INTEGRA LIFESCIENCES HOLDINGS CORP 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. Disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management has designed our disclosure controls and procedures to provide reasonable assurance of achieving the desired control objectives. As required by Exchange Act Rule 13a-15(b), we have carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2020. Based upon this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2020 to provide such reasonable assurance. Management’s Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934, as amended. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America (“GAAP”). We recognize that because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies and procedures may deteriorate. To evaluate the effectiveness of our internal control over financial reporting, management used the criteria described in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based upon this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2020. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2020 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein. Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION Not applicable. PART III INCORPORATION BY REFERENCE The information called for by Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities relating to equity compensation plans, Item 10. Directors, Executive Officers and Corporate Governance, Item 11. Executive Compensation, Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, Item 13. Certain Relationships and Related Transactions, and Director Independence and Item 14. Principal Accountant Fees and Services is incorporated herein by reference to the Company’s definitive proxy statement for its Annual Meeting of Stockholders sche duled to be held on May 14, 2021, w hich definitive proxy statement is expected to be filed with the Commission not later than 120 days after the end of the fiscal year to which this report relates. 49 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE (a) Documents filed as a part of this report. 1. Financial Statements. The following financial statements and financial statement schedules are filed as a part of this report: Report of Independent Registered Public Accounting Firm F-1 Consolidated Statements of Operations for the years ended December 31, 20 20 , 201 9 and 20 18 F-3 Consolidated Statements of Comprehensive Income for the years ended December 31, 20 20 , 20 19 and 2 018 F-4 Consolidated Balance Sheets as of December 31, 20 20 and 2 01 9 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 20 20 , 201 9 and 20 18 F-6 Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 20 20 , 201 9 and 20 18 F-7 Notes to Consolidated Financial Statements F-8 2. Financial Statement Schedule Schedule II — Valuation and Qualifying Accounts for the years ended December 31, 20 20 , 201 9 and 20 18 F-49 All other schedules not listed above have been omitted, because they are not applicable or are not required, or because the required information is included in the consolidated financial statements or notes thereto. 3 . Exhibits required to be filed by Item 601 of Regulation S-K. 2.1 Stock Purchase Agreement, dated as of October 25, 2013, by and between Covidien Group S.A.R.L. and Integra LifeSciences Corporation (Incorporated by Reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 15, 2014) 2.1(a) Put Option Agreement, dated September 29, 2020, between the Company and certain of its subsidiaries and Smith & Nephew USD Limited, a subsidiary of Smith+Nephew (including the Purchase and Sale Agreement attached as Appendix 1 thereto) (Incorporated by reference to Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020). 2.2 Stock and Asset Purchase Agreement by and among Medtronic, Inc., Medtronic Xomed Instrumentation, SAS, and Integra LifeSciences Corporation, dated as of September 12, 2014 (Incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on October 27, 2014) 2.3 Separation and Distribution Agreement between Integra LifeSciences Holdings Corporation and SeaSpine Holdings Corporation, dated as of June 30, 2015 (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on July 7, 2015) 2.4 Agreement and Plan of Merger by and among Integra LifeSciences Corporation, Patriot S1, Inc., TEI Biosciences Inc. and Dr. Yiannis Monovoukas, dated as of June 26, 2015 (Incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on July 20, 2015) 2.5 Agreement and Plan of Merger by and among Integra LifeSciences Corporation, Patriot S2, Inc., TEI Medical Inc. and Dr. Yiannis Monovoukas, dated as of June 26, 2015 (Incorporated by reference to Exhibit 2.2 to the Company's Current Report on Form 8-K filed on July 20, 2015) 2.6 Agreement and Plan of Merger by and among Integra LifeSciences Holdings Corporation, Integra Derma, Inc., and Derma Sciences, Inc. dated as of January 10, 2017 (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on January 11, 2017) 50 2.7 Binding Offer Letter by and among Integra LifeSciences Holdings Corporation and DePuy Synthes, Inc., dated as of February 14, 2017 (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on February 15, 2017 2.8(a) Asset Purchase Agreement accepted and countersigned by DePuy Synthes, dated May 11, 2017 (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on May 15, 2017) 2.8(b) Asset Purchase Agreement, dated September 8, 2017, between the Company and certain of its subsidiaries and Natus Medical Incorporated (Incorporated by reference to Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q filed on October 26, 2017) 3.1(a) Amended and Restated Certificate of Incorporation of the Company dated February 16, 1993 (Incorporated by reference to Exhibit 3.1(a) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005) 3.1(b) Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Company dated May 22, 1998 (Incorporated by reference to Exhibit 3.1(b) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998) 3.1(c) Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Company dated May 17, 1999 (Incorporated by reference to Exhibit 3.1(c) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004) 3.1(d) Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Company dated December 21, 2016 (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on December 22, 2016) 3.2(a) Amended and Restated Bylaws of the Company, effective as of May 17, 2012 (Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on April 13, 2012) 3.2(b) Second Amended and Restated Bylaws of Integra LifeSciences Holdings Corporation, effective as of December 11, 2018 (Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-k filed on December 12, 2018) 4.1 Purchase Agreement, dated June 9, 2011, by and between Integra LifeSciences Holdings Corporation and J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. LLC, Deutsche Bank Securities Inc., RBC Capital Markets, LLC and Wells Fargo Securities, LLC (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 15, 2011) 4.2 Indenture, dated June 15, 2011, by and between Integra LifeSciences Holdings Corporation and Wells Fargo Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on June 15, 2011) 4.2 (a) Indenture, dated as of February 7, 2020, by and between Integra LifeSciences Holdings Corporation and Citibank, N.A., as trustee (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on February 7, 2020) ( Indenture, dated as of February 7, 2020, by and between Integra LifeSciences Holdings Corporation and Citibank, N.A., as trustee (Incorporated by reference to Exhibit 4. 1 to the Company’s Current Report on Form 8-K filed on February 7, 2020). 4.2 (b) First Supplemental Indenture, by and between Integra LifeSciences Holdings Corporation and Citibank, N.A., as trustee (Incorporated by reference to Exhibit 4. 1 to the Company’s Current Report on Form 8-K filed on December 9, 2020) 4.3 Security Agreement, dated as of December 22, 2005, among Integra LifeSciences Holdings Corporation and the additional grantors party thereto in favor of Bank of America, N.A., as administrative and collateral agent (Incorporated by reference to Exhibit 4.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005) 4.4 Pledge Agreement, dated as of December 22, 2005, among Integra LifeSciences Holdings Corporation and the additional grantors party thereto in favor of Bank of America, N.A., as administrative and collateral agent (Incorporated by reference to Exhibit 4.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005) 4.5 Subsidiary Guaranty Agreement, dated as of December 22, 2005, among the guarantors party thereto and individually as a “Guarantor”), in favor of Bank of America, N.A., as administrative and collateral agent (Incorporated by reference to Exhibit 4.6 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005) 51 4.6 Indenture, dated June 11, 2007, among Integra LifeSciences Holdings Corporation, Integra LifeSciences Corporation and Wells Fargo Bank, N.A., as trustee (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 12, 2007) 4.7 Form of 2.75% Senior Convertible Note due 2010 (included in Exhibit 4.8) (Incorporated by reference to Exhibit B to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 12, 2007) 4.8 Indenture, dated June 11, 2007, among Integra LifeSciences Holdings Corporation, Integra LifeSciences Corporation and Wells Fargo Bank, N.A., as trustee (Incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on June 12, 2007) 4.9 Form of 2.375% Senior Convertible Note due 2012 (included in Exhibit 4.10) (Incorporated by reference to Exhibit B to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on June 12, 2007) 4.10(a) Registration Rights Agreement, dated June 11, 2007, among Integra LifeSciences Holdings Corporation, Banc of America Securities LLC, J.P. Morgan Securities Inc. and Morgan Stanley & Co., Incorporated, as representatives of the several initial purchasers (Incorporated by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on June 12, 2007) 4.10(b) Registration Rights Agreement, dated June 11, 2007, among Integra LifeSciences Holdings Corporation, Banc of America Securities LLC, J.P. Morgan Securities Inc. and Morgan Stanley & Co., Incorporated, as representatives of the several initial purchasers (Incorporated by reference to Exhibit 4.6 to the Company’s Current Report on Form 8-K filed on June 12, 2007) 4.11 Integra LifeSciences Deferred Compensation Plan, effective as of May 16, 2019 (Incorporated by reference to Exhibit 4.13 to the Company's Current Form S-8 Registration Statement filed on May 23, 2019) 4.12 Indenture, dated as of February 7, 2020, by and between Integra LifeSciences Holdings Corporation and Citibank, N.A., as trustee. (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 4.13 Description of Securities+ 10.1(a) Lease Modification #2 entered into as of October 28, 2005, by and between Plainsboro Associates and Integra LifeSciences Corporation (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 2, 2005) 10.1(b) Lease Modification #3 entered into as of March 2, 2011, by and between Plainsboro Associates and Integra LifeSciences Corporation (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 3, 2011) 10.1(c) Lease Modification #4 entered into as of April 20, 2017, by and between Plainsboro Associates and Integra LifeSciences Corporation (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 25, 2017) 10.2 Equipment Lease Agreement between Medicus Corporation and the Company, dated as of June 1, 2000 (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000) 10.3(a) Form of Indemnification Agreement for Non-Employee Directors and Officers (effective prior to February 15, 2019) (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 24, 2008)* 10.3(b) 10.3 (c) Form of Indemnification Agreement for Non-Employee Director and Officers effective February 15, 2019. * 10.4 1996 Incentive Stock Option and Non-Qualified Stock Option Plan (as amended through December 27, 1997) (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on February 3, 1998)* 10.5 1998 Stock Option Plan (amended and restated as of July 26, 2005) (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005)* 10.6 1999 Stock Option Plan (amended and restated as of July 26, 2005) (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005)* 10.7(a) Employee Stock Purchase Plan (as amended on May 17, 2004) (Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-8 (Registration No. 333-127488) filed on August 12, 2005)* 52 10.7(b) First Amendment to Employee Stock Purchase Plan, dated October 26, 2005 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 1, 2005)* 10.8(a) Second Amended and Restated 2003 Equity Incentive Plan effective May 19, 2010 (Incorporated by reference to Exhibit 10 to the Company’s Current Report on Form 8-K filed May 21, 2010)* 10.8(b) Amendment to the Second Amended and Restated 2003 Equity Incentive Plan effective May 17, 2012 (Incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012)* 10.8(c) Amendment to the Second Amended and Restated 2003 Equity Incentive Plan effective January 1, 2013 (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013)* 10.8(d) Third Amended and Restated 2003 Equity Incentive Plan effective May 22, 2015 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 29, 2015)* 10.8(e) Fourth Amended and Restated 2003 Equity Incentive Plan, effective May 23, 2017 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 25, 2017) 10.8(f) Amendment to the Integra LifeSciences Holdings Corporation Fourth Amended and Restated 2003 Equity Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020)* 10.9 Additional Call Option Transaction Confirmation, dated as of February 5, 2020, between Integra LifeSciences Holdings Corporation and Morgan Stanley & Co. International plc. 10.10(a) Letter Agreement dated June 7, 2012 between Stuart M. Essig and the Company (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 7, 2012)* 10.10(b) Indemnity letter agreement dated December 27, 1997 from the Company to Stuart M. Essig (Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on February 3, 1998)* 10.11 Registration Rights Provisions for Stuart M. Essig (Incorporated by reference to Exhibit B of Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 3, 1998)* 10.12(a) Registration Rights Provisions for Stuart M. Essig (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on January 8, 2001)* 10.12(b) Registration Rights Provisions for Stuart M. Essig (Incorporated by reference to Exhibit B of Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004)* 10.13 Second Amended and Restated 2005 Employment Agreement between the Company and John B. Henneman, III (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 23, 2014)* 10.14 Consulting Agreement, dated October 12, 2010, between the Company and Inception Surgical (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 12, 2010)* 10.15 Issuer Forward Repurchase Transaction Confirmation, dated as of February 5, 2020, between Integra LifeSciences Holdings Corporation and JPMorgan Chase Bank, National Association, New York Branch. 10.16 Severance Agreement between Judith O’Grady and the Company dated as of January 3, 2012 (Incorporated by reference to Exhibit 10.16(c) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011)* 10.17 Third Amended and Restated Employment Agreement between the Company and Peter J. Arduini (Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on October 26, 2017)* 10.17(a) Amendment to the Third Amendment to the Third Amended and Restated Employment Agreement between the Company and Peter J. Arduini (Incorporated by reference to the Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020)* 53 10.18 Form of Notice of Stock Option Grant with Eight-Year Term for Peter J. Arduini (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed December 23, 2011)* 10.19 Letter Agreement dated February 19, 2013 between Peter J. Arduini and Integra LifeSciences Holdings Corporation (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 25, 2013)* 10.20(a) Lease Contract, dated April 1, 2005, between the Puerto Rico Industrial Development Company and Integra CI, Inc. (executed on September 15, 2006) (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006) 10.20(b) Amendment to Lease Contract dated as of November 2, 2011, between Integra CI, Inc. and Puerto Rico Industrial Development Company (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 7, 2011) 10.20(c) Termination of Amendment to Lease Contract, dated as of April 2, 2012, between Integra CI, Inc. and Puerto Rico Industrial Development Company (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012) 10.21 Restricted Units Agreement dated December 27, 1997 between the Company and Stuart M. Essig (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on February 3, 1998)* 10.22(a) Stock Option Grant and Agreement pursuant to 1999 Stock Option Plan dated December 22, 2000 between the Company and Stuart M. Essig (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on January 8, 2001)* 10.22(b) Stock Option Grant and Agreement pursuant to 2000 Equity Incentive Plan dated December 22, 2000 between the Company and Stuart M. Essig (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on January 8, 2001)* 10.23(a) Restricted Units Agreement dated December 22, 2000 between the Company and Stuart M. Essig (Incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on January 8, 2001)* 10.23(b) Amendment 2006-1, dated as of October 30, 2006, to the Stuart M. Essig Restricted Units Agreement dated as of December 22, 2000 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 3, 2006)* 10.24 Stock Option Grant and Agreement pursuant to 2003 Equity Incentive Plan dated July 27, 2004 between the Company and Stuart M. Essig (Incorporated by reference to Exhibit 10.30 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004)* 10.25(a) Contract Stock/Restricted Units Agreement pursuant to 2003 Equity Incentive Plan dated July 27, 2004 between the Company and Stuart M. Essig (Incorporated by reference to Exhibit 10.31 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004)* 10.25(b) Amendment 2006-1, dated as of October 30, 2006, to the Stuart M. Essig Contract Stock/Restricted Units Agreement dated as of July 27, 2004 (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 3, 2006)* 10.25(c) Amendment 2008-1, dated as of March 6, 2008, to the Stuart M. Essig Contract Stock/Restricted Units Agreement dated as of July 27, 2004 (Incorporated by reference to Exhibit 10.25(c) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007)* 10.25(d) Amendment 2011-1, dated as of May 17, 2011, to the Stuart M. Essig Contract Stock/Restricted Units Agreement dated as of July 24, 2004 (Incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011)* 10/26 Contract Stock/Units Agreement dated as of May 17, 2011 between the Company and Stuart M. Essig (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 23, 2011)* 10.27 Form of Amendment 2011-1 to Contract Stock/Restricted Units Agreements between the Company and Mr. Essig (Incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011)* 54 10.28 Form of Stock Option Grant and Agreement between the Company and Stuart M. Essig (Incorporated by reference to Exhibit 10.32 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004)* 10.29(a) Form of Contract Stock/Restricted Units Agreement for Stuart M. Essig (Incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008)* 10.29(b) New Form of Contract Stock/Restricted Units Agreement (for Annual Equity Awards) for Stuart M. Essig (Incorporated by reference to Exhibit 10.28(b) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010)* 10.29(c) Form of Amendment 2011-1 to Contract Stock/Restricted Units Agreement between the Company and Mr. Essig (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011)* 10.30(a) Form of Performance Stock Agreement for Stuart M. Essig (Incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008)* 10.30(b) Form of Restricted Stock Agreement for Stuart M. Essig for 2009 (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed April 13, 2009)* 10.31(a) Form of Performance Stock Agreement (Executive Officers) (Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on February 25, 2013)* 10.31(b) Form of Performance Stock Agreement (Executive Officers) (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 29, 2016)* 10.31(c) Form of Performance Stock Agreement for Peter J. Arduini (Incorporated by reference to Exhibit 10.2 to the Company’s Report on Form 8-K filed on February 29, 2016)* 10.31(d) Form of Performance Stock Agreement (Executive Officers) (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018) * 10.31(e) Form of Performance Stock Agreement for Peter J. Arduini (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018)* 10.32 Performance Incentive Compensation Plan effective January 1, 2013 (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013)* 10.33(a) First Amendment, dated as of February 15, 2017, to the Performance Incentive Compensation Plan (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 17, 2017) 10.33(b) 2018 Performance Incentive Compensation Plan, effective January 1, 2018 (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 25, 2017) 10.34 New Form of Contract Stock/Restricted Units Agreement pursuant to 2003 Equity Incentive Plan (for 2011) Annual Equity Award for Stuart M. Essig) (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011)* 10.35 Form of Notice of Grant of Stock Option and Stock Option Agreement (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 29, 2005)* 10.36 Form of Non-Qualified Stock Option Agreement (Non-Directors) (Incorporated by reference to Exhibit 10.35 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004)* 10.37 Form of Incentive Stock Option Agreement (Incorporated by reference to Exhibit 10.36 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004)* 10.38 Form of Non-Qualified Stock Option Agreement (Directors) (Incorporated by reference to Exhibit 10.37 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004)* 10.39 Form of Stock Option Agreement (Executive Officers) (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015)* 10.40 Form of Stock Option Agreement for Glenn Coleman (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015)* 55 10.41 Agreement and General Release by and between Robert Paltridge and Integra LifeSciences Corporation (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015)* 10.42 Agreement and General Release by and between Richard D. Gorelick and Integra LifeSciences Corporation 10.43 Form of Change in Control Severance Program (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 1 9 , 20 20 )* 10.44(a) Form of Restricted Stock Agreement for Non-Employee Directors under the 2003 Equity Incentive Plan (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012)* 10.44(b) New Form of Restricted Stock Agreement for Non-Employee Directors under the 2003 Equity Incentive Plan (Incorporated by reference to Exhibit 10.38(b) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012)* 10.45(a) Form of Restricted Stock Agreement for Executive Officers - Annual Vesting (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 25, 2009)* 10.45(b) Form of Restricted Stock Agreement for Executive Officers - Annual Vesting (Incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012)* 10.45(c) New Form of Restricted Stock Agreement for Executive Officers - Annual Vesting (Incorporated by reference to Exhibit 10.38(e) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012)* 10.46(a) Form of Restricted Stock Agreement for Executive Officers - Cliff Vesting (Incorporated by reference to Exhibit 10.8 to the Company’s Quarter Report on Form 10-Q for the quarter ended March 31, 2009)* 10.46(b) Form of Restricted Stock Agreement for Executive Officers - Cliff Vesting (Incorporated by reference to Exhibit 10.6 to the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2012)* 10.46(c) New Form of Restricted Stock Agreement for Executive Officers - Cliff Vesting (Incorporated by reference to Exhibit 10.38(h) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012)* 10.47(a) Form of Restricted Stock Agreement for Mr. Henneman for 2008 and 