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What changed in Integer Holdings Corp's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Integer Holdings Corp's 2023 and 2024 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 2024 report.

+377 added−352 removedSource: 10-K (2025-02-20) vs 10-K (2024-02-20)

Top changes in Integer Holdings Corp's 2024 10-K

377 paragraphs added · 352 removed · 286 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

79 edited+20 added−19 removed85 unchanged
Biggest changeAdditionally, 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.
Biggest changeOur portfolio of market-ready vascular access guidewires and introducers kits enables a range of venous and arterial access applications, including transradial access. 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).
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 customers include large multi-national medical device OEMs and their subsidiaries.
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.
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, labeling, and import requirements.
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.
We also make available free of charge through our website our annual reports 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.
These include laser-cut and machined components, complex braided meshes, guidewires, introducer sheaths, steerable sheaths and delivery catheters, and implants used in transcatheter aortic valve replacement, balloon aortic valvuloplasty, transcatheter mitral valve repair and replacement, atrial and defect closure, left ventricular assist, and shunt procedures. Peripheral Vascular, Neurovascular, and Interventional Oncology.
These include laser-cut and machined components, complex braided meshes, guidewires, introducer sheaths, steerable sheaths and delivery catheters, and implants used in transcatheter aortic valve replacement, balloon aortic valvuloplasty, transcatheter mitral valve repair and replacement, tricuspid mitral valve repair and replacement, atrial and defect closure, left ventricular assist, and shunt procedures. Peripheral Vascular, Neurovascular, and Interventional Oncology.
Carthy was a Quality & Regulatory Leader for the European Region at Sola International, now Carl Zeiss. John Harris, age 64, is Executive Vice President, Global Operations and Manufacturing Strategy. Mr. Harris was promoted to his current position in January 2024 from Senior Vice President, Operations for the Cardio & Vascular product line, which position he had held since 2022.
Carthy was a Quality & Regulatory Leader for the European Region at Sola International, now Carl Zeiss. John Harris, age 65, is Executive Vice President, Global Operations and Manufacturing Strategy. Mr. Harris was promoted to his current position in January 2024 from Senior Vice President, Operations for the Cardio & Vascular product line, which position he had held since 2022.
In most cases, we have pass-through pricing arrangements with our customers that purchase components containing precious metals or have established firm-pricing agreements with our suppliers that are designed to minimize our exposure to market fluctuations. We utilize competitive pricing methods such as bulk purchases, precious metal pool buys, blanket orders, and long-term contracts to secure supply.
In most cases, we have pass-through pricing arrangements with our customers that purchase components containing precious metals or have established firm-pricing agreements with our suppliers that are designed to minimize our exposure to market fluctuations. We utilize competitive pricing methods such as bulk purchases, precious metal forward buys, blanket orders, and long-term contracts to secure supply.
During his 25-year career with Integer, John has held numerous executive roles, including also serving as Vice President of Operations for Cardio & Vascular product line from 2018 to 2022. Payman Khales, age 54, is President, Cardio & Vascular, and joined the Company on February 20, 2018. Mr.
During his 25-year career with Integer, John has held numerous executive roles, including also serving as Vice President of Operations for Cardio & Vascular product line from 2018 to 2022. Payman Khales, age 55, is President, Cardio & Vascular, and joined the Company on February 20, 2018. Mr.
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.
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 52, is Executive Vice President and Chief Financial Officer.
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.
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 61, is Executive Vice President, Quality and Regulatory Affairs. Ms.
Prior to joining Tiffany & Co., Mr. Smith worked in finance at General Electric for 15 years and in assurance services at KPMG for five years. Jim Stephens, age 50, is President, Cardiac Rhythm Management & Neuromodulation. He joined the Company in May 2023. Prior to joining Integer, Mr.
Prior to joining Tiffany & Co., Mr. Smith worked in finance at General Electric for 15 years and in assurance services at KPMG for five years. Jim Stephens, age 51, is President, Cardiac Rhythm Management & Neuromodulation. He joined the Company in May 2023. Prior to joining Integer, Mr.
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.
Consistent with our strategy, the acquisition of Aran further increased 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.
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.
Marshall, II, age 55, 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.
Acquisitions and Investments One facet of our growth strategy is to acquire additional technology or manufacturing capability to expand our product offering in our key existing growth markets. We expect to continue to engage in business development activities and technology licensing arrangements to support our growth in these markets.
Acquisitions and Investments One facet of our growth strategy is to acquire additional technology or manufacturing capabilities to expand our product offering in our key existing growth markets. We expect to continue to engage in business development activities and technology licensing arrangements to support our growth in these markets.
Cardiac Rhythm Management & Neuromodulation Active projects to develop custom batteries, filtered feedthroughs, high voltage capacitors and finished device solutions including both leads and IPG systems that reduce the size and cost, while improving performance, for cardiac and neuromodulation devices. Non-Medical.
Cardiac Rhythm Management & Neuromodulation Active projects to develop custom batteries, filtered feedthroughs, high voltage capacitors and finished device solutions including both leads and IPG systems that reduce the size and cost, while improving performance, for cardiac and neuromodulation devices.
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.
Dziedzic, age 56, 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.
We disclaim any obligation to publicly update or revise the forward-looking statements made in this report as a result of new information, future events or otherwise, except as required by law. - 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 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. - 14 - 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 defined below) matters by various stakeholders; our dependence upon our senior management team and key technical personnel; 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, 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; • 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. - 15 - Table of Contents
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.
Our flexible, high productivity manufacturing capabilities span sites across the U.S., Mexico, Uruguay, Ireland, Malaysia, and the Dominican Republic. - 8 - Table of Contents 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.
In particular, the prices of precious metals, such as platinum, have historically fluctuated, and the prices that we pay for these materials, and, in some cases, their availability, are dependent upon general market conditions.
In particular, the prices of precious metals, such as gold or platinum, have historically fluctuated, and the prices that we pay for these materials, and, in some cases, their availability, are dependent upon general market conditions.
Since our supply chain is complex, our ongoing compliance with these rules could affect the pricing, sourcing and availability of conflict minerals used in the manufacture of our products. We are also subject to disclosure requirements regarding abusive labor practices in portions of our supply chain under the California Transparency in Supply Chains Act and the UK Modern Slavery Act.
Since our supply chain is complex, our ongoing compliance with these rules could affect the pricing, sourcing and availability of conflict minerals used in the manufacture of our products. - 10 - Table of Contents We are also subject to disclosure requirements regarding abusive labor practices in portions of our supply chain under the California Transparency in Supply Chains Act and the UK Modern Slavery Act.
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.
Andrew Senn, age 43, 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.
Contracts with customers can include rebates and tiered pricing arrangements based on pre-determined volume levels, in which higher volume levels typically have lower pricing, or specific prices are offered to customers in exchange for increased volume levels and/or longer contract terms. Typically, our contracts specify minimum order quantities and lead times.
Contracts with customers can include rebates and tiered pricing arrangements based on predetermined volume levels, in which higher volume levels typically have lower pricing, or specific prices are offered to customers in exchange for increased volume levels and/or longer contract terms. Typically, our contracts specify minimum order quantities and lead times.
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).
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).
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.
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.
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.
Sales and Marketing With limited exceptions, we sell our products directly to our customers, including large, multi-national OEMs and their affiliated subsidiaries. In 2024, 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.
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.
Our inorganic strategy will be primarily focused on strategic “tuck-in” acquisitions that will supplement our existing product portfolio. Strategic Overview We continue to take steps to better align our resources in order to invest to grow our portfolio of products.
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.
We may have environmental liability associated with historic operations as disclosed in Note 14, “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.
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.
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; • the timing for final sales of our Portable Medical products; • having available sufficient cash and borrowing capacity to meet working capital, debt service and capital expenditure requirements for the next twelve months; and • projected contractual debt service obligations.
Typical components include polyimide tubing, electrode rings, platinum tips and fine wires. Sub-assemblies include electrode ring and wire assemblies, steerable handle assemblies, and spline and basket assemblies. Finished devices include steerable transseptal sheaths, diagnostic catheters and ablation catheters. Vascular Access, Infusion Therapy and Hemodialysis.
Typical components include polyimide tubing, electrode rings, platinum tips and fine wires. Sub-assemblies include electrode ring and wire assemblies, steerable handle assemblies, and spline and basket assemblies. Finished devices include steerable transseptal sheaths, diagnostic catheters and ablation catheters. - 4 - Table of Contents Vascular Access, Infusion Therapy and Hemodialysis.
As discussed more fully in Item 1A, “Risk Factors” of this report, our business depends on a continuous supply of raw materials from a limited number of suppliers.
As discussed more fully in Item 1A, “Risk Factors,” of this report, our business depends on a continuous supply of raw materials from a limited number of suppliers.
Those markets include: Urology. Our main focus is in endourology for which we develop and manufacture finished devices and components for access and interventional devices such as guidewires, ureteral access sheaths, dilation devices, retrieval devices, ureteral stents, biopsy forceps, and endoscopes. Gastroenterology.
Our main focus is in endourology for which we develop and manufacture finished devices and components for access and interventional devices such as guidewires, ureteral access sheaths, dilation devices, retrieval devices, ureteral stents, biopsy forceps, and endoscopes. Gastroenterology.
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.
Information regarding our sales by geographic area is set forth in Note 19, “Segment and Geographic Information,” of the Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” of this report.
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.
The public can obtain any documents that we file with the SEC at www.sec.gov. - 12 - Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS Information concerning our executive officers is presented below as of February 20, 2025.
This includes leadership competencies, 360-degree feedback for senior leadership, and various online and virtual programs aligned to our leadership competencies. Competitive Pay/Benefits and Gender Equity Our total rewards program is designed to attract, retain and motivate associates to contribute to Integer’s success, and includes market-competitive elements reflective of the geographies in which we operate.
This includes leadership competencies, feedback tools, and various online and virtual programs aligned to our talent programs and leadership competencies. Competitive Pay/Benefits and Gender Equity Our total rewards program is designed to attract, retain and motivate associates to contribute to Integer’s success, and includes market-competitive elements reflective of the geographies in which we operate.
