What changed in this filing

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Item 1. Financial Statements

2021-04-29 compared with 2020-10-29 · 463 added, 533 removed, 530 unchanged (65% of the section changed)

4 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Total revenue, net $ 360,071 $ 354,324

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Cost of goods sold

145,823 133,476

Research and development

In-process research and development

22,374 20,816

Selling, general and administrative

156,633 165,952

Intangible asset amortization

Total costs and expenses

Operating income (loss)

329,357 327,221

Operating income 30,714 27,103

Interest income 1,748 2,570

Interest expense ( 12,929 ) ( 17,752 )

Other income, net

Income (loss) before income taxes

Provision (benefit) for income taxes

Net income (loss)

Net income (loss) per share

Gain from the sale of business 42,876 —

Other income (expense), net 4,869 ( 479 )

Income before income taxes 67,278 11,442

Provision for income taxes 21,884 2,262

Net income $ 45,394 $ 9,180

Net income per share

Basic $ 0.54 $ 0.11

Diluted $ 0.53 $ 0.11

Weighted average common shares outstanding (See Note 13):

84,500 85,188

85,258 85,892

Comprehensive income (loss) (See Note 14) 75,826 ( 19,007 )

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INTEGRA LIFESCIENCES HOLDINGS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except per share amounts)

September 30, 2020

December 31, 2019

March 31, 2021 December 31, 2020

Current assets:

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Trade accounts receivable, net of allowances of $ 6,886 and $ 6,439

223,542 225,532

Inventories, net 328,049 310,117

Assets held for sale

Prepaid expenses and other current assets 78,508 69,282

Assets held for sale — 162,105

Total current assets 1,039,075 1,237,202

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Intangible assets, net 1,193,681 989,436

Goodwill 1,010,072 932,367

Deferred tax assets, net 74,626 73,690

Other assets 36,733 11,277

Total assets $ 3,741,554 $ 3,615,136

LIABILITIES AND STOCKHOLDERS’ EQUITY

1 unchanged sentence

Current portion of borrowings under senior credit facility $ 45,000 $ 33,750

Current portion of borrowings under securitization facility 110,900 112,500

Current portion of lease liability - operating leases 13,900 12,818

Accounts payable, trade 61,500 54,608

Income taxes payable 13,700 —

Contract liabilities 5,400 5,275

Accrued compensation 65,442 76,117

Liabilities held for sale

Accrued expenses and other current liabilities 96,459 94,194

Liabilities held for sale — 11,751

Total current liabilities 412,301 401,013

Long-term borrowings under senior credit facility 922,672 933,387

Long-term borrowings under securitization facility

Long-term convertible securities 562,240 474,834

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240,000 authorized shares;

89,191 and 88,735 issued at September 30, 2020 and December 31, 2019, respectively

89,406 and 89,251 issued at March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital 1,231,637 1,290,909

Treasury stock, at cost;

4,915 shares and 2,865 shares at September 30, 2020 and December 31, 2019, respectively

4,899 shares and 4,914 shares at March 31, 2021 and December 31, 2020, respectively

( 234,461 ) ( 235,141 )

Accumulated other comprehensive loss ( 43,627 ) ( 74,059 )

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(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

OPERATING ACTIVITIES:

Net income $ 45,394 $ 9,180

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

Depreciation and amortization 29,214 29,151

Non-cash in-process research and development expense

Non-cash impairment charges 2,754 —

Income tax expense (benefit)

Deferred income tax (benefit) provision ( 1,234 ) 5,068

Share-based compensation 6,334 3,750

3 unchanged sentences

Loss on disposal of property and equipment ( 2 ) 374

Gain from the sale of business ( 42,876 ) —

Change in fair value of contingent consideration and others 281 ( 1,051 )

1 unchanged sentence

Accounts receivable 16,756 28,301

Inventories ( 2,332 ) ( 26,236 )

Prepaid expenses and other current assets ( 3,574 ) 4,683

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Purchases of property and equipment ( 6,675 ) ( 16,519 )

Acquired in-process research and development milestone

Proceeds from note receivable

Proceeds from sale of Extremity Orthopedics business 191,736 —

Proceeds from sale of property and equipment — 34

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Cash taxes paid in net equity settlement ( 3,637 ) ( 4,348 )

Net cash provided by financing activities

Net cash (used) provided by financing activities ( 3,015 ) 162,005

Effect of exchange rate changes on cash and cash equivalents ( 9,690 ) ( 2,533 )

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(In thousands, except per share amounts)

Nine Months Ended September 30, 2020

Treasury Stock

Additional Paid-In Capital

Accumulated Other Comprehensive Loss

Retained Earnings

Three Months Ended March 31, 2021

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, 2021 89,251 $ 893 ( 4,914 ) $ ( 235,141 ) $ 1,290,908 $ ( 74,059 ) $ 532,266 $ 1,514,867

Other comprehensive loss, net of tax

Net income — — — — — — 45,394 45,394

Other comprehensive income (loss), net of tax — — — — — 30,432 — 30,432

Issuance of common stock through employee stock purchase plan 18 — — — 1,127 — — 1,127

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Share-based compensation — — — — 6,098 — — 6,098

Share repurchase and equity component of the convertible note issuance, net

Accelerated shares repurchased

Adoption of Update No.

2020-06 — — — — ( 63,274 ) — ( 2,772 ) ( 66,046 )

Balance, March 31, 2021 89,406 894 ( 4,899 ) ( 234,461 ) 1,231,637 ( 43,627 ) 574,888 1,529,331

Other comprehensive income, net of tax

Issuance of common stock for vesting of share based awards, net of shares withheld for taxes

Share-based compensation

Accelerated shares repurchased

Balance, June 30, 2020

Other comprehensive income, net of tax

Issuance of common stock for vesting of share based awards, net of shares withheld for taxes

Share-based compensation

Balance, September 30, 2020

Nine Months Ended September 30, 2019

Treasury Stock

Additional Paid-In Capital

Accumulated Other Comprehensive Loss

Retained Earnings

Three Months Ended March 31, 2020

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, 2020 88,735 $ 887 ( 2,865 ) $ ( 119,943 ) $ 1,213,620 $ ( 76,401 ) $ 398,573 $ 1,416,736

Net income — — — — — — 9,180 9,180

Other comprehensive loss, net of tax — — — — — ( 28,187 ) — ( 28,187 )

2 unchanged sentences

Share-based compensation — — — — 3,781 — — 3,781

Share repurchase and equity component of the convertible note issuance, net — — ( 135 ) ( 7,632 ) 42,538 — — 34,906

Accelerated shares repurchased — — ( 1,304 ) ( 75,407 ) ( 16,961 ) — — ( 92,368 )

Adoption of Update No.

2016-13 — — — — — — ( 200 ) ( 200 )

Balance, March 31, 2020 89,105 $ 889 ( 4,294 ) $ ( 202,506 ) $ 1,240,455 $ ( 104,588 ) $ 407,553 $ 1,341,803

Other comprehensive loss, net of tax

Issuance of common stock for vesting of share based awards, net of shares withheld for taxes

Share-based compensation

Balance, June 30, 2019

Other comprehensive loss, net of tax

Issuance of common stock for vesting of share based awards, net of shares withheld for taxes

Share-based compensation

Balance, September 30, 2019

The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.

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The terms “we,” “our,” “us,” “Company” and “Integra” refer to Integra LifeSciences Holdings Corporation, a Delaware corporation, and its subsidiaries unless the context suggests otherwise.

In the opinion of management, the September 30, 2020 unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the financial position, statement of changes in shareholder's equity, results of operations and cash flows of the Company.

In the opinion of management, the March 31, 2021 unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the financial position, statement of changes in shareholder's equity, results of operations and cash flows of the Company.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.

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The December 31, 2020 consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States.

Operating results for the three and nine month period ended September 30, 2020 are not necessarily indicative of the results to be expected for the entire year.

Operating results for the three month period ended March 31, 2021 are not necessarily indicative of the results to be expected for the entire year.

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, 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.

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, 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 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.

