in the range of $50M - $60M per year
bull Depreciation amp Amortization expected to be in the range of $95M - $100MStock
bull Stock-based compensation Expense expected to be ~$15M
($ in millions except per share amounts)
Product Line Review
Advanced Surgical Orthopedics amp Portable Medical
Integer Confidential February 27 2017 Page 14
Providing a wide range of technologies and solutions to the Advanced Surgical and Orthopedic markets
Implants Delivery Systems Reamers Laparoscopic Devices Arthroscopy Products
bull Revenue remains a solid contributor to total Company results down YOY driven by lower product launches during current quarter and accelerated demand in the prior year quarter
bull Shipped wireless prototype to first customer making good progress with additional customers
bull Steady operational performance driven by improvements in customer relationships
bull Multiple continuous improvement initiatives in place across our operations ndash early results are positive
bull Expect incremental revenue growth in 2017 driven by new product launches and acceleration in targeted areas
Cardio amp Vascular
Integer Confidential February 27 2017 Page 15
Offering a full-range of products and services for catheter-based interventional vascular devices and a suite of supply chain solutions to support the
development and manufacturing of complex components sub-assemblies and finished devices
Steerable Sheaths Catheters amp Sheaths Guidewires Stylets amp Accessories
Introducers
bull 4Q16 Revenue increased 7 YoY ndash strong demand for precious metal machining components and OEM product lines
bull Operational performance backed by strong customer relationships enabling deeper penetration and increased customer opportunities
bull First commercial shipment late in 4Q16 of previously delayed key customer program will ramp throughout 2017
bull Positive outlook for 2017 ndash several new opportunities well-positioned in sales process
Cardiac amp Neuromodulation
Integer Confidential February 27 2017 Page 16
Batteries Feedthroughs Enclosures Coated Electrodes
bull Continued positive quarterly momentum and sequential revenue improvement
bull Incremental growth opportunities within the market as OEM partners and customers seek value-added solutions as well as supply chain efficiencies
bull Leading position in the rapidly growing Neuromodulation market
bull Solid pipeline in various stages of development (generally a 2 to 5 year process)
bull Signed several new customer development agreements and manufacturing programs
Providing technology solutions for the active implantable medical device industry by partnering with customers to bring quality products to established and
emerging markets - from initial concept through to high volume manufacturing
Full System Solutions
Electrochem
Integer Confidential February 27 2017 Page 17
Enhancing lives worldwide by providing superior power solutions that enable the success and advancement of our customersrsquo critical applications
Battery Cells
Battery Packs
Battery Chargers
bull Revenues continue to trend with Oil amp Gas marketbull Oil prices begun to stabilize in 4Q16
bull North American energy customer activity coming back online
bull Military and Environmental customer volumes remain steady
bull Engaging with customers across all market segments ndash actively pursuing new customer and market opportunities
bull Growing market share within the space new opportunities driven by long history of operational and quality performance
bull Advancing competitive position through multi-year supply agreements
Strategic Growth Initiatives
Key Strategic Focus Areas
bull Laser focused on achieving strategic objectivesbull Invest to drive growth with customers across full spectrum of
product and systems capabilities
bull Deliver shareholder returns through growth in profitability and cash generation to drive accelerate debt repayment
bull Optimize the commitment and contribution of our Associates by cultivating an ethical values-driven culture
bull Current integration efforts remain on trackbull Formal activities complete mid-2017
bull Expect to achieve total synergies of $60M by YE2018
bull Creating an optimized manufacturing footprintbull Continuous improvement and productivity initiatives
bull Direct material and indirect expense savings
bull Centers of excellence around the world
bull No further plans to close or consolidate locations at this time
Integer Confidential February 27 2017 Page 19
ldquoOur vision is to
enhance the lives of
patients worldwide
by being our
customersrsquo partner of
choice for innovative
technologies and
servicesrdquo
Closing Comments
Well-Positioned for Future Growth
Integer Confidential February 27 2017 Page 21
Operating amp Manufacturing
Scalability
Strong Customer Relationships
Business Optimization
Driving Strong Cash Generation
Innovation Pipeline to Enable
Customer Success
Engineered Medical
Components
Engineered Medical Sub Assemblies
Differentiated Medical
Components amp Subassemblies
Transfer Devices
Co-Developed
Devices
IntegerDesigned Devices
Fully Branded Solutions
Medical Device
Systems
Product Solutions(More IP Focused)
Technical Solutions(Traditional CMO)
80 20
Broad Product Continuum
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1360 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||
Free Cash Flow | $11 | $11 | ($8) | $21 | $22 | |||||||||||
Days Sales Outstanding | 0 | 50 | 50 | 50 | 52 | |||||||||||
Inventory | $252 | $267 | $276 | $262 | $225 | |||||||||||
Inventory Turns | 4 | 4 | 4 | 4 | 5 | |||||||||||
Capital Expenditures | $13 | $19 | $12 | $17 | $12 | |||||||||||
Days Payables Outstanding | 0 | 32 | 36 | 32 | 27 | |||||||||||
Sales | 359634 | 331058 | 348382 | 346567 | 359591 | |||||||||||
COGS | 282377 | 240244 | 252351 | 248658 | 266700 | |||||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||||||
Net Inventory | 252166 | 267380 | 276279 | 262232 | 225151 | |||||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
$79
$65 $69 $75
$71
4Q15 1Q16 2Q16 3Q16 4Q16
Adjusted EBITDA
Integer Confidential February 27 2017 Page 9
Adjusted EBITDA(1)
$0
($ in millions) bull Continued focus on improving business performance to generate cash
bull Ongoing pricing pressure reinforces focus on quality to drive volume increases and efficiency
bull Improve customer satisfaction
bull Reduce costs and expand share of wallet with customers
bull Cumulative synergies of $34Mbull Realized benefits offset by sales mix
pricing pressure salary increases and warranty inventory reserve charges
bull Excludes $121M of OOE and IP related litigation expenses in 4Q16(2)
(1) Adjusted EBITDA provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
(2) See APPENDIX for additional information regarding Other Operating Expenses (OOE) including historical data
22 of Sales 20 20 2022
DebtPayments
Strong Cash Flow Generation
Integer Confidential February 27 2017 Page 10
bull Generating significant cash flow to meet current debt obligations and accelerate debt repayment
bull FY17 Cash Flow of $106M
bull Paid down $17M of debt in 4Q16 $46M YTD
bull Focused on reducing total leverage as quickly as possible
bull Total long-term debt of $18B as of YE 2016
bull No significant maturities until 2020
bull Mitigating exposure to interest rate volatility
bull Well within covenant compliance requirements(2)
bull Successfully amended credit agreement in 4Q16
($ in millions)
(1) Free Cash Flow defined as Cash from Operations less Capital Expenditures
(2) See the APPENDIX to this presentation for further discussion regarding financial covenant calculations
($ in millions)
$31 $41 $48 $88$240
$964
$360
2017 2018 2019 2020 2021 2022 2023
$11
$(8)
$21 $22
1Q16 2Q16 3Q16 4Q16
$30
$4
$38 $34
1Q16 2Q16 3Q16 4Q16
Cash Flow From Operations Free Cash Flow($ in millions)
FY16
Debt Repayment Schedule($ in millions)
$29
$17
$46
Accelerated RepaymentRequired Repayment
$361 $318 $317 $325 $332
4Q15 1Q16 2Q16 3Q16 4Q16
4Q15 1Q16 2Q16 3Q16 4Q16
Inventory $252 $267 $276 $262 $225
Inventory Turns 4 4 4 4 5
Capital Expenditures $13 $19 $12 $17 $12
Working Capital
Integer Confidential February 27 2017 Page 11
Working Capital
$0
($ in millions)
bull Targeting continued reduction in inventory levels through FY17
bull Enhanced Sales amp Operating Plan (SampOP) process showing improved results and more accurate forecasting
bull Rationalizing vendor partners to drive synergies and extend payment terms
bull On-going process improvement programs to reduce direct materials spend and indirect expenses
($ in millions)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
FY16Actual
FY17Outlook
Revenue $1386 $1390 - $1430
Adjusted Diluted EPS $268 $270 - $310
FY 2017 Outlook
Integer Confidential February 27 2017 Page 12
bull Working Capital expected to improve $10M - $20M by YE2017
bull FY17 Adjusted Effective Tax Rate expected to be ~25
bull Cash Taxes expected to be ~$10M
bull Other Operating Expense expected to be in the range of $18M - $22M
bull Capital Expenditures expected to be in the range of $50M - $60M per year
bull Depreciation amp Amortization expected to be in the range of $95M - $100MStock
bull Stock-based compensation Expense expected to be ~$15M
($ in millions except per share amounts)
Product Line Review
Advanced Surgical Orthopedics amp Portable Medical
Integer Confidential February 27 2017 Page 14
Providing a wide range of technologies and solutions to the Advanced Surgical and Orthopedic markets
Implants Delivery Systems Reamers Laparoscopic Devices Arthroscopy Products
bull Revenue remains a solid contributor to total Company results down YOY driven by lower product launches during current quarter and accelerated demand in the prior year quarter
bull Shipped wireless prototype to first customer making good progress with additional customers
bull Steady operational performance driven by improvements in customer relationships
bull Multiple continuous improvement initiatives in place across our operations ndash early results are positive
bull Expect incremental revenue growth in 2017 driven by new product launches and acceleration in targeted areas
Cardio amp Vascular
Integer Confidential February 27 2017 Page 15
Offering a full-range of products and services for catheter-based interventional vascular devices and a suite of supply chain solutions to support the
