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What changed in Integer Holdings Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Integer Holdings Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+361 added−319 removedSource: 10-K (2024-02-20) vs 10-K (2023-02-21)

Top changes in Integer Holdings Corp's 2023 10-K

361 paragraphs added · 319 removed · 262 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

74 edited+14 added−15 removed95 unchanged
Biggest changeWhile 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 the following: • operational risks, such as the duration, scope and impact of the COVID-19 pandemic, including the evolving health, economic, social and governmental environments and the effect of the pandemic on our associates, suppliers and customers as well as the global economy; our dependence upon a limited number 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; interruptions in our manufacturing operations; 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 caused by quality problems related to our products; 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 matters by various stakeholders; and our dependence upon our senior management team and technical personnel; • strategic risks, such as the intense competition we face and our ability to successfully market our products; 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; • financial risks, such as 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; 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; and • legal and compliance risks, such as 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 and the cost to comply with environmental regulations; our ability to comply with customer-driven policies and third party standards or certification requirements; our ability to obtain necessary licenses for new technologies; legal and regulatory risks from our international operations; and the fact that the healthcare industry is highly regulated and subject to various regulatory changes; and • other risks and uncertainties that arise from time to time and are described in Item 1A “Risk Factors” of this report. - 15 - Table of Contents
Biggest changeWe 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. - 15 - Table of Contents 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: • operational risks, such as our dependence upon a limited number 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; interruptions in our manufacturing operations; 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 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 define below) matters by various stakeholders; our dependence upon our senior management team and key technical personnel; our energy market revenues’ dependence on conditions in the historically volatile oil and natural gas industries; and consolidation in the healthcare industry resulting in greater competition; • strategic risks, such as the intense competition we face and our ability to successfully market our products; 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; • financial and indebtedness risks, such as our ability to accurately forecast future performance based on operating results that often fluctuate; 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 Convertible Notes (as defined below) adversely impacting our liquidity, the conversion of our 2028 Convertible Notes, if it were to occur, diluting ownership interests of existing holders of our common stock; the counterparty risk associated with our capped call transaction; the counter 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; and • legal and compliance risks, such as 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 that could result in reduced sales of our products; and • other risks and uncertainties that arise from time to time and are described in Item 1A, “Risk Factors” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report. - 16 - Table of Contents
We offer our customers a comprehensive portfolio comprising the best technologies, providing a single point of support, and driving optimal outcomes. - 8 - Table of Contents Some of the more significant product development opportunities our Medical segment is pursuing are as follows: Product Line Product Development Projects Cardio & Vascular Active projects in structural heart delivery systems subassemblies, structural heart delivery accessories, structural heart implants, electrophysiology catheters, accessories and subassemblies, peripheral vascular catheters and guidewires, neurovascular therapies to prevent hemorrhagic and ischemic stroke, enhanced access introducers, gastrointestinal scope components, fractional flow reserve guidewire subassemblies, sensor-enabled guidewires, and oncology catheters.
We offer our customers a comprehensive portfolio comprising the best technologies, providing a single point of support, and driving optimal outcomes. - 8 - Table of Contents Some of the more significant product development opportunities our Medical segment is pursuing are as follows: Product Line Product Development Projects Cardio & Vascular Active projects in structural heart delivery systems subassemblies, structural heart delivery accessories, components for structural heart implants, electrophysiology catheters, accessories and subassemblies, peripheral vascular catheters and guidewires, neurovascular therapies to prevent hemorrhagic and ischemic stroke, enhanced access introducers, gastrointestinal scope components, fractional flow reserve guidewire subassemblies, sensor-enabled guidewires, and oncology catheters.
In addition, all Board members and professional and management associates are required to annually review and certify their understanding of, and agreement to comply with, the Code of Conduct. Seasonality Our business is generally not seasonal in nature.
In addition, all Board members and professional and management associates are required to annually review and certify their understanding of, and agreement to comply with, our Code of Conduct. Seasonality Our business is generally not seasonal in nature.
Class III devices are generally the highest risk devices and are therefore subject to the highest level of regulatory control, requiring a PMA by the FDA before they are marketed and continued controls in the form of amendments or supplements which require approval prior to making certain product or process changes. - 10 - Table of Contents The member countries of the EU have a single set of requirements that apply to all member countries and our products.
Class III devices are generally the highest risk devices and are therefore subject to the highest level of regulatory control, generally requiring a PMA by the FDA before they are marketed and continued controls in the form of amendments or supplements which require approval prior to making certain product or process changes. - 10 - Table of Contents The member countries of the EU have a single set of requirements that apply to all member countries and medical products.
We incorporate many factors into associate pay decisions, including market comparisons of compensation and benefits for similar roles, individual associate skills and experience in their role, individual performance annually and over multiple years, and relative contributions to the Company’s short- and long-term success. As of December 31, 2022, the percentage of our global workforce represented by women was 48%.
We incorporate many factors into associate pay decisions, including market comparisons of compensation and benefits for similar roles, individual associate skills and experience in their role, individual performance annually and over multiple years, and relative contributions to the Company’s short- and long-term success. As of December 31, 2023 , the percentage of our global workforce represented by women was 48%.
We believe that the procedures we use for quality controls, development, testing, manufacturing, labeling, marketing and distribution of our medical devices conform to the requirements of all pertinent regulations. Environmental Health and Safety Laws We are subject to direct governmental regulation, including the laws and regulations generally applicable to all businesses in the jurisdictions in which we operate.
We believe that the procedures we use for quality control, development, testing, manufacturing, labeling, marketing and distribution of our medical devices conform to the requirements of all pertinent regulations. Environmental Health and Safety Laws We are subject to direct governmental regulation, including the laws and regulations generally applicable to all businesses in the jurisdictions in which we operate.
Government Regulation Medical Device Regulation Integer develops, manufactures, markets and sells products in multiple countries throughout the world and is therefore subject to regulation by numerous agencies and legislative bodies, including the FDA, European Commission, Health Product Regulatory Agency, Health Canada, Therapeutics Goods Administration and other comparable foreign counterparts.
Government Regulation Medical Device Regulation Integer develops, manufactures, markets and sells products in multiple countries throughout the world and is therefore subject to regulation by numerous agencies and legislative bodies, including the FDA, European Medicines Agency, Health Product Regulatory Agency, Health Canada, Therapeutics Goods Administration and other comparable foreign counterparts.
We also provide regulatory services including product registration and post-market surveillance in accordance with the regulatory requirements of the U.S. and European Union (“EU”) as well as other geographies. We have integrated our proprietary technologies in our own products and those of our customers.
We also provide regulatory and clinical services including product registration, clinical evaluations, and post-market surveillance in accordance with the regulatory requirements of the U.S. and European Union (“EU”) as well as other geographies. We have integrated our proprietary technologies in our own products and those of our customers.
Marshall, II, age 53, is Senior Vice President, General Counsel, Chief Ethics and Compliance Officer and Corporate Secretary. He joined the Company in September 2021 on an interim basis and assumed his current role on a permanent basis in January 2022. Mr.
Marshall, II, age 54, is Senior Vice President, General Counsel, Chief Ethics and Compliance Officer and Corporate Secretary. He joined the Company in September 2021 on an interim basis and assumed his current role on a permanent basis in January 2022. Mr.
Additionally, we support customers with custom introducer sheaths and kit solutions leveraging our deep expertise in thin-wall sheath design, hydrophilic coatings and guidewire manufacturing (including poly-jacketed, mandrel, and nitinol core guidewire constructions). - 4 - Table of Contents Non-vascular Markets: Within the Cardio & Vascular group, we also manage non-vascular markets for which we have expertise and offer a broad range of products, technologies and capabilities.
Additionally, we support customers with custom introducer sheaths and kit solutions leveraging our deep expertise in thin-wall sheath design, hydrophilic coatings and guidewire manufacturing (including poly-jacketed, mandrel, and nitinol core guidewire constructions). - 4 - Table of Contents Non-vascular Markets: Within the Cardio & Vascular product line, we also manage non-vascular markets for which we have expertise and offer a broad range of products, technologies and capabilities.
Dziedzic, age 54, is President and Chief Executive Officer of the Company and a member of our Board of Directors. He assumed that role on July 16, 2017 following his appointment as interim President & Chief Executive Officer on March 27, 2017. Mr.
Dziedzic, age 55, is President and Chief Executive Officer of the Company and a member of our Board of Directors. He assumed that role on July 16, 2017 following his appointment as interim President & Chief Executive Officer on March 27, 2017. Mr.
If any such conflict minerals originated in the Democratic Republic of the Congo or adjoining countries (the “DRC region”), we must undertake due diligence efforts to determine whether such minerals financed or benefited armed groups in the DRC region.
If any such conflict minerals originated in the Democratic Republic of the Congo or adjoining countries (the “DRC region”), we must undertake due diligence efforts to ascertain whether such minerals financed or benefited armed groups in the DRC region.
Andrew Senn, age 41, is Senior Vice President, Strategy, Business Development and Investor Relations. Mr. Senn was promoted to the position of Senior Vice President, Strategy and Business Development in January 2022 and assumed the Investor Relations responsibilities in February 2023. From October 2015 to January 2022, Mr.
Andrew Senn, age 42, is Senior Vice President, Strategy, Business Development and Investor Relations. Mr. Senn was promoted to the position of Senior Vice President, Strategy and Business Development in January 2022 and assumed the Investor Relations responsibilities in February 2023. From October 2015 to January 2022, Mr.
We may have environmental liability associated with historic operations as disclosed in Note 13, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements contained in Item 8 of this report. We may also become subject to environmental liabilities in the future as a result of other historic or current operations.
We may have environmental liability associated with historic operations as disclosed in Note 13, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” of this report. We may also become subject to environmental liabilities in the future as a result of other historic or current operations.
Consistent with our strategy, the combination with Aran further increases our ability to offer complete solutions for complex delivery and therapeutic devices in high growth cardiovascular markets such as structural heart, neurovascular, peripheral vascular, and endovascular as well as general surgery.
Consistent with our strategy, the acquisition of Aran further increases our ability to offer complete solutions for complex delivery and therapeutic devices in high growth cardiovascular markets such as structural heart, neurovascular, peripheral vascular, and endovascular as well as general surgery.
The FDA’s Quality System Regulation sets forth basic quality requirements for our sites that includes product design and manufacturing processes, requires the maintenance of certain records, and provides for on-site inspection of our facilities and continuing review by the FDA.
The FDA’s Quality System Regulation sets forth quality requirements for our sites that includes product design and manufacturing processes, requires the maintenance of certain records, and provides for on-site inspection of our facilities and periodic review by the FDA.
Class II devices are higher risk devices than Class I and require greater regulatory controls that includes General Controls combined with Special Controls. Special Controls define the specific risks to health along with an optional means for addressing those risks.
Class II devices are higher risk devices than Class I and require greater regulatory controls that generally include General Controls combined with Special Controls. Special Controls define the specific risks to health along with an optional means for addressing those risks.
Our peripheral vascular, neurovascular, urology and oncology portfolio is primarily focused on the design, development and manufacture of devices used during the treatment of peripheral artery disease, transcatheter embolization and occlusion, aortic aneurysm repair, and neurovascular stroke prevention.
Our peripheral vascular, neurovascular, and interventional oncology portfolio is primarily focused on the design, development and manufacture of devices used during the treatment of peripheral artery disease, transcatheter embolization and occlusion, aortic aneurysm repair, and neurovascular stroke treatment.
We also make available free of charge through our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file those reports with, or furnish them to, the SEC.
We also make available free of charge through our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as soon as reasonably practicable after we electronically file those reports with, or furnish them to, the SEC.
During 2022, sales to one of our Non-Medical segment customers was in excess of 10% of our Non-Medical segment sales, but did not exceed 10% of our total sales.
During 2023, sales to one of our Non-Medical segment customers was in excess of 10% of our Non-Medical segment sales, but did not exceed 10% of our total sales.
Information regarding our sales by geographic area is set forth in Note 18, “Segment and Geographic Information,” of the Notes to Consolidated Financial Statements contained in Item 8 of this report.
Information regarding our sales by geographic area is set forth in Note 18, “Segment and Geographic Information,” of the Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” of this report.
In addition to the U.S. and EU, we have approval to manufacture or market our products in numerous foreign countries and therefore are subject to other regulations affecting, among other things, product standards, sterilization, packaging requirements, labeling requirements, and import laws.
In addition to the U.S. and EU, we have approval to manufacture or market our products in numerous other countries and therefore are subject to those countries’ regulations affecting, among other things, product standards, sterilization, packaging requirements, labeling, and import requirements.
We also provide and receive payment terms to customers and from suppliers in the normal course of business. It will continue to be a priority for us to maintain appropriate working capital levels while improving our operating cash flow and managing our leverage ratio.
We also provide and receive payment terms to customers and from suppliers in the normal course of business, and utilize factoring and supplier financing arrangements. It will continue to be a priority for us to maintain appropriate working capital levels while improving our operating cash flow and managing our leverage ratio.
In addition to our portfolio strategy, we continue to execute our six key operational strategic imperatives designed to drive excellence in everything we do: • Sales Force Excellence: We have changed the organizational structure to match product line growth strategies and customer needs.
In addition to our portfolio strategy, we continue to execute our six key operational strategic imperatives designed to drive excellence in everything we do: • Sales Force Excellence: We align our organizational structure to match product line growth strategies and customer needs.
The public can obtain any documents that we file with the SEC at www.sec.gov. - 13 - Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS Information concerning our executive officers is presented below as of February 21, 2023.
The public can obtain any documents that we file with the SEC at www.sec.gov. - 13 - Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS Information concerning our executive officers is presented below as of February 20, 2024.
Our products include, harmonic scalpels, shaver blades, burr shavers, radio frequency probes, biopsy probes, trocars, electrocautery components, wound dressings, GERD treatment components, and phacoemulsification needles. Orthopedic. Our orthopedic products include instruments used in hip, knee, and spine surgeries. Our products primarily consist of reamers and chisels.
Our products include, harmonic scalpels, shaver blades, burr shavers, radio frequency probes, biopsy probes, trocars, electrocautery components, wound dressings, GERD treatment components, and phacoemulsification needles. - 5 - Table of Contents Orthopedic. Our orthopedic products include instruments used in hip, knee, and spine surgeries. Our products primarily consist of reamers and chisels. Portable Medical.
Key successes in our strategy include: • As of December 31, 2022, 42% of our U.S. based workforce are people of color • Globally, 48% of our workforce as of December 31, 2022 are women • 100% executive leadership actively serve as executive sponsors of D&I initiatives • Each member of our senior leadership team adopted a culture focused goal, and 31% of these goals relate to D&I • Continuing with three cross functional governing D&I councils, which advance the global D&I strategy at all levels of the organization • Establishing three additional employee resource groups, bringing our total up to six groups, which are voluntary, employee-led groups of associates who join together based on common interests, backgrounds or demographic factors • Empowering D&I site champions, whose responsibility it is to promote the Integer’s diversity and inclusion initiatives at each of our locations • Expanded our Day of Understanding to a month-long observance of D&I in 2022 As part of our management approach and culture of promoting, protecting and respecting all associates, we continue to encourage a workplace free from discrimination or unlawful harassment.
Key successes in our strategy include: • As of December 31, 2023, 44% of our U.S. based workforce are people of color • Globally, 48% of our workforce as of December 31, 2023 are women • 100% executive leadership actively serve as executive sponsors of D&I initiatives • Each member of our senior leadership team adopted a culture focused goal, and 31% of these goals relate to D&I • Continuing with three cross functional governing D&I councils, which advance the global D&I strategy at all levels of the organization • Six employee resource groups, which are voluntary, employee-led groups of associates who join together based on common interests, backgrounds or demographic factors • Empowering D&I site champions, whose responsibility it is to promote Integer’s diversity and inclusion initiatives at each of our locations As part of our management approach and culture of promoting, protecting and respecting all associates, we continue to encourage a workplace free from discrimination or unlawful harassment.
As of December 31, 2022, we owned 672 U.S. and foreign patents, and have license right to another 398 patents. Design, development and regulatory aspects of our business also provide competitive advantages, and we require our employees, consultants and other parties having access to our confidential information to execute confidentiality agreements.
As of December 31, 2023, we owned 496 U.S. and foreign patents, and have license right to another 133 patents. Design, development and regulatory aspects of our business also provide competitive advantages, and we require our employees, consultants and other parties having access to our confidential information to execute confidentiality agreements.
Firm backlog orders at December 31, 2022 were approximately $886 million. The majority of the orders outstanding at December 31, 2022 are expected to be shipped within one year. Competition The MDO manufacturing industry has traditionally been highly fragmented with several thousand companies, many of which we believe have limited manufacturing capabilities and limited sales and marketing expertise.
Firm backlog orders at December 31, 2023 were approximately $917 million. The majority of the orders outstanding at December 31, 2023 are expected to be shipped within one year. Competition The MDO manufacturing industry has traditionally been highly fragmented amongst several hundred companies, many of which we believe have limited manufacturing capabilities and limited sales and marketing expertise.
