Integer Holdings Corp
For the period ended Jun 28, 2024. Filed Jul 25, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 28, 2024 · Filed Jul 25, 2024
ITGR$126.56-0.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-29; filed 2024-04-25.
0001114483-24-000059
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-28; filed 2024-07-25.
0001114483-24-000114
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 107 previous paragraphs and 111 current paragraphs.
66 unchanged; 38 reworded; 7 added; 3 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 7 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
•our ability to refinance amounts that may become due upon a request for conversion of the 2028 Convertible Notes;
Current report
The second quarter and first six months of 2024 ended on June 28, 2024 and consisted of 91 days and 180 days, respectively. The second quarter and first six months of 2023 ended on June 30, 2023 and consisted of 91 days and 181 days, respectively.
Current report
(Gain) loss on equity investments for each period were as follows (in thousands):
Current report
Other (Gain) Loss, Net
Current report
Refer to Note 6, “Debt” of the Notes to Condensed Consolidated Financial Statements contained in Item 1 of this report for information regarding the Third Amendment to the 2021 Credit Agreement, which increased the maximum borrowing capacity under the Revolving Credit Facility by $300 million from $500 million to $800 million. After giving effect to the Third Amendment on July 1, 2024, the available borrowing capacity under the Revolving Credit Facility was in excess of the notional amount of the 2028 Convertible Notes, which became eligible for conversion at the option of the holders beginning on July 1, 2024 and ending at the close of business on September 30, 2024. Any determination regarding the convertibility of the 2028 Convertible Notes during future periods will be made in accordance with the terms of the indenture governing the 2028 Convertible Notes.
Current report
Refer to Note 6, “Debt” of the Notes to Condensed Consolidated Financial Statements contained in Item 1 of this report for information regarding the Third Amendment to the 2021 Credit Agreement, entered into on July 1, 2024, which increased the maximum borrowing capacity under the Revolving Credit Facility by $300 million from $500 million to $800 million.
Current report
As of June 28, 2024, the conditions allowing holders of the 2028 Convertible Notes to convert had been met and, therefore, the 2028 Convertible Notes became eligible for conversion at the option of the holders beginning on July 1, 2024 and ending at the close of business on September 30, 2024. Any determination regarding the convertibility of the 2028 Convertible Notes during future periods will be made in accordance with the terms of the indenture governing the 2028 Convertible Notes. If a conversion request occurs, we have the intent and ability to refinance the amounts that may become due with respect to the 2028 Convertible Notes using the available borrowing capacity under the Revolving Credit Facility after entry into the Third Amendment to the 2021 Credit Agreement on July 1, 2024. As such, these obligations with respect to the 2028 Convertible Notes continue to be classified as a long-term liability on the Condensed Consolidated Balance Sheet at June 28, 2024.
Removed paragraphs (3)
Previous report
The first quarters of 2024 and 2023 ended on March 29 and March 31, respectively, and consisted of 89 days and 90 days, respectively.
Previous report
(c)Professional fees increased primarily due to increased costs associated with third-party information technology services and inclusion of the operations of Pulse and InNeuroCo.
Previous report
Other Loss, Net
Reworded paragraphs (38)
Previous wording
Net income for the first quarter of 2024 was $20.5 million, or $0.59 per diluted share, compared to $13.1 million, or $0.39 per diluted share, for the first quarter of 2023. These variances are primarily the result of the following:
Current wording
Net income for the second quarter and first six months of 2024 was $31.2 million, or $0.88 per diluted share, and $51.8 million, or $1.47 per diluted share, respectively, compared to $24.0 million, or $0.71 per diluted share, and $37.0 million, or $1.10 per diluted share for the second quarter and first six months of 2023, respectively. These variances are primarily the result of the following:
Previous wording
•Sales for the first quarter of 2024 increased $36.0 million when compared to the same period in 2023, driven by our Medical product lines with strong demand, new product ramps, growth from emerging customers with PMA (premarket approval) products and contributions from our recent acquisitions.
Current wording
•Sales for the second quarter and first six months of 2024 increased $36.2 million and $72.2 million, respectively, when compared to the same periods in 2023, driven by our Medical product lines with strong demand, new product ramps, growth from emerging customers with PMA (premarket approval) products and contributions from our recent acquisitions.