2009 (Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on April 13, 2009)* 10.47(b) Form of Contract Stock/Restricted Units Agreement pursuant to 2003 Equity Incentive Plan for Mr. Henneman (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on December 24, 2008)* 10.47(c) Form of Option Agreement for John B. Henneman, III (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 6, 2008)* 10.47(d) Form of Performance Stock Agreement for John B. Henneman, III (Incorporated by reference to Exhibit 10.37(b) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007)* 10.48(a) Form of Contract Stock/Restricted Units Agreement (for Signing Grant) for Mr. Arduini (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on October 12, 2010)* 10.48(b) Form of Contract Stock/Restricted Units Agreement (for Annual Equity Awards) for Mr. Arduini (Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on October 12, 2010)* 10.49 Form of Non-Qualified Stock Option Agreement for Mr. Arduini (Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on October 12, 2010)* 10.50(a) Form of Restricted Stock Agreement for Mr. Henneman (Incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on October 12, 2010)* 10.50(b) Form of Restricted Stock Agreement (Annual Vesting) for Mr. Henneman (Incorporated by reference to Exhibit 10.39(n) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011)* 10.51 Davis Promotion Summary, effective December 1, 2016 (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 5, 2016)* 56 10.52 Coleman Promotion Summary, effective June 24, 2019(Incorporated by reference to the Current Report on Form 8-K filed on June 24, 2019) 10.53 Anderson Offer Summary, effective June 24, 2019(Incorporated by reference to the Current Report on Form 8-K filed on June 24, 2019) 10.54 Annual Executive Physical Medical Exam Arrangement (Incorporated by reference to the Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 29, 2013)* 10.55 Amended and Restated Management Incentive Compensation Plan, as of January 1, 2008 (Incorporated by reference to Exhibit 10.43(c) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007)* 10.56 Piggyback Registration Rights Agreement dated December 22, 2008 between Integra LifeSciences Holdings Corporation and George Heenan, Thomas Gilliam and Michael Evers, as trustees of The Bruce A. LeVahn 2008 Trust and Steven M. LeVahn (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 29, 2008) 10.57(a) Lease Agreement between 109 Morgan Lane, LLC and Integra LifeSciences Corporation, dated May 15, 2008 (Incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008) 10.57(b) First Amendment to Lease Agreement between 109 Morgan Lane, LLC and Integra LifeSciences Corporation, dated March 9, 2009 (Incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009) 10.57(c) Lease Agreement dated as of July 1, 2013, between 109 Morgan Lane, LLC and Integra LifeSciences Corporation (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on July 1, 2013) 10.58 Receivables Financing Agreement, dated as of December 21, 2018, by and among Integra Receivables LLC, Integra LifeSciences Sales LLC, as Servicer, PNC Bank, National Association, as Administrative Agent, PNC Capital Markets LLC, as Structuring Agent, and certain lenders and group agents that are parties thereto from time to time (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 28, 2018) 10.59 Purchase and Sale Agreement, dated as of December 21, 2018, by and among Integra LifeSciences Sales LLC, Integra LifeSciences Corporation and Integra Receivables LLC (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 28, 2018) 10.60(a) Sixth Amended and Restated Credit Agreement, dated as of February 3, 2020, among Integra LifeSciences Holdings Corporation, the lenders party thereto, Bank of America, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, Citibank N.A., Morgan Stanley MUFG Loan Partners, LLC and Wells Fargo Bank, N.A., as Co-Syndication Agents, and PNC Bank, N.A., Bank of Nova Scotia, Bank of the West, BBVA USA, Capital One, National Association, Citizens Bank, N.A., DNB Capital LLC, Santander Bank, N.A., TD Bank, N.A. and Truist Bank, as Co-Documentation Agents. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 3, 2020). 10.60(b) Amendment, dated July 14, 2020, to that Sixth Amended and Restated Credit Agreement, among Integra LifeSciences Holdings Corporation, a syndicate of lending banks, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, Citibank N.A., Morgan Stanley MUFG Loan Partners, LLC and Wells Fargo Bank, N.A. as Co-Syndication Agents, and PNC Bank, N.A., Bank of Nova Scotia, Bank of the West, BBVA USA, Capital One, National Association, Citizens Bank, N.A., DNB Capital LLC, Santander Bank, N.A., T.D. Bank, N.A. and Truist Bank, as Co-Documentation Agents (as amended, restated, modified and supplemented from time to time prior to the date hereof, the “Credit Agreement”) (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on July 20, 2020). 10.61 Base Call Option Transaction Confirmation, dated as of February 4, 2020, between Integra LifeSciences Holdings Corporation and Citibank, N.A. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.62 Ratification Agreement, dated as of February 3, 2020, between Integra LifeSciences Holdings Corporation, the Subsidiary Guarantors of Integra LifeSciences Holdings Corporation and Bank of America, N.A., as Administrative Agent (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on February 3, 2020) 57 10.63 Base Call Option Transaction Confirmation, dated as of February 4, 2020, between Integra LifeSciences Holdings Corporation and Morgan Stanley & Co. International plc. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.64 Base Call Option Transaction Confirmation, dated as of February 4, 2020, between Integra LifeSciences Holdings Corporation and Wells Fargo, National Association. (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.65 Base Warrant Confirmation, dated as of February 4, 2020, between Integra LifeSciences Holdings Corporation and Citibank, N.A. (Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.66 Base Warrant Confirmation, dated as of February 4, 2020, between Integra LifeSciences Holdings Corporation and Goldman Sachs & Co. LLC. (Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.67 Base Warrant Confirmation, dated as of February 4, 2020, between Integra LifeSciences Holdings Corporation and Morgan Stanley & Co. International plc. (Incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.68 Base Warrant Confirmation, dated as of February 4, 2020, between Integra LifeSciences Holdings Corporation and Wells Fargo, National Association. (Incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.69 Additional Call Option Transaction Confirmation, dated as of February 5, 2020, between Integra LifeSciences Holdings Corporation and Citibank, N.A. (Incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.70 Additional Call Option Transaction Confirmation, dated as of February 5, 2020, between Integra LifeSciences Holdings Corporation and Goldman Sachs & Co. LLC. (Incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.71 Additional Call Option Transaction Confirmation, dated as of February 5, 2020, between Integra LifeSciences Holdings Corporation and Morgan Stanley & Co. International plc. (Incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.72 Additional Call Option Transaction Confirmation, dated as of February 5, 2020, between Integra LifeSciences Holdings Corporation and Wells Fargo, National Association. (Incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.73 Additional Warrant Confirmation, dated as of February 5, 2020, between Integra LifeSciences Holdings Corporation and Citibank, N.A. (Incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.74 Additional Warrant Confirmation, dated as of February 5, 2020, between Integra LifeSciences Holdings Corporation and Goldman Sachs & Co. LLC. (Incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.75 Additional Warrant Confirmation, dated as of February 5, 2020, between Integra LifeSciences Holdings Corporation and Morgan Stanley & Co. plc. (Incorporated by reference to Exhibit 10.15 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.76 Additional Warrant Confirmation, dated as of February 5, 2020, between Integra LifeSciences Holdings Corporation and Wells Fargo, National Association. (Incorporated by reference to Exhibit 10.16 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.77 Issuer Forward Repurchase Transaction Confirmation, dated as of February 5, 2020, between Integra LifeSciences Holdings Corporation and JPMorgan Chase Bank, National Association, New York Branch. (Incorporated by reference to Exhibit 10.17 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 58 2.1(b) Agreement and Plan of Merger by among Integra LifeSciences Holdings Corporation and ACell Inc. dated as of December 15, 2020+ 21 Subsidiaries of the Company+ 23 Consent of PricewaterhouseCoopers LLP+ 31.1 Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002+ 31.2 Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002+ 32.1 Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002+ 32.2 Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002+ 99.1 Letter, dated December 21, 2011, from the United States Food and Drug Administration to Integra LifeSciences Corporation (Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on January 5, 2012) 99.2 Food and Drug Administration Form FDA-483, dated July 30, 2012, relating to inspection of Plainsboro, NJ manufacturing facility (Incorporated by reference to Exhibit 99.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012) 99.3 Letter, dated November 1, 2012, from the United States Food and Drug Administration to Integra NeuroSciences Ltd. (Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on November 13, 2012) 99.4 Letter, dated February 13, 2013, from the United States Federal Drug Administration to Integra LifeSciences Corporation (Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on February 19, 2013) 99.5 Letter, dated September 24, 2013, from the United States Federal Drug Administration to Integra LifeSciences Corporation (Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on September 27, 2013) 99.6 Food and Drug Administration Form FDA-483, dated November 26, 2013, relating to the inspection of the Añasco Facility (Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on December 3, 2013) 99.7 Letter, dated January 14, 2015, from the United States Food and Drug Administration to Integra LifeSciences Corporation (Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on January 20, 2015) 99.8 Letter, dated May 29, 2015, from the United States Food and Drug Administration to TEI Biosciences Inc. (Incorporated by reference to Exhibit 99.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015) 99.9 Letter, dated June 30, 2015, from the United States Food and Drug Administration to Integra LifeSciences (Ireland) Limited (Incorporated by reference to Exhibit 99.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015) 101.INS XBRL Instance Document+# 101.SCH XBRL Taxonomy Extension Schema Document+# 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document+# 101.DEF XBRL Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Labels Linkbase Document+# 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document+# * Indicates a management contract or compensatory plan or arrangement. + Indicates this document is filed as an exhibit herewith. 59 # The financial information of Integra LifeSciences Holdings Corporation Annual Report on Form 10-K for the year ended December 31, 2020 filed on February 18, 2020 formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Operations, (ii) the Consolidated Statement of Comprehensive Income (Loss), (iii) the Consolidated Balance Sheets, (iv) Parenthetical Data to the Consolidated Balance Sheets, (v) the Consolidated Statements of Cash Flows, (vi) the Consolidated Statements of Changes in Stockholders’ Equity, and (vii) Notes to Consolidated Financial Statements, is furnished electronically herewith. The Company’s Commission File Number for Reports on Form 10-K, Form 10-Q and Form 8-K is 0-26224. ITEM 16. FORM 10-K SUMMARY None. 60 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INTEGRA LIFESCIENCES HOLDINGS CORPORATION By: /s/ Peter J. Arduini Peter J. Arduini President and Chief Executive Officer (Principal Executive Officer) By: /s/ Carrie L. Anderson Carrie L. Anderson Executive Vice President, Chief Financial Officer, and Treasurer (Principal Financial Officer) By: /s/ Jeffrey A. Mosebrook Jeffrey A. Mosebrook Senior Vice President, Finance (Principal Accounting Officer) Date: February 23, 2021 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons, on behalf of the registrant in the capacities indicated. 61 Signature Title Date /s/ Peter J. Arduini President and Chief Executive Officer, February 23, 2021 Peter J. Arduini and Director (Principal Executive Officer) /s/ Carrie L. Anderson Executive Vice President, Chief Financial Officer, February 23, 2021 Carrie L. Anderson and Treasurer (Principal Financial Officer) /s/ Jeffrey A. Mosebrook Senior Vice President, Finance February 23, 2021 Jeffrey A. Mosebrook (Principal Accounting Officer) /s/ Stuart M. Essig, Ph.D. Chairman of the Board February 23, 2021 Stuart M. Essig, Ph.D. /s/ Rhonda Germany Ballintyn Director February 23, 2021 Rhonda Germany Ballintyn /s/ Keith Bradley, Ph.D. Director February 23, 2021 Keith Bradley, Ph.D. /s/ Barbara B. Hill Director February 23, 2021 Barbara B. Hill /s/ Lloyd W. Howell, Jr. Director February 23, 2021 Lloyd W. Howell, Jr. /s/ Donald E. Morel, Jr., Ph.D. Director February 23, 2021 Donald E. Morel, Jr., Ph.D. /s/ Raymond G. Murphy Director February 23, 2021 Raymond G. Murphy /s/ Christian S. Schade Director February 23, 2021 Christian S. Schade 62 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Integra LifeSciences Holdings Corporation Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Integra LifeSciences Holdings Corporation and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive income, of changes in stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Changes in Accounting Principles As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and revenues from contracts with customers in 2018. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that F - 1 (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Excess or Obsolete Inventory Adjustments As described in Note 2 to the consolidated financial statements, the Company’s inventory is stated at the lower of cost, the value determined by the first-in, first-out method, or net realizable value, and the net inventory balance was $362.9 million as of December 31, 2020, $52.8 million of which is presented separately as Assets held for sale. At each balance sheet date, management evaluates inventories for excess quantities, obsolescence or shelf life expiration. This evaluation by management includes analysis of historical sales levels by product, projections of future demand, the risk of technological or competitive obsolescence for products, general market conditions, a review of the shelf life expiration dates for products, as well as the feasibility of reworking or using excess or obsolete products or components in the production or assembly of other products that are not obsolete or for which there are not excess quantities in inventory. To the extent that management determines there are excess or obsolete inventory or quantities with a shelf life that is too near its expiration for the Company to reasonably expect that it can sell those products prior to their expiration, management adjusts the carrying value to estimated net realizable value. The principal considerations for our determination that performing procedures relating to excess or obsolete inventory adjustments is a critical audit matter are the significant judgment by management when developing the estimate for excess or obsolete inventory adjustments, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s analysis and significant assumptions related to projections of future demand and risk of technological or competitive obsolescence for products. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of inventory, including controls over the estimate for excess or obsolete inventory adjustments and management’s projection of future demand and the risk of technological or competitive obsolescence for products. These procedures also included, among others, testing management’s process for developing the estimate for excess or obsolete inventory adjustments, evaluating the appropriateness of the method, testing the completeness, accuracy, and relevance of underlying data used in the estimate; and evaluating the reasonableness of significant assumptions related to projections of future demand and risk of technological or competitive obsolescence for products. Evaluating the reasonableness of management’s assumption related to projections of future demand involved considering the product’s historical performance. Evaluating the reasonableness of management’s assumption related to the risk of technological or competitive obsolescence for products involved considering the technological or competitive obsolescence experiences during the product life cycle of existing products. Valuation of Transferred Intellectual Property Rights That Give Rise to Deferred Tax Benefits As described in Note 13 to the consolidated financial statements, in December 2020, the Company completed an intra-entity transfer of certain intellectual property rights to one of its subsidiaries in Switzerland. While the transfer did not result in a taxable gain, the Company’s Swiss subsidiary received a step-up in tax basis based on the fair value of the transferred intellectual property rights. Management determined the fair value using a discounted cash flow model based on management’s expectations of revenue growth rates, royalty rates, discount rates and useful lives of the intellectual F - 2 property. The Company recorded a $59.2 million deferred tax benefit in Switzerland related to the amortizable tax basis in the transferred intellectual property. The principal considerations for our determination that performing procedures relating to the valuation of transferred intellectual property rights that give rise to deferred tax assets is a critical audit matter are the significant judgment by management in developing the fair value of the intangible assets transferred, which is used as the basis for the recording of the deferred tax assets. This in turn led to significant auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s estimates and assumptions related to revenue growth rates, royalty rates, discount rates and useful lives. In addition, the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of the intangible assets transferred. These procedures also included, among others, testing management’s process for developing the fair value of the intangible assets transferred; evaluating the appropriateness of the discounted cash flow model; testing the completeness, accuracy, and relevance of underlying data used in the model; and evaluating the reasonableness of significant assumptions used by management related to revenue growth rates, royalty rates, discount rates and useful lives. Evaluating the reasonableness of management’s assumptions related to revenue growth rates and useful lives involved considering current and past performance of the products associated with the intellectual property rights and evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow model and the royalty rate and discount rate significant assumptions. /s/ PricewaterhouseCoopers LLP Florham Park, New Jersey February 23, 2021 We have served as the Company’s auditor since 1989. F - 3 INTEGRA LIFESCIENCES HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Years Ended December 31, 2020 2019 2018 Total revenue, net $ 1,371,868 $ 1,517,557 $ 1,472,441 Costs and expenses: Cost of goods sold 520,834 564,681 571,496 Research and development 77,381 79,573 78,041 In-process research and development — 64,916 — Selling, general and administrative 594,526 687,599 690,746 Intangible asset amortization 27,757 27,028 21,160 Total costs and expenses 1,220,498 1,423,797 1,361,443 Operating income 151,370 93,760 110,998 Interest income 9,297 10,779 2,800 Interest expense ( 71,581 ) ( 53,957 ) ( 64,683 ) Other income, net 4,434 9,522 8,288 Income before income taxes 93,520 60,104 57,403 Provision (benefit) for income taxes ( 40,372 ) 9,903 ( 3,398 ) Net income $ 133,892 $ 50,201 $ 60,801 Net income per share Basic $ 1.58 $ 0.59 $ 0.73 Diluted $ 1.57 $ 0.58 $ 0.72 Weighted average common shares outstanding (See Note 14): Basic 84,650 85,637 82,857 Diluted 85,228 86,494 83,999 The accompanying notes are an integral part of these consolidated financial statements. F - 4 INTEGRA LIFESCIENCES HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years Ended December 31, 2020 2019 2018 (In thousands) Net income $ 133,892 $ 50,201 $ 60,801 Other comprehensive income (loss), before tax: Change in foreign currency translation adjustments 53,363 ( 174 ) ( 19,159 ) Unrealized gain (loss) on derivatives Unrealized derivative gain (loss) arising during period ( 96,837 ) ( 13,671 ) 11,709 Less: Reclassification adjustments for gain (loss) included in net income ( 24,442 ) 14,865 13,400 Unrealized loss on derivatives ( 72,395 ) ( 28,536 ) ( 1,691 ) Defined benefit pension plan - net gain (loss) arising during period 4,604 ( 8,973 ) ( 643 ) Total other comprehensive loss, before tax ( 14,428 ) ( 37,683 ) ( 21,493 ) Income tax benefit (expense) related to items in other comprehensive loss 16,771 6,724 ( 143 ) Total other comprehensive loss, net of tax 2,343 ( 30,959 ) ( 21,636 ) Comprehensive income, net of tax $ 136,235 $ 19,242 $ 39,165 The accompanying notes are an integral part of these consolidated financial statements. F - 5 INTEGRA LIFESCIENCES HOLDINGS CORPORATION CONSOLIDATED BALANCE SHEETS December 31, 2020 2019 (In thousands) ASSETS Current Assets: Cash and cash equivalents $ 470,166 $ 198,911 Trade accounts receivable, net of allowances of $ 6,439 and $ 4,303 225,532 275,296 Inventories, net 310,117 316,054 Assets held for sale 162,105 — Prepaid expenses and other current assets 69,282 67,907 Total current assets 1,237,202 858,168 Property, plant and equipment, net 287,529 337,404 Right of use asset - operating leases 83,635 94,530 Intangible assets, net 989,436 1,031,591 Goodwill 932,367 954,280 Deferred tax assets, net 73,690 12,623 Other assets 11,277 14,644 Total assets $ 3,615,136 $ 3,303,240 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Current portion of borrowings under senior credit facility $ 33,750 $ 45,000 Current portion of borrowings under securitization facility 112,500 — Current portion of lease liability - operating leases 12,818 12,253 Accounts payable, trade 54,608 113,090 Contract liabilities 5,275 4,772 Accrued compensation 76,117 79,385 Liabilities held for sale 11,751 — Accrued expenses and other current liabilities 94,194 76,809 Total current liabilities 401,013 331,309 Long-term borrowings under senior credit facility 933,387 1,198,561 Long-term borrowings under securitization facility — 104,500 Long-term convertible securities 474,834 — Lease liability - operating leases 88,118 97,504 Deferred tax liabilities 16,190 36,553 Other liabilities 186,727 118,077 Total liabilities 2,100,269 1,886,504 Stockholders’ Equity: Preferred Stock; no par value; 15,000 authorized shares; none outstanding — — Common stock; $ 0.01 par value; 240,000 authorized shares; 89,251 and 88,735 issued at December 31, 2020 and 2019, respectively 893 887 Additional paid-in capital 1,290,909 1,213,620 Treasury stock, at cost; 4,914 and 2,865 shares at December 31, 2020 and 2019, respectively ( 235,141 ) ( 119,943 ) Accumulated other comprehensive loss ( 74,059 ) ( 76,402 ) Retained earnings 532,265 398,574 Total stockholders’ equity 1,514,867 1,416,736 Total liabilities and stockholders’ equity $ 3,615,136 $ 3,303,240 The accompanying notes are an integral part of these consolidated financial