Forward-looking statements include statements relating to: • the impact of the COVID-19 global pandemic and supply chain pressures on the Company and our business; • future development and expected growth of our business and industry; • our ability to execute our business model and our business strategy; • 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.
Forward-looking statements include, but are not limited to, statements relating to: • supply chain pressures on the Company and our business; • future development and expected growth of our business and industry; • our ability to execute our business model and our business strategy; • 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.
This change is about getting more out of the capabilities we already have, and has increased individual accountability and clarity of ownership, while serving customers more effectively. • Market Focused Innovation: We are ensuring we get the most return on our research and development investments.
This alignment and related evolution is about getting more out of the capabilities we already have and maximizing individual accountability and clarity of ownership, while serving customers more effectively. • Market Focused Innovation: We are ensuring we get the most return on our research and development investments.
Our inorganic strategy will be primarily focused on strategic “bolt-on” acquisitions that will supplement our existing product portfolio. - 7 - Table of Contents Strategic Overview We continue to take steps to better align our resources in order to invest to grow and protect, and preserve our portfolio of products.
Our inorganic strategy will be primarily focused on strategic “tuck-in” acquisitions that will supplement our existing product portfolio. - 7 - Table of Contents Strategic Overview We continue to take steps to better align our resources in order to invest to grow our portfolio of products.
Refer to Note 20, “Discontinued Operations,” of the Notes to Consolidated Financial Statements contained in Item 8 of this report for additional information. - 3 - Table of Contents MEDICAL SEGMENT Cardio & Vascular The Cardio & Vascular product line leverages a global footprint to produce a full range of components, subassemblies, and finished devices used in interventional cardiology, structural heart, heart failure, peripheral vascular, neurovascular, interventional oncology, electrophysiology, vascular access, infusion therapy, hemodialysis, urology, and gastroenterology procedures.
Refer to Note 2, “Business Acquisitions,” of the Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” of this report for additional information about the InNeuroCo, Aran and Oscor acquisitions. - 3 - Table of Contents MEDICAL SEGMENT Cardio & Vascular The Cardio & Vascular product line leverages a global footprint to produce a full range of components, subassemblies, and finished devices used in interventional cardiology, structural heart, heart failure, peripheral vascular, neurovascular, interventional oncology, electrophysiology, vascular access, infusion therapy, hemodialysis, urology, and gastroenterology procedures.
Senn served as Director of Program Management responsible for electrophysiology systems at St. Jude Medical from June 2009 until January 2013. From June 2003 to June 2009, Mr. Senn served in various engineering and program management roles at Lake Region Medical. Kirk Thor, age 59, is Executive Vice President and Chief Human Resources Officer.
Senn served as Director of Program Management responsible for electrophysiology systems at St. Jude Medical from June 2009 until January 2013. From June 2003 to June 2009, Mr. Senn served in various engineering and program management roles at Lake Region Medical. Diron Smith, age 51, is Executive Vice President and Chief Financial Officer.
Many of the regulations applicable to our devices and products in these countries are similar to those of the FDA or EU; however, others vary widely, ranging from simple product registrations to detailed submissions such as those required by the FDA.
Many of the regulations applicable to our devices and products in these countries are similar to those of the U.S. or EU; however, others vary widely, ranging from simple product registrations to detailed submissions.
The loss of a significant amount of business from any large customer or a further consolidation of such customers could have a material adverse effect on our financial condition and results of operations, as further explained in Item 1A “Risk Factors” of this report. - 6 - Table of Contents Sales and Marketing We sell our products directly to our customers.
The loss of a significant amount of business from any large customer or a further consolidation of such customers could have a material adverse effect on our financial condition and results of operations, as further explained in Item 1A, “Risk Factors” of this report.
We cannot quickly establish additional or replacement suppliers for these materials because of these rigid requirements. For these critical raw materials, we maintain safety stocks and partner with suppliers through contract to help ensure the continuity of supply. Many of the raw materials that are used in our products are subject to fluctuations in market price.
For these critical raw materials, we maintain safety stocks and partner with suppliers through contract to help ensure the continuity of supply. Many of the raw materials that are used in our products are subject to fluctuations in market price.
We are also subject to onsite inspection by independent bodies with the authority to issue or not issue certifications we may require to be able to sell products in certain countries.
We are also subject to on-site inspection by independent bodies with the authority to issue or not issue certifications we require to sell products in certain countries.
During 2022, three of our Medical segment customers, Abbott Laboratories, Boston Scientific and Medtronic were each in excess of 10% of total sales and collectively accounted for 46% of our total sales.
During 2023, three of our Medical segment customers, Abbott Laboratories, Boston Scientific and Medtronic were each in excess of 10% of total sales and - 6 - Table of Contents collectively accounted for 45% of our total sales.
From 2013 until joining the Company in January 2018, Mr. Thor was Vice President for Global Talent Management & Organization Effectiveness at Flowserve Corporation. From 2007 to 2012, he served as Vice President for Talent Management & Organization Development at JC Penney.
Kirk Thor, age 60, is Executive Vice President and Chief Human Resources Officer. From 2013 until joining the Company in January 2018, Mr. Thor was Vice President for Global Talent Management & Organization Effectiveness at Flowserve Corporation. From 2007 to 2012, he served as Vice President for Talent Management & Organization Development at JC Penney.
Our minimally invasive and general surgery products are primarily arthroscopic, laparoscopic, and general surgery devices and components used for minimally invasive procedures in the joint, abdominal, gastroesophageal reflux disease (“GERD”), ophthalmology, oncology, and general surgery spaces.
The following are the principal products and services offered by our AS&O product line: Minimally Invasive & General Surgery. Our minimally invasive and general surgery products are primarily arthroscopic, laparoscopic, and general surgery devices and components used for minimally invasive procedures in the joint, abdominal, gastroesophageal reflux disease (“GERD”), ophthalmology, oncology, and general surgery spaces.
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.
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.
This cultural framework recognizes the value of individuals as critical to Integer’s operational strategy. As of December 31, 2022, Integer employed approximately 10,000 associates in addition to a contingent workforce of approximately 100 to assist with various projects and service functions and address peaks in staff requirements. We are a global company serving markets worldwide.
This cultural framework recognizes the value of individuals as critical to Integer’s operational strategy. As of December 31, 2023, Integer employed approximately 10,500 associates in addition to a contingent workforce of approximately 400 to assist with various projects and service functions and address peaks in staff requirements.
These actions may include product recalls or communications with a significant number of physicians about a product or labeling issue. The scope of such actions can range from very minor issues affecting a small number of units to more significant actions. Our Medical customers include large multi-national medical device OEMs and their subsidiaries.
The scope of such actions can range from very minor issues affecting a small number of units to more significant actions. Our Medical customers include large multi-national medical device OEMs and their subsidiaries.
Payman Khales, age 53, is President, Cardio & Vascular, and joined the Company on February 20, 2018. Mr. Khales is also the leader for the Integer Market Focused Innovation strategic imperative. Prior to joining Integer, Mr. Khales was the President of the Environmental Technologies Segment at CECO Environmental Company from May 2014 through July 2017.
Khales is also the leader for the Integer Market Focused Innovation strategic imperative. Prior to joining Integer, Mr. Khales was the President of the Environmental Technologies Segment at CECO Environmental Company from May 2014 through July 2017.
The FDA classifies medical devices based on the risks associated with use of the device. Devices are classified into one of three categories - Class I, Class II, or Class III. Class I devices are deemed to be low risk and are therefore subject to the least regulatory controls, referred to as General Controls.
Devices are classified into one of three categories - Class I, Class II, or Class III. Class I devices are deemed to be low risk and are therefore subject to the least regulatory controls, referred to as General Controls.
As of December 31, 2022 our workforce is distributed as follows: • 43% in the U.S.; • 26% in Mexico; • 17% in Ireland; • 8% in the Dominican Republic; • 3% in both Uruguay and Malaysia; and • less than 1% combined in Germany, Israel and Switzerland.
As of December 31, 2023, our workforce is distributed as follows: • 42% in the U.S.; • 26% in Mexico; • 16% in Ireland; • 9% in the Dominican Republic; • 4% in Uruguay; • 3% in Malaysia; and • less than 1% combined in Israel and Switzerland.
Authorization to commercially market our non-exempt products in the U.S. is granted by the FDA under procedures referred to as 510(k) pre-market notification or pre-market approval (“PMA”). These processes require us to notify the FDA of the new product and obtain FDA clearance or approval before marketing the device.
The ability to commercially market our non-exempt products in the U.S. is granted by the FDA under procedures referred to as 510(k) pre-market notification or pre-market approval (“PMA”). These processes require us to obtain FDA approval or authorization before marketing the device. The FDA classifies medical devices based on the risks associated with use of the device.
Dziedzic was the Executive Vice President and Chief Financial Officer of The Brink’s Company from 2009 to 2016, and prior to joining The Brink’s Company in 2009, he had a 20-year career with General Electric. Jason K. Garland, age 49, is the Company’s Executive Vice President and Chief Financial Officer. Mr.
Dziedzic was the Executive Vice President and Chief Financial Officer of The Brink’s Company from 2009 to 2016, and prior to joining The Brink’s Company in 2009, he had a 20-year career with General Electric. Margaret Carthy, age 60, is Executive Vice President, Quality and Regulatory Affairs. Ms.
This certification requires, among other things, an implemented quality system that applies (where applicable) to the design and manufacture of components, assemblies and finished medical devices, including component quality and supplier control. Maintenance of these certifications for each facility requires periodic re-examination from an independent notified body.
This certification requires, among other things, an implemented quality system that applies (where applicable) to the design and manufacture of components, assemblies and finished medical devices, including component quality and supplier control.
She joined the Company in 2004 and was promoted to her current position in January 2022. Before assuming this role, Ms. Carthy served as Vice President of Quality and Regulatory for our Cardio & Vascular product category. Prior to joining our Company, Ms. Carthy was a Quality & Regulatory Leader for the European Region at Sola International, now Carl Zeiss.
Carthy was promoted from Senior Vice President to Executive Vice President in January 2024. She joined the Company in 2004 and was promoted to her current position in January 2022. Before assuming this role, Ms. Carthy served as Vice President of Quality and Regulatory for the Cardio & Vascular product line. Prior to joining our Company, Ms.
Each site’s quality system is certified under an applicable International Organization for Standardization (“ISO”) quality system standard, such as ISO 13485 (Medical device and component sites) or ISO 9001 (Electrochem).
The quality systems at our sites are compliant with and certified to various recognized international standards, requirements, and directives. Each site’s quality system is certified under an applicable International Organization for Standardization (“ISO”) quality system standard, such as ISO 13485 (Medical device and component sites) or ISO 9001 (Electrochem).
Some of the more significant product development opportunities in our Non-Medical segment are our next generation medium-rate and high-rate batteries that offer extended performance; such as higher power pulsing capabilities and increased operating temperature range. We also offer a suite of smart battery products that include real time battery monitoring as well as voltage, temperature and current cut-off technologies.
Some of the more significant product development opportunities in our Non-Medical segment are our next generation medium-rate and high-rate batteries that offer extended performance; such as increased capacity, higher power pulsing capabilities and increased operating temperature range.
You can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or variations or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially from those stated or implied by these forward-looking statements.
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.
The nature and extent of our commercial relationships with each of our customers are different in terms of breadth of products purchased, product volumes, length of contractual commitment, ordering patterns, inventory management, and selling prices.
OTHER FACTORS IMPACTING OUR OPERATIONS Customers Our products are designed to provide reliable, long-lasting solutions that meet the evolving requirements and needs of our customers. The nature and extent of our commercial relationships with each of our customers are different in terms of breadth of products purchased, product volumes, length of contractual commitment, ordering patterns, inventory management, and selling prices.
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 Securities Exchange Act of 1934, as amended (the “Exchange Act”).
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.
Our flexible, high productivity manufacturing capabilities span sites across the U.S., Mexico, Uruguay, Ireland, Malaysia, the Dominican Republic, and Israel. Due to the highly regulated nature of the products we produce, we have implemented strong quality systems across all sites. The quality systems at our sites are compliant with and certified to various recognized international standards, requirements, and directives.
Our flexible, high productivity manufacturing capabilities span sites across the U.S., Mexico, Uruguay, Ireland, Malaysia, and the Dominican Republic. Due to the highly regulated nature of the products we produce, we have implemented strong quality systems across all sites which are supplemented by a corporate quality system that harmonizes the major functions across sites.
Companies must work with an EU recognized Notified Body to gain approval for the product and manufacturing site before obtaining free movement of products throughout the member countries.
Companies must work with an EU recognized Notified Body to gain approval for the product and manufacturing site before obtaining free movement of products throughout the member countries. In Europe, our devices are considered Class I, Class IIa, or Class III, under MDD or AIMDD and will be in Class I, Class IIa or Class III under the EU-MDR.
NON-MEDICAL SEGMENT Our power solutions enable the success and advancement of our customers’ critical non-medical applications. We provide custom battery packs for use in extreme environments where failure is not an option. The following are the principal products and services offered by our Non-Medical product line: Electrochem.
We provide custom energy storage cells and battery packs for use in extreme environments where failure is not an option. The following are the principal products and services offered by our Non-Medical product line: Electrochem. Electrochem provides customized battery power and power management systems to markets where safety, reliability, quality and durability are critical.
The EU is in the process of replacing its regulatory requirements from the European Medical Device Directives (“MDD” and Active Implantable Medical Device Directive (“AIMDD”) to the European Medical Device Regulation (“EU-MDR”). The EU MDR became effective in May 2021, resulting in additional premarket and post-market requirements which must be in place by May 2024.
The EU is in the process of replacing its regulatory requirements from the European Medical Device Directives (“MDD” and Active Implantable Medical Device Directive (“AIMDD”) to the European Medical Device Regulation (“EU-MDR”).
In 2022, approximately 55% of our products sold were shipped to locations in the United States (“U.S.”). Sales within and outside the U.S. are primarily to customers whose corporate offices are located and headquartered in the U.S.
Sales and Marketing With limited exceptions, we sell our products directly to our customers, including large, multi-national OEMs and their affiliated subsidiaries. In 2023, approximately 56% of our products sold were shipped to locations in the United States (“U.S.”). Sales within and outside the U.S. are primarily to customers whose corporate offices are located and headquartered in the U.S.
Electrochem’s product design capability includes protective circuitry, glass-to-metal hermetic seals, fuses and diodes to help ensure safe, durable and reliable power as devices using our battery solutions are often subjected to harsh conditions. Our primary batteries are used in remote and demanding environments, including down hole drilling tools, pipeline inspection, military devices, and oceanographic buoys.
In addition, Electrochem’s product design capabilities include protective circuitry, glass-to-metal hermetic seals, fuses and diodes to help ensure safe, durable and reliable power as devices using our battery solutions are often subjected to harsh conditions.
Our offerings include customized rechargeable batteries and chargers to power medical devices across multiple clinical markets including patient monitoring, ventilators, portable defibrillators, portable ultrasound, X-Ray machines, hearing devices, and LVAD devices.
Our offerings include customized rechargeable batteries and chargers to power medical devices across multiple clinical markets including patient monitoring, ventilators, portable defibrillators, portable ultrasound and X-Ray machines. We collaborate with our customers on product development opportunities incorporating our power solutions into Class I, II or III medical devices.
Compliance with applicable regulatory requirements is subject to continual review and is monitored through periodic inspections by the FDA and international regulatory bodies. - 9 - Table of Contents Suppliers and Raw Materials We purchase some critical raw materials from a limited number of suppliers due to the technically challenging requirements of the supplied product and/or the lengthy process required to qualify these materials both internally and with our customers.
Suppliers and Raw Materials We purchase some critical raw materials from a limited number of suppliers due to the technically challenging requirements of the supplied product and/or the lengthy process required to qualify these materials both internally and with our customers. We cannot quickly establish additional or replacement suppliers for these materials because of these rigid requirements.
A recognized leader in proprietary medical textiles, high precision biomaterial coverings and coatings as well as advanced metal and polymer braiding, Aran delivers development and manufacturing solutions for implantable medical devices.
On April 6, 2022, we acquired 100% of the outstanding equity interests of Connemara Biomedical Holdings Teoranta, including its operating subsidiaries Aran Biomedical and Proxy Biomedical (collectively “Aran”). A recognized leader in proprietary medical textiles, high precision biomaterial coverings and coatings as well as advanced metal and polymer braiding, Aran delivers development and manufacturing solutions for implantable medical devices.
Advanced Surgical, Orthopedics & Portable Medical The Advanced Surgical, Orthopedics & Portable Medical (“AS&O”) product line offers a broad range of products and services across the many businesses it serves. This product line includes sales to the acquirer of our AS&O Product Line. The following are the principal products and services offered by our AS&O product line: Portable Medical.