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.
As of December 31, 2024, we owned 556 U.S. and foreign patents, and have license right to another 159 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.
However, since most of our customers are large OEM businesses, our sales are influenced by the inventory levels they carry, which can cause shifts in our sales volume as their inventories fluctuate. Available Information Our Internet address is www.integer.net .
Seasonality Our business is generally not seasonal in nature. However, since most of our customers are large OEM businesses, our sales are influenced by the inventory levels they carry, which can cause shifts in our sales volume as their inventories fluctuate. Available Information Our Internet address is www.integer.net .
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.
The majority of the orders outstanding at December 31, 2024 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.
Reflective of our commitment to diverse representation at Integer, we have analyzed the compensation of our senior leadership team and concluded there is no pay gap between genders. - 12 - Table of Contents Focus on Diversity, Inclusion and Non-Discrimination Through our values, Code of Conduct, and commitment to Diversity and Inclusion (“D&I”), we strive to create a culture that unifies and embraces the uniqueness each associate brings to Integer, positioning us for long-term success.
Reflective of our commitment to diverse representation at Integer, we have analyzed the compensation of our senior leadership team and believe there is no pay gap between genders. - 11 - Table of Contents Inclusion and Non-Discrimination Through our values and Code of Conduct, we strive to create a culture that unifies and embraces the uniqueness that each associate brings to Integer, which we believe positions us for long-term success.
Stephens also served for approximately 18 years in various leadership positions at Parker Hannifin Corporation, including from 2017 to 2020 as General Manager of its Stratoflex Products Division and from 2015 to 2017 as General Manager of its Aircraft Wheel & Brake Division. Earlier in his career, he held positions at domnick hunter (UK) and Ceridian Corporation.
Stephens also served for approximately 18 years in various leadership positions at Parker Hannifin Corporation, including from 2017 to 2020 as General Manager of its Stratoflex Products Division and from 2015 to 2017 as General Manager of its Aircraft Wheel & Brake Division.
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.
As of December 31, 2024, our workforce is distributed as follows: • 41% in the U.S.; • 27% in Mexico; • 16% in Ireland; • 9% in the Dominican Republic; • 4% in Uruguay; • 3% in Malaysia; and • less than 1% combined in China and Switzerland.
These regulatory requirements subject our products and our business to numerous risks that are specifically discussed within “Risks Related to Our Industries” under Item 1A, “Risk Factors” of this report. A summary of critical aspects of our regulatory environment is included below.
These regulatory requirements subject our products and our business to numerous risks that are specifically discussed within “Legal and Compliance Risks” under Item 1A, “Risk Factors,” of this report. A summary of critical aspects of our regulatory environment is included below.
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.
The ability to commercially market our non-exempt products in the U.S. is granted by the FDA - 9 - Table of Contents 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.
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 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.
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.
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.
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.
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.
We believe our core business is well positioned because our OEM customers leverage our portfolio of intellectual property. We continue to build a healthy pipeline of diverse medical technology opportunities and provide a new level of industry leading capabilities and services to our OEM customers across the full range of medical device products and services.
We continue to build a healthy pipeline of diverse medical technology opportunities and provide a new level of industry leading capabilities and services to our OEM customers across the full range of medical device products and services.
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 member countries of the EU have a single set of requirements that apply to all member countries and medical products. 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”).
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.
Some of the more significant product development opportunities we are 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 February 2018, he assumed leadership for the Integer Culture strategic imperative. - 14 - Table of Contents CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS Some statements contained in this report and other written and oral statements made from time to time by us and our representatives are not statements of historical or current fact.
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS Some statements contained in this report and other written and oral statements made from time to time by us and our representatives are not statements of historical or current fact.
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.
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 accredited notified bodies.
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.
Since that time, we have been working closely with impacted customers to support the transition of these products to other suppliers. 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.
We are committed to creating a better, more inclusive company in which all of us accept, respect and value one another’s individual differences, encouraging different perspectives and ideas that improve team synergy and communication. Our management approach continues to accelerate our D&I strategy, creating a robust engagement platform designed to increase innovation and enhance business.
We are committed to creating a better, more inclusive company in which all of us accept, respect and value one another’s individual differences, encouraging different perspectives and ideas that improve team synergy and communication.
Food and Drug Administration (“FDA”), to assure the conformance of devices and components in the international markets where they are sold. For these facilities, we maintain FDA registration and compliance with all applicable domestic and international regulations. Compliance with applicable regulatory requirements is subject to continual internal review and is monitored externally through periodic inspections by regulatory bodies.
For these facilities, we maintain FDA registration and compliance with all applicable domestic and international regulations. Compliance with applicable regulatory requirements is subject to continual internal review and is monitored externally through periodic inspections by regulatory bodies.
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.
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.
Additionally, Integer helps OEMs and other emerging companies with the development and manufacture of complete neuromodulation IMD solutions, including custom IPGs, programmer systems, battery chargers, patient controllers, fully finished lead systems and accessories from initial development through commercial quantities.
Additionally, Integer helps OEMs and other emerging companies with the development and manufacture of complete neuromodulation IMD solutions, including custom IPGs, programmer systems, battery chargers, patient controllers, fully finished lead systems and accessories from initial development through commercial quantities. - 5 - Table of Contents Other Markets We provide a broad range of products and services to other markets such as minimally invasive surgery, general surgery, orthopedics, and Portable Medical.
This includes aligning key roles with critical capabilities, positioning the best talent against the biggest work, and putting tools and processes in place to provide higher financial rewards for top performers, so our top performers can see increased results in pay for increased results in their performance.
This includes aligning key roles with critical capabilities, positioning the best talent against the biggest work, and putting tools and processes in place to provide higher financial rewards for top performers, so our top performers can see increased results in pay for increased results in their performance. - 7 - Table of Contents We believe we are well-positioned within the medical technology and MDO manufacturing market and that there is a robust pipeline of opportunities to pursue.
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.
As of December 31, 2024, Integer employed approximately 11,000 associates in addition to a contingent workforce of approximately 500 to assist with various projects and service functions and address peaks in staff requirements.
We leverage our account executives with support from our engineers to design and sell product solutions into our targeted markets. Our account executives are trained to assist our customers in selecting appropriate materials and configurations. We market our products and services through well-defined selling strategies and marketing campaigns that are customized for each of the industries we target.
Our account executives are trained to assist our customers in selecting appropriate materials and configurations. We market our products and services through well-defined selling strategies and marketing campaigns that are customized for each of the industries we target. Firm backlog orders at December 31, 2024 were approximately $728 million.
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.
Earlier in his career, he held positions at domnick hunter (UK) and Ceridian Corporation. - 13 - Table of Contents Kirk Thor, age 61, 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.
Other Laws and Regulations Our sales and marketing practices are subject to regulation by the U.S.
Other Laws and Regulations Our sales and marketing practices are subject to regulation by the U.S. Department of Health and Human Services pursuant to federal anti-kickback laws, and are also subject to similar state laws.
Internal account executives support all sales activity and involve engineers and technology professionals in the sales process to address customer requests across all product lines. For system and device solutions, we partner with our customers’ research, marketing, and clinical groups to jointly develop technology platforms in alignment with their product roadmaps and therapy needs.
For system and device solutions, we partner with our customers’ research, marketing, and clinical groups to jointly develop technology platforms in alignment with their product roadmaps and therapy needs. - 6 - Table of Contents We leverage our account executives with support from our engineers to design and sell product solutions into our targeted markets.
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.
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.
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.
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.
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.
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.
Department of Health and Human Services pursuant to federal anti-kickback laws, and are also subject to similar state laws. - 11 - Table of Contents Human Capital Our Board of Directors and the executive team put significant focus on our human capital resources, as we strive to build leadership capability and create a diverse, inclusive work environment that inspires excellence.
Human Capital Our Board of Directors and the executive team put significant focus on our human capital resources, as we strive to build leadership capability and create a diverse, inclusive work environment that inspires excellence. This cultural framework recognizes the value of individuals as critical to Integer’s operational strategy.
ITEM 1. BUSINESS OVERVIEW Integer Holdings Corporation, headquartered in Plano, Texas, is among the world’s largest medical device outsource (“MDO”) manufacturing companies, serving the cardiac rhythm management, neuromodulation, orthopedics, vascular, advanced surgical and portable medical markets. We provide innovative, high-quality medical technologies that enhance the lives of patients worldwide.
ITEM 1. BUSINESS OVERVIEW Integer Holdings Corporation, headquartered in Plano, Texas, is among the world’s largest medical device contract development and manufacturing organizations in the world, serving the cardiac rhythm management, neuromodulation, and cardio and vascular markets.
We continue to achieve our goal of 100% of associates globally completing annual Code of Conduct and Anti-Harassment, Non-Discrimination and Anti-Retaliation training. Training is conducted in multiple languages, including English, Spanish and Malay, covering all legal and ethical requirements, and is provided when onboarding all associates hired at Integer and conducted annually thereafter.
Training is conducted in multiple languages, including English, Spanish and Malay, covering all legal and ethical requirements, and is provided when onboarding all associates hired at Integer and conducted annually thereafter. 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.
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.
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. Food and Drug Administration (“FDA”), to assure the conformance of devices and components in the international markets where they are sold.
We believe we have the scale and global presence, supported by world-class manufacturing and quality capabilities, to capture these opportunities. We are confident in our capabilities as one of the largest MDO manufacturers, with a long history of successfully integrating companies, driving down costs and growing revenues over the long-term.
We are confident in our capabilities as one of the largest MDO manufacturers, with a long history of successfully integrating companies, driving down costs and growing revenues over the long-term. Ultimately, our strategic vision is to drive shareholder value by enhancing the lives of patients worldwide by being our customers’ partner of choice for innovative technologies and services.
Additionally, we may be unable to quickly establish additional or replacement suppliers for these materials as there are a limited number of worldwide suppliers. Working Capital Practices Our goal is to carry sufficient levels of inventory to ensure that we have adequate supply of raw materials from suppliers and meet the product delivery needs of our customers.
