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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _____________________________________________________________ 
FORM 10-Q
 _____________________________________________________________ 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission File Number 1-16137
 _____________________________________________________________ 
itgr-20220401_g1.jpg
INTEGER HOLDINGS CORPORATION
(Exact name of Registrant as specified in its charter)
 _____________________________________________________________ 
Delaware 16-1531026
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
5830 Granite Parkway,Suite 1150Plano,Texas 75024
(Address of principal executive offices) (Zip Code)
(214) 618-5243
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par value per shareITGRNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  Accelerated filerNon-accelerated filer
Smaller reporting company  Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
The number of shares outstanding of the Company’s common stock, $0.001 par value per share, as of April 22, 2022 was: 33,102,550 shares.



INTEGER HOLDINGS CORPORATION
Form 10-Q
For the Quarterly Period Ended April 1, 2022
TABLE OF CONTENTS

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PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTEGER HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands except share and per share data)April 1,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents$25,668 $17,885 
Accounts receivable, net of provision for credit losses of $0.1 million and $0.1 million, respectively
198,041 182,310 
Inventories173,313 155,699 
Refundable income taxes3,682 4,735 
Contract assets66,343 64,743 
Prepaid expenses and other current assets27,743 27,610 
Total current assets494,790 452,982 
Property, plant and equipment, net273,866 277,099 
Goodwill923,594 924,704 
Other intangible assets, net792,395 807,810 
Deferred income taxes5,702 5,711 
Operating lease assets75,521 70,053 
Other long-term assets42,174 43,856 
Total assets$2,608,042 $2,582,215 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt$15,250 $15,250 
Accounts payable90,018 76,859 
Income taxes payable1,350 725 
Operating lease liabilities10,700 9,862 
Accrued expenses and other current liabilities55,764 56,933 
Total current liabilities173,082 159,629 
Long-term debt814,382 812,876 
Deferred income taxes170,908 171,505 
Operating lease liabilities64,262 59,767 
Other long-term liabilities21,058 23,741 
Total liabilities1,243,692 1,227,518 
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock, $0.001 par value; 100,000,000 shares authorized; 33,102,167 and 33,063,336 shares issued and outstanding, respectively
33 33 
Additional paid-in capital716,589 713,150 
Retained earnings625,691 614,324 
Accumulated other comprehensive income22,037 27,190 
Total stockholders’ equity1,364,350 1,354,697 
Total liabilities and stockholders’ equity$2,608,042 $2,582,215 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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INTEGER HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (Unaudited)
 Three Months Ended
(in thousands except per share data)April 1,
2022
April 2,
2021
Sales$310,912 $290,467 
Cost of sales229,437 205,981 
Gross profit81,475 84,486 
Operating expenses:
Selling, general and administrative39,560 35,502 
Research, development and engineering16,083 13,461 
Restructuring and other charges3,335 915 
Total operating expenses58,978 49,878 
Operating income22,497 34,608 
Interest expense5,968 8,532 
Loss on equity investments2,404 1,335 
Other (income) loss, net177 (237)
Income before taxes 13,948 24,978 
Provision for income taxes2,581 3,458 
Net income$11,367 $21,520 
Earnings per share:
Basic$0.34 $0.65 
Diluted$0.34 $0.65 
Weighted average shares outstanding:
Basic33,091 32,957 
Diluted33,302 33,188 
Comprehensive Income
Net income$11,367 $21,520 
Other comprehensive loss:
Foreign currency translation loss(7,887)(16,364)
Change in fair value of cash flow hedges, net of tax2,734 (706)
Other comprehensive loss, net of tax(5,153)(17,070)
Comprehensive income, net of tax$6,214 $4,450 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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INTEGER HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 Three Months Ended
(in thousands)April 1,
2022
April 2,
2021
Cash flows from operating activities:
Net income$11,367 $21,520 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization22,542 20,294 
Debt related charges included in interest expense481 1,372 
Inventory step-up amortization798  
Stock-based compensation4,995 4,704 
Non-cash lease expense2,539 2,004 
Non-cash loss on equity investments2,404 1,335 
Other non-cash losses1,328 45 
Deferred income taxes(709)(242)
Changes in operating assets and liabilities:
Accounts receivable(15,998)(9,373)
Inventories(20,153)(5,157)
Prepaid expenses and other assets(458)(189)
Contract assets(1,754)(4,677)
Accounts payable14,997 11,434 
Accrued expenses and other liabilities(5,851)(7,887)
Income taxes1,633 1,246 
Net cash provided by operating activities18,161 36,429 
Cash flows from investing activities:
Acquisition of property, plant and equipment(10,863)(7,660)
