Integer Holdings Corp.

02/23/2026 | Press release | Distributed by Public on 02/23/2026 07:04

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes appearing in Item 8, "Financial Statements and Supplementary Data," of this report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those under the heading Item 1A, "Risk Factors," of this report. Unless otherwise stated, all results and comparisons below represent results from continuing operations.
Our Business
Integer Holdings Corporation is one of the largest medical device contract development and manufacturing organizations in the world, serving the cardio and vascular, neuromodulation, and cardiac rhythm management markets. As a strategic partner of choice, we advance the goals of our medical device customers through industry-leading engineering and manufacturing, with a relentless commitment to quality, service, and innovation.
We operate our business in one segment and derive our revenues from three product lines: Cardio & Vascular, Cardiac Rhythm Management & Neuromodulation and Other Markets.
Impact of Global Events
Our future results of operations and liquidity could be materially adversely affected by uncertainty surrounding macroeconomic and geopolitical factors in the U.S. and globally characterized by the supply chain environment, inflationary pressure, changes in interest rates, disruptions in the commodities' markets or in supply chain as a result of wars in Ukraine and the Middle East, and the tensions in Asia relating to China and Taiwan, and the introduction of or changes in tariffs or trade barriers. The impact of these issues on our business will vary by geographic market and product line, but specific impacts to our business may include increased borrowing costs, labor shortages, disruptions in the supply chain, delayed or reduced customer orders and sales, delays in shipments to and from certain countries and potential increased expenses resulting from tariffs or other trade barriers.
We monitor economic conditions closely. In response to reductions in revenue, we can take actions to align our cost structure with changes in demand and manage our working capital. However, there can be no assurance as to the effectiveness of our efforts to mitigate any impact of the current and future adverse economic conditions and other developments.
Sales Outlook
In 2026, we expect sales growth to be impacted by lower sales related to three new products due to lower than anticipated market adoption. We believe the magnitude of these changes on multiple products at the same time is highly unusual.
2030 Convertible Notes Issuance and 2028 Convertible Notes Exchange Transactions
On March 18, 2025, we issued $1.0 billion in aggregate principal amount of 1.875% Convertible Senior Notes due in 2030 (the "2030 Convertible Notes"). The total net proceeds from the issuance of the 2030 Convertible Notes, after deducting initial purchasers' discounts and commissions and debt issuance costs, were $976.1 million. We used $71.0 million of the net proceeds from the offering to fund the cost of entering into capped call transactions relating to the 2030 Convertible Notes.
We used a portion of the remaining net proceeds from the issuance of the 2030 Convertible Notes to exchange $383.7 million in aggregate principal amount of our outstanding 2.125% Convertible Senior Notes due in 2028 (the "2028 Convertible Notes" and together with the "2030 Convertible Notes" the "Convertible Notes") for an aggregate cash exchange consideration of $384.4 million in cash and 1,553,806 shares of common stock (the "Note Exchange Transactions"). The Note Exchange Transactions were considered an induced conversion and, as a result, we recorded $46.7 million during 2025 in induced conversion expense within Other loss, net in the Consolidated Statements of Operations. Contemporaneously with the Note Exchange Transactions, we terminated a portion of the capped call transactions related to the 2028 Convertible Notes and received 436,963 shares of common stock. We allotted the remainder of the net proceeds to pay the down our revolving credit facility and five-year "term A" loan.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Business Acquisitions
We selectively evaluate acquisitions as a means to acquire additional technology or manufacturing capabilities to expand our product offering in our key existing growth markets. Consistent with our tuck-in acquisition strategy, since the beginning of 2022 we have completed the following acquisitions, including those that impact the comparability of our results between periods:
On December 4, 2025, we acquired certain assets of Biocoat. Prior to the acquisition, Biocoat was a privately-held manufacturer specializing in high value surface coating technology platforms, including UV and thermal cure hydrophilic coatings.
On February 28, 2025, we acquired substantially all of the assets and assumed certain liabilities of VSi . Prior to the acquisition, VSi was a privately-held full-service provider of parylene coating solutions, primarily focused on complex medical device applications.
On January 7, 2025, we acquired substantially all of the assets and assumed certain liabilities of Precision. Prior to the acquisition, Precision was a privately-held manufacturer specializing in high value surface coating technology platforms, including fluoropolymer, anodic coatings, ion treatment solutions and laser processing.
On January 5, 2024, we acquired 100% of the outstanding capital stock of Pulse Technologies, Inc. ("Pulse"), a technology, engineering and contract manufacturing company focused on complex micro machining of medical device components for high growth structural heart, heart pump, electrophysiology, leadless pacing, and neuromodulation markets. Pulse also provides proprietary advanced technologies, including hierarchical surface restructuring (HSRTM), scratch-free surface finishes, and titanium nitride coatings. The acquisition of Pulse further increased our end-to-end development capabilities and manufacturing footprint in targeted growth markets and provides customers with expanded capabilities, capacity and resources to accelerate the time to market for customer products.
Refer to Note 2, "Business Acquisitions" of the Notes to Consolidated Financial Statements contained in Item 8, "Financial Statements and Supplementary Data," of this report for additional information about the transactions above.
