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8-K - FORM 8-K - DJO Finance LLCd646489d8k.htm

Exhibit 99.1

 

LOGO

DJO Investor/Media Contact:

DJO Global, Inc.

David Smith

SVP and Treasurer

760.734.3075

ir@djoglobal.com

FOR IMMEDIATE RELEASE

DJO GLOBAL ANNOUNCES FINANCIAL RESULTS FOR THIRD QUARTER 2018

Revenue and Profitability Growth Continue on Strength of Business Transformation

SAN DIEGO, CA, Nov. 13, 2018DJO Global, Inc. (“DJO” or the “Company”), a leading global provider of medical technologies designed to get and keep people moving, today announced financial results for its public reporting subsidiary, DJO Finance LLC (“DJOFL”), for the third quarter ended September 29, 2018.

On January 1, 2018, DJO adopted Accounting Standards Update 2014-09, Revenue From Contracts with Customers, (“ASC 606”). Under ASC 606, in the third quarter the Company reclassified $5.0 million of costs from selling, general and administrative costs to net sales. The table below summarizes net sales and growth rates with, and without, the adoption of ASC 606. The currency impact and constant currency growth rates in the table below are determined by reference to revenue amounts excluding the ASC 606 adoption. Constant currency as presented herein is defined as reported growth adjusted for (i) the impact of year-over-year currency rate changes in the current period and (ii) the impact of the adoption of ASC 606.

 

$000’s    Q3 2018 Net Sales Overview  
     Including ASC 606 Adoption     Excluding ASC 606 Adoption     Currency     Constant  
     Revenue      Growth     Revenue      Growth     Impact     Currency  

Surgical

   $ 53,401        14.6   $ 53,401        14.6     0.0     14.6

International

     78,211        1.6     78,211        1.6     -2.2     3.9

Recovery Sciences

     35,812        -9.0     37,977        -3.5     0.0     -3.5

Bracing and Vascular

     126,626        -1.1     129,453        1.2     0.0     1.2
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total DJO Global

   $  294,051        1.1   $  299,042        2.8     -0.6     3.4

Third Quarter Highlights

 

   

Net sales grew 2.8% to $299.0 million, or $294.1 million as reported with the adoption of ASC 606, compared to $290.9 million in the prior year period.

 

   

Adjusted EBITDA continued to expand, increasing 8.1% over the prior year quarter to $72.2 million.

 

   

Operating income was $19.9 million compared to $21.8 million in the prior year period.


   

Net loss attributable to DJOFL was $29.5 million, compared to a net loss of $22.07 million in the prior year period.

Business Transformation

 

   

The business transformation that began in early 2017 continues to drive profitability, with Adjusted EBITDA margins (excluding the impact of ASC 606 adoption) up 118 basis points, or 92 basis points on a constant currency basis, in the third quarter of 2018 compared to the prior year. Year-to-date Adjusted EBITDA margin was 23.6% (excluding the impact of ASC 606 adoption), up 211 basis points from the prior year period.

 

   

Including $20.6 million in future annual run-rate savings from transformation actions taken to date, Adjusted EBITDA for the twelve months ended September 29, 2018 was $313.8 million.

“Our growth initiatives are working,” said Brady Shirley, DJO’s President and Chief Executive Officer. “We’re seeing revenue growth return in key segments and ongoing margin expansion, evidence that our efforts are driving results, and we continue to anticipate a stronger trajectory for the remainder of our fiscal year.”

Mike Eklund, Chief Financial Officer and Chief Operating Officer of DJO, added, “We have made such great progress in our transformation journey. Productivity was strong again in the quarter, as it has been the last several quarters, with Adjusted EBITDA for the quarter increasing 8.1%, or 2.9 times the growth in revenue, and margins improving about 120 basis points.”

Sales Results

Net sales for DJOFL for the third quarter of 2018 were $299.0 million, an increase of 2.8% from the prior year period, or $294.1 million with the adoption of ASC 606. On a constant currency basis, sales increased 3.4%. For the nine months ending September 29, 2018, net sales increased 3.2% to $901.9 million, or $891.5 million with the adoption of ASC 606. On a constant currency basis, net sales for the first nine months of 2018 increased 1.9% over net sales in the first nine months of 2017. The number of selling days in the quarter was the same as in the prior year period.

