1Q17 Earnings Conference Call. May 8, 2017

Transcription

1 1Q17 Earnings Conference Call May 8, 2017

2 Presentation of Financial Information & Forward Looking Statements Historical financial and operating data in this presentation reflect the consolidated results of Integer for the periods indicated. This presentation includes financial information prepared in accordance with accounting principles generally accepted in the United States, or GAAP, as well as other financial measures referred to as non-gaap. The non-gaap financial measures in this presentation, which include Adjusted Net Income, Adjusted Diluted EPS, Earnings Before Interest Taxes Depreciation and Amortization (EBITDA), and Adjusted EBITDA, should be considered in addition to, but not as substitutes for, the information prepared in accordance with GAAP. For reconciliations of these non-gaap financial measures to the most comparable GAAP measures, please refer to the appendix to this presentation and the earnings release associated with this quarterly period which can be found in the investor relations section of our corporate website ( Statements made in this presentation whether written or oral may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of Securities Exchange Act of 1934, as amended, and involve a number of risks and uncertainties. These statements can be identified by terminology such as may, will, should, could, expects, intends, plans, anticipates, believes, estimates, predicts, potential or continue or variations or the negative of these terms or other comparable terminology. These statements are based on the company s current expectations and speak only as of May 8, The Company s actual results could differ materially from those stated or implied by such forward-looking statements. The Company assumes no obligation to update forward-looking information, including information in this presentation, to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial conditions or prospects. ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 2

3 Agenda Opening Comments Financial Results Product Line Review Strategic / Growth Initiatives Closing Comments Question & Answer Period ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 3

4 Opening Comments

5 Quarterly Results Reflect Continued Progress First quarter results are in-line with our full-year expectations and demonstrate continued progress as we move our business back to a growth trajectory following a challenging Q17 Financial Results Revenue trajectory continues to improve Adjusted Net Income up 26% organically Strong cash flow generation supports continued deleveraging Operational and Commercial Results Nearly complete with initial integration plans, focus shifting to optimization of new business processes Integration synergies on track for ~$50 million of cumulative savings through YE 2017 Improving customer relationships yielding dividends in 1Q17 Overcame a previously strained relationship to sign a multi-year outsourcing agreement of a 100% insourced product. Signed agreement with a large customer to manage a complex portion of their supply chain for an existing product line we currently manufacture ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 5

6 Revenue Recovery Growth in 2017 Revenue trajectory continues to improve 5% Revenue Trailing 4 Quarters 0% to 3% Organic Growth 0% (1)% (2)% (5)% (4)% 4Q15 4Q16 1Q17 4Q17 Trailing 4-quarter Actuals Outlook ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 6

7 Financial Results

8 1Q17 Adjusted Financial Results (1) $( in millions, except per share amounts) Revenue Adjusted EBITDA Adjusted Net Income % Growth +5% organic (2) +4% reported +4% organic (3) (2)% reported +26% organic (3) (1)% reported $331 $345 $65 $64 $13 $13 1Q16 1Q17 1Q16 1Q17 1Q16 1Q17 Adjusted EPS $0.42 $0.41 (1) Refer to the appendix of this presentation for a reconciliation of Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS to the most directly comparable GAAP measure (2) Organic growth for Revenue excludes the impact of foreign exchange and excludes the results of Nuvectra Corporation ( Nuvectra ) prior to its spin-off on March 14, 2016 (3) Organic growth for Adjusted EBITDA and Adjusted Net Income exclude the impact of foreign exchange reported in other (income) loss, net ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 8