Working Capital Practices Our goal is to carry sufficient levels of inventory to ensure that we have adequate supply of raw materials from suppliers and meet the product delivery needs of our customers. 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.
Our scientists, engineers and technicians focus on developing new products, improving and enhancing existing products, and expanding the use of our products in new or tangential applications. In addition to our internal technology and capability development efforts aimed at providing our customers with differentiated solutions, we also engage outside research institutions for unique technology projects. Medical.
In addition to our internal technology and capability development efforts aimed at providing our customers with differentiated solutions, we also engage outside research institutions for unique technology projects. We believe our core business is well positioned because our OEM customers leverage our portfolio of intellectual property.
We believe we are well-positioned within the medical technology and MDO manufacturing market and that there is a robust pipeline of opportunities to pursue. We have expanded our medical device capabilities and are excited about opportunities to partner with customers to drive innovation.
We have expanded our medical device capabilities and are excited about opportunities to partner with customers to drive innovation. We believe we have the scale and global presence, supported by world-class manufacturing and quality capabilities, to capture these opportunities.
We believe that the diversification of our sales among the various subsidiaries and market segments with those three customers reduces our exposure to negative developments with any one customer. Our Non-Medical customers include large multi-national OEMs and their subsidiaries serving the energy, military and environmental services markets.
During 2024, three of our customers, Abbott Laboratories, Boston Scientific and Medtronic were each in excess of 10% of total sales and collectively accounted for 47% of our total sales. We believe that the diversification of our sales among the various subsidiaries and market segments with those three customers reduces our exposure to negative developments with any one customer.
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.
Carthy was promoted to her current position in January 2024 from Senior Vice President, Quality and Regulatory Affairs, which position she had held since 2022.
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.
Other markets are areas where Integer is not strategically focused. Portable Medical. 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. During 2021, we initiated plans to exit our portable medical market to enhance profitability and reallocate manufacturing capacity to support growth.
Ultimately, our strategic vision is to drive shareholder value by enhancing the lives of patients worldwide by being our customers’ partner of choice for innovative technologies and services. Research and Product Development Our position as a leading developer and manufacturer of medical devices and components is largely the result of our long history of technological innovation.
Research and Product Development Our position as a leading developer and manufacturer of medical devices and components is largely the result of our long history of technological innovation. Our scientists, engineers and technicians focus on developing new products, improving and enhancing existing products, and expanding the use of our products in new or tangential applications.
When used in this report, the terms “Integer,” “we,” “us,” “our” and the “Company” mean Integer Holdings Corporation and its subsidiaries. We organize our business into two reportable segments, Medical and Non-Medical, and derive our revenues from four principal product lines.
When used in this report, the terms “Integer,” “we,” “us,” “our” and the “Company” mean Integer Holdings Corporation and its subsidiaries. Over the past several years, Integer has evolved our Portfolio Strategy to focus on higher growth medtech markets where we possess differentiated capabilities.
In addition to medical technologies, we develop batteries for high-end niche applications in energy, military, and environmental markets. Our brands include Greatbatch Medical ® , Lake Region Medical ® and Electrochem ® . Our primary customers include large, multi-national original equipment manufacturers (“OEMs”) and their affiliated subsidiaries.
As a strategic partner of choice to medical device companies and original equipment manufacturers (“OEMs”), we are committed to enhancing the lives of patients worldwide by providing innovative, high-quality products and solutions. Our brands include Greatbatch Medical ® and Lake Region Medical ® . Our primary customers include large, multi-national OEMs and their affiliated subsidiaries.
Refer to “Portable Medical Exit” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report for additional information. NON-MEDICAL SEGMENT Our power solutions enable the success and advancement of our customers’ critical non-medical applications.
Refer to “Divestiture and Market Exit,” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this report for additional information. 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.
Removed
On December 1, 2021, we acquired 100% of the outstanding equity interests of Oscor Inc., Oscor Caribe, LLC and Oscor Europe GmbH (collectively “Oscor”), privately-held companies with operations in Florida, the Dominican Republic and Germany that design, develop, manufacture and market a comprehensive portfolio of highly specialized medical devices, venous access systems and diagnostic catheters and implantable devices.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur business is also subject to risks associated with U.S. and foreign legislation, regulations and trade agreements relating to the materials we import, including the tariffs on steel that the U.S. has imposed and other quotas, duties, tariffs or taxes or restrictions on imports, which could adversely affect our operations and our ability to import materials used in our products at current or increased levels.
Biggest changeOur business is also subject to potential increased costs and expenses and others risks resulting from existing and potential future U.S. and foreign legislation, regulations and trade agreements relating to the products we manufacture outside of the U.S and import into the U.S. and other materials we import, including the tariffs on steel that the U.S. has imposed, the tariffs that the new U.S. presidential administration has imposed or threatened to impose, particularly relating to imports into the U.S. from Canada, Mexico (where we currently manufacture a significant portion of our products) and China, and other quotas, duties, tariffs or taxes or restrictions on imports, all or any of which could adversely affect our operations, increase the costs of products that we manufacture outside the U.S. or adversely impact our profits or margins.
The diversion of management’s attention, and any difficulties encountered in the transition and integration process, could harm our business, financial condition and operating results. We may not be able to maintain the levels of operating efficiency that acquired companies have achieved or might achieve separately.
The diversion of management’s attention, and any difficulties encountered in the transition and integration process, could harm our business, financial condition and operating results. We may not be able to maintain the levels of operating efficiency that acquired companies or businesses have achieved or might achieve separately.
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.
A disruption or delay 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 cannot predict whether additional U.S. and foreign customs quotas, duties (including antidumping or countervailing duties), tariffs, taxes or other charges or restrictions, requirements as to where raw materials must be purchased or other restrictions on our imports will be imposed in the future or adversely modified, or what effect such actions would have on our costs of operations.
We cannot predict whether new or additional U.S. and foreign customs quotas, duties (including antidumping or countervailing duties), tariffs, taxes or other charges or restrictions, requirements as to where raw materials must be purchased or other restrictions on our imports will be imposed in the future or adversely modified, or what effect any such future actions would have on our costs of operations.
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.
If an event (including any weather or natural disaster-related event or a resurgence of the COVID-19 pandemic or other similar pandemic event) 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 any of our facilities, 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.
While we have implemented cost containment measures and taken other actions to offset these inflationary pressures in our global supply chain, we may not be able to completely offset all the increases in our operational costs. - 17 - Table of Contents We rely on third-party manufacturers to supply many of the products and subcomponents that are incorporated into our products and components.
While we have implemented cost containment measures and taken other actions to offset these inflationary pressures in our global supply chain, we may not be able to completely offset all the increases in our operational costs. We rely on third-party manufacturers to supply many of the products and subcomponents that are incorporated into our products and components.
There can be no assurance that the marketplace will support higher prices or that price increases and productivity gains, procurement deflation projects or savings will fully offset any raw material cost increases in the future. In addition, there are a limited number of worldwide suppliers of several raw materials needed to manufacture our products.
There can be no assurance that our customers will support or approve higher prices or that price increases and productivity gains or procurement deflation projects or savings will fully offset any raw material cost increases in the future. In addition, there are a limited number of worldwide suppliers of several raw materials needed to manufacture our products.
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.
If any of these events occurs, our business will be harmed and our revenues and operating results will be adversely affected. 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.
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.
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. - 22 - Table of Contents 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.
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.
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. Quality problems with our products could result in warranty claims and additional costs, could harm our reputation and could erode our competitive advantage.
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.
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. - 26 - Table of Contents 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.
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 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 or unexpected liabilities or costs related to the acquisition of a target company or the operation of an acquired business, which may be beyond the scope of any applicable insurance coverage we may have.
For reasons of quality, cost effectiveness or availability, we obtain some raw materials from a single supplier. Although we work closely with our suppliers to seek to ensure continuity of supply, we may not be able to continue to procure raw materials critical to our business at all or to procure them at acceptable price levels.
For reasons of quality, cost effectiveness or availability, we obtain some raw materials from a single supplier. Although we work closely with our suppliers to seek to ensure continuity of supply, we may not be able to continue to procure raw materials critical to our business in sufficient quantities or at all or to procure them at acceptable price levels.
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.
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. - 29 - Table of Contents
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 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. If we become subject to product liability claims, our operating results and financial condition could suffer.
Our inability to develop new products or expand into new geographic and product markets, as currently intended, could hurt our business, financial condition and results of operations. If we are not successful in making acquisitions to expand and develop our business, our operating results may suffer.
Our inability to develop new products or expand into new geographic and product markets, as currently intended, could hurt our business, financial condition and results of operations. - 21 - Table of Contents If we are not successful in making acquisitions to expand and develop our business, our operating results may suffer.
The option counterparties are financial institutions, and we will be subject to the risk that any or all of them might default under the capped call transactions. Our exposure to the credit risk of the option counterparties will not be secured by any collateral.
We are subject to counterparty risk with respect to the capped call transactions. The option counterparties are financial institutions, and we will be subject to the risk that any or all of them might default under the capped call transactions. Our exposure to the credit risk of the option counterparties will not be secured by any collateral.
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.
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. - 28 - Table of Contents Our business is subject to environmental regulations that could be costly to comply with.
In addition, our medical customers have in the past elected, and may in the future elect, to insource production or implement supplier diversification initiatives.
In addition, our medical customers have in the past elected, and may in the future elect, to in source production or implement supplier diversification initiatives.
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.
At December 31, 2024, we had $1.8 billion of goodwill and other intangible assets, representing 58% 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 $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.
In addition, intangible assets with definite lives, which represent $688.0 million of our net intangible assets at December 31, 2024, 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.
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.
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, “Financial Statements and Supplementary Data,” and the discussion in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this report, when deciding to invest in us.
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.
In 2024, our top three customers collectively accounted for approximately 47% 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 any of these customers recur.
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.
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 13.0% in 2022, to 15.4% in 2023 and to 18.0% for 2024.
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.
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.
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 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.
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.
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; litigation, including individual claims, consumer class actions and commercial litigation; regulatory intervention and sanctions or fines; prolonged negative publicity; and increased costs required to prevent, respond to, or mitigate such cybersecurity attacks or IT disruptions.
