Integer Holdings Corp.
08/04/2026 | Press release | Distributed by Public on 08/04/2026 15:26
Quarterly Report for Quarter Ending July 3, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q should be read in conjunction with the disclosures included in our Annual Report on Form 10-K for the year ended December 31, 2025. In addition, please read this section in conjunction with our Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements contained herein.
Cautionary Note Regarding Forward-Looking Statements
Some statements contained in this report and other written and oral statements made from time to time by us and our representatives are not statements of historical or current fact. As such, they are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Exchange Act, and are subject to the safe harbor created thereby under the Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations, and these statements are subject to known and unknown risks, uncertainties and assumptions. Forward-looking statements include, but are not limited to, statements relating to:
•the proposed Merger (as defined herein), its timing and its consummation;
•our anticipated financial performance related to the Merger, including the benefits of and synergies related to the proposed Merger;
•potential strategic implications as a result of the proposed Merger;
•supply chain pressures on the Company and our business;
•future development and expected growth of our business and industry;
•the success of our acquisition strategy;
•our ability to develop new innovative products;
•our ability to execute our business model and our business strategy;
•the pipeline of opportunities we intend to pursue in our markets, as well as the timing of launch and value of new products;
•having available sufficient cash and borrowing capacity to meet working capital, debt service and capital expenditure requirements for the next twelve months; and
•projected contractual debt service obligations.
You can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "projects," "forecast," "outlook," "assume," "potential" or "continue" or variations or the negative counterparts of these terms or other comparable terminology. These statements are only predictions and are no guarantee of future performance, and investors should not place undue reliance on forward-looking statements as predictive of future results. Actual events or results may differ materially from those stated or implied by these forward-looking statements. In evaluating these statements and our prospects, you should carefully consider the factors set forth below. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary factors and to others contained throughout this report. We disclaim any obligation to publicly update or revise the forward-looking statements made in this report as a result of new information, future events or otherwise, except as required by law.
While it is not possible to create a comprehensive list of all factors that may cause actual results to differ from results expressed or implied by our forward-looking statements or that may affect our future results, some of these factors include, but in no way are limited to, the following:
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
•risks related to the Merger, including the expected timing and likelihood of completion of the Merger, the timing, receipt and terms and conditions of any required governmental and regulatory approvals; the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement; the possibility that our stockholders may not approve the Merger; the risk that the parties may not be able to satisfy the conditions to the Merger in a timely manner or at all; risks related to disruption of management time from ongoing business operations due to the Merger; the risk that any announcements relating to the Merger could have adverse effects on the market price of our common stock; the risk that the Merger and its announcement could have an adverse effect on the parties' business relationships and business generally, including our ability to retain customers and retain and hire key personnel and maintain relationships with their suppliers and customers, and on their operating results and businesses generally; the risk of unforeseen or unknown liabilities; customer, stockholder, regulatory and other stakeholder approvals and support; the risk of unexpected future capital expenditures; the risk of potential litigation relating to the Merger that could be instituted against us or our directors and/or officers; the risk associated with third party contracts containing material consent, anti-assignment, transfer or other provisions that may be related to the Merger which are not waived or otherwise satisfactorily resolved;
•operational risks, such as our dependence upon a limited number of customers; reductions, delays or cancellations in demand from any significant customer or group of customers; pricing pressures and contractual pricing restraints we face from customers; our reliance on third-party suppliers for raw materials, key products and subcomponents; the cost of raw materials, products and subcomponent that are incorporated into our products; trade regulations; changes in order forecasts; our ability to predict and meet the demand for our products; interruptions in our manufacturing operations; uncertainty surrounding macroeconomic and geopolitical factors in the U.S. and globally; our ability to attract, train and retain a sufficient number of qualified associates to maintain and grow our business; the potential for harm to our reputation and competitive advantage caused by quality problems related to our products; our ability to successfully implement a new global enterprise resource planning ("ERP") solution; our dependence upon our information technology systems and our ability to prevent cyber-attacks and other failures; global climate change and the emphasis on ESG (as defined below) matters by various stakeholders; our dependence upon our senior management team and key technical personnel; and consolidation in the healthcare industry both at a competitor and customer level, resulting in increased competition and pricing pressure;
•strategic risks, such as the intense competition we face and our ability to successfully market our current or new products; our ability to recover the R&D investments made in the development of new products; our customers in-sourcing or dual sourcing production; our ability to respond to changes in technology; our ability to develop new products and expand into new geographic and product markets; and our ability to successfully identify, make and integrate acquisitions to expand and develop our business in accordance with expectations;
•market, financial and indebtedness risks, such as our ability to accurately forecast future performance based on operating results that often fluctuate; the volatility of our stock price; our failure to meet our publicly announced outlook; the ability of our stock purchase program to enhance stockholder value; stockholder activism; our significant amount of outstanding indebtedness and our ability to remain in compliance with financial and other covenants under the credit agreement governing our senior secured credit facilities ("Senior Secured Credit Facilities"); economic and credit market uncertainties that could interrupt our access to capital markets, borrowings or financial transactions; the conditional conversion feature of the 2028 Notes (as defined below) and the 2030 Notes (as defined below) adversely impacting our liquidity; the conversion of our 2028 Notes and 2030 Notes; diluting ownership interests of existing holders of our common stock; the counterparty risk associated with our capped call transaction; the financial and market risks related to our international operations and sales; our complex international tax profile; and our ability to realize the full value of our intangible assets;
•legal and compliance risks, such as legal proceedings against us; regulatory issues resulting from product complaints, recalls or regulatory audits; the potential of becoming subject to product liability or intellectual property claims; our ability to protect our intellectual property and proprietary rights; our ability to comply with customer-driven policies and third-party standards or certification requirements; our ability to obtain and/or retain necessary licenses from third parties for new technologies; our ability and the cost to comply with environmental regulations; legal and regulatory risks from our international operations; the fact that the healthcare industry is highly regulated and subject to various regulatory changes; and our business being indirectly subject to healthcare industry cost containment measures and third-party coverage and reimbursement policies that could result in reduced sales of our products; and
•other risks and uncertainties that arise from time to time.
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Unless otherwise noted, any forward-looking statement made by us in this Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made. Except as may be required by applicable law, we disclaim any obligation to update forward-looking statements in this Form 10-Q whether to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial conditions or prospects, or otherwise.
In this Form 10-Q, references to "Integer," "we," "us," "our" and the "Company" mean Integer Holdings Corporation and its subsidiaries, unless the context indicates otherwise.