9 Continued Revenue Improvement in 1Q17 10% Advanced Surgical, Orthopedics & Portable Medical 0% -10% Integer (1) -20% 1Q16 2Q16 3Q16 4Q16 1Q17 10% Quarterly YOY % Change 10% 0% -10% -20% 10% Cardio & Vascular Cardiac & Neuromodulation Quarterly YOY % Organic Change 5% 0% -5% -10% (7)% (8)% (1)% 0% 5% 0% -10% -20% -15% 1Q16 2Q16 3Q16 4Q16 1Q17 10% -10% Non-Medical (Electrochem) Returning to YOY revenue growth for the first time in five quarters -30% -50% (1) Excludes impact from changes in foreign currency exchange rates as well as the results of Nuvectra Corporation ( Nuvectra ) prior to its spin-off on March 14, For reconciliations of non-gaap financial measures to the most directly comparable GAAP measure, please refer to the appendix of this document ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 9

10 Driving Organic Growth to the Bottom Line $( in millions except per share amounts) Adjusted EBITDA (1) Adjusted EPS (1) $65 $3 $(4) $64 $0.09 $(0.10) Organic (2) FX $0.42 $0.41 Organic (2) FX 1Q16 1Q17 1Q16 1Q17 Adjusted Net Income $13.1 $2.9 $(3.1) $12.9 (1) Adjusted EBITDA, Adjusted EPS and Adjusted Net Income provided on a comparable basis. Comparable basis amounts for 1Q16 exclude the results of Nuvectra Corporation ( Nuvectra ) prior to its spinoff on March 14, Refer to the investor relations section of our website for historical pro forma information that contains a reconciliation of 1Q16 comparable amounts to as reported amounts. Refer to the appendix of this presentation for a reconciliation of Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS to the most directly comparable GAAP measure (2) Organic amounts exclude the impact of foreign exchange reported in other (income) loss, net ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 10

11 Continued Strong Cash Flow Generation Cash Flow From Operations $( in millions) Free Cash Flow $( in millions) $38 $34 $39 $21 $22 $26 Generating sufficient cash flow to meet current debt obligations and accelerate debt repayment $4 Repaid $29M of debt in 1Q17 total payments of $73M since acquisition Continued focus on reducing leverage 2Q16 3Q16 4Q16 1Q17 Debt Payments $( in millions) $(8) 2Q16 3Q16 4Q16 1Q17 Future Mandatory Debt Repayment Schedule $( in millions) $938 Near-term mandatory debt repayments very manageable Reduced interest on $1.0B of LT debt 75 bps No significant maturities until % fixed rate $29 $18 $11 1Q17 Accelerated Repayment Required Repayment $360 $230 $27 $30 $38 $ Well within covenant compliance requirements (1) Free Cash Flow defined as Cash from Operations less Capital Expenditures ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 11

12 Reaffirming our Full-Year 2017 Outlook Revenue Adjusted EPS Cash Flow from Operations $1,386 $1,390 - $1,430 $2.68 $ $3.10 $106 ~$ Outlook Outlook Outlook ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 12

13 Product Line Review

14 Advanced Surgical, Orthopedics & Portable Medical Providing a wide range of technologies and solutions to the Advanced Surgical and Orthopedic markets Orthopedic Implants & Instruments Laparoscopy & General Surgery Arthroscopy Products Biopsy & Drug Delivery Portable Medical (Power Solutions) % Change 15% 10% 5% 0% -5% -10% -15% -20% (12)% YOY Growth (1)(2) (5)% (3)% (3)% 1Q16 2Q16 3Q16 4Q16 1Q17 (1) YOY growth rates calculated using the Company s revised method to present sales by product-line. See slide 25 for further information. (2) 2017 YOY growth rate excludes the impact of foreign exchange ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 14 7% 1Q17 Revenue up YOY, primarily driven by return to expected Portable Medical volumes, following completion of facility transfer in 2016 Overall revenue performance is trending positively as a result of new product ramps in the Orthopedic and Arthroscopic product lines Expect incremental revenue growth in 2017 as new product launches reach anticipated volumes and base business sees increasing market growth Customer relationships remain strong; balancing customer needs for improved costs with continuous improvement initiatives and revenue growth Investments in innovation continue with focus on Wireless technology and Single Use Orthopedic instrumentation