development and manufacturing of complex components sub-assemblies and finished devices
Steerable Sheaths Catheters amp Sheaths Guidewires Stylets amp Accessories
Introducers
bull 4Q16 Revenue increased 7 YoY ndash strong demand for precious metal machining components and OEM product lines
bull Operational performance backed by strong customer relationships enabling deeper penetration and increased customer opportunities
bull First commercial shipment late in 4Q16 of previously delayed key customer program will ramp throughout 2017
bull Positive outlook for 2017 ndash several new opportunities well-positioned in sales process
Cardiac amp Neuromodulation
Integer Confidential February 27 2017 Page 16
Batteries Feedthroughs Enclosures Coated Electrodes
bull Continued positive quarterly momentum and sequential revenue improvement
bull Incremental growth opportunities within the market as OEM partners and customers seek value-added solutions as well as supply chain efficiencies
bull Leading position in the rapidly growing Neuromodulation market
bull Solid pipeline in various stages of development (generally a 2 to 5 year process)
bull Signed several new customer development agreements and manufacturing programs
Providing technology solutions for the active implantable medical device industry by partnering with customers to bring quality products to established and
emerging markets - from initial concept through to high volume manufacturing
Full System Solutions
Electrochem
Integer Confidential February 27 2017 Page 17
Enhancing lives worldwide by providing superior power solutions that enable the success and advancement of our customersrsquo critical applications
Battery Cells
Battery Packs
Battery Chargers
bull Revenues continue to trend with Oil amp Gas marketbull Oil prices begun to stabilize in 4Q16
bull North American energy customer activity coming back online
bull Military and Environmental customer volumes remain steady
bull Engaging with customers across all market segments ndash actively pursuing new customer and market opportunities
bull Growing market share within the space new opportunities driven by long history of operational and quality performance
bull Advancing competitive position through multi-year supply agreements
Strategic Growth Initiatives
Key Strategic Focus Areas
bull Laser focused on achieving strategic objectivesbull Invest to drive growth with customers across full spectrum of
product and systems capabilities
bull Deliver shareholder returns through growth in profitability and cash generation to drive accelerate debt repayment
bull Optimize the commitment and contribution of our Associates by cultivating an ethical values-driven culture
bull Current integration efforts remain on trackbull Formal activities complete mid-2017
bull Expect to achieve total synergies of $60M by YE2018
bull Creating an optimized manufacturing footprintbull Continuous improvement and productivity initiatives
bull Direct material and indirect expense savings
bull Centers of excellence around the world
bull No further plans to close or consolidate locations at this time
Integer Confidential February 27 2017 Page 19
ldquoOur vision is to
enhance the lives of
patients worldwide
by being our
customersrsquo partner of
choice for innovative
technologies and
servicesrdquo
Closing Comments
Well-Positioned for Future Growth
Integer Confidential February 27 2017 Page 21
Operating amp Manufacturing
Scalability
Strong Customer Relationships
Business Optimization
Driving Strong Cash Generation
Innovation Pipeline to Enable
Customer Success
Engineered Medical
Components
Engineered Medical Sub Assemblies
Differentiated Medical
Components amp Subassemblies
Transfer Devices
Co-Developed
Devices
IntegerDesigned Devices
Fully Branded Solutions
Medical Device
Systems
Product Solutions(More IP Focused)
Technical Solutions(Traditional CMO)
80 20
Broad Product Continuum
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1360 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||
Free Cash Flow | $11 | $11 | ($8) | $21 | $22 | |||||||||||
Days Sales Outstanding | 0 | 50 | 50 | 50 | 52 | |||||||||||
Inventory | $252 | $267 | $276 | $262 | $225 | |||||||||||
Inventory Turns | 4 | 4 | 4 | 4 | 5 | |||||||||||
Capital Expenditures | $13 | $19 | $12 | $17 | $12 | |||||||||||
Days Payables Outstanding | 0 | 32 | 36 | 32 | 27 | |||||||||||
Sales | 359634 | 331058 | 348382 | 346567 | 359591 | |||||||||||
COGS | 282377 | 240244 | 252351 | 248658 | 266700 | |||||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||||||
Net Inventory | 252166 | 267380 | 276279 | 262232 | 225151 | |||||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
DebtPayments
Strong Cash Flow Generation
Integer Confidential February 27 2017 Page 10
bull Generating significant cash flow to meet current debt obligations and accelerate debt repayment
bull FY17 Cash Flow of $106M
bull Paid down $17M of debt in 4Q16 $46M YTD
bull Focused on reducing total leverage as quickly as possible
bull Total long-term debt of $18B as of YE 2016
bull No significant maturities until 2020
bull Mitigating exposure to interest rate volatility
bull Well within covenant compliance requirements(2)
bull Successfully amended credit agreement in 4Q16
($ in millions)
(1) Free Cash Flow defined as Cash from Operations less Capital Expenditures
(2) See the APPENDIX to this presentation for further discussion regarding financial covenant calculations
($ in millions)
$31 $41 $48 $88$240
$964
$360
2017 2018 2019 2020 2021 2022 2023
$11
$(8)
$21 $22
1Q16 2Q16 3Q16 4Q16
$30
$4
$38 $34
1Q16 2Q16 3Q16 4Q16
Cash Flow From Operations Free Cash Flow($ in millions)
FY16
Debt Repayment Schedule($ in millions)
$29
$17
$46
Accelerated RepaymentRequired Repayment
$361 $318 $317 $325 $332
4Q15 1Q16 2Q16 3Q16 4Q16
4Q15 1Q16 2Q16 3Q16 4Q16
Inventory $252 $267 $276 $262 $225
Inventory Turns 4 4 4 4 5
Capital Expenditures $13 $19 $12 $17 $12
Working Capital
Integer Confidential February 27 2017 Page 11
Working Capital
$0
($ in millions)
bull Targeting continued reduction in inventory levels through FY17
bull Enhanced Sales amp Operating Plan (SampOP) process showing improved results and more accurate forecasting
bull Rationalizing vendor partners to drive synergies and extend payment terms
bull On-going process improvement programs to reduce direct materials spend and indirect expenses
($ in millions)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
FY16Actual
FY17Outlook
Revenue $1386 $1390 - $1430
Adjusted Diluted EPS $268 $270 - $310
FY 2017 Outlook
Integer Confidential February 27 2017 Page 12
bull Working Capital expected to improve $10M - $20M by YE2017
bull FY17 Adjusted Effective Tax Rate expected to be ~25
bull Cash Taxes expected to be ~$10M
bull Other Operating Expense expected to be in the range of $18M - $22M
bull Capital Expenditures expected to be in the range of $50M - $60M per year
bull Depreciation amp Amortization expected to be in the range of $95M - $100MStock
bull Stock-based compensation Expense expected to be ~$15M
($ in millions except per share amounts)
Product Line Review
Advanced Surgical Orthopedics amp Portable Medical
Integer Confidential February 27 2017 Page 14
Providing a wide range of technologies and solutions to the Advanced Surgical and Orthopedic markets
Implants Delivery Systems Reamers Laparoscopic Devices Arthroscopy Products
bull Revenue remains a solid contributor to total Company results down YOY driven by lower product launches during current quarter and accelerated demand in the prior year quarter
bull Shipped wireless prototype to first customer making good progress with additional customers
bull Steady operational performance driven by improvements in customer relationships
bull Multiple continuous improvement initiatives in place across our operations ndash early results are positive
bull Expect incremental revenue growth in 2017 driven by new product launches and acceleration in targeted areas
Cardio amp Vascular
Integer Confidential February 27 2017 Page 15
Offering a full-range of products and services for catheter-based interventional vascular devices and a suite of supply chain solutions to support the
development and manufacturing of complex components sub-assemblies and finished devices
Steerable Sheaths Catheters amp Sheaths Guidewires Stylets amp Accessories
Introducers
bull 4Q16 Revenue increased 7 YoY ndash strong demand for precious metal machining components and OEM product lines
bull Operational performance backed by strong customer relationships enabling deeper penetration and increased customer opportunities
bull First commercial shipment late in 4Q16 of previously delayed key customer program will ramp throughout 2017
bull Positive outlook for 2017 ndash several new opportunities well-positioned in sales process
Cardiac amp Neuromodulation
Integer Confidential February 27 2017 Page 16
Batteries Feedthroughs Enclosures Coated Electrodes
bull Continued positive quarterly momentum and sequential revenue improvement
bull Incremental growth opportunities within the market as OEM partners and customers seek value-added solutions as well as supply chain efficiencies
bull Leading position in the rapidly growing Neuromodulation market
bull Solid pipeline in various stages of development (generally a 2 to 5 year process)
bull Signed several new customer development agreements and manufacturing programs
Providing technology solutions for the active implantable medical device industry by partnering with customers to bring quality products to established and
emerging markets - from initial concept through to high volume manufacturing
Full System Solutions
Electrochem
Integer Confidential February 27 2017 Page 17
Enhancing lives worldwide by providing superior power solutions that enable the success and advancement of our customersrsquo critical applications
Battery Cells
Battery Packs
Battery Chargers
bull Revenues continue to trend with Oil amp Gas marketbull Oil prices begun to stabilize in 4Q16
bull North American energy customer activity coming back online
bull Military and Environmental customer volumes remain steady
bull Engaging with customers across all market segments ndash actively pursuing new customer and market opportunities
bull Growing market share within the space new opportunities driven by long history of operational and quality performance
bull Advancing competitive position through multi-year supply agreements