Advanced Surgical, Orthopedics & Portable Medical The Advanced Surgical, Orthopedics & Portable Medical (“AS&O”) product line offers a broad range of products and services across the many businesses it serves. During 2018, we sold our advanced surgical and orthopedics product line but continue to manufacture advanced surgical and orthopedic products under a supply agreement with the buyer.
Electrochem’s primary lithium power solutions, which include high, moderate and low-rate non-rechargeable cell constructions, are utilized in extreme conditions and are built to withstand exceptionally high and low temperatures as well as high shock and vibration.
We design and manufacture customized primary (non-rechargeable) battery solutions, which are used in multiple industries including the energy, military and environmental markets, among others. Electrochem’s primary lithium power solutions, which include high, moderate and low-rate non-rechargeable cell constructions, are utilized in extreme conditions and are built to withstand robust temperature extremes.
Most recently we added a line of high temperature super capacitors to our portfolio, further extending our capabilities in ruggedized, high temperature energy storage.
In addition, we have developed a suite of current cut-off technologies that can provide added safeguards for our customers’ end applications, while also continuing to evolve our real-time battery monitoring capabilities. Most recently we added a line of high temperature super capacitors to our portfolio, further extending our capabilities in ruggedized, high temperature energy storage.
The Medical segment includes the Cardio & Vascular, Cardiac Rhythm Management & Neuromodulation and Advanced Surgical, Orthopedics & Portable Medical product lines and the Non-Medical segment comprises the Electrochem product line.
The Medical segment includes the Cardio & Vascular, Cardiac Rhythm Management & Neuromodulation and Advanced Surgical, Orthopedics & Portable Medical product lines and the Non-Medical segment comprises the Electrochem product line. Our Acquisitions Effective as of October 1, 2023, we acquired substantially all of the assets and assumed certain liabilities of InNeuroCo, Inc. (“InNeuroCo”), a privately-held company based in Florida.
Additionally, the relative market share among the OEM manufacturers changes periodically, which may cause customer inventory levels to rebalance to match new demand. Consequently, these and other factors can significantly impact our sales in any given period. Our customers may initiate field actions with respect to market-released products.
Consequently, these and other factors can significantly impact our sales in any given period. Our customers may initiate field actions with respect to market-released products. These actions may include product recalls or communications with a significant number of physicians about a product or labeling issue.
We have limited visibility into our customers’ future purchases, covering only a relatively short period of time. Our customers may have inventory management programs, vertical integration plans and/or alternate supply arrangements that may not be communicated to or shared with us.
Our customers may have inventory management programs, vertical integration plans and/or alternate supply arrangements that may not be communicated to or shared with us. Additionally, the relative market share among the OEM manufacturers changes periodically, which may cause customer inventory levels to rebalance to match new demand.
Electrochem also manufactures complementary technologies in the form of real time battery monitoring, and an alternate power technology in the form of high temperature super capacitors. OTHER FACTORS IMPACTING OUR OPERATIONS Customers Our products are designed to provide reliable, long-lasting solutions that meet the evolving requirements and needs of our customers.
Our primary batteries are used in remote and demanding environments, including down hole drilling tools, pipeline inspection, military defense-based devices, and a broad range of remotely deployed and oceanographic devices. Electrochem also manufactures complementary technologies in the form of real time battery monitoring, and an alternate power technology in the form of high temperature super capacitors.
Garland had served as Divisional Vice President & Chief Financial Officer, Global Sales, for Tiffany & Co. from October 2017 until joining the Company in October 2018, and had served as Divisional Vice President & Chief Financial Officer, Diamond & Jewelry Supply, for Tiffany & Co. from July 2015 to October 2017. From 1995 to 2015, Mr.
Prior to joining the Company, he served in various finance roles at Tiffany & Co., including Vice President, Finance Officer, Americas from January 2021 to August 2021, Vice President, Finance Officer, Global Supply & Distribution from October 2017 to January 2021, and Senior Director Finance, Global Jewelry Supply from March 2016 to October 2017.
Along with ISO 13485, the facilities producing finished medical devices are subject to oversight by Notified Bodies and extensive and rigorous regulation by numerous government bodies, including the U.S. Food and Drug Administration (“FDA”) and other international regulatory agencies, to assure the conformance of devices and components on a worldwide basis.
Maintenance of these certifications for each facility requires periodic re-examination from accredited notified bodies. - 9 - Table of Contents Along with ISO 13485, the facilities producing finished medical devices are subject to oversight by national regulations and the various national regulatory bodies where we do business, including the U.S.
Removed
Our Acquisitions and Divestitures On April 6, 2022, we acquired 100% of the equity interests of Connemara Biomedical Holdings Teoranta, including its operating subsidiaries Aran Biomedical and Proxy Biomedical (collectively “Aran”).
Added
A recognized leader in neurovascular catheter innovation with strong development and manufacturing capabilities, InNeuroCo’s expertise and highly differentiated neurovascular catheter innovation complements our existing capabilities and market focus, while further increasing our ability to provide enhanced solutions to our customers in the neurovascular catheter space.
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Refer to Note 2, “Business Acquisitions,” of the Notes to Consolidated Financial Statements contained in Item 8 of this report for additional information about the acquisition.
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During the fourth quarter of 2021, we initiated plans to exit our portable medical market to enhance profitability and reallocate manufacturing capacity to support growth. Since that time, we have been working closely with impacted customers to support the transition of these products to other suppliers.
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Refer to Note 2, “Business Acquisitions,” of the Notes to Consolidated Financial Statements contained in Item 8 of this report for additional information about the acquisition. On February 19, 2020, we acquired certain assets and liabilities of InoMec Ltd.
Added
Due to quality and regulatory requirements, we expected it would take three to four years to complete this transition. We currently expect Portable Medical sales to wind down with the final sales and market exit occurring in 2025.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny accident, such as a chemical spill or fire, could result in significant manufacturing delays or claims for damages resulting from injuries, which would harm our operations and financial condition. The potential liability resulting from any such accident or death, to the extent not covered by insurance, could harm our financial condition or operating results.
Biggest changeThe potential liability resulting from any such accident or death, to the extent not covered by insurance, could harm our financial condition or operating results. Any disruption of operations at any of our facilities, and in particular our larger facilities, could result in production delays, which could adversely affect our operations and harm our business.
The attention of our management may be directed towards integration considerations and may be diverted from our day-to-day business operations, and matters related to the integration may require commitments of time and resources that could otherwise have been devoted to other opportunities that might have been beneficial to us and our business.
The attention of our management may be directed towards integration considerations and may be diverted from our day-to-day business operations, and matters related to the integration may require commitments of time and resources that could otherwise have been devoted to other opportunities that might have been more beneficial to us and our business.
This potential inability to transfer production could occur for a number of reasons, including but not limited to a lack of necessary relevant manufacturing capability at another facility, or the regulatory requirements of the FDA or other governmental regulatory bodies.
This potential inability to transfer production could occur for a number of reasons, including but not limited to a lack of necessary relevant manufacturing capability or capacity at another facility, or the regulatory requirements of the FDA or other governmental regulatory bodies.
If our systems for protecting against cybersecurity risks or other IT disruptions prove insufficient, our business could be disrupted, resulting in numerous consequences, including temporary or permanent loss of, damage to, third party access to, or misappropriation or public disclosure of intellectual property, proprietary or confidential information, or customer, supplier, or employee data; interruption of our business operations; and increased costs required to prevent, respond to, or mitigate such cybersecurity attacks or IT disruptions.
If our systems for protecting against cybersecurity risks or other IT disruptions prove insufficient, our business could be disrupted, resulting in numerous consequences, including temporary or permanent loss of, damage to, third party access to, or misappropriation or public disclosure of our or a third party’s intellectual property, proprietary or confidential information, or customer, supplier, or employee data; interruption of our business operations; and increased costs required to prevent, respond to, or mitigate such cybersecurity attacks or IT disruptions.
In connection with pursuing this growth strategy, some of the risks that we may encounter include expenses associated with and difficulties in identifying potential targets, the costs associated with unsuccessful acquisitions, and higher prices for acquired companies because of significant competition for attractive acquisition targets. - 20 - Table of Contents Successful integration and anticipated benefits of acquisitions cannot be assured and integration matters could divert attention of management away from operations.
In connection with pursuing this growth strategy, some of the risks that we may encounter include expenses associated with and difficulties in identifying potential targets, the costs associated with unsuccessful acquisitions, and higher prices for acquired companies because of significant competition for attractive acquisition targets. - 21 - Table of Contents Successful integration and anticipated benefits of acquisitions cannot be assured and integration matters could divert attention of management away from operations.
Our operating results have fluctuated in the past and are likely to continue to fluctuate from quarter to quarter, making forecasting future performance difficult and resulting in volatility in our stock price.
Our operating results have fluctuated in the past and are likely to continue to fluctuate from quarter to quarter, making forecasting future performance difficult and resulting in volatility in our common stock price.
If any of these events occurs, our business will be harmed and our revenues and operating results will be adversely affected. - 19 - Table of Contents We may face intense competition that could harm our business, including competitors, in-sourcing and the possibility of dual sourcing; and we may be unable to compete successfully against new entrants and established companies with greater resources.
If any of these events occurs, our business will be harmed and our revenues and operating results will be adversely affected. - 20 - Table of Contents We may face intense competition that could harm our business, including competitors, in-sourcing and the possibility of dual sourcing; and we may be unable to compete successfully against new entrants and established companies with greater resources.
Consequently, it is possible that customers may experience problems with their medical devices that could require device recall or other corrective action, where our batteries met the specification at delivery, and for reasons that are not related primarily or at all to any failure by our product to perform in accordance with specifications.
Consequently, it is possible that customers may experience problems with their medical devices that could require device recall or other corrective action, where our batteries or other products or components met the specification at delivery, and for reasons that are not related primarily or at all to any failure by our product to perform in accordance with specifications.
These third party manufacturers have their own complex supply chains and related risks, whether due to the continuing impact of the global pandemic, the military conflict between Russia and Ukraine, or other causes. They are subject to raw material price and availability risks similar to those described above.
These third-party manufacturers have their own complex supply chains and related risks, whether due to the continuing impact of the global pandemic, the shipping risks described below, the military conflict between Russia and Ukraine or other causes. They are subject to raw material price and availability risks similar to those described above.
Consolidation in the healthcare industry could result in greater competition and reduce our revenues and harm our business. Many healthcare industry companies are consolidating to create new companies with greater market power. As the healthcare industry consolidates, competition to provide products and services to industry participants will become more intense.
Consolidation in the healthcare industry could result in greater competition and reduce our revenues and harm our business and our operating results. Many healthcare industry companies are consolidating to create new companies with greater market power. As the healthcare industry consolidates, competition to provide products and services to industry participants will become more intense.
Third party suppliers are also subject to shipping risks, including container shortages, blocked shipping lanes, and port backlogs.
Our third-party suppliers are also subject to shipping risks, including container shortages, blocked shipping lanes, and port backlogs.
If this occurs, sales of medical devices may decline significantly and our customers may reduce or eliminate purchases of our products, or demand further price reductions. The cost containment measures that healthcare payors are instituting, both in the U.S. and internationally, could reduce our revenues and harm our operating results. - 26 - Table of Contents
If this occurs, sales of medical devices may decline significantly and our customers may reduce or eliminate purchases of our products, or demand further price reductions. The cost containment measures that healthcare payors are instituting, both in the U.S. and internationally, could reduce our revenues and harm our operating results.
In addition, during the period in which corrective action is being taken by us to remedy a complaint, recall or negative regulatory audit, regulators may not allow our new products or components to be cleared for marketing and sale. If we become subject to product liability claims, our operating results and financial condition could suffer.
In addition, during the period in which corrective action is being taken by us to remedy a product complaint, recall or negative regulatory audit, regulators may not allow our new products or components to be cleared for marketing and sale. - 26 - Table of Contents If we become subject to product liability claims, our operating results and financial condition could suffer.
In response to perceived increases in healthcare costs in recent years, there have been and continue to be proposals by the Presidential administrations, members of Congress, state governments, regulators and third-party payors to control these costs and, more generally, to reform the U.S. healthcare system, including by amending, repealing or replacing the Patient Protection and Affordable Care Act.
In response to perceived increases in healthcare costs in recent years, there have been and continue to be proposals by the presidential administrations of both major U.S. political parties, members of Congress, state governments, regulators and third-party payors to control these costs and, more generally, to reform the U.S. healthcare system, including by amending, repealing or replacing the Patient Protection and Affordable Care Act.
In addition, to the extent the processes our suppliers use to manufacture products and subcomponents are proprietary, we may be unable to obtain comparable products and subcomponents from alternative suppliers.
In addition, to the extent the processes our third-party suppliers use to manufacture products and subcomponents are proprietary, we may be unable to obtain comparable products and subcomponents from alternative suppliers.
These fluctuations are due to a variety of factors, including the following: • the impact of the ongoing pandemic and the pace of recovery; • timing of orders placed by our customers; • our customers’ approach to inventory management; • changes in the mix of our revenue represented by our various products and customers could result in reductions in our profits if the mix of our revenue represented by lower margin products increases; • a portion of our costs are fixed in nature, which results in our operations being particularly sensitive to fluctuations in production volumes; • increased costs and decreased availability of raw materials or supplies; and • our ability to effectively execute on operational initiatives to drive manufacturing efficiencies. - 21 - Table of Contents We have significant indebtedness that could affect our operations, financial condition, and cash flows if we fail to meet certain financial covenants required by our debt agreements or if our access to capital markets is interrupted.
These fluctuations are due to a variety of factors, including the following: • timing of orders placed by our customers; • our customers’ approach to inventory management; • changes in the mix of our revenue represented by our various products and customers could result in reductions in our profits if the mix of our revenue represented by lower margin products increases; • a portion of our costs are fixed in nature, which results in our operations being particularly sensitive to fluctuations in production volumes; • increased costs and decreased availability of raw materials or supplies; and • our ability to effectively execute on operational initiatives to drive manufacturing efficiencies. - 22 - Table of Contents We have significant indebtedness that could adversely affect our operations, financial condition, and cash flows if we fail to meet certain financial covenants required by our debt agreements or if our access to capital markets is interrupted.
The current and anticipated prices of oil and natural gas influence the oil and gas exploration and production industry and are affected by a variety of political and economic factors, including worldwide demand for oil and natural gas, worldwide and domestic supplies of oil and natural gas, the ability of the Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels and pricing, the level of production of non-OPEC countries, the price and availability of alternative fuels, political stability in oil producing regions and the policies of the various governments regarding exploration and development of their oil and natural gas reserves.
The current and anticipated prices of oil and natural gas influence the oil and gas exploration and production industry and are affected by a variety of political and economic factors, including worldwide demand for oil and natural gas, worldwide and domestic supplies of oil and natural gas, the ability of the Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels and pricing, the level of production of non-OPEC countries, the price and availability of alternative fuels, political stability in oil producing regions and the policies of the U.S. government and foreign governments regarding exploration and development of their oil and natural gas reserves.
Because of difficulties in combining and expanding operations, we may not be able to achieve the cost savings and other size-related benefits that we hoped to achieve after these acquisitions. Financial Risks Our operating results may fluctuate, which may make it difficult to forecast our future performance and may result in volatility in our stock price.
Because of difficulties in combining and expanding operations, we may not be able to achieve the cost savings and other benefits that we hoped to achieve after these acquisitions. Financial and Indebtedness Risks Our operating results may fluctuate, which may make it difficult to forecast our future performance and may result in volatility in our common stock price.
Additionally, we may lose rights granted under licenses for reasons beyond our control or if the license has a finite term and cannot be renewed on favorable terms or at all. - 25 - Table of Contents Our business is subject to environmental regulations that could be costly to comply with.
Additionally, we may lose rights granted under licenses for reasons beyond our control or if the license has a finite term and cannot be renewed on favorable terms or at all. Our business is subject to environmental regulations that could be costly to comply with.
These risks are also present in connection with our entry into new geographic markets. - 22 - Table of Contents Additionally, as a result of our international operations, we are subject to exposure from currency exchange rate fluctuations.
These risks are also present in connection with our entry into new geographic markets. Additionally, as a result of our international operations, we are subject to exposure from currency exchange rate fluctuations.
Our continued growth may depend on our ability to successfully identify and acquire companies that complement or enhance our existing business on acceptable terms. We may not be able to identify or complete future acquisitions.
Our continued growth through acquisitions depends on our ability to successfully identify and acquire companies that complement or enhance our existing business on acceptable terms. We may not be able to identify or complete future acquisitions.
For example, relatively more income in higher tax rate jurisdictions would increase our effective tax rate and thus lower our net income. Similarly, if we generate losses in tax jurisdictions for which no benefits are available, our effective income tax rate will increase.
Our mix of income and losses in these jurisdictions affects our effective tax rate. For example, relatively more income in higher tax rate jurisdictions would increase our effective tax rate and thus lower our net income. Similarly, if we generate losses in tax jurisdictions for which no benefits are available, our effective income tax rate will increase.