Previous wording
•Gross profit for the first quarter of 2024 increased $13.2 million, primarily from higher sales volume leverage, efficiencies gained from the continued improvement in the supply chain and contributions from our recent acquisitions.
Current wording
•Gross profit for the second quarter and first six months of 2024 increased $13.6 million and $26.8 million, respectively, primarily from higher sales volume leverage, efficiencies gained from the continued improvement in the supply chain and contributions from our recent acquisitions.
Previous wording
•Operating expenses for the first quarter of 2024 increased $8.1 million when compared to the same period in 2023, primarily due to higher SG&A and acquisition and integration costs, partially offset by lower RD&E costs.
Current wording
•Operating expenses for the second quarter of 2024 were flat compared to the second quarter of 2023 and increased $8.0 million for the first six months of 2024 when compared to the same period in 2023, primarily due to higher SG&A and acquisition and integration costs, partially offset by lower RD&E costs.
Previous wording
•Interest expense for the first quarter of 2024 decreased $2.6 million compared to the same period in 2023, primarily due to a decrease in losses from extinguishment of debt, partially offset by higher average debt outstanding.
Current wording
•Interest expense for the second quarter and first six months of 2024 increased $3.8 million and $1.2 million, respectively, compared to the same periods in 2023, primarily due to higher average debt outstanding, partially offset by a decrease in losses from extinguishment of debt.
Previous wording
•During the first quarter of 2024 we recognized a gain on equity investments of $1.1 million, compared to a loss on equity investments of $0.2 million during the first quarter of 2023. Gains and losses on equity investments are generally unpredictable in nature.
Current wording
•During the first six months of 2024, we recognized gains on equity investments of $1.1 million, compared to negligible losses for the first six months of 2023. Gains and losses on equity investments are generally unpredictable in nature.
Previous wording
•Other loss, net for the first quarter of 2024 was $1.0 million compared to $0.8 million for the first quarter of 2023, primarily due to fluctuations in foreign currency gains and losses in the respective periods.
Current wording
•Other (gain) loss, net for the second quarter and first six months of 2024 were net gains of $0.1 million and net losses of $0.9 million, respectively, compared to losses of $0.4 million and $1.1 million, respectively, for the second quarter and first six months of 2023, primarily due to fluctuations in foreign currency gains and losses in the respective periods.
Previous wording
•We recorded provisions for income taxes for the first quarters of 2024 and 2023 of $4.2 million and $2.9 million, respectively. The change in income tax expense was primarily due to relative changes in pre-tax income and the impact of discrete tax items.
Current wording
•We recorded provisions for income taxes for the second quarter and first six months of 2024 of $8.8 million and $13.0 million, respectively, compared with provisions for income taxes of $5.9 million and $8.9 million, respectively, for the second quarter and first six months of 2023. The changes in income tax expense were primarily due to relative changes in pre-tax income and the impact of discrete tax items.
Previous wording
For the first quarter of 2024, Cardio & Vascular (“C&V”) sales increased $30.6 million, or 16%, versus the comparable 2023 period. The increase in C&V sales was driven by continued strong demand across all markets, new product ramps in electrophysiology and structural heart, and the InNeuroCo and Pulse acquisitions. C&V sales for the first quarter of 2024 included $12.7 million of sales from the recent Pulse and InNeuroCo acquisitions. Foreign currency exchange rate fluctuations decreased C&V sales for the first quarter of 2024 by $0.2 million in comparison to the 2023 period, primarily due to U.S. dollar fluctuations relative to the Euro.
Current wording
For the second quarter and first six months of 2024, Cardio & Vascular (“C&V”) sales increased $22.8 million, or 11%, and $53.5 million, or 13%, respectively, versus the comparable 2023 periods. The increase in C&V sales was driven by continued strong demand across most markets, new product ramps in electrophysiology and structural heart, and the InNeuroCo and Pulse acquisitions. C&V sales for the second quarter and first six months of 2024 included $14.2 million and $26.9 million, respectively, of sales from the recent Pulse and InNeuroCo acquisitions. Foreign currency exchange rate fluctuations did not have a material impact on C&V sales during the second quarter and first six months of 2024 in comparison to 2023.
Previous wording
For the first quarter of 2024, Cardiac Rhythm Management & Neuromodulation (“CRM&N”) sales increased $11.1 million, or 8%, versus the comparable 2023 period, driven by strong growth in emerging Neuromodulation customers with PMA (premarket approval) products and strong demand in cardiac rhythm management. Foreign currency exchange rate fluctuations did not have a material impact on CRM&N sales during the first quarter of 2024 in comparison to 2023.