Strategic Growth Initiatives
Key Strategic Focus Areas
bull Laser focused on achieving strategic objectivesbull Invest to drive growth with customers across full spectrum of
product and systems capabilities
bull Deliver shareholder returns through growth in profitability and cash generation to drive accelerate debt repayment
bull Optimize the commitment and contribution of our Associates by cultivating an ethical values-driven culture
bull Current integration efforts remain on trackbull Formal activities complete mid-2017
bull Expect to achieve total synergies of $60M by YE2018
bull Creating an optimized manufacturing footprintbull Continuous improvement and productivity initiatives
bull Direct material and indirect expense savings
bull Centers of excellence around the world
bull No further plans to close or consolidate locations at this time
Integer Confidential February 27 2017 Page 19
ldquoOur vision is to
enhance the lives of
patients worldwide
by being our
customersrsquo partner of
choice for innovative
technologies and
servicesrdquo
Closing Comments
Well-Positioned for Future Growth
Integer Confidential February 27 2017 Page 21
Operating amp Manufacturing
Scalability
Strong Customer Relationships
Business Optimization
Driving Strong Cash Generation
Innovation Pipeline to Enable
Customer Success
Engineered Medical
Components
Engineered Medical Sub Assemblies
Differentiated Medical
Components amp Subassemblies
Transfer Devices
Co-Developed
Devices
IntegerDesigned Devices
Fully Branded Solutions
Medical Device
Systems
Product Solutions(More IP Focused)
Technical Solutions(Traditional CMO)
80 20
Broad Product Continuum
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1360 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||
Free Cash Flow | $11 | $11 | ($8) | $21 | $22 | |||||||||||
Days Sales Outstanding | 0 | 50 | 50 | 50 | 52 | |||||||||||
Inventory | $252 | $267 | $276 | $262 | $225 | |||||||||||
Inventory Turns | 4 | 4 | 4 | 4 | 5 | |||||||||||
Capital Expenditures | $13 | $19 | $12 | $17 | $12 | |||||||||||
Days Payables Outstanding | 0 | 32 | 36 | 32 | 27 | |||||||||||
Sales | 359634 | 331058 | 348382 | 346567 | 359591 | |||||||||||
COGS | 282377 | 240244 | 252351 | 248658 | 266700 | |||||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||||||
Net Inventory | 252166 | 267380 | 276279 | 262232 | 225151 | |||||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
$361 $318 $317 $325 $332
4Q15 1Q16 2Q16 3Q16 4Q16
4Q15 1Q16 2Q16 3Q16 4Q16
Inventory $252 $267 $276 $262 $225
Inventory Turns 4 4 4 4 5
Capital Expenditures $13 $19 $12 $17 $12
Working Capital
Integer Confidential February 27 2017 Page 11
Working Capital
$0
($ in millions)
bull Targeting continued reduction in inventory levels through FY17
bull Enhanced Sales amp Operating Plan (SampOP) process showing improved results and more accurate forecasting
bull Rationalizing vendor partners to drive synergies and extend payment terms
bull On-going process improvement programs to reduce direct materials spend and indirect expenses
($ in millions)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
FY16Actual
FY17Outlook
Revenue $1386 $1390 - $1430
Adjusted Diluted EPS $268 $270 - $310
FY 2017 Outlook
Integer Confidential February 27 2017 Page 12
bull Working Capital expected to improve $10M - $20M by YE2017
bull FY17 Adjusted Effective Tax Rate expected to be ~25
bull Cash Taxes expected to be ~$10M
bull Other Operating Expense expected to be in the range of $18M - $22M
bull Capital Expenditures expected to be in the range of $50M - $60M per year
bull Depreciation amp Amortization expected to be in the range of $95M - $100MStock
bull Stock-based compensation Expense expected to be ~$15M
($ in millions except per share amounts)
Product Line Review
Advanced Surgical Orthopedics amp Portable Medical
Integer Confidential February 27 2017 Page 14
Providing a wide range of technologies and solutions to the Advanced Surgical and Orthopedic markets
Implants Delivery Systems Reamers Laparoscopic Devices Arthroscopy Products
bull Revenue remains a solid contributor to total Company results down YOY driven by lower product launches during current quarter and accelerated demand in the prior year quarter
bull Shipped wireless prototype to first customer making good progress with additional customers
bull Steady operational performance driven by improvements in customer relationships
bull Multiple continuous improvement initiatives in place across our operations ndash early results are positive
bull Expect incremental revenue growth in 2017 driven by new product launches and acceleration in targeted areas
Cardio amp Vascular
Integer Confidential February 27 2017 Page 15
Offering a full-range of products and services for catheter-based interventional vascular devices and a suite of supply chain solutions to support the
development and manufacturing of complex components sub-assemblies and finished devices
Steerable Sheaths Catheters amp Sheaths Guidewires Stylets amp Accessories
Introducers
bull 4Q16 Revenue increased 7 YoY ndash strong demand for precious metal machining components and OEM product lines
bull Operational performance backed by strong customer relationships enabling deeper penetration and increased customer opportunities
bull First commercial shipment late in 4Q16 of previously delayed key customer program will ramp throughout 2017
bull Positive outlook for 2017 ndash several new opportunities well-positioned in sales process
Cardiac amp Neuromodulation
Integer Confidential February 27 2017 Page 16
Batteries Feedthroughs Enclosures Coated Electrodes
bull Continued positive quarterly momentum and sequential revenue improvement
bull Incremental growth opportunities within the market as OEM partners and customers seek value-added solutions as well as supply chain efficiencies
bull Leading position in the rapidly growing Neuromodulation market
bull Solid pipeline in various stages of development (generally a 2 to 5 year process)
bull Signed several new customer development agreements and manufacturing programs
Providing technology solutions for the active implantable medical device industry by partnering with customers to bring quality products to established and
emerging markets - from initial concept through to high volume manufacturing
Full System Solutions
Electrochem
Integer Confidential February 27 2017 Page 17
Enhancing lives worldwide by providing superior power solutions that enable the success and advancement of our customersrsquo critical applications
Battery Cells
Battery Packs
Battery Chargers
bull Revenues continue to trend with Oil amp Gas marketbull Oil prices begun to stabilize in 4Q16
bull North American energy customer activity coming back online
bull Military and Environmental customer volumes remain steady
bull Engaging with customers across all market segments ndash actively pursuing new customer and market opportunities
bull Growing market share within the space new opportunities driven by long history of operational and quality performance
bull Advancing competitive position through multi-year supply agreements
Strategic Growth Initiatives
Key Strategic Focus Areas
bull Laser focused on achieving strategic objectivesbull Invest to drive growth with customers across full spectrum of
product and systems capabilities
bull Deliver shareholder returns through growth in profitability and cash generation to drive accelerate debt repayment
bull Optimize the commitment and contribution of our Associates by cultivating an ethical values-driven culture
bull Current integration efforts remain on trackbull Formal activities complete mid-2017
bull Expect to achieve total synergies of $60M by YE2018
bull Creating an optimized manufacturing footprintbull Continuous improvement and productivity initiatives
bull Direct material and indirect expense savings
bull Centers of excellence around the world
bull No further plans to close or consolidate locations at this time
Integer Confidential February 27 2017 Page 19
ldquoOur vision is to
enhance the lives of
patients worldwide
by being our
customersrsquo partner of
choice for innovative
technologies and
servicesrdquo
Closing Comments
Well-Positioned for Future Growth
Integer Confidential February 27 2017 Page 21
Operating amp Manufacturing
Scalability
Strong Customer Relationships
Business Optimization
Driving Strong Cash Generation
Innovation Pipeline to Enable
Customer Success
Engineered Medical
Components
Engineered Medical Sub Assemblies
Differentiated Medical
Components amp Subassemblies
Transfer Devices
Co-Developed
Devices
IntegerDesigned Devices
Fully Branded Solutions
Medical Device
Systems
Product Solutions(More IP Focused)
Technical Solutions(Traditional CMO)
80 20
Broad Product Continuum
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1360 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||
Free Cash Flow | $11 | $11 | ($8) | $21 | $22 | |||||||||||
Days Sales Outstanding | 0 | 50 | 50 | 50 | 52 | |||||||||||
Inventory | $252 | $267 | $276 | $262 | $225 | |||||||||||
Inventory Turns | 4 | 4 | 4 | 4 | 5 | |||||||||||
Capital Expenditures | $13 | $19 | $12 | $17 | $12 | |||||||||||
Days Payables Outstanding | 0 | 32 | 36 | 32 | 27 | |||||||||||
Sales | 359634 | 331058 | 348382 | 346567 | 359591 | |||||||||||
COGS | 282377 | 240244 | 252351 | 248658 | 266700 | |||||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||||||
Net Inventory | 252166 | 267380 | 276279 | 262232 | 225151 | |||||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
FY16Actual
FY17Outlook
Revenue $1386 $1390 - $1430
Adjusted Diluted EPS $268 $270 - $310
FY 2017 Outlook
Integer Confidential February 27 2017 Page 12
bull Working Capital expected to improve $10M - $20M by YE2017
bull FY17 Adjusted Effective Tax Rate expected to be ~25
bull Cash Taxes expected to be ~$10M
bull Other Operating Expense expected to be in the range of $18M - $22M
bull Capital Expenditures expected to be in the range of $50M - $60M per year
bull Depreciation amp Amortization expected to be in the range of $95M - $100MStock
bull Stock-based compensation Expense expected to be ~$15M
($ in millions except per share amounts)
Product Line Review
Advanced Surgical Orthopedics amp Portable Medical
Integer Confidential February 27 2017 Page 14
Providing a wide range of technologies and solutions to the Advanced Surgical and Orthopedic markets