Discontinued Operations
On October 31, 2024, we completed the sale of our wholly-owned subsidiary Electrochem Solutions, Inc. ("Electrochem"), which focused on nonmedical applications for the energy, military and environmental sectors. As a result of the Electrochem divestiture, the results of operations of the Electrochem business have been classified as discontinued operations for all periods presented.
Loss from discontinued operations was not material for 2025. Loss from discontinued operations, net of tax, was $1.2 million for 2024, which represented the results of operations of Electrochem for ten months prior to its divestiture on October 31, 2024 and a pre-tax gain on sale of discontinued operations of $0.8 million.
All results and information presented exclude discontinued operations unless otherwise noted. Refer to Note 3, "Discontinued Operations" of the Notes to Consolidated Financial Statements contained in Item 8, "Financial Statements and Supplementary Data," of this report for additional information on the divestiture of Electrochem.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Our Financial Results
The following table presents selected financial information derived from our Consolidated Financial Statements, contained in Item 8, "Financial Statements and Supplementary Data," of this report, for the periods presented (dollars in thousands, except per share amounts):
Change
2025 vs. 2024
2025 2024 $ %
Cardio & Vascular $ 1,107,084 $ 949,576 $ 157,508 16.6 %
Cardiac Rhythm Management & Neuromodulation 668,803 660,610 8,193 1.2 %
Other Markets 77,750 106,410 (28,660) (26.9) %
Total sales 1,853,637 1,716,596 137,041 8.0 %
Cost of sales 1,353,251 1,257,582 95,669 7.6 %
Gross profit 500,386 459,014 41,372 9.0 %
Gross profit as a % of sales 27.0 % 26.7 %
Operating expenses:
Selling, general and administrative 211,748 185,202 26,546 14.3 %
SG&A as a % of sales 11.4 % 10.8 %
Research, development and engineering 49,499 53,425 (3,926) (7.3) %
RD&E as a % of sales 2.7 % 3.1 %
Restructuring and other charges 17,875 12,149 5,726 47.1 %
Total operating expenses 279,122 250,776 28,346 11.3 %
Operating income 221,264 208,238 13,026 6.3 %
Operating expense as a % of sales 15.1 % 14.6 %
Operating income as a % of sales ("Operating margin") 11.9 % 12.1 %
Interest expense 43,206 56,374 (13,168) (23.4) %
(Gain) loss on equity investments, net (550) 780 (1,330) NM
Other loss, net 53,212 3,521 49,691 NM
Income from continuing operations before income taxes 125,396 147,563 (22,167) (15.0) %
Provision for income taxes 22,566 26,510 (3,944) (14.9) %
Effective tax rate 18.0 % 18.0 %
Income from continuing operations $ 102,830 $ 121,053 $ (18,223) (15.1) %
Income from continuing operations as a % of sales 5.5 % 7.1 %
Diluted earnings per share from continuing operations $ 2.89 $ 3.40 $ (0.51) (15.0) %
NM - Calculated change not meaningful.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
2025 Compared to 2024
The following discussion is a comparison between results for the years ended December 31, 2025 and 2024. For a discussion of our results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, please refer to Item 7 of Part II, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, which was filed with the SEC on February 20, 2025.
Financial Overview
Income from continuing operations for 2025 was $102.8 million or $2.89 per diluted share compared to $121.1 million or $3.40 per diluted share for 2024. These variances are primarily the result of the following:
•Sales for 2025 increased 8% to $1.854 billion, driven by new product ramps in targeted high-growth markets, higher demand across our base business, and contributions from our recent acquisitions.
•Gross profit for 2025 increased $41.4 million, or 9%, primarily from higher sales volume leverage, efficiencies gained from the continued improvement in the supply chain and contributions from our recent acquisitions.
•Operating expenses for 2025 increased by $28.3 million compared to 2024, due to higher SG&A and Restructuring and other charges, partially offset by lower RD&E costs.
•Interest expense for 2025 decreased by $13.2 million, primarily due to lower interest rates on our outstanding borrowings, partially offset by higher average debt balance outstanding and higher losses from extinguishment of debt.
•We recognized net gains on equity investments of $0.6 million during 2025 compared to net losses of $0.8 million during 2024. Gains and losses on equity investments are generally unpredictable in nature.
•Other loss, net for 2025 and 2024 was $53.2 million and $3.5 million, respectively, primarily driven by a $46.7 million of debt conversion inducement expense recorded in 2025 related to the partial exchange of our outstanding 2028 Convertible Notes during the first quarter of 2025.
•We recorded provisions for income taxes of $22.6 million and $26.5 million for 2025 and 2024, respectively. The changes in income tax were primarily due to relative changes in pre-tax income and the impact of discrete tax items.