At December 31, 2022, we had $1.8 billion of goodwill and other intangible assets, representing 64% of our total assets. These intangible assets consist primarily of goodwill, trademarks, tradenames, customer lists and patented technology arising from our acquisitions.
At December 31, 2023, we had $1.8 billion of goodwill and other intangible assets, representing 61% of our total assets. These intangible assets consist primarily of goodwill, trademarks, tradenames, customer lists and patented technology arising from our acquisitions.
In addition, intangible assets with definite lives, which represent $729.6 million of our net intangible assets at December 31, 2022, will continue to be amortized. These expenses will continue to reduce our future earnings or increase our future losses. The accounting for intangible assets requires reliance on forward looking estimates of sales and/or earnings.
In addition, intangible assets with definite lives, which represent $692.9 million of our net intangible assets at December 31, 2023, will continue to be amortized. These expenses will continue to reduce our future earnings or increase our future losses. The accounting for intangible assets requires reliance on forward-looking estimates of sales and/or earnings.
Our effective income tax rate may also be impacted by the recognition of discrete income tax items, such as required adjustments to our liabilities for uncertain tax positions or our deferred tax asset valuation allowance. Our effective income tax rate has fluctuated from 10.4% in 2020, to 8.0% in 2021 and to 14.0% for 2022.
Our effective income tax rate may also be impacted by the recognition of discrete income tax items, such as required adjustments to our liabilities for uncertain tax positions or our deferred tax asset valuation allowance. Our effective income tax rate has fluctuated from 8.0% in 2021, to 14.0% in 2022 and to 15.5% for 2023.
The potential difficulties, and resulting costs and delays, include: • managing a larger combined company; • consolidating corporate and administrative infrastructures; • issues in integrating manufacturing, warehouse and distribution facilities, supply chain, RD&E and sales forces; • difficulties attracting and retaining key personnel; • loss of customers and suppliers and inability to attract new customers and suppliers; • unanticipated issues in integrating information technology, communications and other systems; • incompatibility of purchasing, logistics, marketing, administration and other systems and processes; and • unforeseen and unexpected liabilities related to the acquired business.
The potential difficulties, and resulting costs and delays, include: • managing a larger combined company; • consolidating corporate and administrative infrastructures; • issues in integrating manufacturing, warehouse and distribution facilities, supply chain, RD&E and sales forces; • difficulties attracting and retaining key personnel; • loss of customers and suppliers and inability to attract new customers and suppliers; • unanticipated issues in integrating information technology, communications and other systems; • incompatibility of purchasing, logistics, marketing, administration and other systems and processes; and • unforeseen and unexpected liabilities related to the acquired business, which may be beyond the scope of any applicable insurance coverage we may have.
The outstanding indebtedness and the terms and covenants of the agreements under which this debt was incurred, could, among other things: • require us to dedicate a large portion of our cash flow from operations to the servicing and repayment of our outstanding indebtedness, thereby reducing funds available for working capital, capital expenditures, acquisitions, RD&E expenditures and other general corporate requirements; • limit our ability to obtain additional financing to fund future working capital, capital expenditures, RD&E expenditures and other general corporate requirements in the future; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • restrict our ability to make strategic acquisitions or dispositions or to exploit business opportunities; • place us at a competitive disadvantage compared to our competitors that have less outstanding indebtedness; and • adversely affect the market price of our common stock.
The outstanding indebtedness and the terms and covenants of the agreements under which this debt was incurred, could, among other things: • require us to dedicate a large portion of our cash flow from operations to the servicing and repayment of our outstanding indebtedness, thereby reducing funds available for working capital, capital expenditures, acquisitions, RD&E expenditures and other general corporate requirements; • limit our ability to obtain additional financing to fund future working capital, capital expenditures, RD&E expenditures and other general corporate requirements in the future; • delay or prevent an otherwise beneficial takeover or takeover attempt of us; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • restrict our ability to make strategic acquisitions or dispositions or to exploit business opportunities; • place us at a competitive disadvantage compared to our competitors that have less outstanding indebtedness; and • adversely affect the market price of our common stock, including by dilution resulting from the conversion of all or some of our 2028 Convertible Notes.
Our business depends on a continuous supply of raw materials. The principal raw materials used in our business include platinum, stainless steel, gold, titanium, nitinol, lithium, palladium, iridium, tantalum, nickel cobalt, ruthenium, gallium trichloride, vanadium oxide, CFx and plastics.
The principal raw materials used in our business include platinum, stainless steel, gold, titanium, nitinol, lithium, palladium, iridium, tantalum, nickel cobalt, ruthenium, gallium trichloride, vanadium oxide, CFx and plastics.
Given the unpredictability of these possible changes and their potential interdependency, it is possible such changes could adversely impact our financial results. Our effective income tax rate is the result of the income tax rates in the various countries in which we do business. Our mix of income and losses in these jurisdictions affects our effective tax rate.
Given the unpredictability of these possible changes and their potential interdependency, it is possible such changes could adversely impact our financial results. - 25 - Table of Contents Our effective income tax rate is the result of the income tax rates in the various countries in which we do business.
Our sales outside the U.S., which accounted for approximately 45% of sales for 2022, and our operations in Europe, Asia, Israel, Mexico, South America and the Caribbean are and will continue to be subject to a number of risks and potential costs, including: • changes in foreign economic conditions or regulatory requirements; • changes in foreign currency exchange rates; • local product preferences and product requirements; • outstanding accounts receivables that take longer to collect than is typical in the U.S.; • difficulties in enforcing agreements through foreign legal systems; • less protection of intellectual property in some countries outside of the U.S.; • trade protection measures and import and export licensing requirements; • work force instability; • political and economic instability; • transportation delays or interruptions; and • complex tax and cash management issues.
Our sales outside the U.S., which accounted for approximately 44% of sales for 2023, and our operations in Europe, Asia, Mexico, South America and the Caribbean are and will continue to be subject to a number of risks and potential costs, including: • changes in foreign economic conditions or regulatory requirements; • changes in foreign currency exchange rates; • local product preferences and product requirements; • outstanding accounts receivables that take longer to collect than is typical in the U.S.; • difficulties in enforcing agreements through foreign legal systems; • less protection of intellectual property in some countries outside of the U.S.; • trade protection measures and import and export licensing requirements; • work force instability; • significant natural disasters and other events or factors impact local infrastructure; • political and economic instability, including civil or international conflicts, war and terrorism; • transportation delays or interruptions; and • complex tax and cash management issues.
If an event (including any weather or natural disaster-related event) occurred that resulted in material damage or loss of one or more of these manufacturing facilities or we lacked sufficient labor to fully operate the facility, we might be unable to transfer the manufacture of the relevant products to another facility or location in a cost-effective or timely manner, if at all.
If an event (including any weather or natural disaster-related event or a resurgence of the COVID-19 pandemic) occurred that resulted in material damage, loss or incapacitation of one or more of these manufacturing facilities or if we lacked sufficient labor to fully operate the facility, we may not be able to transfer the manufacture of the relevant products to another facility or location in a cost-effective or timely manner, if at all.
However, these agreements may be breached and, if a breach occurs, there may be no adequate remedies available to us and we may be unable to prevent the unauthorized disclosure or use of our technical knowledge, practices or procedures. If our trade secrets become known, we may lose our competitive advantages.
However, these agreements may be breached and, if a breach occurs, there may be no adequate remedies available to us and we may be unable to prevent the unauthorized disclosure or use of our technical knowledge, practices or procedures.
There is currently aggressive competition for employees who have experience in technology and engineering. We compete intensely with other companies to recruit and hire from this limited pool, which competition has become more acute since the beginning of the COVID-19 pandemic. The industries in which we compete for employees are characterized by high levels of employee attrition.
We compete intensely with other companies to recruit and hire from this limited pool, which competition has become more acute since the beginning of the COVID-19 pandemic. The industries in which we compete for employees are characterized by high levels of employee attrition.
Our international operations expose us to legal and regulatory risks, which could adversely affect our business. Our profitability and international operations are, and will continue to be, subject to risks relating to changes in foreign legal and regulatory requirements. In addition, our international operations are governed by various U.S. laws and regulations, including the U.S.
Our profitability and international operations are, and will continue to be, subject to risks relating to changes in foreign legal and regulatory requirements. In addition, our international operations are governed by various U.S. laws and regulations, including the U.S.
However, a product complaint, recall or negative regulatory audit may cause our products, including product components and finished medical devices, to be removed from the market and harm our operating results or financial condition.
However, a product complaint, recall (either voluntary or as required by any governmental authority) or negative regulatory audit may cause our products, including product components and finished medical devices, to be removed from the market and harm our operating results or financial condition.
Additionally, our failure to comply with the covenants contained in our debt agreements, if not waived, could cause a default under the applicable debt agreement that requires repayment in full, or acceleration, of debt payments.
Additionally, our failure to comply with the covenants contained in the 2021 Credit Agreement governing our Senior Secured Credit Facilities, if not waived, could cause a default under our Senior Secured Credit Facilities that requires repayment in full, or acceleration, of debt payments.
This may result in higher than anticipated costs or lower than anticipated revenues. Furthermore, healthcare industry regulations are complex, change frequently and have tended to become more stringent over time. Federal and state legislatures have periodically considered and implemented programs to reform or amend the U.S. healthcare system at both the federal and state levels.
Furthermore, healthcare industry regulations are complex, change frequently and have tended to become more stringent over time. Federal and state legislatures have periodically considered and implemented programs to reform or amend the U.S. healthcare system at both the federal and state levels.
In addition, competitors may design around our technology or develop competing technologies that do not infringe our proprietary rights. As patents and other intellectual property protection expire, we may lose our competitive advantage.
In addition, competitors may design around our technology or develop competing technologies that do not infringe our proprietary rights. As patents and other intellectual property protection expire, we may lose our competitive advantage. If third parties infringe or misappropriate our patents or other proprietary rights, our business could be seriously harmed.
Several of our product lines are subject to international, federal, state and local health and safety, packaging and product content regulations, including the European Medical Device Regulation that went into effect in May 2021, which was adopted by the EU as a common legal framework for all EU member states.
Several of our product lines are subject to international, federal, state and local health and safety, packaging and product content regulations, including the European Medical Device Regulation, which was adopted by the EU as a common legal framework for all EU member states. In addition, medical devices are subject to regulation by the FDA and similar governmental agencies.
We monitor the markets in which we compete and assess opportunities to better align expenses with revenues, while preserving our ability to make needed investments in RD&E projects, capital and our associates that we believe are critical to our long-term success. Our success will depend in large part upon our ability to attract, train, retain and motivate highly skilled associates.
We monitor the markets in which we compete and assess opportunities to better align expenses with revenues, while preserving our ability to make needed investments in RD&E projects, capital and our associates that we believe are critical to our long-term success.
Additional or modified regulations relating to the manufacture, transportation, storage, use and disposal of materials used to manufacture our products or restricting disposal or transportation of batteries may be imposed that may result in higher costs or lower operating results. In addition, we cannot predict the effect that additional or modified environmental regulations may have on us or our customers.
Additional or modified regulations relating to the manufacture, transportation, storage, use and disposal of materials used to manufacture our products or restricting disposal or transportation of batteries may be imposed that may result in higher costs or lower operating results.
There continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty. Such uncertainty may have an impact on our business, including increased costs of compliance, which may impact our results of operations. We are dependent upon our senior management team and key technical personnel and the loss of any of them could significantly harm us.
Such uncertainty may have an impact on our business, including increased costs of compliance, which may impact our results of operations. We are dependent upon our senior management team and key technical personnel and the loss of any of them could significantly harm us.
ITEM 1A. RISK FACTORS Our business faces many risks, and you should carefully consider the following risk factors, together with all of the other information included in this report, including the financial statements and related notes contained in Item 8 of this report, when deciding to invest in us.
RISK FACTORS Our business faces many risks, and you should carefully consider the following risk factors, together with all of the other information included in this report, including the financial statements and related notes contained in Part II, Item 8 – “Financial Statements and Supplementary Data” and the discussion in Part II, Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report, when deciding to invest in us.
Given the highly competitive industry in which we operate, we have reduced prices to some of our customers in recent years and we expect customer pressure for continued price reductions in future periods.
Given the highly competitive industry in which we operate, we have reduced prices for some of our customers in recent years, and we expect customer pressure for continued price reductions in future periods. These additional price reductions, if they were to occur, may cause our operating results and financial condition to suffer.
A disruption in deliveries from our suppliers, price increases or decreased availability of raw materials could have an adverse effect on our ability to meet our commitments to our customers and increase our operating costs. We rely on third party manufacturers to supply many of the products and subcomponents that are incorporated into our products and components.
A disruption in deliveries from our suppliers, price increases or decreased availability of raw materials could have an adverse effect on our ability to meet our commitments to our customers and increase our operating costs.
It is unclear how such reforms will progress under the new presidential administration.
It is unclear how such reforms will progress under the current presidential administration or if a new presidential administration is elected in 2024.
However, these reserves may not be adequate to cover future warranty claims. If our reserves for warranty claims are inadequate, additional warranty costs or inventory write-offs may need to be incurred in the future, which could harm our operating results.
If our reserves for warranty claims are inadequate, additional warranty costs or inventory write-offs may need to be incurred in the future, which could harm our operating results. We also could be subject to negative publicity and our reputation could be harmed if we fail to meet quality standards.
In the event our products fail to meet these standards, we generally allow customers to return defective or damaged products under warranty. We carry a safety stock of inventory for our customers that may be impacted by warranty claims. We reserve for our exposure to warranty claims based upon recent historical experience and other specific information as it becomes available.
Quality is important to us and our customers, and our products are held to high quality and performance standards. In the event our products fail to meet these standards, we generally allow customers to return defective or damaged products under warranty. We carry a safety stock of inventory for our customers that may be impacted by warranty claims.
In addition, medical devices are subject to regulation by the FDA and similar governmental agencies. These regulations cover a wide variety of product activities from design and development to labeling, manufacturing, promotion, sales and distribution. Compliance with these regulations is time consuming, burdensome and expensive and could adversely affect our ability to sell products.
These regulations cover a wide variety of product activities from design and development to labeling, manufacturing, promotion, sales and distribution. Compliance with these regulations is time consuming, burdensome and expensive and could adversely affect our ability to sell products. This may result in higher than anticipated costs or lower than anticipated revenues.
This insurance may not be adequate to protect us against product liability claims made against us. If we are unable to protect our intellectual property and proprietary rights, our business could be harmed. We rely on a combination of patents, licenses, trade secrets and know-how to establish and protect our rights to our technologies and products.
We may not be able to maintain this insurance at a reasonable cost or on reasonable terms, or at all. This insurance may not be adequate to protect us against product liability claims made against us. If we are unable to protect our intellectual property and proprietary rights, our business could be harmed.
The occurrence of product liability claims or product recalls could affect our operating results and financial condition. We carry product liability insurance with coverage that is limited in scope and amount. We may not be able to maintain this insurance at a reasonable cost or on reasonable terms, or at all.
We may choose to settle product liability claims against us regardless of their actual merit, and the occurrence of product liability claims or product recalls could adversely affect our operating results and financial condition. We carry product liability insurance with coverage that is limited in scope and amount.
As a result, we are increasingly dependent upon our technology systems to operate our business and our ability to effectively manage our business depends on the security, reliability and adequacy of our technology systems and data.
Due to the complex nature of our business, and due to policies we have in place allowing certain of our employees to work from home from time to time, we are increasingly dependent upon our technology systems to operate our business and our ability to effectively manage our business depends on the security, reliability and adequacy of our technology systems and data.
These additional price reductions, if they were to occur, may cause our operating results and financial condition to suffer. - 16 - Table of Contents We rely on third party suppliers for raw materials, key products and subcomponents. Unavailability of, or increased prices for, these materials, products or subcomponents could adversely affect our results of operations.
We rely on third-party suppliers for raw materials, key products and subcomponents. Unavailability of, or increased prices for, these materials, products or subcomponents could adversely affect our results of operations and financial condition. Our business depends on a continuous supply of raw materials.
If third parties infringe or misappropriate our patents or other proprietary rights, our businesses could be seriously harmed. - 24 - Table of Contents In addition, we cannot be assured that our existing or planned products do not or will not infringe on the intellectual property rights of others or that others will not claim such infringement.
In addition, we cannot assure you that our existing or planned products do not or will not infringe on the intellectual property rights of others or that others will not claim such infringement.
We may be subject to intellectual property claims, which could be costly and time consuming and could divert our management’s attention from our business operations. In producing our products, third parties may claim that we are infringing on their intellectual property rights, and we may be found to have infringed on those intellectual property rights.
In producing our products, third parties may claim that we are infringing on their intellectual property rights, and we may be found to have infringed on those intellectual property rights. We may be unaware of the intellectual property rights of others that may be used in our technology and products.