Implants Delivery Systems Reamers Laparoscopic Devices Arthroscopy Products
bull Revenue remains a solid contributor to total Company results down YOY driven by lower product launches during current quarter and accelerated demand in the prior year quarter
bull Shipped wireless prototype to first customer making good progress with additional customers
bull Steady operational performance driven by improvements in customer relationships
bull Multiple continuous improvement initiatives in place across our operations ndash early results are positive
bull Expect incremental revenue growth in 2017 driven by new product launches and acceleration in targeted areas
Cardio amp Vascular
Integer Confidential February 27 2017 Page 15
Offering a full-range of products and services for catheter-based interventional vascular devices and a suite of supply chain solutions to support the
development and manufacturing of complex components sub-assemblies and finished devices
Steerable Sheaths Catheters amp Sheaths Guidewires Stylets amp Accessories
Introducers
bull 4Q16 Revenue increased 7 YoY ndash strong demand for precious metal machining components and OEM product lines
bull Operational performance backed by strong customer relationships enabling deeper penetration and increased customer opportunities
bull First commercial shipment late in 4Q16 of previously delayed key customer program will ramp throughout 2017
bull Positive outlook for 2017 ndash several new opportunities well-positioned in sales process
Cardiac amp Neuromodulation
Integer Confidential February 27 2017 Page 16
Batteries Feedthroughs Enclosures Coated Electrodes
bull Continued positive quarterly momentum and sequential revenue improvement
bull Incremental growth opportunities within the market as OEM partners and customers seek value-added solutions as well as supply chain efficiencies
bull Leading position in the rapidly growing Neuromodulation market
bull Solid pipeline in various stages of development (generally a 2 to 5 year process)
bull Signed several new customer development agreements and manufacturing programs
Providing technology solutions for the active implantable medical device industry by partnering with customers to bring quality products to established and
emerging markets - from initial concept through to high volume manufacturing
Full System Solutions
Electrochem
Integer Confidential February 27 2017 Page 17
Enhancing lives worldwide by providing superior power solutions that enable the success and advancement of our customersrsquo critical applications
Battery Cells
Battery Packs
Battery Chargers
bull Revenues continue to trend with Oil amp Gas marketbull Oil prices begun to stabilize in 4Q16
bull North American energy customer activity coming back online
bull Military and Environmental customer volumes remain steady
bull Engaging with customers across all market segments ndash actively pursuing new customer and market opportunities
bull Growing market share within the space new opportunities driven by long history of operational and quality performance
bull Advancing competitive position through multi-year supply agreements
Strategic Growth Initiatives
Key Strategic Focus Areas
bull Laser focused on achieving strategic objectivesbull Invest to drive growth with customers across full spectrum of
product and systems capabilities
bull Deliver shareholder returns through growth in profitability and cash generation to drive accelerate debt repayment
bull Optimize the commitment and contribution of our Associates by cultivating an ethical values-driven culture
bull Current integration efforts remain on trackbull Formal activities complete mid-2017
bull Expect to achieve total synergies of $60M by YE2018
bull Creating an optimized manufacturing footprintbull Continuous improvement and productivity initiatives
bull Direct material and indirect expense savings
bull Centers of excellence around the world
bull No further plans to close or consolidate locations at this time
Integer Confidential February 27 2017 Page 19
ldquoOur vision is to
enhance the lives of
patients worldwide
by being our
customersrsquo partner of
choice for innovative
technologies and
servicesrdquo
Closing Comments
Well-Positioned for Future Growth
Integer Confidential February 27 2017 Page 21
Operating amp Manufacturing
Scalability
Strong Customer Relationships
Business Optimization
Driving Strong Cash Generation
Innovation Pipeline to Enable
Customer Success
Engineered Medical
Components
Engineered Medical Sub Assemblies
Differentiated Medical
Components amp Subassemblies
Transfer Devices
Co-Developed
Devices
IntegerDesigned Devices
Fully Branded Solutions
Medical Device
Systems
Product Solutions(More IP Focused)
Technical Solutions(Traditional CMO)
80 20
Broad Product Continuum
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Product Line Review
Advanced Surgical Orthopedics amp Portable Medical
Integer Confidential February 27 2017 Page 14
Providing a wide range of technologies and solutions to the Advanced Surgical and Orthopedic markets
Implants Delivery Systems Reamers Laparoscopic Devices Arthroscopy Products
bull Revenue remains a solid contributor to total Company results down YOY driven by lower product launches during current quarter and accelerated demand in the prior year quarter
bull Shipped wireless prototype to first customer making good progress with additional customers
bull Steady operational performance driven by improvements in customer relationships
bull Multiple continuous improvement initiatives in place across our operations ndash early results are positive
bull Expect incremental revenue growth in 2017 driven by new product launches and acceleration in targeted areas
Cardio amp Vascular
Integer Confidential February 27 2017 Page 15
Offering a full-range of products and services for catheter-based interventional vascular devices and a suite of supply chain solutions to support the
development and manufacturing of complex components sub-assemblies and finished devices
Steerable Sheaths Catheters amp Sheaths Guidewires Stylets amp Accessories
Introducers
bull 4Q16 Revenue increased 7 YoY ndash strong demand for precious metal machining components and OEM product lines
bull Operational performance backed by strong customer relationships enabling deeper penetration and increased customer opportunities
bull First commercial shipment late in 4Q16 of previously delayed key customer program will ramp throughout 2017
bull Positive outlook for 2017 ndash several new opportunities well-positioned in sales process
Cardiac amp Neuromodulation
Integer Confidential February 27 2017 Page 16
Batteries Feedthroughs Enclosures Coated Electrodes
bull Continued positive quarterly momentum and sequential revenue improvement
bull Incremental growth opportunities within the market as OEM partners and customers seek value-added solutions as well as supply chain efficiencies
bull Leading position in the rapidly growing Neuromodulation market
bull Solid pipeline in various stages of development (generally a 2 to 5 year process)
bull Signed several new customer development agreements and manufacturing programs
Providing technology solutions for the active implantable medical device industry by partnering with customers to bring quality products to established and
emerging markets - from initial concept through to high volume manufacturing
Full System Solutions
Electrochem
Integer Confidential February 27 2017 Page 17
Enhancing lives worldwide by providing superior power solutions that enable the success and advancement of our customersrsquo critical applications
Battery Cells
Battery Packs
Battery Chargers
bull Revenues continue to trend with Oil amp Gas marketbull Oil prices begun to stabilize in 4Q16
bull North American energy customer activity coming back online
bull Military and Environmental customer volumes remain steady
bull Engaging with customers across all market segments ndash actively pursuing new customer and market opportunities
bull Growing market share within the space new opportunities driven by long history of operational and quality performance
bull Advancing competitive position through multi-year supply agreements
Strategic Growth Initiatives
Key Strategic Focus Areas
bull Laser focused on achieving strategic objectivesbull Invest to drive growth with customers across full spectrum of
product and systems capabilities
bull Deliver shareholder returns through growth in profitability and cash generation to drive accelerate debt repayment
bull Optimize the commitment and contribution of our Associates by cultivating an ethical values-driven culture
bull Current integration efforts remain on trackbull Formal activities complete mid-2017
bull Expect to achieve total synergies of $60M by YE2018
bull Creating an optimized manufacturing footprintbull Continuous improvement and productivity initiatives
bull Direct material and indirect expense savings
bull Centers of excellence around the world
bull No further plans to close or consolidate locations at this time
Integer Confidential February 27 2017 Page 19
ldquoOur vision is to
enhance the lives of
patients worldwide
by being our
customersrsquo partner of
choice for innovative
technologies and
servicesrdquo
Closing Comments
Well-Positioned for Future Growth
Integer Confidential February 27 2017 Page 21
Operating amp Manufacturing
Scalability
Strong Customer Relationships
Business Optimization
Driving Strong Cash Generation
Innovation Pipeline to Enable
Customer Success
Engineered Medical
Components
Engineered Medical Sub Assemblies
Differentiated Medical
Components amp Subassemblies
Transfer Devices
Co-Developed
Devices
IntegerDesigned Devices
Fully Branded Solutions
Medical Device
Systems
Product Solutions(More IP Focused)
Technical Solutions(Traditional CMO)
80 20
Broad Product Continuum
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Advanced Surgical Orthopedics amp Portable Medical
Integer Confidential February 27 2017 Page 14
Providing a wide range of technologies and solutions to the Advanced Surgical and Orthopedic markets
Implants Delivery Systems Reamers Laparoscopic Devices Arthroscopy Products
bull Revenue remains a solid contributor to total Company results down YOY driven by lower product launches during current quarter and accelerated demand in the prior year quarter