Risks and Uncertainties

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The extent of the impact of the COVID-19 pandemic on the Company's business is highly uncertain and difficult to predict, as the responses to the pandemic and information is rapidly evolving.

From late March, the Company's customers diverted resources to treat COVID-19 patients and deferred or canceled elective or non-emergent surgical procedures, all of which impacted hospitals' abilities to meet their obligations, including to the Company.

Beginning in May 2020 and through the end of the third quarter of 2020, procedural volumes relevant to the Company’s products steadily increased and, in some geographic areas, began to approach normalized levels.

During the beginning of 2020, the Company's customers diverted resources to treat COVID-19 patients and deferred or canceled elective or non-emergent surgical procedures, all of which impacted hospitals' abilities to meet their obligations, including to the Company.

Towards the end of 2020 and during the first quarter of 2021, procedural volumes relevant to the Company’s products steadily increased and, in some geographic areas, began to approach normalized levels.

However, on-going uncertainty persists about the continuing sustainability of those procedural volumes as virus outbreaks constrain healthcare networks.

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The Company's future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, supply chain disruptions and uncertain demand, and the impact of any initiatives or programs that the Company may undertake to address financial and operations challenges faced by its customers.

The COVID-19 pandemic continues to cause a financial strain on healthcare systems which varies by location, and as a result we do not expect the same level of spending in the fourth quarter that we experienced last year.

During the first quarter of 2021, the Company's revenues were still impacted due to COVID-19 resurgences and lower surgical procedural volumes, though not to the levels seen in early 2020.

As a result, the Company has continued to manage its operating costs in this environment.

Even after the COVID-19 pandemic and government responses thereto have subsided, residual economic and other effects may have an impact on the demand for post-pandemic surgery levels that are difficult to predict.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Recently Issued Accounting Standards

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No.

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Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates.

The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

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.

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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 current COVID-19 pandemic, or other customer-specific factors.

Although the Company has historically not experienced significant credit losses, it is possible that there could be an adverse impact as hospital's cash flows are impacted by their response to the COVID-19 pandemic.

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 .

The new 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 will be effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

Early adoption is permitted.

The adoption is not expected to have a material impact on the Company's consolidated financial statements and related disclosures.

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 during 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 the new guidance, a customer will apply the same criteria for capitalizing implementation costs as it would for an arrangement that has a software license.

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.

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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 intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The new 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.

In December 2019, the FASB issued ASU 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 adopted ASU No.

2019-12 as of January 1, 2021.

Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively.

The Company is currently assessing the impact of this standard on its financial condition and results of operations.

The adoption of this guidance did not have a material impact on the Company's 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 amendment applies to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference London Inter-Bank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform.

This ASU is effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022.

In January 2021, the FASB also issued ASU 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.

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

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

separation models required under current GAAP.

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.

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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 is currently assessing the impact of this standard on its consolidated financial statements and related disclosures.

As detailed in Note 6 – Debt , 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 are subject to the guidance included in ASU 2020-06.

The Company adopted this guidance on January 1, 2021 using the modified retrospective approach which resulted in a cumulative-effect adjustment that increased (decreased) the following consolidated balance sheet accounts:

ADJUSTMENT CONSOLIDATED BALANCE SHEET CLASSIFICATION AMOUNT

(in millions)

Deferred tax impact of cumulative-effect adjustment Deferred tax liabilities $ ( 20.6 )

Debt discount reclassification Long-term convertible securities 89.1

Equity issuance costs reclassification Long-term convertible securities ( 2.5 )

Debt discount amortization and equity costs reclassification, net of tax Retained Earnings ( 2.8 )

Net impact of cumulative-effect adjustment Additional paid-in capital ( 63.3 )

Upon adoption of this ASU No.

2020-06, the Company’s Convertible Senior Notes were reflected entirely as a liability since the embedded conversion feature will no longer be separately presented within stockholders’ equity.

On December 9, 2020, the Company made an irrevocable election under the indenture to require the principal portion of its convertible senior notes to be settled in cash and any excess in shares.

Following the irrevocable notice, only the amounts settled in excess of the principal will be considered in diluted earnings per share under the “if-converted” method.

Additionally, from January 1, 2021, the Company is no longer incurring non-cash interest expense for the amortization of debt discount, therefore the interest expense for the 2025 Notes, which is included in the interest expense on the consolidated statements of operations and comprehensive loss, is lower as compared to the fiscal year of 2020.

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 ASU will be effective for the Company for annual and interim periods beginning after beginning January 1, 2021.

The Company adopted this standard on the January 1, 2021.

The adoption of this guidance did not have a material impact on the Company's results, financial position or disclosures.

There are no other recently issued accounting pronouncements that are expected to have any significant effect on the Company's financial position, results of operations or cash flows.

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.

The transaction is expected to close at or around the end of 2020, subject to the satisfaction of customary conditions, including regulatory approvals and consultation with employee representative bodies.

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 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 condensed consolidated balance sheet as assets and liabilities held for sale as of September 30, 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 September 30, 2020 (amounts in thousands):

Prepaid and other current assets

ACQUISITIONS AND DIVESTITURES

Sale of Extremity Orthopedics Business

On January 4, 2021, the Company completed its previously announced sale of its Extremity Orthopedics business to Smith & Nephew USD Limited ("Smith & Nephew").

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.

The Company received an aggregate purchase price of $ 240.0 million from Smith and Nephew and concurrently paid $ 41.5 million to the Consortium of Focused Orthopedists, LLC ("CFO") effectively terminating the licensing agreement between Integra and CFO relating to the development of shoulder arthroplasty products.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Assets and liabilities divested 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

Intangible assets

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

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Total liabilities held for sale $ 11,751

BUSINESS DEVELOPMENT

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.

The Divestiture does not represent a strategic shift that will have a major effect on the Company's operations and financial statements.

Goodwill was allocated to the assets and liabilities divested using the relative fair value method of the Extremity Orthopedics business to the Company's Tissue Technologies reporting unit.

The Company recognized a gain of $ 42.9 million in connection with the sale that is presented in Gain from the sale of business in the consolidated statement of operations for the three months ended March 31, 2021.

The net proceeds are subject to adjustments based on changes in the actual closing net working capital.The purchase price is preliminary pending finalization of potential working capital adjustments.

The Company also entered into a transition services agreement ("TSA") with Smith & Nephew which requires the Company to provide certain services on behalf of Smith & Nephew for the duration of the period subsequent to the sale of the business as defined in the agreement.

The Com pany recognized a payable due to Smith & Nephew of $ 9.0 million, included in the consolidated balance sheet within accrued expenses and other current liabilities respectively.

On January 20, 2021, the Company acquired ACell Inc.

(the "ACell Acquisition") for an acquisition purchase price of $ 305.4 million plus contingent consideration of up to $ 100 million, that may be payable upon achieving certain revenue-based performance milestones in 2022, 2023 and 2025 .

The purchase price is subject to adjustments based on changes in the actual closing net working capital.

The consideration is preliminary pending finalization of potential working capital adjustments.

ACell was a privately-held company that offered a portfolio of regenerative products for complex wound management, including developing and commercializing products based on MatriStem Urinary Bladder Matrix ("UBM"), a technology platform derived from porcine urinary bladder extracellular matrix.

Assets Acquired and Liabilities Assumed at Fair Value

The ACell Acquisition has been accounted for using the acquisition method of accounting.

This method requires that assets acquired and liabilities assumed in a business combination are recognized at their fair values as of the acquisition date.

As of March 31, 2021, certain amounts relating to the valuation of intangible assets and tax related matters have not been finalized.