statements. F - 6 INTEGRA LIFESCIENCES HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2020 2019 2018 (In thousands) OPERATING ACTIVITIES: Net income $ 133,892 $ 50,201 $ 60,801 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 116,031 109,462 110,730 Non-cash in-process research and development expense 519 64,916 — Non-cash impairment charges — 5,764 4,941 Income tax expense (benefit) ( 64,138 ) ( 19,046 ) ( 8,184 ) Share-based compensation 19,590 21,255 20,779 Amortization of debt issuance costs and expenses associated with debt refinancing 12,076 5,390 6,270 Non-cash lease expense 2,955 5,060 — Accretion of bond issuance discount 15,415 — — Loss on disposal of property and equipment and construction in-progress 7,855 1,821 1,385 Change in fair value of contingent consideration and others 951 1,119 1,214 Changes in assets and liabilities: Accounts receivable 52,105 ( 9,428 ) ( 17,021 ) Inventories ( 48,348 ) ( 43,308 ) 8,300 Prepaid expenses and other current assets 1,632 13,071 3,933 Other non-current assets 13,735 13,156 1,052 Accounts payable, accrued expenses and other current liabilities ( 57,512 ) 14,666 3,588 Contract liabilities ( 37 ) ( 607 ) 1,504 Other non-current liabilities ( 2,889 ) ( 2,059 ) 391 Net cash provided by operating activities 203,832 231,433 199,683 INVESTING ACTIVITIES: Purchases of property and equipment ( 38,890 ) ( 69,537 ) ( 77,741 ) Acquired in-process research and development and intangibles ( 25,000 ) ( 64,995 ) — Proceeds from note receivable — 752 910 Cash used in business acquisitions, net of cash acquired — ( 30,509 ) 26,704 Proceeds from sales of property and equipment 3,657 37 422 Net proceeds(payments) on swaps designated as net investment hedges ( 7,840 ) 1,584 — Net cash used in investing activities ( 68,073 ) ( 162,668 ) ( 49,705 ) FINANCING ACTIVITIES: Proceeds from borrowings of long-term indebtedness 171,500 236,900 171,200 Payments on debt ( 441,000 ) ( 246,100 ) ( 660,000 ) Purchase of option hedge on convertible notes ( 104,248 ) — — Proceeds from convertible notes issuance 575,000 — — Proceeds from sale of stock purchase warrants 44,563 — — Payment of debt issuance costs ( 24,347 ) — ( 5,037 ) Purchase of treasury stock ( 100,000 ) — — Proceeds from exercised stock options 5,232 6,948 9,392 Net cash paid for contingent consideration — — ( 38,196 ) Proceeds from the issuance of common stock, net of issuance costs — — 349,590 Cash taxes paid in net equity settlement ( 5,075 ) ( 6,514 ) ( 7,821 ) Net cash provided by (used in) financing activities 121,625 ( 8,766 ) ( 180,872 ) Effect of exchange rate changes on cash and cash equivalents 13,871 74 ( 5,203 ) Net increase (decrease) in cash and cash equivalents 271,255 60,073 ( 36,097 ) Cash and cash equivalents at beginning of period 198,911 138,838 174,935 Cash and cash equivalents at end of period $ 470,166 $ 198,911 $ 138,838 The accompanying notes are an integral part of these consolidated financial statements. F - 7 INTEGRA LIFESCIENCES HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Common Stock Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Retained Earnings Total Equity Shares Amount Shares Amount (In thousands) Balance, January 1, 2018 81,306 $ 813 ( 2,927 ) $ ( 121,644 ) $ 821,758 $ ( 23,807 ) $ 285,186 $ 962,306 Adoption of Update No. 2014-09 — — — — — — 1,854 1,854 Adoption of Update No. 2018-02 — — — — — — 532 532 Net income — — — — — — 60,801 60,801 Other comprehensive loss, net of tax — — — — — ( 21,636 ) — ( 21,636 ) Issuance of common stock through employee stock purchase plan — — — — 553 — — 553 Issuance of common stock for vesting of share-based awards, net of shares withheld for taxes 700 4 46 1,030 52 — — 1,086 Equity offering 6,038 60 — — 349,529 — — 349,589 Share-based compensation — 3 — — 20,709 — — 20,712 Balance, December 31, 2018 88,044 880 ( 2,881 ) ( 120,615 ) 1,192,601 ( 45,443 ) 348,373 1,375,796 Net income — — — — — — 50,201 50,201 Other comprehensive loss, net of tax — — — — — ( 30,959 ) — ( 30,959 ) Issuance of common stock through employee stock purchase plan 17 — — — 716 — — 716 Issuance of common stock for vesting of share-based awards, net of shares withheld for taxes 674 7 16 672 ( 961 ) — — ( 282 ) Share-based compensation — — — — 21,264 — — 21,264 Balance, December 31, 2019 88,735 887 ( 2,865 ) ( 119,943 ) 1,213,620 ( 76,402 ) 398,574 1,416,736 Net income — — — — — — 133,892 133,892 Other comprehensive loss, net of tax — — — — — 2,343 — 2,343 Issuance of common stock through employee stock purchase plan 13 — — — 694 — — 694 Issuance of common stock for vesting of share-based awards, net of shares withheld for taxes 503 2 11 526 ( 1,066 ) — — ( 538 ) Share-based compensation — 4 — — 19,397 — — 19,401 Share repurchase and equity component of the convertible note issuance, net — — — — 42,539 — — 42,539 Accelerated shares repurchased — — ( 2,060 ) ( 115,724 ) 15,724 — — ( 100,000 ) Adoption of Update No. 2016-13 — — — — — — ( 200 ) ( 200 ) Balance, December 31, 2020 89,251 893 ( 4,914 ) ( 235,141 ) 1,290,908 ( 74,059 ) 532,266 1,514,867 The accompanying notes are an integral part of these consolidated financial statements. F - 8 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS Integra LifeSciences Holdings Corporation (the “Company”) was incorporated in Delaware in 1989. The Company, a worldwide leader in medical devices, is dedicated to limiting uncertainty for surgeons through the development, manufacturing, and marketing of cost-effective surgical implants and medical instruments. Its products are used primarily in neurosurgery, reconstruction and general surgery. The Company sells its products directly through various sales forces and through a variety of other distribution channels. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION These financial statements and the accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America and conform to Regulation S-X under the Securities Exchange Act of 1934, as amended. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All intercompany accounts and transactions are eliminated in consolidation. See Note 5, Acquisitions , for details of new subsidiaries included in the consolidation. USE OF ESTIMATES The preparation of consolidated financial statements is in conformity with generally accepted accounting principles in the United States ("GAAP") which requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent liabilities, and the reported amounts of revenues and expenses. Significant estimates affecting amounts reported or disclosed in the consolidated financial statements include allowances for doubtful accounts receivable and sales returns and allowances, net realizable value of inventories, in-process research and development ("IPR&D"), valuation of intangible assets including amortization periods for acquired intangible assets, discount rates and estimated projected cash flows used to value and test impairments of long-lived assets and goodwill, estimates of projected cash flows and depreciation and amortization periods for long-lived assets, computation of taxes, valuation allowances recorded against deferred tax assets, the valuation of stock-based compensation, valuation of derivative instruments, valuation of the equity component of convertible debt instruments, valuation of contingent liabilities, the fair value of debt instruments and loss contingencies. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the current circumstances. Actual results could differ from these estimates. The novel coronavirus (“COVID-19”) pandemic and the resulting adverse impacts to global economic conditions, as well as our operations, may impact future estimates including, but not limited to, inventory valuations, fair value measurements, goodwill and long-lived asset impairments, the effectiveness of the Company’s hedging instruments, deferred tax valuation allowances, and allowances for doubtful accounts receivable. RECLASSIFICATIONS Certain amounts from the prior year's financial statements have been reclassified in order to conform to the current year's presentation. CASH AND CASH EQUIVALENTS The Company considers all short-term, highly liquid investments purchased with original maturities of three months or less to be cash equivalents. These investments are carried at cost, which approximates fair value. TRADE ACCOUNTS RECEIVABLE AND ALLOWANCES FOR DOUBTFUL ACCOUNTS RECEIVABLE Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company grants credit to customers in the normal course of business, but generally does not require collateral or any other security to support its receivables. The Company evaluates the collectability of accounts receivable based on a combination of factors. The Company recognizes a provision for doubtful accounts that reflects the Company’s estimate of expected credit losses for trade accounts receivable. In circumstances where a specific customer is unable to meet its financial obligations to the Company, a provision to the allowances for doubtful accounts is recorded against amounts due to reduce the net recognized receivable to the amount that is reasonably expected to be collected. For all other customers, the Company evaluates measurement of all expected credit losses for trade receivables held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Provisions to the allowances for doubtful accounts are recorded to selling, general and administrative expenses. Account balances are charged off against the allowance when it is probable that the receivable will not be recovered. F - 9 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Provision for doubtful accounts net of recoveries, associated with accounts receivable, included in selling, general and administrative expense, were $ 3.6 million, $ 2.1 million, and $ 0.6 million for the years ended December 31, 2020, 2019 and 2018, respectively. INVENTORIES Inventories, consisting of purchased materials, direct labor and manufacturing overhead, are stated at the lower of cost, the value determined by the first-in, first-out method, or net realizable value. Inventories consisted of the following: December 31, 2020 2019 (In thousands) Finished goods $ 180,301 $ 201,870 Work in process 53,336 48,333 Raw materials 76,480 65,851 Total inventories, net $ 310,117 $ 316,054 At December 31, 2020, $ 52.8 million of inventories, net was presented separately as "Assets held for sale" in conjunction with the sale of the Extremity Orthopedics business. See Note 3, Assets and Liabilities Held for Sale . At each balance sheet date, the Company evaluates inventories for excess quantities, obsolescence or shelf life expiration. This evaluation includes analysis of historical sales levels by product, projections of future demand, the risk of technological or competitive obsolescence for products, general market conditions, a review of the shelf life expiration dates for products, as well as the feasibility of reworking or using excess or obsolete products or components in the production or assembly of other products that are not obsolete or for which there are not excess quantities in inventory. To the extent that management determines there are excess or obsolete inventory or quantities with a shelf life that is too near its expiration for the Company to reasonably expect that it can sell those products prior to their expiration, the Company adjusts the carrying value to estimated net realizable value. The Company capitalizes inventory costs associated with certain products prior to regulatory approval, based on management's judgment of probable economic benefit. The Company could be required to expense previously capitalized costs related to pre-approval inventory upon a change in such judgment, due to, among other potential factors, a denial or delay of approval by necessary regulatory bodies or a decision by management to discontinue the related development program. No such amounts were capitalized at December 31, 2020 or 2019. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at historical cost less accumulated depreciation and any impairment charges. The Company provides for depreciation using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the lesser of the lease term or the useful life. The cost of major additions and improvements is capitalized, while maintenance and repair costs that do not improve or extend the lives of the respective assets are charged to operations as incurred. The cost of computer software developed or obtained for internal use is accounted for in accordance with the Accounting Standards Codification 350-40, Internal-Use Software. F - 10 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Property, plant and equipment balances and corresponding lives were as follows: December 31, 2020 2019 Useful Lives (In thousands) Land $ 1,541 $ 1,476 Buildings and building improvements 17,345 16,262 5 - 40 years Leasehold improvements 144,852 114,941 1 - 20 years Machinery and production equipment 166,973 155,313 3 - 20 years Surgical instrument kits 1,164 33,104 4 - 5 years Information systems and hardware 143,770 138,398 1 - 7 years Furniture, fixtures, and office equipment 20,843 22,145 1 - 15 years Construction-in-progress 73,890 140,366 Total 570,378 622,005 Less: Accumulated depreciation ( 282,849 ) ( 284,601 ) Property, plant and equipment, net $ 287,529 $ 337,404 At December 31, 2020, $ 37.9 million of property, plant and equipment, net was presented separately as "Assets held for sale" in conjunction with the sale of the Extremity Orthopedics business. See Note 3, Assets and Liabilities Held for Sale . Depreciation expense associated with property, plant and equipment was $ 42.1 million, $ 42.6 million, and $ 44.1 million for the years ended December 31, 2020, 2019 and 2018, respectively. During the fourth quarter of 2020, the Company wrote-off certain construction in progress of $ 6.7 million related to a manufacturing project that the Company decided to discontinue. The Company determined that the carrying amounts of these assets were not recoverable. CAPITALIZED INTEREST The interest cost on capital projects, including facilities build-out and internal use software, is capitalized and included in the cost of the project. Capitalization commences with the first expenditure for the project and continues until the project is substantially complete and ready for its intended use. When no debt is incurred specifically for a project, interest is capitalized on project expenditures using the weighted average cost of the Company's outstanding borrowings. For the years ended December 31, 2020 and 2019, respectively, the Company capitalized $ 2.3 million and $ 3.1 million of interest expense into property, plant and equipment. ACQUISITIONS Results of operations of acquired companies are included in the Company’s results of operations as of the respective acquisition dates. Acquired businesses are accounted for using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recorded at fair value, with limited exceptions. Any excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill. Transaction costs and costs to restructure the acquired Company are expensed as incurred. The operating results of the acquired business are reflected in the consolidated financial statements after the date of acquisition. Acquired IPR&D is recognized at fair value and initially characterized as an indefinite-lived intangible asset, irrespective of whether the acquired IPR&D has an alternative future use. Contingent consideration is recognized at the estimated fair value on the acquisition date. Subsequent changes to the fair value of contingent payments are recognized in selling, general and administrative expense in consolidated statements of operations. Contingent payments related to acquisitions consist of development, regulatory, and commercial milestone payments, in addition to sales-based payments, and are valued using discounted cash flow techniques. The fair value of development, regulatory, and commercial milestone payments reflects management’s expectations of the probability of payment and increases or decreases as the probability of payment or expectation of timing of payments changes. The fair value of sales-based payments is based upon probability-weighted future revenue estimates and increases or decreases as revenue estimates or expectation of timing of payments changes. If the acquired net assets do not constitute a business under the acquisition method of accounting, the transaction is accounted for as an asset acquisition and no goodwill is recognized. In an asset acquisition, the amount allocated to acquired IPR&D with no alternative future use is charged to expense at the acquisition date. Payments that would be recognized as contingent consideration in a business combination are expensed when probable in an asset acquisition. Refer to Note 5, Acquisitions for more information. F - 11 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) GOODWILL AND OTHER INTANGIBLE ASSETS The excess of the cost over the fair value of net assets of acquired businesses is recorded as goodwill. Goodwill is not subject to amortization but is reviewed for impairment at the reporting unit level annually, or more frequently if impairment indicators arise. The Company's assessment of the recoverability of goodwill is based upon a comparison of the carrying value of goodwill with its estimated fair value. The Company reviews goodwill for impairment in the third quarter every year in accordance with ASC Topic 350 and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. Refer to Note 8, Goodwill and Other Intangibles for more information. The Company has two reportable segments with three underlying reporting units. Refer to Note 17, Segment and Geographic Information for more information on reportable segments. When the Company acquires a business, the assets acquired, including IPR&D, and liabilities assumed are recorded at their respective fair values as of the acquisition date. The Company's policy defines IPR&D as the fair value of those projects for which the related products have not received regulatory approval and have no alternative future use. Determining the fair value of intangible assets, including IPR&D, acquired as part of a business combination requires the Company to make significant estimates. These estimates include the amount and timing of projected future cash flows, the discount rate used to discount those cash flows to present value, the assessment of the asset’s life cycle, and the consideration of legal, technical, regulatory, economic, and competitive risks. The fair value assigned to other intangible assets is determined by estimating the future cash flows of each project or technology and discounting the net cash flows back to their present values. The discount rate used is determined at the time of measurement in accordance with accepted valuation methodologies. IPR&D acquired in a business combination is capitalized as an indefinite-lived intangible asset. Development costs incurred after the acquisition are expensed as incurred. Upon receipt of regulatory approval, the indefinite-lived intangible asset is then accounted for as a finite-lived intangible asset and amortized on a straight-line basis or accelerated basis, as appropriate, over its estimated useful life. If the research and development project is subsequently abandoned, the indefinite-lived intangible asset is charged to expense. IPR&D acquired outside of a business combination is expensed immediately. Due to the uncertainty associated with research and development projects, there is risk that actual results will differ materially from the original cash flow projections and that the research and development project will result in a successful commercial product. The risks associated with achieving commercialization include, but are not limited to, delay or failure to obtain regulatory approvals to conduct clinical trials, delay or failure to obtain required market clearances, delays or issues with patent issuance, or validity and litigation. Other intangible assets include patents, trademarks, purchased technology, and supplier and customer relationships. Identifiable intangible assets are initially recorded at fair market value at the time of acquisition generally using an income or cost approach. The Company capitalizes costs incurred to renew or extend the term of recognized intangible assets and amortizes those costs over their expected useful lives. LONG-LIVED ASSETS Long-lived assets held and used by the Company, including property, plant and equipment, intangible assets, and leases are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets to be held and used, a recoverability test is performed using projected undiscounted net cash flows applicable to the long-lived assets. If an impairment exists, the amount of such impairment is calculated based on the estimated fair value of the asset. Impairments to long-lived assets to be disposed of are recorded based upon the difference between the carrying value and the fair value of the applicable assets. INTEGRA FOUNDATION The Company may periodically make contributions to the Integra Foundation, Inc. The Integra Foundation was incorporated in 2002 exclusively for charitable, educational, and scientific purposes and qualifies under IRC 501(c)(3) as an exempt private foundation. Under its charter, the Integra Foundation engages in activities that promote health, the diagnosis and treatment of disease, and the development of medical science through grants, contributions and other appropriate means. The Integra Foundation is a separate legal entity and is not a subsidiary of the Company; therefore, its results are not included in these consolidated financial statements. The Company contributed $ 0.8 million, $ 0.3 million and $ 0.8 million to the Integra Foundation during the years ended December 31, 2020, 2019 and 2018, respectively. These contributions were recorded in selling, general, and administrative expense. F - 12 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) DERIVATIVES The Company develops, manufactures, and sells medical devices globally and its earnings and cash flows are exposed to market risk from changes in interest rates and currency exchange rates. The Company addresses these risks through a risk management program that includes the use of derivative financial instruments and operates the program pursuant to documented corporate risk management policies. All derivative financial instruments are recognized in the financial statements at fair value in accordance with the authoritative guidance. Under the guidance, for those instruments that are designated and qualify as hedging instruments, the hedging instrument must be designated as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation, based on the exposure being hedged. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. The Company's derivative instruments do not subject its earnings or cash flows to material risk, and gains and losses on these derivatives generally offset losses and gains on the item being hedged. The Company has not entered into derivative transactions for speculative purposes and from time to time, the Company may enter into derivatives that are not designated as hedging instruments in order to protect itself from currency volatility due to intercompany balances. All derivative instruments are recognized at their fair values as either assets or liabilities on the balance sheet. The Company determines the fair value of its derivative instruments using the framework prescribed by the authoritative guidance, by considering the estimated amount the Company would receive to sell or transfer these instruments at the reporting date and by taking into account: expected forward interest rates, currency exchange rates, the creditworthiness of the counterparty for assets, and its creditworthiness for liabilities. In certain instances, the Company utilizes a discounted cash flow model to measure fair value. Generally, the Company uses inputs that include quoted prices for similar assets or liabilities in active markets, other observable inputs for the asset or liability and inputs derived principally from, or corroborated by, observable market data by correlation or other means. The Company has classified all of its derivative assets and liabilities within Level 2 of the fair value hierarchy because observable inputs are available for substantially the full term of its derivative instruments. The Company classifies derivatives designated as hedges in the same category as the item being hedged for cash flow presentation purposes. The Company entered into a foreign currency forward contract that is not designated as a hedging instrument for accounting purposes. This contract is recorded at fair value, with the changes in fair value recognized into other income, net on the consolidated financial statements. Refer to Note 7, Derivative Instruments for more information. FOREIGN CURRENCY All assets and liabilities of foreign subsidiaries which have a functional currency other than the U.S. dollar are translated at the rate of exchange at year-end, while elements of the income statement are translated at the average exchange rates in effect during the year. The net effect of these translation adjustments is shown as a component of accumulated other comprehensive income (loss). These currency translation adjustments are not currently adjusted for income taxes as they relate to permanent investments in non-U.S. subsidiaries. Foreign currency transaction losses of $ 1.6 million, $ 0.3 million and $ 1.7 million are reported in other income, net in the statements of operations, for the year ended December 31, 2020, 2019 and 2018, respectively. INCOME TAXES Income taxes are accounted for by using the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted. The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not to be sustained upon examination based on the technical merits of the position. Reserves are established for positions that don't meet this recognition threshold. The reserve is measured as the largest amount of benefit determined on a cumulative probability basis that the Company believes is more likely than not to be realized upon ultimate settlement of the position. These reserves are classified as long-term liabilities in the consolidated balance sheets of the Company, unless the reserves are expected to be paid in cash during the next twelve months, in which case they are classified as current liabilities. The Company also records interest and penalties accrued in relation to uncertain tax benefits as a component of income tax expense. While the Company believes it has identified all reasonably identifiable exposures and the reserve it has established for identifiable exposures is appropriate under the circumstances, it is possible that additional exposures exist and that exposures may be settled at amounts different than the amounts reserved. It is also possible that changes in facts and circumstances could cause the Company to either materially increase or reduce the carrying amount of its tax reserve. The Company continues to indefinitely reinvest substantially all of its foreign earnings. The current provisional analysis indicates that the Company has sufficient U.S. liquidity, including borrowing capacity, to fund foreseeable U.S. cash needs without requiring the repatriation of foreign cash. The Tax Cuts and Jobs Act (the “2017 Tax Act”), enacted in December 2017, F - 13 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) imposed a toll tax on a deemed repatriation of undistributed earnings of foreign subsidiaries. One time or unusual items that may impact the ability or intent to keep the foreign earnings and cash indefinitely reinvested include significant U.S. acquisitions, loans from a foreign subsidiary and changes in tax laws. REVENUE RECOGNITION On January 1, 2018, the Company adopted Topic 606 using the modified retrospective method applied to all contracts which were not completed as of January 1, 2018. Results of operations for the reporting periods after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with Topic 605, Revenue Recognition . The adoption of Topic 606 resulted in an increase to the opening retained earnings of $ 1.9 million, which was recorded net of taxes as of January 1, 2018 to reflect the change in timing of the recognition of revenue related to the Company's private label business from point in time to over time during the manufacturing process and goods in transit for which control was transferred to customers at the time of shipment. The total assets and liabilities increased by $ 7.1 million and $ 5.2 million, respectively, as of January 1, 2018. Revenue is recognized upon the transfer of control of promised products or services to the customers in an amount that reflects the consideration the Company expects to receive in exchange for those products and services. Total revenue, net, includes product sales, product royalties and other revenues, such as fees received from services. For products shipped with FOB shipping point terms, the control of the product passes to the customer at the time of shipment. For shipments in which the control of the product is transferred when the customer receives the product, the Company recognizes revenue upon receipt by the customer. Certain products that the Company produces for private label customers have no alternative use and the Company has a right of payment for performance to date. Revenues from those products are recognized over the period that the Company manufactures these products, which is typically one to three months . The Company uses the input method to measure the manufacturing activities completed to date, which depicts the progress of the Company's performance obligation of transferring control of goods being manufactured for private label customers. A portion of the Company's product revenue is generated from consigned inventory maintained at hospitals and distributors, and also from inventory physically held by field sales representatives. For these types of products sales, the Company retains control until the product has been used or implanted, at which time revenue is recognized. Revenues from sale of products and services are evidenced by either a contract with the customer or a valid purchase order and an invoice which includes all relevant terms of sale. For product sales, invoices are generally issued upon the transfer of control (or upon the completion of the manufacturing in the case of the private label transactions recognized over time) and are typically payable 30 days after the invoice date. The Company performs a review of each specific customer's creditworthiness and ability to pay prior to acceptance as a customer. Further, the Company performs periodic reviews of its customers' creditworthiness prospectively. Refer to Note 4, Revenue From Contracts With Customers for more information. RESEARCH AND DEVELOPMENT Research and development costs, including salaries, depreciation, consultant and other external fees, and facility costs directly attributable to research and development activities, are expensed in the period in which they are incurred. EMPLOYEE TERMINATION BENEFITS The Company does not have a written severance plan, and it does not offer similar termination benefits to affected employees in all restructuring initiatives. Accordingly, in situations where minimum statutory termination benefits must be paid to the affected employees, the Company records employee severance costs associated with these restructuring activities in accordance with the authoritative guidance for non-retirement post-employment benefits. Charges associated with these activities are recorded when the payment of benefits is probable and can be reasonably estimated. In all other situations where the Company pays out termination benefits, including supplemental benefits paid in excess of statutory minimum amounts and benefits offered to affected employees based on management's discretion, the Company records these termination costs in accordance with the authoritative guidance for ASC Topic 712 Compensation-Nonretirement Benefits and ASC Topic 420 One-time Employee Termination Benefits . The timing of the recognition of charges for employee severance costs other than minimum statutory benefits depends on whether the affected employees are required to render service beyond their legal notification period in order to receive the benefits. If affected employees are required to render service beyond their legal notification period, charges are recognized over the future service period. Otherwise, charges are recognized when management has approved a specific plan and employee communication requirements have been met. F - 14 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) For the year ended December 31, 2020, the Company incurred restructuring costs of $ 4.9 million in cost of goods sold, $ 1.2 million in selling, general and administrative and $ 0.3 million in research and development related to employee terminations associated with a future plant closure in the consolidated statement of operations. As of December 31, 2020, the restructuring costs of $ 6.4 million were included in other liabilities in the consolidated balance sheet. STOCK-BASED COMPENSATION Relevant authoritative guidance requires companies to recognize the expense related to the fair value of their stock-based compensation awards. Stock-based compensation expense for stock option awards are based on the grant date fair value using the binomial distribution model. The Company recognizes compensation expense for stock option awards, restricted stock awards, performance stock awards and contract stock awards over the requisite service period of the award. All excess tax benefits and taxes and tax deficiencies from stock-based compensation are included in provision for income taxes in the consolidated statement of operations. Refer to Note 10, Stock-based Compensation for more information. PENSION BENEFITS The Company maintains defined benefit pension plans that cover certain employees in France, Japan, Germany and Switzerland. Various factors are considered in determining the pension liability, including the number of employees expected to be paid their salary levels and years of service, the expected return on plan assets, the discount rate used to determine the benefit obligations, the timing of benefit payments and other actuarial assumptions. Retirement benefit plan assumptions are reassessed on an annual basis or more frequently if changes in circumstances indicate a re-evaluation of assumptions are required. The key benefit plan assumptions are the discount rate and expected rate of return on plan assets. The discount rate is based on average rates on bonds that matched the expected cash outflows of the benefit plans. The expected rate of return is based on historical and expected returns on the various categories of plan assets. The Company uses the corridor approach in measuring the amount of net periodic benefit pension cost to recognize each period. The corridor approach defers all actuarial gains and losses resulting from variances between actual results and actuarial assumptions. Those unrecognized gains and losses are amortized when the net gains and losses exceed 10% of the greater of the market-related value of plan assets or the projected benefit obligation at the beginning of the year. The amount in excess of the corridor is amortized over the average remaining service period to retirement date of active plan participants. Deferred Compensation Plan In May 2019, the Company adopted the Integra LifeSciences Deferred Compensation Plan (the “Plan”). Under the Plan, certain employees of the Company may defer the payment and taxation of up to 75 % of their base salary and up to 100 % of bonus amounts and other eligible cash compensation. This deferred compensation is invested in funds offered under the Plan and is valued based on Level 1 measurements in the fair value hierarchy. The purpose of the Plan is to retain key employees by providing them with an opportunity to defer a portion of their compensation as elected by the participant in accordance with the Plan. Any amounts set aside to defray the liabilities assumed by the Company will remain the general assets of the Company until such amounts are distributed to the participants. Assets of the Company's deferred compensation plan are included in Other current assets and recorded at fair value based on their quoted market prices. CONCENTRATION OF CREDIT RISK Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents, which are held at major financial institutions, investment-grade marketable debt securities and trade receivables. The Company's products are sold on an uncollateralized basis and on credit terms based upon a credit risk assessment of each customer. A portion of the Company's trade receivables to customers outside the United States includes sales to foreign distributors, who then sell to government owned or supported healthcare systems. No ne of the Company's customers accounted for 10 % or more of the consolidated net sales during the years ended December 31, 2020, 2019 and 2018. RECENT ACCOUNTING PRONOUNCEMENTS In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (the New Lease Standard). The New Lease Standard requires that lessees recognize virtually all of its leases on the balance sheet by recording a right-of-use asset and lease liability (other than leases that meet the definition of a "short-term lease"). This update became effective for all annual periods and interim reporting periods beginning after December 15, 2018. The Company adopted the New Lease Standard as of January 1, 2019 using a modified retrospective transition. Under this method, financial results reported in periods prior to January 1, 2019 are unchanged. The Company elected the ‘package of practical expedients’ which permits the Company not to reassess the prior conclusions about lease identification, lease classification and initial direct costs under the new standard. The Company also F - 15 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) elected the use-of-hindsight practical expedient. As most of the leases do not provide an implicit rate, the Company used the collateralized incremental borrowing rate based on the information available at the lease implementation date in determining the present value of the lease payments. The adoption of the New Lease Standard had an initial impact on the consolidated balance sheet due to the recognition of $ 76.4 million of lease liabilities with corresponding right-of-use assets ("ROU") of $ 67.3 million for operating leases. The difference between lease liabilities and right-of-use assets is primarily attributed to unamortized lease incentives which is amortized over the term of each respective lease. Refer to Note 12, Leases and Related Party Leases for more information. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires the measurement of all expected credit losses for financial assets including trade receivables held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. The ASU became effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted this guidance on January 1, 2020 using a modified retrospective transition method which requires a cumulative-effect adjustment to the opening balance of retained earnings to be recognized on the date of adoption with no change to financial results reported in prior periods. The cumulative-effect adjustment recorded on January 1, 2020 is not material. The adoption of this ASU did not have a significant impact on the Company's consolidated financial statements and related disclosures. The Company's exposure to credit losses may increase if its customers are adversely affected by changes in healthcare laws, coverage, and reimbursement, economic pressures or uncertainty associated with local or global economic recessions, disruption associated with the COVID-19 pandemic, and other customer-specific factors. Although the Company has historically not experienced significant credit losses, it is possible that there could be an adverse impact due to customer and governmental responses to the COVID-19 pandemic. In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans . This guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans, including removing certain previous disclosure requirements, adding certain new disclosure requirements, and clarifying certain other disclosure requirements. The ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption was permitted. The Company adopted this guidance for the year ended December 31, 2020. The adoption of this guidance did not have a significant impact on the Company's consolidated financial statements and related disclosures. In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) , relating to a customer's accounting for implementation, set-up, and other upfront costs incurred in a cloud computing arrangement that is hosted by a vendor (e.g., a service contract). Under this guidance, a customer will apply the same criteria for capitalizing implementation costs as it would for an arrangement that has a software license. The new guidance also prescribes the balance sheet, income statement, and cash flow classification of the capitalized implementation costs and related amortization expense, and requires additional quantitative and qualitative disclosures. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted this guidance on January 1, 2020 using a prospective transition method. The adoption of this guidance did not have a significant impact on the Company's consolidated financial statements and related disclosures. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes : Simplifying the Accounting for Income Taxes, intended to simplify the accounting for income taxes by eliminating certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for annual periods beginning after December 15, 2020 and interim periods within, with early adoption permitted. The Company will adopt ASU No. 2019-12 effective January 1, 2021. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. The Company does not expect this guidance to have a material impact on our results or financial position. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform , which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. This amendment applies to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. This ASU became effective immediately and may be applied prospectively to contract modifications made and hedging F - 16 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) relationships entered into or evaluated on or before December 31, 2022. In January of 2021, the FASB also issued ASU No. 2021-01, Reference Rate Reform- Scope which clarified certain optional expedients and exceptions to entities that are affected because of the reference rate reform. The amendments in this ASU affect the guidance in ASU No. 2020-04 and are effective in the same timeframe as ASU No. 2020-04. The Company is currently assessing the impact that this ASU will have on its consolidated financial statements and related disclosures. In August 2020, the FASB issued ASU No. 2020-06 Debt- Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40)-Accounting For Convertible Instruments and Contracts in an Entity's Own Equity . The guidance simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify. The guidance also simplifies the diluted net income per share calculation in certain areas. The ASU will be effective for annual and interim periods beginning after December 15, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company will adopt this standard on January 1, 2021 using the modified retrospective method. The estimated impact includes the convertible debt instrument being accounted for as a single liability measured at its amortized cost and elimination of the non-cash interest expense as the Company will not separately present the equity embedded conversion feature in such debt. The Company also expects to adopt the if-converted method for earnings per share. In October 2020, the FASB issued ASU 2020-10, Codification Improvements , which updates various codification topics by clarifying or improving disclosure requirements to align with the SEC’s regulations. The Company will adopt ASU 2020-10 as of the reporting period beginning January 1, 2021. The adoption of this update is not expected to have a material effect on the Company’s consolidated financial statements. There are no other recently issued accounting pronouncements that are expected to have a significant effect on the Company's financial position, results of operations or cash flows. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for interest during the years ended December 31, 2020, 2019 and 2018 was $ 47.3 million (net of $ 2.3 million that was capitalized into construction in progress), $ 48.9 million (net of $ 3.1 million that was capitalized into construction in progress) and $ 58.3 million (net of $ 2.3 million that was capitalized into construction in progress), respectively. Cash paid for income taxes, net of refunds, for the years ended December 31, 2020, 2019 and 2018 was $ 29.8 million, $ 16.2 million and $ 10.4 million, respectively. NON-CASH INVESTING AND FINANCING ACTIVITIES Property and equipment purchases included in liabilities at December 31, 2020, 2019 and 2018 were $ 1.6 million, $ 11.0 million and $ 5.4 million, respectively. In December 2019, the Company achieved the first developmental milestone which triggered a $ 5.0 million obligation to be paid to former shareholders of Rebound Therapeutics Corporation ("Rebound"). In addition, the Company recorded $ 5.0 million as in-process research and development expense in the consolidated statements of operations. The obligation was included in accrued liabilities at December 31, 2019 in the consolidated balance sheets. The milestone was paid during the first quarter of 2020. 