bull Shipped wireless prototype to first customer making good progress with additional customers
bull Steady operational performance driven by improvements in customer relationships
bull Multiple continuous improvement initiatives in place across our operations ndash early results are positive
bull Expect incremental revenue growth in 2017 driven by new product launches and acceleration in targeted areas
Cardio amp Vascular
Integer Confidential February 27 2017 Page 15
Offering a full-range of products and services for catheter-based interventional vascular devices and a suite of supply chain solutions to support the
development and manufacturing of complex components sub-assemblies and finished devices
Steerable Sheaths Catheters amp Sheaths Guidewires Stylets amp Accessories
Introducers
bull 4Q16 Revenue increased 7 YoY ndash strong demand for precious metal machining components and OEM product lines
bull Operational performance backed by strong customer relationships enabling deeper penetration and increased customer opportunities
bull First commercial shipment late in 4Q16 of previously delayed key customer program will ramp throughout 2017
bull Positive outlook for 2017 ndash several new opportunities well-positioned in sales process
Cardiac amp Neuromodulation
Integer Confidential February 27 2017 Page 16
Batteries Feedthroughs Enclosures Coated Electrodes
bull Continued positive quarterly momentum and sequential revenue improvement
bull Incremental growth opportunities within the market as OEM partners and customers seek value-added solutions as well as supply chain efficiencies
bull Leading position in the rapidly growing Neuromodulation market
bull Solid pipeline in various stages of development (generally a 2 to 5 year process)
bull Signed several new customer development agreements and manufacturing programs
Providing technology solutions for the active implantable medical device industry by partnering with customers to bring quality products to established and
emerging markets - from initial concept through to high volume manufacturing
Full System Solutions
Electrochem
Integer Confidential February 27 2017 Page 17
Enhancing lives worldwide by providing superior power solutions that enable the success and advancement of our customersrsquo critical applications
Battery Cells
Battery Packs
Battery Chargers
bull Revenues continue to trend with Oil amp Gas marketbull Oil prices begun to stabilize in 4Q16
bull North American energy customer activity coming back online
bull Military and Environmental customer volumes remain steady
bull Engaging with customers across all market segments ndash actively pursuing new customer and market opportunities
bull Growing market share within the space new opportunities driven by long history of operational and quality performance
bull Advancing competitive position through multi-year supply agreements
Strategic Growth Initiatives
Key Strategic Focus Areas
bull Laser focused on achieving strategic objectivesbull Invest to drive growth with customers across full spectrum of
product and systems capabilities
bull Deliver shareholder returns through growth in profitability and cash generation to drive accelerate debt repayment
bull Optimize the commitment and contribution of our Associates by cultivating an ethical values-driven culture
bull Current integration efforts remain on trackbull Formal activities complete mid-2017
bull Expect to achieve total synergies of $60M by YE2018
bull Creating an optimized manufacturing footprintbull Continuous improvement and productivity initiatives
bull Direct material and indirect expense savings
bull Centers of excellence around the world
bull No further plans to close or consolidate locations at this time
Integer Confidential February 27 2017 Page 19
ldquoOur vision is to
enhance the lives of
patients worldwide
by being our
customersrsquo partner of
choice for innovative
technologies and
servicesrdquo
Closing Comments
Well-Positioned for Future Growth
Integer Confidential February 27 2017 Page 21
Operating amp Manufacturing
Scalability
Strong Customer Relationships
Business Optimization
Driving Strong Cash Generation
Innovation Pipeline to Enable
Customer Success
Engineered Medical
Components
Engineered Medical Sub Assemblies
Differentiated Medical
Components amp Subassemblies
Transfer Devices
Co-Developed
Devices
IntegerDesigned Devices
Fully Branded Solutions
Medical Device
Systems
Product Solutions(More IP Focused)
Technical Solutions(Traditional CMO)
80 20
Broad Product Continuum
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Cardio amp Vascular
Integer Confidential February 27 2017 Page 15
Offering a full-range of products and services for catheter-based interventional vascular devices and a suite of supply chain solutions to support the
development and manufacturing of complex components sub-assemblies and finished devices
Steerable Sheaths Catheters amp Sheaths Guidewires Stylets amp Accessories
Introducers
bull 4Q16 Revenue increased 7 YoY ndash strong demand for precious metal machining components and OEM product lines
bull Operational performance backed by strong customer relationships enabling deeper penetration and increased customer opportunities
bull First commercial shipment late in 4Q16 of previously delayed key customer program will ramp throughout 2017
bull Positive outlook for 2017 ndash several new opportunities well-positioned in sales process
Cardiac amp Neuromodulation
Integer Confidential February 27 2017 Page 16
Batteries Feedthroughs Enclosures Coated Electrodes
bull Continued positive quarterly momentum and sequential revenue improvement
bull Incremental growth opportunities within the market as OEM partners and customers seek value-added solutions as well as supply chain efficiencies
bull Leading position in the rapidly growing Neuromodulation market
bull Solid pipeline in various stages of development (generally a 2 to 5 year process)
bull Signed several new customer development agreements and manufacturing programs
Providing technology solutions for the active implantable medical device industry by partnering with customers to bring quality products to established and
emerging markets - from initial concept through to high volume manufacturing
Full System Solutions
Electrochem
Integer Confidential February 27 2017 Page 17
Enhancing lives worldwide by providing superior power solutions that enable the success and advancement of our customersrsquo critical applications
Battery Cells
Battery Packs
Battery Chargers
bull Revenues continue to trend with Oil amp Gas marketbull Oil prices begun to stabilize in 4Q16
bull North American energy customer activity coming back online
bull Military and Environmental customer volumes remain steady
bull Engaging with customers across all market segments ndash actively pursuing new customer and market opportunities
bull Growing market share within the space new opportunities driven by long history of operational and quality performance
bull Advancing competitive position through multi-year supply agreements
Strategic Growth Initiatives
Key Strategic Focus Areas
bull Laser focused on achieving strategic objectivesbull Invest to drive growth with customers across full spectrum of
product and systems capabilities
bull Deliver shareholder returns through growth in profitability and cash generation to drive accelerate debt repayment
bull Optimize the commitment and contribution of our Associates by cultivating an ethical values-driven culture
bull Current integration efforts remain on trackbull Formal activities complete mid-2017
bull Expect to achieve total synergies of $60M by YE2018
bull Creating an optimized manufacturing footprintbull Continuous improvement and productivity initiatives
bull Direct material and indirect expense savings
bull Centers of excellence around the world
bull No further plans to close or consolidate locations at this time
Integer Confidential February 27 2017 Page 19
ldquoOur vision is to
enhance the lives of
patients worldwide
by being our
customersrsquo partner of
choice for innovative
technologies and
servicesrdquo
Closing Comments
Well-Positioned for Future Growth
Integer Confidential February 27 2017 Page 21
Operating amp Manufacturing
Scalability
Strong Customer Relationships
Business Optimization
Driving Strong Cash Generation
Innovation Pipeline to Enable
Customer Success
Engineered Medical
Components
Engineered Medical Sub Assemblies
Differentiated Medical
Components amp Subassemblies
Transfer Devices
Co-Developed
Devices
IntegerDesigned Devices
Fully Branded Solutions
Medical Device
Systems
Product Solutions(More IP Focused)
Technical Solutions(Traditional CMO)
80 20
Broad Product Continuum
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Cardiac amp Neuromodulation
Integer Confidential February 27 2017 Page 16
Batteries Feedthroughs Enclosures Coated Electrodes
bull Continued positive quarterly momentum and sequential revenue improvement
bull Incremental growth opportunities within the market as OEM partners and customers seek value-added solutions as well as supply chain efficiencies
bull Leading position in the rapidly growing Neuromodulation market
bull Solid pipeline in various stages of development (generally a 2 to 5 year process)
bull Signed several new customer development agreements and manufacturing programs
Providing technology solutions for the active implantable medical device industry by partnering with customers to bring quality products to established and
emerging markets - from initial concept through to high volume manufacturing
Full System Solutions
Electrochem
Integer Confidential February 27 2017 Page 17
Enhancing lives worldwide by providing superior power solutions that enable the success and advancement of our customersrsquo critical applications
Battery Cells
Battery Packs
Battery Chargers
bull Revenues continue to trend with Oil amp Gas marketbull Oil prices begun to stabilize in 4Q16
bull North American energy customer activity coming back online
bull Military and Environmental customer volumes remain steady
bull Engaging with customers across all market segments ndash actively pursuing new customer and market opportunities
bull Growing market share within the space new opportunities driven by long history of operational and quality performance
bull Advancing competitive position through multi-year supply agreements