Sales
Sales by product line for 2025 and 2024 were as follows (dollars in thousands):
Change
2025 2024 $ %
Cardio & Vascular $ 1,107,084 $ 949,576 $ 157,508 16.6 %
Cardiac Rhythm Management & Neuromodulation 668,803 660,610 8,193 1.2
Other Markets 77,750 106,410 (28,660) (26.9)
Total sales $ 1,853,637 $ 1,716,596 $ 137,041 8.0
Cardio & Vascular ("C&V") sales for 2025 increased $157.5 million, or 17%, in comparison to 2024. The increase in C&V sales for 2025 was driven by strong growth from new product ramps in electrophysiology, contributions from acquisitions, and strong demand in neurovascular. C&V sales for 2025 included $58.7 million of aggregate sales attributable to the 2025 acquisitions. Foreign currency exchange rate fluctuations increased C&V sales for 2025 by $2.2 million in comparison to 2024, primarily due to U.S. dollar fluctuations relative to the Euro.
Cardiac Rhythm Management & Neuromodulation ("CRM&N") sales for 2025 increased $8.2 million, or 1%, in comparison to 2024, with Cardiac Rhythm Management and Neuromodulation growing at market, offset by the planned decline of an early spinal cord simulation neuromodulation finished implantable pulse generator (non-emerging) customer, announced in 2020. Foreign currency exchange rate fluctuations did not have a material impact on CRM&N sales for 2025 in comparison to 2024.
Other Markets sales for 2025 decreased $28.7 million, or 27%, in comparison to 2024, driven by the decline in Portable Medical from the multi-year exit announced in 2022. Foreign currency exchange rate fluctuations did not have a material impact on Other Markets sales for 2025 in comparison to 2024.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Gross Profit
Change
2025 2024 $ %
Gross profit (in thousands) $ 500,386 $ 459,014 $ 41,372 9.0 %
Gross margin 27.0 % 26.7 %
Gross profit as a percent of sales ("Gross margin") for 2025 increased 30 basis points compared to 2024. Gross margin, or gross profit as a percentage of sales, has been and will continue to be affected by a variety of factors, including the average sales price of our products and services and transaction volume growth. We expect our gross margin to fluctuate over time depending on the factors described above.
SG&A Expenses
SG&A expenses comprise the following for 2025 and 2024 (in thousands):
Change
2025 2024 $ %
Compensation and benefits(a)
$ 109,012 $ 97,086 $ 11,926 12.3 %
Depreciation and amortization expense(b)
50,852 42,837 8,015 18.7
Professional fees(c)
19,889 16,338 3,551 21.7
Contract services(d)
17,196 14,197 2,999 21.1
Bank fees and charges 3,446 3,695 (249) (6.7)
Travel and entertainment 3,324 2,641 683 25.9
All other SG&A 8,029 8,408 (379) (4.5)
Total SG&A expense
$ 211,748 $ 185,202 $ 26,546
__________
(a)Compensation and benefits increased primarily due to annual merit increases, acquisitions, leadership transition costs, and enterprise resource planning ("ERP") implementation costs. Leadership transition costs primarily include incremental costs associated with executive leadership transitions. ERP implementation costs relate to direct and incremental costs incurred in connection with our multi-phase implementation of a new ERP solution and the related technology infrastructure costs.
(b)Depreciation and amortization expense increased due to amortization of customer list intangible assets related to recent acquisitions.
(c)Professional fees increased primarily due to higher legal and consulting fees.
(d)Contract services expense increased primarily due to higher software costs from information technology enhancements.
RD&E
RD&E expenses for 2025 and 2024 were $49.5 million and $53.4 million, respectively. The decrease in RD&E expenses for 2025 compared to 2024 was primarily due to the timing of program milestone achievements for customer funded programs. RD&E expenses are influenced by the number and timing of in-process projects and labor hours and other costs associated with these projects. Our research and development initiatives continue to emphasize new product development, product improvements, and the development of new technological platform innovations.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Restructuring and Other Charges
We continuously evaluate our business and identify opportunities to realign resources to better serve our customers and markets, improve operational efficiency and capabilities, and lower operating costs. To realize the benefits associated with these opportunities, we undertake restructuring-type activities to transform our business. We incur costs associated with these activities, which primarily include exit and disposal costs and other costs directly related to the restructuring initiative. Restructuring charges include exit and disposal costs from these activities. In addition, from time to time, we incur costs associated with acquiring and integrating businesses, and certain other general expenses, including asset impairments.
Restructuring and other charges comprise the following for 2025 and 2024 (in thousands):
Change
2025 2024 $ %
Restructuring charges(a)
2,284 4,013 (1,729) (43.1) %
Acquisition and integration costs(b)
8,165 8,941 (776) (8.7)
Other general expenses(c)
7,426 (805) 8,231 NM
Total restructuring and other charges
$ 17,875 $ 12,149 $ 5,726 47.1
NM - Calculated change not meaningful.
__________
(a)Restructuring charges for 2025 and 2024 primarily consisted of costs associated with our operational excellence and manufacturing alignment to support growth initiatives.
(b)Amount for 2025 includes $1.8 million of acquisition expenses and $6.3 million of integration expenses. Acquisition expenses 2025 primarily include acquisition expenses related to the Precision, VSi, and Biocoat acquisitions, and are net of a benefit for adjustments to the fair value of acquisition-related contingent consideration liabilities totaling $2.3 million. Amount for 2024 includes acquisition expenses of $5.5 million, primarily related to the Pulse and Precision acquisitions, and $3.4 million of integration expenses. The acquisition amount for 2024 is net of benefits of $3.6 million related to adjustments to the fair value of acquisition-related contingent consideration liabilities. See Note 18, "Financial Instruments and Fair Value Measurements," of the Notes to Consolidated Financial Statements contained in Item 8, "Financial Statements and Supplementary Data," of this report for additional information related to the fair value measurement of the contingent consideration.