The Merger
On August 2, 2026, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement," and the transactions contemplated thereby, the "Transaction"), by and among the Company, Armstrong Parent, Inc., a Delaware corporation ("Parent"), and Armstrong Bidco, Inc., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"). Parent and Merger Sub are each affiliates of investment funds managed by Kohlberg Kravis Roberts & Co. L.P., a leading global investment firm. Pursuant to the Merger Agreement, and upon the terms and subject to the conditions therein, Merger Sub will merge with and into the Company (the "Merger"), with the Company surviving the Merger as a wholly owned subsidiary of Parent. If the Merger is consummated, the Company's securities will be delisted from NYSE as soon as practicable following the Effective Time (defined below), and the Company will become a privately held company.
Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the "Effective Time"), each share of common stock of the Company, par value $0.001 per share (the "Company Common Shares") issued and outstanding immediately prior to the Effective Time (other than Company Common Shares (i) held by the Company as a treasury share or owned by Parent, Merger Sub or any other Subsidiary of Parent immediately prior to the Effective Time, (ii) held by any subsidiary of the Company immediately prior to the Effective Time and (iii) held by any person who is entitled to demand, and has properly demanded, appraisal in respect of such Company Common Shares pursuant to applicable law), will automatically be converted into the right to receive $127 in cash, without interest (the "Merger Consideration").
Outstanding equity awards will generally be treated as follows: (i) vested restricted stock unit ("RSU") awards and 50% of unvested RSU awards will be canceled in exchange for a cash amount based on the Merger Consideration, and 50% of unvested RSUs will be converted into a deferred cash award based on the Merger Consideration that vests based on the original RSU award's vesting conditions (with certain termination vesting protections); (ii) performance stock unit ("PSU") awards for which the performance period is completed but that has not yet been settled will be canceled in exchange for a cash amount equal to the Merger Consideration based on actual performance, and PSU awards with open performance periods will be converted into a cash amount based on the Merger Consideration assuming the greater of target and actual performance, with 50% of such amount being paid as soon as practicable (assessed on a tranche-by-tranche basis) and the remaining 50% of such amount being paid subject to satisfaction of the original PSU award's service vesting conditions (with certain termination vesting protections and without regard to any performance conditions); and (iii) stock options will be vested and canceled in exchange for a cash amount equal to the excess (if any) of the Merger Consideration over the applicable exercise price.
The consummation of the Merger is subject to certain customary closing conditions set forth in the Merger Agreement, including: (i) the approval and adoption of the Merger Agreement by the holders of a majority of the outstanding Company Common Shares (the "Company Stockholder Approval"); (ii) the absence of any order issued by any governmental authority (whether temporary, preliminary or permanent) of competent jurisdiction, or applicable law prohibiting, rendering illegal or enjoining the consummation of the Merger; (iii) the expiration or termination of any waiting periods applicable to the consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and certain other applicable antitrust and foreign direct investment laws of certain jurisdictions; (iv) each party's performance of and compliance with its covenants, obligations and agreements contained in the Merger Agreement in all material respects; (v) no Company Material Adverse Effect (as defined in the Merger Agreement) having occurred since the date of the Merger Agreement and (vi) the accuracy of the representations and warranties of the parties in the Merger Agreement (subject to customary materiality qualifiers). The Merger is not subject to any financing condition, and Parent and Merger Sub have obtained equity and debt financing commitments for the Transaction.
Subject to certain exceptions, the Company has agreed not to solicit alternative acquisition proposals, engage in discussions with any third party regarding alternative acquisition proposals or change its recommendation to its stockholders in favor of the Merger.
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Merger Agreement contains certain customary termination rights for each of the Company and Parent, including, (i) by mutual written agreement of the Company and Parent, (ii) if the Merger has not been consummated on or before May 2, 2027 (the "Outside Date"), (iii) any applicable order, writ, injunction, judgment or decree of any governmental authority (an "Order") issued by any governmental authority of competent jurisdiction rendering illegal, or restraining, enjoining or otherwise prohibiting the consummation of the Merger and such Order has become final and nonappealable, (iv) the Company Stockholder Approval shall not have been obtained at a meeting of holders of the Company Common Shares (the "Company Stockholders Meeting") or (v) the other party is in breach of any representation or warranty or failure to perform any covenant or agreement on the part of the respective parties in a manner that would result in a failure of an applicable closing condition and such breach cannot be cured or, if curable, has not been cured within 20 business days after notice to the other party of such breach (or, if earlier, five business days prior to the Outside Date).
In addition, prior to receipt of the Company Stockholder Approval, (i) the Company may also terminate the Merger Agreement to (A) accept a Superior Proposal, subject to Parent's right to match such Superior Proposal and payment to Parent of the Company Termination Fee (as described below), or (B) in circumstances relating to Parent's breach of the Merger Agreement or failure to consummate the Merger when it is required to do so under the Merger Agreement, subject to payment to the Company of the Parent Termination Fee (as defined below) and (ii) Parent may terminate the Merger Agreement if the Board of Directors changes its recommendation to the Company's stockholders regarding the Merger Agreement (an "Adverse Recommendation Change").
The Merger Agreement provides for the payment of termination fees upon termination of the Merger Agreement under certain specified circumstances. The Company will be obligated to pay Parent a termination fee of $154 million (the "Company Termination Fee") if the Merger Agreement is terminated (i) by the Company to accept a Superior Proposal, (ii) by Parent following an Adverse Recommendation Change, or (iii) in certain circumstances by either Parent or the Company and prior to such termination a bona fide acquisition proposal is publicly announced or publicly disclosed and not publicly withdrawn or otherwise abandoned at least five business days prior to such termination of the Merger Agreement or the date of the Company Stockholders Meeting and the Company enters into a definitive agreement for, or consummates, a transaction involving a Superior Proposal within twelve months of such termination.
Parent will be obligated to pay the Company a termination fee of $307 million (the "Parent Termination Fee") if the Merger Agreement is terminated by the Company in certain circumstances relating to Parent's breach of the Merger Agreement or failure to consummate the Merger when it is required to do so under the Merger Agreement.
Our Business
Integer Holdings Corporation is one of the largest medical device contract development and manufacturing organizations in the world, serving the cardio and vascular, neuromodulation, and cardiac rhythm management markets. As a strategic partner of choice, we advance the goals of our medical device customers through industry-leading engineering and manufacturing, with a relentless commitment to quality, service, and innovation.
We operate our business in one segment and derive our revenues from three product lines: Cardio & Vascular, Cardiac Rhythm Management & Neuromodulation and Other Markets.
The second quarter and first six months of 2026 ended on July 3 and consisted of 91 days and 184 days, respectively. The second quarter and first six months of 2025 ended on June 27 and consisted of 91 days and 178 days, respectively.
Impact of Global Events
Our future results of operations and liquidity could be materially adversely affected by uncertainty surrounding macroeconomic and geopolitical factors in the U.S. and globally characterized by the supply chain environment, inflationary pressure, changes in interest rates, disruptions in the commodities' markets or in supply chain as a result of wars in Ukraine and the Middle East, the tensions in Asia relating to China and Taiwan, and the introduction of or changes in tariffs or trade barriers. The impact of these issues on our business will vary by geographic market and product line, but specific impacts to our business may include increased borrowing costs, labor shortages, disruptions in the supply chain, delayed or reduced customer orders and sales, delays in shipments to and from certain countries and potential increased expenses resulting from tariffs or other trade barriers.