Current wording
For the second quarter and first six months of 2024, Cardiac Rhythm Management & Neuromodulation (“CRM&N”) sales increased $14.2 million, or 9%, and $25.3 million, or 8%, respectively, versus the comparable 2023 periods, driven by strong growth in emerging neuromodulation customers with PMA (premarket approval) products. Foreign currency exchange rate fluctuations did not have a material impact on CRM&N sales during the second quarter and first six months of 2024 in comparison to 2023.
Previous wording
Advanced Surgical, Orthopedic & Portable Medical (“AS&O”) sales for the first quarter of 2024 increased $1.2 million, or 4%, versus the comparable 2023 period, driven by growth of Advanced Surgical and Orthopedics, partially offset by a decline in Portable Medical from execution of the planned multi-year exit announced in 2022. AS&O sales for the first quarters of 2024 and 2023 included $16.1 million and $18.5 million, respectively, of Portable Medical sales. Foreign currency exchange rate fluctuations did not have a material impact on AS&O sales during the first quarter of 2024 in comparison to 2023.
Current wording
Advanced Surgical, Orthopedic & Portable Medical (“AS&O”) sales for the second quarter and first six months of 2024 increased $1.2 million, or 4%, and $2.4 million, or 4%, respectively, versus the comparable 2023 periods, driven by growth of Advanced Surgical and Orthopedics, partially offset by a decline in Portable Medical from execution of the planned multi-year exit announced in 2022. Foreign currency exchange rate fluctuations did not have a material impact on AS&O sales during the second quarter and first six months of 2024 in comparison to the 2023 periods.
Previous wording
For the first quarter of 2024, Non-Medical sales decreased $6.9 million, or 48%, versus the comparable 2023 period, returning to a normalized run-rate after previously higher sales from the supply chain recovery. Foreign currency exchange rate fluctuations did not have a material impact on Non-Medical sales during the first quarter of 2024 in comparison to 2023.
Current wording
For the second quarter and first six months of 2024, Non-Medical sales decreased $2.1 million, or 19%, and $9.0 million, or 36%, respectively, versus the comparable 2023 periods, returning to a normalized run-rate after previously higher sales from the supply chain recovery. Foreign currency exchange rate fluctuations did not have a material impact on Non-Medical sales during the second quarter and first six months of 2024 in comparison to the 2023 periods.
Previous wording
Gross margin for the first quarter of 2024 increased 100 basis points compared to the comparable 2023 period, primarily driven by higher sales volume leverage and efficiencies gained from the continued improvement in the supply chain.
Current wording
Gross margin for the second quarter and first six months of 2024 increased 100 basis points and 90 basis points, respectively, compared to the comparable 2023 periods, primarily driven by higher sales volume leverage and efficiencies realized through our manufacturing excellence initiatives.
Previous wording
(a)Compensation and benefits increased primarily due to annual merit increases, higher incentive compensation and an increase in headcount related to the recent Pulse and InNeuroCo acquisitions.
Current wording
(a)Compensation and benefits increased primarily due to annual merit increases and an increase in headcount related to the recent Pulse and InNeuroCo acquisitions.
Previous wording
(d)Contract services expense increased primarily due to higher software costs from information technology enhancements.
Current wording
(c)Contract services expense increased primarily due to higher software costs from information technology enhancements.
Previous wording
(e)The increase in bank fees and charges was driven by increased accounts receivable factoring and supplier financing fees primarily due to the launch of accounts receivable factoring arrangements during 2023.
Current wording
(d)The increase in bank fees and charges was driven by increased accounts receivable factoring and supplier financing fees primarily due to the launch of accounts receivable factoring arrangements during 2023.
Previous wording
RD&E expense for the first quarter of 2024 was $15.8 million, compared to $19.1 million for the first quarter of 2023. The decrease in RD&E expenses for the first quarter of 2024 compared to the first quarter of 2023 was primarily due to lower labor costs and 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.
Current wording
RD&E expense for the second quarter and first six months of 2024 was $16.1 million and $31.9 million, respectively, compared to $16.9 million and $36.0 million, respectively, for the second quarter and first six months of 2023. The decreases in RD&E expense during the second quarter and first six months of 2024 compared to the same periods in 2023 were primarily due to lower labor costs and 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.