Proceeds from sale of property, plant and equipment465 15 
Net cash used in investing activities(10,398)(7,645)
Cash flows from financing activities:
Principal payments of term loans(3,813)(45,375)
Proceeds from revolving credit facility15,000  
Payments of revolving credit facility(10,000) 
Proceeds from the exercise of stock options 116 
Payment of debt issuance costs (72)
Tax withholdings related to net share settlements of restricted stock unit awards(1,556)(2,601)
Contingent consideration payments(493)(1,621)
Principal payments on finance leases(166)(9)
Net cash used in financing activities(1,028)(49,562)
Effect of foreign currency exchange rates on cash and cash equivalents1,048 (26)
Net increase (decrease) in cash and cash equivalents7,783 (20,804)
Cash and cash equivalents, beginning of period17,885 49,206 
Cash and cash equivalents, end of period$25,668 $28,402 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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INTEGER HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
 Three Months Ended
(in thousands)April 1,
2022
April 2,
2021
Total stockholders’ equity, beginning balance$1,354,697 $1,271,055 
Common stock and additional paid-in capital
Balance, beginning of period713,183 700,847 
Stock awards exercised or vested(1,556)(2,485)
Stock-based compensation4,995 4,704 
Balance, end of period716,622 703,066 
Retained earnings
Balance, beginning of period614,324 517,516 
Net income11,367 21,520 
Balance, end of period625,691 539,036 
Accumulated other comprehensive income
Balance, beginning of period27,190 52,692 
Other comprehensive loss(5,153)(17,070)
Balance, end of period22,037 35,622 
Total stockholders’ equity, ending balance$1,364,350 $1,277,724 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(1.)    BASIS OF PRESENTATION
Integer Holdings Corporation (together with its consolidated subsidiaries, “Integer” or the “Company”) is a publicly-traded corporation listed on the New York Stock Exchange under the symbol “ITGR.” Integer is a medical device outsource manufacturer serving the cardiac, neuromodulation, vascular, orthopedics, advanced surgical and portable medical markets. The Company provides innovative, high-quality medical technologies that enhance the lives of patients worldwide. In addition, it develops batteries for high-end niche applications in the energy, military, and environmental markets.
The accompanying condensed consolidated financial statements are presented in accordance with the rules and regulations of the United States ("U.S.") Securities and Exchange Commission ("SEC") and do not include all of the disclosures normally required by U.S. generally accepted accounting principles (“U.S. GAAP”) as contained in the Company’s Annual Report on Form 10-K. Accordingly, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
In the opinion of management, the condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of the Company for the periods presented. The results for interim periods are not necessarily indicative of results or trends that may be expected for the fiscal year as a whole. The condensed consolidated financial statements were prepared using U.S. GAAP, which require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, certain components of equity, sales, expenses, and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ materially from these estimates.
The first quarters of 2022 and 2021 ended on April 1 and April 2, respectively, and consisted of 91 days and 92 days, respectively.
Reclassifications
Certain prior period amounts have been reclassified to conform to current year presentation. Refer to Note 14, “Segment Information,” for a description of the changes made to the Company’s prior period product line sales classification to reflect the current year presentation. Refer to Note 5, “Goodwill and Other Intangibles, Net,” for a description of the changes made to the Company’s prior period definite-lived asset classification to reflect the current year presentation.
Risks and Uncertainties
Beginning in early March 2020, the global spread of the novel coronavirus (“COVID-19”) created significant uncertainty and worldwide economic disruption. Specific impacts to the Company’s business included and continue to include labor shortages, disruptions in the supply chain, delayed or reduced customer orders and sales, restrictions on associates’ ability to travel or work, and delays in shipments to and from certain countries. The Company is uncertain of the future impact of the ongoing COVID-19 pandemic or recovery of prior deterioration in economic conditions to its sales channels, supply chain, manufacturing, and distribution. Additionally, the current conflict between Russia and Ukraine and the related sanctions and other penalties imposed by countries across the globe against Russia are creating substantial uncertainty in the global economy. While the Company does not have operations in Russia or Ukraine and does not have significant direct exposure to customers and vendors in those countries, it is unable to predict the impact that these actions will have on the global economy or on the Company’s financial condition, results of operations, and cash flows as of the date of these financial statements.