We monitor economic conditions closely. In response to reductions in revenue, we can take actions to align our cost structure with changes in demand and manage our working capital. However, there can be no assurance as to the effectiveness of our efforts to mitigate any impact of the current and future adverse economic conditions and other developments.
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Sales Outlook
In 2026, we expect year over year sales growth to be primarily impacted by lower sales related to three new products due to lower than anticipated market adoption. We believe the magnitude of these changes on multiple products at the same time is highly unusual.
Business Acquisitions
We selectively evaluate acquisitions as a means to acquire additional technology or manufacturing capabilities to expand our product offering in our key existing growth markets. Consistent with our tuck-in acquisition strategy, since the beginning of 2022 we have completed the following acquisitions, including those that impact the comparability of our results between periods:
On December 4, 2025, we acquired certain assets of Biocoat. Prior to the acquisition, Biocoat was a privately-held manufacturer specializing in high value surface coating technology platforms, including UV and thermal cure hydrophilic coatings.
On February 28, 2025, we acquired substantially all of the assets and assumed certain liabilities of VSi. Prior to the acquisition, VSi was a privately-held full-service provider of parylene coating solutions, primarily focused on complex medical device applications.
On January 7, 2025, we acquired substantially all of the assets and assumed certain liabilities of Precision. Prior to the acquisition, Precision was a privately-held manufacturer specializing in high value surface coating technology platforms, including fluoropolymer, anodic coatings, ion treatment solutions and laser processing.
Refer to Note 2, "Business Acquisitions" of the Notes to Condensed Consolidated Financial Statements contained in Item 1 of this report for additional information about the transactions above.
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financial Overview
Income from continuing operations for the second quarter and first six months of 2026 was $23.6 million, or $0.69 per diluted share, and $40.1 million, or $1.17 per diluted share, respectively, compared to $37.0 million, or $1.04 per diluted share, and $14.5 million, or $0.41 per diluted share for the second quarter and first six months of 2025, respectively. These variances are primarily the result of the following:
•Sales for the second quarter and first six months of 2026 decreased $12.4 million and $10.2 million, respectively, when compared to the same periods in 2025, driven by lower Cardio & Vascular and Other Markets sales, partially offset by higher Cardiac Rhythm Management & Neuromodulation sales. Sales for the second quarter and first six months of 2026 were impacted by lower sales related to lower than anticipated market adoption of three new products.
•Gross profit for the second quarter and first six months of 2026 decreased $16.2 million and $26.9 million, respectively, primarily driven by lower fixed cost absorption due to lower production volumes.
•Operating expenses for the second quarter and first six months of 2026 increased $8.6 million and $15.6 million, respectively, when compared to the same periods in 2025, primarily due to higher SG&A expenses and Restructuring and other charges. Operating expenses as a percentage of sales were 16.9% and 14.7% for the second quarters of 2026 and 2025, respectively, and 17.3% and 15.4% for the first six months of 2026 and 2025, respectively.
•Interest expense for the second quarter of 2026 increased $0.4 million compared to the same period in 2025 due to higher average debt balance outstanding, partially offset by lower losses from extinguishment of debt. Interest expense for the first six months of 2026 decreased $4.7 million compared to the same period in 2025, due to lower interest rates on our outstanding borrowings and lower losses from extinguishment of debt, partially offset by higher average debt balance outstanding.
•During the first six months of 2026 we recognized net losses from our equity investments of $1.4 million, compared to net gains of $0.2 million for the first six months of 2025. (Gain) loss on equity investments for the second quarter of 2026 and 2025 were not material. Gains and losses on equity investments are generally unpredictable in nature.
•Other loss, net for the second quarter and first six months of 2026 were net losses of $1.1 million and $1.5 million, respectively, compared to net losses of $4.0 million and $51.9 million, respectively, for the second quarter and first six months of 2025. Other loss, net for 2025 includes $46.7 million of debt conversion inducement expense, which was recognized in the first quarter of 2025, related to the partial exchange of our outstanding 2028 Notes.
•We recorded an income tax benefit for the second quarter and provision for income taxes for the first six months of 2026 of $0.3 million and $3.5 million, respectively, compared with provisions for income taxes of $8.6 million and $18.1 million, respectively, for the second quarter and first six months of 2025. The changes in income tax expense were primarily due to relative changes in pre-tax income and the impact of discrete tax items.
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Our Financial Results
The following table presents selected financial information derived from our Condensed Consolidated Financial Statements, contained in Item 1 of this report, for the periods presented (dollars in thousands, except per share).
| Three Months Ended | |||||||||||||||||||||||
| July 3, | June 27, | Change | |||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
| Sales | $ | 464,110 | $ | 476,494 | $ | (12,384) | (2.6) | % | |||||||||||||||
| Cost of sales | 351,168 | 347,342 | 3,826 | 1.1 | % | ||||||||||||||||||
| Gross profit | 112,942 | 129,152 | (16,210) | (12.6) | % | ||||||||||||||||||
| Gross profit as a % of sales | 24.3 | % | 27.1 | % | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Selling, general and administrative ("SG&A") | 57,699 | 52,923 | 4,776 | 9.0 | % | ||||||||||||||||||
| SG&A as a % of sales | 12.4 | % | 11.1 | % | |||||||||||||||||||
| Research, development and engineering ("RD&E") | 11,278 | 14,240 | (2,962) | (20.8) | % | ||||||||||||||||||
| RD&E as a % of sales | 2.4 | % | 3.0 | % | |||||||||||||||||||
| Restructuring and other charges | 9,437 | 2,651 | 6,786 | 256.0 | % | ||||||||||||||||||
| Total operating expenses | 78,414 | 69,814 | 8,600 | 12.3 | % | ||||||||||||||||||
| Operating income | 34,528 | 59,338 | (24,810) | (41.8) | % | ||||||||||||||||||
| Operating expense as a % of sales | 16.9 | % | 14.7 | % | |||||||||||||||||||
| Operating income as a % of sales ("Operating margin") | 7.4 | % | 12.5 | % | |||||||||||||||||||
| Interest expense | 10,135 | 9,754 | 381 | 3.9 | % | ||||||||||||||||||
| (Gain) loss on equity investments | (42) | 8 | (50) | NM | |||||||||||||||||||
| Other loss, net | 1,144 | 3,980 | (2,836) | (71.3) | % | ||||||||||||||||||
| Income from continuing operations before taxes | 23,291 | 45,596 | (22,305) | (48.9) | % | ||||||||||||||||||
| Provision (benefit) for income taxes | (314) | 8,587 | (8,901) | (103.7) | % | ||||||||||||||||||
| Effective tax rate | (1.3) | % | 18.8 | % | |||||||||||||||||||
| Income from continuing operations | $ | 23,605 | $ | 37,009 | $ | (13,404) | (36.2) | % | |||||||||||||||
| Income from continuing operations as a % of sales | 5.1 | % | 7.8 | % | |||||||||||||||||||
| Diluted earnings per share from continuing operations | $ | 0.69 | $ | 1.04 | $ | (0.35) | (33.7) | % | |||||||||||||||
NM - Calculated change not meaningful.