The finalization of these matters may result in changes to goodwill.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

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 as of

September 30, 2019

Weighted Average Life

(Dollars in thousands)

Other current assets

Property, plant and equipment

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date:

Preliminary Valuation Weighted Average Life

(In thousands)

Current assets:

Trade accounts receivable, net 16,469

Inventories, net 18,299

Prepaids expenses and other current assets 1,498

Total current assets 38,992

Property, plant and equipment, net 13,769

Intangible assets 245,000 13 - 14 years

Goodwill 92,983

Right of use asset - operating leases 9,259

Deferred tax assets 9,768

Intangible assets:

CerebroFlo developed technology

Enabling technology license

Other assets 148

Total assets acquired 409,919

Accounts payable, accrued expenses and other liabilities

Current liabilities:

Accounts payable $ 718

Accrued expenses 6,227

Current portion of lease liability - operating leases 1,673

Total current liabilities 8,618

Other long-term liability 276

Lease liability - operating leases 7,585

Deferred tax liability 64,178

Contingent consideration 23,900

Deferred tax liabilities

Total liabilities assumed 104,557

Net assets acquired $ 305,362

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 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 estimated fair value of the developed technology acquired was determined using the multi-period excess earnings method of the income approach, which estimates value based on the present value of future economic benefits.

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 product including net revenues, cost of sales, R&D costs, selling and marketing costs, working capital, and contributory asset charges, the appropriate discount rate to select in order to 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 8.5 % 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.

1 unchanged sentence

For these and other reasons, actual results may vary significantly from estimated results.

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.

The Company allocated goodwill related to the ACell Acquisition to the Tissue Technologies segment.

Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected synergies of the combined company and assembled workforce.

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 the Company's 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.

As part of the acquisition, the Company is required to pay the former shareholders of ACell up to $ 100 million based on the achievement of certain revenue-based performance milestones in 2022, 2023, and 2025.

T he Company used iterations of the Monte Carlo simulation to calculate the fair value of the contingent consideration that considered the possible outcomes of

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

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 $ 10.0 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.

scenarios related to each specific milestone.

The Company estimated the fair value of the contingent consideration to be $ 23.9 million at the acquisition date.

The estimated fair value as of September 30, 2020 was $ 14.2 million.

This amount is included in other liabilities at September 30, 2020 in the consolidated balance sheets of the Company.

The Company determines the acquisition date fair value of contingent consideration obligations using a Monte Carlo simulation, as well as significant unobservable inputs, reflecting the Company’s assessment of the assumptions market participants would use to value these liabilities.

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 most likely payouts 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 considerations may result from changes in discount periods and rates and changes in the timing and amount of revenue estimates.

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.

Deferred Tax Liabilities

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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 in-process research and development (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 during the year ended December 31, 2019.

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.

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.

During the quarter ended March 31, 2019, 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, the Company will pay $ 41.5 million to CFO pursuant to the terms of certain agreements between Integra and CFO relating to the sale of shares of ISC which includes the development of shoulder arthroplasty products effectively terminating our licensing agreement with ISC.

See Note 2, Assets and Liabilities Held for Sale, for details of the transaction.

Pro forma revenues for the three months ended March 31, 2021 and 2020 were $ 364.7 million and $ 377.3 million, respectively.

Pro forma net income and earnings per share are not presented for this acquisition as they are not material.

REVENUES FROM CONTRACTS WITH CUSTOMERS

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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 for 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

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

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 product 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 thirty 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.

Performance Obligations

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

The following table summarizes the changes in the contract asset and liability balances for the nine months ended September 30, 2020 :

The following table summarizes the changes in the contract asset and liability balances for the three months ended March 31, 2021:

Contract Asset

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Contract asset, net of transferred to trade receivables on contracts during the period

Contract asset, September 30, 2020

Contract asset, March 31, 2021 $ 6,499

Contract Liability

3 unchanged sentences

Foreign currency translation

Contract liability, September 30, 2020

At September 30, 2020 , the short-term portion of the contract liability of $ 4.9 million and the long-term portion of $ 6.5 million were included in accrued expenses and other current liabilities and other liabilities in the consolidated balance sheet.

As of September 30, 2020 , the Company is expected to recognize approximately 43 % of unsatisfied (or partially unsatisfied) performance obligations as revenue through 2020, with the remaining balance to be recognized in 2021 and thereafter.

Shipping and Handling Fees

Contract liability, March 31, 2021 11,866

At March 31, 2021, the short-term portion of the contract liability of $ 5.4 million and the long-term portion of $ 6.5 million were included in accrued expenses and other current liabilities and other liabilities in the consolidated balance sheet.

As of March 31, 2021, the Company is expected to recognize approximately 46 % of unsatisfied (or partially unsatisfied) performance obligations as revenue through 2021, with the remaining balance to be recognized in 2022 and thereafter.

Shipping and Handling Fee s

The Company elected to account for shipping and handling activities as a fulfillment cost rather than a separate performance obligation.

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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 the three months ended March 31, 2021 and 2020 (amounts in thousands):

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Disaggregated Revenue

The following table presents revenues disaggregated by the major sources of revenues for the three and nine months ended September 30, 2020 and 2019 (amounts in thousands):

Three Months Ended September 30, 2020

Three Months Ended September 30, 2019

Nine Months Ended September 30, 2020

Nine Months Ended September 30, 2019

Three Months Ended March 31, 2021 Three Months Ended March 31, 2020

Neurosurgery $ 189,254 $ 184,943

Instruments 51,987 46,497

Total Codman Specialty Surgical 241,241 231,440

Wound Reconstruction and Care (2)

88,698 72,267

Extremity Orthopedics (1)

Private Label 30,132 29,145

Total Orthopedics and Tissue Technologies

Total Tissue Technologies 118,830 122,884

Total revenue $ 360,071 $ 354,324

Prior period amounts were reclassified between categories within the Codman Specialty Surgical segment to conform to the current period presentation.

(1) On January 4, 2021, the Company completed its previously announced sale of its Extremity Orthopedics business to Smith & Nephew USD Limited.

In conjunction with the sale of this business, the Company rebranded the Orthopedics and Tissue Technologies segment as Tissue Technologies in the first quarter of 2021.

Acquisitions and Divestitures, for details.

(2) On January 20, 2021, the Company acquired ACell Inc.

for an acquisition purchase price of $ 305.4 million plus contingent consideration of up to $ 100 million, that may be payable upon achieving certain revenue-based performance milestones in 2022, 2023 and 2025 .

Acquisitions and Divestitures, for details.

See Note 15, Segment and Geographical Information , for details of revenues based on the location of the customer.

Inventories, net consisted of the following:

September 30, 2020

December 31, 2019

March 31, 2021 December 31, 2020

(In thousands)

2 unchanged sentences

Raw materials 79,164 $ 76,480

Transfer to assets held for sale (See Note 2.

Assets Held for Sale )

Total inventories

Total inventories, net $ 328,049 $ 310,117

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.

Further, the increase in inventory at March 31, 2021 as compared to the year ended December 31, 2020, was primarily driven from the inventory acquired in conjunction with the ACell Inc.

See Note 2, Acquisitions and Divestitures , for details.

GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for the nine -month period ended September 30, 2020 were as follows:

Changes in the carrying amount of goodwill for the three-month period ended March 31, 2021 were as follows:

Codman Specialty

Orthopedics and

Tissue Technologies

Surgical Tissue Technologies Total

(In thousands)

Goodwill at December 31, 2020 $ 671,975 $ 260,392 $ 932,367

Transfer to assets held for sale (See Note 2.

Assets Held for Sale )

ACell Acquisition — 92,983 92,983

Foreign currency translation ( 10,013 ) ( 5,265 ) ( 15,278 )

Goodwill at September 30, 2020

Goodwill at March 31, 2021 $ 661,962 $ 348,110 $ 1,010,072

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

1 unchanged sentence

The components of the Company’s identifiable intangible assets were as follows:

September 30, 2020

March 31, 2021

Life Cost Accumulated

Amortization Net

(Dollars in thousands)

Completed technology

Customer relationships

Trademarks/brand names

Codman tradename

Supplier relationships

All other (1)

Transfer to assets held for sale (See Note 2.

Assets Held for Sale )

Completed technology 18 years 1,120,918 ( 257,360 ) 863,558

Customer relationships 12 years 212,332 ( 134,794 ) 77,538

Trademarks/brand names 28 years 98,533 ( 28,862 ) 69,671

Codman tradename Indefinite 165,091 — 165,091

Supplier relationships 30 years 30,211 ( 15,447 ) 14,764

All other 10 years 6,813 ( 3,754 ) 3,059

1,633,898 ( 440,217 ) 1,193,681

December 31, 2020

Life Cost Accumulated

Amortization Net

(Dollars in thousands)

Completed technology

Customer relationships

Trademarks/brand names

Codman tradename

Supplier relationships

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 tradename Indefinite 170,226 — 170,226

Supplier relationships 27 years 30,211 ( 15,203 ) 15,008

All other (1)

At September 30, 2020 and December 31, 2019 , all other included IPR&D of $ 1.0 million, which was indefinite-lived.