Interruptions of our manufacturing operations could delay production and adversely affect our operations. Our products are designed and manufactured in facilities located around the world. In most cases, the manufacturing of specific product lines is concentrated in one or a few locations.
Our products are designed and manufactured in facilities located around the world. In most cases, the manufacturing of specific product lines is concentrated in one or a few locations.
At December 31, 2023, we had $974 million in principal amount of debt outstanding under the Senior Secured Credit Facilities and the 2.125% convertible senior notes due 2028 (the “2028 Convertible Notes”).
At December 31, 2024, we had $1.0 billion in principal amount of debt outstanding under the Senior Secured Credit Facilities and the 2.125% convertible senior notes due 2028 (the “2028 Convertible Notes”).
Transition to low-carbon alternatives may result in reduced demand or product obsolescence for certain of our customers’ products, which in turn would result in reduced profit margin associated with certain of our customers, or loss of customers that we may not be able to replace.
The economic and market uncertainty created by transitioning to low-carbon alternatives may result in reduced demand or product obsolescence for certain of our customers’ products, which in turn would result in reduced profit margin associated with certain of our customers, or loss of customers that we may not be able to replace.
The loss or unavailability to us of any member of our senior management team or a key technical employee could significantly harm us. We face intense competition for these professionals from our competitors, customers and companies operating in our industry, which competition has become more acute during the term of the COVID-19 pandemic.
The loss or unavailability to us of any member of our senior management team or a key technical employee could significantly harm us. We face intense competition for these professionals from our competitors, customers and companies operating in our industry.
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.
As of December 31, 2024, our debt service obligations, comprised of principal and interest on our outstanding indebtedness and commitment fees on the unused portion of our Revolving Credit Facility, are estimated to be approximately $52 million for 2025.
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.
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 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.
We are a global company with a complex business model. 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 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.
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, carbon monoflouride and plastics.
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.
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.
Our product development efforts may be affected by a number of factors, including our ability to anticipate customer needs, develop or acquire new technologies and enhancements, secure intellectual property protection for our products, and manufacture products in a cost effective manner. We would be harmed if we did not meet customer requirements and expectations.
Our product development efforts may be affected by a number of factors, including our ability to anticipate customer needs, develop or acquire new technologies and enhancements (including but not limited to artificial intelligence), secure intellectual property protection for our products, and manufacture products in a cost-effective manner.
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.
If tax laws and related regulations change, our financial results could be materially impacted. 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 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.
Our sales outside the U.S., which accounted for approximately 45% of sales for 2024, and our operations in Europe, Asia, Mexico, South America, Central 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, including costs we may incur as a result of the enactment of new tariffs or changes in existing tariffs (in particular, the potential new tariffs imposed by the new U.S. presidential administration on goods imported into the U.S. from Mexico, where we currently manufacture a significant portion of our products) or our inability to pass these tariff costs on to our customers, 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.
We have a complex tax profile due to the global nature of our operations and may experience increases and variability in our quarterly and annual effective tax rate due to several factors, including changes in the mix of pre-tax income and the jurisdictions to which it relates, business acquisitions, settlements with taxing authorities and changes in tax rates.
However, fluctuations in foreign currency exchange rates could have a significant impact on our financial results in the future. - 25 - Table of Contents We have a complex tax profile due to the global nature of our operations and may experience increases and variability in our quarterly and annual effective tax rate due to several factors, including changes in the mix of pre-tax income and the jurisdictions to which it relates, business acquisitions, settlements with taxing authorities and changes in tax rates.
Our success depends, and our continued success will depend, in large part upon our ability to attract, train, retain and motivate highly skilled associates. There is currently aggressive competition for employees who have experience in technology and engineering.
Our success depends, and our continued success will depend, in large part upon our ability to attract, train, retain and motivate highly skilled associates. 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.
Additionally, new technologies that we develop may not be rapidly accepted because of industry-specific factors, including the need for regulatory clearance, entrenched patterns of clinical practice and uncertainty over third-party reimbursement.
Additionally, new products and technologies that we develop may not be rapidly accepted because of industry-specific factors, including the need for regulatory clearance, entrenched patterns of clinical practice and uncertainty over third-party reimbursement, and we may not be able to recover all or a meaningful part of our investment in the new products and technologies.
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.
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.
Significant increases in the cost of raw materials that cannot be recovered through increases in the prices of our products could adversely affect our results of operations.
Increasing global demand for raw materials has caused prices of certain materials to increase. Significant increases in the cost of raw materials that cannot be recovered through increases in the prices of our products could adversely affect our results of operations.
In certain circumstances, we may rely on third-party vendors to process, store and transmit data for our business whose operations are subject to similar risks. These risks could have a material adverse effect on our business, financial condition and results of operations.
In certain circumstances, we may rely on third-party vendors to process, store and transmit data for our business whose operations are subject to similar risks.
Our 2028 Convertible Notes may become convertible in the future at the option of their holders under certain circumstances. If holders of our 2028 Convertible Notes elect to convert their notes, we may settle our conversion obligation by delivering to them a significant number of shares of our common stock, which would cause dilution to our existing stockholders.
If holders of our 2028 Convertible Notes elect to convert their notes, we may settle our conversion obligation by delivering to them a significant number of shares of our common stock, which would cause dilution to our existing stockholders. In connection with the pricing of the 2028 Convertible Notes, we entered into capped call transactions with the option counterparties.
In addition, if any such capped call transactions fail to become effective, the option counterparties or their respective affiliates may unwind their hedge positions with respect to our common stock, which could adversely affect the trading price of our common stock. - 24 - Table of Contents We are subject to counterparty risk with respect to the capped call transactions.
This activity could cause or avoid an increase or decrease in the market price of our common stock. In addition, if any such capped call transactions fail to become effective, the option counterparties or their respective affiliates may unwind their hedge positions with respect to our common stock, which could adversely affect the trading price of our common stock.
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. There continues to be a lack of consistent climate legislation and regulation, which creates economic and regulatory uncertainty.
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.
In addition, the option counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions following the pricing of the 2028 Convertible Notes and prior to the maturity of the 2028 Convertible Notes (and are likely to do so on each exercise date for the capped call transactions or following any termination of any portion of the capped call transactions in connection with any repurchase, redemption or early conversion of the 2028 Convertible Notes).
The capped call transactions are expected generally to reduce potential dilution to our common stock upon conversion of any 2028 Convertible Notes and/or offset or substantially offset any cash payments we are required to make in excess of the principal amount of converted 2028 Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap. - 24 - Table of Contents In addition, the option counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2028 Convertible Notes (and are likely to do so on each exercise date for the capped call transactions or following any termination of any portion of the capped call transactions in connection with any repurchase, redemption or early conversion of the 2028 Convertible Notes).
Part of our business strategy includes acquiring additional businesses and assets, which we have done in each of the last four years. If we do not successfully integrate acquisitions, we may not realize anticipated operating advantages and cost savings.
Successful integration and anticipated benefits of acquisitions cannot be assured and integration matters could divert attention of management away from operations. Part of our business strategy includes acquiring additional businesses and assets, which we have done in each of the last six years. If we do not successfully integrate acquisitions, we may not realize anticipated operating advantages and cost savings.
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.
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.
We may not have sufficient funds to satisfy all amounts due under the other indebtedness and the 2028 Convertible Notes. - 23 - Table of Contents Even if holders of the 2028 Convertible Notes do not elect to convert their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 2028 Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
Even if holders of the 2028 Convertible Notes do not elect to convert their notes, or if our available borrowing capacity under our Revolving Credit Facility were to fall below the outstanding principal amount of the 2028 Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 2028 Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
We or our third-party providers and business partners may also be subjected to audits or investigations by one or more domestic or foreign government agencies relating to compliance with information security and privacy laws and regulations, and noncompliance with the laws and regulations could results in material fines or litigation.
We or our third-party providers and business partners may also be subjected to audits or investigations by one or more domestic or foreign government agencies relating to compliance with information security and privacy laws and regulations, and noncompliance with the laws and regulations could results in material fines or litigation. - 19 - Table of Contents Global climate change and related emphasis on environmental, social and governance (“ESG”) matters by various stakeholders could negatively affect our business or the price of our common stock.
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.
If third parties infringe or misappropriate our patents or other proprietary rights, our business could be seriously harmed. - 27 - Table of Contents 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.
Changes in international tax laws or additional changes in U.S. tax laws could materially affect our financial position and results of operations.
The tax regimes we are subject to or operate under may be subject to significant changes, and changes in international tax laws or additional changes in U.S. tax laws could materially affect our financial position and results of operations.
Although we believe we offer competitive salaries and benefits, we have had to, and may in the future have to, increase spending to attract, train and retain qualified personnel.
The industries in which we compete for employees are characterized by high levels of employee attrition. Although we believe we offer competitive salaries and benefits, we have had to, and may in the future have to, increase spending to attract, train and retain qualified personnel.
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.
These third-party manufacturers have their own complex supply chains and related risks, whether due to the shipping risks described below, the raw material and availability risks described above, or other causes.
Future quotas, duties or tariffs may adversely affect our business, financial condition, results of operations or cash flows. Future trade agreements could also provide our competitors with an advantage over us, or increase our costs, either of which could adversely affect our business, financial condition, results of operations or cash flows.
In addition, future trade agreements or a global trade war could also provide our competitors with an advantage over us, or increase our costs, either of which could adversely affect our business, financial condition, results of operations or cash flows. - 17 - Table of Contents Interruptions of our manufacturing operations could delay production and adversely affect our operations.
We intend to develop new and modified products using our existing technologies and engineering capabilities and to continue to expand into new geographic and product markets. These efforts have required and will continue to require us to make substantial investments, including significant RD&E expenditures and capital expenditures for new, expanded or improved manufacturing facilities.
These efforts have required, and will continue to require, us to make substantial investments, including significant RD&E expenditures and capital expenditures for new, expanded or improved manufacturing facilities.
In addition, our - 19 - Table of Contents adoption of certain standards or mandated compliance with certain requirements could necessitate additional investments that could increase our operating costs and have a negative impact on our profitability.