Recent Accounting Pronouncements
The Company considers the applicability and impact of all Accounting Standard Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”). The Company evaluated all recent accounting pronouncements issued, including those that are currently effective, and determined that the adoption of these pronouncements would not have a material effect on the financial position, results of operations or cash flows of the Company. There have been no new or material changes to the significant accounting policies discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, that are of significance, or potential significance, to the Company.
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INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(2.)    BUSINESS ACQUISITIONS
2021 Acquisition
On December 1, 2021, the Company acquired 100% of the 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 for a cash purchase price of $220.4 million, of which $2.6 million is net cash acquired subject to payment in connection with working capital and other closing adjustments. Serving the Company’s current markets, Oscor broadens the Company’s product portfolio, expands its research and development capabilities, and adds low-cost manufacturing capacity. The Company used proceeds from its Senior Secured Credit Facilities to fund the acquisition. Oscor is included in the Company’s Medical segment. The goodwill is primarily associated with future customer relationships and an acquired assembled work force.
The Company has provisionally estimated fair values for the assets purchased, liabilities assumed and purchase consideration as of the date of the acquisition. The determination of estimated fair value required management to make significant estimates and assumptions based on information that was available at the time the consolidated financial statements were prepared. The Company recorded the preliminary purchase price allocation in the fourth quarter of 2021. During the first quarter of 2022, the Company recorded measurement period adjustment resulting in an increase to goodwill of $2.9 million which consisted of a $1.0 million decrease in inventory and a $1.9 million increase in current liabilities. The preliminary purchase price allocation remains subject to working capital adjustments. As a result, the allocation of the provisional purchase price may change in the future.
The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed (in thousands):
Fair value of net assets acquired
Current assets (excluding inventory)$12,148 
Inventory11,270 
Property, plant and equipment17,977 
Goodwill80,778 
Intangible assets105,300 
Operating lease assets15,142 
Other noncurrent assets695 
Current liabilities(10,824)
Operating lease liabilities(12,044)
Fair value of net assets acquired$220,442 
Actual and Pro Forma (unaudited) disclosures
For segment reporting purposes, the results of operations and assets from the Oscor have been included in the Company’s Medical segment since the acquisition date. For the three months ended April 1, 2022, sales related to Oscor were $19.0 million. Earnings related to the operations of Oscor for the three months ended April 1, 2022 were not material.
Pro forma results of operations for the three months ended April 2, 2021, assuming the acquisition of Oscor occurred as of the beginning of fiscal year 2020, are presented in the following table (in thousands). The pro forma results include the historical results of operations of the Company and Oscor, as well as adjustments for additional amortization of the assets acquired, additional interest expense related to the financing of the transaction and other transactional adjustments. The pro forma results do not include efficiencies, cost reductions or synergies expected to result from the acquisition. These pro forma results do not purport to be indicative of the results that would have been obtained, or to be a projection of results that may be obtained in the future.
Sales$304,101 
Net income19,936 
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INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(2.)    BUSINESS ACQUISITIONS (Continued)
Acquisition costs
During the three months ended April 1, 2022, direct costs of this acquisition of $0.4 million were expensed as incurred and included in Restructuring and other charges in the Condensed Consolidated Statements of Operations and Comprehensive Income.