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
| Six Months Ended | |||||||||||||||||||||||
| July 3, | June 27, | Change | |||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
| Sales | $ | 903,690 | $ | 913,886 | $ | (10,196) | (1.1) | % | |||||||||||||||
| Cost of sales | 681,153 | 664,416 | 16,737 | 2.5 | % | ||||||||||||||||||
| Gross profit | 222,537 | 249,470 | (26,933) | (10.8) | % | ||||||||||||||||||
| Gross profit as a % of sales | 24.6 | % | 27.3 | % | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| SG&A | 116,410 | 104,083 | 12,327 | 11.8 | % | ||||||||||||||||||
| SG&A as a % of sales | 12.9 | % | 11.4 | % | |||||||||||||||||||
| RD&E | 27,521 | 28,441 | (920) | (3.2) | % | ||||||||||||||||||
| RD&E as a % of sales | 3.0 | % | 3.1 | % | |||||||||||||||||||
| Restructuring and other charges | 12,209 | 8,056 | 4,153 | 51.6 | % | ||||||||||||||||||
| Total operating expenses | 156,140 | 140,580 | 15,560 | 11.1 | % | ||||||||||||||||||
| Operating income | 66,397 | 108,890 | (42,493) | (39.0) | % | ||||||||||||||||||
| Operating expense as a % of sales | 17.3 | % | 15.4 | % | |||||||||||||||||||
| Operating income as a % of sales | 7.3 | % | 11.9 | % | |||||||||||||||||||
| Interest expense | 19,869 | 24,559 | (4,690) | (19.1) | % | ||||||||||||||||||
| Gain on equity investments | 1,426 | (173) | 1,599 | NM | |||||||||||||||||||
| Other loss, net | 1,460 | 51,907 | (50,447) | (97.2) | % | ||||||||||||||||||
| Income from continuing operations before taxes | 43,642 | 32,597 | 11,045 | 33.9 | % | ||||||||||||||||||
| Provision for income taxes | 3,531 | 18,053 | (14,522) | (80.4) | % | ||||||||||||||||||
| Effective tax rate | 8.1 | % | 55.4 | % | |||||||||||||||||||
| Income from continuing operations | $ | 40,111 | $ | 14,544 | $ | 25,567 | 175.8 | % | |||||||||||||||
| Income from continuing operations as a % of sales | 4.4 | % | 1.6 | % | |||||||||||||||||||
| Diluted earnings per share from continuing operations | $ | 1.17 | $ | 0.41 | $ | 0.76 | 185.4 | % | |||||||||||||||
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Product Line Sales
Sales by product lines were as follows (in thousands):
| Three Months Ended | |||||||||||||||||||||||
| July 3, | June 27, | Change | |||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
| Cardio & Vascular | $ | 280,308 | $ | 286,855 | $ | (6,547) | (2.3) | % | |||||||||||||||
|
Cardiac Rhythm Management & Neuromodulation
|
173,712 | 171,998 | 1,714 | 1.0 | |||||||||||||||||||
| Other Markets | 10,090 | 17,641 | (7,551) | (42.8) | |||||||||||||||||||
| Total sales | $ | 464,110 | 464110 | $ | 476,494 | $ | (12,384) | (2.6) | |||||||||||||||
| Six Months Ended | |||||||||||||||||||||||
| July 3, | June 27, | Change | |||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
| Cardio & Vascular | $ | 542,041 | $ | 545,726 | $ | (3,685) | (0.7) | % | |||||||||||||||
| Cardiac Rhythm Management & Neuromodulation | 341,976 | 332,343 | 9,633 | 2.9 | |||||||||||||||||||
| Other Markets | 19,673 | 35,817 | (16,144) | (45.1) | |||||||||||||||||||
| Total sales | $ | 903,690 | 903690 | $ | 913,886 | $ | (10,196) | (1.1) | |||||||||||||||
For the second quarter and first six months of 2026, Cardio & Vascular ("C&V") sales decreased $6.5 million, or (2)%, and $3.7 million, or (1)%, respectively, versus the comparable 2025 periods. Our 2025 acquisitions increased C&V sales for the second quarter and first six months of 2026 by $0.2 million and $2.9 million, in comparison to the corresponding periods in 2025. C&V sales for the second quarter and first six months of 2026 were also impacted by lower sales of two new Electrophysiology products due to lower than anticipated market adoption. Foreign currency exchange rate fluctuations increased C&V sales for the second quarter and first six months of 2026 by $0.3 million and $1.6 million, in comparison to the corresponding periods in 2025, primarily due to U.S. dollar fluctuations relative to the Euro.
For the second quarter and first six months of 2026, Cardiac Rhythm Management & Neuromodulation ("CRM&N") sales increased $1.7 million, or 1%, and $9.6 million, or 3%, respectively, versus the comparable 2025 periods. Growth was partially offset by lower sales of a Neuromodulation product due to lower than anticipated market adoption. Foreign currency exchange rate fluctuations did not have a material impact on CRM&N sales during the second quarter of 2026 in comparison to the corresponding period in 2025.
Other Markets sales for the second quarter and first six months of 2026 decreased $7.6 million, or 43%, and $16.1 million or 45%, respectively, versus the comparable 2025 periods, primarily due to the Portable Medical Exit. Foreign currency exchange rate fluctuations did not have a material impact on Other Markets sales during the second quarter and first six months of 2026 in comparison to the corresponding periods in 2025.
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Gross Profit
| Three Months Ended | |||||||||||||||||||||||
| July 3, | June 27, | Change | |||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
| Gross profit (in thousands) | $ | 112,942 | $ | 129,152 | $ | (16,210) | (12.6) | % | |||||||||||||||
| Gross margin | 24.3 | % | 27.1 | % | |||||||||||||||||||
| Six Months Ended | |||||||||||||||||||||||
| July 3, | June 27, | Change | |||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
| Gross profit (in thousands) | $ | 222,537 | $ | 249,470 | $ | (26,933) | (10.8) | % | |||||||||||||||
| Gross margin | 24.6 | % | 27.3 | % | |||||||||||||||||||
Gross margin declined in the second quarter and first six months of 2026 compared to the same prior year period due to the negative impact of lower fixed cost absorption, partly offset by on-going cost reduction initiatives. Gross margin, or gross profit as a percentage of sales, has been and will continue to be affected by a variety of factors, including the average sales price of our products and services and transaction volume growth. We expect our gross margin to fluctuate over time.