In addition, our adoption of certain standards or mandated compliance with certain requirements could necessitate additional investments that could increase our operating costs and have a negative impact on our profitability. The long-term effects of global climate change are difficult to predict and may be widespread.
It is unclear how such reforms will progress under the current presidential administration or if a new presidential administration is elected in 2024.
It is unclear how such reforms will progress under the new U.S. presidential administration.
Our inability, for technological or other reasons, to successfully develop and introduce new and innovative products, technologies and enhancements could result in a loss of customers and lower revenues. We intend to develop new products and expand into new geographic and product markets, which may not be successful and could harm our operating results.
In addition, we would be harmed if our products and technologies do not meet customer requirements and expectations. Our inability, for technological or other reasons, to successfully develop and introduce new and innovative products, technologies and enhancements could result in a loss of customers and lower revenues.
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.
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 and financial condition.
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.
Customer, investor and employee expectations relating to ESG have been rapidly evolving and increasing. In addition, governmental and non-governmental organizations are enhancing or advancing 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.
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.
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, the acquisition or assumption of unexpected or unanticipated liabilities or costs resulting from the acquisition of a target company or the operation of an acquired business, and higher prices for acquired companies because of significant competition for attractive acquisition targets.
If we are unable to protect our business against or efficiently respond to cybersecurity attacks, it could have a material adverse impact on our business, results of operations and financial condition. Additionally, the legal and regulatory environment surrounding information security and privacy is increasingly demanding, with the imposition of new and changing requirements across businesses.
These risks could have a material adverse effect on our business, financial condition and results of operations. If we are unable to protect our business against or efficiently respond to cybersecurity attacks, it could have a material adverse impact on our business, results of operations and financial condition.
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.
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 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.
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.
Strategic Risks If we are unable to successfully market our current or future products, our business will be harmed and our revenues and operating results will be adversely affected. If the markets for our products do not grow as we or industry experts forecast, our revenues could be less than expected.
If we are forced to reduce our prices, our revenues would decrease and our operating results would suffer. Strategic Risks If we are unable to successfully market our current or future products, our business will be harmed and our revenues and operating results will be adversely affected.
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.
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.
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.
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.
We may not be able to locate or employ these qualified personnel on acceptable terms or may need to increase spending to attract these qualified personnel. Our energy market revenues are dependent on conditions in the oil and natural gas industry, which historically have been volatile.
We may not be able to locate or employ these qualified personnel on acceptable terms or may need to increase spending to attract these qualified personnel. Consolidation in the healthcare industry could result in greater competition and reduce our revenues and harm our business and our operating results.
In addition, any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed or stolen. These risks could harm our reputation and brand, and our relationships with customers, suppliers, employees and other third parties, and may result in claims or proceedings against us.
Vulnerabilities may be introduced from the use of artificial intelligence by us, our customers, suppliers and other business partners and third-party vendors. These risks could harm our reputation and brand, and our relationships with customers, suppliers, employees and other third parties, and may result in claims or proceedings against us.
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.
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. These industry participants may try to use their market power to negotiate price reductions for our products or may undertake additional vertical integration or supplier diversification initiatives.
Furthermore, it is difficult to predict the rate at which the markets for our products will grow or if new and increased competition will result in market saturation. Slower growth in the cardiac rhythm management, neuromodulation, cardio and vascular, environmental, military or energy markets in particular would adversely impact our revenues.
If the markets for our products do not grow as we or industry experts forecast, our revenues could be less than expected. Furthermore, it is difficult to predict the rate at which the markets for our products will grow or if new and increased competition will result in market saturation.
Persistent inflation, especially in Europe and the U.S., has led central banks to raise interest rates to dampen inflation. Changes in interest rates directly impact the amount of interest we pay on our variable rate obligations and continued or sustained increases in interest rates could negatively impact our business.
Persistent inflation, especially in Europe and the U.S., has led central banks to raise interest rates to dampen inflation.
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.
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. - 18 - Table of Contents 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.
The supply and price of raw materials may be susceptible to fluctuations due to transportation issues, government regulations, price controls, foreign civil unrest, tariffs, worldwide economic conditions or other unforeseen circumstances, including the continuing impact of the global pandemic. Increasing global demand for raw materials has caused prices of certain materials to increase.
The supply and price of raw materials may be susceptible to fluctuations due to transportation issues, government regulations, price controls, wars in Ukraine and the Middle East, increased tensions in Asia relating to China and Taiwan, changing geopolitical conditions, including any political instability resulting from war, terrorism, insurrections and foreign civil unrest, tariffs, worldwide economic conditions or other unforeseen circumstances.
The conditional conversion feature of the 2028 Convertible Notes, if triggered, may adversely affect our financial condition and operating results. Under certain circumstances, the holders of our 2028 Convertible Notes may convert their notes at their option prior to the scheduled maturities.
The holders of our 2028 Convertible Notes have had the ability to, and may in the future continue to have the ability to, convert their notes at their option prior to the scheduled maturities.
In addition, we face the risk that our products will lose widespread market acceptance. Our customers may not continue to utilize the products we offer and a market may not develop for our future products.
Our customers may not continue to utilize the products we offer and a market may not develop for our future products. - 20 - Table of Contents We have in the past spent, and in the future may need to spend, more time and resources than we expect to develop, market and introduce new products.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeRisks from Cybersecurity Threats We are not aware of any risks from any potential cybersecurity threat or from any previous cybersecurity incident that have materially affected or are likely to materially affect our business strategy, results of operations or financial condition.
Biggest changeFinally, we require our contracts with third-party vendors to include contractual obligations with respect to cybersecurity matters that are applicable those vendors, including data breach notifications. - 30 - Table of Contents Risks from Cybersecurity Threats Based upon the information that we have as of the end of the year covered by this report, we do not believe that any risks from any cybersecurity threat or from any previous cybersecurity incident have materially affected or are reasonably likely to materially affect our business strategy, results of operations or financial condition.
This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents. The CISO works with the SPCC to implement and oversee processes for the regular monitoring of our information systems. This includes the deployment of advanced security measures and regular system audits to identify potential vulnerabilities.
This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents. The CISO works with the SPCC to implement and oversee processes for the regular monitoring of our information systems. This includes the deployment of advanced security measures and regular system audits to seek to identify potential vulnerabilities.
If a cybersecurity event involving the Company were to occur, the CDEC would be immediately engaged to initially evaluate the potential materiality of the event and the potential need for public disclosure, and the SPCC and other members of senior management would be engaged to determine the timing and extent of the response and to consider whether any future vulnerabilities are expected.
If a cybersecurity event involving the Company were to occur, the CDEC would be engaged to initially evaluate the potential materiality of the event and the potential need for public disclosure, and the SPCC and other members of senior management would be engaged to determine the timing and extent of the response and to consider whether any future vulnerabilities are expected.
The SPCC meets quarterly and as necessary. The SPCC is a cross-functional committee, and its members include Company officers and associates involved in various aspects of the Company’s governance and operations, including our General Counsel, Corporate Controller, Chief Information Officer, Head of Environmental, Health, Safety and Security and others, and is chaired by Mr.
The SPCC meets quarterly and as necessary. The SPCC is a cross-functional committee, and its members include Company officers and associates involved in various aspects of the Company’s governance and operations, including our General Counsel, Corporate Controller, Chief Information Officer, Head of Environmental, Health, Safety and Security and others, and is chaired by our Chief Information Security Officer (“CISO”).
As part of this evaluation, the Company, through the SPCC, would also identify immediate actions to mitigate the impact and long-term strategies for remediation and prevention of future incidents.
As part of this evaluation, the Company, through the SPCC, would also work to identify actions to seek to mitigate the impact and long-term strategies for remediation and prevention of future incidents.
Balducci oversees our governance programs, tests our compliance with standards, remediates known risks, and leads our cybersecurity training program for associates. Company Processes for Monitoring Cybersecurity Incidents The CISO is continually informed about the latest developments in cybersecurity, including potential threats and innovative risk management techniques.
In addition, our CISO oversees our governance programs, tests our compliance with standards, remediates known risks, and leads our cybersecurity training program for associates. Company Processes for Monitoring Cybersecurity Incidents The CISO is regularly informed about developments in cybersecurity, including potential threats and innovative risk management techniques.
In addition, we require all Company associates to complete mandatory cybersecurity awareness and information handling training at the time of hiring and on an annual basis. Risk Management Personnel Our CISO, Mr. Richard Balducci, is primarily responsible for assessing, monitoring and managing our cybersecurity risks. Mr. Balducci has worked in the cybersecurity field since 1996.
In addition, we require all Company associates to complete mandatory cybersecurity awareness and information handling training at the time of hiring and on an annual basis. Risk Management Personnel Our CISO is primarily responsible for assessing, monitoring and managing our cybersecurity risks and has worked in the cybersecurity field since 1996. His background includes both the public and private sectors.
Richard Balducci, our Chief Information Security Officer (“CISO”). In addition, we have established a management-level Cyber Disclosure Escalation Committee (the “CDEC”) to assist in the evaluation of cybersecurity incidents that may arise from time to time and the potential need for public disclosure of any such incident.
In addition, we have established a management-level Cyber Disclosure Escalation Committee (the “CDEC”) to assist in the evaluation of cybersecurity incidents that may arise from time to time and the potential need for public disclosure of any such incident.
His background includes both the public and private sectors. Mr. Balducci has served as our CISO since 2020 and has built out a comprehensive security program for the Company by adding cybersecurity capabilities and aligning our cybersecurity systems to leading industry standards, including the National Institute of Standards and Technology Cybersecurity Framework. In addition, Mr.
Our CISO has served in his position with the Company since 2020 and has built out a comprehensive security program for the Company by adding cybersecurity capabilities and aligning our cybersecurity systems to leading industry standards, including the National Institute of Standards and Technology Cybersecurity Framework.
We describe whether and how cybersecurity-related risks could materially affect our business, results of operation and financial condition in Item 1A, “Risk Factors” under the heading “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.” - 30 - Table of Contents Cybersecurity Governance Matters Our Board understands the critical nature of managing risks associated with cybersecurity threats.