(3.)    SUPPLEMENTAL CASH FLOW INFORMATION
The following is supplemental information relating to the Condensed Consolidated Statements of Cash Flows (in thousands):
Three Months Ended
April 1,
2022
April 2,
2021
Noncash investing and financing activities:
Property, plant and equipment purchases included in accounts payable$3,688 $2,981 
Supplemental lease disclosures:
Assets acquired under operating leases7,914 7,414 
(4.)    INVENTORIES
Inventories comprise the following (in thousands):
April 1,
2022
December 31,
2021
Raw materials$75,749 $70,956 
Work-in-process84,586 74,152 
Finished goods12,978 10,591 
Total$173,313 $155,699 
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INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(5.)     GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Goodwill
The changes in the carrying amount of goodwill by reportable segment for the three months ended April 1, 2022 were as follows (in thousands):
MedicalNon- MedicalTotal
December 31, 2021$907,704 $17,000 $924,704 
Acquisitions and related adjustments (Note 2)2,891  2,891 
Foreign currency translation(4,001) (4,001)
April 1, 2022$906,594 $17,000 $923,594 
Intangible Assets
The Company reclassified purchased tradenames with a net carrying value of $16.2 million from Purchased technology and patents as of December 31, 2021 to Amortizing tradenames and other to conform to the current period presentation. The Company made this reclassification to better align with the classification of amortization expense for similar assets. Intangible assets comprise the following (in thousands):
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
April 1, 2022
Definite-lived:
Purchased technology and patents$268,350 $(167,423)$100,927 
Customer lists779,412 (194,174)585,238 
Amortizing tradenames and other20,447 (4,505)15,942 
Total amortizing intangible assets$1,068,209 $(366,102)$702,107 
Indefinite-lived:
Trademarks and tradenames$90,288 
December 31, 2021
Definite-lived:
Purchased technology and patents$269,359 $(164,298)$105,061 
Customer lists783,618 (187,412)596,206 
Amortizing tradenames and other20,462 (4,207)16,255 
Total amortizing intangible assets$1,073,439 $(355,917)$717,522 
Indefinite-lived:
Trademarks and tradenames$90,288 
Aggregate intangible asset amortization expense comprises the following (in thousands):
 Three Months Ended
 April 1,
2022
April 2,
2021
Cost of sales$3,645 $3,268 
Selling, general and administrative expenses7,959 7,182 
Total intangible asset amortization expense$11,604 $10,450 
Estimated future intangible asset amortization expense based on the carrying value as of April 1, 2022 is as follows (in thousands):
Remainder of 20222023202420252026After 2026
Amortization Expense$34,782 48,257 47,349 45,724 43,397 482,598 
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INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(6.)     DEBT
The Company has senior secured credit facilities (the “Senior Secured Credit Facilities”), which consist of a five-year $400 million revolving credit facility (the “Revolving Credit Facility”), a five-year “term A” loan (the “TLA Facility”) and a seven-year “term B” loan (the “TLB Facility” and, together with the TLA Facility, the “Term Loan Facilities”). The TLB Facility was issued at a 0.50% discount.
Long-term debt related to the Senior Secured Credit Facilities as of April 1, 2022 and December 31, 2021, respectively, comprises the following (in thousands):
 April 1,
2022
December 31,
2021
Senior secured term loan A$464,125 $467,062 
Senior secured term loan B348,250 349,125 
Senior secured revolving credit facility24,300 19,300 
Unamortized discount on term loan B and deferred debt issuance costs(7,043)(7,361)
Total debt829,632 828,126 
Current portion of long-term debt(15,250)(15,250)
Total long-term debt$814,382 $812,876 
Revolving Credit Facility
The Revolving Credit Facility matures on September 2, 2026 and includes a $40 million sublimit for swingline loans and standby letters of credit. As of April 1, 2022, the Company had available borrowing capacity on the Revolving Credit Facility of $370.2 million after giving effect to $24.3 million of outstanding borrowings and $5.5 million of outstanding standby letters of credit.
Interest rates on the Revolving Credit Facility are at the Company’s option, either at: (i) the applicable LIBOR (or an applicable benchmark replacement) plus the applicable margin, which will range between 1.25% and 2.25%, based on the Company’s Total Net Leverage Ratio (as defined in the Senior Secured Credit Facilities agreement), or (ii) the Base Rate (as defined below) plus the applicable margin, which will range between 0.25% and 1.25%, based on the Company’s Total Net Leverage Ratio. The Base Rate is defined, for any day, as the per annum rate equal to the highest of (i) the prime rate (as defined in the Senior Secured Credit Facilities agreement), (ii) the Federal Funds Rate, as published by the Federal Reserve Bank of New York, plus 0.50%, and (iii) one-month LIBOR plus 1.00%. As of April 1, 2022, the interest rate on outstanding borrowings under the Revolving Credit Facility was 1.96%.
The Company is required to pay a commitment fee on the unused portion of the Revolving Credit Facility, which will range between 0.15% and 0.25%, depending on the Company’s Total Net Leverage Ratio. As of April 1, 2022, the commitment fee on the unused portion of the Revolving Credit Facility was 0.15%.
Term Loan Facilities
The TLA Facility and TLB Facility mature on September 2, 2026 and September 2, 2028, respectively, and require quarterly installments. The quarterly principal installments under the TLA Facility increase over the term of the loan. The interest rate terms for the TLA Facility are the same as those outlined above for the Revolving Credit Facility. Interest rates on the TLB Facility are, at the Company’s option, either at: (i) the applicable LIBOR rate plus 2.50%, with LIBOR subject to a 0.50% floor, or (ii) the Base Rate plus 1.50%. As of April 1, 2022, the interest rates on the TLA Facility and TLB Facility were 1.96% and 3.00%, respectively.