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
SG&A Expenses
Changes to SG&A expenses from the prior year periods were due to the following (in thousands):
| Three Months Ended | |||||||||||||||||||||||
| July 3, | June 27, | Change | |||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
| Compensation and benefits | $ | 27,221 | $ | 27,851 | $ | (630) | (2.3) | % | |||||||||||||||
| Depreciation and amortization expense | 12,841 | 12,709 | 132 | 1.0 | |||||||||||||||||||
|
Professional fees(a)
|
9,093 | 4,460 | 4,633 | 103.9 | |||||||||||||||||||
|
Contract services(b)
|
4,837 | 4,088 | 749 | 18.3 | |||||||||||||||||||
| Travel and entertainment | 792 | 806 | (14) | (1.7) | |||||||||||||||||||
| Bank fees and charges | 648 | 913 | (265) | (29.0) | |||||||||||||||||||
| All other SG&A | 2,267 | 2,096 | 171 | 8.2 | |||||||||||||||||||
| Total SG&A expense | $ | 57,699 | $ | 52,923 | $ | 4,776 | 9.0 | ||||||||||||||||
| Six Months Ended | |||||||||||||||||||||||
| July 3, | June 27, | Change | |||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
| Compensation and benefits | $ | 56,253 | $ | 55,414 | $ | 839 | 1.5 | % | |||||||||||||||
| Depreciation and amortization expense | 25,703 | 24,485 | 1,218 | 5.0 | |||||||||||||||||||
|
Professional fees(a)
|
16,714 | 7,800 | 8,914 | 114.3 | |||||||||||||||||||
|
Contract services(b)
|
9,837 | 8,067 | 1,770 | 21.9 | |||||||||||||||||||
| Travel and entertainment | 1,229 | 1,981 | (752) | (38.0) | |||||||||||||||||||
| Bank fees and charges | 1,479 | 1,745 | (266) | (15.2) | |||||||||||||||||||
| All other SG&A | 5,195 | 4,591 | 604 | 13.2 | |||||||||||||||||||
| Total SG&A expense | $ | 116,410 | $ | 104,083 | $ | 12,327 | 11.8 | ||||||||||||||||
__________
(a)Professional fees for the second quarter and first six months of 2026 were impacted by legal and advisory fees related to a stockholder activist matter and defense of a securities class action lawsuit. The activist related costs amounted to $0.6 and $3.8 million for the second quarter and first six months of 2026. In addition, we recorded $1.8 million during the second quarter of 2026 in connection with our defense of a securities class action lawsuit. For additional information regarding legal proceedings pending against us, refer to Note 10, "Commitments and Contingencies," of the Notes to Condensed Consolidated Financial Statements contained in Item 1 of this report.
(b)Contract services expense increased primarily due to higher software costs from information technology enhancements.
RD&E
RD&E expense for the second quarter and first six months of 2026 was $11.3 million and $27.5 million, respectively, compared to $14.2 million and $28.4 million, respectively, for the second quarter and first six months of 2025. The decreases in RD&E expense during the second quarter and first six months of 2026 compared to the same period in 2025, was primarily due to the timing of program milestone achievements for customer funded programs. RD&E expenses are influenced by the number and timing of in-process projects and labor hours and other costs associated with these projects. Our research and development initiatives continue to emphasize new product development, product improvements, and the development of new technological platform innovations.
- 43 -
INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Restructuring and Other Charges
We continuously evaluate our business and identify opportunities to realign resources to better serve our customers and markets, improve operational efficiency and capabilities, and lower operating costs. To realize the benefits associated with these opportunities, we undertake restructuring-type activities to transform our business. We incur costs associated with these activities, which primarily include exit and disposal costs and other costs directly related to the restructuring initiative. Restructuring charges include exit and disposal costs from these activities. In addition, from time to time, we incur costs associated with acquiring and integrating businesses, and certain other general expenses, including asset impairments.
Restructuring and other charges comprise the following (in thousands):
| Three Months Ended | |||||||||||||||||||||||
| July 3, | June 27, | Change | |||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
|
Restructuring charges(a)
|
$ | 1,841 | $ | 637 | $ | 1,204 | 189.0 | % | |||||||||||||||
|
Acquisition and integration costs(b)
|
173 | 2,007 | (1,834) | (91.4) | |||||||||||||||||||
|
Other general expenses(c)
|
7,423 | 7 | 7,416 | NM | |||||||||||||||||||
| Total restructuring and other charges | $ | 9,437 | $ | 2,651 | $ | 6,786 | 256.0 | ||||||||||||||||
| Six Months Ended | |||||||||||||||||||||||
| July 3, | June 27, | Change | |||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
|
Restructuring charges(a)
|
$ | 2,448 | $ | 1,301 | $ | 1,147 | 88.2 | % | |||||||||||||||
|
Acquisition and integration costs(b)
|
1,615 | 6,749 | (5,134) | (76.1) | |||||||||||||||||||
|
Other general expenses(c)
|
8,146 | 6 | 8,140 | NM | |||||||||||||||||||
| Total restructuring and other charges | $ | 12,209 | $ | 8,056 | $ | 4,153 | 51.6 | ||||||||||||||||
__________
(a)Restructuring charges for the second quarter and first six months of 2026 and 2025 primarily consist of costs associated with our strategic reorganization and alignment and manufacturing alignment to support growth initiatives.
(b)Amounts for the second quarter and first six months of 2026 primarily include integration expenses related to our recent acquisitions and $0.7 million of costs recorded during the first quarter of 2026 related to our investment in a convertible debt instrument. These expenses were partially offset by a benefit of $1.2 million recorded during the second quarter of 2026 to adjust the fair value of acquisition-related contingent consideration liabilities. Amounts for the second quarter and first six months of 2025 primarily include acquisition expenses related to the Precision and VSi acquisitions.
(c)Amounts include gains and losses in connection with the disposal of property, plant and equipment. Amount for the second quarter and first six months of 2026 include fixed asset impairment charges of $5.9 million. The impairment charges were primarily due to revised expectations regarding the future use of certain fixed assets.
Refer to Note 8, "Restructuring and Other Charges" of the Notes to Condensed Consolidated Financial Statements contained in Item 1 of this report for additional information regarding these initiatives.