3. ASSETS AND LIABILITIES HELD FOR SALE On September 29, 2020, the Company and certain of its subsidiaries entered into an agreement to sell its Extremity Orthopedics business to Smith & Nephew USD Limited for approximately $ 240 million in cash. The transaction includes the sale of the Company’s upper and lower Extremity Orthopedics product portfolio, including ankle and shoulder arthroplasty and hand and wrist product lines. In connection with the transaction, the Company will pay $ 41.5 million to the Consortium of Focused Orthopedists, LLC (“CFO”) pursuant to the terms of certain agreements between Integra and CFO relating to the development of shoulder arthroplasty products. On January 4, 2021, upon the terms and conditions set forth in the Divestiture agreement, the Company completed its previously announced sale of its Extremity Orthopedics business to Smith & Nephew USD Limited and received an aggregate purchase price of $ 240.0 million. Refer to Note 18. Subsequent Events for details of the transaction. The Company considered the assets and liabilities associated with the Extremity Orthopedics business to be accounted as held for-sale as the six criteria under ASC 260 were met during the third quarter of 2020. Upon designation of the assets and liabilities as held for sale, the Company recorded the assets at the lower of their carrying value or their estimated fair value, less F - 17 estimated costs to sell. Goodwill was allocated to the assets and liabilities held for sale using the relative fair value method of the Extremity Orthopedics business to the Company's Orthopedics and Tissue Technologies reporting unit. The fair value of the business less costs to sell exceeded the related carrying value. The Extremity Orthopedics business was treated as a single disposal group and presented separately in the consolidated balance sheet as assets and liabilities held for sale as of December 31, 2020. These balances are presented as current assets and liabilities as they are expected to be sold within twelve months. The major classes of assets and liabilities classified as a held for sale consisted of the following as of December 31, 2020 (amounts in thousands): Prepaid expenses and other current assets 713 Right of use asset - operating leases and Other assets 3,186 Deferred tax assets 6,589 Intangible assets, net 13,332 Property, plant and equipment, net 37,893 Goodwill 47,546 Inventories 52,845 Total assets held for sale 162,104 Other liabilities 336 Current portion of lease liability - operating leases 539 Accrued compensation 1,767 Deferred tax liabilities 3,440 Lease liability - operating leases 5,669 Total liabilities held for sale 11,751 4. REVENUES FROM CONTRACTS WITH CUSTOMERS Summary of Accounting Policies on Revenue Recognition Revenue is recognized upon the transfer of control of promised products or services to the customers in an amount that reflects the consideration the Company expects to receive in exchange for those products and services. Performance Obligations The Company's performance obligations consist mainly of transferring control of goods and services identified in the contracts, purchase orders, or invoices. The Company has no significant multi-element contracts with customers. Significant Judgments Usage-based royalties and licenses are estimated based on the provisions of contracts with customers and recognized in the same period that the royalty-based products are sold by the Company's strategic partners. The Company estimates and recognizes royalty revenue based upon communication with licensees, historical information, and expected sales trends. Differences between actual reported licensee sales and those that were estimated are adjusted in the period in which they become known, which is typically the following quarter. Historically, such adjustments have not been significant. The Company estimates returns, price concessions, and discount allowances using the expected value method based on historical trends and other known factors. Rebate allowances are estimated using the most likely method based on each customer contract. The Company's return policy, as set forth in its product catalogs and sales invoices, requires review and authorization in advance prior to the return of product. Upon the authorization, a credit will be issued for the goods returned within a set amount of days from the shipment, which is generally ninety days . The Company disregards the effects of a financing component if the Company expects, at contract inception, that the period between the transfer and customer payment for the goods or services will be one year or less. The Company has no significant revenues recognized on payments expected to be received more than one year after the transfer of control of products or services to customers. 18 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Contract Asset and Liability Revenues recognized from the Company's private label business that are not invoiced to the customers as a result of recognizing revenue over time are recorded as a contract asset included in the prepaid expenses and other current assets account in the consolidated balance sheet. Other operating revenues may include fees received under service agreements. Non-refundable fees received under multiple-period service agreements are recognized as revenue as the Company satisfies the performance obligations to the other party. A portion of the transaction price allocated to the performance obligations to be satisfied in the future periods is recognized as contract liability. The following table summarized the changes in the contract asset and liability balances for the year ended December 31, 2020: Total (amounts in thousands) Contract Asset Contract asset, January 1, 2020 $ 8,680 Transferred to trade receivable of contract asset included in beginning of the year contract asset ( 8,680 ) Contract asset, net of transferred to trade receivables on contracts during the period 7,430 Contract asset, December 31, 2020 $ 7,430 Contract Liability Contract liability, January 1, 2020 $ 11,946 Recognition of revenue included in beginning of year contract liability ( 3,925 ) Contract liability, net of revenue recognized on contracts during the period 3,856 Foreign currency translation 84 Contract liability, December 31, 2020 $ 11,961 At December 31, 2020, the short-term portion of the contract liability of $ 5.3 million and the long-term portion of $ 6.7 million were included in accrued expenses and other current liabilities and other liabilities in the consolidated balance sheet. As of December 31, 2020, the Company is expected to recognize revenue of approximately $ 5.3 million in 2021, $ 2.9 million in 2022, $ 1.5 million in 2023, $ 0.8 million in 2024, $ 0.6 million in 2025, and $ 0.9 million thereafter. Shipping and Handling Fees The Company elected to account for shipping and handling activities as a fulfillment cost rather than a separate performance obligation. Amounts billed to customers for shipping and handling are included as part of the transaction price and recognized as revenue when control of underlying products is transferred to the customer. The related shipping and freight charges incurred by the Company are included in the cost of goods sold. Product Warranties Certain of the Company's medical devices, including monitoring systems and neurosurgical systems, are designed to operate over long periods of time. These products are sold with warranties which may extend for up to two years from the date of purchase. The warranties are not considered a separate performance obligation. The Company estimates its product warranties using the expected value method based on historical trends and other known factors. The Company includes them in accrued expenses and other current liabilities in the consolidated balance sheet. Taxes Collected from Customers The Company elected to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer. Disaggregated Revenue The following table presents revenues disaggregated by the major sources of revenues for years-ended December 31, 2020, 2019 and 2018 (amounts in thousands): F - 19 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Year Ended December 31, 2020 Year Ended December 31, 2019 Year Ended December 31, 2018 (amounts in thousands) Neurosurgery 716,339 767,793 740,268 Instruments 178,492 $ 228,413 $ 223,661 Total Codman Specialty Surgical 894,831 996,206 963,929 Wound Reconstruction 293,038 322,739 311,565 Extremity Orthopedics 78,316 90,082 90,588 Private Label 105,683 108,530 106,359 Total Orthopedics and Tissue Technologies 477,037 521,351 508,512 Total revenue $ 1,371,868 $ 1,517,557 $ 1,472,441 Prior period amounts were reclassified between categories within the Codman Specialty Surgical segment to conform to the current period presentation. See Note 17, Segment and Geographical Information , for details of revenues based on the location of the customer. 5. ACQUISITIONS Arkis BioSciences Inc. On July 29, 2019, the Company acquired Arkis BioSciences Inc. ("Arkis") for an acquisition purchase price of $ 30.6 million (the "Arkis Acquisition") plus contingent consideration of up to $ 25.5 million, that may be payable based on the successful completion of certain development and commercial milestones. The contingent consideration had an acquisition date fair value of $ 13.1 million. Arkis was a privately-held company that marketed the CerebroFlo® external ventricular drainage (EVD) catheter with Endexo® technology, a permanent additive designed to reduce the potential for catheter obstruction due to thrombus formation. Assets Acquired and Liabilities Assumed at Fair Value The Arkis Acquisition has been accounted for using the acquisition method of accounting. This method requires that assets acquired and liabilities assumed in a business combination to be recognized at their fair values as of the acquisition date. The following table summarizes the final fair values of the assets acquired and liabilities assumed at the acquisition date: Final Valuation Weighted Average Life (Dollars in thousands) Cash $ 90 Other current assets 751 Property, plant and equipment 457 Deferred tax assets 1,697 Intangible assets: CerebroFlo developed technology 20,100 15 years Enabling technology license 1,980 14 years Goodwill 27,153 Total assets acquired 52,228 Accounts payable, accrued expenses and other liabilities 2,926 Contingent consideration 13,100 Deferred tax liabilities 5,603 Net assets acquired $ 30,599 Intangible Assets The estimated fair value of the intangible assets was determined using the income approach, which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the more significant assumptions inherent in the development of those asset valuations include the estimated net cash flows for each year for each asset (including net revenues, cost of sales, R&D costs, selling and marketing costs, and working capital/contributory asset charges), the appropriate discount rate to select in order to F - 20 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, and competitive trends impacting the asset and each cash flow stream. The Company used a discount rate of 14.5 % to arrive at the present value for the acquired intangible assets to reflect the rate of return a market participant would expect to earn and incremental commercial uncertainty in the cash flow projections. No assurances can be given that the underlying assumptions used to prepare the discounted cash flow analysis will not change. For these and other reasons, actual results may vary significantly from estimated results. Goodwill The Company allocated goodwill related to the Arkis Acquisition to the Codman Specialty Surgical segment. Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce. One of the key factors that contributes to the recognition of goodwill, and a driver for the Company's acquisition of Arkis, is the planned expansion of the Endexo technology with the existing products within the Codman Specialty Surgical segment. Goodwill recognized as a result of this acquisition is non-deductible for income tax purposes. Contingent Consideration The Company determines the acquisition date fair value of contingent consideration obligations based on a probability-weighted income approach derived from revenue estimates and a probability assessment with respect to the likelihood of achieving contingent obligations. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined using the fair value concepts in ASC 820. The resultant probability-weighted cash flows are discounted using an appropriate effective annual interest rate. At each reporting date, the contingent consideration obligation will be revalued to estimated fair value and changes in fair value will be reflected as income or expense in our consolidated statement of operations. Changes in the fair value of the contingent consideration obligations may result from changes in discount periods and rates, changes in the timing and amount of revenue estimates and changes in probability assumptions with respect to the likelihood of achieving the various contingent payment obligations. Adverse changes in assumptions utilized in the contingent consideration fair value estimates could result in an increase in the contingent consideration obligation and a corresponding charge to operating results. As part of the acquisition, the Company is required to pay the former shareholders of Arkis up to $ 25.5 million based on the timing of certain development milestones of $ 10 million and commercial sales milestones of $ 15.5 million, respectively. The Company used a probability weighted income approach to calculate the fair value of the contingent consideration that considered the possible outcomes of scenarios related to each specified milestone. The Company estimated the fair value of the contingent consideration to be $ 13.1 million at the acquisition date. The estimated the fair value as of December 31, 2020 was $ 15.1 million. The Company recorded $ 3.4 million in accrued expenses and other current liabilities and $ 11.7 million in other liabilities at December 31, 2020 in the consolidated balance sheets of the Company. Deferred Tax Liabilities Deferred tax liabilities result from identifiable intangible assets’ fair value adjustments. These adjustments create excess book basis over tax basis which is tax-effected by the statutory tax rates of applicable jurisdictions. The pro forma results are not presented for this acquisition as they are not material. Rebound Therapeutics Corporation On September 9, 2019, the Company acquired Rebound Therapeutics Corporation (“Rebound”), developers of a single-use medical device known as the AURORA Surgiscope® System ("Aurora") which enables minimally invasive access, using optics and illumination, for visualization, diagnostic and therapeutic use in neurosurgery (the “Rebound transaction”). Under the terms of the Rebound transaction, the Company made an upfront payment of $ 67.1 million and are committed to pay up to $ 35.0 million of contingent development milestones upon achievement of certain regulatory milestones. The acquisition of Rebound was primarily concentrated in one single identifiable asset and thus, for accounting purposes, the Company has concluded that the acquired assets do not meet the accounting definition of a business. The initial payment was allocated primarily to Aurora, resulting in a $ 59.9 million IPR&D expense. The balance of approximately $ 7.2 million, which included $ 2.1 million of cash and cash equivalents and a net deferred tax asset of $ 4.2 million, was allocated to the remaining net assets acquired. The deferred tax asset primarily resulted from a federal net operating loss carry forward. During the fourth quarter of 2019, the Company achieved the first developmental milestone which triggered a $ 5.0 million obligation to be paid to former shareholders of Rebound. The Company recorded $ 5.0 million as IPR&D expense in the consolidated statements of operations. The obligation was included in accrued expenses and other current liabilities at December 31, 2019 in the consolidated balance sheets. The milestone was paid during the first quarter of 2020. F - 21 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) During the fourth quarter of 2020, the Company achieved another developmental milestone which triggered a $ 20.0 million obligation to be paid to the former shareholders of Rebound. The Company recorded $ 20.0 million as an intangible asset in the consolidated balance sheet upon achieving the milestone. The milestone was paid during the fourth quarter of 2020. Integrated Shoulder Collaboration, Inc. On January 4, 2019, the Company entered into a licensing agreement with Integrated Shoulder Collaboration, Inc ("ISC"). Under the terms of the agreement, the Company paid ISC $ 1.7 million for the exclusive, worldwide license to commercialize its short stem and stemless shoulder system. A patent related to short stem and stemless shoulder systems was issued to ISC during the first quarter of 2019. ISC is eligible to receive royalties on sales of the short stem and stemless shoulder system. The Company has the option to acquire ISC at a date four years subsequent to the first commercial sale, which becomes mandatory upon the achievement of a certain sales thresholds of the short stem and stemless shoulder system, for an amount not to exceed $ 80.0 million. The transaction was accounted for as an asset acquisition as the Company concluded that it acquired primarily one asset. The total upfront payment of $ 1.7 million was expensed as a component of research and development expense and the future milestone and option payments will be recorded if the corresponding events become probable. In connection with the sale of the Company's Extremity Orthopedic business, on January 4, 2021 the Company paid $ 41.5 million to CFO pursuant to the terms of certain agreements between the Company and CFO relating to the sale of shares of ISC effectively terminating our licensing agreement with ISC. See Note 3, Assets and Liabilities Held for Sale and Note 18. Subsequent Events for details of the transaction. 6. DEBT Amendment to the Sixth Amended and Restated Senior Credit Agreement On February 3, 2020, the Company entered into the sixth amendment and restatement (the "February 2020 Amendment") of its Senior Credit Facility (the "Senior Credit Facility") with a syndicate of lending banks with Bank of America, N.A., as Administrative Agent. The February 2020 Amendment extended the maturity date to February 3, 2025. The Company continues to have the aggregate principal amount of up to approximately $ 2.2 billion available to it through the following facilities: (i) $ 877.5 million Term Loan facility, and (ii) a $ 1.3 billion revolving credit facility, which includes a $ 60.0 million sublimit for the issuance of standby letters of credit and a $ 60.0 million sublimit for swingline loans. On July 14, 2020, the Company entered into an amendment (the "July 2020 Amendment") to the February 2020 Amendment of the Senior Credit Facility to increase financial flexibility in light of the unprecedented impact and uncertainty of the COVID-19 pandemic on the global economy. The July 2020 amendment does not increase the Company’s total indebtedness. In connection with the July 14, 2020 amendment, the Company’s maximum consolidated total leverage ratio in the financial covenants (as defined in the Senior Credit Facility) was modified to the following: Fiscal Quarter Maximum Consolidated Total Leverage Ratio Execution of July 2020 Amendment through June 30, 2021 5.50 to 1.00 September 30, 2021 through June 30, 2022 5.00 to 1.00 September 30, 2022 through June 30, 2023 4.50 to 1.00 September 30, 2023 and the last day of each fiscal quarter thereafter 4.00 to 1.00 Borrowings under the Senior Credit Facility bear interest, at the Company’s option, at a rate equal to the following: i. the Eurodollar Rate (as defined in the amendment and restatement) in effect from time to time plus the applicable rate (ranging from 1.00 % to 2.25 %), or ii. the highest of: 1. the weighted average overnight Federal funds rate, as published by the Federal Reserve Bank of New York, plus 0.50 % 2. the prime lending rate of Bank of America, N.A. or 3. the one-month Eurodollar Rate plus 1.00 % The applicable rates are based on the Company’s consolidated total leverage ratio (defined as the ratio of (a) consolidated funded indebtedness as of such date less cash that is not subject to any restriction on the use or investment thereof to (b) consolidated EBITDA as defined by the July 2020 amendment, for the period of four consecutive fiscal quarters ending on such date). F - 22 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The Company will pay an annual commitment fee (ranging from 0.15 % to 0.30 %), based on the Company's consolidated total leverage ratio, on the amount available for borrowing under the revolving credit facility. The Senior Credit Facility is collateralized by substantially all of the assets of the Company’s U.S. subsidiaries, excluding intangible assets. The Senior Credit Facility is subject to various financial and negative covenants and at December 31, 2020, the Company was in compliance with all such covenants and is expected to be in compliance over the next year. In connection with the February 2020 Amendment, the Company capitalized $ 4.6 million of financing costs in connection with modification of the Senior Credit Facility and wrote off $ 1.2 million of previously capitalized financing costs during the first quarter of 2020. In connection with the July 2020 amendment, the Company expensed $ 3.3 million of incremental financing costs in connection with the modification of the Senior Credit Facility during the third quarter of 2020. At December 31, 2020 and 2019, there was $ 97.5 million and $ 375.0 million outstanding, respectively, under the revolving portion of the Senior Credit Facility at weighted average interest rates of 1.5 % and 3.2 %, respectively. At December 31, 2020 and 2019, there was $ 877.5 million outstanding, respectively, under the Term Loan component of the Senior Credit Facility at weighted average interest rates of 1.5 % and 3.2 %, respectively. At December 31, 2020, $ 33.8 million million of the Term Loan component of the Senior Credit Facility is classified as current on the consolidated balance sheet as the first mandatory repayment is due June 30, 2021. The fair value of outstanding borrowings of the Senior Credit Facility's revolving credit facility and Term Loan component at December 31, 2020 were approximately $ 98.4 million and $ 883.6 million, respectively. These fair values were determined by using a discounted cash flow model based on current market interest rates available to the Company. These inputs are corroborated by observable market data for similar liabilities and therefore classified within Level 2 of the fair value hierarchy. Level 2 inputs represent inputs that are observable for the asset or liability, either directly or indirectly, and are other than active market observable inputs that reflect unadjusted quoted prices for identical assets or liabilities Letters of credit outstanding as of December 31, 2020 and 2019 totaled $ 1.6 million and $ 0.8 million, respectively. There were no amounts drawn as of December 31, 2020. Contractual repayments of the Term Loan component of Senior Credit Facility are due as follows: Year-ended December 31, 2020 Principal Repayment (In thousands) 2021 $ 33,750 2022 45,000 2023 61,875 2024 67,500 2025 669,375 $ 877,500 The outstanding balance of the revolving credit component of the Senior Credit Facility is due on February 3, 2025. Convertible Senior Notes On February 4, 2020, the Company issued $ 575.0 million aggregate principal amount of its 0.5 % Convertible Senior Notes due 2025 (the "2025 Notes"). The 2025 Notes will mature on August 15, 2025 and bear interest at a rate of 0.5 % per annum payable semi-annually in arrears, unless earlier converted, repurchased or redeemed in accordance with the terms of the Notes. The portion of debt proceeds that was classified as equity at the time of the offering was $ 104.5 million, and that amount is being amortized to interest expense using the effective interest method through August 2025. The effective interest rate implicit in the liability component is 4.2 %. In connection with this offering, the Company capitalized $ 13.2 million of financing fees. At December 31, 2020, the carrying amount of the liability component was $ 485.9 million, the remaining unamortized discount was $ 89.1 million, and the principal amount outstanding was $ 575.0 million. The fair value of the 2025 Notes at December 31, 2020 was $ 638.1 million. The 2025 Notes are senior, unsecured obligations of the Company, and are convertible into cash and shares of its common stock based on initial conversion rate, subject to adjustment of 13.5739 shares per $1,000 principal amounts of the 2025 Notes (which represents an initial conversion price of $ 73.67 per share). The 2025 Notes convert only in the following circumstances: (1) if the closing price of the Company's common stock has been at least 130 % of the conversion price during the period; (2) if the average trading price per $1000 principal amount of the 2025 Notes is less than or equal to 98 % of the average conversion value of the 2025 Notes during a period as defined in the indenture; (3) at any time on or after February 20, 2023; or (4) if F - 23 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) specified corporate transactions occur. As of December 31, 2020, none of these conditions existed with respect to the 2025 Notes and as a result the 2025 Notes are classified as long term. On December 9, 2020, the Company entered into the First Supplemental Indenture to the original agreement dated as of February 4, 2020 between the Company and Citibank, N.A., as trustee, governing the Company’s outstanding 2025 Notes. The Company irrevocably elected (1) to eliminate the Company’s option to choose physical settlement on any conversion of the 2025 Notes that occurs on or after the date of the First Supplemental Indenture and (2) with respect to any Combination Settlement for a conversion of the 2025 Notes, the Specified Dollar Amount that will be settled in cash per $1,000 principal amount of the 2025 Notes shall be no lower than $ 1,000 . Holders of the Notes will have the right to require the Company to repurchase for cash all or a portion of their Notes at 100 % of their principal amount, plus any accrued and unpaid interest, upon the occurrence of a fundamental change (as defined in the indenture relating to the Notes). The Company will also be required to increase the conversion rate for holders who convert their Notes in connection with certain fundamental changes occurring prior to the maturity date or following delivery by the Company of a notice of redemption. In connection with the issuance of the 2025 Notes, the Company entered into call transactions and warrant transactions, primarily with affiliates of the initial purchasers of the 2025 Notes (the “hedge participants”). The cost of the call transactions was $ 104.2 million for the 2025 Notes. The Company received $ 44.5 million of proceeds from the warrant transactions for the 2025 Notes. The call transactions involved purchasing call options from the hedge participants, and the warrant transactions involved selling call options to the hedge participants with a higher strike price than the purchased call options. The initial strike price of the call transactions was $ 73.67 , subject to anti-dilution adjustments substantially similar to those in the 2025 Notes. The initial strike price of the warrant transactions was $ 113.34 for the 2025 Notes, subject to customary anti-dilution adjustments. During the twelve months ended December 31, 2020, the Company recognized cash interest related to the contractual interest coupon of $ 2.6 million and amortization of the discount on the liability component of $ 15.4 million for a total interest charge of $ 18.0 million on the 2025 Notes. Securitization Facility During the fourth quarter of 2018, the Company entered into an accounts receivable securitization facility (the "Securitization Facility") under which accounts receivable of certain domestic subsidiaries are sold on a non-recourse basis to a special purpose entity (“SPE”), which is a bankruptcy-remote, consolidated subsidiary of the Company. Accordingly, the assets of the SPE are not available to satisfy the obligations of the Company or any of its subsidiaries. From time to time, the SPE may finance such accounts receivable with a revolving loan facility secured by a pledge of such accounts receivable. The amount of outstanding borrowings on the Securitization Facility at any one time is limited to $ 150.0 million. The Securitization Facility Agreement ("Securitization Agreement") is for an initial three-year term and may be extended. The Securitization Agreement governing the Securitization Facility contains certain covenants and termination events. An occurrence of an event of default or a termination event under this Securitization Agreement may give rise to the right of its counterparty to terminate this facility. As of December 31, 2020, the Company was in compliance with the covenants and none of the termination events had occurred. The Company had $ 112.5 million and $ 104.5 million of outstanding borrowings under its Securitization Facility at a weighted average interest rate of 1.3 % and 2.8 % as of December 31, 2020 and 2019, respectively. At December 31, 2020, the total amount outstanding under the Securitization Facility is classified as current on the consolidated balance sheet as the total amount is due on December 21, 2021. The fair value of the outstanding borrowing of the Securitization facility at December 31, 2020 was approximately $ 112.3 million. 