Covenants
The Senior Secured Credit Facilities agreement contains customary terms and conditions, including representations and warranties and affirmative and negative covenants, as well as financial covenants for the benefit of the lenders under the Revolving Credit Facility and the TLA Facility, which require that (i) the Company maintain a Total Net Leverage Ratio not to exceed 5.50:1.00 (stepping down to 5.00:1.00 for the third fiscal quarter of 2023 through maturity and subject to increase in certain circumstances following qualified acquisitions, but shall not exceed 5.50:1.00) and (ii) the Company maintain an interest coverage ratio of at least 2.50:1.00. The TLB Facility does not contain any financial maintenance covenants. As of April 1, 2022, the Company was in compliance with these financial covenants.

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INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(6.)     DEBT (Continued)
Contractual maturities under the Senior Secured Credit Facilities for the remainder of 2022 and through maturity, excluding any discounts or premiums, as of April 1, 2022 are as follows (in thousands):
Remainder of 20222023202420252026After 2026
Future minimum principal payments$11,438 18,187 29,938 38,750 406,737 331,625 
(7.)     STOCK-BASED COMPENSATION
The Company maintains certain stock-based compensation plans that were approved by the Company’s stockholders and are administered by the Board of Directors (the “Board”) or the Compensation and Organization Committee of the Board. The stock-based compensation plans provide for the granting of stock options, restricted stock awards, restricted stock units (“RSUs”), stock appreciation rights and stock bonuses to employees, non-employee directors, consultants, and service providers.
Stock-based Compensation Expense
The components and classification of stock-based compensation expense were as follows (in thousands):
 Three Months Ended
 April 1,
2022
April 2,
2021
RSUs and PRSUs$4,995 $4,704 
Total stock-based compensation expense$4,995 $4,704 
Cost of sales$769 $1,114 
Selling, general and administrative3,545 3,355 
Research, development and engineering325 235 
Restructuring and other charges356  
Total stock-based compensation expense$4,995 $4,704 
Stock Options
The following table summarizes the Company’s stock option activity for the three month period ended April 1, 2022:
Number of
Stock
Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
(In Years)
Aggregate
Intrinsic
Value
(In Millions)
Outstanding at December 31, 2021247,640 $38.03 
No activity— — 
Outstanding and exercisable at April 1, 2022247,640 $38.03 3.9$11.0 
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INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(7.)     STOCK-BASED COMPENSATION (Continued)
Restricted Stock Units
During the three months ended April 1, 2022, the Company awarded grants of either time-based RSUs or a mix of time-based RSUs and performance-based RSUs (“PRSUs”) to certain members of its management. Most time-based RSUs granted during the three months ended April 1, 2022 vest over a period of three years from the grant date, subject to the recipient’s continuous service to the Company. The grant-date fair value of all time-based RSUs is equal to the closing market price of Integer common stock on the date of grant.
The following table summarizes time-vested RSU activity for the three month period ended April 1, 2022:
Time-Vested
Activity
Weighted
Average
Grant Date Fair Value
Nonvested at December 31, 2021248,131 $81.14 
Granted133,995 79.76 
Vested(60,814)78.49 
Forfeited(9,613)78.98 
Nonvested at April 1, 2022311,699 $81.13 
For the Company’s PRSUs, in addition to service conditions, the ultimate number of shares to be earned depends on the achievement of market-based performance conditions. The market-based performance conditions are based on the Company’s achievement of a relative total shareholder return (“TSR”) performance requirement, on a percentile basis, compared to a defined group of peer companies over three year performance periods, or contingent upon achieving specified stock price milestones over a five year performance period.
The following table summarizes PRSU activity for the three month period ended April 1, 2022:
Performance-
Vested
Activity
Weighted
Average
Grant Date Fair Value
Nonvested at December 31, 2021198,869 $92.07 
Granted131,393 90.84 
Forfeited(51,375)99.62 
Nonvested at April 1, 2022278,887 $90.10 
The Company uses a Monte Carlo simulation model to determine the grant-date fair value of awards with market-based performance conditions. The grant-date fair value of all other PRSUs is equal to the closing market price of Integer common stock on the date of grant.