(c)Amount for 2025 includes $6.9 million primarily related to termination benefits from actions to align labor with manufacturing volumes. Amount for 2024 includes loss recoveries of $1.2 million recorded during the second quarter of 2024 relating to property damage which occurred in the fourth quarter of 2023 at one of our manufacturing facilities. Amounts for both years also include gains and losses in connection with the disposal of property, plant and equipment.
Refer to Note 12, "Restructuring and Other Charges," of the Notes to Consolidated Financial Statements contained in Item 8, "Financial Statements and Supplementary Data," of this report for additional information regarding these initiatives.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Interest Expense
Information relating to our interest expense for 2025 and 2024 is as follows (dollars in thousands):
2025 2024 Change
Amount Rate Amount Rate Amount Rate (bp)
Contractual interest expense $ 34,736 2.81 % $ 51,520 4.83 % $ (16,784) (202)
Amortization of deferred debt issuance costs and original issue discount 5,989 0.54 4,057 0.42 1,932 12
Loss from extinguishment of debt
893 0.07 - - 893 7
Interest expense on borrowings 41,618 3.42 % 55,577 5.25 % (13,959) (183)
Other interest expense 1,588 797 791
Total interest expense $ 43,206 $ 56,374 $ (13,168)
Interest expense relates primarily to borrowings made under our Senior Secured Credit Facilities, which consist of a five-year $800 million revolving credit facility (the "Revolving Credit Facility") and a five-year "term A" loan (the "TLA Facility"), and our Convertible Notes. Other interest expense primarily includes interest on finance leases.
During 2025, contractual interest expense has decreased due to a lower weighted average interest rate, partially offset by a higher average debt balance outstanding and higher losses from extinguishment of debt. The favorable weighted average interest rate is due to the replacement of some of our higher variable rate debt with lower fixed rate debt through issuance of the 2030 Convertible Notes. The higher average debt balance outstanding is primarily the result of borrowings to fund the 2025 acquisitions.
Other components of interest expense on borrowings include non-cash amortization and write-off (losses from extinguishment of debt) of deferred debt issuance costs and original issue discount. Amortization of deferred debt issuance costs and original issue discount increased during 2025 compared to 2024 as a result of higher unamortized balances related to new debt. The losses from extinguishment of debt during 2025 were related to prepayments of portions of the TLA Facility, primarily in connection with issuance of our 2030 Convertible Notes.
As of December 31, 2025 and 2024, approximately 92% and 50%, respectively, of our principal amount of debt were fixed rate borrowings.
See Note 9, "Debt," of the Notes to the Consolidated Financial Statements contained in Item 8, "Financial Statements and Supplementary Data," of this report for additional information pertaining to our debt.
(Gain) Loss on Equity Investments, Net
During 2025 and 2024, we recognized net gains of $0.6 million and net losses of $0.8 million, respectively, on our equity investments. Gains and losses on equity investments are generally unpredictable in nature. During 2024, we recognized impairment charges of $0.2 million related to investments in our non-marketable equity securities. The residual gains and losses for 2025 and 2024 relate to our share of equity method investee gains/losses, including unrealized appreciation and depreciation of the underlying interests of the investee. As of December 31, 2025 and December 31, 2024, the carrying value of our equity investments was $7.9 million and $7.4 million, respectively. See Note 18, "Financial Instruments and Fair Value Measurements," of the Notes to Consolidated Financial Statements contained in Item 8, "Financial Statements and Supplementary Data," of this report for further details regarding these investments.
Other Loss, Net
Other loss, net reflects certain items not directly related to our core operations, including foreign currency gains and losses from the impact of exchange rates on transactions denominated in foreign currencies and other non-core items. Other loss, net for 2025 and 2024 were net losses of $53.2 million and $3.5 million, respectively. Other loss, net for 2025 includes $46.7 million of debt conversion inducement expense, which was recognized in the first quarter of 2025, related to the partial exchange of our outstanding 2028 Convertible Notes, and foreign currency losses totaling $6.1 million. Other loss, net for 2024 includes and foreign currency losses totaling $3.2 million. Our foreign currency transaction gains/losses are based primarily on fluctuations of the U.S. dollar relative to the Euro, Mexican peso, Uruguayan peso and Malaysian ringgits.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Provision for Income Taxes
Information relating to our provision for income taxes for 2025 and 2024 is as follows (dollars in thousands):
Change
2025 2024 $ %
Income before taxes $ 125,396 $ 147,563 (22,167) (15.0) %
Provision for income taxes
22,566 26,510 (3,944) (14.9)
Effective tax rate
18.0 % 18.0 %
The provision for income taxes was $22.6 million and $26.5 million for the years ended December 31, 2025 and 2024, respectively. The decrease in the tax provision was primarily due to lower net income before taxes, a recognized increase in the impact of deductible stock based compensation, net of limitations, an increase in R&D tax credits and tax benefits associated with realized foreign tax credits, the year over year change in unrecognized tax benefits, and the impact of earnings realized in foreign jurisdictions with statutory rates that are different than the U.S. federal statutory rate, partially offset by the impact of the net nondeductible induced conversion expenditures incurred as a result of the induced conversion from the exchange of the 2028 Convertible Notes and an increase in global minimum tax (Pillar 2).