Net sales for DJO’s Surgical Implant segment grew 14.6% in the quarter to $53.4 million. There was strong double-digit growth across all three implant product lines compared to the same quarter in the prior year. For the nine months ending September 29, 2018, the Surgical Implant segment grew 10.1% over the prior year period to $160.9 million.

 

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Net sales for DJO’s International segment grew 1.6% in the third quarter to $78.2 million, or 3.9% on a constant currency basis. There was strong growth in France and Australia, partially offset by market conditions in the Benelux region and in the United Kingdom. For the nine months ending September 29, 2018, the International segment revenue was $253.8 million, an increase of 8.1%, or 3.1% on a constant currency basis.

Net sales for DJO’s Recovery Sciences segment declined 3.5% in the third quarter to $38.0 million, or $35.8 million with the adoption ASC 606. Strong growth in the segment’s Regeneration CMF product line was offset by softness in the Chattanooga product line compared to the prior year period. For the nine months ending September 29, 2018, the Recovery Sciences segment declined 4.5% to $111.3 million, or $109.2 million with the adoption of ASC 606.

Net sales for DJO’s Bracing and Vascular segment grew 1.2% to $129.5 million in the third quarter, or $126.6 million with the adoption of ASC 606. There was strong growth in the segment’s DonJoy product line, partially offset by weakness in the Dr. Comfort footwear product line. Strength in acute care, demand for new products, and continued progress in transformation initiatives to improve service levels contributed to the results. For the nine months ending September 29, 2018, Bracing and Vascular net sales were $375.9 million, a slight decline of 0.1% from the first nine months of 2017, or $367.6 million with the adoption of ASC 606.

Earnings Results

Operating income was $19.9 million in the quarter compared to $21.8 million in the prior year period. For the nine months ending September 29, 2018, operating income was $89.1 million compared to $37.5 million in the prior year period, an increase of 138.0%. Net loss attributable to DJOFL was $29.5 million in the quarter compared to $22.7 million in the prior year period. For the nine months ended September 29, net loss was $60.8 million compared to $97.0 million in the nine months ended September 30, 2017.

Adjusted EBITDA for the third quarter was $72.2 million, an increase of 8.1% from the prior year period, or 7.5% based on constant currency rates. For the nine months ended September 29, 2018, Adjusted EBITDA was $212.7 million, up 13.3% from the prior year, or 12.0% on a constant currency basis. Including projected future run-rate savings of $20.6 million from cost savings programs currently underway as permitted under our credit agreement and the indentures governing our outstanding notes, Adjusted EBITDA for the twelve months ended September 29, 2018 was $313.8 million.

 

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Net cash provided by continuing operating activities was $51.2 million for the nine months ended September 29, 2018 compared to $61.7 million for the nine months ended September 30, 2017. The change in cash flow was primarily attributable to higher inventory balances to allow for the modernization and consolidation of distribution facilities as part of the Company’s transformation initiatives, and to the payment in 2018 of certain non-recurring costs accrued in 2017 offset by the reduced net loss recognized during the period.

The Company defines Adjusted EBITDA as net (loss) income attributable to DJOFL plus net interest expense, income tax provision (benefit), and depreciation and amortization, further adjusted for certain non-cash items, non-recurring items and other adjustment items as permitted in calculating covenant compliance under the Company’s secured term loan and revolving credit facilities (“Senior Secured Credit Facilities”) and the indentures governing its 8.125% second lien notes and its 10.75% third lien notes. A reconciliation between net loss attributable to DJOFL and Adjusted EBITDA is included in the attached financial tables.

Conference Call Information

DJO has scheduled a conference call to discuss this announcement beginning at 8:30 am, Eastern Time Tuesday, November 13, 2018. Individuals interested in listening to the conference call may do so by dialing (866) 394-8509 (International callers please use (346) 265-0698), using the reservation code 22322226. A telephone replay will be available for 48 hours following the conclusion of the call by dialing (855) 859-2056 and using the above reservation code. The live conference call and replay will be available via the Internet at www.DJOglobal.com.