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Interest Expense
Information relating to our interest expense is as follows (dollars in thousands):
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| July 3, 2026 | June 27, 2025 | Change | |||||||||||||||||||||||||||||||||
| Amount | Rate | Amount | Rate | Amount | Rate (bp) | ||||||||||||||||||||||||||||||
| Contractual interest expense | $ | 7,650 | 2.40 | % | $ | 7,632 | 2.41 | % | $ | 18 | (1) | ||||||||||||||||||||||||
|
Amortization of deferred debt issuance costs and original issue discount |
1,638 | 0.52 | 1,615 | 0.55 | 23 | (3) | |||||||||||||||||||||||||||||
|
Losses from extinguishment of debt
|
- | - | 130 | 0.04 | (130) | (4) | |||||||||||||||||||||||||||||
| Interest expense on borrowings | 9,288 | 2.92 | % | 9,377 | 3.00 | % | (89) | (8) | |||||||||||||||||||||||||||
| Other interest expense | 847 | 377 | 470 | ||||||||||||||||||||||||||||||||
| Total interest expense | $ | 10,135 | $ | 9,754 | $ | 381 | |||||||||||||||||||||||||||||
| Six Months Ended | |||||||||||||||||||||||||||||||||||
| July 3, 2026 | June 27, 2025 | Change | |||||||||||||||||||||||||||||||||
| Amount | Rate | Amount | Rate | Amount | Rate (bp) | ||||||||||||||||||||||||||||||
| Contractual interest expense | $ | 15,042 | 2.40 | % | $ | 20,117 | 3.22 | % | $ | (5,075) | (82) | ||||||||||||||||||||||||
|
Amortization of deferred debt issuance costs and original issue discount |
3,263 | 0.52 | 2,760 | 0.49 | 503 | 3 | |||||||||||||||||||||||||||||
|
Losses from extinguishment of debt
|
- | - | 867 | 0.14 | (867) | (14) | |||||||||||||||||||||||||||||
| Interest expense on borrowings | 18,305 | 2.92 | % | 23,744 | 3.85 | % | (5,439) | (93) | |||||||||||||||||||||||||||
| Other interest expense | 1,564 | 815 | 749 | ||||||||||||||||||||||||||||||||
| Total interest expense | $ | 19,869 | $ | 24,559 | $ | (4,690) | |||||||||||||||||||||||||||||
Contractual interest expense for the second quarter of 2026 has leveled off, with a slight increase in the quarter compared to the same period in 2025. During the first six months of 2026, contractual interest expense decreased due to a lower weighted average interest rate, partially offset by a higher average debt balance outstanding. The favorable weighted average interest rate is due to the replacement of some of our higher variable rate debt with lower fixed rate debt through issuance of the 2030 Notes at the end of the first quarter of 2025. The higher average debt balance outstanding is primarily the result of borrowings to fund the 2025 acquisitions and to repurchase common stock.
Other components of interest expense on borrowings include non-cash amortization and write-off (losses from extinguishment of debt) of deferred debt issuance costs and original issue discount. Amortization of deferred debt issuance costs and original issue discount increased during the second quarter and first six months of 2026 compared to the same periods in 2025 as a result of higher unamortized balances related to new debt. The losses from extinguishment of debt during the first quarter of 2025 were related to prepayments of portions of the TLA Facility, primarily in connection with issuance of our 2030 Notes.
As of July 3, 2026 and December 31, 2025, approximately 89% and 92%, respectively, of our principal amount of debt are fixed rate borrowings.
See Note 6, "Debt," of the Notes to the Condensed Consolidated Financial Statements contained in Item 1 of this report for additional information pertaining to our debt.
- 45 -
INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Gain) Loss on Equity Investments
(Gain) loss on equity investments for each period were as follows (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
|
July 3, 2026 |
June 27, 2025 |
July 3, 2026 |
June 27, 2025 |
||||||||||||||||||||
| Equity method investment (gain) loss | $ | (42) | $ | 8 | $ | 1,426 | $ | (173) | |||||||||||||||
Equity method investment (gain) loss for both 2026 and 2025 relates to our share of equity method investee gains including unrealized appreciation/depreciation of the underlying interests of the investee. As of July 3, 2026 and December 31, 2025, the carrying value of our equity investments was $6.4 million and $7.9 million, respectively.
See Note 13, "Financial Instruments and Fair Value Measurements" of the Notes to the Condensed Consolidated Financial Statements contained in Item 1 of this report for further details regarding these investments.
Other Loss, Net
| Three Months Ended | |||||||||||||||||||||||
| July 3, | June 27, | Change | |||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
|
Foreign currency transaction losses, net(a)
|
$ | 999 | $ | 3,866 | $ | (2,867) | (74) | % | |||||||||||||||
| Other losses, net | 145 | 114 | 31 | 27 | % | ||||||||||||||||||
| $ | 1,144 | $ | 3,980 | $ | (2,836) | (71) | % | ||||||||||||||||
| Six Months Ended | |||||||||||||||||||||||
| July 3, | June 27, | Change | |||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
|
Foreign currency transaction losses, net(a)
|
$ | 1,375 | $ | 5,010 | $ | (3,635) | (73) | % | |||||||||||||||
|
Debt conversion inducement expense(b)
|
- | 46,681 | (46,681) | NM | |||||||||||||||||||
| Other losses, net | 85 | 216 | (131) | (61) | % | ||||||||||||||||||
| $ | 1,460 | $ | 51,907 | $ | (50,447) | (97) | % | ||||||||||||||||
__________
(a)Represents gains/losses from the impact of exchange rates on transactions denominated in foreign currencies. Our foreign currency transaction gains/losses are based primarily on fluctuations of the U.S. dollar relative to the Euro, Mexican peso, Uruguayan peso, Malaysian ringgits, or Dominican peso.
(b)Debt conversion inducement expense was recognized in the first quarter of 2025 related to the partial exchange of our outstanding 2028 Notes.
- 46 -
INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Provision for Income Taxes
| Three Months Ended | |||||||||||||||||||||||
| July 3, | June 27, | Change | |||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
| Income from continuing operations before taxes | $ | 23,291 | $ | 45,596 | $ | (22,305) | (49) | % | |||||||||||||||
| Provision (benefit) for income taxes | (314) | 8,587 | (8,901) | (104) | % | ||||||||||||||||||
| Effective tax rate | (1.3) | % | 18.8 | % | |||||||||||||||||||
| Six Months Ended | |||||||||||||||||||||||
| July 3, | June 27, | Change | |||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
| Income from continuing operations before taxes | $ | 43,642 | $ | 32,597 | $ | 11,045 | 34 | % | |||||||||||||||
| Provision for income taxes | 3,531 | 18,053 | (14,522) | (80) | % | ||||||||||||||||||
| Effective tax rate | 8.1 | % | 55.4 | % | |||||||||||||||||||
The decrease in the tax provision was primarily due to an increase in R&D tax credits, a favorable provision to return adjustment, and the impact of the non-recurring 2025 expense associated with the net nondeductible induced conversion expenditures incurred as a result of the induced conversion from the exchange of the 2028 Convertible Notes, partially offset by shortfalls recognized upon the vesting of RSUs.