15 Cardio & Vascular Offering a full-range of products and services for catheter-based interventional vascular devices and a suite of supply chain solutions to support the development and manufacturing of complex components, sub-assemblies and finished devices Steerable Sheaths Catheters & Sheaths Guidewires, Stylets & Accessories Introducers % Change 15% 10% 5% 0% 0% -5% -10% -15% -20% (2)% 0% YOY Growth (1) 2% 10% 1Q16 2Q16 3Q16 4Q16 1Q17 (1) YOY growth rates calculated using the Company s revised method to present sales by product-line. See slide 25 for further information. 9% Growth driven by longevity and strength of existing OEM and contract component business Historical variability in growth driven by customer stocking actions taken in advance of product facility transfers expect to see more normalized demand pattern in future quarters Positive outlook for 2017 several new opportunities, wellpositioned in sales process Strong customer relationships enabling deeper penetration and increased customer opportunities for future revenue ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 15

16 Cardiac & Neuromodulation Providing technology solutions for the active implantable medical device industry by partnering with customers to bring high-quality products to established and emerging markets from initial concept through to high-volume manufacturing Pulse Generator Components & Assemblies Leads & Lead Components, Adaptors & Assemblies Pulse Generators & External Solutions (Programmers, Chargers, Patient Devices) % Change 15% 10% 5% 0% -5% -10% -15% -20% YOY Growth (1)(2) 3% (4)% (5)% (3)% (13)% 1Q16 2Q16 3Q16 4Q16 1Q17 Demand strengthening and production ramping throughout the year on several key customer product lines including batteries, enclosures, feedthroughs and machined components Driving mid- and long-term growth through active support of higher growth rate neuromodulation customers Positive outlook for 2017 increased focus on customer relationships and value-added services expected to accelerate revenue opportunities (1) YOY growth rates calculated using the Company s revised method to present sales by product-line. See slide 25 for further information. (2) Excludes the results of Nuvectra Corporation prior to its spin-off on March 14, 2016 ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 16

17 Electrochem Enhancing lives worldwide by providing superior power solutions that enable the success and advancement of our customers critical applications Battery Cells Battery Packs Battery Chargers % Change 10% 0% 0% -10% -20% -30% -40% -50% YOY Growth (1) (3)% (14)% (26)% (34)% (41)% 1Q16 2Q16 3Q16 4Q16 1Q17 Revenue continues to trend towards YOY growth driven by increased North American energy customer activity Positive outlook for balance of 2017 pending continued stabilization in the Energy market Demonstrated history of operational and quality performance driving incremental revenue opportunities through market share gains and increased value add Military and Environmental customer volumes dependent on government funding (1) YOY growth rates calculated using the Company s revised method to present sales by product-line. See slide 25 for further information. Aggressively pursuing new customer and expanded market opportunities ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 17

18 Strategic / Growth Initiatives

19 Key Strategic Focus Areas Our vision is to enhance the lives of patients worldwide by being our customers partner of choice for innovative technologies and services. Executing our strategy Serving the needs of our customers as their global device outsource partner Leveraging our global presence and breadth of capabilities to provide high quality manufactured products from components to finished devices Delivering innovative design, process solutions and services Optimizing operations and commercial actions Continuous improvement and productivity initiatives across global operations Executing supply chain optimization programs Standardizing IT systems across the organization Penetrating high-growth market areas Transitioning leadership to drive further growth CEO search progressing well Interim CEO priorities Execute existing strategy and deliver on Integer commitments to customers, associates and investors New CFO (Gary Haire) started May 1 st, focusing on profitable growth, cash flow generation and operational improvements ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 19

20 Closing Comments

21 Well-Positioned for Future Growth Broad Product Continuum Engineered Components Engineered Sub-Assemblies Contract Manufactured Devices Customer Owned / Co-Developed Devices Integer Owned Systems, Devices & Co-Developed 80% 20% Technical Solutions (Traditional CMO) Product Solutions (More IP Focused) Strong Customer Relationships Operating & Manufacturing Scalability Innovation Pipeline to Enable Customer Success Business Optimization Driving Strong Cash Generation ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 21