Previous wording
(a)Restructuring charges for the first quarters of 2024 and 2023 primarily consist of costs associated with our strategic reorganization and alignment and manufacturing alignment to support growth initiatives.
Current wording
(a)Restructuring charges for the first six months of 2024 and 2023 primarily consist of costs associated with our strategic reorganization and alignment and manufacturing alignment to support growth initiatives.
Previous wording
(b)Amount for the first quarter of 2024 primarily includes acquisition expenses related to the InNeuroCo and Pulse acquisitions. Amount for the first quarter of 2023 primarily included integration expenses related to the Aran and Oscor acquisitions, partially offset by a benefit of $0.3 million to adjust the fair value of acquisition-related contingent consideration liabilities.
Current wording
(b)Amounts for the first six months of 2024 primarily include acquisition expenses related to the InNeuroCo and Pulse acquisitions. Amounts for the first six months of 2023 primarily included integration expenses related to the Aran and Oscor acquisitions, partially offset by a benefit of $0.3 million to adjust the fair value of acquisition-related contingent consideration liabilities.
Previous wording
(c)Amounts include gains and losses in connection with the disposal of property, plant and equipment.
Current wording
(c)Amounts include gains and losses in connection with the disposal of property, plant and equipment. In addition, during the second quarter of 2024 we recorded $1.2 million of loss recoveries relating to property damage which occurred in the fourth quarter of 2023 at one of our manufacturing facilities.
Previous wording
During the first quarter of 2024, contractual interest expense has increased due to higher average debt outstanding, partially offset by a lower weighted average interest rate. The higher average debt balance outstanding is primarily the result of borrowings on our Revolving Credit Facility to fund the Pulse and InNeuroCo acquisitions. The lower weighted average interest rate was primarily due to the replacement of some of our higher variable rate debt with lower fixed rate debt through issuance of the 2028 Convertible Notes during the first quarter of 2023. In addition, during the second quarter of 2023 we realized a 25 basis point reduction in the interest rate margin on our Senior Secured Credit Facilities based on our secured net leverage ratio (as defined in the 2021 Credit Agreement).
Current wording
During 2024, contractual interest expense has increased due to higher average debt outstanding. The higher average debt balance outstanding is primarily the result of borrowings on our Revolving Credit Facility to fund the Pulse and InNeuroCo acquisitions.
Previous wording
Other components of interest expense on borrowings include gains and losses on interest rate swaps and non-cash amortization and write-off (losses from extinguishment of debt) of deferred debt issuance costs and original issue discount. Interest rate swap includes realized (gains) losses on our interest rate swap contract, which fluctuate depending on the spread between the rate swap contract fixed rate and senior secured credit facility floating rate. Our outstanding interest rate swap matured as of June 30, 2023. Amortization of deferred debt issuance costs and original issue discount increased during the first quarter of 2024 compared to the first quarter of 2023 as a result of higher unamortized balances related to new debt. The losses from extinguishment of debt during the first quarter of 2023 were related to prepayments of portions of the TLA Facility and full repayment of our seven-year “term B” loan (the “TLB Facility”) in connection with issuance of the 2028 Convertible Notes.
Current wording
Other components of interest expense on borrowings include gains on an interest rate swap contract and non-cash amortization and write-off (losses from extinguishment of debt) of deferred debt issuance costs and original issue discount. Gain on interest rate swap includes realized gains on an interest rate swap contract which matured as of June 30, 2023. Amortization of deferred debt issuance costs and original issue discount increased during 2024 compared to the same periods in 2023 as a result of higher unamortized balances related to new debt. The losses from extinguishment of debt during the first six months of 2023 were related to prepayments of portions of the TLA Facility and full repayment of our seven-year “term B” loan (the “TLB Facility”) in connection with issuance of the 2028 Convertible Notes.
Previous wording
As of March 29, 2024 and December 31, 2023, approximately 43% and 51%, respectively, of our principal amount of debt are fixed rate borrowings.
Current wording
As of June 28, 2024 and December 31, 2023, approximately 44% and 51%, respectively, of our principal amount of debt are fixed rate borrowings.