7. DERIVATIVE INSTRUMENTS Interest Rate Hedging The Company’s interest rate risk relates to U.S. dollar denominated variable interest rate borrowings. The Company uses interest rate swap derivative instruments to manage earnings and cash flow exposure resulting from changes in interest rates. These interest rate swaps apply a fixed interest rate on a portion of the Company's expected LIBOR-indexed floating-rate borrowings. F - 24 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The Company held the following interest rate swaps as of December 31, 2020 and 2019 (dollar amounts in thousands): December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019 Hedged Item Notional Amount Designation Date Effective Date Termination Date Fixed Interest Rate Estimated Fair Value Asset (Liability) 3-month USD LIBOR $ — $ 50,000 February 6, 2017 June 30, 2017 June 30, 2020 1.834 % $ — $ ( 2 ) 1-month USD LIBOR — 100,000 February 6, 2017 June 30, 2017 June 30, 2020 1.652 % — 12 1-month USD LIBOR 100,000 100,000 March 27, 2017 December 31, 2017 June 30, 2021 1.971 % ( 929 ) ( 581 ) 1-month USD LIBOR 150,000 150,000 December 13, 2017 January 1, 2018 December 31, 2022 2.201 % ( 6,152 ) ( 2,880 ) 1-month USD LIBOR 150,000 150,000 December 13, 2017 January 1, 2018 December 31, 2022 2.201 % ( 6,405 ) ( 2,880 ) 1-month USD LIBOR 100,000 100,000 December 13, 2017 July 1, 2019 June 30, 2024 2.423 % ( 7,724 ) ( 3,517 ) 1-month USD LIBOR 50,000 50,000 December 13, 2017 July 1, 2019 June 30, 2024 2.423 % ( 3,778 ) ( 1,778 ) 1-month USD LIBOR 200,000 200,000 December 13, 2017 January 1, 2018 December 31, 2024 2.313 % ( 16,243 ) ( 6,595 ) 1-month USD LIBOR 75,000 75,000 October 10, 2018 July 1, 2020 June 30, 2025 3.220 % ( 9,836 ) ( 5,750 ) 1-month USD LIBOR 75,000 75,000 October 10, 2018 July 1, 2020 June 30, 2025 3.199 % ( 9,826 ) ( 5,747 ) 1-month USD LIBOR 75,000 75,000 October 10, 2018 July 1, 2020 June 30, 2025 3.209 % ( 9,783 ) ( 5,807 ) 1-month USD LIBOR 100,000 100,000 December 18, 2018 December 30, 2022 December 31, 2027 2.885 % ( 10,407 ) ( 4,930 ) 1-month USD LIBOR 100,000 100,000 December 18, 2018 December 30, 2022 December 31, 2027 2.867 % ( 10,431 ) ( 4,691 ) 1-month USD LIBOR 125,000 — December 15, 2020 July 31, 2025 December 31, 2027 1.415 % ( 382 ) — 1-month USD LIBOR 50,000 — December 15, 2020 July 1, 2025 December 31, 2027 1.404 % ( 162 ) — 1-month USD LIBOR 225,000 — December 15, 2020 July 31, 2025 December 31, 2027 1.415 % ( 846 ) — 1-month USD LIBOR 225,000 — December 15, 2020 July 31, 2025 December 31, 2027 1.415 % ( 679 ) — 1-month USD LIBOR 75,000 — December 15, 2020 July 1, 2025 December 31, 2027 1.404 % ( 187 ) — Total interest rate derivatives designated as cash flow hedge $ 1,875,000 $ 1,325,000 $ ( 93,769 ) $ ( 45,145 ) The Company has designated these derivative instruments as cash flow hedges. The Company assesses the effectiveness of these derivative instruments and has recorded the changes in the fair value of the derivative instrument designated as a cash flow hedge as unrealized gains or losses in accumulated other comprehensive loss (“AOCL”), net of tax, until the hedged item affected earnings, at which point any gain or loss was reclassified to earnings. If the hedged cash flow does not occur, or if it becomes probable that it will not occur, the Company will reclassify the remaining amount of any gain or loss on the related cash flow hedge recorded in AOCL to interest expense at that time. Foreign Currency Hedging From time to time the Company enters into foreign currency hedge contracts intended to protect the U.S. dollar value of certain forecasted foreign currency denominated transactions. The Company assesses the effectiveness of the contracts that are designated as hedging instruments. The changes in fair value of foreign currency cash flow hedges are recorded in AOCL, net of tax, until the hedged item affects earnings. Once the related hedged item affects earnings, the Company reclassifies amounts recorded in AOCL to earnings. If the hedged forecasted transaction does not occur, or if it becomes probable that it will not occur, the Company will reclassify the amount of any gain or loss on the related cash flow hedge to earnings at that time. For contracts not designated as hedging instruments, the changes in fair value of the contracts are recognized in other income, net in the consolidated statements of operation, along with the offsetting foreign currency gain or loss on the underlying assets or liabilities. During the fourth quarter of 2020, the Company entered into foreign currency forward contracts, with a notional amount of $ 9.7 million to mitigate the foreign exchange risk related to certain intercompany loans denominated in Canadian Dollar ("CAD") and intercompany receivables denominated in Japanese Yen ("JPY"). The contracts are not designated as hedging instruments. The Company recognized a $ 0.2 million loss from the change in fair value of the contracts, which was included in other income, net in the consolidated statement of operations. The fair value of the foreign currency forward contracts was $ 0.2 million as of December 31, 2020. The success of the Company’s hedging program depends, in part, on forecasts of certain activity denominated in foreign currency. The Company may experience unanticipated currency exchange gains or losses to the extent that there are differences F - 25 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) between forecasted and actual activities during periods of currency volatility. In addition, changes in currency exchange rates related to any unhedged transactions may affect earnings and cash flows. Cross-Currency Rate Swaps On October 2, 2017, the Company entered into cross currency swap agreements to convert a notional amount of $ 300.0 million equivalent to 291.2 million of Swiss francs ("CHF") denominated intercompany loans into U.S. dollars. The CHF denominated intercompany loans were the result of the purchase of intellectual property by a subsidiary in Switzerland as part of an acquisition. On December 21, 2020, the Company entered into cross-currency swap agreements to convert a notional amount of $ 471.6 million equivalent to 420.1 million of a CHF denominated intercompany loan into U.S. dollars. The CHF denominated intercompany loan was the result of an intra-entity transfer of certain intellectual property rights to a subsidiary in Switzerland completed during the fourth quarter of 2020. The objective of these cross-currency swaps is to reduce volatility of earnings and cash flows associated with changes in the foreign currency exchange rate. Under the terms of these contracts, which have been designated as cash flow hedges, the Company will make interest payments in Swiss Francs and receive interest in U.S. dollars. Upon the maturity of these contracts, the Company will pay the principal amount of the loans in Swiss Francs and receive U.S. dollars from the counterparties. The Company held the following cross-currency rate swaps as of December 31, 2020 (dollar amounts in thousands): December 31, 2020 Effective Date Termination Date Fixed Rate Aggregate Notional Amount Fair Value (Liability) Pay CHF October 2, 2017 October 2, 2021 1.85 % CHF 48,533 ( 4,335 ) Receive U.S.$ 4.46 % $ 50,000 Pay CHF October 2, 2017 October 2, 2022 1.95 % CHF 145,598 ( 11,262 ) Receive U.S.$ 4.52 % $ 150,000 Pay CHF December 21, 2020 December 20, 2025 3.00 % CHF 420,137 ( 7,843 ) Receive U.S.$ 3.98 % $ 471,640 Total $ ( 23,441 ) On October 2, 2020 in accordance with the termination date, the Company settled a cross-currency swap designated as a cash flow hedge of an intercompany loan with an aggregate notional amount of $ 33.3 million. As a result of the settlement, the Company recorded a loss of $ 0.3 million in other income, net in the consolidated statement of operations. The Company held the following cross-currency rate swaps as of December 31, 2019 (dollar amounts in thousands): December 31, 2019 Effective Date Termination Date Fixed Rate Aggregate Notional Amount Fair Value (Liability) Pay CHF October 2, 2017 October 2, 2020 1.75 % CHF 32,355 $ ( 101 ) Receive U.S.$ 4.38 % $ 33,333 Pay CHF October 2, 2017 October 2, 2021 1.85 % CHF 48,533 ( 119 ) Receive U.S.$ 4.46 % $ 50,000 Pay CHF October 2, 2017 October 2, 2022 1.95 % CHF 145,598 ( 289 ) Receive U.S.$ 4.52 % $ 150,000 Total $ ( 509 ) F - 26 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) During the year ended December 31, 2019, the Company settled cross-currency swaps designated as cash flow hedges of an intercompany loan with an aggregate notional amount of $ 66.7 million. The original maturity dates were October 2, 2020 however, as the intercompany loan settlement was consummated, the cross-currency swap was settled simultaneously. As a result of the settlements, the Company recorded a loss of $ 0.4 million in other income, net in the consolidated statement of operations. The cross-currency swaps are carried on the consolidated balance sheet at fair value, and changes in the fair values are recorded as unrealized gains or losses in AOCL. For the years ended December 31, 2020 and 2019, the Company recorded a loss of $ 21.7 million and loss of $ 4.0 million, respectively, in other income, net related to change in fair value related to the foreign currency rate tran slation to offset the gains or losses recognized on the intercompany loans. For the years ended December 31, 2020 and 2019, the Company reco rded a loss of $ 17.1 million and a gain of $ 9.3 million, respectively, in AOCL related to change in fair value of the cross-currency swaps. For the years ended December 31, 2020 and 2019, the Company recor ded gains of $ 5.8 million and $ 7.0 million, respectively, in other income, net included in the consolidated statements of operations related to the interest rate differential of the cross-currency swaps. The estimated gain that is expected to be reclassified to other income, net from AOCL as of December 31, 2020 within the next twelve months is $ 3.3 million. As of December 31, 2020, the Company does not expect any gains or losses will be reclassified into earnings as a result of the discontinuance of these cash flow hedges because the original forecasted transaction will not occur. Net Investment Hedges The Company manages certain foreign exchange risks through a variety of strategies, including hedging. The Company is exposed to foreign exchange risk from its international operations through foreign currency purchases, net investments in foreign subsidiaries, and foreign currency assets and liabilities created in the normal course of business. On October 1, 2018 and December 16, 2020, the Company entered into cross-currency swap agreements designated as net investment hedges to partially offset the effects of foreign currency on foreign subsidiaries. The Company held the following cross-currency rate swaps designated as net investment hedges as of December 31, 2020 (dollar amounts in thousands): December 31, 2020 Effective Date Termination Date Fixed Rate Aggregate Notional Amount Fair Value Asset (Liability) Pay EUR October 3, 2018 September 30, 2021 — EUR 44,859 $ ( 1,884 ) Receive U.S.$ 3.01 % $ 52,000 Pay EUR October 3, 2018 September 30, 2023 — EUR 51,760 ( 450 ) Receive U.S.$ 2.57 % $ 60,000 Pay EUR October 3, 2018 September 30, 2025 — EUR 38,820 92 Receive U.S.$ 2.19 % $ 45,000 Pay CHF December 16, 2020 December 16, 2027 — CHF 222,300 ( 3,794 ) Receive USD 1.10 % $ 250,000 Total $ ( 6,036 ) During the year ended December 31, 2020, the Company settled cross-currency swaps designated as net investment hedge with an aggregate notional amount of $ 167.5 million and 128.3 million Pound Sterling respectively as a result of an intra-entity transfer of certain intellectual property rights to a subsidiary. The original settlement date was September 30, 2025. As a result of the settlement, the Company recorded a loss of $ 7.8 million in AOCL. F - 27 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The Company held the following cross-currency rate swaps designated as net investment hedges as of December 31, 2019 (dollar amounts in thousands): December 31, 2019 Effective Date Termination Date Fixed Rate Aggregate Notional Amount Fair Value Asset (Liability) Pay EUR October 3, 2018 September 30, 2021 — EUR 44,859 $ 2,459 Receive U.S.$ 3.01 % $ 52,000 Pay EUR October 3, 2018 September 30, 2023 — EUR 51,760 3,087 Receive U.S.$ 2.57 % $ 60,000 Pay EUR October 3, 2018 September 30, 2025 — EUR 38,820 2,032 Receive U.S.$ 2.19 % $ 45,000 Pay GBP October 3, 2018 September 30, 2025 1.67 % GBP 128,284 ( 154 ) Receive U.S.$ 2.71 % $ 167,500 Pay CHF October 3, 2018 September 30, 2025 — CHF 165,172 1,221 Receive GBP 1.67 % GBP 128,284 Total $ 8,645 During the year ended December 31, 2019, the Company settled a cross-currency swap designated as a net-investment hedge of with an aggregate notional amount of $ 30.0 million. The original termination date was September 30, 2021. As a result of the settlement, the Company recorded a gain of $ 1.6 million in AOCL. The cross-currency swaps were carried on the consolidated balance sheet at fair value and changes in the fair values were recorded as unrealized gains or losses in AOCL. For the year ended December 31, 2020 and 2019, the Company recorded a loss of $ 14.9 million and a gain of $ 20.5 million, respectively, in AOCL related to the change in fair value of the cross-currency swaps. For the years ended December 31, 2020 and 2019, the Company recorded a gain of $ 7.6 million and $ 9.6 million, respectively, in interest income included in the consolidated statements of operations related to the interest rate differential of the cross-currency swaps. The estimated gain that is expected to be reclassified to interest income from AOCL as of December 31, 2020 within the next twelve months is $ 3.4 million. Counterparty Credit Risk The Company manages its concentration of counterparty credit risk on its derivative instruments by limiting acceptable counterparties to a group of major financial institutions with investment grade credit ratings, and by actively monitoring their credit ratings and outstanding positions on an ongoing basis. Therefore, the Company considers the credit risk of the counterparties to be low. Furthermore, none of the Company’s derivative transactions are subject to collateral or other security arrangements, and none contain provisions that depend upon the Company’s credit ratings from any credit rating agency. Fair Value of Derivative Instruments The Company has classified all of its derivative instruments within Level 2 of the fair value hierarchy because observable inputs are available for substantially the full term of the derivative instruments. The fair values of the interest rate swaps and cross-currency swaps were developed using a market approach based on publicly available market yield curves and the terms of the swap. The Company performs ongoing assessments of counterparty credit risk. F - 28 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The following table summarizes the fair value for derivatives designated as hedging instruments in the consolidated balance sheets as of December 31, 2020 and 2019: Fair Value as of December 31, 2020 2019 Location on Balance Sheet (1) : (In thousands) Derivatives designated as hedges — Assets: Prepaid expenses and other current assets Cash Flow Hedges Interest rate swap (2) $ — $ 12 Cross-currency swap 7,623 5,032 Net Investment Hedges Cross-currency swap 5,297 7,952 Other assets Cash Flow Hedges Interest rate swap (2) — — Net Investment Hedges Cross-currency swap — 3,465 Total Derivatives designated as hedges — Assets $ 12,920 $ 16,461 Derivatives designated as hedges — Liabilities Accrued expenses and other current liabilities Cash Flow Hedges Interest rate swap (2) $ 22,033 $ 6,635 Cross-currency swap 4,335 101 Net Investment Hedges Cross-currency swap 1,884 — Other liabilities Cash Flow Hedges Interest rate swap (2) 71,736 38,522 Cross-currency swap 26,728 5,440 Net Investment Hedges Cross-currency swap 9,449 2,772 Total Derivative designated as hedges — Liabilities $ 136,165 $ 53,470 (1) The Company classifies derivative assets and liabilities as current based on the cash flows expected to be incurred within the following 12 months. (2) At December 31, 2020 and 2019, the total notional amounts related to the Company’s interest rate swaps were $ 1.9 billion and $ 1.3 billion, respectively. F - 29 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The following presents the effect of derivative instruments designated as cash flow hedges and net investment hedges on the accompanying consolidated statements of operations during the years ended December 31, 2020 and 2019: Balance in AOCL Beginning of Year Amount of Gain (Loss) Recognized in AOCL Amount of Gain (Loss) Reclassified from AOCL into Earnings Balance in AOCL End of Year Location in Statements of Operations (In thousands) Year Ended December 31, 2020 Cash Flow Hedges Interest rate swap $ ( 45,145 ) $ ( 64,778 ) $ ( 16,154 ) $ ( 93,769 ) Interest expense Cross-currency swap 177 ( 17,147 ) ( 15,897 ) ( 1,073 ) Other income, net Net Investment Hedges Cross-currency swap 10,229 ( 14,911 ) 7,609 ( 12,291 ) Interest income $ ( 34,739 ) $ ( 96,836 ) $ ( 24,442 ) $ ( 107,133 ) Year Ended December 31, 2019 Cash Flow Hedges Interest rate swap $ 619 $ ( 43,493 ) $ 2,271 $ ( 45,145 ) Interest expense Cross-currency swap ( 6,190 ) 9,334 2,967 177 Other income, net Net Investment Hedges Cross-currency swap ( 632 ) 20,488 9,627 10,229 Interest income $ ( 6,203 ) $ ( 13,671 ) $ 14,865 $ ( 34,739 ) 8. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill The Company tests goodwill for impairment by either performing a qualitative evaluation or a quantitative test. The qualitative evaluation is an assessment of factors including reporting unit specific operating results as well as industry, market and general economic conditions, to determine whether it is more likely than not that the fair values of a reporting unit is less than its carrying amount, including goodwill. The Company may elect to bypass the qualitative assessment for its three reporting units and perform a quantitative test. The assumptions used in evaluating goodwill for impairment are subject to change and are tracked against historical results by management. The quantitative test estimates the fair value of its three reporting units using a discounted cash flow model, which incorporates significant estimates and assumptions made by management which, by their nature, are characterized by uncertainty. Inputs used to fair value the Company's reporting units are considered inputs of the fair value hierarchy. For Level 3 measurements, significant increases or decreases in long-term growth rates or discount rates in isolation or in combination could result in a significantly lower or higher fair value measurement. The key assumptions impacting the valuation included the following: • The reporting unit's financial projections, which are based on management's assessment of regional and macroeconomic variables, industry trends and market opportunities, and the Company's strategic objectives and future growth plans. • The projected terminal value for the reporting unit, which represents the present value of projected cash flows beyond the last period in the discounted cash flow analysis. The terminal value reflects the Company's assumptions related to long-term growth rates and profitability, which are based on several factors, including local and macroeconomic variables, market opportunities, and future growth plans. • The discount rate used to measure the present value of the projected future cash flows is set using a weighted-average cost of capital method that considers market and industry data as well as the Company's specific risk factors that are F - 30 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) likely to be considered by a market participant. The weighted-average cost of capital is the Company's estimate of the overall after-tax rate of return required by equity and debt holders of a business enterprise. The Company elected to perform a qualitative analysis for its three reporting units as of July 31, 2020. The Company determined, after performing qualitative analysis, that there was no evidence that it is more likely than not that the fair value of any identified reporting unit was less that the carrying amounts, therefore, it was not necessary to perform a quantitative impairment test. Changes in the carrying amount of goodwill in 2020 and 2019 were as follows: Codman Specialty Surgical Orthopedics and Tissue Technologies Total (In thousands) Goodwill at January 1, 2019 $ 625,760 $ 300,715 $ 926,475 Arkis Acquisition 27,600 — 27,600 Foreign currency translation 140 65 205 Goodwill at December 31, 2019 $ 653,500 $ 300,780 $ 954,280 Foreign currency translation 18,475 7,158 25,633 Transfer to assets held for sale (See Note 3. Assets Held for Sale ) $ — $ ( 47,546 ) $ ( 47,546 ) Goodwill at December 31, 2020 $ 671,975 $ 260,392 $ 932,367 Other Intangible Assets The components of the Company's identifiable intangible assets were as follows: December 31, 2020 Weighted Average Life Cost Accumulated Amortization Net (Dollars in Thousands) Completed technology 19 years $ 896,478 $ ( 248,088 ) $ 648,390 Customer relationships 12 years 213,270 ( 132,838 ) 80,432 Trademarks/brand names 28 years 104,209 ( 31,767 ) 72,442 Codman trade name Indefinite 170,226 — 170,226 Supplier relationships 27 years 30,211 ( 15,203 ) 15,008 All other (1) 4 years 9,995 ( 7,057 ) 2,938 $ 1,424,389 $ ( 434,953 ) $ 989,436 December 31, 2019 Weighted Average Life Cost Accumulated Amortization Net (Dollars in Thousands) Completed technology 19 years $ 880,623 $ ( 213,702 ) $ 666,921 Customer relationships 12 years 222,575 ( 119,393 ) 103,182 Trademarks/brand names 28 years 103,873 ( 28,514 ) 75,359 Codman trade name Indefinite 163,126 — 163,126 Supplier relationships 27 years 34,721 ( 17,947 ) 16,774 All other (1) 4 years 10,869 ( 4,640 ) 6,229 $ 1,415,787 $ ( 384,196 ) $ 1,031,591 F - 31 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (1) At December 31, 2020 and 2019, all other included IPR&D of $ 1.0 million, which was indefinite-lived. At December 31, 2020, this IPR&D asset was presented separately as "assets held for sale" in conjunction with the sale of the Extremity Orthopedics business which is expected to be sold within twelve months. See Note 3, Assets and Liabilities Held for Sale , for details. At December 31, 2020, $ 13.3 million of Intangible assets, net were presented separately as "assets held for sale" in conjunction with the sale of the Extremity Orthopedics business. See Note 3, Assets and Liabilities Held for Sale . The Company tests intangible assets with indefinite lives for impairment annually in the third quarter in accordance with ASC Topic 350. The Company elected to bypass the qualitative evaluation for its Codman tradename intangible asset and perform quantitative test during the third quarter of 2020. In performing the test, the Company utilized a range of projected sales growth rates, a royalty rate of 5.0 %, a tax rate of 24.0 % and a discount rate of 11.5 %. The assumptions used in evaluating the Codman tradename for impairment are subject to change and are tracked against historical results by management. Based on the results of the quantitative test, the Company recorded no impairment to the Codman tradename intangible asset. Product rights and other definite-lived intangible assets are tested periodically for impairment in accordance with ASC Topic 360 when events or changes in circumstances indicate that an asset's carrying value may not be recoverable. The impairment testing involves comparing the carrying amount of the asset or asset group to the forecasted undiscounted future cash flows. In the event the carrying value of the asset exceeds the undiscounted future cash flows, the carrying value is considered not recoverable and impairment exists. An impairment loss is measured as the excess of the asset's carrying value over its fair value, calculated using discounted future cash flows. The computed impairment loss is recognized in the period that the impairment occurs. During the second quarter of 2019, a contract manufacturing customer of the private label product line received a notification from the FDA ordering them to remove their product from the market. The Company recorded an impairment charge of $ 5.8 million in intangible asset amortization in the consolidated statement of operations related to the customer relationship intangible asset acquired from TEI Biosciences, Inc. and TEI Medical Inc. (collectively "TEI") due to revised future projections based on the contract termination. Amortization expense (including amounts reported in cost of product revenues) for the years ended December 31, 2020, 2019 and 2018 was $ 74.5 million, $ 72.8 million and $ 71.6 million, respectively. Annual amortization expense is expected to approximate $ 63.8 million in 2021, $ 61.4 million in 2022, $ 60.7 million in 2023, $ 60.2 million in 2024, $ 60.2 million in 2025 and $ 512.3 million thereafter. Amortization of product technology based intangible assets totaled $ 46.7 million, $ 45.8 million and $ 50.4 million for the years ended December 31, 2020, 2019 and 2018, respectively, and is presented by the Company within cost of goods sold. 9. TREASURY STOCK As of December 31, 2020 and 2019, there were 4.9 million and 2.9 million shares of treasury stock outstanding with a cost of $ 235.1 million and $ 119.9 million, at a weighted average cost per share of $ 47.86 and $ 41.87 , respectively. On December 7, 2020, the Board of Directors authorized the Company to repurchase up to $ 225 million of the Company’s common stock. The program allows the Company to repurchase its shares opportunistically from time to time. The repurchase authorization expires in December 2022. This stock repurchase authorization replaces the previous $ 225 million stock repurchase authorization, of which $ 125 million remained authorized at the time of its replacement, and which was otherwise set to expire on December 31, 2020. During the twelve months ended December 31, 2020, the Company repurchased 2.1 million shares of Integra’s common stock as part of the previous share repurchase authorization. The Company utilized $ 100.0 million of net proceeds from the offering of the Convertible Senior Notes to execute the share repurchase transactions. This included $ 7.6 million from certain purchasers of the convertible notes in conjunction with the closing of the offering. On February 5, 2020, the Company entered into a $ 92.4 million accelerated share repurchase ("ASR") to complete the remaining $ 100.0 million of share repurchase. The Company received 1.3 million shares at inception of the ASR, which represented approximately 80 % of the expected total shares. Upon settlement of the ASR in June 2020, the Company received an additional 0.6 million shares determined using the volume-weighted average price of the Company's common stock during the term of the transaction. F - 32 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 10. STOCK-BASED COMPENSATION Stock-based compensation expense - all related to employees and members of the Board of Directors - recognized under the authoritative guidance was as follows: Years Ended December 31, 2020 2019 2018 (In thousands) Cost of goods sold 344 317 449 Research and development 1,471 1,785 1,609 Selling, general and administrative $ 17,776 $ 19,153 $ 18,721 Total stock-based compensation expense 19,591 21,255 20,779 Total estimated tax benefit related to stock-based compensation expense 6,221 9,420 10,430 Net effect on net income $ 13,370 $ 11,835 $ 10,349 EMPLOYEE STOCK PURCHASE PLAN The purpose of the Employee Stock Purchase Plan (the “ESPP”) is to provide eligible employees of the Company with the opportunity to acquire shares of common stock at periodic intervals by means of accumulated payroll deductions. The ESPP is a non-compensatory plan. Under the ESPP, a total of 3.0 million shares of common stock are reserved for issuance. These shares will be made available either from the Company’s authorized but unissued shares of common stock or from shares of common stock reacquired by the Company as treasury stock. At December 31, 2020, 2.0 million shares remain available for purchase under the ESPP. During the years ended December 31, 2020, 2019 and 2018, the Company issued 18,284 shares, 12,531 shares and 16,721 shares under the ESPP for $ 1.1 million, $ 0.7 million and $ 0.7 million, respectively. EQUITY AWARD PLANS As of December 31, 2020, the Company had stock options, restricted stock awards, performance stock awards, contract stock awards and restricted stock unit awards outstanding under three plans, the 2000 Equity Incentive Plan (the “2000 Plan”), the 2001 Equity Incentive Plan (the “2001 Plan”), and the 2003 Equity Incentive Plan (the “2003 Plan,” and collectively, (the “Plans”)). In May 2010 and May 2017, the stockholders of the Company approved amendments to the 2003 Plan to increase by 3.5 million and 1.7 million, respectively, the number of shares of common stock that may be issued under the 2003 Plan. The Company has reserved 4.0 million shares under each of the 2000 Plan and the 2001 Plan, and 14.7 million shares under the 2003 Plan. The Plans permit the Company to grant incentive and non-qualified stock options, stock appreciation rights, restricted stock, contract stock, performance stock, or dividend equivalent rights to designated directors, officers, employees and associates of the Company. Stock options issued under the Plans become exercisable over specified periods, generally within four years from the date of grant for officers and employees, and within one year from the date of the grant for members of the Board of Directors. The awards generally expire eight years from the grant date for employees and from six to ten years for directors and certain executive officers. Restricted stock issued under the Plans vests ratably over specified periods, generally three years after the date of grant. Stock Options The Company values stock option grants using the binomial distribution model. Management believes that the binomial distribution model is preferable to the Black-Scholes model because it is a more flexible model that gives consideration to the impact of non-transferability and vesting provisions in valuing employee stock options. In determining the value of stock options granted, the Company considered that it has never paid cash dividends and does not currently intend to pay cash dividends, and thus has assumed a 0 % dividend yield. Expected volatilities are based on the historical volatility of the Company’s stock price. The expected life of stock options is estimated based on historical data on exercise of stock options, post-vesting forfeitures and other factors to estimate the expected term of the stock options granted. The risk-free interest rates are derived from the U.S. Treasury yield curve in effect on the date of grant for instruments with a remaining term similar to the expected life of the options. The Company accounts for forfeitures as they occur. F - 33 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The following weighted-average assumptions were used in the calculation of fair value: Years Ended December 31, 2020 2019 2018 Dividend yield 0 % 0 % 0 % Expected volatility 27 % 28 % 28 % Risk free interest rate 0.89 % 2.51 % 2.79 % Expected life of option from grant date 7 years 7 years 8 years Weighted average grant date fair value of options granted $ 13.03 $ 18.74 $ 21.78 The following table summarizes the Company’s stock option activity. Weighted Average Exercise Price Weighted Average Contractual Term in Years Aggregate Intrinsic Value Shares Stock Options (In thousands) (In thousands) Outstanding at January 1, 2020 1,284 $ 34.83 — — Granted 349 43.39 — — Exercised ( 236 ) 19.20 — — Forfeited or Expired ( 51 ) 49.12 — — Outstanding at December 31, 2020 1,346 $ 39.25 4.41 $ 34,560 Exercisable at December 31, 2020 881,261 $ 35.19 3.20 $ 26,197 The Company recognized $ 3.2 million, $ 3.0 million and $ 2.6 million in expense related to stock options during the years ended December 31, 2020, 2019 and 2018, respectively. The intrinsic value of options exercised for the years ended December 31, 2020, 2019 and 2018 were $ 8.7 million, $ 14.6 million and $ 16.9 million, respectively. Cash received from option exercises and employee stock purchase plan was $ 5.2 million, $ 6.9 million and $ 9.4 million, for the years ended December 31, 2020, 2019 and 2018, respectively. The realized tax benefit from options exercised were $ 1.7 million, $ 3.0 million and $ 3.1 million for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020, there was approximately $ 5.1 million of total unrecognized compensation costs related to unvested stock options. These costs are expected to be recognized over a weighted-average period of approximately two years . Awards of Restricted Stock, Performance Stock and Contract Stock The following table summarizes the Company’s awards of restricted stock, performance stock and contract stock for the year ended December 31, 2020. Restricted Stock Awards Performance Stock and Contract Stock Awards Shares Weighted Average Grant Date Fair Value Per Share Shares Weighted Average Grant Date Fair Value Per Share (In thousands) (In thousands) Unvested, January 1, 2020 460 $ 54.31 192 55.38 Granted 286 44.78 234 43.63 Adjustments for performance achievement related to award target — — 14 51.93 Cancellations ( 42 ) 50.11 ( 31 ) — Released ( 232 ) 52.07 ( 157 ) 43.48 Vested but not released — — ( 55 ) 51.84 Unvested, December 31, 2020 472 $ 50.02 197 47.66 F - 34 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The Company recognized $ 16.4 million, $ 18.1 million and $ 18.1 million in expense related to such awards during the years ended December 31, 2020, 2019 and 2018, respectively. The total fair market value of shares vested and released in 2020, 2019 and 2018 was $ 17.3 million, $ 21.1 million and $ 24.8 million, respectively. Vested awards include shares that have been fully earned but had not been delivered as of December 31, 2020. Performance stock awards have performance features associated with them. Performance stock, restricted stock and contract stock awards generally have requisite service periods of three years . The fair value of these awards is being expensed on a straight-line basis over the vesting period. As of December 31, 2020, there was approximately $ 22.6 million of total unrecognized compensation costs related to unvested restricted stock, performance stock and contract stock awards. These costs are expected to be recognized over a weighted-average period of approximately two years . As of December 31, 2020, there were approximately 0.5 million vested Restricted Units and 0.1 million vested performance share units held by various employees for which the related shares have not yet been issued. The final determination of the number of shares to be issued is made by the Company's Compensation Committee of the Board of Directors which is is contingent upon achieving certain revenue and organic revenue growth performance metric. At December 31, 2020, there were approximately 1.9 million shares available for grant under the Plans. The Company capitalized into inventory, share based compensation costs of $ 0.4 million, $ 0.3 million and $ 0.4 million for the years ended December 31, 2020, 2019 and 2018, respectively. Such share-based compensation was recognized as cost of goods sold when related inventory was sold. 11. RETIREMENT BENEFIT PLANS DEFINED BENEFIT PLANS The Company has various defined benefit plans which covers certain employees in France, Japan, Germany and Switzerland. Net periodic benefit costs for the Company’s defined benefit pension plans for the years ended December 31, 2020 and 2019 included the following (amounts in thousands): Year ended December 31, 2020 2019 Service cost $ 4,029 $ 3,815 Interest cost 219 517 Expected return on plan assets ( 652 ) ( 1,047 ) Amortization of prior service cost (credit) ( 274 ) ( 259 ) Recognized actuarial losses 787 65 Settlements ( 102 ) 602 Net period benefit cost $ 4,007 $ 3,693 The following weighted average assumptions were used to develop net periodic pension benefit costs and the actuarial present values of projected pension benefit obligations for the years ended December 31, 2020 and 2019, respectively: As of December 31, 2020 2019 Discount rate 0.34 % 0.40 % Expected return on plan assets 2.04 % 3.33 % Rate of compensation increase 2.14 % 2.25 % Interest crediting rate for cash balance plans 1.00 % 0.93 % The Company’s discount rates are determined by considering current yield curves representing high quality, long-term fixed income instruments. The resulting discount rates are consistent with the duration of plan liabilities. In 2020 and 2019, the discount rates were prescribed as the current yield on corporate bonds with an average rating of AA or AAA of equivalent currency and term to the liabilities. The expected returns on plan assets represent the average rate of return expected to be earned on plan assets over the period the benefits included in the benefit obligation are to be paid. In developing the expected rates of return, the Company considers returns of historical market data as well as actual returns on the plan assets. Using this reference information, the long-term return expectations for each asset category are developed according to the allocation among those investment categories. F - 35 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The assessment is determined using projections from external financial sources, long-term historical averages, actual returns by asset class and the various asset class allocations by market. The following sets forth the change in projected benefit obligations and the change in plan assets for the years ended December 31, 2020 and 2019 and a reconciliation of the funded status at December 31, 2020 and 2019, respectively (amounts in thousands): Year ended December 31, 2020 2019 Change In Projected Benefit Obligations Projected benefit obligations, beginning of year $ 66,972 $ 52,542 Interest cost 219 517 Service cost 4,029 3,815 Actuarial (gain) loss ( 3,347 ) 12,188 Plan amendments — ( 3,133 ) Plan settlements ( 77 ) ( 2,664 ) Employee contribution 883 899 Premiums paid ( 388 ) ( 395 ) Benefit payment ( 1,537 ) ( 635 ) Plans transferred in — 3,199 Effect of foreign currency exchange rates 6,115 639 Projected benefit obligations, end of year $ 72,869 $ 66,972 Year ended December 31, 2020 2019 Change In Plan Assets Plan assets at fair value, beginning of year $ 30,770 $ 31,103 Actual return on plan assets 2,882 ( 152 ) Employer contributions 2,274 2,189 Employee contributions 883 899 Plan settlements ( 56 ) ( 2,645 ) Benefits paid ( 1,537 ) ( 635 ) Premiums paid ( 388 ) ( 395 ) Effect of foreign currency exchange rates 2,997 406 Plan assets at fair value, end of year $ 37,825 $ 30,770 Year ended December 31, 2020 2019 Reconciliation Of Funded Status Fair value of plan assets $ 37,825 $ 30,770 Benefit obligations 72,869 66,972 Unfunded benefit obligations $ 35,044 $ 36,202 The unfunded benefit obligations are included in other liabilities in the consolidated balance sheets at December 31, 2020 and 2019, respectively. During the periods ended December 31, 2020 and 2019, the Company had a net gain of $ 4.6 million and a net loss of $ 9.0 million, respectively, recognized within accumulated other comprehensive loss that has not been recognized as a component of net periodic benefit cost. The gain recognized during the period ended December 31, 2020, is primarily attributed to a change in the discount rate used to estimate the projected benefit obligation for defined benefit plans which cover certain employees in Switzerland. The combined accumulated benefit obligations for the defined benefit plans was $ 61.5 million and $ 61.1 million as of December 31, 2020 and 2019, respectively. Unrecognized gains and losses are amortized over the average remaining future service for each plan. For plans with no active employees, they are amortized over the average life expectancy. The amortization of gains and losses is determined by using a 10% corridor of the greater of the market value of assets or the accumulated benefit obligation. Total unamortized gains and losses in excess of the corridor are amortized over the average remaining future service. F - 36 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Prior service costs/benefits for the pension plans are amortized over the average remaining future service of plan participants at the time of the plan amendment. The net plan assets of the pension plans are invested in common trusts. Common trusts are classified as Level 2 in fair value hierarchy. The fair value of common trusts is valued at net asset value based on the fair values of the underlying investments of the trusts as determined by the sponsor of the trusts. The investment strategy of the Company's defined benefit plans is both to meet the liabilities of the plans as they fall due and to maximize the return on invested assets within appropriate risk profile. The benefit plans in France and Germany had no assets at December 31, 2020. As of December 31, 2020, no plan assets are expected to be returned to the Company in the next twelve months. The following table is the summary of expected future benefit payments (in thousands): 2021 $ 1,900 2022 $ 1,626 2023 $ 1,694 2024 $ 1,789 2025 $ 2,101 Next five years $ 10,429 As of December 31, 2020, contributions expected to be paid to the plan in 2021 is $ 2.3 million. DEFINED CONTRIBUTION PLANS The Company also has various defined contribution savings plans that cover substantially all employees in the United States, Belgium, Canada, France, Japan, Netherlands, the U.K. and Puerto Rico. The Company matches a certain percentage of each employee’s contributions as per the provisions of the plans. Total contributions by the Company to the plans were $ 6.7 million, $ 8.6 million and $ 8.1 million for the years ended December 31, 2020, 2019 and 2018, respectively. DEFERRED COMPENSATION PLAN During the first quarter of 2020, employees participating in the Company's deferred compensation plan began to defer their compensation. This deferred compensation is invested in funds offered under this plan and is valued based on Level 1 measurements in the fair value hierarchy. Assets of the Company's deferred compensation plan are included in Other current assets and recorded at fair value based on their quoted market prices. The fair value of these assets at December 31, 2020 was $ 2.0 million. Offsetting liabilities relating to the deferred compensation plan are included in Other liabilities. 12. LEASES AND RELATED PARTY LEASES The Company leases administrative, manufacturing, research and distribution facilities and vehicles through operating lease agreements. The Company has no finance leases as of December 31, 2020. Many of the Company's leases include both lease (e.g., fixed payments including rent) and non-lease components (e.g., common-area or other maintenance costs). For vehicles, the Company has elected the practical expedient to group lease and non-lease components. Most facility leases include one or more options to renew. The exercise of lease renewal options is typically at the Company's sole discretion, therefore, the majority of renewals to extend the lease terms are not included in the ROU assets and lease liabilities as they are not reasonably certain of exercise. The Company regularly evaluates renewal options and when they are reasonably certain of exercise, the renewal period is included in the lease term. As most of the Company's leases do not provide an implicit rate, the Company uses a collateralized incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. Total operating lease expense for the year ended December 31, 2020 and December 31, 2019, was $ 19.7 million and $ 19.6 million, respectively, which includes $ 0.3 million, in related party operating lease expense. F - 37 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Supplemental balance sheet information related to operating leases at December 31, 2020 were as follows: December 31, 2020 December 31, 2019 (In thousands, except lease term and discount rate) ROU assets $ 83,635 $ 94,530 Current lease liabilities 12,818 12,253 Non-current lease liabilities 88,118 97,504 Total lease liabilities $ 100,936 $ 109,757 Weighted average remaining lease term (in years): Leased facilities 11.6 years 12.8 years Leased vehicles 2.3 years 2.6 years Weighted average discount rate: Leased facilities 4.6 % 5.4 % Leased vehicles 2.3 % 3.2 % Supplemental cash flow information related to leases was as follows for the year ended December 31, 2020 (in thousands): December 31, 2020 December 31, 2019 (In thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 15,226 $ 11,469 ROU assets obtained in exchange for lease liabilities: Operating leases 6,027 41,423 Future minimum lease payments under operating leases at December 31, 2020 were as follows: Related Parties Third Parties Total (In thousands) 2021 296 13,458 13,754 2022 296 13,992 14,288 2023 296 11,054 11,350 2024 296 10,254 10,550 2025 296 9,645 9,941 Thereafter 1,130 77,784 78,914 Total minimum lease payments $ 2,610 $ 136,187 $ 138,797 Less: Imputed interest $ 37,861 Total lease liabilities 100,936 Less: Current lease liabilities 12,818 Long-term lease liabilities 88,118 There were no future minimum lease payments under finance leases at December 31, 2020. F - 38 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Related Party Leases The Company leases its manufacturing facility in Plainsboro, New Jersey, from a general partnership that is 50 % owned by a corporation whose stockholders are trusts, whose beneficiaries include family members of the Company’s former director. The term of the current lease agreement is through October 31, 2029 at an annual rate of approximately $ 0.3 million per year. The current lease agreement also provides (i) a 5 -year renewal option for the Company to extend the lease from November 1, 2029 through October 31, 2034 at the fair market rental rate of the premises, and (ii) another 5 -year renewal option to extend the lease from November 1, 2034 through October 31, 2039 at the fair market rental rate of the premises. 