22 Question & Answer Period

23 APPENDIX

24 Historical Financial Results $( in millions, except per share amounts) Revenue (1) Adjusted EPS (1)(2) $331 $12 $348 $347 $10 $9 $360 $11 $345 $11 $98 $109 $100 $107 $105 $0.83 $0.87 $107 $107 $108 $116 $104 $0.42 $0.56 $0.41 $114 $122 $129 $126 $125 1Q16 2Q16 3Q16 4Q16 1Q17 1Q16 2Q16 3Q16 4Q16 1Q17 Non-Medical Adv. Surgical, Ortho & Portable Medical (1) Revenue and Adjusted EPS information provided on a comparable basis. Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation Cardiac & Neuro Cardio & Vascular ( Nuvectra ) prior to its spin-off on March 14, Refer to the investor relations section of our website for historical pro forma information that contains a reconciliation of 1Q16 comparable amounts to as reported amounts. (2) Refer to the appendix of this presentation for a reconciliation of Adjusted Net Income to the most directly comparable GAAP measure ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 24

25 Revised Product-Line Historical Financial Results (1) 2015 Product-Line Sales (2) 1Q15 2Q15 3Q15 4Q15 FY2015 Medical Sales Advanced Surgical, Orthopedics, & Portable Medical $ 112,081 $ 115,113 $ 103,764 $ 109,941 $ 440,899 Cardiac & Neuromodulation 111, , , , ,789 Cardio & Vascular 116, , , , ,701 Total Medical Sales $ 340,157 $ 360,372 $ 336,443 $ 346,417 $ 1,383,389 Non-Medical Sales (Electrochem) 17,710 16,545 11,977 13,217 59,449 Total Sales $ 357,867 $ 376,917 $ 348,420 $ 359,634 $ 1,442, Product-Line Sales (2) 1Q16 2Q16 3Q16 4Q16 FY2016 Medical Sales Advanced Surgical, Orthopedics, & Portable Medical $ 98,362 $ 109,391 $ 100,203 $ 106,745 $ 414,701 Cardiac & Neuromodulation 107, , , , ,361 Cardio & Vascular 113, , , , ,857 Total Medical Sales $ 319,386 $ 338,563 $ 337,697 $ 348,273 $ 1,343,919 Non-Medical Sales (Electrochem) 11,672 9,819 8,870 11,318 41,679 Total Sales $ 331,058 $ 348,382 $ 346,567 $ 359,591 $ 1,385,598 (1) During 1Q17, the Company revised the method used to present sales by product-line in order to align the legacy Greatbatch and Lake Region methodologies. The Company believes the revised presentation will provide improved reporting and better transparency into the operational results of its business and markets. Prior period amounts have been reclassified to conform to the new product-line sales reporting presentation. (2) Sales information provided on a comparable basis. Comparable basis amounts for 2016 exclude the results of Nuvectra Corporation ( Nuvectra ) prior to its spin-off on March 14, Comparable amounts for 2015 exclude the results of Nuvectra and include the results of the former Lake Region Medical. ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 25

26 Working Capital 1Q16 2Q16 3Q16 4Q16 1Q17 Inventory $267 $276 $262 $225 $231 Inventory Turns (1) Capital Expenditures $19 $12 $17 $11 $12 Working Capital $( in millions) $318 $317 $325 $332 $325 1Q16 2Q16 3Q16 4Q16 1Q17 (1) Inventory Turns calculated as COGS divided by quarterly Average Inventory multiplied by 4 to reach an annualized number ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 26

27 Other Operating Expenses Three Months Ended 2014 Investments in Capacity and Capabilities Legacy Lake Region Medical Consolidation and Optimization 1Q17 1Q16 NOTES: $1.6 $4.2 $0.7 $2.4 Portable Medical and Vascular product line transfers Acquisition and Integration Costs $4.8 $10.0 Lake Region Medical Asset Dispositions, Severance, and Other Other consolidation and disposition initiatives $4.6 $4.5 $0.1 $0.1 Nuvectra spin-off in 1Q16 Management transition costs in 1Q17 TOTAL OOE $11.8 $21.1 ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 27