At September 30, 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 2, Assets and Liabilities Held for Sale , for details.

Goodwill and Intangible Assets with Indefinite Lives

The Company tests goodwill and intangible assets with indefinite lives for impairment annually in the third quarter in accordance with ASC Topic 350.

Additionally, the Company may perform interim tests if an event occurs or circumstances change that could potentially reduce the fair value of a reporting unit or indefinite lived intangible asset below its carrying amount.

The carrying value of each reporting unit is determined by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units.

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 this qualitative evaluation for some or all of its reporting units and perform a quantitative test.

During the third quarter of 2020, the Company began with the qualitative evaluation, which was sufficient to find no impairment.

For intangible assets with indefinite lives, the Company elected to bypass the qualitative evaluation for its Codman tradename intangible asset and perform a quantitative test during the third quarter 2020.

In performing this test, the Company utilized 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.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

4 years 6,693 ( 3,755 ) 2,938

1,421,087 ( 431,651 ) 989,436

(1) Prior period amounts were reclassified as it relates to All other within this table to conform to the current period presentation.

The increase in the Company's identifiable intangible assets at March 31, 2021 as compared to the year ended December 31, 2020, was primarily driven from intangible assets acquired in conjunction with the ACell Inc.

See Note 2, Acquisitions and Divestitures , for details.

Based on quarter-end exchange rates, amortization expense (including amounts reported in cost of product revenues) is expected to be approximately $ 60.7 million for the remainder of 2021, $ 78.8 million in 2022, $ 78.0 million in 2023, $ 77.3 million in 2024, $ 77.3 million in 2025, $ 77.2 million in 2026 and $ 582.7 million thereafter.

7 unchanged sentences

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

September 30, 2021 through June 30, 2022

September 30, 2022 through June 30, 2023

September 30, 2023 and the last day of each fiscal quarter thereafter

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

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:

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subsidiaries, excluding intangible assets.

The Senior Credit Facility is subject to various financial and negative covenants and at September 30, 2020 , the Company was in compliance with all such covenants.

The Senior Credit Facility is subject to various financial and negative covenants and at March 31, 2021, the Company was in compliance with all such covenants.

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 September 30, 2020 and December 31, 2019 , there was $ 97.5 million and $ 375.0 million outstanding, respectively, under the revolving credit component of the Senior Credit Facility at weighted average interest rates of 1.5 % and 3.2 % , respectively.

At September 30, 2020 and December 31, 2019 , there was $ 877.5 million outstanding, respectively, under the Term Loan component of the Senior Credit Facility at a weighted average interest rate of 1.5 % and 3.2 % , respectively.

At September 30, 2020 , $ 22.5

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

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 and Term Loan components at September 30, 2020 were $ 94.6 million and $ 853.7 million , respectively.

At March 31, 2021 and December 31, 2020, there wa s $ 97.5 million ou tstanding under the revolving credit component of the Senior Credit Facility at weighted average interest rates of 1.5 %.

At March 31, 2021 and December 31, 2020, there was $ 877.5 million outstanding under the Term Loan component of the Senior Credit Facility at a weighted average interest rate of 1.5 %.

At March 31, 2021 , $ 45.0 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 and Term Loan components at March 31, 2021 were $ 98.5 million and $ 884.9 million, resp ectively.

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 September 30, 2020 and December 31, 2019 totaled $ 1.6 million and $ 0.8 million .

There were no amounts drawn as of September 30, 2020 .

Level 2 inputs represent inputs that are observable for the asset or liability, either directly or indirectly, and are other than active market observable i nputs that reflect unadjusted quoted prices for identical assets or liabilities.

Letters of credit outstanding as of March 31, 2021 and December 31, 2020 totaled $ 1.6 million.

There were no amounts drawn as of March 31, 2021.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Contractual repayments of the Term Loan component of the Senior Credit Facility are due as follows:

Quarter Ended September 30, 2020

Principal Repayment

Quarter Ended March 31, 2021 Principal Repayment

(In thousands)

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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 % .

The portion of debt proceeds that was classified as equity at the time of the offering was $ 104.5 million.

The effective interest rate implicit in the liability component was 4.2 %.

In connection with this offering, the Company capitalized $ 13.2 million of financing fees.

At September 30, 2020 , the carrying amount of the liability component was $ 481.5 million, the remaining unamortized discount was $ 93.5 million, and the principal amount outstanding was $ 575.0 million.

The fair value of the 2025 Notes at September 30, 2020 was $ 541.8 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).

4 unchanged sentences

or (4) if specified corporate transactions occur.

As of September 30, 2020 , none of these conditions existed with respect to the 2025 Notes and as a result the 2025 Notes are classified as long term.

As of March 31, 2021, 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).

4 unchanged sentences

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

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.

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.

On January 1, 2021, the Company adopted ASU 2020-06 using the modified retrospective method.

See Note 1, Basis of Presentation, for further details.

At March 31, 2021, in conjunction with the adoption of the ASU, the carrying amount of the liability was $ 575.0 million.

The fair value of the 2025 Notes at March 31, 2021 was $ 642.1 million.

Factors that the Company considered when estimating the fair value of the 2025 Notes included recent quoted market prices or dealer quote.

The level of the 2025 Notes is considered as Level 1.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

The initial strike price of the warrant transactions was $ 113.34 for the 2025 Notes, subject to customary anti-dilution adjustments.

During the nine months ended September 30, 2020 , the Company recognized cash interest related to the contractual interest coupon of $ 1.9 million and amortization of the discount on the liability component of $ 11.1 million for a total interest charge of $ 13.0 million on the 2025 Notes.

During the three months ended March 31, 2020, the Company recognized cash interest of $ 0.4 million and amortization of the discount on the liability component of $ 2.5 million for a total interest charge of $ 2.9 million on the 2020 Notes.

On January 1, 2021, the Company adopted ASU 2020-06 using the modified retrospective method.

See Note 1, Basis of Presentation, for further details.

During the three months ended March 31, 2021, as a result of the adoption of the ASU, the Company recognized only cash interest related to the contractual interest coupon of $ 0.7 million on the 2025 Notes.

Securitization Facility

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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 September 30, 2020 , the Company was in compliance with the covenants and none of the termination events had occurred.

At September 30, 2020 and December 31, 2019 , the Company had $ 92.3 million and $ 104.5 million , respectively, of outstanding borrowings under its Securitization Facility at a weighted average interest rate of 1.4 % and 2.8 % , respectively.

The fair value of the outstanding borrowing of the Securitization Facility at September 30, 2020 was $ 92.8 million .

As of March 31, 2021, the Company was in compliance with the covenants and none of the termination events had occurred.

At March 31, 2021 and December 31, 2020, the Company had $ 110.9 million and $ 112.5 million, respectively, of outstanding borrowings under its Securitization Facility at a weighted average interest rate of 1.3 %.

At March 31, 2021, 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 March 31, 2021 was $ 110.8 million.

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 i nputs that reflect unadjusted quoted prices for identical assets or liabilities.

DERIVATIVE INSTRUMENTS

4 unchanged sentences

These interest rate swaps apply a fixed interest rate on a portion of the Company's expected LIBOR-indexed floating-rate borrowings.