Furthermore, many of our supply agreements do not contain minimum purchase level requirements and therefore there is no guaranteed source of revenue that we can depend upon under these agreements. In addition, we are dependent on the continued growth, viability and financial stability of these customers.
We do not have long-term supply agreements with all of our customers, and our customers may not agree to renew or extend our supply agreements with them. Furthermore, many of our supply agreements do not contain minimum purchase level requirements and therefore there is no guaranteed source of revenue that we can depend upon under these agreements.
If any claim for invalidation prevailed, third parties may manufacture and sell products that compete with our products and our revenues from any related license agreements would decrease accordingly. Former employers of our associates may assert claims that these associates have improperly disclosed to us the confidential or proprietary information of those former employers.
In addition, third parties may claim that our patents have been improperly granted and may seek to invalidate our existing or future patents. If any claim for invalidation prevailed, third parties may manufacture and sell products that compete with our products and our revenues from any related license agreements would decrease accordingly.
Customer, investor and employee expectations relating to ESG have been rapidly evolving and increasing. In addition, government organizations are enhancing or advancing legal and regulatory requirements specific to ESG matters. The heightened stakeholder focus on ESG issues related to our business requires the continuous monitoring of various and evolving laws, regulations, standards and expectations and the associated reporting requirements.
The heightened stakeholder focus on ESG issues related to our business requires the continuous monitoring of various and evolving laws, regulations, standards and expectations and the associated reporting requirements.
A failure to adequately meet stakeholder expectations may result in noncompliance, the loss of business, reputational impacts, reduced demand for our stock, diluted - 18 - Table of Contents market valuation, and an inability to attract customers. In addition, our adoption of certain standards or mandated compliance to certain requirements could necessitate additional investments that could impact our profitability.
A failure to adequately meet stakeholder expectations may result in material noncompliance, the loss of business, reputational impacts, reduced investor demand to purchase or continue to hold our common stock, diluted market valuation and an inability to attract customers.
We depend heavily on a limited number of customers, and if we lose any of them or they reduce their business with us, we would lose a substantial portion of our revenues. In 2022, our top three customers collectively accounted for approximately 46% of our revenues.
As a result, the trading price of our common stock could decline and you could lose all or part of your investment in our common stock. Operational Risks We depend heavily on a limited number of customers, and if we lose any of them or they reduce their business with us, we would lose a substantial portion of our revenues.
Although we believe we offer competitive salaries and benefits, we may have to increase spending to attract, train and retain qualified personnel. If we are unable to attract, train and retain a sufficient number of qualified associates to maintain and grow our business, it could have an adverse impact on our results of operations.
If we are unable to attract, train and retain a sufficient number of qualified associates to maintain and grow our business, it could have an adverse impact on our results of operations. - 18 - Table of Contents Quality problems with our products could result in warranty claims and additional costs, could harm our reputation and could erode our competitive advantage.
We also typically do not receive significant indemnification from parties that license technology to us against third party claims of intellectual property infringement. Any litigation or other challenges regarding our patents or other intellectual property, with or without merit, could be costly and time consuming and could divert the attention of our management and key personnel from our business operations.
Any litigation or other challenges regarding our patents or other intellectual property, with or without merit, could be costly and time consuming and could divert the attention of our management and key personnel from our business operations. The complexity of the technology involved in producing our products and the uncertainty of intellectual property litigation increases these risks.
Economic and credit market uncertainty could interrupt our access to capital markets, borrowings, or financial transactions to hedge certain risks, which could adversely affect our business prospects and financial condition. To date, we have been able to access debt and equity financing that has allowed us to complete acquisitions, make investments in growth opportunities and fund working capital requirements.
To date, we have been able to access debt and equity financing that has allowed us to complete acquisitions, make investments in growth opportunities and fund working capital requirements. In addition, we enter into financial transactions to hedge certain risks, including foreign exchange and interest rate risk, as further discussed below.
Any disruption of operations at any of our facilities, and in particular our larger facilities, could result in production delays, which could adversely affect our operations and harm our business. - 17 - Table of Contents We may not be able to attract, train and retain a sufficient number of qualified associates to maintain and grow our business.
We may not be able to attract, train and retain a sufficient number of qualified associates to maintain and grow our business.
The markets in which these customers operate are subject to rapid technological change, vigorous competition and short product life cycles. As a result, when these customers are adversely affected by these factors, we may be similarly adversely affected.
In addition, we are dependent on the continued growth, viability and financial stability of these customers. The markets in which these customers operate are subject to rapid technological change, vigorous competition and short product life cycles.
In the ordinary course of business, our operations are, and in the future are expected to continue to be, dependent on digital technologies and information technology (“IT”) systems. The COVID-19 pandemic has caused us to modify our business practices, including the requirement that many of our office-based employees work from home, at least part-time.
In the ordinary course of business, our operations are, and in the future are expected to continue to be, dependent on digital technologies and information technology (“IT”) systems.
Climate changes could disrupt our operations by impacting the availability and cost of materials within our supply chain and could also increase our other operating costs. Further, increased public awareness and concern regarding global climate change may result in new or enhanced legal requirements to reduce or mitigate the effects of greenhouse gas emissions.
Global climate change could disrupt our operations by impacting the availability and cost of materials within our supply chain and could also increase our other operating costs.
An interruption in our access to external financing or financial transactions to hedge risk could adversely affect our business prospects and financial condition. Our international sales and operations are subject to a variety of market and financial risks and costs that could affect our profitability and operating results.
An interruption in our access to external financing or financial transactions to hedge risk could adversely affect our business prospects and financial condition. In addition, certain of our borrowings are at variable interest rates and therefore we are subject to interest rate risk.
In addition, we might be required to devote significant resources to address any quality issues associated with our products, which could reduce the resources available for product development and other matters. Our operations are subject to cyber-attacks and other information technology disruptions that could have a material adverse effect on our business, consolidated results of operations and consolidated financial condition.
Our operations are subject to cyber-attacks and other information technology disruptions that could have a material adverse effect on our business, results of operations and financial condition. We are a global company with a complex business model.
At December 31, 2022, we had $931 million in principal amount of debt outstanding. As of December 31, 2022, our debt service obligations, comprising principal and interest, are estimated to be approximately $78 million for 2023.
As of December 31, 2023, our debt service obligations, comprising principal, interest and commitment fees on the unused portion of our Revolving Credit Facility, are estimated to be approximately $44 million for 2024.
However, these measures afford only limited protection, and our patent rights, whether issued, subject to license or in process, and our other intellectual property protections may be misappropriated, circumvented or invalidated. The laws of some foreign countries do not offer the same level of protection for our intellectual property as the laws of the U.S.
We rely on a combination of patents, licenses, trade secrets and know-how to establish and protect our rights to our technologies and products. However, these measures afford only limited protection, and our patent rights, whether issued, subject to license or in process, and our other intellectual property protections may be misappropriated, circumvented or invalidated.
If that were to occur, there can be no assurance that we would be able to refinance or obtain a replacement financing on favorable terms or at all. The transition away from LIBOR may adversely affect our borrowing costs.
If that were to occur, there can be no assurance that we would be able to refinance or obtain a replacement financing on favorable terms or at all. Economic and credit market uncertainty could interrupt our access to capital markets, borrowings, or financial transactions to hedge certain risks, which could adversely affect our business prospects and financial condition.
Reductions in demand from these customers, largely because of reduction in demand for medical procedures during the COVID-19 pandemic, has negatively impacted our results of operations during prior fiscal years and may impact our future results of operations if material reductions in demand recur. These customers may not agree to renew or extend our supply agreements with them.
In 2023, our top three customers collectively accounted for approximately 45% of our revenues. Reductions in demand from these customers has negatively impacted our results of operations during prior fiscal years and may impact our future results of operations if material reductions in demand from these customers recur.
We also could be subject to negative publicity and our reputation could be harmed if we fail to meet quality standards. This could erode our competitive advantage over competitors, causing us to lose or see a material reduction in business from customers and resulting in lower revenues.
This could erode our competitive advantage over competitors, causing us to lose or see a material reduction in business from customers and resulting in lower revenues. In addition, we might be required to devote significant resources to address any quality issues associated with our products, which could reduce the resources available for product development and other matters.
The ongoing COVID-19 pandemic has caused, and may continue to cause, delays in production, unanticipated costs and lost revenues. In addition, our business involves complex manufacturing processes and the use of various hazardous materials, chemicals and other regulated substances, such as trichloroethylene, that can be dangerous to our associates.
In addition, our business involves complex manufacturing processes and the use of various hazardous materials, chemicals and other regulated substances, such as trichloroethylene, which can be dangerous to our associates. We must also comply with various health and safety regulations in the U.S. and abroad in connection with our operations.
We must also comply with various health and safety regulations in the U.S. and abroad in connection with our operations. Although we employ safety procedures in the design and operation of our facilities, there is a risk that an accident or death could occur.
Although we employ safety procedures in the design and operation of our facilities, there is a risk that an accident or death could occur. Any accident, such as a chemical spill or fire, could result in significant manufacturing delays or claims for damages resulting from injuries, which would harm our business, results of operations and financial condition.
A prolonged pandemic could have adverse changes on the underlying estimates, assumptions or judgments and could have a material adverse impact on the fair value of our goodwill and other indefinite-lived intangible assets. - 23 - Table of Contents Legal and Compliance Risks Regulatory issues resulting from product complaints, or recalls, or regulatory audits could harm our ability to produce and supply products or bring new products to market.
Estimating the future performance of our business is extremely challenging and the range of deviation from internal estimates could be more significant in the current market environment. Legal and Compliance Risks Regulatory issues resulting from product complaints, recalls or regulatory audits could harm our ability to produce and supply products or bring new products to market.
Removed
Operational Risks Our operations have been and may continue to be adversely impacted by the ongoing global impact of the COVID-19 pandemic. The global spread of COVID-19 and its variants has created significant uncertainty and worldwide economic disruption. COVID-19 has negatively impacted our operating results and may continue to do so in the future.
Added
As a result, when these customers are adversely affected by these factors, we have in the past been and may in the future be similarly adversely affected.
Removed
The duration and scope of the impact is uncertain given the evolving health, economic, social and governmental environments. Specific impacts to our business have included delayed and reduced customer orders, increased absenteeism, disruptions in our supply chain, delays in shipments to and from certain countries, and restrictions on our associates’ ability to travel or work.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES Our principal executive office and headquarters is located in Plano, Texas, in a leased facility. As of December 31, 2022, we operated 17 facilities in the U.S., six in Europe, three in Mexico, two in Asia, one in the Dominican Republic, one in South America, and one in Israel.
Biggest changeITEM 2. PROPERTIES Our principal executive office and headquarters is located in Plano, Texas, in a leased facility. As of December 31, 2023, we operated 18 facilities in the U.S., 5 in Europe, 3 in Mexico, 2 in Asia, 1 in the Dominican Republic and 1 in South America. Of these facilities, 23 were leased and 7 were owned.
We continuously review our anticipated requirements for facilities and, on the basis of that review, may from time to time acquire additional facilities, expand or dispose of existing facilities.
We continuously review our anticipated requirements for facilities and, on the basis of that review, may from time to time acquire additional facilities or expand or dispose of existing facilities.
Of these facilities, 24 were leased and 7 were owned. We occupy approximately two million square feet of manufacturing and RD&E space worldwide. We believe the facilities we operate and their equipment are effectively utilized, well maintained, generally are in good condition, and will be able to accommodate our capacity needs to meet current levels of demand.
We occupy approximately two million square feet of manufacturing and RD&E space worldwide. We believe the facilities we operate and their equipment are effectively utilized, well maintained, generally are in good condition, and will be able to accommodate our capacity needs to meet current levels of demand.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS For information regarding certain legal proceedings pending against us, see Note 13, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements contained in Item 8 of this report. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. - 27 - Table of Contents PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS For information regarding certain legal proceedings pending against us, see Note 13, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” of this report. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. - 32 - Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 27 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 28 Item 6. [Reserved] 28 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 29 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 44 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 32 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 33 Item 6. [Reserved] 33 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 34 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 49 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeCompany/Index 12/29/17 12/28/18 12/31/19 12/31/20 12/31/21 12/31/22 Integer Holdings Corporation $ 100.00 $ 167.84 $ 177.55 $ 179.23 $ 188.94 $ 151.13 Russell 2000 Index 100.00 87.14 106.65 111.59 143.14 122.41 iShares US Medical Devices ETF 100.00 115.28 155.69 190.94 227.06 182.32
Biggest changeCompany/Index 12/28/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Integer Holdings Corporation $ 100.00 $ 105.79 $ 106.79 $ 112.57 $ 90.04 $ 130.32 Russell 2000 Index 100.00 122.39 128.07 164.27 140.48 161.05 iShares US Medical Devices ETF 100.00 132.72 164.81 199.47 160.14 165.28
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock and Dividends. The Company’s common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “ITGR.” We have not paid cash dividends and do not anticipate paying any cash dividends in the foreseeable future. Stockholders.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock and Dividends. The Company’s common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “ITGR.” We have not paid cash dividends in the past and do not anticipate paying any cash dividends in the foreseeable future. Stockholders.
According to the records of our transfer agent, there were approximately 100 holders of record of our common stock on February 10, 2023. Because many of these shares are held by brokers and other institutions on behalf of the ultimate beneficial holders of these shares, we are unable to estimate the total number of stockholders represented by these record holders.
According to the records of our transfer agent, there were approximately 100 holders of record of our common stock on February 16, 2024. Because many of these shares are held by brokers and other institutions on behalf of the ultimate beneficial holders of these shares, we are unable to estimate the total number of stockholders represented by these record holders.
PERFORMANCE GRAPH The following graph compares, for the five year period ended December 31, 2022, the cumulative total stockholder return for Integer Holdings Corporation, the Russell 2000 Index, and iShares US Medical Devices ETF. The graph assumes that $100 was invested on December 29, 2017 and assumes reinvestment of dividends.
PERFORMANCE GRAPH The following graph compares, for the five year period ended December 31, 2023, the cumulative total stockholder return for Integer Holdings Corporation, the Russell 2000 Index, and iShares US Medical Devices ETF. The graph assumes that $100 was invested on December 28, 2018 and assumes reinvestment of dividends.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe changes in income tax were primarily due to relative changes in pre-tax income and the impact of discrete tax items. - 31 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Our Financial Results The following table presents selected financial information derived from our Consolidated Financial Statements, contained in Item 8 of this report, for the periods presented (dollars in thousands, except per share amounts): Change Change 2022 vs. 2021 2021 vs. 2020 2022 2021 2020 $ % $ % Medical Sales: Cardio & Vascular $ 699,469 $ 593,117 $ 538,240 $ 106,352 18 % $ 54,877 10 % Cardiac Rhythm Management & Neuromodulation 532,580 502,288 398,409 30,292 6 % 103,879 26 % Advanced Surgical, Orthopedics & Portable Medical 97,502 87,221 101,329 10,281 12 % (14,108) (14) % Total Medical Sales 1,329,551 1,182,626 1,037,978 146,925 12 % 144,648 14 % Non-Medical 46,545 38,453 35,464 8,092 21 % 2,989 8 % Total sales 1,376,096 1,221,079 1,073,442 155,017 13 % 147,637 14 % Cost of sales 1,017,090 884,109 787,735 132,981 15 % 96,374 12 % Gross profit 359,006 336,970 285,707 22,036 7 % 51,263 18 % Gross profit as a % of sales 26.1 % 27.6 % 26.6 % Operating expenses: Selling, general and administrative 160,578 141,418 109,006 19,160 14 % 32,412 30 % Research, development and engineering 60,918 51,985 48,468 8,933 17 % 3,517 7 % Restructuring and other charges 16,183 7,856 7,621 8,327 106 % 235 3 % Total operating expenses 237,679 201,259 165,095 36,420 18 % 36,164 22 % Operating income 121,327 135,711 120,612 (14,384) (11) % 15,099 13 % Interest expense 38,632 31,628 38,220 7,004 22 % (6,592) (17) % (Gain) loss on equity investments, net 7,636 3,143 (5,337) 4,493 143 % 8,480 (159) % Other (income) loss, net (899) (123) 1,522 (776) NM (1,645) NM Income from continuing operations before income taxes 75,958 101,063 86,207 (25,105) (25) % 14,856 17 % Provision for income taxes 10,608 8,043 8,949 2,565 32 % (906) (10) % Effective tax rate 14.0 % 8.0 % 10.4 % Income from continuing operations $ 65,350 $ 93,020 $ 77,258 $ (27,670) (30) % $ 15,762 20 % Diluted earnings per share from continuing operations $ 1.96 $ 2.80 $ 2.33 $ (0.84) (30) % $ 0.47 20 % NM - Calculated change not meaningful. - 32 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Fiscal 2022 Compared with Fiscal 2021 The following discussion is a comparison between results for the years ended December 31, 2022 and 2021.