About DJO Global

DJO Global is a leading global provider of medical technologies designed to get and keep people moving. The Company’s products address the continuum of patient care from injury prevention to rehabilitation, enabling people to regain or maintain their natural motion. Its products are used by orthopaedic surgeons, primary care physicians, pain management specialists, physical therapists, podiatrists, chiropractors, athletic trainers and other healthcare professionals. In addition, many of the Company’s medical devices and related accessories are used by athletes and patients for injury prevention and at-home physical therapy treatment. The Company’s product lines include rigid and soft orthopaedic bracing, hot and cold therapy, bone growth stimulators, vascular therapy

 

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systems and compression garments, therapeutic shoes and inserts, electrical stimulators used for pain management and physical therapy products. The Company’s surgical division offers a comprehensive suite of reconstructive joint products for the hip, knee and shoulder. DJO Global’s products are marketed under a portfolio of brands including Aircast®, Chattanooga, CMF™, Compex®, DonJoy®, ProCare®, DJO® Surgical, Dr. Comfort® and ExosTM. For additional information on the Company, please visit www.DJOglobal.com.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements relate to, among other things, the Company’s expectations for improved liquidity, estimated cost reductions associated with the execution of its business transformation plans and improved efficiencies. The words “believe,” “will,” “should,” “expect,” “target,” “intend,” “estimate” and “anticipate,” variations of such words and similar expressions identify forward-looking statements, but their absence does not mean that a statement is not a forward-looking statement. These forward-looking statements are based on the Company’s current expectations and are subject to a number of risks, uncertainties and assumptions, many of which are beyond the Company’s ability to control or predict. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The important factors that could cause actual operating results to differ significantly from those expressed or implied by such forward-looking statements include, but are not limited to the successful execution of the Company’s business transformation plans, including achievement of planned actions to improve liquidity, improvements in operational effectiveness, optimization of the Company’s procurement activities, improvements in manufacturing, distribution, sales and operations planning, and actions to improve the profitability of the mix of our product and customers. Other important factors that could cause actual operating results to differ significantly from those expressed or implied by such forward-looking statements include, but are not limited to: business strategies relative to our Bracing and Vascular, Recovery Sciences, International and Surgical Implant segments; the continued growth of the markets the Company addresses and any impact on these markets from changes in global economic conditions; the impact of potential reductions in reimbursement levels and coverage by Medicare and other governmental and commercial payers; the Company’s highly leveraged financial position; the Company’s ability to successfully develop, license or acquire, and timely introduce and market new products or product enhancements; risks relating to the Company’s international operations; resources needed and risks involved in complying with government regulations and government investigations; the availability and sufficiency of insurance coverage for pending and future product liability claims; and the effects of healthcare reform, Medicare competitive bidding, managed care

 

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and buying groups on the prices of the Company’s products. These and other risk factors related to DJO are detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission on March 16, 2018. Many of the factors that will determine the outcome of the subject matter of this press release are beyond the Company’s ability to control or predict.

-tables to follow-

 

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DJO FINANCE LLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

 

     Three Months Ended
    Nine Months Ended
 
     September 29,
2018
    September 30,
2017
    September 29,
2018
    September 30,
2017
 

Net sales

   $ 294,051     $ 290,876     $ 891,517     $ 874,011  

Operating expenses:

        

Cost of sales (exclusive of amortization of intangible assets of $6,635 and $19,929 for the three and nine months ended September 29, 2018, respectively and $6,981 and $20,942 for the three and nine months ended September 30, 2017, respectively)

     129,400       122,325       375,780       366,779  

Selling, general and administrative

     119,964       122,066       351,459       391,967  

Research and development

     10,249       8,864       30,687       27,066  

Amortization of intangible assets

     14,557       15,852       44,445       50,713  
  

 

 

   

 

 

   

 

 

   

 

 

 
     274,170       269,107       802,371       836,525  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     19,881       21,769       89,146       37,486  

Other (expense) income:

        

Interest expense, net

     (46,598     (43,691     (136,299     (129,446

Other (expense) income, net

     (554     824       (1,040     2,008  
  

 

 

   

 

 

   

 

 

   

 

 

 
     (47,152     (42,867     (137,339     (127,438
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

     (27,271     (21,098     (48,193     (89,952

Income tax provision

     (2,182     (1,504     (12,201     (6,677
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss from continuing operations

     (29,453     (22,602     (60,394     (96,629

Net income from discontinued operations

     164       123       486       228  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

     (29,289     (22,479     (59,908     (96,401

Net income attributable to noncontrolling interests

     (208     (214     (846     (644
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to DJO Finance LLC