The Company held the following interest rate swaps as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands):

September 30, 2020

December 31, 2019

September 30, 2020

December 31, 2019

Notional Amount

Designation Date

Effective Date

Termination Date

Fixed Interest Rate

Estimated Fair Value

The Company held the following interest rate swaps as of March 31, 2021 and December 31, 2020 (dollar amounts in thousands):

March 31, 2021 December 31, 2020

Hedged Item Notional Amount Designation Date Effective Date Termination Date Fixed Interest Rate Estimated Fair Value

Asset (Liability)

3-month USD LIBOR Loan

February 6, 2017

June 30, 2017

June 30, 2020

1-month USD LIBOR Loan

February 6, 2017

June 30, 2017

June 30, 2020

1-month USD LIBOR Loan

March 27, 2017

December 31, 2017

June 30, 2021

1-month USD LIBOR Loan

December 13, 2017

January 1, 2018

December 31, 2022

1-month USD LIBOR Loan

December 13, 2017

January 1, 2018

December 31, 2022

1-month USD LIBOR Loan

December 13, 2017

June 30, 2024

1-month USD LIBOR Loan

December 13, 2017

June 30, 2024

1-month USD LIBOR Loan

December 13, 2017

January 1, 2018

December 31, 2024

1-month USD LIBOR Loan

October 10, 2018

June 30, 2025

1-month USD LIBOR Loan

October 10, 2018

June 30, 2025

1-month USD LIBOR Loan

October 10, 2018

June 30, 2025

1-month USD LIBOR Loan

December 18, 2018

December 30, 2022

December 31, 2027

1-month USD LIBOR Loan

December 18, 2018

December 30, 2022

December 31, 2027

1-month USD LIBOR Loan 100,000 March 27, 2017 December 31, 2017 June 30, 2021 1.971 % ( 463 ) ( 929 )

1-month USD LIBOR Loan 300,000 December 13, 2017 January 1, 2018 December 31, 2022 2.201 % ( 10,526 ) ( 12,557 )

1-month USD LIBOR Loan 150,000 December 13, 2017 July 1, 2019 June 30, 2024 2.423 % ( 9,413 ) ( 11,502 )

1-month USD LIBOR Loan 200,000 December 13, 2017 January 1, 2018 December 31, 2024 2.313 % ( 12,293 ) ( 16,243 )

1-month USD LIBOR Loan 75,000 October 10, 2018 July 1, 2020 June 30, 2025 3.220 % ( 7,842 ) ( 9,836 )

1-month USD LIBOR Loan 75,000 October 10, 2018 July 1, 2020 June 30, 2025 3.199 % ( 7,805 ) ( 9,826 )

1-month USD LIBOR Loan 75,000 October 10, 2018 July 1, 2020 June 30, 2025 3.209 % ( 7,849 ) ( 9,783 )

1-month USD LIBOR Loan 100,000 December 18, 2018 December 30, 2022 December 31, 2027 2.885 % ( 6,037 ) ( 10,407 )

1-month USD LIBOR Loan 100,000 December 18, 2018 December 30, 2022 December 31, 2027 2.867 % ( 5,826 ) ( 10,431 )

1-month USD LIBOR Loan 575,000 December 15, 2020 July 31, 2025 December 31, 2027 1.415 % 11,810 ( 1,907 )

1-month USD LIBOR Loan 125,000 December 15, 2020 July 1, 2025 December 31, 2027 1.404 % 2,697 ( 348 )

Total interest rate derivatives designated as cash flow hedge $ 1,875,000 $ ( 53,547 ) $ ( 93,769 )

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

The Company has designated these derivative instruments as cash flow hedges.

1 unchanged sentence

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.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Foreign Currency Hedging

2 unchanged sentences

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.

The changes in fair value of foreign currency cash flow hedges are recorded in AOCL, net of tax.

Those amounts are subsequently reclassified to earnings from AOCL as impacted by the hedged item when the hedged item affects 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 (expense), net in the consolidated statements of operation, along with the offsetting foreign currency gain or loss on the underlying assets or liabilities.

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 as of March 31, 2021.

The Company subsequently settled its foreign currency forward contracts associated with the intercompany receivables denominated in JPY during the first quarter of 2021.

The fair value of the foreign currency forward contracts denominated in CAD was $ 0.2 million as of March 31, 2021.

The success of the Company’s hedging program depends, in part, on forecasts of certain activity denominated in foreign currency.

2 unchanged sentences

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 CHF denominated intercompany loans into U.S.

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.

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.

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 intercompany loan requires quarterly payments of CHF 5.8 million plus accrued interest.

As a result, the aggregate notional amount of the related cross-currency swaps will decrease by a corresponding amount.

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.

2 unchanged sentences

dollars from the counterparties.

The Company held the following cross-currency rate swaps as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands):

September 30, 2020

December 31, 2019

Effective Date

Termination Date

Aggregate Notional Amount

The Company held the following cross-currency rate swaps as of March 31, 2021 and December 31, 2020 (dollar amounts in thousands):

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

March 31, 2021 December 31, 2020

Effective Date Termination Date Fixed Rate Aggregate Notional Amount Fair Value

Asset (Liability)

October 2, 2017

October 2, 2020

Pay CHF October 2, 2017 October 2, 2021 1.85 % CHF 48,533 48,533 ( 955 ) ( 4,335 )

Receive U.S.$ 4.46 % $ 50,000 50,000

October 2, 2017

October 2, 2021

Pay CHF October 2, 2017 October 2, 2022 1.95 % CHF 145,598 145,598 ( 868 ) ( 11,262 )

Receive U.S.$ 4.52 % $ 150,000 150,000

October 2, 2017

October 2, 2022

Pay CHF December 21, 2020 December 20, 2025 3.00 % CHF 414,387 420,137 17,314 ( 7,843 )

Receive U.S.$ 3.98 % $ 465,185 471,640

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 .

Total $ 15,491 $ ( 23,441 )

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 three and nine months ended September 30, 2020 , the Company recorded losses of $ 6.9 million and $ 12.0 million , respectively, in other income, net related to change in fair value related to the foreign currency rate translation to offset the gains recognized on the intercompany loans.

For the three and nine months ended September 30, 2019 , the Company recorded gains of $ 5.7 million and $ 3.9 million , respectively, in other income, net related to change in fair value related to the foreign currency rate translation to offset the losses recognized on the intercompany loans.

For the three and nine months ended September 30, 2020 , the Company recorded a loss of $ 6.3 million and a gain of $ 2.7 million in AOCL, respectively, related to change in fair value of the cross-currency swaps.

For the three and nine months ended September 30, 2019 , the Company recorded gains of $ 9.7 million and $ 15.4 million in AOCL, respectively, related to change in fair value of the cross-currency swaps.

For the three and nine months ended September 30, 2020 , the Company recorded gains of $ 1.5 million and $ 4.5 million , respectively, in other income, net included in the consolidated statements of operations related to the interest rate differential of the cross-currency swaps.

For the three and nine months ended September 30, 2019 , the Company recorded gains of $ 1.8 million and

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

$ 5.5 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 (expense), net from AOCL as of September 30, 2020 within the next twelve months is $ 3.0 million .

As of September 30, 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.

For the three months ended March 31, 2021 and 2020, the Company recorded a gain of $ 42.9 million and a loss of $ 1.7 million, respectively, in other income, net related to change in fair value related to the foreign currency rate translation to offset the gains or losses recognized on the intercompany loans.

For the three months ended March 31, 2021 and 2020, the Company recorded gains of $ 40.2 million and $ 5.9 million in AOCL, respectively, related to change in fair value of the cross-currency swaps.

For the three months ended March 31, 2021 and 2020, the Company recorded gains of $ 1.3 million and $ 1.5 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 (expense), net from AOCL as of March 31, 2021 within the next twelve months is $ 9.1 million.