Biggest changeThe changes in income tax were primarily due to relative changes in pre-tax income and the impact of discrete tax items. - 36 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Our Financial Results The following table presents selected financial information derived from our Consolidated Financial Statements, contained in Item 8, “Financial Statements and Supplementary Data” of this report, for the periods presented (dollars in thousands, except per share amounts): Change Change 2023 vs. 2022 2022 vs. 2021 2023 2022 2021 $ % $ % Medical Sales: Cardio & Vascular $ 836,342 $ 699,469 $ 593,117 $ 136,873 20 % $ 106,352 18 % Cardiac Rhythm Management & Neuromodulation 610,577 532,580 502,288 77,997 15 % 30,292 6 % Advanced Surgical, Orthopedics & Portable Medical 106,421 97,502 87,221 8,919 9 % 10,281 12 % Total Medical Sales 1,553,340 1,329,551 1,182,626 223,789 17 % 146,925 12 % Non-Medical 43,333 46,545 38,453 (3,212) (7) % 8,092 21 % Total sales 1,596,673 1,376,096 1,221,079 220,577 16 % 155,017 13 % Cost of sales 1,178,384 1,017,090 884,109 161,294 16 % 132,981 15 % Gross profit 418,289 359,006 336,970 59,283 17 % 22,036 7 % Gross profit as a % of sales 26.2 % 26.1 % 27.6 % Operating expenses: Selling, general and administrative 175,619 160,578 141,418 15,041 9 % 19,160 14 % Research, development and engineering 63,771 60,918 51,985 2,853 5 % 8,933 17 % Restructuring and other charges 11,569 16,183 7,856 (4,614) (29) % 8,327 106 % Total operating expenses 250,959 237,679 201,259 13,280 6 % 36,420 18 % Operating income 167,330 121,327 135,711 46,003 38 % (14,384) (11) % Interest expense 53,370 38,632 31,628 14,738 38 % 7,004 22 % Loss on equity investments, net 5,691 7,636 3,143 (1,945) (25) % 4,493 143 % Other (income) loss, net 975 (899) (123) 1,874 NM (776) NM Income from continuing operations before income taxes 107,294 75,958 101,063 31,336 41 % (25,105) (25) % Provision for income taxes 16,644 10,608 8,043 6,036 57 % 2,565 32 % Effective tax rate 15.5 % 14.0 % 8.0 % Income from continuing operations $ 90,650 $ 65,350 $ 93,020 $ 25,300 39 % $ (27,670) (30) % Diluted earnings per share from continuing operations $ 2.69 $ 1.96 $ 2.80 $ 0.73 37 % $ (0.84) (30) % NM - Calculated change not meaningful. - 37 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Fiscal 2023 Compared with Fiscal 2022 The following discussion is a comparison between results for the years ended December 31, 2023 and 2022.
We also develop batteries for high-end niche applications in the non-medical energy, military, and environmental markets. Our vision is to enhance the lives of patients worldwide by being our customers’ partner of choice for innovative technologies and services. We organize our business into two reportable segments, Medical and Non-Medical, and derive our revenues from four principle product lines.
We also develop batteries for high-end niche applications in the non-medical energy, military, and environmental markets. Our vision is to enhance the lives of patients worldwide by being our customers’ partner of choice for innovative technologies and services. We organize our business into two reportable segments, Medical and Non-Medical, and derive our revenues from four principal product lines.
Our research and development initiatives continue to emphasize new product development, product improvements, and the development of new technological platform innovations. - 34 - Table of Contents 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.
Our research and development initiatives continue to emphasize new product development, product improvements, and the development of new technological platform innovations. - 39 - Table of Contents 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.
Unforeseen changes, such as the loss of one or more significant customers, technology obsolescence, or significant manufacturing disruption, among other factors, could substantially alter the assumptions regarding the ability to realize the return of our investment in long-lived assets, definite-lived intangible assets or their estimated useful lives. - 43 - Table of Contents
Unforeseen changes, such as the loss of one or more significant customers, technology obsolescence, or significant manufacturing disruption, among other factors, could substantially alter the assumptions regarding the ability to realize the return of our investment in long-lived assets, definite-lived intangible assets or their estimated useful lives. - 48 - Table of Contents
Other (income) loss, net primarily includes 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, Dominican peso, or Israeli shekel.
Other (income) loss, net primarily includes 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.
Our effective tax rate for 2022 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), stock-based compensation windfalls, and the impact of earnings realized in foreign jurisdictions with statutory rates that are different than the U.S. federal statutory rate.
Our effective tax rate for 2023 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), stock-based compensation windfalls, and the impact of earnings realized in foreign jurisdictions with statutory rates that are different than the U.S. federal statutory rate.
The assessment indicated that it was more likely than not that the fair value of the Medical reporting unit exceeded its carrying value. We elected to bypass the qualitative assessment and performed a quantitative analysis for our Non-Medical reporting unit. Resulting from the quantitative analysis, the fair value exceeded the carrying value of the Non-Medical reporting unit by approximately 148%.
The assessment indicated that it was more likely than not that the fair value of the Medical reporting unit exceeded its carrying value. We elected to bypass the qualitative assessment and performed a quantitative analysis for our Non-Medical reporting unit. Resulting from the quantitative analysis, the fair value exceeded the carrying value of the Non-Medical reporting unit by approximately 11%.
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 and restructuring-related charges are costs directly related to the restructuring initiatives.
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.
Impairment, if any, is based on the excess of the carrying value over the fair value of these assets. We performed a quantitative assessment to test our indefinite-lived intangible assets for impairment as of December 31, 2022.
Impairment, if any, is based on the excess of the carrying value over the fair value of these assets. We performed a quantitative assessment to test our indefinite-lived intangible assets for impairment as of December 31, 2023.
This listing is not a comprehensive list of all of our accounting policies. For further information regarding the application of these and other accounting policies, see Note 1, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements contained in Item 8 of this report.
This listing is not a comprehensive list of all of our accounting policies. For further information regarding the application of these and other accounting policies, see Note 1, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” of this report.
Consistent with our strategy, the combination with Aran further increases our ability to offer complete solutions for complex delivery and therapeutic devices in high growth cardiovascular markets such as structural heart, neurovascular, peripheral vascular, and endovascular as well as general surgery.
Consistent with our strategy, the acquisition of Aran further increases our ability to offer complete solutions for complex delivery and therapeutic devices in high growth cardiovascular markets such as structural heart, neurovascular, peripheral vascular, and endovascular as well as general surgery.
In addition, we continue to explore tax planning opportunities that may have a material impact on our effective tax rate. It is reasonably possible that a reduction of approximately $1.8 million of the balance of unrecognized tax benefits may occur within the next twelve months as a result of the lapse of the statute of limitations and/or audit settlements.
In addition, we continue to explore tax planning opportunities that may have a material impact on our effective tax rate. It is reasonably possible that a reduction of approximately $0.6 million of the balance of unrecognized tax benefits may occur within the next twelve months as a result of the lapse of the statute of limitations and/or audit settlements.
Refer to Note 1, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements contained in Item 8 of this report for additional information about these recently issued accounting standards and their potential impact on our financial condition or results of operations. - 41 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS CRITICAL ACCOUNTING ESTIMATES Management’s discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP.
Refer to Note 1, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” of this report for additional information about these recently issued accounting standards and their potential impact on our financial condition or results of operations. - 46 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS CRITICAL ACCOUNTING ESTIMATES Management’s discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP.
For a discussion of our results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020, please refer to Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 , which was filed with the SEC on February 22, 2022.
For a discussion of our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 , which was filed with the SEC on February 21, 2023.
If the carrying value of a reporting unit exceeds its fair value, an impairment loss is recognized equal to the excess, limited to the amount of goodwill allocated to that reporting unit. - 42 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS We performed a qualitative assessment of our Medical reporting unit as of December 31, 2022.
If the carrying value of a reporting unit exceeds its fair value, an impairment loss is recognized equal to the excess, limited to the amount of goodwill allocated to that reporting unit. - 47 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS We performed a qualitative assessment of our Medical reporting unit as of December 31, 2023.
(b) Refer to Note 14, “Leases,” of the Notes to Consolidated Financial Statements contained in Item 8 of this report for additional information about our operating and finance lease obligations.
(b) Refer to Note 14, “Leases,” of the Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” of this report for additional information about our operating and finance lease obligations.
The impact of foreign currency exchange rates on transactions denominated in foreign currencies included in Other (income) loss, net for 2022 and 2021 were net gains of $1.1 million and $0.1 million, respectively. We continually monitor our foreign currency exposures and seek to take steps to mitigate these risks.
The impact of foreign currency exchange rates on transactions denominated in foreign currencies included in Other (income) loss, net for 2023 were net losses of $1.0 million and net gains of $1.1 million for 2022. We continually monitor our foreign currency exposures and seek to take steps to mitigate these risks.
Presented below is a summary of contractual obligations and other minimum commitments as of December 31, 2022. Refer to Note 13, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements contained in Item 8 of this report for additional information regarding self-insurance liabilities, which are not reflected in the table below.
Presented below is a summary of contractual obligations and other minimum commitments as of December 31, 2023. Refer to Note 13, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” of this report for additional information regarding self-insurance liabilities, which are not reflected in the table below.
Based on current expectations, we believe that our projected cash flows provided by operations, available cash and cash equivalents and availability under our Revolving Credit Facility are sufficient to meet our working capital, debt service and capital expenditure requirements for at least the next twelve months.
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.
The Lake Region Medical tradename had an excess of the estimated fair value over carrying value of approximately 77% and a carrying value of $70 million at December 31, 2022. We do not believe that our indefinite-lived intangible assets are at risk for impairment.
The Lake Region Medical tradename had an excess of the estimated fair value over carrying value of approximately 75% and a carrying value of $70 million at December 31, 2023. We do not believe that our indefinite-lived intangible assets are at risk for impairment.
The provision for income taxes for 2022 differs from the U.S. statutory rate due to the following (dollars in thousands): U.S.
The provision for income taxes for 2023 differs from the U.S. statutory rate due to the following (dollars in thousands): U.S.
The residual losses for 2022 and 2021 relate to our share of equity method investee gains/losses, including unrealized appreciation and depreciation of the underlying interests of the investee. As of December 31, 2022 and December 31, 2021, the carrying value of our equity investments was $13.9 million and $21.8 million, respectively.
The residual losses for 2023 and 2022 relate to our share of equity method investee gains/losses, including unrealized appreciation and depreciation of the underlying interests of the investee. As of December 31, 2023 and December 31, 2022, the carrying value of our equity investments was $8.2 million and $13.9 million, respectively.
Capital expenditures, which are net of proceeds from the sale of property, plant and equipment, for 2022 totaled $74.1 million, compared to $53.0 million and $46.8 million in 2021 and 2020, respectively. Capital expenditures in 2022 related primarily to upgrades of manufacturing facilities and information technology.
Capital expenditures, which are net of proceeds from the sale of property, plant and equipment, for 2023 totaled $119.8 million, compared to $74.1 million and $53.0 million in 2022 and 2021, respectively. Capital expenditures in 2023 related primarily to upgrades of manufacturing facilities and information technology systems.
For the Greatbatch Medical tradename, the excess of the estimated fair value over carrying value (expressed as a percentage of carrying value) was in excess of its carrying value of $20 million by approximately 294% as of December 31, 2022.
For the Greatbatch Medical tradename, the excess of the estimated fair value over carrying value (expressed as a percentage of carrying value) was in excess of its carrying value of $20 million by approximately 327% as of December 31, 2023.
Refer to Note 8, “Debt,” of the Notes to Consolidated Financial Statements contained in Item 8 of this report for additional information regarding long-term debt.
Refer to Note 8, “Debt,” of the Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” of this report for additional information regarding long-term debt.
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.
In response to reductions in revenue, we can take actions to align our cost structure with changes in demand and manage our working capital.
Our Business • Our business • Impact of global events • Business acquisitions • Product line sales realignment • Discontinued operations • Financial overview Our Financial Results • Fiscal 2022 compared with fiscal 2021 • Liquidity and capital resources • Cash and other commitments • Impact of recently issued accounting standards Critical Accounting Estimates • Inventories • Acquisition method of accounting • Valuation of goodwill and intangible assets Our Business Integer Holdings Corporation is one of the largest MDO manufacturers in the world serving the cardiac rhythm management, neuromodulation, orthopedics, vascular and advanced surgical markets.
Our Business • Our business • Impact of global events • Business acquisitions • Portable medical exit • Discontinued operations • Financial overview Our Financial Results • Fiscal 2023 compared with fiscal 2022 • Liquidity and capital resources • Cash and other commitments • Impact of recently issued accounting standards Critical Accounting Estimates • Inventories • Acquisition method of accounting • Valuation of goodwill, indefinite-lived intangible assets and long-lived assets Our Business Integer Holdings Corporation is one of the largest MDO manufacturers in the world serving the cardiac rhythm management, neuromodulation, orthopedics, vascular and advanced surgical markets.
The impact of these issues on our business will vary by geographic market and product line, but specific impacts to our business include increased borrowing costs, labor shortages, disruptions in the supply chain, delayed or reduced customer orders and sales, restrictions on associates’ ability to travel or work, and delays in shipments to and from certain countries.
The impact of these issues on our business will vary by geographic market and product line, but specific impacts to our business include increased borrowing costs, labor shortages, disruptions in the supply chain, delayed or reduced customer orders and sales, and delays in shipments to and from certain countries. We monitor economic conditions closely.
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.
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.
We expect 2023 capital expenditures to approximate $100 million to $120 million, with a significant portion related to additional upgrades of manufacturing facilities and information technology, as well as for manufacturing equipment to support productivity initiatives.
We expect 2024 capital expenditures to approximate $90 million to $110 million, with a significant portion related to additional upgrades of manufacturing facilities and information technology systems, as well as for manufacturing equipment to support productivity initiatives.
The changes in income tax were primarily due to relative changes in pre-tax income and the impact of discrete tax items. Fiscal 2021 Compared with Fiscal 2020 Income from continuing operations for 2021 was $93.0 million or $2.80 per diluted share compared to $77.3 million or $2.33 per diluted share for 2020.
The changes in income tax were primarily due to relative changes in pre-tax income and the impact of discrete tax items. Fiscal 2022 Compared with Fiscal 2021 Income from continuing operations for 2022 was $65.4 million or $1.96 per diluted share compared to $93.0 million or $2.80 per diluted share for 2021.
(Gain) Loss on Equity Investments, Net During 2022 and 2021, we recognized net losses of $7.6 million and $3.1 million, respectively, on our equity investments. Gains and losses on equity investments are generally unpredictable in nature. During 2021, we recognized impairment charges of $0.1 million related to investments in our non-marketable equity securities.
Loss on Equity Investments, Net During 2023 and 2022, we recognized net losses of $5.7 million and $7.6 million, respectively, on our equity investments. Gains and losses on equity investments are generally unpredictable in nature. During 2023, we recognized impairment charges of $5.2 million related to investments in our non-marketable equity securities.
Refer to Note 20, “Discontinued Operations,” of the Notes to Consolidated Financial Statements contained in Item 8 of this report for additional information. - 30 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Financial Overview Fiscal 2022 Compared with Fiscal 2021 Income from continuing operations for 2022 was $65.4 million or $1.96 per diluted share compared to $93.0 million or $2.80 per diluted share for 2021.
Refer to Note 20, “Discontinued Operations,” of the Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” of this report for additional information. - 35 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Financial Overview Fiscal 2023 Compared with Fiscal 2022 Income from continuing operations for 2023 was $90.7 million or $2.69 per diluted share compared to $65.4 million or $1.96 per diluted share for 2022.
See Note 17, “Financial Instruments and Fair Value Measurements,” of the Notes to Consolidated Financial Statements contained in Item 8 of this report for further details regarding these investments. - 36 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Other (Income) Loss, Net Other (income) loss, net during 2022 and 2021 was income of $0.9 million and $0.1 million, respectively.
See Note 17, “Financial Instruments and Fair Value Measurements,” of the Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” of this report for further details regarding these investments. - 41 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Other (Income) Loss, Net Other (income) loss, net for 2023 were losses of $1.0 million compared to income of $0.9 million in 2022.
The stand-alone U.S. component of the effective tax rate for 2022 reflected a $4.9 million provision on $14.4 million of pre-tax book income (effective tax rate of 34.2%) versus a $2.0 million provision on $48.3 million of pre-tax book income (effective tax rate of 4.0%) for 2021.
The stand-alone U.S. component of the effective tax rate for 2023 reflected a $5.8 million provision on $31.0 million of pre-tax book income (effective tax rate of 18.8%) versus a $4.9 million provision on $14.4 million of pre-tax book income (effective tax rate of 34.2%) for 2022.
(b) Amounts for 2022 primarily include expenses related to the Aran and Oscor acquisitions. Amounts for 2021 primarily include expenses related to the Oscor acquisition. The 2022 and 2021 amounts also include $3.1 million and $0.1 million, respectively, of net expense related to adjustments to increase the fair value of acquisition-related contingent consideration liabilities.