There is a potential for volatility of our effective tax rate due to several factors, including changes in the mix of pre-tax income and the jurisdictions to which it relates, business acquisitions, settlements with taxing authorities, changes in tax rates, and foreign currency exchange rate fluctuations. In addition, we continue to explore tax planning opportunities that may have a material impact on our effective tax rate.
A more detailed analysis of differences between the U.S. federal statutory rate and the consolidated effective rate, as well as other information about our income tax provisions, is provided in Note 13, "Income Taxes," of the Notes to Consolidated Financial Statements contained in Item 8, "Financial Statements and Supplementary Data."
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Liquidity and Capital Resources
Sources of Liquidity
(dollars in thousands) December 31,
2025 		December 31,
2024
Cash and cash equivalents $ 17,161 $ 46,543
Working capital $ 538,056 $ 443,946
Current ratio 3.32 2.95
Cash and cash equivalents at December 31, 2025 decreased by $29.4 million from December 31, 2024. Cash generated by operating activities of $196.1 million was primarily offset by purchases of property, plant and equipment of $91.0 million, $50.0 million of repurchases of common stock, and tax withholding payments related to net share settlements of restricted stock unit awards of $16.9 million. The payment of the cash portion of the purchase price for each of the 2025 acquisitions totaling $178.9 million was fully funded by borrowings on our Revolving Credit Facility. Net proceeds of $976.1 million from the issuance of our 2030 Convertible Notes were utilized to purchase capped call options relating to the 2030 Convertible Notes, exchange of a portion of our 2028 Convertible Notes, and pay down our Revolving Credit Facility and TLA Facility. Net of the above noted acquisition and debt-related activity, we paid a net principal amount of $68.0 million on our Senior Secured Credit Facility in 2025.
Working capital increased by $94.1 million from December 31, 2024, or $123.5 million excluding the decrease in cash and cash equivalents. The increase in working capital, exclusive of cash and cash equivalents, primarily relates to positive fluctuations in accounts receivable, prepaid expenses and other current assets, and the current portion of long-term debt. Accounts receivable increased due to an increase in sales volume, lower factoring volume, and timing of customer payments compared to the prior year.
At December 31, 2025, $10.1 million of our cash and cash equivalents were held by foreign subsidiaries. We intend to limit our distributions from foreign subsidiaries to previously taxed income or current period earnings. If distributions are made utilizing current period earnings, we will record foreign withholding taxes in the period of the distribution.
As of December 31, 2025, our capital structure consisted of $1.185 billion of debt, net of deferred debt issuance costs and unamortized discounts, and 34 million shares of common stock outstanding. As of December 31, 2025, we have access to $794.7 million of borrowing capacity under our Revolving Credit Facility, available for normal course of business and letters of credit. We are authorized to issue up to 100 million shares of common stock, of which approximately 34 million shares were outstanding at December 31, 2025, and 100 million shares of preferred stock, none of which were outstanding at December 31, 2025. As of December 31, 2025, our contractual debt service obligations for 2026, consisting of interest on our outstanding debt and commitment fees on the unused portion of the Revolving Credit Facility are estimated to be approximately $27 million. As of December 31, 2025, we have prepaid all contractual principal payments on our outstanding indebtedness required in the next twelve months. Actual principal and interest payments may be higher if, for instance, the applicable interest rates on our Senior Secured Credit Facilities increase, we borrow additional amounts on our Revolving Credit Facility, or we pay principal amounts in excess of the required minimums reflected in the contractual debt service obligations above.
Our off-balance sheet commitments related to our outstanding letters of credit as of December 31, 2025 were $5.3 million.
Credit Facilities
As of December 31, 2025, we had Senior Secured Credit Facilities that consist of an $800 million Revolving Credit Facility, with no outstanding principal balance, and a TLA Facility with an outstanding principal balance of $91 million. The Revolving Credit Facility and TLA Facility mature on February 15, 2028. The Senior Secured Credit Facilities include a mandatory prepayment provision customary for similar credit facilities.
The Revolving Credit Facility and TLA Facility contain covenants requiring that we maintain (i) a Total Net Leverage Ratio not to exceed 5.00:1.00, subject to increase in certain circumstances following certain qualified acquisitions and (ii) an interest coverage ratio of at least 2.50:1.00. As of December 31, 2025, we were in compliance with these financial covenants. As of December 31, 2025, our Total Net Leverage Ratio, calculated in accordance with our Senior Secured Credit Facilities agreement, was approximately 2.7:1.0. For the year ended December 31, 2025, our interest coverage ratio, calculated in accordance with our Senior Secured Credit Facilities agreement, was approximately 13.6:1.0.