Our effective tax rate for 2026 differs from the U.S. federal statutory tax rate of 21% due principally to the estimated impact of Federal Tax Credits (including R&D credits and foreign tax credits), and the application of U.S. and foreign international tax rules related to the taxation of global earnings, including Net CFC tested income ("NCTI"), formerly referred to as global intangible low-tax income ("GILTI"), the deduction associated with foreign-derived deduction-eligible income ("FDDEI"), formerly known as foreign-derived intangible income ("FDII"), and the impact of the OECD's Pillar Two global minimum tax framework.
NCTI represents income earned by the Company's controlled foreign corporations that is subject to current U.S. federal income taxation, after consideration of applicable foreign tax credits. NCTI is treated as a period cost and included in the Company's income tax provision in the period in which the related foreign earnings arise. The amount of NCTI recognized is influenced by the level and mix of foreign earnings, foreign effective tax rates, and the availability of foreign tax credits.
FDDEI provides a deduction that reduces U.S. taxable income generated from certain qualifying foreign sales and services. The benefit recognized from FDDEI depends on the level of qualifying income, overall U.S. taxable income, and statutory limitations.
In addition, our rate is impacted by earnings realized in foreign jurisdictions with statutory rates that are different than the U.S. federal statutory rate. The primary foreign jurisdictions in which we operate and the statutory tax rate for each respective jurisdiction include Ireland (12.5%), Malaysia (24%), Mexico (30%), Switzerland (22%) and Uruguay (25%). Our manufacturing operations in Costa Rica and the Dominican Republic operate under a free trade zone agreement through April 2031 and March 2034, respectively.
In January 2026, the Organization for Economic Cooperation and Development ("OECD") released administrative guidance recognizing the U.S. minimum tax regime and introducing a "side-by-side" package intended to exempt U.S. parented groups from Pillar 2 minimum taxes imposed by foreign jurisdictions on U.S. earnings. Although full adoption of the guidance is expected to eliminate this exposure with respect to the U.S. jurisdiction, laws to implement the framework have not been enacted in all relevant countries. Accordingly, our financial results reflect the laws enacted and in effect as of July 3, 2026.
Changes in the geographic mix of earnings, foreign income tax rates, the availability of tax credits and deductions, business acquisitions, settlements with taxing authorities, and the continued implementation and interpretation of international tax rules, including NCTI, FDDEI, and Pillar Two, may contribute to volatility in the Company's effective tax rate in future periods. In addition, we continue to explore tax planning opportunities that may have a material impact on our effective tax rate.
Refer to Note 9, "Income Taxes," to the accompanying Consolidated Condensed Financial Statements for discussion regarding the Company's significant tax matters.
- 47 -
INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Liquidity and Capital Resources
Sources of Liquidity
| (dollars in thousands) |
July 3, 2026 |
December 31, 2025 |
|||||||||
| Cash and cash equivalents | $ | 21,375 | $ | 17,161 | |||||||
| Working capital from continuing operations | $ | 593,494 | $ | 538,056 | |||||||
| Current ratio from continuing operations | 3.73 | 3.32 | |||||||||
Cash and cash equivalents at July 3, 2026 increased by $4.2 million from December 31, 2025. Cash generated by operating activities of $84.4 million and proceeds from net borrowings on our revolving credit facility of $50.0 million were primarily offset by purchases of property, plant and equipment of $46.7 million, $50.0 million of repurchases of common stock, a $14.0 million investment in a convertible debt instrument, and tax withholding payments related to net share settlements of restricted stock unit awards of $10.3 million.
Working capital increased by $55.4 million from December 31, 2025, or $51.2 million excluding the increase in cash and cash equivalents. The increase in working capital, exclusive of cash and cash equivalents, primarily relates to positive fluctuations in inventory, contract assets and accrued expenses and other liabilities, which were partially offset by a decrease in accounts receivable from the favorable timing of customer payments.
At July 3, 2026, $7.8 million of our cash and cash equivalents were held by foreign subsidiaries. We intend to limit our distributions from foreign subsidiaries to previously taxed income or current period earnings. If distributions are made utilizing current period earnings, we will record foreign withholding taxes in the period of the distribution.
As of July 3, 2026, our capital structure consisted of $1,237.9 million of debt, net of deferred debt issuance costs and unamortized discounts and 34 million shares of common stock outstanding. As of July 3, 2026, we had access to $744.7 million of borrowing capacity under our Revolving Credit Facility, available for normal course of business and letters of credit, and are authorized to issue up to 100 million shares of common stock and 100 million shares of preferred stock. As of July 3, 2026, our contractual debt service obligations for the remainder of 2026, consisting of interest on our outstanding debt and commitment fees on the unused portion of the Revolving Credit Facility are estimated to be approximately $15 million. Actual principal and interest payments may be higher if, for instance, the applicable interest rates on our Senior Secured Credit Facilities increase, we borrow additional amounts on our Revolving Credit Facility, or we pay principal amounts in excess of the required minimums reflected in the contractual debt service obligations above.
Based on current expectations, we believe that our projected cash flows provided by operations, available cash and cash equivalents and borrowings under our Revolving Credit Facility are sufficient to meet our working capital, debt service and capital expenditure requirements for the next twelve months. If our future financing needs increase, we may need to arrange additional debt or equity financing. We continually evaluate and consider various financing alternatives to enhance or supplement our existing financial resources. However, we cannot be assured that we will be able to enter into any such arrangements on acceptable terms or at all. On August 2, 2026, we entered into the Merger Agreement. Subject to the terms and conditions of the Merger Agreement, at the Effective Time, each share of Company Common Shares outstanding immediately prior to the Effective Time, subject to certain limitations, will automatically be converted into the right to receive $127 in cash, without interest and thereafter the Company will be delisted from the NYSE. See The Merger above and Item 1A. Risk Factors, Risks Related to the Merger.
Credit Facilities and 2028 Notes
As of July 3, 2026, we had Senior Secured Credit Facilities that consist of an $800 million Revolving Credit Facility, with $50 million outstanding principal balance, and a TLA Facility with an outstanding principal balance of $91 million. The Revolving Credit Facility and TLA Facility mature on February 15, 2028. The Senior Secured Credit Facilities include a mandatory prepayment provision customary for similar credit facilities.
The Revolving Credit Facility and TLA Facility contain covenants requiring that we maintain (i) a Total Net Leverage Ratio not to exceed 5.00:1.00, subject to increase in certain circumstances following certain qualified acquisitions and (ii) an interest coverage ratio of at least 2.50:1.00. As of July 3, 2026, we were in compliance with these financial covenants. As of July 3, 2026, our Total Net Leverage Ratio, calculated in accordance with our Senior Secured Credit Facilities agreement, was approximately 2.9:1.0. For the twelve month period ended July 3, 2026, our interest coverage ratio, calculated in accordance with our Senior Secured Credit Facilities agreement, was approximately 14.0:1.0.