As of March 31, 2021, 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

1 unchanged sentence

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, 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 September 30, 2020 and December 31, 2019 , respectively (dollar amounts in thousands):

September 30, 2020

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 March 31, 2021 and December 31, 2020, respectively (dollar amounts in thousands):

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

March 31, 2021

December 31, 2020

Effective Date

Termination Date

Aggregate Notional Amount

Effective Date Termination Date Fixed Rate Aggregate Notional Amount Fair Value

Asset (Liability)

October 3, 2018

September 30, 2021

Pay EUR October 3, 2018 September 30, 2021 — % EUR 44,859 $ ( 9 ) $ ( 1,884 )

Receive U.S.$ 3.01 % $ 52,000

October 3, 2018

September 30, 2023

Pay EUR October 3, 2018 September 30, 2023 — % EUR 51,760 1,707 ( 450 )

Receive U.S.$ 2.57 % $ 60,000

October 3, 2018

September 30, 2025

Pay EUR October 3, 2018 September 30, 2025 — % EUR 38,820 1,096 92

Receive U.S.$ 2.19 % $ 45,000

October 3, 2018

September 30, 2025

Pay CHF December 16, 2020 December 16, 2027 — % CHF 222,300 3,033 ( 3,794 )

Receive U.S.$ 1.10 % $ 250,000

October 3, 2018

September 30, 2025

Total $ 5,827 $ ( 6,036 )

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 three and nine months ended September 30, 2020 , the Company recorded loss of $ 11.3 million and a gain of $ 5.1 million in AOCL related to the change in fair value of the cross-currency swaps.

For the three and nine months ended September 30, 2019 , the Company recorded gains of $ 17.1 million and $ 26.6 million in AOCL related to the change in fair value of the cross-currency swaps.

For the three and nine months ended September 30, 2020 , the Company recorded gains of $ 2.2 million and $ 6.6 million in interest income included in the consolidated statements of operations related to the interest rate differential of the cross-currency swaps.

For the three and nine months ended September 30, 2019 , the Company recorded gains of $ 2.5 million and $ 7.2 million , respectively, in interest income included in the consolidation 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 September 30, 2020 within the next twelve months is $ 7.7 million .

For the three months ended March 31, 2021 and 2020, the Company recorded gains of $ 11.9 million and $ 16.7 million in AOCL related to the change in fair value of the cross-currency swaps.

For the three months ended March 31, 2021 and 2020, the Company recorded gains of $ 1.7 million and $ 2.2 million 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 March 31, 2021 within the next twelve months is $ 5.2 million.

Counterparty Credit Risk

2 unchanged sentences

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.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Fair Value of Derivative Instruments

2 unchanged sentences

The Company performs ongoing assessments of counterparty credit risk.

The following table summarizes the fair value for derivatives designated as hedging instruments in the condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019 :

The following table summarizes the fair value for derivatives designated as hedging instruments in the condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020:

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Fair Value as of

Location on Balance Sheet (1) :

September 30, 2020

December 31, 2019

March 31, 2021 December 31, 2020

(In thousands)

2 unchanged sentences

Cash Flow Hedges

Interest rate swap

Cross-currency swap 10,083 7,623

1 unchanged sentence

Cross-currency swap 5,209 5,297

Cash Flow Hedges

Interest rate swap (2)

Cross-currency swap 10,978

Net Investment Hedges

5 unchanged sentences

Interest rate swap (2)

21,337 22,033

Cross-currency swap 955 4,335

Net Investment Hedges

Cross-currency swap 10 1,884

Other liabilities

1 unchanged sentence

Interest rate swap (2)

46,717 71,736

Cross-currency swap 4,615 26,728

2 unchanged sentences

Total derivatives designated as hedges — Liabilities $ 73,652 $ 136,165

The Company classifies derivative assets and liabilities as non-current based on the cash flows expected to be incurred within the following 12 months.

(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 March 31, 2021 and December 31, 2020, the total notional amounts related to the Company’s interest rate swaps both

were $ 1.9 billion.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

The following presents the effect of derivative instruments designated as cash flow hedges on the accompanying condensed consolidated statement of operations during the three and nine months ended September 30, 2020 and 2019 :

Balance in AOCL

Recognized in

Amount of Gain (Loss)

Reclassified from

Balance in AOCL

End of Quarter

Statements of

(In thousands)

Three Months Ended September 30, 2020

Cash Flow Hedges

Interest rate swap

Interest expense

Cross-currency swap

Other income (expense),net

Net Investment Hedges

Cross-currency swap

Interest income

Three Months Ended September 30, 2019

Cash Flow Hedges

Interest rate swap

Interest expense

Cross-currency swap

Other income (expense),net

Net Investment Hedges

Cross-currency swap

Interest income

Balance in AOCL

Quarter Amount of

Recognized in

Amount of Gain (Loss)

AOCL Amount of Gain (Loss)

Reclassified from

Balance in AOCL

End of Quarter

Earnings Balance in AOCL

End of Quarter Location in

Statements of

(In thousands)

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Cash Flow Hedges

Interest rate swap

Interest expense

Cross-currency swap

Other income (expense),net

Interest rate swap $ ( 93,769 ) $ 34,518 $ ( 5,705 ) $ ( 53,546 ) Interest expense

Cross-currency swap ( 1,073 ) 40,194 44,150 ( 5,029 ) Other income (expense),net

Net Investment Hedges

Cross-currency swap

Interest income

Nine months ended September 30, 2019

Cross-currency swap ( 12,291 ) 13,573 1,711 ( 429 ) Interest income

$ ( 107,133 ) $ 88,285 $ 40,156 $ ( 59,004 )

Three Months Ended March 31, 2020

Cash Flow Hedges

Interest rate swap

Interest expense

Cross-currency swap

Other income (expense), net

Interest rate swap $ ( 45,145 ) $ ( 51,651 ) $ ( 1,043 ) $ ( 95,753 ) Interest expense

Cross-currency swap 177 5,907 ( 182 ) 6,266 Other income (expense),net

Net Investment Hedges

Cross-currency swap

Interest income

Cross-currency swap 10,229 18,897 2,180 26,946 Interest income

$ ( 34,739 ) $ ( 26,847 ) $ 955 $ ( 62,541 )

STOCK-BASED COMPENSATION

As of September 30, 2020 , the Company had stock options, restricted stock awards, performance stock units, contract stock awards and restricted stock unit awards outstanding under two plans, the 2001 Equity Incentive Plan (the “2001 Plan”) and the 2003 Equity Incentive Plan (the “2003 Plan,” and collectively, the “Plans”).

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 date of grant for directors and generally expire eight years from the grant

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

date for employees, and from six to ten years for directors and certain executive officers.

As of March 31, 2021, the Company had stock options, restricted stock awards, performance stock awards, contract stock awards and restricted stock unit awards outstanding under the 2003 Equity Incentive Plan (the “2003 Plan”).

The 2000 and 2001 Equity Incentive Plans were terminated as of February 19, 2021, and no further awards may be issued under the plans.

Stock options issued under the 2003 Plan become exercisable over specified periods, generally within four years from the date of grant for officers and employees, and within one year from date of grant for directors and generally expire eight years from the grant date for employees, and from six to ten years for directors and certain executive officers.

The Company values stock option grants using the binomial distribution model.

2 unchanged sentences

Stock Options

As of September 30, 2020 , there were approximately $ 6.0 million of total unrecognized compensation costs related to unvested stock options.

As of March 31, 2021, there were approximately $ 7.7 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 three years .

There were 348,587 stock options granted during the nine months ended September 30, 2020 .

For the nine months ended September 30, 2020 , the weighted average grant date fair value for stock options was $ 13.03 per option.

There were 149,558 stock options granted during the three months ended March 31, 2021.

For the three months ended March 31, 2021, the weighted average grant date fair value for stock options was $ 22.59 per option.

Awards of Restricted Stock and Performance Stock

2 unchanged sentences

The Company expenses the fair value of restricted stock awards on a straight-line basis over the requisite service period.

As of September 30, 2020 , there was approximately $ 27.5 million of total unrecognized compensation costs related to these unvested awards.

As of March 31, 2021, there was approximately $ 42.4 million of total unrecognized compensation costs related to these unvested awards.

The Company expects to recognize these costs over a weighted-average period of approximately two years .

The Company granted 322,485 restricted stock awards and 180,875 performance stock awards during the nine months ended September 30, 2020 .

For the nine months ended September 30, 2020 , the weighted average grant date fair value for restricted stock awards and performance stock units was $ 44.08 and $ 43.39 per award, respectively.

The Company granted 211,262 restricted stock awards and 176,147 performance stock awards during the three months ended March 31, 2021.

For the three months ended March 31, 2021, the weighted average grant date fair value for restricted stock awards and performance stock units was $ 68.00 and $ 68.10 per award, respectively.