For more information on risks to us from cybersecurity threats see Item 1A, “Risk Factors,” under the heading “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.” Cybersecurity Governance Matters Our Board understands the critical nature of managing risks associated with cybersecurity threats.
However, the risks from cybersecurity threats and incidents continues to increase, and the preventative actions we have taken and continue to take to reduce the risk of cybersecurity threats and incidents may not successfully protect against all such threats and incidents.
However, the risks from cybersecurity threats and incidents continue to increase, and the preventative actions we have taken and continue to take to reduce the risk of cybersecurity threats and incidents may not successfully protect against all such threats and incidents, and, as a result, there can be no assurance that we or the third parties we interact with will not experience a cybersecurity event in the future that will materially affect us.
Removed
Finally, we require our contracts with third-party vendors to include contractual obligations with respect to cybersecurity matters that are applicable those vendors, including data breach notifications.

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, 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.
Biggest changeITEM 2. PROPERTIES Our principal executive office and headquarters is located in Plano, Texas, in a leased facility. As of December 31, 2024, we operated 15 facilities in the U.S., 4 in Europe, 3 in Mexico, 2 in Asia, 1 in the Dominican Republic and 1 in South America. Of these facilities, 20 were leased and 6 were owned.

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, “Financial Statements and Supplementary Data” of this report. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. - 32 - Table of Contents PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS For information regarding certain legal proceedings pending against us, see Note 14, “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 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.
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 52 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePERFORMANCE 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.
Biggest changeStock Performance Graph The following graph compares, for the five year period ended December 31, 2024, 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 31, 2019 and assumes reinvestment of dividends.
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.
According to the records of our transfer agent, there were approximately 100 holders of record of our common stock on February 14, 2025. 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.
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Company/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
Added
Company/Index 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 Integer Holdings Corporation $ 100.00 $ 100.94 $ 106.42 $ 85.12 $ 123.19 $ 164.76 Russell 2000 Index 100.00 104.63 134.21 114.78 131.59 142.19 iShares US Medical Devices ETF 100.00 124.18 150.30 120.67 124.55 135.27 Unregistered Sales of Equity Securities During the three months ended December 31, 2024, the Company issued 13 shares of its unregistered common stock upon settlement of conversions of an aggregate of $4,000 in principal amount of the 2028 Convertible Notes.
Added
These shares of the Company’s common stock were issued in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended. We did not receive any proceeds upon conversion.

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. - 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.
Biggest changeOur 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 2024 vs. 2023 2023 vs. 2022 2024 2023 2022 $ % $ % Cardio & Vascular $ 949,576 $ 836,343 $ 699,401 $ 113,233 14 % $ 136,942 20 % Cardiac Rhythm Management & Neuromodulation 660,610 612,891 534,371 47,719 8 % 78,520 15 % Other Markets 106,410 106,422 97,505 (12) — % 8,917 9 % Total sales 1,716,596 1,555,656 1,331,277 160,940 10 % 224,379 17 % Cost of sales 1,257,582 1,145,767 985,516 111,815 10 % 160,251 16 % Gross profit 459,014 409,889 345,761 49,125 12 % 64,128 19 % Gross profit as a % of sales 26.7 % 26.3 % 26.0 % Operating expenses: Selling, general and administrative 185,202 173,171 158,050 12,031 7 % 15,121 10 % Research, development and engineering 53,425 61,967 59,762 (8,542) (14) % 2,205 4 % Restructuring and other charges 12,149 11,428 15,271 721 6 % (3,843) (25) % Total operating expenses 250,776 246,566 233,083 4,210 2 % 13,483 6 % Operating income 208,238 163,323 112,678 44,915 28 % 50,645 45 % Interest expense 56,374 51,275 37,265 5,099 10 % 14,010 38 % Loss on equity investments, net 780 5,691 7,636 (4,911) (86) % (1,945) (25) % Other (income) loss, net 3,521 975 (899) 2,546 NM 1,874 NM Income from continuing operations before income taxes 147,563 105,382 68,676 42,181 40 % 36,706 53 % Provision for income taxes 26,510 16,239 8,929 10,271 63 % 7,310 82 % Effective tax rate 18.0 % 15.4 % 13.0 % Income from continuing operations $ 121,053 $ 89,143 $ 59,747 $ 31,910 36 % $ 29,396 49 % Diluted earnings per share from continuing operations $ 3.40 $ 2.64 $ 1.79 $ 0.76 29 % $ 0.85 47 % NM - Calculated change not meaningful. - 36 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Fiscal 2024 Compared with Fiscal 2023 The following discussion is a comparison between results for the years ended December 31, 2024 and 2023.
If it is more-likely-than-not that a reporting unit’s fair value is less than its carrying value, or if we elect not to perform a qualitative assessment of a reporting unit, a quantitative analysis is performed, in which the fair value of the reporting unit is compared to its carrying value.
If it is more-likely-than-not that the reporting unit’s fair value is less than its carrying value, or if we elect not to perform a qualitative assessment of the reporting unit, a quantitative analysis is performed, in which the fair value of the reporting unit is compared to its carrying value.
In conducting this annual impairment testing, we may first perform a qualitative assessment of whether it is more-likely-than-not that a reporting unit’s fair value is less than its carrying value. If not, no further goodwill impairment testing is required.
In conducting this annual impairment testing, we may first perform a qualitative assessment of whether it is more-likely-than-not that the reporting unit’s fair value is less than its carrying value. If not, no further goodwill impairment testing is required.
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.
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 Convertible Notes.
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.
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 $4.0 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.
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.
Our research and development initiatives continue to emphasize new product development, product improvements, and the development of new technological platform innovations. - 38 - 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.
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.
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.
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
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. - 51 - Table of Contents
The Senior Secured Credit Facilities include a mandatory prepayment provision customary for similar credit facilities. During the first quarter of 2023, we issued $500 million aggregate principal amount of notes. The 2028 Convertible Notes mature on February 15, 2028 and bear interest at a fixed rate of 2.125% per annum.
The Senior Secured Credit Facilities include a mandatory prepayment provision customary for similar credit facilities. During 2023, we issued $500 million aggregate principal amount of notes. The 2028 Convertible Notes mature on February 15, 2028 and bear interest at a fixed rate of 2.125% per annum.
Evaluation of goodwill for impairment We test each reporting unit’s goodwill for impairment on the last day of our fiscal year and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value.
Evaluation of goodwill for impairment We test our reporting unit’s goodwill for impairment on the last day of our fiscal year and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of the reporting unit below its carrying value.
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.
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.
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.
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, 2024.
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.
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. - 49 - 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.
Included in restructuring charges for 2023 are $3.6 million in costs related to the relocation and closure of our R&D facility in Israel. (b) Amount for 2023 primarily includes acquisition expenses related to the InNeuroCo and Pulse (complete in January 2024) acquisitions, and integration expenses related to the Aran and Oscor acquisitions.
Included in restructuring charges for 2023 are $3.6 million in costs related to the relocation and closure of our R&D facility in Israel. (b) Amount for 2023 primarily includes acquisition expenses related to the InNeuroCo and Pulse acquisitions, and integration expenses related to the Aran and Oscor acquisitions.
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.
See Note 18, “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.
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.
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.
Our off-balance sheet commitments related to our outstanding letters of credit as of December 31, 2023 were $3.5 million.
Our off-balance sheet commitments related to our outstanding letters of credit as of December 31, 2024 were $5.3 million.
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.
Refer to Note 9, “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.
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 Lake Region Medical tradename had an excess of the estimated fair value over carrying value of approximately 88% and a carrying value of $70 million at December 31, 2024. We do not believe that our indefinite-lived intangible assets are at risk for impairment.
The provision for income taxes for 2023 differs from the U.S. statutory rate due to the following (dollars in thousands): U.S.
The provision for income taxes for 2024 differs from the U.S. statutory rate due to the following (dollars in thousands): U.S.
On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework. The effective dates are January 1, 2024, and January 1, 2025 for different aspects of the directive.
On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the OECD Pillar Two Framework. The effective dates are January 1, 2024, and January 1, 2025 for different aspects of the directive.
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.
Presented below is a summary of contractual obligations and other minimum commitments as of December 31, 2024. Refer to Note 14, “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.
(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.
(b) Refer to Note 15, “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.
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.
We expect 2025 capital expenditures to approximate $110 million to $120 million, with a significant portion related to additional upgrades of manufacturing facilities, as well as for manufacturing equipment to support productivity initiatives and information technology systems.
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.
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.
Refer to Note 12, “Income Taxes,” of the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data” of this report for additional information about these unrecognized tax benefits.
Refer to Note 13, “Income Taxes,” of the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data,” of this report for additional information about these unrecognized tax benefits.
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 acquisition of Aran further increased 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.
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.
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 354% as of December 31, 2024.
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.
Loss on Equity Investments, Net During 2024 and 2023, we recognized net losses of $0.8 million and $5.7 million, respectively, on our equity investments. Gains and losses on equity investments are generally unpredictable in nature. During 2024 and 2023, we recognized impairment charges of $0.2 million and $5.2 million, respectively, related to investments in our non-marketable equity securities.
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.
The impact of foreign currency exchange rates on transactions denominated in foreign currencies included in Other (income) loss, net for 2024 and 2023 were net losses of $3.2 million and $1.0 million, respectively. We continually monitor our foreign currency exposures and seek to take steps to mitigate these risks.
Effective as of October 1, 2023, we acquired substantially all of the assets and assumed certain liabilities of InNeuroCo, Inc.(“InNeuroCo”). InNeuroCo is 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.
On October 1, 2023, we acquired substantially all of the assets and assumed certain liabilities of InNeuroCo, 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.
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.
As of December 31, 2024, our contractual debt service obligations for 2025, consisting of principal and interest on our outstanding debt and commitment fees on the unused portion of the Revolving Credit Facility are estimated to be approximately $52 million.
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.
Capital expenditures, which are net of proceeds from the sale of property, plant and equipment, for 2024 totaled $105.3 million, compared to $119.8 million and $74.1 million in 2023 and 2022, respectively. Capital expenditures in 2024 related primarily to upgrades of manufacturing facilities, manufacturing equipment and information technology systems.