   $ (29,497   $ (22,693   $ (60,754   $ (97,045
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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DJO FINANCE LLC

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

     September 29,
2018
    December 31,
2017
 

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 27,619     $ 31,985  

Accounts receivable, net

     172,492       190,324  

Inventories, net

     183,837       169,137  

Prepaid expenses and other current assets

     30,818       20,218  

Current assets of discontinued operations

     511       511  
  

 

 

   

 

 

 

Total current assets

     415,277       412,175  

Property and equipment, net

     143,041       133,522  

Goodwill

     878,689       864,112  

Intangible assets, net

     570,725       607,088  

Other assets

     4,523       5,128  
  

 

 

   

 

 

 

Total assets

   $ 2,012,255     $ 2,022,025  
  

 

 

   

 

 

 

LIABILITIES AND DEFICIT

    

Current liabilities:

    

Accounts payable

   $ 102,009     $ 98,331  

Accrued interest

     47,329       18,015  

Current portion of debt obligations

     23,488       15,936  

Other current liabilities

     128,989       126,360  
  

 

 

   

 

 

 

Total current liabilities

     301,815       258,642  

Long-term debt obligations

     2,397,975       2,398,184  

Deferred tax liabilities, net

     145,606       142,597  

Other long-term liabilities

     20,675       13,080  
  

 

 

   

 

 

 

Total liabilities

   $ 2,866,071     $ 2,812,503  
  

 

 

   

 

 

 

Commitments and contingencies (Note 15)

    

Deficit:

    

DJO Finance LLC membership deficit:

    

Member capital

     847,111       844,115  

Accumulated deficit

     (1,676,347     (1,615,536

Accumulated other comprehensive loss

     (26,189     (21,072
  

 

 

   

 

 

 

Total membership deficit

     (855,425     (792,493

Noncontrolling interests

     1,609       2,015  

Total deficit

     (853,816     (790,478
  

 

 

   

 

 

 

Total liabilities and deficit

   $ 2,012,255     $ 2,022,025  
  

 

 

   

 

 

 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

 

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DJO FINANCE LLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

     Nine Months Ended
 
     September 29,
2018
    September 30,
2017
 

Cash flows from operating activities:

    

Net loss

   $ (59,908   $ (96,401

Net income from discontinued operations

     (486     (228

Adjustments to reconcile net loss to net cash provided by operating activities:

    

Depreciation

     34,942       32,288  

Amortization of intangible assets

     44,445       50,713  

Amortization of debt issuance costs and non-cash interest expense

     6,608       6,153  

Stock-based compensation expense

     2,155       1,329  

Loss on disposal of assets, net

     641       1,001  

Deferred income tax (benefit) expense

     (3,225     2,865  

Changes in operating assets and liabilities, net of acquired assets and liabilities:

    

Accounts receivable

     16,123       7,472  

Inventories

     (15,885     (7,959

Prepaid expenses and other assets

     (5,646     (562

Accrued interest

     29,596       24,998  

Accounts payable and other current liabilities

     1,826       40,080  
  

 

 

   

 

 

 

Net cash provided by continuing operating activities

     51,186       61,749  
  

 

 

   

 

 

 

Net cash provided by discontinued operations

     486       228  
  

 

 

   

 

 

 

Net cash provided by operating activities

     51,672       61,977  

Cash flows from investing activities:

    

Acquisition of business, net of cash acquired

     (9,392     —    

Purchases of property and equipment

     (40,758     (33,597
  

 

 

   

 

 

 

Net cash used in investing activities

     (50,150     (33,597

Cash flows from financing activities:

    

Proceeds from revolver borrowings

     88,500       65,275  

Proceeds from capital lease

     15,000       —    

Repayments of debt obligations

     (107,136     (87,290

Repurchase of common stock

     —         (3,600

Investment by parent

     —         443  

Dividends paid to minority interests

     (1,169     (1,102
  

 

 

   

 

 

 

Net cash used in financing activities

     (4,805     (26,274

Effect of exchange rate changes on cash and cash equivalents

     (1,083     1,700  
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (4,366     3,806  

Cash and cash equivalents at the beginning of the period

     31,985       35,212  
  

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

   $ 27,619     $ 39,018  
  

 

 

   

 

 

 

Non-cash investing activities:

    

