~ 2Q22 sales and profit consistent with expectations ~

~ Increasing 2022 sales and operating income outlook ~

PLANO, Texas, July 28, 2022 (GLOBE NEWSWIRE) -- Integer Holdings Corporation (NYSE:ITGR), a leading medical device outsource manufacturer, today announced results for the three months ended July 1, 2022.

Second Quarter 2022 Highlights (compared to Second Quarter 2021, except as noted)

Sales increased 12% to $350 million, inclusive of sales from recent Oscor and Aran acquisitions.
GAAP net income decreased $9 million to $21 million, a decrease of 29%. Non-GAAP adjusted net income decreased $1 million to $35 million, a decrease of 3%.
GAAP operating income decreased $7 million to $33 million, a decrease of 17%. Non-GAAP adjusted operating income decreased 1% to $50 million.
GAAP diluted EPS decreased $0.27 per share to $0.62 per share. Non-GAAP adjusted EPS decreased 3% per share to $1.04 per share.
Over the last four quarters our adjusted gross margins have been approximately 28%, or 300 bps below pre-pandemic levels, driven by incremental labor and supply chain costs related to overtime, training, and manufacturing inefficiencies from supply chain disruptions.
From the end of the fourth quarter 2021, total debt increased $119 million to $947 million and net total debt increased $121 million to $938 million, attributable to the $129 million in cash paid to acquire Aran Biomedical, resulting in a leverage ratio of 3.9 times adjusted EBITDA.

Executing Strategy to Drive Accelerated Revenue Growth

Expect revenue growth to accelerate in the second half 2022 through new product introductions in high growth electrophysiology, structural heart, and neuromodulation markets.
Oscor acquisition exceeding expectations and increased sales outlook by $5 million to $71 million.
Closed acquisition of Aran Biomedical on April 6, 2022. Integration is on track with strong engagement from strategic customers.

"Integer delivered second quarter 2022 financial results consistent with our expectations, as sales grew 13% versus the first quarter 2022 and 12% versus prior year. Integer's associates around the globe remain focused on delivering products for our customers and the patients they serve, while managing the challenges of the ongoing labor and supply chain dynamics," said Joseph Dziedzic, Integer's president and CEO. "We have raised our full year 2022 sales outlook and expect to grow 12% to 14% versus 2021, driven by strong demand, accelerating new product introductions, and our recent Oscor and Aran acquisitions."

Discussion of Product Line Second Quarter 2022 Sales

Cardio & Vascular sales increased 25% in the second quarter 2022 compared to the second quarter 2021 driven by strong demand in the neurovascular, electrophysiology, and structural heart markets, as well as the Oscor and Aran acquisitions.
Cardiac Rhythm Management & Neuromodulation sales increased 2% in the second quarter 2022 compared to the second quarter 2021 as the sales growth from the recently acquired Oscor was offset by labor and supply chain constraints.
Advanced Surgical, Orthopedics & Portable Medical includes sales under supply agreement to the acquirer of our divested AS&O product line. Sales were flat in the second quarter 2022 compared to the second quarter 2021, inclusive of a reduction in demand for COVID-related ventilator and patient monitoring components.
Electrochem sales decreased 1% in the second quarter 2022 compared to the second quarter 2021 as our ability to fulfill strong customer demand was constrained by supplier shortages.

2022 Outlook^(a)

Organic sales growth now expected to be 6% to 8%.