Strategic Growth Initiatives
Key Strategic Focus Areas
bull Laser focused on achieving strategic objectivesbull Invest to drive growth with customers across full spectrum of
product and systems capabilities
bull Deliver shareholder returns through growth in profitability and cash generation to drive accelerate debt repayment
bull Optimize the commitment and contribution of our Associates by cultivating an ethical values-driven culture
bull Current integration efforts remain on trackbull Formal activities complete mid-2017
bull Expect to achieve total synergies of $60M by YE2018
bull Creating an optimized manufacturing footprintbull Continuous improvement and productivity initiatives
bull Direct material and indirect expense savings
bull Centers of excellence around the world
bull No further plans to close or consolidate locations at this time
Integer Confidential February 27 2017 Page 19
ldquoOur vision is to
enhance the lives of
patients worldwide
by being our
customersrsquo partner of
choice for innovative
technologies and
servicesrdquo
Closing Comments
Well-Positioned for Future Growth
Integer Confidential February 27 2017 Page 21
Operating amp Manufacturing
Scalability
Strong Customer Relationships
Business Optimization
Driving Strong Cash Generation
Innovation Pipeline to Enable
Customer Success
Engineered Medical
Components
Engineered Medical Sub Assemblies
Differentiated Medical
Components amp Subassemblies
Transfer Devices
Co-Developed
Devices
IntegerDesigned Devices
Fully Branded Solutions
Medical Device
Systems
Product Solutions(More IP Focused)
Technical Solutions(Traditional CMO)
80 20
Broad Product Continuum
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Electrochem
Integer Confidential February 27 2017 Page 17
Enhancing lives worldwide by providing superior power solutions that enable the success and advancement of our customersrsquo critical applications
Battery Cells
Battery Packs
Battery Chargers
bull Revenues continue to trend with Oil amp Gas marketbull Oil prices begun to stabilize in 4Q16
bull North American energy customer activity coming back online
bull Military and Environmental customer volumes remain steady
bull Engaging with customers across all market segments ndash actively pursuing new customer and market opportunities
bull Growing market share within the space new opportunities driven by long history of operational and quality performance
bull Advancing competitive position through multi-year supply agreements
Strategic Growth Initiatives
Key Strategic Focus Areas
bull Laser focused on achieving strategic objectivesbull Invest to drive growth with customers across full spectrum of
product and systems capabilities
bull Deliver shareholder returns through growth in profitability and cash generation to drive accelerate debt repayment
bull Optimize the commitment and contribution of our Associates by cultivating an ethical values-driven culture
bull Current integration efforts remain on trackbull Formal activities complete mid-2017
bull Expect to achieve total synergies of $60M by YE2018
bull Creating an optimized manufacturing footprintbull Continuous improvement and productivity initiatives
bull Direct material and indirect expense savings
bull Centers of excellence around the world
bull No further plans to close or consolidate locations at this time
Integer Confidential February 27 2017 Page 19
ldquoOur vision is to
enhance the lives of
patients worldwide
by being our
customersrsquo partner of
choice for innovative
technologies and
servicesrdquo
Closing Comments
Well-Positioned for Future Growth
Integer Confidential February 27 2017 Page 21
Operating amp Manufacturing
Scalability
Strong Customer Relationships
Business Optimization
Driving Strong Cash Generation
Innovation Pipeline to Enable
Customer Success
Engineered Medical
Components
Engineered Medical Sub Assemblies
Differentiated Medical
Components amp Subassemblies
Transfer Devices
Co-Developed
Devices
IntegerDesigned Devices
Fully Branded Solutions
Medical Device
Systems
Product Solutions(More IP Focused)
Technical Solutions(Traditional CMO)
80 20
Broad Product Continuum
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Strategic Growth Initiatives
Key Strategic Focus Areas
bull Laser focused on achieving strategic objectivesbull Invest to drive growth with customers across full spectrum of
product and systems capabilities
bull Deliver shareholder returns through growth in profitability and cash generation to drive accelerate debt repayment
bull Optimize the commitment and contribution of our Associates by cultivating an ethical values-driven culture
bull Current integration efforts remain on trackbull Formal activities complete mid-2017
bull Expect to achieve total synergies of $60M by YE2018
bull Creating an optimized manufacturing footprintbull Continuous improvement and productivity initiatives
bull Direct material and indirect expense savings
bull Centers of excellence around the world
bull No further plans to close or consolidate locations at this time
Integer Confidential February 27 2017 Page 19
ldquoOur vision is to
enhance the lives of
patients worldwide
by being our
customersrsquo partner of
choice for innovative
technologies and
servicesrdquo
Closing Comments
Well-Positioned for Future Growth
Integer Confidential February 27 2017 Page 21
Operating amp Manufacturing
Scalability
Strong Customer Relationships
Business Optimization
Driving Strong Cash Generation
Innovation Pipeline to Enable
Customer Success
Engineered Medical
Components
Engineered Medical Sub Assemblies
Differentiated Medical
Components amp Subassemblies
Transfer Devices
Co-Developed
Devices
IntegerDesigned Devices
Fully Branded Solutions
Medical Device
Systems
Product Solutions(More IP Focused)
Technical Solutions(Traditional CMO)
80 20
Broad Product Continuum
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Key Strategic Focus Areas
bull Laser focused on achieving strategic objectivesbull Invest to drive growth with customers across full spectrum of
product and systems capabilities
bull Deliver shareholder returns through growth in profitability and cash generation to drive accelerate debt repayment
bull Optimize the commitment and contribution of our Associates by cultivating an ethical values-driven culture
bull Current integration efforts remain on trackbull Formal activities complete mid-2017
bull Expect to achieve total synergies of $60M by YE2018
bull Creating an optimized manufacturing footprintbull Continuous improvement and productivity initiatives
bull Direct material and indirect expense savings
bull Centers of excellence around the world
bull No further plans to close or consolidate locations at this time
Integer Confidential February 27 2017 Page 19
ldquoOur vision is to
enhance the lives of
patients worldwide
by being our
customersrsquo partner of
choice for innovative
technologies and
servicesrdquo
Closing Comments
Well-Positioned for Future Growth
Integer Confidential February 27 2017 Page 21
Operating amp Manufacturing
Scalability
Strong Customer Relationships
Business Optimization
Driving Strong Cash Generation
Innovation Pipeline to Enable
Customer Success
Engineered Medical
Components
Engineered Medical Sub Assemblies
Differentiated Medical
Components amp Subassemblies
Transfer Devices
Co-Developed
Devices
IntegerDesigned Devices
Fully Branded Solutions
Medical Device
Systems
Product Solutions(More IP Focused)
Technical Solutions(Traditional CMO)
80 20
Broad Product Continuum
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Closing Comments
Well-Positioned for Future Growth
Integer Confidential February 27 2017 Page 21
Operating amp Manufacturing
Scalability
Strong Customer Relationships
Business Optimization
Driving Strong Cash Generation
Innovation Pipeline to Enable
Customer Success
Engineered Medical
Components
Engineered Medical Sub Assemblies
Differentiated Medical
Components amp Subassemblies
Transfer Devices
Co-Developed
Devices
IntegerDesigned Devices
Fully Branded Solutions
Medical Device
Systems
Product Solutions(More IP Focused)
Technical Solutions(Traditional CMO)
80 20
Broad Product Continuum
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Well-Positioned for Future Growth
Integer Confidential February 27 2017 Page 21
Operating amp Manufacturing
Scalability
Strong Customer Relationships
Business Optimization
Driving Strong Cash Generation
Innovation Pipeline to Enable
Customer Success
Engineered Medical
Components
Engineered Medical Sub Assemblies
Differentiated Medical
Components amp Subassemblies
Transfer Devices
Co-Developed
Devices
IntegerDesigned Devices
Fully Branded Solutions
Medical Device
Systems
Product Solutions(More IP Focused)
Technical Solutions(Traditional CMO)
80 20
Broad Product Continuum
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Question amp Answer Period
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
APPENDIX
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Other Operating Expenses
Integer Confidential February 27 2017 Page 24
(1) Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts
1116 123016 1116 123016 NOTES
2014 Investments in Capacity and Capabilities $52 $33 $230 $172
Portable Medical and Vascular product line transfers
Orthopedic Facilities Optimization $00 $01 $14 $07
Lake Region Medical Consolidation and Optimization $20 $12 $20 $86
Acquisition and Integration Costs $281 $52 $335 $283 Lake Region Medical and CCC Medical Devices
Asset Dispositions Severance and Other $17 $19 $66 $69 Nuvectra spin-off
Comparable Basis Adjustments net(1) $35 $00 $182 ($11)
TOTAL OOE $405 $117 $847 $606
Three Months Ended Twelve Months Ended
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
4Q151Q162Q163Q164Q163607640000000000131789699999999993316610999999999993251580000000000233208699999999999
2H1620172018201920202021202220231531414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q16298580000000000013895999999999999938045000000000002Free Cash Flow
1Q162Q163Q161109-7738000000000000421478999999999999
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 65 3Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 300 3Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | |||||||||||||||
4Q15 | 3Q16 | 4Q16 | |||||||||||||
Sales | $ 348 | $ 347 | $ 360 | ||||||||||||
Gross Margin | 282 | 283 | 258 | ||||||||||||
Operating Expenses | $ 74 | $ 61 | $ 62 | -161 | 13 | ||||||||||