28 Non-GAAP Reconciliation Net Income and Diluted EPS Reconciliation QTD (in thousands except per share amounts) Pre-Tax Three Months Ended March 31, 2017 April 1, 2016 Net Income (Loss) Per Diluted Share Pre-Tax Net Income (Loss) Per Diluted Share As reported (GAAP) $ (4,195) $ (4,339) $ (0.14) $ (12,762) $ (12,660) $ (0.41 Adjustments: Amortization of intangibles (a) 10,978 7, ,464 6, IP related litigation (SG&A) (a)(b) ,907 1, Consolidation and optimization expenses (OOE) (a)(c) 2,395 1, ,649 5, Acquisition and integration expenses (OOE) (a)(d) 4,820 3, ,965 6, Asset dispositions, severance and other (OOE) (a)(e) 4,556 2, ,526 4, (Gain) loss on cost and equity method investments, net (a) (1,301) (846) (0.03 Loss on extinguishment of debt (a)(f) 1,559 1, Nuvectra results prior to spin-off (a)(g) 4,037 2, Taxes (a) (7,975) (9,385) Adjusted (Non-GAAP) $ 12,913 $ 0.41 $ 13,100 $ 0.42 Adjusted diluted weighted average shares (h) 31,685 31,253 See the Footnotes to this table on Slide 31 of this presentation ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 28

29 Non-GAAP Reconciliation 1Q17 Net Income and Diluted EPS Reconciliation GAAP Income Statement 1Q17 Actual Amortization Litigation Related Charges (b) Non-GAAP Adj. (a) Consolidation & Optimization (c)(e) Acquisition & Integration (d) Debt / Investment Related Charges (f) Non-GAAP 1Q17 Adjusted Sales $ 345,413 $ 345,413 Cost of sales 254,187 (4,084) 250,103 Gross profit $ 91,226 $ 4,084 $ - $ - $ - $ - $ 95,310 Gross margin 26.4% 27.6% Operating expenses: SG&A 39,499 (6,758) (377) 32,364 SG&A as a % of revenues 11.4% 9.4% Research, development & engineering 13,411 (136) 13,275 RD&E as a % of revenues 3.9% 3.8% Other operating expense 11,771 (6,951) (4,820) - Operating income $ 26,545 $ 10,978 $ 377 $ 6,951 $ 4,820 $ - $ 49,671 Operating margin 7.7% 14.4% Other (income) & expenses: Interest expense 28,893 (1,559) 27,334 Interest income - - Other (income) loss, net 1,847 (398) 1,449 Loss before income taxes $ (4,195) $ 10,978 $ 377 $ 6,951 $ 4,820 $ 1,957 $ 20,888 Provision for income taxes 144 3, ,095 1, ,975 Effective tax rate -3.43% 38.18% Net income (loss) $ (4,339) $ 7,746 $ 245 $ 4,856 $ 3,133 $ 1,272 $ 12,913 Net margin -1.3% 3.7% Weighted Average Shares O/S (h) 31,685 31,685 31,685 31,685 31,685 31,685 31,685 EPS $ (0.14) $ 0.24 $ 0.01 $ 0.15 $ 0.10 $ 0.04 $ 0.41 See the Footnotes to this table on Slide 31 of this presentation ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 29