Previous wording
During the first quarter of 2024 we recognized a gain on equity investments of $1.1 million, compared to a loss on equity investments of $0.2 million during the first quarter of 2023. The amounts for both the first quarter of 2024 and the first quarter of 2023 relate to our share of equity method investee (gains) losses including unrealized appreciation/depreciation of the underlying interests of the investee. As of March 29, 2024 and December 31, 2023, the carrying value of our equity investments was $9.3 million and $8.2 million, respectively. See Note 13, “Financial Instruments and Fair Value Measurements” of the Notes to the Condensed Consolidated Financial Statements contained in Item 1 of this report for further details regarding these investments.
Current wording
The amounts for both periods in 2024 and 2023 relate to our share of equity method investee (gains) losses including unrealized appreciation/depreciation of the underlying interests of the investee. As of June 28, 2024 and December 31, 2023, the carrying value of our equity investments was $9.3 million and $8.2 million, respectively. See Note 13, “Financial Instruments and Fair Value Measurements” of the Notes to the Condensed Consolidated Financial Statements contained in Item 1 of this report for further details regarding these investments.
Previous wording
Other loss, net for the first quarter of 2024 was $1.0 million compared to $0.8 million for the first quarter of 2023. Other loss, net primarily includes gains/losses from the impact of exchange rates on transactions denominated in foreign currencies. Our foreign currency transaction gains/losses are based primarily on fluctuations of the U.S. dollar relative to the Euro, Mexican peso, Uruguayan peso, Malaysian ringgits or Dominican peso.
Current wording
Other (gain) loss, net for the second quarter and first six months of 2024 were net gains of $0.1 million and net losses of $0.9 million, respectively, compared to net losses of $0.4 million and $1.1 million for the second quarter and first six months of 2023. Other (gain) loss, net primarily includes gains/losses from the impact of exchange rates on transactions denominated in foreign currencies. Our foreign currency transaction gains/losses are based primarily on fluctuations of the U.S. dollar relative to the Euro, Mexican peso, Uruguayan peso, Malaysian ringgits or Dominican peso.
Previous wording
The impact of exchange rates on transactions denominated in foreign currencies included in Other loss, net for the first quarters of 2024 and 2023 were net losses of $1.1 million and $0.8 million, respectively. We continually monitor our foreign currency exposures and seek to take steps to mitigate these risks. However, fluctuations in exchange rates could have a significant impact, positive or negative, on our financial results in the future.
Current wording
The impact of exchange rates on transactions denominated in foreign currencies included in Other (gain) loss, net for the second quarter and first six months of 2024 were net gains of $0.2 million and net losses of $0.9 million, respectively, compared to losses of $0.4 million and $1.2 million for the second quarter and first six months of 2023, respectively. We continually monitor our foreign currency exposures and seek to take steps to mitigate these risks. However, fluctuations in exchange rates could have a significant impact, positive or negative, on our financial results in the future.
Previous wording
We recognized income tax expense of $4.2 million for the first quarter of 2024 on $24.7 million of income before taxes (effective tax rate of 17.1%), compared to an income tax expense of $2.9 million on $16.0 million of income before taxes (effective tax rate of 18.3%) for the same period of 2023. Income tax expense for the first quarter of 2024 included discrete tax benefits of $0.8 million. The discrete tax benefits for the first quarter of 2024 are predominately related to excess tax benefits, net of deductibility limitations, recognized upon vesting of RSUs. Income tax expense for the first quarter of 2023 included $0.1 million of discrete tax expense, which relates to tax shortfalls recorded for the forfeiture of certain PRSUs, partially offset by excess tax benefits recognized upon vesting of RSUs.
Current wording
We recognized income tax expense of $8.8 million for the second quarter of 2024 on $40.0 million of income before taxes (effective tax rate of 21.9%), compared to an income tax expense of $5.9 million on $29.9 million of income before taxes (effective tax rate of 19.8%) for the same period of 2023. The income tax expense for the first six months of 2024 was $13.0 million on $64.8 million of income before taxes (effective tax rate of 20.1%), compared to income tax expense of $8.9 million on income before taxes of $45.9 million (effective tax rate of 19.3%) for the same period of 2023. Income tax expense for the second quarter and first six months of 2024 included discrete tax expense of $0.5 million and a discrete tax benefit of $0.3 million, respectively. For the second quarter and first six months of 2023, we recorded discrete tax expense of $0.4 million and $0.5 million, respectively.