The Company also maintains an Employee Stock Purchase Plan (the “ESPP”), which provides eligible employees 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 based on its terms.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

RETIREMENT PLANS

The Company maintains defined benefit pension plans that cover certain employees in France, Japan, Germany and Switzerland.

Net periodic benefit costs for the Company’s defined benefit pension plans for the three and nine months ended September 30, 2020 were $ 1.0 million and $ 3.0 million, respectively.

The components of the net periodic benefit costs other than the service cost component of $ 1.0 million and $ 2.9 million for the three and nine months ended September 30, 2020 , respectively, are included in other income (expense), net in the consolidated statements of operations.

Net periodic benefit costs for the Company’s defined benefit pension plans for the three and nine months ended September 30, 2019 was $ 1.0 million and $ 2.1 million, respectively.

The components of the net periodic benefit costs other than the service cost component of $ 0.7 million and $ 2.0 million for the three and nine months ended September 30, 2019 , respectively, are included in other income (expense), net in the consolidated statements of operations.

The estimated fair values of plan assets were $ 33.2 million and $ 30.8 million as of September 30, 2020 and December 31, 2019 , respectively.

The net plan assets of the pension plans are invested in common trusts as of September 30, 2020 and December 31, 2019 .

Net periodic benefit costs for the Company’s defined benefit pension plans for the three months ended March 31, 2021 were $ 0.6 million.

The components of the net periodic benefit costs other than the service cost component of $ 0.8 million for the three months ended March 31, 2021, are included in other income (expense), net in the consolidated statements of operations.

Net periodic benefit costs for the Company’s defined benefit pension plans for the three months ended March 31, 2020 was $ 1.0 million.

The components of the net periodic benefit costs other than the service cost component of $ 0.9 million for the three months ended March 31, 2020, are included in other income (expense), net in the consolidated statements of operations.

The estimated fair values of plan assets were $ 32.8 million and $ 37.8 million as of March 31, 2021 and December 31, 2020, respectively.

The net plan assets of the pension plans are invested in common trusts as of March 31, 2021 and December 31, 2020.

Common trusts are classified as Level 2 in the fair value hierarchy.

2 unchanged sentences

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.

During the first quarter of 2020, employees participating in the Plan began to defer their 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.

The Company maintains a Deferred Compensation Plan in which 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.

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 September 30, 2020 was $ 1.7 million.

The fair value of these assets at March 31, 2021 was $ 2.9 million.

Offsetting liabilities relating to the deferred compensation plan are included in Other liabilities.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

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 September 30, 2020 .

The Company has no finance leases as of March 31, 2021.

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).

4 unchanged sentences

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 nine months ended September 30, 2020 and September 30, 2019 , was $ 14.6 million and $ 14.2 million respectively, which includes $ 0.2 million , in related party operating lease expense.

Supplemental balance sheet information related to operating leases at September 30, 2020 were as follows:

September 30, 2020

Total operating lease expense for the three months ended March 31, 2021 and March 31, 2020 was $ 5.3 million and $ 4.8 million respectively, which includes $ 0.1 million, in related party operating lease expense.

Supplemental balance sheet information related to operating leases were as follows:

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

March 31, 2021

December 31, 2020

(In thousands, except lease term and discount rate)

ROU assets 91,174 83,635

Current lease liabilities 13,900 12,818

Non-current lease liabilities 95,549 88,118

Total lease liabilities $ 109,449 $ 100,936

Weighted average remaining lease term (in years):

Leased facilities

Leased vehicles

Leased facilities 11.8 years 11.6 years

Leased vehicles 2.0 years 2.3 years

Weighted average discount rate:

1 unchanged sentence

Leased vehicles 2.7 % 2.3 %

Supplemental cash flow information related to leases for the nine months ended September 30, 2020 and September 30, 2019 were as follows:

September 30, 2020

September 30, 2019

(In thousands)

Supplemental cash flow information related to leases for the three months ended March 31, 2021 and 2020 were as follows:

March 31, 2021 March 31, 2020

(In thousands) (In thousands)

Cash paid for amounts included in the measurement of lease liabilities:

4 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Future minimum lease payments under operating leases at September 30, 2020 were as follows:

Related Parties

Third Parties

Future minimum lease payments under operating leases at March 31, 2021 were as follows:

Third Parties Related Parties Total

(In thousands)

2021 $ 11,637 $ 222 $ 11,859

2022 16,331 296 16,627

2023 12,949 296 13,245

2024 11,410 296 11,706

2025 10,813 296 11,109

2026 9,672 296 9,968

Thereafter 72,854 837 73,691

Total minimum lease payments $ 145,666 $ 2,539 $ 148,205

8 unchanged sentences

TREASURY STOCK

As of September 30, 2020 and December 31, 2019 , there were 4.9 million and 2.9 million shares of treasury stock outstanding with a cost of $ 235.2 million and $ 119.9 million, at a weighted average cost per share of $ 47.86 and $ 41.87 , respectively.

On December 11, 2018, the board of directors of the Company (the “Board”) authorized the Company to repurchase up to $ 225.0 million of the Company’s common stock.

As of March 31, 2021 and December 31, 2020, there were 4.9 million shares of treasury stock outstanding with a cost of $ 234.5 million and $ 235.1 million, respectively, at a weighted average cost per share of $ 47.86 .

On December 7, 2020, the Board of Directors of the Company authorized the Company to repurchase up to $ 225.0 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.

During the nine months ended September 30, 2020 , the Company repurchased 2.1 million shares of Integra’s common stock as part of the existing share repurchase authorization.

The Company has $ 225.0 million remaining under the share repurchase of its Common Stock.

The price and timing of any future purchases under the share repurchase program will depend on factors such as levels of cash generation from operations, the volume of stock option exercises by employees, cash requirements for acquisitions, dividends, economic and market conditions and stock price.

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.

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.

The Company has $ 125.0 million remaining under the share repurchase of its Common Stock.

The following table provides a summary of the Company's effective tax rate:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Reported tax rate 32.5 % 19.8 %

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

The Company’s effective income tax rates for the three months ended September 30, 2020 and 2019 were 22.1 % and ( 0.4 )% , respectively.

For the three months ended September 30, 2020 , the primary drivers of the higher tax rate are the jurisdictional mix of income along with a $ 4.2 million recognition of a deferred tax liability related to an outside tax basis from the sale of the Extremity Orthopedics business, offset by a $ 3.2 million benefit from the reversal of the French valuation allowance.

For the three months ended September 30, 2019 , the rate was primarily driven by the impact of the Rebound transaction, which resulted in a $ 59.9 million IPR&D expense.

This amount was not deductible for tax purposes.

The Company's effective income tax rates for the nine months ended September 30, 2020 and September 30, 2019 were 24.6 % and ( 3.5 )% , respectively.

For the nine months ended September 30, 2020 , the primary drivers of the higher tax rate are the jurisdictional mix of income along with a $ 4.2 million recognition of a deferred tax liability related to an outside tax basis from the sale of the Extremity Orthopedics business.

For the nine months ended September 30, 2019 , the primary driver of the tax rate is the impact of the Rebound transaction, which resulted in a $ 59.9 million IPR&D expense.

This amount is not deductible for tax purposes.

This was offset by a tax benefit of $ 10.8 million related to a federal tax holiday in Switzerland, which was finalized during the quarter ended March 31, 2019.

The Company received a federal tax credit in Switzerland of 12 million CHF, which may be used over a seven year period, ending in 2024.

As of September 30, 2020 , the Company has not provided deferred income taxes on unrepatriated earnings from foreign subsidiaries as they are deemed indefinitely reinvested.

The Company’s effective income tax rates for the three months ended March 31, 2021 and 2020 were 32.5 % and 19.8 %, respectively.

For the three months ended March 31, 2021, the primary driver of the higher tax rate is the tax impact of the gain on the sale of the business which closed during the first quarter of 2021.

For the three months ended March 31, 2020, the primary drivers of the rate were lower income impacted by the COVID-19 pandemic, coupled with a $ 3.3 million valuation allowance on certain foreign deferred tax assets.