Failure to comply with these financial covenants would result in an event of default as defined under the Revolving Credit Facility and TLA Facility unless waived by the lenders. An event of default may result in the acceleration of our indebtedness. As a result, management believes that compliance with these covenants is material to us.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Convertible Notes
In March 2025, we issued $1.0 billion aggregate principal amount of 2030 Convertible Notes, which mature on March 15, 2030 and bear interest at a fixed rate of 1.875% per annum. The total net proceeds from the issuance of the 2030 Convertible Notes, after deducting initial purchasers' discounts and commissions and debt issuance costs, were approximately $976 million. We used the net proceeds from the issuance of the 2030 Convertible Notes to pay down our Revolving Credit Facility and TLA Facility, exchange a portion of our 2028 Convertible Notes, and to pay the cost of the capped calls related to the issuance of our 2030 Convertible Notes.
In February 2023, we issued $500 million aggregate principal amount of notes. The 2028 Convertible Notes mature on February 15, 2028 and bear interest at a fixed rate of 2.125% per annum. In March 2025, in connection with the issuance of the 2030 Convertible Notes, the Company used part of the net proceeds therefrom to exchange $383.7 million in aggregate principal amount of the 2028 Convertible Notes in privately-negotiated transactions. As of December 31, 2025, the remaining aggregate principal amount of the 2028 Convertible Notes was $116.3 million.
As of December 31, 2025, the conditions allowing holders of the Convertible Notes to convert had not been met. Any determination regarding the convertibility of the Convertible Notes during future periods will be made in accordance with the terms of the indenture governing the Convertible Notes. These obligations are classified as a long-term liability on the Consolidated Balance Sheet at December 31, 2025.
See Note 9, "Debt," of the Notes to the Consolidated Financial Statements contained in Item 8, "Financial Statements and Supplementary Data," of this report for a further information of our outstanding debt.
Share Repurchase Program
On November 4, 2025, we announced that our Board of Directors had approved a share repurchase program authorizing us to repurchase up to an aggregate of $200.0 million of our outstanding common stock (the "Share Repurchase Program"). Under the Share Repurchase Program, we may repurchase shares from time to time on the open market, in privately-negotiated purchases or otherwise. The Share Repurchase Program has no expiration date and will continue until otherwise suspended or terminated. We are not obligated to repurchase any dollar amount or to acquire any specific number of shares and repurchases may be executed at the discretion of management on an opportunistic basis, or pursuant to trading plans or other arrangements. During 2025, we repurchased 698,356 shares of our common stock for a total of $50.0 million.
Subsequent to December 31, 2025, we entered into an accelerated share repurchase agreement on February 19, 2026 to repurchase approximately $50.0 million of common stock under the Share Repurchase Program. Refer to Note 21, "Subsequent Events" in the Notes to Consolidated Financial Statements contained in Item 8, "Financial Statements and Supplementary Data," of this report for additional information.
Factoring Arrangements
We may utilize accounts receivable factoring arrangements with financial institutions to accelerate the timing of cash receipts and enhance our cash position. These arrangements, in all cases, do not contain recourse provisions which would obligate us in the event of our customers' failure to pay. During 2025 and 2024, we sold, without recourse, $228.7 million and $231.0 million, respectively, of accounts receivable. See Note 1, "Summary of Significant Accounting Policies," of the Notes to the Consolidated Financial Statements contained in Item 8, "Financial Statements and Supplementary Data," of this report for a further information regarding the factoring arrangements.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Summary of Cash Flow
The following cash flow summary information includes cash flows related to discontinued operations (in thousands):
2025 2024
Cash provided by (used in):
Operating activities $ 196,148 $ 205,205
Investing activities (270,731) (195,414)
Financing activities 43,558 13,321
Effect of foreign currency exchange rates on cash and cash equivalents 1,643 (243)
Net change in cash and cash equivalents $ (29,382) $ 22,869
Operating Activities- During 2025, we generated cash from operations of $196.1 million, compared to $205.2 million in 2024, as a $56.7 million increase in net income adjusted for non-cash items such as depreciation and amortization was offset by a $65.8 million decrease in cash flow provided by changes in operating assets and liabilities. Net income adjusted for non-cash items included $46.7 of debt conversion inducement expense which was incurred in 2025 but not in 2024. The decrease associated with changes in operating assets and liabilities is primarily related to an increase in accounts receivable from higher sales volume, lower factoring volume, and timing of customer payments.
Investing Activities -The $75.3 million increase in net cash used in investing activities was attributable to an increase in net cash paid for acquisitions and a decrease of cash received from the 2024 sale of Electrochem, partially offset by decreased purchases of property, plant and equipment. Investing activities for 2025 include net cash paid of $178.9 million for the Precision, VSi and Biocoat acquisitions, compared to net cash paid of $138.5 million during 2024 for the Pulse acquisition.
Financing Activities -Net cash provided by financing activities during 2025 was $43.6 million compared to net cash provided by financing activities of $13.3 million in 2024. Cash provided by financing activities during 2025 was primarily the net proceeds from the issuance of our 2030 Convertible Notes of $977.5 million, which was partially offset by a $71.0 million purchase of capped call options associated with the 2030 Convertible Notes, $383.7 million in aggregate principal amount of exchanged 2028 Convertible Notes, $284.0 million of principal payments on our TLA Facility, $126.0 million net payments on our Revolving Credit Facility, $50.0 million of repurchases of common stock, and $13.3 million related to stock-based compensation activity.