30 Non-GAAP Reconciliation 1Q16 Net Income and Diluted EPS Reconciliation THREE MONTHS ENDED GAAP Non-GAAP Adj. (a) Non-GAAP Debt / Income Statement 1Q16 Actual Amortization Litigation Related Charges (b) Consolidation & Optimization (c)(e) Acquisition & Integration (d) Nuvectra Spin (g) Investment Related Charges (f) 1Q16 Adjusted Sales $ 332,238 $ (1,180) $ 331,058 Cost of sales 240,770 (4,240) (526) 236,004 Gross profit $ 91,468 $ 4,240 $ - $ - $ - $ (654) $ - $ 95,054 Gross margin 27.5% 28.7% Operating expenses: SG&A 41,888 (5,136) (1,907) (1,861) 32,984 SG&A as a % of revenues 12.6% 9.9% Research, development & engineering 17,306 (88) (2,830) 14,388 RD&E as a % of revenues 5.2% 4.3% Other operating expense 21,140 (11,175) (9,965) - - Operating income $ 11,134 $ 9,464 $ 1,907 $ 11,175 $ 9,965 $ 4,037 $ - $ 47,682 Operating margin 3.4% 14.4% Other (income) & expenses: Interest expense 27,617 27,617 Interest income - - Other (income) loss, net (3,721) 1,301 (2,420) Loss before income taxes $ (12,762) $ 9,464 $ 1,907 $ 11,175 $ 9,965 $ 4,037 $ (1,301) $ 22,485 Provision for income taxes (102) 2, ,635 3,454 1,413 (455) 9,385 Effective tax rate 0.80% 41.74% Net income (loss) $ (12,660) $ 6,691 $ 1,240 $ 9,540 $ 6,511 $ 2,624 $ (846) $ 13,100 Net margin -3.8% 4.0% Weighted Average Shares O/S (h)(j) 30,718 31,253 31,253 31,253 31,253 31,253 31,253 31,253 EPS (i) $ (0.41) $ 0.21 $ 0.04 $ 0.31 $ 0.21 $ 0.08 $ (0.03) $ 0.42 See the Footnotes to this table on Slide 31 of this presentation ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 30

31 Non-GAAP Reconciliations Footnotes to Net Income and Diluted EPS Reconciliation (a) (b) (c) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment. Net income amounts are computed using a 35% U.S. tax rate, and the statutory tax rates in Mexico, Germany, France, Netherlands, Uruguay, Ireland and Switzerland, as adjusted for the existence of net operating losses. Expenses that are not deductible for tax purposes (i.e. permanent tax differences) are added back at 100%. In 2013, we filed suit against AVX Corporation alleging they were infringing our intellectual property. Given the complexity and significant costs incurred pursuing this litigation, we are excluding these litigation expenses from adjusted amounts. This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded the Company $37.5 million in damages. To date, no gains have been recognized in connection with this litigation. During 2017 and 2016, we incurred costs primarily related to the transfer of our Beaverton, OR portable medical and Plymouth, MN vascular manufacturing operations to Tijuana, Mexico, the closure of our Arvada, CO, site and the consolidation of our two Galway, Ireland sites. In addition, 2017 costs also include expenses related to the closure of our Clarence, NY facility. (d) Reflects acquisition and integration costs related to the acquisition of Lake Region Medical, which was acquired in October (e) (f) Amounts for 2017 include approximately $4.7 million of expense related to our CEO and CFO transitions. Costs for 2016 primarily include legal and professional fees incurred in connection with the spin-off of Nuvectra, which was completed in March Represents debt extinguishment charges in connection with pre-payments made on our Term B Loan Facility in the first quarter 2017, which are included in Interest Expense. (g) Represents the results of Nuvectra Corporation ( Nuvectra ) prior to its spin-off on March 14, (h) The adjusted diluted weighted average shares for the three months ended March 31, 2017 and April 1, 2016 include 669,000 and 535,000, respectively, of potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been antidilutive given the Company s net loss in those quarters. ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 31