Previous wording
Cash and cash equivalents at March 29, 2024 increased by $18.5 million from December 31, 2023, primarily as a result of cash generated by operating activities and net borrowings on our Revolving Credit Facility, mostly offset by purchases of property, plant and equipment and cash paid to acquire Pulse.
Current wording
Cash and cash equivalents at June 28, 2024 increased by $10.5 million from December 31, 2023, primarily as a result of cash generated by operating activities and net borrowings on our Revolving Credit Facility, mostly offset by purchases of property, plant and equipment and cash paid to acquire Pulse.
Previous wording
Working capital increased by $70.4 million from December 31, 2023, or $52.0 million excluding the increase in cash and cash equivalents. The increase in working capital, exclusive of cash and cash equivalents, primarily relates to positive fluctuations in inventory and accrued expenses. Inventory increased from higher sales volume and product demand while accrued expenses decreased from payments of accrued profit sharing and bonuses.
Current wording
Working capital increased by $74.3 million from December 31, 2023, or $63.8 million excluding the increase in cash and cash equivalents. The increase in working capital, exclusive of cash and cash equivalents, primarily relates to positive fluctuations in inventory, contract assets and accrued expenses. Inventory increased from higher sales volume and product demand which also contributed to the increase in contract assets. Accrued expenses decreased from payments of accrued profit sharing and bonuses.
Previous wording
At March 29, 2024, $21.0 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.
Current wording
At June 28, 2024, $15.1 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.
Previous wording
As of March 29, 2024, our capital structure consisted of $1.141 billion of debt, net of deferred debt issuance costs and unamortized discounts and 34 million shares of common stock outstanding. As of March 29, 2024, we had access to $217.5 million of borrowing capacity under our Revolving Credit Facility, available for normal course of business and letters of credit, and are authorized to issue up to 100 million shares of common stock and 100 million shares of preferred stock. As of March 29, 2024, our contractual debt service obligations for the remainder of 2024, consisting of interest on our outstanding debt, are estimated to be approximately $39 million. 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.
Current wording
As of June 28, 2024, our capital structure consisted of $1.119 billion of debt, net of deferred debt issuance costs and unamortized discounts and 34 million shares of common stock outstanding. As of June 28, 2024, we had access to $240.5 million of borrowing capacity under our Revolving Credit Facility, available for normal course of business and letters of credit, and are authorized to issue up to 100 million shares of common stock and 100 million shares of preferred stock. As of June 28, 2024, our contractual debt service obligations for the remainder of 2024, consisting of interest on our outstanding debt, are estimated to be approximately $27 million. 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.
Previous wording
As of March 29, 2024, we had Senior Secured Credit Facilities that consist of a $500 million Revolving Credit Facility, with an outstanding principal balance of $279 million, and a TLA Facility with an outstanding principal balance of $375 million. The Revolving Credit Facility and TLA Facility mature on February 15, 2028. The Senior Secured Credit Facilities include a mandatory prepayment provision customary for similar credit facilities.
Current wording
As of June 28, 2024, we had Senior Secured Credit Facilities that consist of a $500 million Revolving Credit Facility, with an outstanding principal balance of $256 million, and a TLA Facility with an outstanding principal balance of $375 million. The Revolving Credit Facility and TLA Facility mature on February 15, 2028. The Senior Secured Credit Facilities include a mandatory prepayment provision customary for similar credit facilities.
Previous wording
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 March 29, 2024, we were in compliance with these financial covenants. As of March 29, 2024, our Total Net Leverage Ratio, calculated in accordance with our Senior Secured Credit Facilities agreement, was approximately 2.8:1.0. For the twelve month period ended March 29, 2024, our interest coverage ratio, calculated in accordance with our Senior Secured Credit Facilities agreement, was approximately 8.5:1.0.
Current wording
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 June 28, 2024, we were in compliance with these financial covenants. As of June 28, 2024, our Total Net Leverage Ratio, calculated in accordance with our Senior Secured Credit Facilities agreement, was approximately 2.7:1.0. For the twelve month period ended June 28, 2024, our interest coverage ratio, calculated in accordance with our Senior Secured Credit Facilities agreement, was approximately 8.0:1.0.
Previous wording
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 the first quarter of 2024, we sold, without recourse, $57.6 million of accounts receivable. We did not utilize receivable factoring arrangements prior to the second quarter of 2023. See Note 1 “Basis of Presentation” of the Notes to the Condensed Consolidated Financial Statements contained in Item 1 of this report for further information regarding our factoring arrangements.