As of December 31, 2023, approximately $6.4 million of unrecognized tax benefits would favorably impact the effective tax rate (net of federal impact on state issues), if recognized.
As of December 31, 2024, approximately $6.1 million of unrecognized tax benefits would favorably impact the effective tax rate (net of federal impact on state issues), if recognized.
We are authorized to issue up to 100 million shares of common stock, of which approximately 33 million shares were issued and outstanding at December 31, 2023, and 100 million shares of preferred stock, none of which were outstanding at December 31, 2023.
We are authorized to issue up to 100 million shares of common stock, of which approximately 34 million shares were issued and outstanding at December 31, 2024, and 100 million shares of preferred stock, none of which were outstanding at December 31, 2024.
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.
The residual losses for 2024 and 2023 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, 2024 and December 31, 2023, the carrying value of our equity investments was $7.4 million and $8.2 million, respectively.
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 .
Credit Facilities and 2028 Convertible Notes As of December 31, 2024, we had Senior Secured Credit Facilities that consist of an $800 million Revolving Credit Facility, with an outstanding principal balance of $126 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 .
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.
If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized equal to the excess, limited to the amount of goodwill allocated to the reporting unit. - 50 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS We performed a qualitative assessment of our single reporting unit as of December 31, 2024.
In response to reductions in revenue, we can take actions to align our cost structure with changes in demand and manage our working capital.
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.
(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.
(b) Depreciation and amortization expense increased due to amortization of customer list intangible assets from the acquisitions of Aran and Oscor, which was acquired in December 2021. (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.
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 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.
Portable Medical Exit 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.
During 2022, we announced plans to exit our portable medical market (the “Portable Medical Exit”) 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.
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.
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.
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.
Amortization of deferred debt issuance costs and original issue discount increased during 2024 compared to the same periods in 2023 as a result of higher unamortized balances related to new debt.
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.
Gains and losses on equity investments are generally unpredictable in nature. • Other (income) loss, net for 2024 and 2023 were losses of $3.5 million and $1.0 million, respectively, primarily due to fluctuations in foreign currency gains and losses in the respective periods. • We recorded provisions for income taxes of $26.5 million and $16.2 million for 2024 and 2023, respectively.
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.
Our Business • Our business • Impact of global events • Business acquisitions • Divestiture and market exit • Discontinued operations Our Financial Results • Fiscal 2024 compared with fiscal 2023 • 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 medical device contract development and manufacturing organizations in the world, serving the cardiac rhythm management, neuromodulation, and cardio and vascular markets.
These benefits are partially offset by the impact of U.S. taxes on foreign earnings, including the GILTI provision which requires us to include foreign subsidiary earnings in excess of a deemed return on a foreign subsidiary’s tangible assets in our U.S. income tax return.
These benefits are partially offset by the impact of the OECD Pillar II Global Minimum Tax enacted on January 1, 2024, and the impact of U.S. taxes on foreign earnings, including the GILTI provision which requires us to include foreign subsidiary earnings in excess of a deemed return on a foreign subsidiary’s tangible assets in our U.S. income tax return.
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.
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, delays in shipments to and from certain countries and potential increased expenses resulting from tariffs or other trade barriers.
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.
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. (c) Amounts include gains and losses in connection with the disposal of property, plant and equipment.
(“Pulse”). Prior to the acquisition, Pulse was a privately-held technology, engineering and contract manufacturing company focused on complex micro machining of medical device components for high growth structural heart, heart pump, electrophysiology, leadless pacing, and neuromodulation markets. Based in Pennsylvania, Pulse also provides proprietary advanced technologies, including Hierarchical Surface Restructuring (HSR TM ), Scratch-Free Surface Finishes, and Titanium Nitride Coatings.
On January 5, 2024, we acquired Pulse, a privately-held technology, engineering and contract manufacturing company focused on complex micro machining of medical device components for high growth structural heart, heart pump, electrophysiology, leadless pacing, and neuromodulation markets. Pulse also provides proprietary advanced technologies, including hierarchical surface restructuring (HSR TM ), scratch-free surface finishes, and titanium nitride coatings.
Consistent with our tuck-in acquisition strategy, the acquisition of Pulse further increases our end-to-end development capabilities and manufacturing footprint in targeted growth markets and provides customers with expanded capabilities, capacity and resources to accelerate products’ time to market.
The acquisition of Pulse further increased our end-to-end development capabilities and manufacturing footprint in targeted growth markets and provides customers with expanded capabilities, capacity and resources to accelerate the time to market for customer products.
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.
Restructuring and Other Charges Restructuring and other charges comprise the following for 2023 and 2022 (in thousands): 2023 2022 Change Restructuring charges (a) 5,874 4,008 1,866 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 $ 11,428 $ 15,271 $ (3,843) __________ (a) Restructuring charges for 2023 and 2022 primarily consisted of costs associated with our strategic reorganization and alignment and manufacturing alignment to support growth initiatives.
(e) The increase in bank fees and charges was driven by increased factoring and supplier financing fees primarily due to the launch of accounts receivable factoring arrangements during 2023. RD&E RD&E expenses for 2023 and 2022 were $63.8 million and $60.9 million, respectively.
(e) The increase in bank fees and charges was driven by increased factoring and supplier financing fees primarily due to the launch of accounts receivable factoring arrangements during 2023. - 43 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS RD&E RD&E expenses for 2023 and 2022 were $62.0 million and $59.8 million, respectively.
As of December 31, 2023, we have access to $397.5 million of borrowing capacity under our Revolving Credit Facility.
As of December 31, 2024, we have access to $668.7 million of borrowing capacity under our Revolving Credit Facility.
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.
As of December 31, 2024, our capital structure consisted of $990.2 million of debt, net of deferred debt issuance costs and unamortized discounts, outstanding under our Senior Secured Credit Facilities and the 2028 Convertible Notes, and 34 million shares of common stock outstanding.
The cash used in financing activities during 2023 was primarily related to the $335.6 million full repayment of our Term Loan B facility, $80.3 million in repayments of our TLA Facility, $41.7 million of net payments on our Revolving Credit Facility, $35.0 million of capped call purchases related to the issuance of our 2028 Convertible Notes, and $7.7 million paid to settle certain contingent consideration liabilities related to the Aran and Inomec acquisitions, which was partially offset by the issuance of our 2028 Convertible Notes of $486.3 million.
The cash used in financing activities during 2023 was primarily related to the $335.6 million full repayment of our Term Loan B facility, $80.3 million in repayments of our TLA Facility, $41.7 million of net payments on our Revolving Credit Facility, $35.0 million of capped call purchases related to the issuance of our 2028 Convertible Notes, and $7.7 million paid to settle certain contingent consideration liabilities related to acquisitions, which was partially offset by the issuance of our 2028 Convertible Notes of $486.3 million. - 48 - 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.
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.
As of December 31, 2024, we were in compliance with these financial covenants. As of December 31, 2024, our Total Net Leverage Ratio, calculated in accordance with our Senior Secured Credit Facilities agreement, was approximately 2.3:1.0. For the year ended December 31, 2024, our interest coverage ratio, calculated in accordance with our Senior Secured Credit Facilities agreement, was approximately 8.1:1.0.
We did not utilize receivable factoring arrangements prior to 2023. See Note 1 “Summary of Significant Accounting Policies” of the Notes to the Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” of this report for a further information regarding the factoring arrangements.
See Note 1, “Summary of Significant Accounting Policies,” of the Notes to the Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” of this report for a further information regarding the factoring arrangements.
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.
Summary of Cash Flow The following cash flow summary information includes cash flows related to discontinued operations (in thousands): 2024 2023 Cash provided by (used in): Operating activities $ 205,205 $ 180,213 Investing activities (195,414) (163,367) Financing activities 13,321 (18,014) Effect of foreign currency exchange rates on cash and cash equivalents (243) 570 Net change in cash and cash equivalents $ 22,869 $ (598) Operating Activities - During 2024, we generated cash from operations of $205.2 million, compared to $180.2 million in 2023.
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.
The stand-alone International component of the effective tax rate for 2024 reflected a $16.0 million provision on $92.0 million of pre-tax book income (effective tax rate of 17.4%) versus a $10.8 million provision on $76.3 million of pre-tax book income (effective tax rate of 14.2%) for 2023.
International Combined $ % $ % $ % Income before provision for income taxes $ 31,001 $ 76,293 $ 107,294 Provision at statutory rate $ 6,510 21.0 % $ 16,021 21.0 % $ 22,531 21.0 % Federal tax credits (including R&D) (11,113) (35.8) — — (11,113) (10.4) Foreign rate differential 1,921 6.2 (7,434) (9.7) (5,513) (5.1) Stock-based compensation 1,862 6.0 — — 1,862 1.7 Uncertain tax positions (1,170) (3.8) — — (1,170) (1.1) State taxes, net of federal benefit 1,185 3.8 — — 1,185 1.1 U.S. tax on foreign earnings, net of §250 deduction 6,090 19.7 — — 6,090 5.7 Valuation allowance 411 1.3 1,326 1.7 1,737 1.6 Other 120 0.4 915 1.2 1,035 1.0 Provision for income taxes $ 5,816 18.8 % $ 10,828 14.2 % $ 16,644 15.5 % - 42 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS The provision for income taxes for 2022 differs from the U.S. statutory rate due to the following (dollars in thousands): U.S.
International Combined $ % $ % $ % Income before provision for income taxes $ 29,089 $ 76,293 $ 105,382 Provision at statutory rate $ 6,109 21.0 % $ 16,021 21.0 % $ 22,130 21.0 % Federal tax credits (including R&D) (11,129) (38.3) — — (11,129) (10.6) Foreign rate differential 1,921 6.6 (7,434) (9.7) (5,513) (5.2) Stock-based compensation 1,847 6.3 — — 1,847 1.7 Uncertain tax positions (1,170) (4.0) — — (1,170) (1.1) State taxes, net of federal benefit 1,108 3.8 — — 1,108 1.1 U.S. tax on foreign earnings, net of §250 deduction 6,194 21.3 — — 6,194 5.9 Valuation allowance 411 1.4 1,326 1.7 1,737 1.6 Other 120 0.4 915 1.2 1,035 1.0 Provision for income taxes $ 5,411 18.5 % $ 10,828 14.2 % $ 16,239 15.4 % The provision for income taxes for 2022 differs from the U.S. statutory rate due to the following (dollars in thousands): U.S.