Cash and Other Commitments
We have material cash requirements to pay third parties under various contractual obligations discussed below. Presented below is a summary of contractual obligations and other minimum commitments as of December 31, 2025. Refer to Note 14, "Commitments and Contingencies," of the Notes to Consolidated Financial Statements contained in Item 8, "Financial Statements and Supplementary Data," of this report for additional information regarding self-insurance liabilities, which are not reflected in the table below.
Payments due by period
Total Less than 1 year 1-3 years 3-5 years More than 5 years
Principal amount of debt outstanding(a)
$ 1,207,284 $ - $ 207,284 $ 1,000,000 $ -
Interest on debt(a)
103,025 27,090 47,810 28,125 -
Operating lease obligations(b)
121,478 14,055 27,649 26,320 53,454
Finance lease obligations(b)
43,325 9,434 17,002 6,241 10,648
__________
(a)Interest payments in the table above reflect the contractual interest payments on our outstanding debt and commitment fees on the unused portion of the Revolving Credit Facility based upon the balance outstanding and applicable interest rates at December 31, 2025, and exclude the impact of the debt discount and deferred issuance costs. Refer to Note 9, "Debt," of the Notes to Consolidated Financial Statements contained in Item 8, "Financial Statements and Supplementary Data," of this report for additional information regarding long-term debt.
(b)Refer to Note 15, "Leases," of the Notes to Consolidated Financial Statements contained in Item 8, "Financial Statements and Supplementary Data," of this report for additional information about our operating and finance lease obligations.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Capital expenditures, which are net of proceeds from the sale of property, plant and equipment, for 2025 totaled $91.0 million, compared to $105.4 million and $119.9 million in 2024 and 2023, respectively. Capital expenditures in 2025 related primarily to upgrades of manufacturing facilities, manufacturing equipment and information technology systems. We expect 2026 capital expenditures to approximate between $95 million to $105 million, with a significant portion related to additional upgrades of manufacturing facilities, as well as for manufacturing equipment to support productivity initiatives and information technology systems.
We have recorded liabilities for unrecognized tax benefits that, because of their nature, have a high degree of uncertainty regarding the timing of future cash payment and other events that extinguish these liabilities. Refer to Note 13, "Income Taxes," of the Notes to Consolidated Financial Statements in Item 8, "Financial Statements and Supplementary Data," of this report for additional information about these unrecognized tax benefits.
Based on current expectations, we believe that our projected cash flows provided by operations, available cash and cash equivalents and borrowings under our Revolving Credit Facility are sufficient to meet our working capital, debt service and capital expenditure requirements for the next twelve months. However, such cash flows are dependent upon our future operating performance which, in turn, is subject to prevailing economic conditions, and to financial, business and other factors, including the conditions of our markets, some of which are beyond our control. If our future financing needs increase, we may need to arrange additional debt or equity financing. We continually evaluate and consider various financing alternatives to enhance or supplement our existing financial resources. However, we cannot be assured that we will be able to enter into any such arrangements on acceptable terms or at all.
Impact of Recently Issued Accounting Standards
In the normal course of business, we evaluate all new accounting pronouncements issued by the Financial Accounting Standards Board ("FASB"), SEC, or other authoritative accounting bodies to determine the potential impact they may have on our Consolidated Financial Statements. Refer to Note 1, "Summary of Significant Accounting Policies," of the Notes to Consolidated Financial Statements contained in Item 8, "Financial Statements and Supplementary Data," of this report for additional information about these recently issued accounting standards and their potential impact on our financial condition or results of operations.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
CRITICAL ACCOUNTING ESTIMATES
Management's discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. We make estimates and assumptions in the preparation of our consolidated financial statements that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. We base our estimates and judgments upon historical experience and other factors that are believed to be reasonable under the circumstances. Changes in estimates or assumptions could result in a material adjustment to the consolidated financial statements.
We have identified several critical accounting estimates. An accounting estimate is considered critical if both: (a) the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment involved, and (b) the impact of changes in the estimates and assumptions have had or are reasonably likely to have a material effect on the consolidated financial statements. This listing is not a comprehensive list of all of our accounting policies. For further information regarding the application of these and other accounting policies, see Note 1, "Summary of Significant Accounting Policies," of the Notes to Consolidated Financial Statements contained in Item 8, "Financial Statements and Supplementary Data," of this report.
Inventories
Inventories are measured on a first-in, first-out basis at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The valuation of inventory requires us to estimate obsolete or excess inventory, as well as inventory that is not of saleable quality.
Historically, our inventory adjustment has been adequate to cover our losses. However, variations in methods or assumptions could have a material impact on our results. If our demand forecast for specific products is greater than actual demand and we fail to reduce manufacturing output accordingly, we could be required to record additional inventory write-down or expense a greater amount of overhead costs, which would negatively impact our net income.