Purchases of surgical instruments included in accounts payable

   $ 6,193     $ 4,731  

Stock issued as part of acquisition consideration

   $ 698     $ —    

 

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DJO FINANCE LLC

UNAUDITED SEGMENT INFORMATION

(in thousands)

 

     Three Months Ended
    Nine Months Ended
 
     September 29,
2018
    September 30,
2017
    September 29,
2018
    September 30,
2017
 

Net sales:

        

Bracing and Vascular

   $ 126,627     $ 127,971     $ 367,627     $ 376,439  

Recovery Sciences

     35,812       39,346       109,159       116,622  

Surgical Implant

     53,401       46,613       160,938       146,197  

International

     78,211       76,946       253,793       234,753  
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 294,051     $ 290,876     $ 891,517     $ 874,011  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income:

        

Bracing and Vascular

   $ 29,180     $ 27,060     $ 78,436     $ 72,292  

Recovery Sciences

     11,400       11,322       29,649       30,938  

Surgical Implant

     11,074       9,126       34,005       27,328  

International

     16,742       14,894       55,592       42,013  

Expenses not allocated to segments and eliminations

     (48,515     (40,633     (108,536     (135,085
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 19,881     $ 21,769     $ 89,146     $ 37,486  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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DJO Finance LLC

Adjusted EBITDA

For the Nine Months Ended September 29, 2018 and September 30, 2017

(unaudited)

Our Senior Secured Credit Facilities, consisting of a $1,055.0 million term loan facility (including a $20.0 million delayed draw term loan facility) and a $150.0 million asset-based revolving credit facility, under which $87.5 million was outstanding as of September 29, 2018, and the Indentures governing our $1,015.0 million of 8.125% second lien notes and $298.5 million of 10.75% third lien notes (collectively, the “notes”) represent significant components of our capital structure. Under our Senior Secured Credit Facilities, we are required to maintain a specified senior secured first lien leverage ratio, which is determined based on our Adjusted EBITDA. If we fail to comply with the senior secured first lien leverage ratio under our Senior Secured Credit Facilities, we would be in default. Upon the occurrence of an event of default under the Senior Secured Credit Facilities, the lenders could elect to declare all amounts outstanding under the Senior Secured Credit Facilities to be immediately due and payable and terminate all commitments to extend further credit. If we were unable to repay those amounts, the lenders under the Senior Secured Credit Facilities could proceed against the collateral granted to them to secure that indebtedness. We have pledged substantially all of our assets as collateral under the Senior Secured Credit Facilities and under the notes. Any acceleration under the Senior Secured Credit Facilities would also result in a default under the Indentures governing the notes, which could lead to the note holders electing to declare the principal, premium, if any, and interest on the then outstanding notes immediately due and payable. In addition, under the Indentures governing the notes, our and our subsidiaries’ ability to engage in activities such as incurring additional indebtedness, making investments, refinancing subordinated indebtedness, paying dividends and entering into certain merger transactions is governed, in part, by our ability to satisfy tests based on Adjusted EBITDA. Our ability to meet the covenants specified in the Senior Secured Credit Facilities and the Indentures governing those notes will depend on future events, some of which are beyond our control, and we cannot assure you that we will meet those covenants.

Adjusted EBITDA is defined as net income (loss) attributable to DJOFL plus interest expense, net, income tax provision (benefit), and depreciation and amortization, further adjusted for certain non-cash items, non-recurring items and other adjustment items as permitted in calculating covenant compliance and other ratios under our Senior Secured Credit Facilities and the Indentures governing the notes. We believe that the presentation of Adjusted EBITDA is appropriate to provide additional information to investors about the calculation of, and compliance with, certain financial covenants and other ratios in our Senior Secured Credit Facilities and the Indentures governing the notes. Adjusted EBITDA is a material component of these calculations.

Adjusted EBITDA should not be considered as an alternative to net income (loss) attributable to DJOFL or other performance measures presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), or as an alternative to cash flow from operations as a measure of our liquidity. Adjusted EBITDA does not represent net income (loss) attributable to DJOFL or cash flow from operations as those terms are defined by GAAP and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. In particular, the definition of Adjusted EBITDA under our Senior Secured Credit Facilities and the Indentures governing the notes allows us to add back certain non-cash, extraordinary, unusual or non-recurring charges that are deducted in calculating net income (loss) attributable to DJOFL. However, these are expenses that may recur, vary greatly and are difficult to predict. While Adjusted EBITDA and similar measures are frequently used as measures of operations and the ability to meet debt service requirements, Adjusted EBITDA is not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation.