These variances are primarily the result of the following: • Sales for 2023 increased 16% to $1.597 billion, driven by our Medical product lines with strong demand, new product ramps, growth from emerging customers with PMA (premarket approval) products and supply chain improvements. • Gross profit for 2023 increased $59.3 million or 17%, primarily from higher sales volume leverage and efficiencies gained from the continued improvement in the supply chain. • Operating expenses for 2023 increased by $13.3 million compared to 2022, primarily due to higher labor costs and amortization expense, partially offset by lower restructuring and other charges. • Interest expense for 2023 increased by $14.7 million, due to higher interest rates, higher average debt outstanding and higher losses from extinguishment of debt. • We recognized net losses on equity investments of $5.7 million and $7.6 million during 2023 and 2022, respectively.
These variances are primarily the result of the following: • Sales for 2024 increased 10% to $1.717 billion, driven by strong demand, new product ramps, growth from emerging customers with PMA (premarket approval) products and contributions from our recent acquisitions. • Gross profit for 2024 increased $49.1 million, or 12%, primarily from higher sales volume leverage, efficiencies gained from the continued improvement in the supply chain and contributions from our recent acquisitions. • Operating expenses for 2024 increased by $4.2 million compared to 2023, due to higher SG&A and Restructuring and other charges, partially offset by lower RD&E costs. • Interest expense for 2024 increased by $5.1 million, primarily due to higher average debt outstanding, partially offset by a decrease in losses from extinguishment of debt. • We recognized net losses on equity investments of $0.8 million and $5.7 million during 2024 and 2023, respectively.
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 increase of $25.0 million was the result of a $27.3 million increase in net income adjusted for non-cash items such as depreciation and amortization, partially offset by a $2.3 million decrease in cash flow provided by changes in operating assets and liabilities.
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.
See Note 18, “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. Other (Income) Loss, Net Other (income) loss, net for 2024 and 2023 were net losses of $3.5 million and $1.0 million, respectively.
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.
Refer to Note 21, “Subsequent Events,” 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 Precision.
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.
The stand-alone U.S. component of the effective tax rate for 2023 reflected a $5.4 million provision on $29.1 million of pre-tax book income (effective tax rate of 18.5%) versus a $3.3 million provision on $7.2 million of pre-tax book income (effective tax rate of 45.6%) for 2022.
Factoring Arrangements We may utilize accounts receivable factoring arrangements with financial institutions to accelerate the timing of cash receipts and enhance our cash position. These arrangements, in all cases, do not contain recourse provisions which would obligate us in the event of our customers’ failure to pay. During 2023, we sold, without recourse, $144.4 million of accounts receivable.
These arrangements, in all cases, do not contain recourse provisions which would obligate us in the event of our customers’ failure to pay. During 2024 and 2023, we sold, without recourse, $231.0 million and $144.4 million, respectively, of accounts receivable.
Other components of interest expense on borrowings include gains and losses on interest rate swaps and non-cash amortization and write-off (losses from extinguishment of debt) of deferred debt issuance costs and original issue discount.
Other components of interest expense on borrowings include gains on an interest rate swap contract and non-cash amortization and write-off (losses from extinguishment of debt) of deferred debt issuance costs and original issue discount. Gain on interest rate swap includes realized gains on an interest rate swap contract which matured as of June 30, 2023.
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.
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.
We intend to limit our distributions from foreign subsidiaries to previously taxed income or current period earnings. If distributions are made utilizing current period earnings, we will record foreign withholding taxes in the period of the distribution.
If distributions are made utilizing current period earnings, we will record foreign withholding taxes in the period of the distribution.
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 higher average debt balance outstanding was 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.
Interest rates have continued to climb due to increases in overall market rates, partially offset by a 25 basis point decrease in the interest rate margin on our Senior Secured Credit Facilities.
Interest rates climbed due to increases in overall market rates, partially offset by a 25 basis point decrease in the interest rate margin on our Senior Secured Credit Facilities. The decrease in the interest rate margin was effective during the second quarter of 2023 based on our secured net leverage ratio.
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.
Refer to Note 12, “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. - 39 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Interest Expense Information relating to our interest expense for 2024 and 2023 is as follows (dollars in thousands): 2024 2023 Change Amount Rate Amount Rate Amount Rate (bp) Contractual interest expense $ 51,520 4.83 % $ 44,082 4.62 % $ 7,438 21 Gain on interest rate swap — — (1,262) (0.12) 1,262 12 Amortization of deferred debt issuance costs and original issue discount 4,057 0.42 3,536 0.42 521 — Loss from extinguishment of debt — — 4,518 0.46 (4,518) (46) Interest expense on borrowings 55,577 5.25 % 50,874 5.38 % 4,703 (13) Other interest expense 797 401 396 Total interest expense $ 56,374 $ 51,275 $ 5,099 Interest expense relates primarily to borrowings made under our Senior Secured Credit Facilities, which consist of a five-year $800 million revolving credit facility (the “Revolving Credit Facility”) and a five-year “term A” loan (the “TLA Facility”), and our 2028 Convertible Notes.
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.
See Note 9, “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. As of December 31, 2024 and 2023, approximately 50% of our principal amount of debt were fixed rate borrowings.
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.
As such, the obligations associated with the 2028 Convertible Notes continue to be classified as a long-term liability on the Consolidated Balance Sheets as of December 31, 2024. - 47 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS 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.
Foreign currency exchange rate fluctuations increased C&V sales for 2023 by $1.2 million. Cardiac Rhythm Management & Neuromodulation (“CRM&N”) sales for 2023 increased $78.0 million or 15% in comparison to 2022. CRM&N sales for 2023 were driven by double-digit CRM growth from strong customer demand, double-digit Neuromodulation growth from emerging customers, and supply chain improvements.
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. Foreign currency exchange rate fluctuations increased C&V sales for 2023 by $1.2 million. CRM&N sales for 2023 increased $78.5 million or 15% in comparison to 2022.
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.
Refer to Note 3, “Discontinued Operations” of the Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” of this report for additional information on the divestiture of Electrochem.
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.
Provision for Income Taxes During 2023 and 2022, our provision for income taxes was $16.2 million on worldwide pre-tax income of $105.4 million (effective tax rate of 15.4%) and $8.9 million on worldwide pre-tax income of $68.7 million (effective tax rate of 13.0%), respectively.
Working capital increased by $62.2 million from December 31, 2022, or $62.8 million excluding the decrease in cash and cash equivalents. The increase in working capital, exclusive of cash and cash equivalents, primarily relates to higher sales volume and product demand which contributed to positive fluctuations in inventory, accounts receivable and contract asset balances.
Working capital increased by $61.4 million from December 31, 2023, or $38.6 million excluding the increase in cash and cash equivalents. The increase in working capital, exclusive of cash and cash equivalents, primarily relates to positive fluctuations in accounts receivable, inventory and contract assets.
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.
International Combined $ % $ % $ % Income before provision for income taxes $ 7,164 $ 61,512 $ 68,676 Provision at statutory rate $ 1,505 21.0 % $ 12,917 21.0 % $ 14,422 21.0 % Federal tax credits (including R&D) (9,305) (130.0) — — (9,305) (13.6) Foreign rate differential 1,459 20.4 (9,152) (14.9) (7,693) (11.2) Stock-based compensation 1,983 27.7 — — 1,983 2.9 Uncertain tax positions 2,469 34.5 — — 2,469 3.6 State taxes, net of federal benefit 687 9.6 — — 687 1.0 U.S. tax on foreign earnings, net of §250 deduction 5,323 74.3 — — 5,323 7.8 Valuation allowance (912) (12.7) 694 1.1 (218) (0.3) Other 60 0.8 1,201 2.0 1,261 1.8 Provision for income taxes $ 3,269 45.6 % $ 5,660 9.2 % $ 8,929 13.0 % Our effective tax rate of 15.4% for 2023 is higher than our effective tax rate of 13.0% for 2022, primarily due to the expiration of a tax holiday in Malaysia, 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. - 46 - Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Liquidity and Capital Resources Sources of Liquidity (dollars in thousands) December 31, 2024 December 31, 2023 Cash and cash equivalents $ 46,543 $ 23,674 Working capital from continuing operations (1) $ 443,946 $ 382,497 Current ratio from continuing operations (1) 2.95 2.76 __________ (1) Excludes assets held for sale at December 31, 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeRefer 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.
Biggest changeThe amounts recorded during 2024 related to our forward contracts was an increase in Cost of sales of $1.5 million. Refer to Note 18, “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 $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.
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, 2024. Interest Rate Risk We regularly monitor interest rate risk attributable to our outstanding debt obligations.
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.
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 2024 increased sales in comparison to 2023 by $0.2 million.
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.
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 $8 million on our 2024 annual sales.
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.
We recorded net foreign currency measurement and transaction losses of $3.2 million for 2024. 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 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.
The net effect of these translation adjustments is recorded in the Consolidated Financial Statements as Comprehensive income (loss). The translation adjustment for 2024 was a loss of $27.5 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.
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.
A hypothetical one percentage point (100 basis points) change in SOFR on the $501 million of floating rate debt outstanding as of December 31, 2024 would increase our interest expense by approximately $5 million. We had no loans in Euros outstanding at December 31, 2024.
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.
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, 2024, we had $1.0 billion in principal amount of debt outstanding.
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.
We had currency derivative instruments with notional amounts totaling $132.9 million outstanding as of December 31, 2024. As of December 31, 2024, we recorded liabilities totaling $6.5 million to recognize the fair value of these derivative instruments on our Consolidated Balance Sheets.
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.
As of December 31, 2024 and 2023, approximately 50% of our principal amount of debt is fixed rate borrowings. - 52 - Table of Contents
Removed
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.
Removed
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
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.
Removed
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

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