Amount for 2022 primarily includes expenses related to the Aran and Oscor acquisitions. The 2023 and 2022 amounts also include a benefit of $0.7 million and expense of $3.1 million, respectively, related to adjustments to the fair value of acquisition-related contingent consideration liabilities.
Gains and losses on equity investments are generally unpredictable in nature. • Other (income) loss, net for 2021 was income of $0.1 million compared to a loss of $1.5 million during 2020, primarily due to fluctuations in foreign currency gains and losses in the respective periods. • We recorded provisions for income taxes of $8.0 million and $8.9 million for 2021 and 2020, respectively.
Gains and losses on equity investments are generally unpredictable in nature. • Other (income) loss, net for 2023 were losses of $1.0 million compared to income of $0.9 million for 2022, primarily due to fluctuations in foreign currency gains and losses in the respective periods. • We recorded provisions for income taxes of $16.6 million and $10.6 million for 2023 and 2022, respectively.
During 2022, we recognized income from discontinued operations of $1.0 million or $0.03 per diluted share. During 2021, we recognized income from discontinued operations of $3.8 million or $0.11 per diluted share. There was no income from discontinued operations during 2020.
During 2021, we recognized income from discontinued operations of $3.8 million or $0.11 per diluted share.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes appearing in Item 8 of this report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes appearing in Item 8, “Financial Statements and Supplementary Data” of this report.
Impact of Global Events Global economic challenges, including the impact of the war in Ukraine, the COVID-19 pandemic, severe and sustained inflation, a rising interest rate environment, fluctuations in global currencies, and supply chain disruptions may continue to cause economic uncertainty and volatility.
Impact of Global Events Global economic challenges, including the impact of the military conflicts between Russia and Ukraine and bet ween Israel and Hamas, severe and sustained inflation, a rising interest rate environment, fluctuations in global currencies, and supply chain disruptions may continue to cause economic uncertainty and volatility.
Summary of Cash Flow The following cash flow summary information includes cash flows related to discontinued operations (in thousands): 2022 2021 Cash provided by (used in): Operating activities $ 116,381 $ 156,666 Investing activities (200,421) (270,998) Financing activities 92,476 81,986 Effect of foreign currency exchange rates on cash and cash equivalents (2,049) 1,025 Net change in cash and cash equivalents $ 6,387 $ (31,321) Operating Activities - During 2022, we generated cash from operations of $116.4 million, compared to $156.7 million in 2021.
Summary of Cash Flow The following cash flow summary information includes cash flows related to discontinued operations (in thousands): 2023 2022 Cash provided by (used in): Operating activities $ 180,213 $ 116,381 Investing activities (163,367) (200,421) Financing activities (18,014) 92,476 Effect of foreign currency exchange rates on cash and cash equivalents 570 (2,049) Net change in cash and cash equivalents $ (598) $ 6,387 Operating Activities - During 2023, we generated cash from operations of $180.2 million, compared to $116.4 million in 2022.
See Note 17, “Financial Instruments and Fair Value Measurements,” of the Notes to Consolidated Financial Statements contained in Item 8 of this report for additional information related to the fair value measurement of the contingent consideration.
See Note 17, “Financial Instruments and Fair Value Measurements,” of the Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” of this report for additional information related to the fair value measurement of the contingent consideration. (c) Amounts include gains and losses in connection with the disposal of property, plant and equipment.
Provision for Income Taxes During 2022 and 2021, our provision for income taxes was $10.6 million on worldwide pre-tax income of $76.0 million (effective tax rate of 14.0%) and $8.0 million on worldwide pre-tax income of $101.1 million (effective tax rate of 8.0%), respectively.
Provision for Income Taxes During 2023 and 2022, our provision for income taxes was $16.6 million on worldwide pre-tax income of $107.3 million (effective tax rate of 15.5%) and $10.6 million on worldwide pre-tax income of $76.0 million (effective tax rate of 14.0%), respectively.
The decrease of $40.3 million was the result of decreases of $12.2 million in net income adjusted for non-cash items such as depreciation and amortization and $28.1 million in cash flow provided by changes in operating assets and liabilities.
The increase of $63.8 million was the result of a $23.5 million increase in cash flow provided by changes in operating assets and liabilities and a $40.3 million increase in net income adjusted for non-cash items such as depreciation and amortization.
The primary foreign jurisdictions in which we operate and the statutory tax rate for each respective jurisdiction include Switzerland (22%), Mexico (30%), Uruguay (25%), Ireland (12.5%) and Malaysia (24%). We currently have a tax holiday in Malaysia through April 2023, provided certain conditions continue to be met.
The primary foreign jurisdictions in which we operate and the statutory tax rate for each respective jurisdiction include Switzerland (22%), Mexico (30%), Uruguay (25%), Ireland (12.5%) and Malaysia (24%). We have previously operated in Malaysia under a tax holiday.
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, including our Senior Secured Credit Facilities. However, we cannot be assured that we will be able to enter into any such arrangements on acceptable terms or at all.
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.
The stand-alone International component of the effective tax rate for 2022 reflected a $5.6 million provision on $61.5 million of pre-tax book income (effective tax rate of 9.2%) versus a $6.0 million provision on $52.8 million of pre-tax book income (effective tax rate of 11.4%) for 2021.
The stand-alone International component of the effective tax rate for 2023 reflected a $10.8 million provision on $76.3 million of pre-tax book income (effective tax rate of 14.2%) versus a $5.7 million provision on $61.5 million of pre-tax book income (effective tax rate of 9.2%) for 2022.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those under the heading “Risk Factors” in Item 1A of this report. Unless otherwise stated, all results and comparisons below represent results from continuing operations.
This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those under the heading Item 1A, “Risk Factors” of this report.
However, such cash flows are dependent upon our future operating performance which, in turn, is subject to prevailing economic conditions, the effects of the COVID-19 pandemic, and to financial, business and other factors, including the conditions of our markets, some of which are beyond our control.
However, such cash flows are dependent upon our future operating performance which, in turn, is subject to prevailing economic conditions, and to financial, business and other factors, including the conditions of our markets, some of which are beyond our control. If our future financing needs increase, we may need to arrange additional debt or equity financing.
International Combined $ % $ % $ % Income before provision for income taxes $ 14,446 $ 61,512 $ 75,958 Provision at statutory rate $ 3,034 21.0 % $ 12,917 21.0 % $ 15,951 21.0 % Federal tax credits (including R&D) (9,399) (65.2) — — (9,399) (12.4) Foreign rate differential 1,459 10.1 (9,152) (14.9) (7,693) (10.1) Stock-based compensation 2,009 13.9 — — 2,009 2.6 Uncertain tax positions 2,469 17.1 — — 2,469 3.3 State taxes, net of federal benefit 978 6.8 — — 978 1.3 U.S. tax on foreign earnings, net of §250 deduction 5,225 36.2 — — 5,225 6.9 Valuation allowance (888) (6.1) 694 1.1 (194) (0.3) Other 61 0.4 1,201 2.0 1,262 1.7 Provision for income taxes $ 4,948 34.2 % $ 5,660 9.2 % $ 10,608 14.0 % - 37 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS The provision for income taxes for 2021 differs from the U.S. statutory rate due to the following (dollars in thousands): U.S.
International Combined $ % $ % $ % Income before provision for income taxes $ 14,446 $ 61,512 $ 75,958 Provision at statutory rate $ 3,034 21.0 % $ 12,917 21.0 % $ 15,951 21.0 % Federal tax credits (including R&D) (9,399) (65.2) — — (9,399) (12.4) Foreign rate differential 1,459 10.1 (9,152) (14.9) (7,693) (10.1) Stock-based compensation 2,009 13.9 — — 2,009 2.6 Uncertain tax positions 2,469 17.1 — — 2,469 3.3 State taxes, net of federal benefit 978 6.8 — — 978 1.3 U.S. tax on foreign earnings, net of §250 deduction 5,225 36.2 — — 5,225 6.9 Valuation allowance (888) (6.1) 694 1.1 (194) (0.3) Other 61 0.4 1,201 2.0 1,262 1.7 Provision for income taxes $ 4,948 34.2 % $ 5,660 9.2 % $ 10,608 14.0 % Our effective tax rate of 15.5% for 2023 is higher than our effective tax rate of 14.0% for 2022, primarily due to the expiration of the Malaysia Tax Holiday described below, the increase in pre-tax book income and related statutory rate differential, and the impact of non-recurring discrete tax benefits recorded in 2022 for provision to return adjustments for the 2021 tax return filed in 2022, partially offset by favorable discrete tax benefits in 2023 from the release of uncertain tax benefits related to the expiration of the statute of the 2019 tax year.
Interest rate swap includes realized (gains) losses on our interest rate swap contract which fluctuate depending on the spread between the rate swap contract fixed rate and TLA Facility floating rate.
Interest rate swap includes realized (gains) losses on our interest rate swap contract, which fluctuate depending on the spread between the rate swap contract fixed rate and senior secured credit facility floating rate. Our outstanding interest rate swap matured as of June 30, 2023.
(b) Amortization expense increased due to amortization of intangible assets from the Aran and Oscor acquisitions. (c) Professional fees increased primarily due to inclusion of the operations of Aran and Oscor for all or part of 2022. (d) Contract services expense increased primarily due to higher software costs from information technology enhancements.
(b) Depreciation and amortization expense increased due to amortization of intangible assets from the Aran and Oscor customer list intangible assets. (c) Professional fees increased primarily due to increased costs associated with third-party information technology services. (d) Contract services expense increased primarily due to higher software costs from information technology enhancements.
As of December 31, 2022, our contractual debt service obligations for 2023, consisting of principal and interest on our outstanding debt, are estimated to be approximately $78 million.
As of December 31, 2023, our contractual debt service obligations for 2024, consisting of interest on our outstanding debt and commitment fees on the unused portion of the Revolving Credit Facility are estimated to be approximately $44 million.
Refer to Note 8, “Debt,” of the Notes to Consolidated Financial Statements contained in Item 8 of this report for further description of our outstanding debt.
See Note 8, “Debt,” of the Notes to the Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” of this report for additional information pertaining to our debt.
Refer to Note 11, “Restructuring and Other Charges,” of the Notes to Consolidated Financial Statements contained in Item 8 of this report for additional information regarding these initiatives. - 35 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Interest Expense Information relating to our interest expense for 2022 and 2021 is as follows (dollars in thousands): 2022 2021 Change Amount Rate Amount Rate Amount Rate (bp) Contractual interest expense $ 35,282 3.80 % $ 21,042 2.99 % $ 14,240 81 Loss on interest rate swap 918 0.10 3,406 0.48 (2,488) (38) Amortization of deferred debt issuance costs and original issue discount 1,922 0.23 3,251 0.50 (1,329) (27) Loss from extinguishment of debt 114 0.01 3,774 0.54 (3,660) (53) Interest expense on borrowings 38,236 4.14 % 31,473 4.51 % 6,763 (37) Other interest expense 396 155 241 Total interest expense $ 38,632 $ 31,628 $ 7,004 Interest expense relates primarily to borrowings made under our Senior Secured Credit Facilities, which consist of a five-year $400 million revolving credit facility (the “Revolving Credit Facility”), a five-year “term A” loan (the “TLA Facility”), and a seven-year “term B” loan (the “TLB Facility”).
Refer to Note 11, “Restructuring and Other Charges,” of the Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” of this report for additional information regarding these initiatives. - 40 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Interest Expense Information relating to our interest expense for 2023 and 2022 is as follows (dollars in thousands): 2023 2022 Change Amount Rate Amount Rate Amount Rate (bp) Contractual interest expense $ 46,177 4.62 % $ 35,282 3.80 % $ 10,895 82 (Gain) loss on interest rate swap (1,262) (0.12) 918 0.10 (2,180) (22) Amortization of deferred debt issuance costs and original issue discount 3,536 0.42 1,922 0.23 1,614 19 Loss from extinguishment of debt 4,518 0.46 114 0.01 4,404 45 Interest expense on borrowings 52,969 5.38 % 38,236 4.14 % 14,733 124 Other interest expense 401 396 5 Total interest expense $ 53,370 $ 38,632 $ 14,738 Interest expense relates primarily to borrowings made under our Senior Secured Credit Facilities, which consist of a five-year $500 million revolving credit facility (the “Revolving Credit Facility”) and a five-year “term A” loan (the “TLA Facility”), and $500 million aggregate principal amount of the 2028 Convertible Notes.
Goodwill and intangible assets determined to have an indefinite useful life are not amortized. Instead, these assets are evaluated for impairment on an annual basis on the last day of our fiscal year and whenever events or business conditions change that could indicate that the asset is impaired.
Instead, these assets are evaluated for impairment on an annual basis on the last day of our fiscal year and whenever events or business conditions change that could indicate that the asset is impaired. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (asset group) may not be recoverable.
We have recorded liabilities for unrecognized tax benefits that, because of their nature, have a high degree of uncertainty regarding the timing of future cash payment and other events that extinguish these liabilities. Refer to Note 12, “Income Taxes,” of the Notes to Consolidated Financial Statements in Item 8 of this report for additional information about these unrecognized tax benefits.
We have recorded liabilities for unrecognized tax benefits that, because of their nature, have a high degree of uncertainty regarding the timing of future cash payment and other events that extinguish these liabilities.
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. - 29 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Business Acquisitions On April 6, 2022, we acquired 100% of the equity interests of Connemara Biomedical Holdings Teoranta, including its operating subsidiaries Aran Biomedical and Proxy Biomedical (collectively “Aran”).
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. - 34 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Business Acquisitions Subsequent to the end of the 2023, on January 5, 2024, we acquired 100% of the equity interests of Pulse Technologies, Inc.
For more information on our acquisitions and application of the acquisition method, see Note 2, “Business Acquisitions,”of the Notes to Consolidated Financial Statements contained in Item 8 of this report. Valuation of Goodwill and Intangible Assets We make assumptions in establishing the carrying value, fair value and, if applicable, the estimated lives of our intangible and other long-lived assets.
For more information on our acquisitions and application of the acquisition method, see Note 2, “Business Acquisitions,”of the Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” of this report.
RD&E expenses are influenced by the number and timing of in-process projects and labor hours and other costs associated with these projects.
The increase in RD&E expenses for 2023 compared to 2022 was primarily due to higher labor costs attributed to annual merit increases and higher incentive compensation. RD&E expenses are influenced by the number and timing of in-process projects and labor hours and other costs associated with these projects.
Restructuring and other charges comprise the following for 2022 and 2021 (in thousands): 2022 2021 Change Restructuring charges (a) 4,920 4,804 116 Acquisition and integration costs (b) 10,075 2,544 7,531 Other general expenses (c) 1,188 508 680 Total restructuring and other charges $ 16,183 $ 7,856 $ 8,327 __________ (a) Restructuring charges for 2022 and 2021 primarily consist of termination benefits associated with our operational excellence and strategic reorganization and alignment initiatives.
Restructuring and other charges comprise the following for 2023 and 2022 (in thousands): 2023 2022 Change Restructuring charges (a) 6,015 4,920 1,095 Acquisition and integration costs (b) 3,444 10,075 (6,631) Other general expenses (c) 2,110 1,188 922 Total restructuring and other charges $ 11,569 $ 16,183 $ (4,614) __________ (a) Restructuring charges for 2023 and 2022 primarily consist of costs associated with our strategic reorganization and alignment and manufacturing alignment to support growth initiatives.
The 2021 Credit Agreement contains customary terms and conditions, including representations and warranties and affirmative and negative covenants, as well as financial covenants for the benefit of the lenders under the Revolving Credit Facility and the TLA Facility, which require that we maintain (i) a total net leverage ratio not to exceed 5.50:1.00 (stepping down to 5.00:1.00 for the third fiscal quarter of 2023 through maturity and subject to increase in certain circumstances following qualified acquisitions, but not to exceed 5.50:1.00) and (ii) an interest coverage ratio of at least 2.50:1.00.
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 December 31, 2023, we were in compliance with these financial covenants.
The Medical segment includes the Cardio & Vascular, Cardiac Rhythm Management & Neuromodulation and Advanced Surgical, Orthopedics & Portable Medical product lines and the Non-Medical segment comprises the Electrochem product line. For more information on our segments, please refer to Note 18, “Segment and Geographic Information,” of the Notes to Consolidated Financial Statements contained in Item 8 of this report.
For more information on our segments, please refer to Note 18, “Segment and Geographic Information,” of the Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” of this report.
As of December 31, 2022, we were in compliance with these financial covenants. The TLB Facility does not contain any financial maintenance covenants. As of December 31, 2022, our total net leverage ratio, calculated in accordance with our Senior Secured Credit Facilities agreement, was approximately 2.9 to 1.0.