of Sales | 212 | 176 | 172 | ||||||||||||
GAAP Net Income | $ (5) | $ 11 | $ 8 | ||||||||||||
Adjusted Net Income | $ 20 | $ 26 | $ 27 | ||||||||||||
EBITDA | $ 51 | $ 59 | $ 56 | ||||||||||||
Adjusted EBITDA | $ 73 | $ 75 | $ 71 | -40 | |||||||||||
of Sales | 211 | 216 | 196 | ||||||||||||
GAAP Diluted EPS | $ (015) | $ 037 | $ 025 | ||||||||||||
Adjusted Diluted EPS | $ 064 | $ 083 | $ 087 | 359 | 48 | ||||||||||
Cash Flow from Operations | $ 38 | $ 34 |
Debt ndash Financial Covenant Calculations
Integer Confidential February 27 2017 Page 25
(1) Financial Covenant ratios adjust in future reporting periods Details are available in ITGRrsquos publicly filed credit agreements
(2) R12 = Rolling 12 months
(3) R12 Cash Interest Expense excludes debt related amortization amounts included in Interest Expense
(4) Future Synergies and Cost Savings
bull At the end of each fiscal quarter Integer can add the planned impact of synergies and cost savings initiatives connected to the Lake Region acquisition for the next twelve months
bull These are calculated on a pro forma basis assuming they had been in effect at the beginning of the test period
bull Synergies may include the incremental Adjusted EBITDA impact of revenue synergies These would be new revenue initiatives that are specifically enabled by the merger
bull Synergies are limited to a maximum of $35 million The allowable adjustment changes over time beginning in 2017
Financial Covenant Calculations(1)(2)
Leverage Ratio (lt 625 4Q16)Leverage Ratio = Net Debt R12 Bank EBITDA
Interest Coverage Ratio (gt 250 4Q16)Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3)
Net DebtNet DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M)
Bank EBITDAR12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4)
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
201720182019202020212022202331414898240964360
4Q151Q162Q163Q160298580000000000013895999999999999938045000000000002Free Cash Flow
4Q151Q162Q163Q1601109-7738000000000000421478999999999999
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922068999999999996
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1396 | $1376 | $1395 | $1375 | ||||||||||
Net Income | $13 | $9 | $86 | $82 | ||||||||||
Earnings per Diluted Share | $042 | $027 | $275 | $260 | ||||||||||
EBITDA | na | na | $295 | $285 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | 4Q16Actual | FY16Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $360 | $1375 - $1395 | |||||||||||
Adjusted | ||||||||||||||||
EBITDA | $65 | $69 | $75 | $71 | $285 - $295 | |||||||||||
Net Income | $13 | $18 | $26 | $27 | $82 - $86 | |||||||||||
Diluted EPS | $042 | $056 | $083 | $087 | $260 - $275 | |||||||||||
Net Synergies | $5 | $9 | $11 | $11 | $30 - $35 | |||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | |||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 |
Debt Repayment Schedule | |||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | |||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | ||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | ||||||||
Inventory | $252 | $276 | $262 | $225 | ||||||||
Inventory Turns | 4 | 4 | 4 | 5 | ||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | ||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | ||||||||
Sales | 331058 | 348382 | 346567 | 359591 | ||||||||
COGS | 240244 | 252351 | 248658 | 266700 | ||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | ||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | ||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 | |||||||
WarrantyEampO | 0 | 0 | 0 | 0 | 0 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 273 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 264 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 191 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 9 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 208 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 030 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Integer Confidential February 27 2017 Page 26
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash QTD
See the Footnotes to this table on Slide 28 of this presentation
Three Months EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 4543 $ 7933 025 $(3746
1) $ (24907) (085)Adjustments
Amortization of intangibles(a) 9411 6646 021 7488 5277 018Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 052IP related litigation (SGampA)(a)(b) 349 227 001 1131 735 002Consolidation and optimization expenses (OOE)(a)(c) 4686 3884 012 7191 5736 019Acquisition and integration expenses (OOE)(a)(d) 5173 3406 011 28083 20924 069Asset dispositions severance and other (OOE)(a)(e) 1874 1301 004 1741 1499 005Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 4675 3039 010Loss on cost and equity method investments net(a) 1765 1147 004 1769 1150 004Tax adjustments(g) mdash 2630 008 mdash (1200) (004)Taxes(a) (627) mdash mdash (9745) mdash mdash
As reported adjusted (Non-GAAP)(h) 27174 087 27858 092Comparable basis adjustments net(i) mdash mdash (71) (005)
Comparable basis adjusted (Non-GAAP)(h) $ 27174 $ 087 $ 27787 $ 087
As reported adjusted diluted weighted average shares(j) 31254 30125Comparable basis adjusted diluted weighted average shares(j)(k) 31254 31805
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation ndash YTD
Integer Confidential February 27 2017 Page 27
See the Footnotes to this table on Slide 28 of this presentation
Year EndedDecember 30 2016 January 1 2016
(in thousands except per share amounts) Pre-TaxNet
Income
PerDilutedShare Pre-Tax
NetIncome (Loss)
PerDilutedShare
As reported (GAAP) $ 1185 $ 5961 $ 019 $(1570
0) $ (7594) (029)Adjustments
Amortization of intangibles(a) 37862 26771 086 17496 12273 045Inventory step-up amortization (COS)(a) mdash mdash mdash 22986 15605 057IP related litigation (SGampA)(a)(b) 3040 1976 006 4417 2871 011Consolidation and optimization expenses (OOE)(a)(c) 26490 21582 069 26393 21158 077Acquisition and integration expenses (OOE)(a)(d) 28316 18554 059 33449 25885 095Asset dispositions severance and other (OOE)(a)(e) 6931 5760 018 6622 5099 019Lake Region Medical transaction costs (interest expense)(a)(f) mdash mdash mdash 9463 6151 023(Gain) loss on cost and equity method investments net(a) 833 541 002 (3350) (2177) (008)Tax adjustments(g) mdash (154) mdash mdash mdash mdashTaxes(a) (23666) mdash mdash (22505) mdash mdash
As reported adjusted (Non-GAAP)(h) 80991 259 79271 290Comparable basis adjustments net(i) 2624 008 18833 021
Comparable basis adjusted (Non-GAAP)(h) $ 83615 $ 268 $ 98104 $ 311
As reported adjusted diluted weighted average shares(j) 31222 27304Comparable basis adjusted diluted weighted average shares(j)(k) 31222 31504
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Non-GAAP ReconciliationsFootnotes to ldquoNet Income and Diluted EPS Reconciliationrdquo
Integer Confidential February 27 2017 Page 28
a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment Net income amounts are computed using a 35 US Mexico Germany and France statutory tax rate a 0 Swiss tax rate a 20 Netherlands statutory tax rate a 25 Uruguay statutory tax rate and a 125 Ireland statutory tax rate Expenses that are not deductible for tax purposes (ie permanent tax differences) are added back at 100
b) In 2013 we filed suit against AVX Corporation alleging they were infringing our intellectual property Given the complexity and significant costs incurred pursuing this litigation we are excluding these litigation expenses from adjusted amounts This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $375 million in damages To date no gains have been recognized in connection with this litigation
c) During 2016 and 2015 we incurred costs primarily related to the transfer of our Beaverton OR portable medical and Plymouth MN vascular manufacturing operations to Tijuana Mexico Additionally with the acquisition of Lake Region Medical 2016 costs also include expenses incurred in connection with the closure of Lake Region Medicalrsquos Arvada CO site and the consolidation of its two Galway Ireland sites which was initiated by Lake Region Medical in 2014
d) During 2016 and 2015 we incurred acquisition and integration costs related to the acquisition of Lake Region Medical which was acquired in October 2015 During 2015 we incurred costs related to the integration of CCC Medical Devices which was acquired in August 2014
e) Costs primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra which was completed in March 2016 as well as various asset disposition charges
f) During the third and fourth quarters of 2015 we recorded transaction costs (ie debt commitment fees interest rate swap termination costs debt extinguishment charges) in connection with our acquisition of Lake Region Medical
g) Tax adjustments for the 2016 periods include a discrete tax benefit related to certain transaction costs of the Lake Region Medical acquisition and the spin-off of Nuvectra recorded in the third quarter and a tax charge recorded in the fourth quarter in connection with the enactment of regulations under sect987 of the Internal Revenue Code which resulted in an adjustment to our deferred tax assets For the 2015 fourth quarter tax adjustments consist of the 2015 Federal RampD tax credit which was enacted during that period and was permanently reinstated
h) The per share data in this table has been rounded to the nearest $001 and therefore may not sum to the totali) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 revenue tax
benefit adjusted net loss and adjusted diluted EPS prior to its spin-off was $12 million $18 million $26 million and a loss of $008 per share respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
j) The as reported and comparable basis adjusted diluted weighted average shares for full year 2016 includes 249000 potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive given the Companyrsquos net loss in the first and second quarters Fourth quarter and full year 2015 as reported and comparable basis adjusted diluted weighted average shares include 947000 and 941000 additional shares respectively related to outstanding equity awards that were not dilutive for GAAP EPS purposes