Current wording
We 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 the first six months of 2024, we sold, without recourse, $116.8 million of accounts receivable. We did not utilize receivable factoring arrangements prior to the second quarter of 2023. See Note 1 “Basis of Presentation” of the Notes to the Condensed Consolidated Financial Statements contained in Item 1 of this report for further information regarding our factoring arrangements.
Previous wording
Operating Activities– During the first three months of 2024, we generated cash from operations of $23.2 million, compared to $6.2 million for the first three months of 2023. The increase of $17.1 million was the result of a $9.2 million increase in cash flow provided by changes in operating assets and liabilities and a $7.8 million increase in net income adjusted for non-cash items such as depreciation and amortization.
Current wording
Operating Activities– During the first six months of 2024, we generated cash from operations of $70.5 million, compared to $62.3 million for the first six months of 2023. The increase of $8.1 million was the result of a $18.5 million increase in net income adjusted for non-cash items such as depreciation and amortization, partially offset by a $10.4 million decrease in cash flow provided by changes in operating assets and liabilities.
Previous wording
The increase in net income adjusted for non-cash items such as depreciation and amortization was primarily from higher sales volume and margin partially offset by higher acquisition costs related to the Pulse acquisition. The increase associated with changes in operating assets and liabilities is primarily related to the benefit of lower growth in accounts receivable offset by unfavorable cash flow impacts from accrued expenses and accounts payable. Accounts receivable benefited from new factoring arrangements that were entered into after the first quarter of 2023 that accelerated accounts receivable collections while fluctuations in accrued expenses included higher levels of profit sharing and bonus payments in the first three months of 2024. Accounts payable fluctuations were driven primarily from the timing of supplier payments.
Current wording
The increase in net income adjusted for non-cash items such as depreciation and amortization was primarily from higher sales volume and margin partially offset by higher acquisition costs related to the Pulse acquisition. The decrease associated with changes in operating assets and liabilities is primarily related to unfavorable cash flow impacts from accrued expenses and inventory, partially offset by the benefit of lower growth in accounts receivable. Accrued expenses included higher levels of profit sharing and bonus payments in the first six months of 2024. Inventory growth during the first six months of 2024 is consistent with the higher sales volume and product demand, Accounts receivable benefited from new factoring arrangements that were entered into after the first quarter of 2023.
Previous wording
Investing Activities – The $143.5 million increase in net cash used in investing activities was attributable to cash paid for an acquisition and increased purchases of property, plant and equipment. Investing activities for the first quarter of 2024 included net cash paid of $139.1 million for the Pulse acquisition.
Current wording
Investing Activities – The $141.4 million increase in net cash used in investing activities was attributable to cash paid for an acquisition and increased purchases of property, plant and equipment. Investing activities for the first six months of 2024 included net cash paid of $138.5 million for the Pulse acquisition.
Previous wording
Financing Activities – Net cash provided by financing activities for the first three months of 2024, was $163.3 million compared to $33.1 million for the first three months of 2023. Cash provided by financing activities for the first three months of 2024 was primarily due to net borrowings on our Revolving Credit Facility of $180.0 million, primarily to fund the Pulse acquisition. The cash provided by financing activities for the first three months of 2023 was primarily related to the issuance of our 2028 Convertible Notes of $486.3 million, which was partially offset by $335.6 million in full repayment of our TLB Facility, $55.3 million in repayments on our TLA Facility, $23.8 million of net payments on our Revolving Credit Facility and $35.0 million of capped call purchases related to the issuance of our 2028 Convertible Notes.
Current wording
Financing Activities – Net cash provided by financing activities for the first six months of 2024 was $138.8 million compared to $7.6 million for the first six months of 2023. Cash provided by financing activities for the first six months of 2024 was primarily due to net borrowings on our Revolving Credit Facility of $157.0 million, primarily to fund the Pulse acquisition. The cash provided by financing activities for the first six months of 2023 was primarily related to the issuance of our 2028 Convertible Notes of $486.3 million, which was partially offset by $335.6 million in full repayment of our TLB Facility, $55.3 million in repayments on our TLA Facility, $23.8 million of net payments on our Revolving Credit Facility and $35.0 million of capped call purchases related to the issuance of our 2028 Convertible Notes.