The weighted average fair value and assumptions used to value the PRSU awards granted with market-based performance conditions are as follows:
 Three Months Ended
 April 1,
2022
April 2,
2021
Weighted average fair value$97.58 $85.16 
Risk-free interest rate1.58 %0.19 %
Expected volatility42 %41 %
Expected life (in years)3.93.0
Expected dividend yield % %
The valuation of the market-based PRSUs granted during 2022 and 2021 also reflects a weighted average illiquidity discount of 9.25% and 8.19%, respectively, related to the six-month period that recipients are restricted from selling, transferring, pledging or assigning the underlying shares, in the event of vesting.
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INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(8.)     RESTRUCTURING AND OTHER CHARGES
The Company continuously evaluates the business and identifies opportunities to realign its resources to better serve its customers and markets, improve operational efficiency and capabilities, and lower its operating costs or improve profitability. To realize the benefits associated with these opportunities, the Company undertakes restructuring-type activities to transform its business. The Company incurs costs associated with these activities, which primarily include exit and disposal costs and other costs directly related to the restructuring initiative. The Company records exit and disposal costs (“restructuring charges”) as incurred in accordance with ASC 420, Exit or Disposal Cost Obligations, and are classified within Restructuring and other charges, while other costs directly related to the restructuring initiatives (“restructuring-related charges”) are classified within Cost of sales, Selling, general and administrative, and Research, development and engineering expenses in the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income.
In addition, from time to time, the Company incurs costs associated with acquiring and integrating businesses, and certain other general expenses, including asset impairments. The Company classifies costs associated with these items within Restructuring and other charges in the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income.
Restructuring and other charges comprise the following (in thousands):
 Three Months Ended
 April 1,
2022
April 2,
2021
Restructuring charges$1,103 $654 
Acquisition and integration costs
1,936 84 
Other general expenses296 177 
Total restructuring and other charges
$3,335 $915 
Restructuring programs
The following table comprises restructuring and restructuring-related charges by income statement classification for the three month period ended April 1, 2022 (in thousands):
Restructuring charges:
Restructuring and other charges
$1,103 
Restructuring-related expenses(a):
Cost of sales155 
Selling, general and administrative318 
Research, development and engineering177 
Total restructuring and restructuring-related charges
$1,753 
__________
(a) Restructuring-related expenses primarily include retention bonuses and manufacturing transfer charges. Restructuring related expense for the three month period ended April 2, 2021 were not material.
Operational excellence initiatives
The Company’s operational excellence (“OE”) initiatives mainly consist of costs associated with executing on its sales force, manufacturing, business process and performance excellence operational strategic imperatives. These projects focus on changing the Company’s organizational structure to match product line growth strategies and customer needs, transitioning its manufacturing process into a competitive advantage and standardizing and optimizing its business processes.
2022 OE Initiatives - Costs related to the Company’s 2022 OE initiatives are primarily recorded within the Medical segment or unallocated operating expenses and mainly include termination benefits. The Company estimates that it will incur aggregate pre-tax charges in connection with the 2022 OE initiatives of between approximately $3 million to $5 million, the majority of which are expected to be cash expenditures. As of April 1, 2022, total restructuring and restructuring-related charges incurred since inception were $0.4 million. These actions are expected to be substantially complete by the end of 2023.


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INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(8.)     RESTRUCTURING AND OTHER CHARGES (Continued)
2021 OE Initiatives - Costs related to the Company’s 2021 OE initiatives are primarily recorded within the Medical segment or unallocated operating expenses and mainly include termination benefits. The Company estimates that it will incur aggregate pre-tax charges in connection with the 2021 OE initiatives of between approximately $4 million to $5 million, the majority of which are expected to be cash expenditures. As of April 1, 2022, total restructuring and restructuring-related charges incurred since inception were $3.9 million. These actions are expected to be substantially complete by the end of 2022.
Strategic reorganization and alignment
The Company’s strategic reorganization and alignment (“SRA”) initiatives primarily include those that align resources with market conditions and the Company’s strategic direction in order to enhance the profitability of its portfolio of products.
2021 SRA Initiatives - During the fourth quarter of 2021, the Company initiated plans to exit certain markets served in our Medical segment to enhance profitability and reallocate manufacturing capacity needed to support our overall growth plans. The Company estimates that it will incur a range of pre-tax charges in connection with the 2021 SRA initiatives of approximately $5 million and $8 million, the majority of which are expected to be cash expenditures. Costs related to the Company’s 2021 SRA Initiatives are primarily recorded within the Medical segment and mainly include termination benefits. As of April 1, 2022, total restructuring and restructuring-related charges incurred since inception were $1.4 million. These actions are expected to be completed by the end of 2025.