As of December 31, 2023, our Total Net Leverage Ratio, calculated in accordance with our Senior Secured Credit Facilities agreement, was approximately 2.6:1.0. For the year ended December 31, 2023, our interest coverage ratio, calculated in accordance with our Senior Secured Credit Facilities agreement, was approximately 9.2:1.0.
The Revolving Credit and TLA Facilities mature on September 2, 2026. The TLB Facility matures on September 2, 2028. Our off-balance sheet commitments related to our outstanding letters of credit as of December 31, 2022 were $3.5 million.
Our off-balance sheet commitments related to our outstanding letters of credit as of December 31, 2023 were $3.5 million.
Refer to Note 2, “Business Acquisitions,” of the Notes to Consolidated Financial Statements contained in Item 8 of this report for additional information about the acquisition of Aran and Oscor. Product Line Sales Realignment We have communicated to certain customers our intent to exit certain markets we serve in the Advanced Surgical, Orthopedics & Portable Medical product line.
Refer to Note 2, “Business Acquisitions,” of the Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” of this report for additional information about the acquisition of InNeuroCo and Aran.
Investing Activities – The $70.6 million decrease in net cash used in investing activities was primarily attributable to a decrease in net cash paid for business acquisitions $91.3 million and increased purchases of property, plant, and equipment of $21.3 million. Financing Activities – Net cash provided by financing activities during 2022 was $92.5 million compared to $82.0 million in 2021.
Investing Activities – The $37.1 million decrease in net cash used in investing activities was primarily attributable to a decrease in net cash paid for acquisitions, partially offset by increased purchases of property, plant and equipment. Investing activities for 2023 included net cash paid of $43.6 million for the InNeuroCo acquisition.
We paid $8.1 million of debt issuance costs in connection with the refinancing of our Senior Secured Credit Facilities in 2021. - 39 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Capital Structure - As of December 31, 2022, our capital structure consists of $925.3 million of debt, net of deferred debt issuance costs and unamortized discounts, outstanding under our Senior Secured Credit Facilities and 33 million shares of common stock outstanding.
As of December 31, 2023, our capital structure consists of $959.9 million of debt, net of debt discounts and deferred issuance costs, outstanding under our Senior Secured Credit Facilities and the 2028 Convertible Notes, and 33 million shares of common stock outstanding.
The decrease in net income adjusted for non-cash items such as depreciation and amortization is from higher compensation and benefit costs, restructuring charges, acquisition and integration expenses, and interest expense partially offset by higher sales volume.
The increase in net income adjusted for non-cash items such as depreciation and amortization is primarily from higher sales volume partially offset by higher interest expense. The increase associated with changes in operating assets and liabilities is primarily related to less accounts receivable, inventory and accounts payable growth.
The losses from extinguishment of debt during 2022 and 2021 were related to prepayments of portions of the Term Loan B facility. 2021 also included a write-off of $3.3 million of deferred issuance costs and unamortized discount in connection with the refinancing of our credit facilities in September 2021.
The losses from extinguishment of debt during 2023 were related to prepayments of portions of the TLA Facility and full repayment of our Term Loan B facility in connection with issuance of the 2028 Notes.
Sales Sales by product line for 2022 and 2021 were as follows (dollars in thousands): Change 2022 2021 $ % Medical Sales: Cardio & Vascular $ 699,469 $ 593,117 $ 106,352 17.9 % Cardiac Rhythm Management & Neuromodulation 532,580 502,288 30,292 6.0 % Advanced Surgical, Orthopedics & Portable Medical 97,502 87,221 10,281 11.8 % Total Medical Sales 1,329,551 1,182,626 146,925 12.4 % Non-Medical 46,545 38,453 8,092 21.0 % Total sales $ 1,376,096 $ 1,221,079 $ 155,017 12.7 % Total 2022 sales increased 13% to $1.376 billion in comparison to 2021.
Sales Sales by product line for 2023 and 2022 were as follows (dollars in thousands): Change 2023 2022 $ % Medical Sales: Cardio & Vascular $ 836,342 $ 699,469 $ 136,873 19.6 % Cardiac Rhythm Management & Neuromodulation 610,577 532,580 77,997 14.6 % Advanced Surgical, Orthopedics & Portable Medical 106,421 97,502 8,919 9.1 % Total Medical Sales 1,553,340 1,329,551 223,789 16.8 % Non-Medical 43,333 46,545 (3,212) (6.9) % Total sales $ 1,596,673 $ 1,376,096 $ 220,577 16.0 % Total 2023 sales increased 16% to $1.597 billion in comparison to 2022.
Financing activities during 2022 and 2021 each included net borrowings of $95.8 million. The net cash inflow for 2022 included $166.0 million in borrowings on our Revolving Credit Facility primarily to fund the Aran acquisition. The net cash inflow for 2021 included $220.0 million in borrowings to fund the Oscor acquisition.
The net cash inflow for 2022 included $166.0 million in borrowings on our Revolving Credit Facility, primarily to fund the Aran acquisition. - 45 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Cash and Other Commitments We have material cash requirements to pay third parties under various contractual obligations discussed below.
Advanced Surgical, Orthopedics & Portable Medical (“AS&O”) sales for 2022 increased by $10.3 million in comparison to 2021, primarily due to higher demand to support the start of the multi-year Portable Medical exit announced earlier this year. Foreign currency exchange rate fluctuations lowered AS&O sales for 2022 by $0.1 million.
Foreign currency exchange rate fluctuations did not have a material impact on CRM&N sales for 2023. Advanced Surgical, Orthopedics & Portable Medical (“AS&O”) sales for 2023 increased by $8.9 million in comparison to 2022, driven by high double-digit growth in Portable Medical related to demand to support the multi-year Portable Medical exit.
As of December 31, 2022, approximately $7.7 million of unrecognized tax benefits would favorably impact the effective tax rate (net of federal impact on state issues), if recognized. - 38 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Liquidity and Capital Resources (dollars in thousands) December 31, 2022 December 31, 2021 Cash and cash equivalents $ 24,272 $ 17,885 Working capital $ 334,546 $ 293,353 Current ratio 2.50 2.84 Cash and cash equivalents at December 31, 2022 increased by $6.4 million from December 31, 2021, primarily as a result of cash generated by operating activities, partially offset by purchases of property, plant and equipment and debt principal payments.
We are continuing to evaluate the potential impact on future periods of the Pillar Two Framework, pending legislative adoption by additional individual countries. - 43 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Liquidity and Capital Resources (dollars in thousands) December 31, 2023 December 31, 2022 Cash and cash equivalents $ 23,674 $ 24,272 Working capital $ 396,699 $ 334,546 Current ratio 2.80 2.50 Cash and cash equivalents at December 31, 2023 decreased by $0.6 million from December 31, 2022, primarily as a result of cash generated by operating activities, which includes the benefit of accelerated customer collections from new factoring arrangements, partially offset by purchases of property, plant and equipment, certain assets of InNeuroCo, and net payments on long-term debt and contingent consideration.
Compared to the same periods in 2021, amortization of deferred debt issuance costs and original issue discount decreased as a result of the extended maturity under the new Senior Secured Credit Facilities.
Amortization of deferred debt issuance costs and original issue discount increased during 2023 compared to 2022 as a result of higher unamortized balances related to new debt.
In addition, we acquired manufacturing operations in the Dominican Republic as part of the acquisition of Oscor, and are operating under a free trade zone agreement in the Dominican Republic through March 2034.
We met the conditions of the Malaysian tax holiday and the holiday expired in accordance with its original terms on April 30, 2023. Our manufacturing operations in the Dominican Republic operate under a free trade zone agreement through March 2034.
The most significant drivers of this decrease were as follows: Cardio & Vascular (“C&V”) sales for 2022 increased $106.4 million or 18% in comparison to 2021. C&V sales for 2022 reflect strong customer demand, as well as sales from the Oscor and Aran acquisitions. Foreign currency exchange rate fluctuations lowered C&V sales for 2022 by $6.3 million.
The most significant drivers of this increase were as follows: Cardio & Vascular (“C&V”) sales for 2023 increased $136.9 million or 20% in comparison to 2022. The increase in C&V sales for 2023 was driven by strong demand, acquisition performance and supply chain improvements, with double-digit growth across all C&V markets.
See Note 8, “Debt,” of the Notes to the Consolidated Financial Statements contained in Item 8 of this report for additional information pertaining to our debt. As of December 31, 2022 and 2021, approximately 11% and 18%, respectively, of our principal amount of debt outstanding has been effectively converted to fixed-rate borrowings through the use of an interest rate swap.
As of December 31, 2023 and 2022, approximately 51% and 11%, respectively, of our principal amount of debt are fixed rate borrowings or have been converted to fixed-rate borrowings with an interest rate swap.
During 2022, contractual interest expense increased due to higher average debt outstanding combined with increasing applicable interest rates.
During 2023, contractual interest expense has increased due to higher average debt outstanding combined with increasing applicable interest rates. The higher average debt balance outstanding is the result of incremental borrowings related to the strategic change to replace some of our variable rate debt to fixed rate through issuance of the 2028 Convertible Notes.
The 2021 Credit Agreement governs our Senior Secured Credit Facilities, which consist of a five-year $400 million Revolving Credit Facility, which had available borrowing capacity of $256.2 million as of December 31, 2022, a five-year TLA Facility with outstanding principal balance of $455 million, and a seven-year TLB Facility with outstanding principal balance of $336 million.
Credit Facilities and 2028 Convertible Notes As of December 31, 2023, we had Senior Secured Credit Facilities that consist of a $500 million Revolving Credit Facility, with an outstanding principal balance of $99 million, and a TLA Facility with an outstanding principal balance of $375 million. The Revolving Credit Facility and TLA Facility mature on February 15 , 2028 .

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

13 edited+3 added−2 removed4 unchanged
Biggest changeAs of December 31, 2022, approximately 11% of our principal amount of debt outstanding has been effectively converted to fixed-rate borrowings through the use of an interest rate swap, in comparison to approximately 18% as of December 31, 2021. We had an interest swap agreement with a notional amount of $100 million outstanding as of December 31, 2022.
Biggest changeAs of December 31, 2023 and 2022, approximately 51% and 11%, respectively, of our principal amount of debt are fixed rate borrowings or have been converted to fixed-rate borrowings with an interest rate swap.
Refer to Note 17, “Financial Instruments and Fair Value Measurements,” of the Notes to the Consolidated Financial Statements contained in Item 8 of this report for additional information regarding our outstanding forward contracts.
Refer to Note 17, “Financial Instruments and Fair Value Measurements,” of the Notes to the Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” of this report for additional information regarding our outstanding forward contracts.
A hypothetical 10% change in the value of the U.S. dollar in relation to our most significant foreign currency net assets would have had an impact of approximately $37 million on our foreign net assets as of December 31, 2022 . Interest Rate Risk We regularly monitor interest rate risk attributable to our outstanding debt obligations.
A hypothetical 10% change in the value of the U.S. dollar in relation to our most significant foreign currency net assets would have had an impact of approximately $38 million on our foreign net assets as of December 31, 2023. Interest Rate Risk We regularly monitor interest rate risk attributable to our outstanding debt obligations.
Foreign Currency Exchange Rate Risk We have foreign operations in the Dominican Republic, Germany, Ireland, Israel, Malaysia, Mexico, Switzerland, and Uruguay which expose us to foreign currency exchange rate fluctuations due to transactions denominated in Dominican pesos, Euros, Israeli shekels, Malaysian ringgits, Mexican pesos, Swiss francs, and Uruguayan pesos.
Foreign Currency Exchange Rate Risk We have foreign operations in the Dominican Republic, Ireland, Malaysia, Mexico, Switzerland, and Uruguay which expose us to foreign currency exchange rate fluctuations due to transactions denominated in Dominican pesos, Euros, Malaysian ringgits, Mexican pesos, Swiss francs, and Uruguayan pesos.
We recorded net foreign currency transaction gains of $1.1 million for 2022. We translate all assets and liabilities of our foreign operations where the U.S. dollar is not the functional currency at the period-end exchange rate and translate sales and expenses at the average exchange rates in effect during the period.
We recorded net foreign currency measurement and transaction losses of $1.0 million for 2023. We translate all assets and liabilities of our foreign operations where the U.S. dollar is not the functional currency at the period-end exchange rate and translate sales and expenses at the average exchange rates in effect during the period.
The net effect of these translation adjustments is recorded in the Consolidated Financial Statements as Comprehensive income (loss). The translation adjustment for 2022 was a loss of $25.6 million and primarily related to the strengthening U.S. dollar relative to the Euro. Translation adjustments are not adjusted for income taxes as they relate to permanent investments in our foreign subsidiaries.
The net effect of these translation adjustments is recorded in the Consolidated Financial Statements as Comprehensive income (loss). The translation adjustment for 2023 was a gain of $14.4 million and primarily related to the strengthening Euro relative to the U.S. dollar. Translation adjustments are not adjusted for income taxes as they relate to permanent investments in our foreign subsidiaries.
We had currency derivative instruments with notional amounts totaling $57.2 million outstanding as of December 31, 2022. As of December 31, 2022, we recorded assets totaling $0.5 million to recognize the fair value of these derivative instruments on our Consolidated Balance Sheets.
We had currency derivative instruments with notional amounts totaling $90.0 million outstanding as of December 31, 2023. As of December 31, 2023, we recorded assets totaling $2.2 million to recognize the fair value of these derivative instruments on our Consolidated Balance Sheets.
This amount is not indicative of the hypothetical net earnings impact due to the partially offsetting impacts on cost of sales and operating expenses in those currencies. We estimate that foreign currency exchange rate fluctuations during 2022 decreased sales in comparison to 2021 by $6.5 million.
This amount is not indicative of the hypothetical net earnings impact due to the partially offsetting impacts on cost of sales and operating expenses in those currencies. We estimate that foreign currency exchange rate fluctuations during 2023 increased sales in comparison to 2022 by $1.2 million.
From time to time, we may enter into interest rate swap agreements in order to reduce the cash flow risk caused by interest rate changes on our outstanding floating rate borrowings. As of December 31, 2022, we had $931 million in principal amount of debt outstanding.
We may enter into interest rate swap agreements in order to reduce the cash flow risk caused by interest rate changes on our outstanding floating rate borrowings. As of December 31, 2023, we had $974.0 million in principal amount of debt outstanding.
A hypothetical 10% change in the value of the U.S. dollar in relation to our most significant foreign currency exposures would have had an impact of approximately $5 million on our 2022 annual sales.
A hypothetical 10% change in the value of the U.S. dollar in relation to the Euro, our most significant foreign currency exposure, would have had an impact of approximately $7 million on our 2023 annual sales.
The amounts recorded during 2022 related to our forward contracts were decreases in Sales, Cost of sales and Operating expenses of $2.1 million, $2.2 million and $0.4 million, respectively.
The amounts recorded during 2023 related to our forward contracts were decreases in Sales and Cost of sales of $0.2 million and $5.6 million, respectively.
A hypothetical one percentage point (100 basis points) change in the LIBOR rate on the $831 million of unhedged variable rate debt outstanding at December 31, 2022 would increase our interest expense by approximately $8 million.
A hypothetical one percentage point (100 basis points) change in SOFR on the $474 million of variable rate debt outstanding as of December 31, 2023 would increase our interest expense by approximately $5 million. We had no loans in Euros outstanding at December 31, 2023.
Interest rates on our Revolving Credit Facility, TLA Facility and TLB Facility, reset, at our option, based upon the prime rate or LIBOR rate, thus subjecting us to interest rate risk.
Interest rates on our Revolving Credit Facility and TLA Facility, reset at a rate based on the secured overnight financing rate (“SOFR”), in relation to any loan in U.S. dollars, and the Euro Interbank Offered Rate (“EURIBOR”), in relation to any loan in Euros, thus subjecting us to interest rate risk.
Removed
We entered into this agreement in order to reduce our exposure to fluctuations in the LIBOR rate. The amount recorded during 2022 related to this interest rate swap was an increase of $0.9 million to Interest expense. As of December 31, 2022, this swap had a favorable fair value of $1.3 million.
Added
During February 2023, we strategically replaced about half of our variable rate debt with fixed rate debt through the issuance of the 2028 Convertible Notes at a fixed rate of 2.125% and paying down our highest rate variable debt, the Term Loan B facility, and a portion of our Revolving Credit Facility.
Removed
Refer to Note 8, “Debt,” and Note 17, “Financial Instruments and Fair Value Measurements,” of the Notes to Consolidated Financial Statements in Item 8 of this report for additional information about our outstanding debt and interest rate swap agreement, respectively. - 44 - Table of Contents
Added
These transactions are expected to mitigate increased borrowing costs and result in a more balanced mix of fixed and floating rates to help protect against interest rate exposure. Our outstanding interest rate swap matured as of June 30, 2023.
Added
We may enter into interest rate swap agreements in the future in order to reduce our exposure to fluctuations in floating rates. - 49 - Table of Contents

Other ITGR 10-K year-over-year comparisons