Integer Holdings (NYSE:ITGR) said it has received a positive outlook and a reaffirmed B+ long-term issuer credit rating from Standard & Poor’s (S&P). The positive outlook, which was revised from stable, is based on Integer’s debt reduction and expected future targeted debt-to-adjusted EBITDA leverage ratio between 2.5X – 3.5X.
S&P also cited Plano, Texas-based Integer’s customer relationships, array of product offerings and competitive advantage as the industry consolidates its supplier base with larger medical device manufacturers. S&P also hinted at an upgrade if Integer demonstrates consistent long-term leverage in the targeted range.
“We are pleased to see Integer’s financial improvements recognized through this revised S&P outlook,” said company EVP and chief financial officer Jason Garland in a prepared statement. “We remain committed to executing our growth strategy while managing our debt leverage within the targeted range.”
Last month, Integer reported fourth-quarter 2018 adjusted earnings of $1.04 per share, which beat the Street estimate of 92 cents. The bottom line also increased 8.3% from Q4 2017. Revenues dropped 22.4% year over year to $303 million but still pushed past analysts’ estimate of $298 million.
Integer has strengthened its balance sheet by reducing its leverage ratio from 5.6X at the end of 2017 to 3.5X at the end of 2018. In Q3 2018, Integer paid down its debt balance by $548 million, using proceeds from the sale of its Advanced Surgical & Orthopedic product line. As a result, Integer received multiple debt rating upgrades: S&P increased its issuer credit rating from B to B+, and Moody’s Investors Service upgraded its corporate family rating from B3 to B2.
Integer executives said during the Q4 analyst call that they expect the company to generate continued strong free cash flow and pay down its outstanding debt by an additional $105 million to $115 million in 2019.