 

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The following table provides reconciliation between net income (loss) attributable to DJOFL and Adjusted EBITDA (in thousands):

 

                             Twelve
Months
Ended
 
     Three Months Ended     Nine Months Ended  
     September 29,
2018
    September 30,
2017
    September 29,
2018
    September 30,
2017
    September 29,
2018
 

Net loss attributable to DJO Finance LLC

   $ (29,497   $ (22,693   $ (60,754   $ (97,045   $ 397  

Income (loss) from discontinued operations, net

     (164     (123     (486     (228     (567

Interest expense, net

     46,598       43,691       136,299       129,446       181,091  

Income tax provision (benefit)

     2,182       1,504       12,201       6,677       (55,196

Depreciation and amortization

     26,010       26,285       79,386       83,001       107,646  

Non-cash charges (a)

     1,280       1,204       2,030       2,312       4,817  

Non-recurring and integration charges (b)

     24,989       15,712       41,272       59,296       51,240  

Other adjustment items (c)

     841       1,249       2,701       4,160       3,797  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     72,239       66,829       212,649       187,619       293,225  

Permitted pro forma adjustments applicable to the twelve months period only (Note 1)
Future cost savings

             20,533  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 72,239     $ 66,829     $ 212,649     $ 187,619     $ 313,758  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Note 1 — Permitted pro forma adjustments include future cost savings from cost reduction actions related to our business transformation initiative, recognized as permitted under our credit agreement and the indentures governing our notes.

 

(a)

Non-cash charges are comprised of the following (in thousands):

 

                                Twelve
Months
Ended
 
     Three Months Ended      Nine Months Ended  
     September 29,
2018
     September 30,
2017
     September 29,
2018
    September 30,
2017
     September 29,
2018
 

Stock compensation expense

   $ 1,260      $ 483      $ 2,155     $ 1,329      $ 4,522  

Loss (gain) on disposal of fixed assets and assets held for sale, net

     20        721        (125     983        295  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total non-cash charges

   $ 1,280      $ 1,204      $ 2,030     $ 2,312      $ 4,817  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

(b)

Non-recurring and integration charges are comprised of the following (in thousands):

 

                                Twelve
Months
Ended
 
     Three Months Ended      Nine Months Ended  
     September 29,
2018
     September 30,
2017
     September 29,
2018
     September 30,
2017
    September 29,
2018
 

Restructuring and reorganization (1)

   $ 21,105      $ 11,391      $ 35,222      $ 50,441     $ 41,121  

Acquisition related expenses and integration (2)

     698        879        1,447        1,457       2,096  

Executive transition

     —          —          —          (49     —    

Litigation and regulatory costs and settlements, net (3)

     3,186        3,336        4,603        6,748       8,029  

IT automation projects

     —          106        —          699       (6
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total non-recurring and integration charges

   $ 24,989      $ 15,712      $ 41,272      $ 59,296     $ 51,240  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

(1)

Consist of costs related to the Company’s business transformation projects to improve the Company’s operational profitability and liquidity.

 

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(2)

Consists of direct acquisition costs and integration expenses related to acquired businesses and costs related to potential acquisitions.

(3)

For the twelve months ended September 29, 2018, litigation and regulatory costs consisted of $1.5 million in litigation costs related to ongoing product liability issues and $6.5 million related to other litigation and regulatory costs and settlements.

 

(c)

Other adjustment items before permitted pro forma adjustments are comprised of the following (in thousands):

 

                               Twelve
Months
Ended
 
     Three Months Ended     Nine Months Ended  
     September 29,
2018
     September 30,
2017
    September 29,
2018
     September 30,
2017
    September 29,
2018
 

Blackstone monitoring fees

   $ —        $ 1,750     $ —        $ 5,250     $ 975  

Non-controlling interests

     208        214       846        644       1,001  

Foreign currency transaction losses (gains) and other expense (income)

     481        (793     967        (2,229     1,098  

Franchise and other tax

     80        109       816        273       925  

Other

     72        (31     72        222       (202
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total other adjustment items

   $ 841      $ 1,249     $ 2,701      $ 4,160     $ 3,797  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

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