13. INCOME TAXES Income (Loss) before income taxes consisted of the following: Years Ended December 31, 2020 2019 2018 (In thousands) United States operations $ 15,082 $ ( 38,359 ) $ ( 21,218 ) Foreign operations 78,438 98,463 78,621 Total $ 93,520 $ 60,104 $ 57,403 The 2017 U.S. Tax Act was signed into law on December 22, 2017. The 2017 Tax Act made significant changes to the previous tax law, which included the reduction of the federal statutory rate from 35% to 21% and the recognition of a one-time repatriation tax on accumulated untaxed earnings of foreign subsidiaries. As of December 31, 2018, the Company finalized its calculations and completed its accounting for the income tax effect of the 2017 Tax Act, for which the finalization adjustments recognized during 2018 were not significant. A number of these provisions continue to have an impact on our effective tax rate, including limitations on the deductibility of executive compensation and the elimination of certain tax deductions. Additionally, the implementation of a territorial tax system, which subjects certain foreign earnings to additional taxation as global intangible low-taxed income, continues to adversely affect income tax expense. F - 39 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) A reconciliation of the U.S. Federal statutory rate to the Company’s effective tax rate is as follows: Years Ended December 31, 2020 2019 2018 Federal statutory rate 21.0 % 21.0 % 21.0 % Increase (decrease) in income taxes resulting from: State income taxes, net of federal tax benefit 1.2 % 1.0 % ( 0.4 ) % Foreign operations ( 7.9 ) % ( 20.0 ) % ( 21.8 ) % Excess tax benefits from stock compensation ( 1.0 ) % ( 5.6 ) % ( 7.8 ) % Charitable contributions ( 0.3 ) % ( 0.6 ) % ( 1.2 ) % Nondeductible meals and entertainment 0.4 % 1.5 % 1.6 % Intercompany profit in inventory 1.2 % 1.2 % 6.2 % Nondeductible facilitative costs 1.4 % 0.8 % — % Changes in valuation allowances 0.1 % 0.2 % 0.2 % Uncertain tax positions 0.5 % 0.2 % 0.4 % Research and development credit ( 1.6 ) % ( 2.9 ) % ( 2.6 ) % Return to provision ( 2.3 ) % 1.7 % ( 2.9 ) % Global intangible low-taxed income ("GILTI") 2.5 % 7.6 % 3.5 % Nondeductible executive compensation 2.4 % 3.0 % 1.6 % Carryback of Federal net operating loss ("NOL") — % 0.1 % ( 3.7 ) % Other 0.5 % 0.4 % — % Swiss tax holiday — % ( 15.7 ) % — % IPR&D expense — % 22.7 % — % Foreign-Derived Intangible Income ( 0.8 ) % — % — % Transfer of Intra-entity of certain intellectual property - Rate Differential on FMV Step-Up ( 63.3 ) % — % — % Assets held for sale - Outside Basis Difference 2.8 % — % — % Effective tax rate ( 43.2 ) % 16.5 % ( 5.9 ) % Our effective tax rate was ( 43.2 )% and 16.5 % of income before income taxes for the years ended December 31, 2020 and December 31, 2019, respectively. In 2020, the Company’s lower worldwide effective tax rate, as compared to 2019, is primarily driven by an $ 59.2 million income tax benefit on an intra-entity transfer of certain intellectual property, substantially completed during the fourth quarter in 2020. Excluding this transaction, the effective worldwide tax rate for 2020 is 20.2 %. In December 2020, the Company completed an intra-entity transfer of certain intellectual property rights to one of its subsidiaries in Switzerland. While the transfer did not result in a taxable gain, the Company’s Swiss subsidiary received a step-up in tax basis based on the fair value of the transferred intellectual property rights. The Company determined the fair value using a discounted cash flow model based on expectations of revenue growth rates, royalty rates, discount rates, and useful lives of the intellectual property. The Co mpany recorded a $ 59.2 million deferred tax benefit in Switzerland related to the amortizable tax basis in the transferred intellectual property. During 2020, the Company’s foreign operations generated a $ 48.2 million decrease in income tax expense when compared to the same period in 2019, because of the intra-entity transfer of certain intellectual property, geographic and business mix of taxable earnings and losses, among other factors. The 2020 foreign effective tax rate is ( 57.1 )%, compared to 3.5 % in 2019. The Company’s foreign tax rate is primarily based upon statutory rates and is also impacted by the intra-entity transfer of certain intellectual property as described above. During 2019, the Company's foreign operations generated a $ 5.7 million decrease in income tax expense when compared with 2018, because of geographic and business mix of taxable earnings and losses, among other factors. The 2019 foreign effective tax rate is 3.5 %, compared to 11.6 % in 2018. The Company's foreign tax rate is primarily based upon statutory rates and is also impacted by the tax holiday in Switzerland, described below. During 2019, the Company finalized negotiations related to tax holidays in Switzerland, on a federal, cantonal, and communal level. The Company received a federal tax credit in Switzerland of $ 12.1 million ($ 0.14 per share), which may be used over a seven-year period, ending in 2024. The Company also received a reduction in its rate for the cantonal and communal level taxes during the third quarter of 2019, pursuant to tax reform in Switzerland. F - 40 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The provision for income taxes consisted of the following: Years Ended December 31, 2020 2019 2018 (In thousands) Current: Federal $ 6,184 $ 14,597 $ ( 3,880 ) State 5,029 3,447 1,609 Foreign 12,553 10,905 7,057 Total current $ 23,766 $ 28,949 $ 4,786 Deferred: Federal ( 5,079 ) ( 10,889 ) ( 7,202 ) State ( 1,760 ) ( 666 ) ( 3,048 ) Foreign ( 57,299 ) ( 7,491 ) 2,066 Total deferred $ ( 64,138 ) $ ( 19,046 ) $ ( 8,184 ) Provision for income taxes $ ( 40,372 ) $ 9,903 $ ( 3,398 ) The income tax effects of significant temporary differences that give rise to deferred tax assets and liabilities, shown before jurisdictional netting, are presented below: December 31, 2020 2019 (In thousands) Assets: Doubtful accounts $ 2,207 $ 2,426 Inventory related items 47,034 39,548 Tax credits 18,319 19,134 Accrued vacation 3,403 3,206 Accrued bonus 4,883 6,017 Stock compensation 6,160 8,347 Deferred revenue 1,665 1,805 Net operating loss carryforwards 29,335 37,418 Capitalization of research and development expenses 13,044 9,781 Unrealized foreign exchange loss 23,798 8,105 Charitable contributions carryforward 203 235 Leases and Other 23,205 12,496 Total deferred tax assets 173,256 148,518 Less valuation allowance ( 9,897 ) ( 9,865 ) Deferred tax assets after valuation allowance $ 163,359 $ 138,653 Liabilities: Intangible and fixed assets ( 90,274 ) ( 150,879 ) Leases and Other ( 15,585 ) ( 11,704 ) Total deferred tax liabilities $ ( 105,859 ) $ ( 162,583 ) Total net deferred tax assets (liabilities) $ 57,500 $ ( 23,930 ) Prior period amounts were reclassified as it relates to Leases and Other between deferred tax asset and liabilities within this table to conform to the current period presentation. F - 41 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) At December 31, 2020, the Company had net operating loss carryforwards of $ 90.2 million for federal income tax purposes, $ 36.7 million for foreign income tax purposes and $ 41.6 million for state income tax purposes to offset future taxable income. The majority of the federal net operating loss carryforwards expire through 2037, while $ 11.8 million have an indefinite carry forward period. For foreign net operating loss carryforwards, $ 0.3 million expire through 2025, and the remaining $ 36.4 million have an indefinite carry forward period. The state net operating loss carryforwards expire through 2036. The valuation allowance relates to deferred tax assets for certain items that will be deductible for income tax purposes under very limited circumstances and for which the Company believes it will not satisfy the more likely than not threshold for realization of the associated tax benefit. In the event that the Company determines that it would be able to realize more or less than the recorded amount of net deferred tax assets, an adjustment to the deferred tax asset valuation allowance would be recorded in the period such a determination is made. The Company’s valuation allowance increased by less than $ 0.1 million, increased by $ 2.9 million and decreased by $ 1.0 million at December 31, 2020, 2019 and 2018, respectively. The 2020 valuation allowance primarily remained unchanged from the prior period.The 2019 overall increase in the valuation allowance primarily resulted from certain assets from the Rebound and Arkis acquisitions. As of December 31, 2020, the Company has not provided deferred income taxes on unrepatriated earnings from foreign subsidiaries as they are deemed to be indefinitely reinvested. Such taxes would primarily be attributable to foreign withholding taxes and local income taxes when such earnings are distributed. As such, the Company has determined the tax impact of repatriating these earnings would no t be material as of December 31, 2020. A reconciliation of the beginning and ending amount of uncertain tax benefits is as follows: Years Ended December 31, 2020 2019 2018 (In thousands) Balance, beginning of year $ 676 $ 676 $ 424 Gross increases: Current year tax positions — 53 273 Prior years' tax positions 26 — — Gross decreases: Statute of limitations lapses — — ( 21 ) Other — ( 53 ) — Balance, end of year $ 702 $ 676 $ 676 Approximately $ 0.7 million of the balance at December 31, 2020 relates to uncertain tax positions that, if recognized, would affect the annual effective tax rate. There are no amounts within the balance of uncertain tax positions at December 31, 2020 related to tax positions for which it is reasonably possible that the amounts could be reduced during the twelve months following December 31, 2020. The Company recognizes interest and penalties relating to uncertain tax positions in income tax expense. The Company recognized a minimal benefit for the years ended December 31, 2020, 2019 and 2018. The Company had minimal interest and penalties accrued for the years ended December 31, 2020 and 2019 and 2018. The Company files Federal income tax returns, as well as multiple state, local and foreign jurisdiction tax returns. The Company is no longer subject to examinations of its U.S. consolidated Federal income tax returns by the IRS through fiscal year 2016. All significant state and local matters have been concluded through fiscal 2015. All significant foreign matters have been settled through fiscal 2012. F - 42 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 14. NET INCOME PER SHARE Basic and diluted net income per share was as follows: Years Ended December 31, 2020 2019 2018 (In thousands, except per share amounts) Basic net income per share: Net income $ 133,892 $ 50,201 $ 60,801 Weighted average common shares outstanding 84,650 85,637 82,857 Basic net income per common share $ 1.58 $ 0.59 $ 0.73 Diluted net income per share: Net income $ 133,892 $ 50,201 $ 60,801 Weighted average common shares outstanding — Basic 84,650 85,637 82,857 Effect of dilutive securities: Stock options and restricted stock 577 857 1,142 Weighted average common shares for diluted earnings per share 85,228 86,494 83,999 Diluted net income per common share $ 1.57 $ 0.58 $ 0.72 Common stock of approximately 0.3 million and 0.4 million shares at December 31, 2020, and 2019 that are issuable through exercise of dilutive securities, respectively, and were not included in the computation of diluted net income per share because their effect would have been anti-dilutive. Performance Shares and Restricted Units that entitle the holders to approximately 0.5 million shares of common stock are included in the basic and diluted weighted average shares outstanding calculation from their date of issuance because no further consideration is due related to the issuance of the underlying common shares. 15. ACCUMULATED OTHER COMPREHENSIVE LOSS Changes in accumulated other comprehensive loss by component between December 31, 2020 and 2019 are presented in the table below, net of tax: Gains and Losses on Derivatives Defined Benefit Pension Items Foreign Currency Items Total (In thousands) Balance at December 31, 2019 $ ( 26,625 ) $ ( 9,709 ) $ ( 40,068 ) $ ( 76,402 ) Other comprehensive gain (loss) ( 74,394 ) 4,604 53,363 ( 16,427 ) Less: Amounts reclassified from accumulated other comprehensive income, net ( 18,770 ) — — ( 18,770 ) Net current-period other comprehensive gain (loss) ( 55,624 ) 4,604 53,363 2,343 Balance at December 31, 2020 $ ( 82,249 ) $ ( 5,105 ) $ 13,295 $ ( 74,059 ) For the year ended December 31, 2020, the Company reclassified a loss of $ 12.2 million and $ 6.6 million from accumulated other comprehensive loss to other income, net and interest income, respectively. F - 43 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 16. COMMITMENTS AND CONTINGENCIES In consideration for certain technology, manufacturing, distribution, and selling rights and licenses granted to the Company, the Company has agreed to pay royalties on sales of certain products that it sells. The royalty payments that the Company made under these agreements were not significant for any of the periods presented. The Company is subject to various claims, lawsuits and proceedings in the ordinary course of the Company's business, including claims by current or former employees, distributors and competitors and with respect to its products and product liability claims, lawsuits and proceedings, some of which have been settled by the Company. In the opinion of management, such claims are either adequately covered by insurance or otherwise indemnified, or are not expected, individually or in the aggregate, to result in a material, adverse effect on the Company's financial condition. However, it is possible that the Company's results of operations, financial position and cash flows in a particular period could be materially affected by these contingencies. The Company accrues for loss contingencies when it is deemed probable that a loss has been incurred and that loss is estimable. The amounts accrued are based on the full amount of the estimated loss before considering insurance proceeds and do not include an estimate for legal fees expected to be incurred in connection with the loss contingency. The Company consistently accrues legal fees expected to be incurred in connection with loss contingencies as those fees are incurred by outside counsel as a period cost. Contingent Consideration The Company determined the fair value of contingent consideration during the twelve-month period ended December 31, 2020 and 2019 to reflect the change in estimate, additions, payments, transfers and the time value of money during the period. A reconciliation of the opening balances to the closing balances of these Level 3 measurements for the years ended December 31, 2020 and 2019 is as follows (in thousands): Year Ended December 31, 2020 Contingent Consideration Liability Related to Acquisition of Arkis (See Note 5) Contingent Consideration Liability Related to Acquisition of Derma Sciences Location in Financial Statements Short-term Long-term Long-term Balance as of January 1, 2020 $ — $ 14,210 $ 230 Transfers from long-term to current portion 3,415 ( 3,415 ) — Loss from change in fair value of contingent consideration liabilities — 951 — Research and development Balance as of December 31, 2020 $ 3,415 $ 11,746 $ 230 Year Ended December 31, 2019 Contingent Consideration Related to Acquisition of Arkis (See Note 5) Contingent Consideration Liability Related to Acquisition of Derma Sciences Location in Financial Statements Long-term Long-term Balance as of January 1, 2019 $ — $ 230 Additions from acquisition of Arkis 13,100 — Loss from change in fair value of contingent consideration liabilities 1,110 — Research and development Balance as of December 31, 2019 $ 14,210 $ 230 F - 44 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 17. SEGMENT AND GEOGRAPHIC INFORMATION The Company internally manages two global reportable segments and reports the results of its businesses to its chief operating decision maker. The two reportable segments and their activities are described below. • The Codman Specialty Surgical segment includes (i) the Neurosurgery business, which sells a full line of products for neurosurgery and neuro critical care such as tissue ablation equipment, dural repair products, cerebral spinal fluid management devices, intracranial monitoring equipment, and cranial stabilization equipment and (ii) the Instruments business, which sells more than 40,000 instrument patterns and surgical and lighting products to hospitals, surgery centers, dental, podiatry, and veterinary offices. • The Orthopedics and Tissue Technologies segment includes such offerings as skin and wound repair, bone and joint fixation implants in the upper and lower extremities, bone grafts, and nerve and tendon repair products. The Corporate and other category includes (i) various executive, finance, human resource, information systems and legal functions, (ii) brand management, and (iii) share-based compensation costs. The operating results of the various reportable segments as presented are not comparable to one another because (i) certain operating segments are more dependent than others on corporate functions for unallocated general and administrative and/or operational manufacturing functions, and (ii) the Company does not allocate certain manufacturing costs and general and administrative costs to the operating segment results. Net sales and profit by reportable segment for the years ended December 31, 2020, 2019 and 2018 are as follows: Years Ended December 31, 2020 2019 2018 (In thousands) Segment Net Sales Codman Specialty Surgical $ 894,831 $ 996,206 $ 963,929 Orthopedics and Tissue Technologies 477,037 521,351 508,512 Total revenues $ 1,371,868 $ 1,517,557 $ 1,472,441 Segment Profit Codman Specialty Surgical $ 356,657 $ 395,019 $ 363,336 Orthopedics and Tissue Technologies 159,630 144,638 149,510 Segment profit 516,287 539,657 512,846 Amortization ( 27,757 ) ( 27,028 ) ( 21,160 ) Corporate and other ( 337,160 ) ( 418,869 ) ( 380,688 ) Operating income $ 151,370 $ 93,760 $ 110,998 The Company does not allocate any assets to the reportable segments. No asset information is reported to the chief operating decision maker and disclosed in the financial information for each segment. The Company attributes revenue to geographic areas based on the location of the customer. Total revenue, net and long-lived assets (tangible) by major geographic area are summarized below: United States* Europe Asia Pacific Rest of the World Consolidated (In thousands) Total revenue, net: 2020 $ 971,975 $ 172,689 $ 157,174 $ 70,030 $ 1,371,868 2019 1,077,379 197,468 157,391 85,319 1,517,557 2018 1,045,887 201,354 144,253 80,947 1,472,441 Total long-lived assets: 2020 $ 324,893 $ 38,812 $ 13,121 $ 5,577 $ 382,403 2019 383,652 47,325 8,598 7,143 446,718 * Includes long-lived assets in Puerto Rico. F - 45 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 18. SUBSEQUENT EVENTS Sale of Extremity Orthopedics Business On January 4, 2021, upon the terms and conditions set forth in the Divestiture agreement (see Note 3, Assets and Liabilities Held for Sale), the Company completed its previously announced sale of its Extremity Orthopedics business to Smith & Nephew USD Limited. The Company received an aggregate purchase price of $ 240.0 million from Smith and Nephew and concurrently paid $ 41.5 million to CFO effectively terminating our licensing agreement (see Note 5, Acquisitions) . The transaction included the sale of the Company's upper and lower Extremity Orthopedics product portfolio, including ankle and shoulder arthroplasty and hand and wrist product lines. ACell Inc. Acquisition On January 20, 2021, the Company acquired ACell, Inc. for an acquisition purchase price of $ 300 million. Under the terms of the definitive merger agreement, the Company paid the consideration for the merger as an upfront cash payment subject to a customary post-closing adjustment for certain working capital. The Company is also required to pay the former shareholders of ACell Inc. up to $ 100 million based upon achieving certain revenue-based performance milestones in 2022, 2023 and 2025. Equity Award Plans The 2000 and 2001 Equity Incentive Plans were terminated as of February 19, 2021, and no further awards may be issued under the plans. 19. SELECTED QUARTERLY INFORMATION - UNAUDITED (In thousands, except per share data) Quarter Total revenue, net Gross margin Net income (loss) Per Share - Basic (1) Per Share - Diluted (1) 2020 First 354,324 220,848 9,180 $ 0.11 $ 0.11 Second 258,665 153,187 ( 369 ) ( 0.00 ) ( 0.00 ) Third 370,232 235,421 32,337 0.38 0.38 Fourth 388,647 241,578 92,744 1.10 1.09 1,371,868 851,034 133,892 2019 First 359,690 230,778 32,756 $ 0.38 $ 0.38 Second 383,645 239,974 29,736 0.35 0.34 Third 379,095 236,459 ( 27,610 ) ( 0.32 ) ( 0.32 ) Fourth 395,127 245,665 15,319 0.18 0.18 1,517,557 952,876 50,201 (1) Per common share amounts for the quarters and full years have been calculated separately. Accordingly, quarterly amounts do not necessarily add to the annual amount because of differences in the weighted average common shares outstanding during each period principally due to the effect of the Company’s issuing and repurchasing shares of its common stock during the year. F - 46 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS Balance at Beginning of Period Charged to Costs and Expenses Other Deductions Balance at End of Period Description (In thousands) Year ended December 31, 2020 Allowance for doubtful accounts $ 4,303 $ 3,635 $ — $ ( 1,499 ) (1) $ 6,439 Deferred tax assets valuation allowance 12,069 1,617 — 139 13,825 Year ended December 31, 2019 Allowance for doubtful accounts $ 3,719 $ 2,126 $ — $ ( 1,542 ) (1) $ 4,303 Deferred tax assets valuation allowance 6,973 3,848 1,291 (3) ( 43 ) 12,069 Year ended December 31, 2018 Allowance for doubtful accounts $ 8,882 $ 557 $ ( 4,649 ) (2) $ ( 1,071 ) (1) $ 3,719 Deferred tax assets valuation allowance 7,961 ( 894 ) — ( 94 ) 6,973 (1) Deductions primarily relates to allowance for doubtful accounts written off during the year, net of recoveries and other adjustments. (2) The Company transferred sales returns and allowances from accounts receivable, net to accrued expenses and other current liabilities upon adopting Topic 606 on January 1, 2018 using the modified retrospective method. (3) The above amount primarily relates to amounts acquired through the acquisition of Arkis and a charge recorded in 2019 to valuation allowance related to the non-deductibility of executive compensation. F - 47