- 48 -
INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Failure to comply with these financial covenants would result in an event of default as defined under the Revolving Credit Facility and TLA Facility unless waived by the lenders. An event of default may result in the acceleration of our indebtedness. As a result, management believes that compliance with these covenants is material to us.
Convertible Notes
In March 2025, we issued $1.0 billion aggregate principal amount of 2030 Convertible Notes, which mature on March 15, 2030 and bear interest at a fixed rate of 1.875% per annum. The total net proceeds from the issuance of the 2030 Convertible Notes, after deducting initial purchasers' discounts and commissions and debt issuance costs, were approximately $976 million. We used the net proceeds from the issuance of the 2030 Convertible Notes to pay down our Revolving Credit Facility and TLA Facility, exchange a portion of our 2028 Convertible Notes, and to pay the cost of the capped calls related to the issuance of our 2030 Convertible Notes.
In February 2023, we issued $500 million aggregate principal amount of notes. The 2028 Convertible Notes mature on February 15, 2028 and bear interest at a fixed rate of 2.125% per annum. In March 2025, in connection with the issuance of the 2030 Convertible Notes, the Company used part of the net proceeds therefrom to exchange $383.7 million in aggregate principal amount of the 2028 Convertible Notes in privately-negotiated transactions. As of July 3, 2026, the remaining aggregate principal amount of the 2028 Convertible Notes was $116.3 million.
As of July 3, 2026, the conditions allowing holders of the Convertible Notes to convert had not been met. Any determination regarding the convertibility of the Convertible Notes during future periods will be made in accordance with the terms of the indenture governing the Convertible Notes. These obligations are classified as a long-term liability on the Consolidated Balance Sheet at July 3, 2026.
See Note 6, "Debt" of the Notes to the Condensed Consolidated Financial Statements contained in Item 1 of this report for a further information on the Company's outstanding debt.
Share Repurchase Program
On November 4, 2025, we announced that our Board of Directors had approved a share repurchase program authorizing us to repurchase up to an aggregate of $200.0 million of our outstanding common stock (the "Share Repurchase Program"). Under the Share Repurchase Program, we may repurchase shares from time to time on the open market, in privately-negotiated purchases or otherwise. The Share Repurchase Program has no expiration date and will continue until otherwise suspended or terminated. We are not obligated to repurchase any dollar amount or to acquire any specific number of shares and repurchases may be executed at the discretion of management on an opportunistic basis, or pursuant to trading plans or other arrangements. During 2025, we repurchased 698,356 shares of our common stock for a total of $50.0 million.
On February 19, 2026, we entered into an accelerated share repurchase agreement to repurchase $50.0 million of common stock under the Share Repurchase Program. Under the terms of the ASR Agreement, we paid Bank of America $50.0 million on February 19, 2026 and on that date received initial delivery of 462,535 shares of common stock. On April 2, 2026, Bank of America delivered 127,070 additional shares which completed the ASR Agreement totaling 589,605 repurchased shares. The Company used available cash and borrowings under our credit facility to fund the repurchase of the common shares under the ASR Agreement. As of July 3, 2026, the Company had $100 million of capacity remaining under the Share Repurchase Program.
Factoring Arrangements
We utilize accounts receivable factoring arrangements with financial institutions to accelerate the timing of cash receipts and enhance our cash position. These arrangements, in all cases, do not contain recourse provisions, which would obligate us in the event of our customers' failure to pay. During the first six months of 2026 and 2025, we sold, without recourse, $25.1 million and $131.1 million of accounts receivable, respectively. See Note 3, "Supplemental Financial Statement Disclosures" of the Notes to the Condensed Consolidated Financial Statements contained in Item 1 of this report for further information regarding our factoring arrangements.
- 49 -
INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Summary of Cash Flow
The following cash flow summary information includes cash flows related to discontinued operations.
| Six Months Ended | |||||||||||
| (in thousands) |
July 3, 2026 |
June 27, 2025 |
|||||||||
| Cash provided by (used in): | |||||||||||
| Operating activities | $ | 84,430 | $ | 75,138 | |||||||
| Investing activities | (60,586) | (214,994) | |||||||||
| Financing activities | (19,755) | 115,989 | |||||||||
| Effect of foreign currency exchange rates on cash and cash equivalents | 125 | 459 | |||||||||
| Net change in cash and cash equivalents | $ | 4,214 | $ | (23,408) | |||||||
Operating Activities - During the first six months of 2026, we generated cash from operations of $84.4 million, compared to $75.1 million for the first six months of 2025, as an increase in cash flow provided by changes in operating assets and liabilities was partially offset by a $13.0 million decrease in net income adjusted for non-cash items such as depreciation and amortization.
Investing Activities - The $154.4 million decrease in net cash used in investing activities was primarily attributable to lower cash paid for acquisitions offset by the purchase of a long-term investment. Investing activities for the first six months of 2025 included net cash paid of $171.8 million for the Precision and VSi acquisitions.
Financing Activities - Net cash used in financing activities for the first six months of 2026 was $19.8 million compared to $116.0 million provided by financing activities for the first six months of 2025. In the first six months of 2026, cash payments of $50.0 million for repurchases of common stock and $10.3 million related to stock-based compensation activity were primarily offset by net proceeds of $50.0 million received from net borrowings under our revolving credit facility. Cash provided by financing activities for the first six months of 2025 was primarily the net proceeds from the issuance of our 2030 Convertible Notes of $977.5 million, which was partially offset by a $71.0 million purchase of capped call options associated with the 2030 Convertible Notes, $383.7 million in aggregate principal amount of exchanged 2028 Convertible Notes, $274.0 million of principal payments on our TLA Facility, $116.0 million net payments on our Revolving Credit Facility, and $13.1 million related to stock-based compensation activity.
Off-Balance Sheet Arrangements
We do not currently have off balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our Condensed Consolidated Financial Statements.
Impact of Recently Issued Accounting Standards
In the normal course of business, we evaluate all new accounting pronouncements issued by the FASB, SEC, or other authoritative accounting bodies to determine the potential impact they may have on our Condensed Consolidated Financial Statements. See Note 1, "Basis of Presentation" of the Notes to Condensed Consolidated Financial Statements contained in Item 1 of this report for additional information about these recently issued accounting standards and their potential impact on our financial condition or results of operations.
Critical Accounting Policies and Estimates
The preparation of our Condensed Consolidated Financial Statements in accordance with accounting principles generally accepted in the U.S. requires management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements and accompanying notes. Our estimates, assumptions and judgments are based on historical experience and various other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amount of assets and liabilities that are not readily apparent from other sources. Making estimates, assumptions and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyond our control. Management believes the estimates, assumptions and judgments employed and resulting balances reported in the Condensed Consolidated Financial Statements are reasonable; however, actual results could differ materially.
There have been no significant changes to the critical accounting policies and estimates as compared to those disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2025.
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