k) Comparable basis diluted weighted average shares for the 2015 periods include the pro forma impact of shares issued in conjunction with the acquisition of Lake Region Medical as if the acquisition occurred at the beginning of the period No adjustment is necessary for the 2016 periods as shares issued for the acquisition are included in the Companyrsquos outstanding shares in accordance with GAAP
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Non-GAAP ReconciliationsAdjusted EBITDA Reconciliation
Integer Confidential February 27 2017 Page 29
a) Comparable basis adjustments for 2016 represent the exclusion of the results of Nuvectra prior to its spin-off on March 14 2016 Nuvectrarsquos 2016 GAAP net loss EBITDA and adjusted EBITDA prior to its spin-off was $34 million $49 million and $37 million respectively Comparable basis adjustments for the 2015 periods represent the exclusion of the Nuvectra results for the entire period and the inclusion of the former Lake Region Medical results prior to its acquisition on October 27 2015 Our historical pro forma information presentation which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable basis amounts to as reported amounts
Three Months Ended Year Ended
(dollars in thousands)December 30
2016January 1
2016December 30
2016January 1
2016Net income (loss) as reported $ 7933 $ (24907) $ 5961 $ (7594)
Interest expense 27875 25362 111270 33513Benefit for income taxes (3390) (12554) (4776) (8106)Depreciation 13699 10203 52662 27136Amortization 9411 7488 37862 17496
EBITDA 55528 5592 202979 62445
Inventory step-up amortization mdash 22986 mdash 22986IP related litigation 349 1131 3040 4417Stock-based compensation 1160 288 6933 9287Consolidation and optimization expenses 4686 7191 26490 26393Acquisition and integration expenses 5173 28083 28316 33449Asset dispositions severance and other 1874 1741 6931 6622Noncash loss on cost and equity method investments 1765 1993 1495 275
As reported adjusted EBITDA (Non-GAAP) 70535 69005 276184 165874Comparable basis adjustments(a) mdash 9930 3665 138323Comparable basis adjusted EBITDA (Non-GAAP) $ 70535 $ 78935 $ 279849 $ 304197
As reported adjusted EBITDA as a of sales 196 217 199 207Comparable basis adjusted EBITDA as a of sales 196 219 202 211
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Non-GAAP Reconciliations2017 Full-Year Outlook
Integer Confidential February 27 2017 Page 30
Except as described below further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share included in our ldquoBusiness Outlookrdquo above are not available without unreasonable efforts on a forward-looking basis due to the high variability complexity and visibility of the charges excluded from this non-GAAP financial measure
Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS excluding items such as intangible amortization IP related litigation costs and consolidation acquisition integration and asset dispositionwrite-down charges totaling approximately $72 million The after-tax impact of these items is estimated to be approximately $50 million or approximately $160 per diluted share
($ in millions except per share amounts)
High Low High Low
Revenue $1430 $1390 $1430 $1390
Earnings per Diluted Share $150 $110 $310 $270
GAAP Adjusted Comparable Basis
1Q152Q153Q154Q151Q162Q163Q164Q16138084144711468530000000000113261600000000001133651442189999999999914827314236799999999999CardiacNeuromodulation
1Q152Q153Q154Q151Q162Q163Q164Q1698866109157938490000000000041108995894999999999996916230000000000059578100000000000610492400000000001Advanced Surgical Orthopedics amp Portable Medical
1Q152Q153Q154Q151Q162Q163Q164Q161057731088398763000000000005105177000000000019132899999999999410431699999999999951910194199999999999Electrochem
1Q152Q153Q154Q151Q162Q163Q164Q16177116545000000000002119771321700000000000111672000000000001981900000000000088869999999999999211318Elimination of Interproduct line sales1Q152Q153Q154Q151Q162Q163Q164Q16-25659999999999998-23250000000000002-30219999999999998-2266-1488-15960000000000001-15469999999999999-096099999999999997
4Q151Q162Q163Q164Q16789350000000000026537689270000000000077501699999999999670534999999999997
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Free Cash Flow
1Q162Q163Q164Q161109-773800000000000042147899999999999922069000000000003
Cash Flow from Operations
1Q162Q163Q164Q1629858000000000001389599999999999993804500000000000233732999999999997
201720182019202020212022202331414898240964360
Reqd Debt PaymentsFY1629Addl PaymentsFY1615
1Q162Q163Q164Q1631789699999999993316610999999999993251580000000000233208699999999999
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208
Mechanics of Financial Covenant Calculations | ||
Financial Covenant Calculations(1)(2) | ||
Leverage Ratio (lt 625 4Q16) | ||
Leverage Ratio = Net Debt R12 Bank EBITDA | ||
Interest Coverage Ratio (gt 250 4Q16) | ||
Interest Coverage Ratio = R12 Bank EBITDA R12 Cash Interest Expense(3) | ||
Net Debt | ||
Net DEBT = Total Debt - Cash amp Cash Equivalents (not to exceed $50M) | ||
Bank EBITDA | ||
R12 Bank EBITDA = R12 Adjusted EBITDA + Future Synergies and Cost Savings(4) | ||
GAAP | Adjusted Comparable Basis | |||||||||||||
High | Low | High | Low | |||||||||||
Revenue | $1430 | $1390 | $1430 | $1390 | ||||||||||
Earnings per Diluted Share | $150 | $110 | $310 | $270 |
Three Months Ended | Twelve Months Ended | |||||||||||||||
1116 | 123016 | 1116 | 123016 | NOTES | ||||||||||||
2014 Investments in Capacity and Capabilities | $52 | $33 | $230 | $172 | Portable Medical and Vascular product line transfers | |||||||||||
Orthopedic Facilities Optimization | $00 | $01 | $14 | $07 | ||||||||||||
Legacy Lake Region Medical Consolidation and Optimization | $20 | $12 | $20 | $86 | ||||||||||||
Acquisition and Integration Costs | $281 | $52 | $335 | $283 | Lake Region Medical and CCC Medical Devices | |||||||||||
Asset Dispositions Severance and Other | $17 | $19 | $66 | $69 | Nuvectra spin-off | |||||||||||
Comparable Basis Adjustments net(1) | $35 | $00 | $182 | ($11) | ||||||||||||
TOTAL OOE | $405 | $117 | $847 | $606 | ||||||||||||
(1) | Details of Other Operating Expenses (OOE) provided on a comparable basis Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation (ldquoNuvectrardquo) prior to its spin-off on March 14 2016 Comparable basis amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical Historical pro forma information which was filed with the SEC on Form 8-K on February 29 2016 contains a reconciliation of 2015 comparable amounts to as reported amounts |
1Q16Actual | 2Q16Actual | 3Q16Actual | FY16Actual | FY17Outlook | ||||||||||||
Revenue | $331 | $348 | $347 | $1386 | $1390 - $1430 | |||||||||||
Adjusted Diluted EPS | $268 | $270 - $310 | ||||||||||||||
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Current Assets | $ 575 | $ 534 | $ 534 | $ 525 | $ 517 | |||||||
Current Liabilities | $ 214 | $ 217 | $ 217 | $ 200 | $ 185 | |||||||
Working Capital | $ 361 | $ 318 | $ 317 | $ 325 | $ 332 | |||||||
Current Ratio | 27 | 25 | 25 | 26 | 28 |
1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||
Free Cash Flow | $11 | ($8) | $21 | $22 | |||||||||
Days Sales Outstanding | 50 | 50 | 50 | 52 | |||||||||
Inventory | $252 | $276 | $262 | $225 | |||||||||
Inventory Turns | 4 | 4 | 4 | 5 | |||||||||
Capital Expenditures | $19 | $12 | $17 | $12 | |||||||||
Days Payables Outstanding | 32 | 36 | 32 | 27 | |||||||||
Sales | 331058 | 348382 | 346567 | 359591 | |||||||||
COGS | 240244 | 252351 | 248658 | 266700 | |||||||||
Accounts Recievables | 183563 | 192121 | 191409 | 204626 | |||||||||
Net Inventory | 267380 | 276279 | 262232 | 225151 | |||||||||
Accounts Payable | 83306 | 99135 | 86290 | 77896 |
Debt Repayment Schedule | ||||||||||||||||||||||||||||||
2H16 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | FY16 | ||||||||||||||||||
Payment | $ 15 | $ 31 | $ 41 | $ 48 | $ 98 | $ 240 | $ 964 | $ 360 | Reqd Debt Payments | 73 | 73 | 73 | 73 | 290 | ||||||||||||||||
Addl Payments | 50 | 100 | 150 | |||||||||||||||||||||||||||
73 | 73 | 123 | 173 | 440 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 | Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | ||||||||||||||
Free Cash Flow | $ - 0 | $ 11 | $ (8) | $ 21 | $ 22 | Capex | $ 19 | $ 12 | $ 17 | $ 12 | |||||||||||||||
Cash Flow from Operations | $ - 0 | $ 30 | $ 4 | $ 38 | $ 34 |
4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | ||||||||
Adjusted EBITDA | $ 79 | $ 65 | $ 69 | $ 75 | $ 71 |
Revenue Details | 4Q16 | 3Q16 | ||||||||||||||||||||||||||||||
1Q15 | 2Q15 | 3Q15 | 4Q15 | 1Q16 | 2Q16 | 3Q16 | 4Q16 | YOY | QOQ | YTD | YOY | QOQ | YTD | |||||||||||||||||||
Cardio and Vascular | $ 138 | $ 145 | $ 147 | $ 133 | $ 134 | $ 144 | $ 148 | $ 142 | 74 | -40 | 11 | 10 | 28 | -08 | ||||||||||||||||||
CardiacNeuromodulation | $ 99 | $ 109 | $ 94 | $ 111 | $ 96 | $ 92 | $ 96 | $ 105 | -54 | 95 | -59 | 21 | 45 | -62 | ||||||||||||||||||
Advanced Surgical Orthopedics amp Portable Medical | $ 106 | $ 109 | $ 99 | $ 105 | $ 91 | $ 104 | $ 95 | $ 102 | -31 | 71 | -62 | -36 | -87 | -72 | ||||||||||||||||||
Electrochem | $ 18 | $ 17 | $ 12 | $ 13 | $ 12 | $ 10 | $ 9 | $ 11 | -144 | 276 | -299 | -259 | -97 | -343 | ||||||||||||||||||
Elimination of Interproduct line sales | $ (3) | $ (2) | $ (3) | $ (2) | $ (1) | $ (2) | $ (2) | $ (1) | -576 | -379 | -451 | -488 | -31 | -415 | ||||||||||||||||||
$ 358 | $ 377 | $ 348 | $ 360 | $ 331 | $ 348 | $ 347 | $ 360 | -05 | 38 | -40 | -05 | -05 | -53 |
Key Financial Results | ||||||||||||||||||||
4Q15 | 3Q16 | 4Q16 | FY15 | FY16 | ||||||||||||||||
Sales | $ 360 | $ 347 | $ 360 | $ 1443 | $ 1386 | |||||||||||||||
Gross Margin | 215 | 283 | 258 | 264 | 272 | (054) | ||||||||||||||
Operating Expenses | $ 89 | $ 61 | $ 62 | $ 302 | $ 270 | -303 | 13 | |||||||||||||
of Sales | 247 | 176 | 172 | 209 | 195 | |||||||||||||||
GAAP Net Income | $ (47) | $ 11 | $ 8 | $ (39) | $ 6 | |||||||||||||||
Adjusted Net Income | $ 28 | $ 26 | $ 27 | $ 98 | $ 84 | |||||||||||||||
EBITDA | $ (7) | $ 59 | $ 56 | $ 161 | $ 203 | |||||||||||||||
Adjusted EBITDA | $ 79 | $ 75 | $ 71 | $ 304 | $ 280 | -106 | ||||||||||||||
of Sales | 219 | 216 | 196 | 211 | 202 | |||||||||||||||
GAAP Diluted EPS | $ (154) | $ 037 | $ 025 | $ (127) | $ 019 | |||||||||||||||
Adjusted Diluted EPS | $ 087 | $ 083 | $ 087 | $ 311 | $ 268 | 00 | 48 | |||||||||||||
Cash Flow from Operations | -- | $ 38 | $ 34 | -- | $ 106 |
Integer Confidential February 27 2017 Page 31
Contact Information
Amy WakehamVP Investor Relations
Integeririntegernet
wwwintegernet
(O) 2146184978
(M) 2144307208