Acquisition Method of Accounting
We account for business combinations using the acquisition method of accounting. We recognize the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their estimated fair values on the date of acquisition. Any excess purchase price over the fair value of net assets acquired is recorded to goodwill. Determining the fair value of these items requires management's judgment and more often than not the utilization of independent valuation specialists. The judgments made in the determination of the estimated fair values assigned to the assets acquired, the liabilities assumed and any noncontrolling interest in the investee, as well as the estimated useful life of each asset and the duration of each liability, can materially impact the financial statements in periods after acquisition, such as through depreciation and amortization expense. For more information on our acquisitions and application of the acquisition method, see Note 2, "Business Acquisitions," of the Notes to Consolidated Financial Statements contained in Item 8, "Financial Statements and Supplementary Data," of this report.
Valuation of Goodwill, Indefinite-Lived Intangible Assets and Long-Lived Assets
We make assumptions in establishing the carrying value, fair value and, if applicable, the estimated lives of our intangible and other long-lived assets. Goodwill and intangible assets determined to have an indefinite useful life are not amortized. Instead, these assets are evaluated for impairment on an annual basis on the last day of our fiscal year and whenever events or business conditions change that could indicate that the asset is impaired. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (asset group) may not be recoverable.
Evaluation of goodwill for impairment
We test our reporting unit's goodwill for impairment on the last day of our fiscal year and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of the reporting unit below its carrying value. In conducting this annual impairment testing, we may first perform a qualitative assessment of whether it is more-likely-than-not that the reporting unit's fair value is less than its carrying value. If not, no further goodwill impairment testing is required. If it is more-likely-than-not that the reporting unit's fair value is less than its carrying value, or if we elect not to perform a qualitative assessment of the reporting unit, a quantitative analysis is performed, in which the fair value of the reporting unit is compared to its carrying value. Fair value of the reporting unit is estimated using a discounted cash flow model. The model incorporates significant judgments and assumptions including, revenue growth, operating margins, capital expenditures, fluctuations in working capital, and discount rates. If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized equal to the excess, limited to the amount of goodwill allocated to the reporting unit.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
We performed a quantitative a to test our single reporting unit's goodwill for impairment as of December 31, 2025. The excess of the estimated fair value over carrying value was significantly in excess of its carrying value as of December 31, 2025. We do not believe that our goodwill is at risk for impairment. However, a significant increase in the discount rate, decrease in the terminal growth rate, increase in tax rates, substantial reductions in our end-markets and volume assumptions, or increases in our cost assumptions could have a negative impact on the estimated fair value of our reporting unit and require us to recognize an impairment loss in a future period.
Evaluation of indefinite-lived intangible assets for impairment
Our indefinite-lived intangible assets include the Greatbatch Medical and Lake Region Medical tradenames. Similar to goodwill, we perform an annual impairment review of our indefinite-lived intangible assets on the last day of our fiscal year, unless events occur that trigger the need for an interim impairment review. We have the option to first assess qualitative factors in determining whether it is more-likely-than-not that an indefinite-lived intangible asset is impaired. If we elect not to use this option, or we determine that it is more-likely-than-not that the asset is impaired, we perform a quantitative assessment that requires us to estimate the fair value of each indefinite-lived intangible asset and compare that amount to its carrying value. Fair value is estimated using the relief-from-royalty method. Significant assumptions inherent in this methodology include estimates of royalty rates and discount rates. The discount rate applied is based on the risk inherent in the respective intangible assets and royalty rates are based on the rates at which comparable tradenames are being licensed in the marketplace. Impairment, if any, is based on the excess of the carrying value over the fair value of these assets.
We performed a quantitative assessment to test our indefinite-lived intangible assets for impairment as of December 31, 2025. For the Greatbatch Medical tradename, the excess of the estimated fair value over carrying value (expressed as a percentage of carrying value) was significantly in excess of its carrying value of $20 million as of December 31, 2025. The Lake Region Medical tradename was significantly in excess of the carrying value of $70 million at December 31, 2025. We do not believe that our indefinite-lived intangible assets are at risk for impairment. However, a significant increase in the discount rate, decrease in the terminal growth rate, increase in tax rates, decrease in the royalty rate or substantial reductions in our end-markets and volume assumptions could have a negative impact on the estimated fair values of either of our tradenames and require us to recognize impairments of these indefinite-lived intangible assets in a future period.
Evaluation of long-lived assets for impairment
When impairment indicators exist, we determine if the carrying value of the long-lived asset(s) or definite-lived intangible asset(s) including, but not limited to, PP&E and right-of-use lease assets, exceeds the related undiscounted future cash flows. In cases where the carrying value exceeds the undiscounted future cash flows, the carrying value is written down to fair value. Fair value is generally determined using a discounted cash flow analysis. When it is determined that the useful life of an asset (asset group) is shorter than the originally estimated life, and there are sufficient cash flows to support the carrying value of the asset (asset group), we accelerate the rate of depreciation/amortization in order to fully depreciate/amortize the asset over its shorter useful life.
Estimation of the cash flows and useful lives of long-lived assets and definite-lived intangible assets requires significant management judgment. Events could occur that would materially affect our estimates and assumptions. Unforeseen changes, such as the loss of one or more significant customers, technology obsolescence, or significant manufacturing disruption, among other factors, could substantially alter the assumptions regarding the ability to realize the return of our investment in long-lived assets, definite-lived intangible assets or their estimated useful lives.
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