The following table summarizes the activity for restructuring reserves (in thousands):
Operational
excellence
initiatives
Strategic reorganization and alignmentTotal
December 31, 2021$298 $134 $432 
Charges incurred, net of reversals647 456 1,103 
Cash payments(657)(34)(691)
April 1, 2022$288 $556 $844 
Acquisition and integration
Acquisition and integration costs primarily consist of professional fees and other costs related to business acquisitions. During the three months ended April 1, 2022, acquisition and integration costs included $1.9 million of expenses primarily related to the acquisitions of Oscor and Aran.
Other general expenses
During the three months ended April 1, 2022 and April 2, 2021, the Company recorded expenses related to other initiatives not described above, which relate primarily to integration and operational initiatives to reduce future costs and improve efficiencies.
- 15 -


INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(9.)    INCOME TAXES
The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. There is a potential for volatility of the effective tax rate due to several factors, including discrete items, changes in the mix and amount of pre-tax income and the jurisdictions to which it relates, changes in tax laws and foreign tax holidays, business reorganizations, settlements with taxing authorities and foreign currency fluctuations. In addition, the Company continues to explore tax planning opportunities that may have a material impact on its effective tax rate.
The Company’s effective tax rate for the first quarter of 2022 was 18.5% on $13.9 million of income before taxes compared to 13.8% on $25.0 million of income before taxes for the same period in 2021. The difference between the Company’s effective tax rates and the U.S. federal statutory income tax rate of 21% for the first quarter of 2022 and 2021 is due principally to the net impact of the Company’s earnings outside the U.S., which are generally taxed at rates that differ from the U.S federal rate, the Global Intangible Low-Taxed Income (“GILTI”) tax, the Foreign Derived Intangible Income (“FDII”) deduction, the availability of tax credits, and the recognition of certain discrete tax items. The Company recorded a discrete tax expense of $0.5 million for the first quarter of 2022, compared to discrete tax benefits of $0.6 million, for the first quarter of 2021. The discrete tax amounts for both periods are predominately related to excess tax benefits recognized upon vesting of RSUs during those quarters and/or tax shortfalls recorded for the forfeiture of certain PRSUs.
Unrecognized tax benefits reflect the difference between positions taken or expected to be taken on income tax returns and the amounts reflected in the financial statements. As of April 1, 2022, the Company had unrecognized tax benefits of approximately $5.7 million, of which approximately $5.6 million would favorably impact the effective tax rate, net of federal benefit on state issues, if recognized. As of April 1, 2022, the Company believes the reasonably possible total amount of unrecognized tax benefits that could increase or decrease in the next 12 months as a result of various statute expirations, audit closures, and/or tax settlements would not be material to its consolidated financial statements.
In response to the COVID-19 pandemic, many governments have enacted or are contemplating measures to provide aid and economic stimulus. These measures may include deferring the due dates of tax payments or other changes to their income and non-income-based tax laws. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020 in the U.S., includes measures to assist companies, including temporary changes to income and non-income-based tax laws. The CARES Act provided for deferred payment of the employer portion of social security taxes through the end of 2020. As of April 1, 2022 and December 31, 2021, the Company had a remaining deferred amount of $4.8 million, which the Company expects to pay within the next twelve months. The deferred payroll taxes are included within Accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets.
(10.)    COMMITMENTS AND CONTINGENCIES
Contingent Consideration Arrangements
The Company records contingent consideration liabilities related to the earn-out provisions for certain acquisitions. See Note 13 “Financial Instruments and Fair Value Measurements” for additional information.
Litigation
The Company is subject to litigation arising from time to time in the ordinary course of its business. The Company does not expect that the ultimate resolution of any pending legal actions will have a material effect on its consolidated results of operations, financial position, or cash flows. However, litigation is subject to inherent uncertainties. As such, there can be no assurance that any pending legal action, which the Company currently believes to be immaterial, will not become material in the future.
Product Warranties
The Company generally warrants that its products will meet customer specifications and will be free from defects in materials and workmanship. The product warranty liability is presented within Accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets. The change in product warranty liability comprised the following (in thousands):
December 31, 2021$509 
Additions to warranty reserve, net of reversals(20)
Adjustments to pre-existing warranties (111)
April 1, 2022$378 
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INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(11.)    EARNINGS PER SHARE (“EPS”)
The following table sets forth a reconciliation of the information used in computing basic and diluted EPS (in thousands, except per share amounts):
 Three Months Ended
April 1,
2022
April 2,
2021
Numerator for basic and diluted EPS:
Net income$11,367 $21,520 
Denominator for basic and diluted EPS:
Weighted average shares outstanding - Basic33,091 32,957 
Dilutive effect of share-based awards211 231 
Weighted average shares outstanding - Diluted33,302 33,188 
Basic EPS$0.34 $0.65 
Diluted EPS$0.34 $0.65 
The diluted weighted average share calculations do not include the following securities, which are not dilutive to the EPS calculations or the performance criteria have not been met (in thousands):
 Three Months Ended
April 1,
2022
April 2,
2021
Time-vested RSUs3 10 
PRSUs166 64 
- 17 -


INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(12.)     STOCKHOLDERS’ EQUITY
Common Stock
The following is a summary of the number of shares of common stock issued, treasury stock and common stock outstanding for the three month periods ended April 1, 2022 and April 2, 2021:
Three Months Ended
April 1,
2022
April 2,
2021
Shares outstanding at beginning of period33,063,336 32,908,178 
Stock options exercised 4,229 
Vesting of RSUs, net of shares withheld to cover taxes38,831 62,295 
Shares outstanding at end of period33,102,167 32,974,702 
Accumulated Other Comprehensive Income
Accumulated other comprehensive income comprises the following (in thousands):
Defined
Benefit
Plan
Liability
Cash
Flow
Hedges
Foreign
Currency
Translation
Adjustment
Total
Pre-Tax
Amount
TaxNet-of-Tax
Amount
December 31, 2021$(890)$(2,291)$29,720 $26,539 $651 $27,190 
Unrealized gain on cash flow hedges— 2,856 — 2,856 (600)2,256 
Realized gain on foreign currency hedges— (162)— (162)34 (128)
Realized loss on interest rate swap hedge— 767 — 767 (161)606 
Foreign currency translation loss— — (7,887)(7,887) (7,887)
April 1, 2022$(890)$1,170 $21,833 $22,113 $(76)$22,037 
December 31, 2020$(1,095)$(4,956)$57,546 $51,495 $1,197 $52,692 
Unrealized loss on cash flow hedges— (1,269)— (1,269)266 (1,003)
Realized gain on foreign currency hedges— (659)— (659)139 (520)
Realized loss on interest rate swap hedges— 1,034 — 1,034 (217)817 
Foreign currency translation loss— — (16,364)(16,364) (16,364)
April 2, 2021$(1,095)$(5,850)$41,182 $34,237 $1,385 $35,622 
- 18 -


INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(13.)     FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Fair value measurement standards apply to certain financial assets and liabilities that are measured at fair value on a recurring basis (each reporting period). For the Company, these financial assets and liabilities include its derivative instruments and contingent consideration. The Company does not have any nonfinancial assets or liabilities that are measured at fair value on a recurring basis.
The Company is exposed to global market risks, including the effect of changes in interest rates and foreign currency exchange rates, and uses derivatives to manage these exposures that occur in the normal course of business. The Company does not hold or issue derivatives for trading or speculative purposes. All derivatives are recorded at fair value on the Condensed Consolidated Balance Sheets.
The following tables provide information regarding assets and liabilities recorded at fair value on a recurring basis (in thousands):
Fair ValueQuoted
Prices in
Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
April 1, 2022
Assets: Foreign currency hedging contracts$1,887 $ $1,887 $ 
Liabilities: Foreign currency hedging contracts330  330  
Liabilities: Interest rate swap387  387  
Liabilities: Contingent consideration1,976   1,976 
December 31, 2021
Assets: Foreign currency hedging contracts$687 $ $687 $ 
Liabilities: Interest rate swap2,978  2,978  
Liabilities: Contingent consideration2,415   2,415 
Derivatives Designated as Hedging Instruments
Interest Rate Swaps
The Company periodically enters into interest rate swap agreements in order to reduce the cash flow risk caused by interest rate changes on its outstanding floating rate borrowings. Under these swap agreements, the Company pays a fixed rate of interest and receives a floating rate equal to one-month LIBOR. The variable rate received from the swap agreements and the variable rate paid on the outstanding debt will have the same rate of interest, excluding the credit spread, and will reset and pay interest on the same date. The Company has designated these swap agreements as cash flow hedges based on concluding the hedged forecasted transaction is probable of occurring within the period the cash flow hedge is anticipated to affect earnings.
Information regarding the Company’s outstanding interest rate swap designated as cash flow hedges as of April 1, 2022 is as follows (dollars in thousands):