(dollars in millions, except per share amounts)	GAAP		Non-GAAP^(b)
	As Reported	Change from Prior Year	Adjusted	Change from Prior Year
Sales	$1,370 to $1,395	12% to 14%	N/A	N/A
Operating income	$136 to $148	0% to 9%	$206 to $218	10% to 16%
EBITDA	N/A	N/A	$273 to $285	13% to 17%
Net income	$83 to $93	(11)% to 0%	$140 to $151	4% to 11%
Diluted earnings per share	$2.49 to $2.79	(11)% to 0%	$4.20 to $4.50	3% to 10%
Cash flow from operating activities	$151 - $166	(4)% to 6%	N/A	N/A

^(a) Except as described below, further reconciliations by line item to the closest corresponding GAAP financial measure for Adjusted operating income, Adjusted EBITDA, Adjusted net income, organic sales growth, and Adjusted Earnings per Share ("EPS"), all from continuing operations, included in our "2022 Outlook" above, and Adjusted interest expense, Adjusted effective tax rate and leverage ratio below, are not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and visibility of the charges excluded from these non-GAAP financial measures.

^(b) Adjusted operating income for 2022 consists of GAAP operating income, excluding items such as amortization of intangible assets, restructuring and restructuring-related charges, and acquisition and integration costs, totaling approximately $70 million, pre-tax. Adjusted net income and Adjusted EPS for 2022 consist of GAAP net income and diluted EPS, excluding items such as amortization of intangible assets, restructuring and restructuring-related charges, acquisition and integration costs, and gain or loss on equity investments totaling approximately $73 million, pre-tax. The after-tax impact of these items is estimated to be approximately $57 million, or approximately $1.71 per diluted share.

Adjusted EBITDA is expected to consist of Adjusted net income, excluding items such as depreciation, interest, stock-based compensation and taxes totaling approximately $133 million to $135 million.

Supplemental Financial Information

(dollars in millions)	2022 Outlook	2021 Actual
Depreciation and amortization	$95 - $100	$81
Adjusted total interest expense^(a)	$35 - $40	$28
Stock-based compensation	$19 - $21	$16
Restructuring, acquisition and other charges^(b)	$13 - $17	$8
Adjusted effective tax rate^(c)	16.0% - 17.5%	15%
Leverage ratio	3.0x - 3.2x	3.4x
Capital expenditures, net	$65 - $75	$53
Cash tax payments	$15 - $20	$20

^(a) Adjusted total interest expense refers to our expected full-year GAAP total interest expense, expected to range from $35 million to $40 million for 2022, adjusted to remove the full-year impact of charges associated with the accelerated write-off of deferred issuance costs and unamortized discounts (loss on extinguishment of debt) included in GAAP total interest expense.

^(b⁾ Restructuring, acquisition and other charges consists of restructuring and restructuring-related charges, acquisition and integration costs and other general expenses.

^(c) Adjusted effective tax rate refers to our full-year GAAP effective tax rate, expected to range from 14.0% to 15.5% for 2022, adjusted to reflect the full-year impact of the items that are excluded in providing adjusted net income and certain other identified items.

Summary Financial Results

(dollars in thousands, except per share data)

	Three Months Ended
	July 1, 2022		July 2, 2021		QTD Change
Operating income	$	32,707	$	39,350	(16.9)	%
Net income	$	20,836	$	29,433	(29.2)	%
Diluted EPS	$	0.62	$	0.89	(30.3)	%

EBITDA^(a)	$	55,407	$	58,435	(5.2)	%
Adjusted EBITDA^(a)	$	65,897	$	63,743	3.4	%
Adjusted operating income^(a)	$	49,679	$	50,064	(0.8)	%
Adjusted net income^(a)	$	34,651	$	35,558	(2.6)	%
Adjusted EPS^(a)	$	1.04	$	1.07	(2.8)	%

	Six Months Ended
	July 1, 2022		July 2, 2021		YTD Change
Operating income	$	55,204	$	73,958	(25.4)	%
Net income	$	32,203	$	50,953	(36.8)	%
Diluted EPS	$	0.97	$	1.53	(36.6)	%

EBITDA^(a)	$	97,865	$	112,239	(12.8)	%
Adjusted EBITDA^(a)	$	120,102	$	124,855	(3.8)	%
Adjusted operating income^(a)	$	88,484	$	96,391	(8.2)	%
Adjusted net income^(a)	$	60,730	$	67,668	(10.3)	%
Adjusted EPS^(a)	$	1.82	$	2.04	(10.8)	%

^(a) EBITDA, Adjusted EBITDA, Adjusted operating income, Adjusted net income, and Adjusted EPS are Non-GAAP financial measures. Please see "Notes Regarding Non-GAAP Financial Information" for additional information regarding our use of non-GAAP financial measures. Refer to Tables A, B and C at the end of this release for reconciliations of adjusted amounts to the closest corresponding GAAP financial measures.

Summary Product Line Results

(dollars in thousands)

	Three Months Ended
	July 1, 2022		July 2, 2021		QTD Change		Organic Change^(a)
Medical Sales
Cardio & Vascular	$	180,604	$	144,683	24.8	%	16.7	%
Cardiac Rhythm Management & Neuromodulation		135,945		133,660	1.7	%	(5.4)	%
Advanced Surgical, Orthopedics & Portable Medical		23,285		23,283	—	%	0.1	%
Total Medical Sales		339,834		301,626	12.7	%	5.6	%
Non-Medical Sales		10,247		10,397	(1.4)	%	(1.4)	%
Total Sales	$	350,081	$	312,023	12.2	%	5.3	%

	Six Months Ended
	July 1, 2022		July 2, 2021		YTD Change		Organic Change^(a)
Medical Sales
Cardio & Vascular	$	339,641	$	285,889	18.8	%	12.5	%
Cardiac Rhythm Management & Neuromodulation		259,269		255,363	1.5	%	(6.6)	%
Advanced Surgical, Orthopedics & Portable Medical		42,951		43,339	(0.9)	%	(0.8)	%
Total Medical Sales		641,861		584,591	9.8	%	3.2	%
Non-Medical Sales		19,132		17,899	6.9	%	6.9	%
Total Sales	$	660,993	$	602,490	9.7	%	3.3	%

^(a) Organic sales change is a Non-GAAP financial measure. Please see "Notes Regarding Non-GAAP Financial Information" for additional information regarding our use of non-GAAP financial measures and refer to Table D at the end of this release for a reconciliation of these amounts.

Conference Call Information

The Company will host a conference call on Thursday, July 28, 2022, at 8 a.m. CT / 9 a.m. ET to discuss these results. The scheduled conference call will be webcast live and is accessible through our website at investor.integer.net or by dialing (888) 330-3567 (U.S.) or (646) 960-0842 (outside U.S.) and the conference ID is 9252310. The call will be archived on the Company's website. An earnings call slide presentation containing supplemental information about the Company's results will be posted to our website at investor.integer.net prior to the conference call and will be referenced during the conference call.

From time to time, the Company posts information that may be of interest to investors on its website at investor.integer.net. To automatically receive Integer financial news by email, please visit investor.integer.net and subscribe to email alerts.

About Integer^®Integer Holdings Corporation (NYSE:ITGR) is one of the largest medical device outsource (MDO) manufacturers in the world serving the cardiac, neuromodulation, vascular, portable medical and orthopedics markets. The Company provides innovative, high-quality medical technologies that enhance the lives of patients worldwide. In addition, the Company develops batteries for high-end niche applications in energy, military, and environmental markets. The Company's brands include Greatbatch Medical^®, Lake Region Medical^® and Electrochem^®. Additional information is available at www.integer.net.

Contact Information

Tony Borowicz

Senior Vice President, Investor Relations

716.759.5809

tony.borowicz@integer.net

Notes Regarding Non-GAAP Financial Information

In addition to our results reported in accordance with generally accepted accounting principles in the United States of America ("GAAP"), we provide adjusted net income, adjusted EPS, earnings before interest, taxes, depreciation and amortization ("EBITDA"), adjusted EBITDA, adjusted operating income, and organic sales change rates.

Adjusted net income and adjusted EPS consist of GAAP amounts adjusted for the following to the extent occurring during the period: (i) amortization of intangible assets, (ii) certain legal expenses, (iii) restructuring and restructuring- related charges; (iv) acquisition and integration related costs; (v) other general expenses; (vi) (gain) loss on equity investments; (vii) extinguishment of debt charges; (viii) European Union medical device regulation incremental charges, (ix) inventory step-up amortization; (x) unusual, or infrequently occurring items; (xi) the income tax provision (benefit) related to these adjustments and (xii) certain tax items that are outside the normal tax provision for the period. Adjusted EPS is calculated by dividing adjusted net income by diluted weighted average shares outstanding.

EBITDA is calculated by adding back interest expense, provision (benefit) for income taxes, depreciation expense, and amortization expense from intangible assets and financing leases, to net income, which is the most directly comparable GAAP financial measure. Adjusted EBITDA consists of EBITDA plus adding back stock-based compensation and the same adjustments as listed above except for items (i), (vii), (xi) and (xii). Adjusted operating income consists of operating income adjusted for the same items listed above except for items (vi), (vii), (xi) and (xii).

Organic sales change is reported sales growth adjusted for the impact of foreign currency and the contribution of acquisitions. To calculate the impact of foreign currency on sales growth rates, we convert any sale made in a foreign currency by converting current period sales into prior period sales using the exchange rate in effect at that time and then compare the two, negating any effect foreign currency had on our transactional revenue, and exclude the amount of sales acquired or divested during the period from the current/previous period amounts, respectively.

We believe that the presentation of adjusted net income, adjusted EPS, EBITDA, adjusted EBITDA, adjusted operating income, and organic sales change rates, provides important supplemental information to management and investors seeking to understand the financial and business trends relating to our financial condition and results of operations. In addition to the performance measures identified above, we believe that net total debt and leverage ratio provide meaningful measures of liquidity and a useful basis for assessing our ability to fund our activities, including the financing of acquisitions and debt repayments. Net total debt is calculated as total principal amount of debt outstanding less cash and cash equivalents. We calculate leverage ratio as net total debt divided by adjusted EBITDA for the trailing 4 quarters. Free cash flow is defined as Net cash provided by operating activities (as stated in our Condensed Consolidated Statements of Cash Flows) reduced by capital expenditures (acquisition of property, plant, and equipment (PP&E), net of proceeds from the sale of PP&E).

Forward-Looking Statements

Some of the statements contained in this press release are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to recovery from the COVID-19 global pandemic; future sales, expenses, and profitability; future development and expected growth of our business and industry, including expansion of our manufacturing capacity; our ability to execute our business model and our business strategy, including completion and integration of current or future acquisition targets; having available sufficient cash and borrowing capacity to meet working capital, debt service and capital expenditure requirements for the next twelve months; projected capital spending; and other events, conditions or developments that will or may occur in the future. You can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "projects," or "continue" or variations or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially from those stated or implied by these forward-looking statements. In evaluating these statements and our prospects, you should carefully consider the factors set forth below.

Although it is not possible to create a comprehensive list of all factors that may cause actual results to differ from the results expressed or implied by our forward-looking statements or that may affect our future results, some of these factors and other risks and uncertainties that arise from time to time are described in Item 1A "Risk Factors" of our Annual Report on Form 10-K and in our other periodic filings with the SEC and include the following:

operational risks, such as the duration, scope and impact of the COVID-19 pandemic, including the evolving health, economic, social and governmental environments and the effect of the pandemic on our associates, suppliers and customers as well as the global economy; our dependence upon a limited number of customers; pricing pressures that we face from customers; our reliance on third party suppliers for raw materials, key products and subcomponents; our ability to attract, train and retain a sufficient number of qualified associates; the potential for harm to our reputation caused by quality problems related to our products; the dependence of our energy market-related revenues on the conditions in the oil and natural gas industry; interruptions in our manufacturing operations; our dependence upon our information technology systems and our ability to prevent cyber-attacks and other failures; and our dependence upon our senior management team and technical personnel;
strategic risks, such as the intense competition we face and our ability to successfully market our products; our ability to respond to changes in technology; our ability to develop new products and expand into new geographic and product markets; and our ability to successfully identify, make and integrate acquisitions to expand and develop our business in accordance with expectations;
financial risks, such as our significant amount of outstanding indebtedness and our ability to remain in compliance with financial and other covenants under our senior secured credit facilities; economic and credit market uncertainties that could interrupt our access to capital markets, borrowings or financial transactions; financial and market risks related to our international operations and sales; our complex international tax profile; and our ability to realize the full value of our intangible assets; and
legal and compliance risks, such as regulatory issues resulting from product complaints, recalls or regulatory audits; the potential of becoming subject to product liability or intellectual property claims; our ability to protect our intellectual property and proprietary rights; our ability and the cost to comply with environmental regulations; our ability to comply with customer-driven policies and third party standards or certification requirements; our ability to obtain necessary licenses for new technologies; legal and regulatory risks from our international operations; and the fact that the healthcare industry is highly regulated and subject to various regulatory changes;

Except as may be required by law, we assume no obligation to update forward-looking statements in this press release whether to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial conditions or prospects, or otherwise.

Condensed Consolidated Balance Sheets - Unaudited
(in thousands)

	July 1, 2022			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	15,593		$	17,885
Accounts receivable, net		221,939			182,310
Inventories		194,458			155,699
Refundable income taxes		4,627			4,735
Contract assets		70,408			64,743
Prepaid expenses and other current assets		25,988			27,610
Total current assets		533,013			452,982
Property, plant and equipment, net		280,461			277,099
Goodwill		978,559			924,704
Other intangible assets, net		841,122			807,810
Deferred income taxes		6,149			5,711
Operating lease assets		75,777			70,053
Other long-term assets		43,006			43,856
Total assets	$	2,758,087		$	2,582,215
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	15,250		$	15,250
Accounts payable		103,111			76,859
Income taxes payable		259			725
Operating lease liabilities		10,762			9,862
Accrued expenses and other current liabilities		68,344			56,933
Total current liabilities		197,726			159,629
Long-term debt		931,889			812,876
Deferred income taxes		178,695			171,505
Operating lease liabilities		64,436			59,767
Other long-term liabilities		21,890			23,741
Total liabilities		1,394,636			1,227,518
Stockholders' equity:
Common stock		33			33
Additional paid-in capital		722,175			713,150
Retained earnings		646,527			614,324
Accumulated other comprehensive income (loss)		(5,284	)		27,190
Total stockholders' equity		1,363,451			1,354,697
Total liabilities and stockholders' equity	$	2,758,087		$	2,582,215

Condensed Consolidated Statements of Operations - Unaudited
(in thousands, except per share data)

	Three Months Ended				Six Months Ended
	July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021
Sales	$	350,081	$	312,023	$	660,993	$	602,490
Cost of sales (COS)		257,184		223,277		486,621		429,258
Gross profit		92,897		88,746		174,372		173,232
Operating expenses:
Selling, general and administrative (SG&A)		41,786		35,379		81,346		70,881
Research, development and engineering (RD&E)		14,871		13,738		30,954		27,199
Restructuring and other charges		3,533		279		6,868		1,194
Total operating expenses		60,190		49,396		119,168		99,274
Operating income		32,707		39,350		55,204		73,958
Interest expense		7,773		7,532		13,741		16,064
Loss on equity investments		320		684		2,724		2,019
Other loss, net		191		356		368		119
Income before taxes		24,423		30,778		38,371		55,756
Provision for income taxes		3,587		1,345		6,168		4,803
Net income	$	20,836	$	29,433	$	32,203	$	50,953

Earnings per share:
Basic	$	0.63	$	0.89	$	0.97	$	1.55
Diluted	$	0.62	$	0.89	$	0.97	$	1.53

Weighted average shares outstanding:
Basic		33,111		32,982		33,101		32,970
Diluted		33,350		33,254		33,326		33,221

Condensed Consolidated Statements of Cash Flows - Unaudited
(in thousands)

	Six Months Ended
	July 1, 2022			July 2, 2021
Cash flows from operating activities:
Net income	$	32,203		$	50,953
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		45,753			40,419
Debt related charges included in interest expense		962			2,446
Inventory step-up amortization		798			—
Stock-based compensation		10,951			8,953
Non-cash lease expense		5,344			3,947
Non-cash loss on equity investments		2,724			2,019
Other non-cash losses		7,510			29
Deferred income taxes		(969	)		(242	)
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable		(37,642	)		(19,141	)
Inventories		(41,471	)		898
Prepaid expenses and other assets		(783	)		(2,604	)
Contract assets		(6,189	)		(16,792	)
Accounts payable		25,554			16,937
Accrued expenses and other liabilities		(7,295	)		(13,737	)
Income taxes payable		(439	)		(5,298	)
Net cash provided by operating activities		37,011			68,787
Cash flows from investing activities:
Acquisition of property, plant and equipment		(22,610	)		(18,416	)
Proceeds from sale of property, plant and equipment		587			15
Acquisitions, net		(126,636	)		—
Net cash used in investing activities		(148,659	)		(18,401	)
Cash flows from financing activities:
Principal payments of term loans		(7,625	)		(64,750	)
Proceeds from revolving credit facility		160,000			—
Payments of revolving credit facility		(34,000	)		—
Proceeds from the exercise of stock options		—			340
Payment of debt issuance costs		—			(141	)
Tax withholdings related to net share settlements of restricted stock unit awards		(1,926	)		(2,988	)
Contingent consideration payments		(493	)		(1,621	)
Principal payments on finance leases		(353	)		(24	)
Net cash provided by (used in) financing activities		115,603			(69,184	)
Effect of foreign currency exchange rates on cash and cash equivalents		(6,247	)		173
Net decrease in cash and cash equivalents		(2,292	)		(18,625	)
Cash and cash equivalents, beginning of period		17,885			49,206
Cash and cash equivalents, end of period	$	15,593		$	30,581

Reconciliations of Non-GAAP Measures

Table A: Net Income and Diluted EPS Reconciliations

(in thousands, except per share amounts)

	Three Months Ended
	July 1, 2022								July 2, 2021
	Pre-Tax			Net of Tax			Per Diluted Share		Pre-Tax			Net of Tax			Per Diluted Share
Net income (GAAP)	$	24,423		$	20,836		$	0.62	$	30,778		$	29,433		$	0.89
Adjustments^(a):
Amortization of intangible assets		12,285			9,710			0.29		10,339			8,177			0.25
Certain legal expenses (SG&A)^(b)		—			—			—		288			228			0.01
Restructuring and restructuring-related charges^(c)		884			728			0.02		191			149			—
Acquisition and integration costs^(d)		3,333			2,614			0.08		26			21			—
Other general expenses^(e)		205			167			0.01		62			39			—
Loss on equity investments		320			253			0.01		684			540			0.02
Loss on extinguishment of debt		—			—			—		82			65			—
Medical device regulations^(f)		182			143			—		169			134			—
Customer bankruptcy^(g)		83			66			—		(361	)		(285	)		(0.01	)
Inventory step-up amortization (COS)^(h)		—			—			—		—			—			—
Tax adjustments⁽ⁱ⁾		—			134			—		—			(2,943	)		(0.09	)
Adjusted net income (Non-GAAP)	$	41,715		$	34,651			1.04	$	42,258		$	35,558			1.07

Weighted average shares for adjusted diluted EPS					33,350								33,254

	Six Months Ended
	July 1, 2022								July 2, 2021
	Pre-Tax			Net of Tax			Per Diluted Share		Pre-Tax			Net of Tax			Per Diluted Share
Net income (GAAP)	$	38,371		$	32,203		$	0.97	$	55,756		$	50,953		$	1.53
Adjustments^(a):
Amortization of intangible assets		23,889			18,882			0.57		20,789			16,442			0.49
Certain legal expenses (SG&A)^(b)		—			—			—		545			431			0.01
Restructuring and restructuring-related charges^(c)		2,637			2,075			0.06		845			666			0.02
Acquisition and integration costs^(d)		5,269			4,149			0.12		110			92			—
Other general expenses^(e)		501			396			0.01		239			169			0.01
Loss on equity investments		2,724			2,152			0.06		2,019			1,595			0.05
Loss on extinguishment of debt		—			—			—		428			338			0.01
Medical device regulations^(f)		292			230			0.01		290			229			0.01
Customer bankruptcy^(g)		(106	)		(83	)		—		(385	)		(304	)		(0.01	)
Inventory step-up amortization (COS)^(h)		798			630			0.02		—			—			—
Tax adjustments⁽ⁱ⁾		—			96			—		—			(2,943	)		(0.09	)
Adjusted net income (Non-GAAP)	$	74,375		$	60,730		$	1.82	$	80,636		$	67,668		$	2.04

Weighted average shares for adjusted diluted EPS					33,326								33,221

^(a)The difference between pre-tax and net of tax amounts is the estimated tax impact related to the respective adjustment. Net of tax amounts are computed using a 21% U.S. tax rate, and the statutory tax rates applicable in foreign tax jurisdictions, as adjusted for the existence of net operating losses ("NOLs"). Expenses that are not deductible for tax purposes (i.e. permanent tax differences) are added back at 100%.

^(b)Expenses associated with non-ordinary course legal matters.

^(c)We initiate discrete restructuring programs primarily to realign resources to better serve our customers and markets, improve operational efficiency and capabilities, and lower operating costs or improve profitability. Depending on the program, restructuring charges may include termination benefits, contract termination, facility closure and other exit and disposal costs. Restructuring-related expenses are directly related to the program and may include retention bonuses, accelerated depreciation, consulting expense and costs to transfer manufacturing operations among our facilities.

^(d)Acquisition and integration costs are incremental costs that are directly related to a business or asset acquisition. These costs may include, among other things, professional, consulting and other fees, system integration costs, and fair value adjustments relating to contingent consideration.

^(e)Other general expenses are discrete transactions occurring sporadically and affect period-over-period comparisons.

^(f)The charges represent incremental costs of complying with the new European Union medical device regulations for previously registered products and primarily include charges for contractors supporting the project and other direct third-party expenses.

^(g)In November 2019, one of our customers, Nuvectra Corporation, filed a voluntary Chapter 11 bankruptcy petition (the "Customer Bankruptcy"). The 2022 and 2021 amounts are predominantly due to favorable settlements on supplier purchase order termination clauses and benefits recognized from the utilization or sale of previously reserved inventory.

^(h)The accounting associated with our acquisitions require us to record inventory at its fair value, which is sometimes greater than the previous book value of inventory. The increase in inventory value is amortized to cost of sales over the period that the related inventory is sold. We exclude inventory step-up amortization from our non-GAAP financial measures because it is a non-cash expense that we do not believe is indicative of our ongoing operating results.

⁽ⁱ⁾For the 2022 periods, tax adjustments predominately related to acquisition costs that are not deductible for tax purposes and interest associated with uncertain tax benefits related to acquired foreign tax credits. For the 2021 periods, tax adjustments predominately related to discrete tax benefits associated with the reversal of previously unrecognized tax benefits resulting from the effective settlement of tax audits and the utilization of acquired foreign tax credits during the periods presented.

Please see "Notes Regarding Non-GAAP Financial Information" for additional information regarding our use of non-GAAP financial measures.

Table B: Adjusted Operating Income Reconciliations

(in thousands)

	Three Months Ended					Six Months Ended
	July 1, 2022		July 2, 2021			July 1, 2022			July 2, 2021
Operating income (GAAP)	$	32,707	$	39,350		$	55,204		$	73,958
Adjustments:
Amortization of intangible assets		12,285		10,339			23,889			20,789
Certain legal expenses		—		288			—			545
Restructuring and restructuring-related charges		884		191			2,637			845
Acquisition and integration costs		3,333		26			5,269			110
Other general expenses		205		62			501			239
Medical device regulations		182		169			292			290
Customer bankruptcy		83		(361	)		(106	)		(385	)
Inventory step-up amortization	$	—	$	—			798			—
Adjusted operating income (Non-GAAP)	$	49,679	$	50,064		$	88,484		$	96,391

Table C: EBITDA Reconciliations

(in thousands)

	Three Months Ended					Six Months Ended
	July 1, 2022		July 2, 2021			July 1, 2022			July 2, 2021
Net income (GAAP)	$	20,836	$	29,433		$	32,203		$	50,953

Interest expense		7,773		7,532			13,741			16,064
Provision for income taxes		3,587		1,345			6,168			4,803
Depreciation		10,666		9,786			21,402			19,630
Amortization of intangible assets and financing leases		12,545		10,339			24,351			20,789
EBITDA (Non-GAAP)		55,407		58,435			97,865			112,239
Stock-based compensation^(a)		5,483		4,249			10,122			8,953
Certain legal expenses		—		288			—			545
Restructuring and restructuring-related charges		884		191			2,637			845
Acquisition and integration costs		3,333		26			5,269			110
Other general expenses		205		62			501			239
Loss on equity investments		320		684			2,724			2,019
Medical device regulations		182		169			292			290
Customer bankruptcy		83		(361	)		(106	)		(385	)
Inventory step-up amortization		—		—			798			—
Adjusted EBITDA (Non-GAAP)	$	65,897	$	63,743		$	120,102		$	124,855

^(a)Total stock-based compensation expense less amounts included in acquisition and integration costs.

Table D: Organic Sales Change Reconciliation (% Change)

	GAAP Reported Growth	Impact of Acquisitions and Foreign Currency^(a)	Non-GAAP Organic Change
QTD Change (2Q 2022 vs. 2Q 2021)
Medical Sales
Cardio & Vascular	24.8%	8.1%	16.7%
Cardiac Rhythm Management & Neuromodulation	1.7%	7.1%	(5.4)%
Advanced Surgical, Orthopedics & Portable Medical	—%	(0.1)%	0.1%
Total Medical Sales	12.7%	7.1%	5.6%
Non-Medical Sales	(1.4)%	—%	(1.4)%
Total Sales	12.2%	6.9%	5.3%

YTD Change (6M 2022 vs. 6M 2021)
Medical Sales
Cardio & Vascular	18.8%	6.3%	12.5%
Cardiac Rhythm Management & Neuromodulation	1.5%	8.1%	(6.6)%
Advanced Surgical, Orthopedics & Portable Medical	(0.9)%	(0.1)%	(0.8)%
Total Medical Sales	9.8%	6.6%	3.2%
Non-Medical Sales	6.9%	—%	6.9%
Total Sales	9.7%	6.4%	3.3%

^(a) Sales have been adjusted to exclude the impact of foreign currency exchange rate fluctuations and acquisitions.

Table E: Net Total Debt Reconciliation

(in thousands)

	July 1, 2022		December 31, 2021
Total debt	$	947,139	$	828,126
Add: Unamortized discount and deferred debt issuance costs included above		6,724		7,361
Total principal amount of debt outstanding		953,863		835,487
Less: Cash and cash equivalents		15,593		17,885
Net Total Debt (Non-GAAP)	$	938,270	$	817,602

Integer Holdings Corporation Reports Second Quarter 2022 Results