32 Non-GAAP Reconciliations Adjusted EBITDA Reconciliation (in thousands) Three Months Ended March 31, 2017 April 1, 2016 Net loss (GAAP) $ (4,339 ) $ (12,660 ) Interest expense 28,893 27,617 (Benefit) provision for income taxes 144 (102) Depreciation 13,628 12,949 Amortization 10,978 9,464 EBITDA 49,304 37,268 IP related litigation 377 1,907 Stock-based compensation (excluding OOE) 2,406 2,029 Consolidation and optimization expenses 2,395 6,649 Acquisition and integration expenses 4,820 9,965 Asset dispositions, severance and other 4,556 4,526 Noncash (gain) loss on cost and equity method investments 398 (639) Nuvectra results prior to spin-off (a) 3,665 Adjusted EBITDA (Non-GAAP) $ 64,256 $ 65,370 a) Represents the results of Nuvectra prior to its spin-off in March 2016 ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 32

33 Non-GAAP Reconciliations Organic Revenue Growth Rate Reconciliation Growth Rates Medical Sales As Reported Three Months Ended 1Q 2017 Impact of Nuvectra Prior to Spin-off Foreign Currency Organic Growth Cardio & Vascular 10 % 10 % Cardiac & Neuromodulation (a) (4 )% 1 % (3 )% Advanced Surgical, Orthopedics & Portable Medical (b) 7 % 1 % 8 % Total Medical Sales 4 % 1 % 5 % Non-Medical Sales (3 )% (3 )% Total Sales 4 % 1 % 5 % (a) (b) Cardiac & Neuromodulation sales for 2016 includes $1.2 million relating to Nuvectra prior to its spin-off on March 14, This amount is excluded from prior year amounts when calculating organic percentage change. First quarter 2017 sales were negatively impacted by approximately $1.4 million due to foreign currency exchange rate fluctuations, primarily in our AS&O product line. ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 33

34 Non-GAAP Reconciliations Non-GAAP Organic Growth Rate Reconciliation Growth (Decline) % GAAP Three Months Ended 1Q 2017 Impact of Impact of Foreign Non-GAAP Currency Adjustments (a) Loss (b) Organic Growth EBITDA 32 % (34)% 6% 4% Net Income (Loss) (66)% 65 % 27% 26% Diluted EPS (66)% 64 % 26% 24% (a) Represents the impact to our growth rate from our Non-GAAP adjustments. See Tables A and B for further detail on these items. (b) Represents the impact to our growth rate of the $3.8 million foreign exchange loss increase $(3.1 million net of tax, $0.10 per diluted share) reported in other (income) loss, net from the first quarter of 2017 compared to the first quarter of ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 34

35 Non-GAAP Reconciliations 2017 Full-Year Outlook $( in millions, except per share amounts) GAAP Non-GAAP As Reported Growth Adjusted Basis Growth Revenue $1,390 to $1,430 0% to 3% $1,390 to $1,430 0% to 3% Earnings per Diluted Share $1.03 to $1.43 favorable $2.70 to $3.10 1% to 16% Cash Flow from Operations ~$150 ~43% Supplemental Financial Items Affecting Cash Flow (in millions, except effective tax rate): 2017 Outlook 2016 Actual Capital expenditures $50 - $60 $59 Depreciation and amortization $95 - $100 $91 Stock-based compensation ~$13 $8 Working capital decrease $10 - $20 $29 Other operating expense $25 - $30 $62 Adjusted effective tax rate ~25% 23% Cash Taxes ~$10 ~$7 Except as described below, further reconciliations by line item to the closest corresponding GAAP financial measures for Adjusted Basis Earnings per Diluted Share, included in our Business Outlook above, are not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and visibility of the charges excluded from this non-gaap financial measure. Adjusted EPS for 2017 is expected to consist of GAAP Net Income and EPS, excluding items such as intangible amortization, IP related litigation costs, and consolidation, acquisition, integration, and asset disposition/write-down charges totaling approximately $77 million. The after-tax impact of these items is estimated to be approximately $53 million, or approximately $1.67 per diluted share. ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 35

36 Contact Information Amy Wakeham VP, Investor Relations Integer (O) (M) ITGR: 1Q17 Earnings Conference Call / May 8, 2017 / Page 36