As of March 31, 2021, the Company has not provided deferred income taxes on unrepatriated earnings from foreign subsidiaries as they are deemed 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 not be material as of September 30, 2020 .

As such, the Company has determined the tax impact of repatriating these earnings would not be material as of March 31, 2021.

The Company does not anticipate the need to repatriate earnings from foreign subsidiaries as a result of the impact of the COVID-19 pandemic.

On March 27, 2020, the Coronavirus Aid Relief, and Economic Security Act (CARES Act) was signed into law.

The CARES Act included certain income tax provisions for corporations and individuals, among other provisions.

The Company does not expect the CARES Act provisions to have a significant impact on the Company's income taxes.

The Company continues to monitor the issuance of new legislation, regulations, and case law that may impact federal, state, and international tax positions.

NET INCOME (LOSS) PER SHARE

Basic and diluted net income (loss) per share was as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands, except per share amounts)

NET INCOME PER SHARE

Basic and diluted net income per share was as follows:

Three Months Ended March 31,

(In thousands, except per share amounts)

Basic net income (loss) per share:

Net income (loss)

Basic net income per share:

Net income $ 45,394 $ 9,180

Weighted average common shares outstanding 84,500 85,188

Basic net income (loss) per common share

Diluted net income (loss) per share:

Net income (loss)

Basic net income per common share $ 0.54 $ 0.11

Diluted net income per share:

Net income $ 45,394 $ 9,180

Weighted average common shares outstanding — Basic 84,500 85,188

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Weighted average common shares for diluted earnings per share 85,258 85,892

Diluted net income (loss) per common share

Common stock of approximately 0.3 million and 0.6 million shares at September 30, 2020 , and 2019 , respectively that are issuable through exercise of dilutive securities were not included in the computation of diluted net income (loss) per share because their effect would have been anti-dilutive.

Diluted net income per common share $ 0.53 $ 0.11

Common stock of approximately 0.5 million and 0.4 million shares at March 31, 2021, and 2020, respectively that are issuable through exercise of dilutive securities 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.

Based on the adoption of ASU 2020-06, as the principal amount of the 2025 Notes will be paid in cash and only the conversion spread is settled in shares, the Company will be utilizing the if-converted method and only includes the net number of incremental shares that would be issued upon conversion.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) was as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

ACCUMULATED OTHER COMPREHENSIVE LOSS

Comprehensive loss for three months ended March 31, 2021 and 2020 was as follows:

Three Months Ended March 31,

(In thousands)

Net income (loss)

Net income $ 45,394 $ 9,180

Foreign currency translation adjustment ( 6,802 ) ( 6,813 )

2 unchanged sentences

Comprehensive income (loss), net $ 75,826 $ ( 19,007 )

Changes in accumulated other comprehensive loss by component between December 31, 2019 and September 30, 2020 are presented in the table below, net of tax:

Gains and Losses on Derivatives

Defined Benefit Pension Items

Foreign Currency Items

Changes in accumulated other comprehensive loss by component between December 31, 2020 and March 31, 2021 are presented in the table below, net of tax:

Gains and Losses on Derivatives Defined Benefit Pension Items Foreign Currency Items Total

(In thousands)

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Amounts reclassified from accumulated other comprehensive loss

30,861 — — 30,861

Net current-period other comprehensive income (loss)

Balance at September 30, 2020

For the nine months ended September 30, 2020 , the Company reclassified a loss of $ 5.7 million and $ 2.9 million from accumulated other comprehensive loss to other income (expense), net and interest income, respectively.

36,915 319 ( 6,802 ) 30,432

Balance at March 31, 2021 $ ( 45,334 ) $ ( 4,786 ) $ 6,493 $ ( 43,627 )

For the three months ended March 31, 2021, the Company reclassified a loss of $ 33.9 million and $ 3.1 million from accumulated other comprehensive loss to other income (expense), net and interest income.

SEGMENT AND GEOGRAPHIC INFORMATION

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• 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 Tissue Technologies segment includes such offerings as skin and wound repair, bone grafts, and nerve and tendon repair products.

In conjunction with the sale of the Extremity Orthopedics business, the Company rebranded the Orthopedics and Tissue Technologies segment as Tissue Technologies in the first quarter of 2021.

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 each reportable segment for the three and nine months ended September 30, 2020 and 2019 are as follows:

Net sales and profit by each reportable segment for the three months ended March 31, 2021 and 2020 are as follows :

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

Three Months Ended March 31,

(In thousands)

1 unchanged sentence

Codman Specialty Surgical $ 241,241 $ 231,440

Orthopedics and Tissue Technologies

Tissue Technologies

118,830 122,884

Total revenues $ 360,071 $ 354,324

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Codman Specialty Surgical $ 106,778 $ 87,235

Orthopedics and Tissue Technologies

Tissue Technologies

50,011 31,271

Segment profit 156,789 118,506

Amortization ( 4,527 ) ( 6,977 )

Corporate and other ( 121,548 ) ( 84,426 )

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Total revenue by major geographic area consisted of the following:

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

Three Months Ended March 31,

(In thousands)

United States $ 247,793 $ 246,852

Europe 45,819 45,896

Asia Pacific 47,295 39,960

Rest of World 19,164 21,616

1 unchanged sentence

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.

In consideration for certain technology, manufacturing, distribution, 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.

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Contingent Consideration

The Company determined the fair value of contingent consideration during the nine month period ended September 30, 2020 and September 30, 2019 to reflect the change in estimates, 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 nine months ended September 30, 2020 and September 30, 2019 is as follows (in thousands):

Nine Months Ended September 30, 2020

Contingent Consideration Liability Related to Acquisition of Arkis (See Note 3)

Contingent Consideration

Liability Related to Acquisition of Derma Sciences

Location in Financial Statements

The Company determined the fair value of contingent consideration during the three month period ended March 31, 2021 and March 31, 2020 to reflect the change in estimates, 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 three months ended March 31, 2021 and March 31, 2020 is as follows (in thousands):

Three Months Ended March 31, 2021 Contingent Consideration Liability Related to Acquisition of:

Arkis Derma Sciences ACell Inc.

(See Note 2) Location in Financial Statements

Short-term Long-term Long-term Long-term

Balance as of January 1, 2021 $ 3,415 $ 11,746 $ 230 $ —

Loss from change in fair value of contingent consideration liabilities

Research and development

Balance as of September 30, 2020

Nine Months Ended September 30, 2019

Contingent Consideration Liability Related to Acquisition of Arkis (See Note 3)

Contingent Consideration

Liability Related to Acquisition of Derma Sciences

Location in Financial Statements

Additions from acquisition of ACell — — — 23,900

Loss from change in fair value of contingent consideration liabilities 17 $ 265 — — Research and development

Balance as of March 31, 2021 $ 3,432 $ 12,011 $ 230 $ 23,900

Three Months Ended March 31, 2020 Contingent Consideration Liability Related to Acquisition of:

Arkis Derma Sciences Location in Financial Statements

Long-term Long-term

Balance as of January 1, 2020 $ 14,210 $ 230

Additions from acquisition of Arkis

Balance as of September 30, 2019

Loss from change in fair value of contingent consideration liabilities ( 1,051 ) — Research and development

Balance as of March 31, 2020 $ 13,159 $ 230

Arkis BioSciences Inc.

On July 29, 2019, the Company acquired Arkis BioSciences Inc.

The Company estimated the fair value of the contingent consideration to be $ 13.1 million at the acquisition date.

The estimated fair value as of March 31, 2021 and March 31, 2020 was $ 15.4 million and $ 13.2 million, respectively.

The Company recorded $ 3.4 million in accrued expenses and other current liabilities at March 31, 2021 and $ 12 million and $ 13.2 million in other liabilities at March 31, 2021 and March 31, 2020, respectively, in the consolidated balance sheet of the Company.

Derma Sciences

5 unchanged sentences

The potential maximum undiscounted payment amounts to $ 3.0 million.

The estimated fair value as of September 30, 2020 and September 30, 2019 was $ 0.2 million .

The estimated fair value as of March 31, 2021 and March 31, 2020 was $ 0.2 million.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements