What changed in this filing

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Item 1. Financial Statements

2021-07-29 compared with 2021-04-29 · 265 added, 231 removed, 762 unchanged (39% of the section changed)

3 unchanged sentences

AND COMPREHENSIVE INCOME / (LOSS)

(In thousands, except per share amounts)

Three Months Ended March 31,

(Dollars in thousands, except per share amounts)

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Total revenue, net $ 389,992 $ 258,665 $ 750,063 $ 612,989

1 unchanged sentence

Cost of goods sold 151,267 105,478 297,090 238,954

145,823 133,476

Research and development 20,121 14,926 42,495 35,742

22,374 20,816

Selling, general and administrative 162,552 116,108 319,185 282,060

156,633 165,952

Intangible asset amortization 4,198 8,073 8,725 15,050

Total costs and expenses 338,138 244,585 667,495 571,806

329,357 327,221

Operating income 51,854 14,080 82,568 41,183

1 unchanged sentence

Interest expense ( 13,149 ) ( 15,682 ) ( 26,078 ) ( 33,434 )

Gain from the sale of business 42,876 —

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

Gain (loss) from the sale of business ( 679 ) — 42,197 —

Other income, net 5,034 972 9,903 493

Income before income taxes 44,824 1,651 112,102 13,093

Provision for income taxes 9,756 2,020 31,640 4,282

Net income $ 45,394 $ 9,180

Net income (loss) $ 35,068 $ ( 369 ) $ 80,462 $ 8,811

Net income per share

2 unchanged sentences

Weighted average common shares outstanding (See Note 13):

84,500 85,188

85,258 85,892

Basic 84,687 84,706 84,593 84,955

Diluted 85,340 84,706 85,324 85,548

Comprehensive income (loss) (See Note 14) 28,731 1,095 104,558 $ ( 17,912 )

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except per share amounts)

March 31, 2021 December 31, 2020

(Dollars in thousands, except per share amounts)

June 30, 2021 December 31, 2020

Current assets:

26 unchanged sentences

Long-term borrowings under senior credit facility 823,208 933,387

Long-term borrowings under securitization facility 112,500 —

Long-term convertible securities 562,968 474,834

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240,000 authorized shares;

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

89,474 and 89,251 issued at June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital 1,248,555 1,290,909

Treasury stock, at cost;

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

4,899 shares and 4,914 shares at June 30, 2021 and December 31, 2020, respectively

( 234,461 ) ( 235,141 )

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Three Months Ended March 31,

(Dollars in thousands)

Six Months Ended June 30,

OPERATING ACTIVITIES:

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Accounts payable, accrued expenses and other current liabilities 27,277 ( 88,671 )

Contract liabilities ( 83 ) 338

Other non-current liabilities 482 ( 4,048 )

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY

(In thousands, except per share amounts)

Three Months Ended March 31, 2021

(Dollars in thousands, except per share amounts)

Six Months Ended June 30, 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 ) $ 1,290,909 $ ( 74,059 ) $ 532,265 $ 1,514,867

Net income — — — — — — 45,394 45,394

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

Other comprehensive income, net of tax — — — — — 30,432 — 30,432

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

4 unchanged sentences

Balance, March 31, 2021 89,406 894 ( 4,899 ) ( 234,461 ) 1,231,638 ( 43,627 ) 574,887 1,529,331

Three Months Ended March 31, 2020

Net income — — — — — — 35,068 35,068

Other comprehensive loss, net of tax — — — — — ( 6,336 ) — ( 6,336 )

Issuance of common stock for vesting of share based awards, net of shares withheld for taxes 68 1 — — 1,175 — — 1,176

Share-based compensation — — — — 15,742 — — 15,742

Balance, June 30, 2021 89,474 $ 895 ( 4,899 ) $ ( 234,461 ) $ 1,248,555 $ ( 49,963 ) $ 609,955 $ 1,574,981

Six Months Ended June 30, 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

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

Net loss — — — — — — ( 369 ) ( 369 )

Other comprehensive income, net of tax — — — — — 1,464 — 1,464

Issuance of common stock for vesting of share based awards, net of shares withheld for taxes 84 3 — ( 35 ) 1,282 — — 1,250

Share-based compensation — — — — 4,948 — — 4,948

Accelerated shares repurchased — — ( 621 ) ( 32,685 ) 32,685 — — —

Balance, June 30, 2020 89,189 892 ( 4,915 ) ( 235,226 ) 1,279,370 ( 103,124 ) 407,184 1,349,096

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 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.

In the opinion of management, the June 30, 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.

1 unchanged sentence

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

Operating results for the three and six month period ended June 30, 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.

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The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic.

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.

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.

Towards the end of 2020 and during the first half 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 magnitude and overall effectiveness of these actions remains uncertain.

The severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company's customers, all of which are uncertain and cannot be predicted with certainty.

The severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, duration of the pandemic, including resurgences, new variants or strains, impact of government regulations, the speed and effectiveness of vaccine distribution, vaccine adoption rates and the direct and indirect economic effects of the pandemic and containment measures.

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.

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.

During the first half 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.

If the downturn is more severe and prolonged than currently expected, the Company may need to take further steps to reduce costs.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans .

This guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans, including removing certain previous disclosure requirements, adding certain new disclosure requirements, and clarifying certain other disclosure requirements.

This guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

The ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

2 unchanged sentences

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).

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), relating to a customer's accounting for implementation, set-up, and other upfront costs incurred in a cloud computing arrangement that is hosted by a vendor (e.g., a service contract).

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

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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 amendments in this ASU affect the guidance in ASU 2020-04 and are effective in the same timeframe as ASU 2020-04.

The Company is currently assessing the impact that this ASU will have on its consolidated financial statements and related disclosures.

1 unchanged sentence

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

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 .

In August 2020, the FASB issued ASU 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.

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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.

Upon adoption of this ASU 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.

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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 ASU will be effective for the Company for annual and interim periods beginning after 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.

In May 2021, the FASB issued ASU No.

2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options which provides guidance to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange.

The amendments in this ASU No.

2021-04 are effective for all entities for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted, including interim periods within those fiscal years.

The amendment currently has no impact to the Company as the effect will largely depend on the terms of written call options or financings issued or modified in the future.

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.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

ACQUISITIONS AND DIVESTITURES

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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):

Assets and liabilities divested consisted of the following as of December 31, 2020 (dollar amounts in thousands):

Prepaid expenses and other current assets $ 713

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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.

In connection with the sale, the Company recognized a loss of $ 0.7 million associated with certain working capital adjustments and gain of $ 42.2 million that is presented in Gain from the sale of business in the consolidated statement of operations for the three and six months ended June 30, 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.

The Com pany recognized a payable due to Smith & Nephew of $ 10.9 million as of June 30, 2021, 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 $ 306.9 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.

The final working capital adjustments of $ 1.3 million was finalized and paid as of June 30, 2021;

however certain amounts relating to tax related matters have not been finalized.

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

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.

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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

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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)

Dollars in thousands Preliminary Valuation as of June 30, 2021 Weighted Average Life

Current assets:

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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.

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, 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.

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Goodwill recognized as a result of this acquisition is non-deductible for income tax purposes.

Contingent Consideration

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)

scenarios related to each specific milestone.

Contingent Consideration

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 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 June 30, 2021 was $ 23.5 million.

This amount is included in other liabilities at June 30, 2021 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.

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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.

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

Pro Forma Results (unaudited)

Pro forma revenues for the three months ended June 30, 2021 and 2020 were $ 390.0 million and $ 269.6 million, re spectively.

Pro forma revenues for the six months ended June 30, 2021 and 2020 were $ 754.7 million and $ 646.9 million, respectively.

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

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The Company has no significant revenues recognized on payments expected to be received more than one year after the transfer of control of products or services to customers.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

Contract Asset and Liability

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A portion of the transaction price allocated to the performance obligations to be satisfied in the future periods is recognized as contract liability.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

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

The following table summarizes the changes in the contract asset and liability balances for the six months ended June 30, 2021:

Contract Asset

Contract asset, January 1, 2021 $ 7,430

Transferred to trade receivable of contract asset included

in beginning of the year contract asset

Transferred to trade receivable of contract asset included in beginning of the year contract asset ( 7,430 )

Contract asset, net of transferred to trade receivables on contracts during the period 7,952

Contract asset, March 31, 2021 $ 6,499

Contract asset, June 30, 2021

Contract Liability

3 unchanged sentences

Foreign currency translation ( 125 )

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

Contract liability, June 30, 2021

At June 30, 2021, the short-term portion of the contract liability of $ 5.9 million and the long-term portion of $ 6.2 million were included in accrued expenses and other current liabilities and other liabilities, respectively, in the consolidated balance sheet.

As of June 30, 2021, the Company is expected to recognize approximately 49 % of unsatisfied (or partially unsatisfied) performance obligations as revenue within twelve months , with the remaining balance to be recognized thereafter.

Shipping and Handling Fees

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

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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)

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

Disaggregated Revenue

The following table presents revenues disaggregated by the major sources of revenues for the three and six months ended June 30, 2021 and 2020 (dollar amounts in thousands):

Three Months Ended June 30, 2021 Three Months Ended June 30, 2020 Six Months Ended June 30, 2021 Six Months Ended June 30, 2020

Neurosurgery $ 202,600 $ 141,430 $ 391,854 $ 326,373

4 unchanged sentences

Extremity Orthopedics (1)

— 11,162 — 32,634

Private Label 30,539 21,434 60,671 50,579

1 unchanged sentence

Total revenue $ 389,992 $ 258,665 $ 750,063 $ 612,989

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

(1) On January 4, 2021, the Company completed its previously announced sale of its Extremity Orthopedics business.

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.

(2) See Note 2.

Acquisitions and Divestitures, for details around the ACell Inc.

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

Inventories, net consisted of the following:

March 31, 2021 December 31, 2020

(In thousands)

Dollars in thousands June 30, 2021 December 31, 2020

Finished goods $ 180,835 $ 180,301

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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 three-month period ended March 31, 2021 were as follows:

Codman Specialty

Changes in the carrying amount of goodwill for the six-month period ended June 30, 2021 were as follows:

Dollars in thousands Codman Specialty

Surgical Tissue Technologies Total

(In thousands)

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

1 unchanged sentence

Foreign currency translation ( 7,218 ) ( 3,809 ) ( 11,027 )

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

Goodwill at June 30, 2021 $ 664,757 $ 350,881 $ 1,015,638

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

March 31, 2021

June 30, 2021

Dollars in thousands Weighted

Life Cost Accumulated

Amortization Net

(Dollars in thousands)

Completed technology 18 years $ 1,125,279 $ ( 274,287 ) $ 850,992

6 unchanged sentences

December 31, 2020

Dollars in thousands Weighted

Life Cost Accumulated

Amortization Net

(Dollars in thousands)

Completed technology 19 years $ 896,478 $ ( 248,088 ) $ 648,390

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(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.

The increase in the Company's identifiable intangible assets at June 30, 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.

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In connection with the July 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:

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

Fiscal Quarter Maximum Consolidated Total Leverage Ratio

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September 30, 2023 and the last day of each fiscal quarter thereafter 4.00 to 1.00

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

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 March 31, 2021, the Company was in compliance with all such covenants.

The Senior Credit Facility is subject to various financial and negative covenants and at June 30, 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 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.

At June 30, 2021 and December 31, 2020, there wa s $ 8.8 million an d $ 97.5 million, respectively, ou tstanding under the revolving credit component of the Senior Credit Facility at weighted average interest rates of 1.5 %.

At June 30, 2021 and December 31, 2020, there was $ 866.3 million and $ 877.5 million, respectively, outstanding under the Term Loan component of the Senior Credit Facility at a weighted average interest rate of 1.5 %.

At June 30, 2021, $ 45.0 million of the Term Loan component of the Senior Credit Facility is classified as current on the consolidated balance sheet.

The fair value of outstanding borrowings of the Senior Credit Facility's revolving credit and Term Loan components at June 30, 2021 wer e $ 8.6 million and $ 850.4 million, re sp ectively.

These fair values were determined by using a discounted cash flow model based on current market interest rates available to the Company.

1 unchanged sentence

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)

Letters of credit outstanding as of June 30, 2021 and December 31, 2020 to taled $ 1.6 million.

There were no amounts drawn as of June 30, 2021.

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

Quarter Ended March 31, 2021 Principal Repayment

(In thousands)

Quarter Ended June 30, 2021

Principal Repayment

Dollars in thousands

Remainder of 2021 $ 22,500

2022 $ 45,000

2023 $ 61,875

2024 $ 67,500

2025 $ 669,375

The outstanding balance of the revolving credit component of the Senior Credit Facility is due on February 3, 2025.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

Convertible Senior Notes

10 unchanged sentences

or (4) if specified corporate transactions occur.

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.

As of June 30, 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.

8 unchanged sentences

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.

At December 31, 2020, the carrying amount of the liability component was $ 485.9 million , the remaining unamortized discount wa s $ 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.

At June 30, 2021 , in conjunction with the adoption of the ASU, the carrying amount of the liability w as $ 575.0 million.

The fair value of the 2025 Notes at June 30, 2021 was $ 630.7 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)

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.

As a result of the adoption of the ASU, the Company recognized only cash interest related to the contractual interest coupon of $ 1.4 million on the 2025 Notes for the six months ended June 30, 2021.

Prior to the adoption, during the six months ended June 30, 2020, the Company recognized cash interest of $ 1.2 million and amortization of the discount on the liability component of $ 6.8 million for a total interest charge of $ 8.0 million on the 2020 Notes.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

Securitization Facility

3 unchanged sentences

The amount of outstanding borrowings on the Securitization Facility at any one time is limited to $ 150.0 million.

The Securitization Facility Agreement ("Securitization Agreement") is for an initial three-year term and may be extended.

The Securitization Agreement governing the Securitization Facility contains certain covenants and termination events.

The Securitization Facility Agreement ("Securitization Agreement") governing the Securitization Facility contains certain covenants and termination events.

An occurrence of an event of default or a termination event under this Securitization Agreement may give rise to the right of its counterparty to terminate this facility.

As of 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.

As of June 30, 2021, the Company was in compliance with the covenants and none of the termination events had occurred.

On May 28, 2021, the Company entered into an amendment (the "May 2021 Amendment") of the Securitization Facility which extended the maturity date from December 21, 2021 to May 28, 2024.

The May 2021 amendment does not increase the Company’s total indebtedness.

At June 30, 2021 and December 31, 2020, the Company had $ 112.5 million, respectively, of outstanding borrowings under its Securitization Facility at a weighted average interest rate of 1.2 % and 1.3 %, respectively.

The fair value of the outstanding borrowing of the Securitization Facility at June 30, 2021 was $ 110.3 million.

These fair values were determined by using a discounted cash flow model based on current market interest rates available to the Company.

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

March 31, 2021 December 31, 2020

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

The Company held the following interest rate swaps as of June 30, 2021 and December 31, 2020 (dollar amounts in thousands):

June 30, 2021 December 31, 2020 June 30, 2021 December 31, 2020

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

11 unchanged sentences

1-month USD LIBOR Loan 125,000 125,000 December 15, 2020 July 1, 2025 December 31, 2027 1.404 % 987 ( 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)

$ 1,775,000 $ 1,875,000 $ ( 62,736 ) $ ( 93,769 )

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

11 unchanged sentences

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 recognized a $ 0.3 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 June 30, 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 fair value of the foreign currency forward contracts denominated in CAD was $ 0.3 million as of June 30, 2021.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

During the second quarter of 2021, the Company entered into a foreign currency swap, with a notional of $ 7.3 million to mitigate the risk from fluctuations in foreign currency exchange rates associated with certain intercompany loan denominated in Japanese Yen ("JPY").

In a foreign currency swap transaction, the Company agrees with another party to exchange, at specified intervals, the difference between one currency and another currency at a fixed exchange rate, generally set at inception, calculated by reference to an agreed upon notional amount.

The notional amount of each currency is exchanged at the inception and termination of the currency swap by each party.

The change in fair value of the foreign currency swap was not material for the period.

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

12 unchanged sentences

dollars from the counterparties.

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

The Company held the following cross-currency rate swaps as of June 30, 2021 and December 31, 2020 (dollar amounts in thousands):

June 30, 2021 December 31, 2020 June 30, 2021 December 31, 2020

Effective Date Termination Date Fixed Rate Aggregate Notional Amount Fair Value

8 unchanged sentences

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 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.

For the three and six months ended June 30, 2021, the Company recorded a loss of $ 12.9 million and a gain of $ 30.0 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 and six months ended June 30, 2020, the Company recorded losses of $ 3.4 million and $ 5.1 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 six months ended June 30, 2021, the Company recorded a loss of $ 11.0 million and a gain of $ 29.2 million in AOCL, respectively, related to change in fair value of the cross-currency swaps.

For the three and six months ended June 30, 2020, the Company recorded a loss of $ 2.3 million and a gain of $ 3.6 million in AOCL, respectively, related to change in fair value of the cross-currency swaps.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

For the three and six months ended June 30, 2021, the Company recorded gains of $ 1.3 million and $ 2.5 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 six months ended June 30, 2020, the Company recorded gains of $ 1.5 million and $ 3.0 million, respectively, in other income, net included in the consolidated statements of operations related to the interest rate differential of the cross-currency swaps.

The estimated gain that is expected to be reclassified to other income (expense), net from AOCL as of June 30, 2021 within the next twelve months is $ 7.0 million.

As of June 30, 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

2 unchanged sentences

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

The Company held the following cross-currency rate swaps designated as net investment hedges as of June 30, 2021 and December 31, 2020, respectively (dollar amounts in thousands):

June 30, 2021

December 31, 2020

11 unchanged sentences

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 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.

For the three and six months ended June 30, 2021, the Company recorded gains of $ 0.1 million and $ 13.7 million, respectively, in AOCL related to the change in fair value of the cross-currency swaps.

For the three and six months ended June 30, 2020, the Company recorded a loss of $ 2.5 million and a gain of $ 16.4 million, respectively, in AOCL related to the change in fair value of the cross-currency swaps.

For the three and six months ended June 30, 2021, the Company recorded gains of $ 1.7 million and $ 3.4 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 six months ended June 30, 2020, the Company recorded gains of $ 2.2 million and $ 4.4 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 June 30, 2021 within the next twelve months is $ 4.5 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 March 31, 2021 and December 31, 2020:

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

The following table summarizes the fair value for derivatives designated as hedging instruments in the condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020:

Fair Value as of

Location on Balance Sheet (1) :

March 31, 2021 December 31, 2020

(In thousands)

June 30, 2021 December 31, 2020

Dollars in thousands

Derivatives designated as hedges — Assets:

27 unchanged sentences

(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.

(2) At June 30, 2021 and December 31, 2020, the total notional amounts related to the Company’s interest rate swaps were $ 1.8 billion and $ 1.9 billion, respectively.

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 months ended March 31, 2021 and 2020:

Balance in AOCL

Dollars in thousands Balance in AOCL

Quarter Amount of

5 unchanged sentences

Statements of

(In thousands)

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Cash Flow Hedges

4 unchanged sentences

$ ( 59,004 ) $ ( 25,894 ) $ ( 15,721 ) $ ( 69,177 )

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Cash Flow Hedges

4 unchanged sentences

$ ( 62,541 ) $ ( 14,853 ) $ ( 3,334 ) $ ( 74,060 )

Dollars in thousands Balance in AOCL

Year Amount of

Recognized in

AOCL Amount of Gain (Loss)

Reclassified from

Earnings Balance in AOCL

End of Quarter Location in

Statements of

Six Months Ended June 30, 2021

Cash Flow Hedges

Interest rate swap $ ( 93,769 ) $ 19,505 $ ( 11,528 ) $ ( 62,736 ) Interest expense

Cross-currency swap ( 1,073 ) 29,225 32,515 ( 4,363 ) Other income (expense),net

Net Investment Hedges

Cross-currency swap ( 12,291 ) 13,661 3,448 ( 2,078 ) Interest income

$ ( 107,133 ) $ 62,391 $ 24,435 $ ( 69,177 )

Six Months Ended June 30, 2020

Cash Flow Hedges

Interest rate swap $ ( 45,146 ) $ ( 61,637 ) $ ( 4,656 ) $ ( 102,127 ) Interest expense

Cross-currency swap 177 3,585 ( 2,081 ) 5,843 Other income (expense), net

Net Investment Hedges

Cross-currency swap 10,229 16,357 4,362 22,224 Interest income

$ ( 34,740 ) $ ( 41,695 ) $ ( 2,375 ) $ ( 74,060 )

STOCK-BASED COMPENSATION

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”).

As of June 30, 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.

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, within one year from date of grant for directors which generally expire eight years from the grant date for employees, and from six to ten years for directors and certain executive officers, except in certain instances that result in accelerated vesting due to death, disability, retirement age or change in-control provisions within their grant agreements.

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

1 unchanged sentence

The vesting of performance stock issued under the Plans is subject to service and performance conditions.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

Stock Options

As of March 31, 2021, there were approximately $ 7.7 million of total unrecognized compensation costs related to unvested stock options.

As of June 30, 2021, there were approximately $ 4.6 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 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.

There were 149,558 stock options granted during the six months ended June 30, 2021.

For the six months ended June 30, 2021, the weighted average grant date fair value for stock options was $ 22.59 per option.

Awards of Restricted Stock and Performance Stock

Performance stock and restricted stock awards generally have requisite service periods of three years .

Performance stock and restricted stock awards generally have requisite service periods of three years , except in certain instances that result in accelerated vesting due to death, disability, retirement age provision or change in-control provisions in their grant agreements.

Performance stock units are subject to graded vesting conditions based on revenue goals of the Company.

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

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

As of June 30, 2021, there was approximately $ 32.9 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 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 granted 242,464 restricted stock awards and 176,147 performance stock awards during the six months ended June 30, 2021.

For the six months ended June 30, 2021, the weighted average grant date fair value for restricted stock awards and performance stock units was $ 68.21 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 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.

Net periodic benefit costs for the Company’s defined benefit pension plans for three and the six months ended June 30, 2021 were $ 0.6 million and $ 1.2 million.

The components of the net periodic benefit costs other than the service cost component of $ 0.8 million and $ 1.7 million for the three and six months ended June 30, 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 and six months ended June 30, 2020 were $ 1.0 million and $ 1.9 million, respectively.

The components of the net periodic benefit costs other than the service cost component of $ 0.9 million and $ 1.9 million for the three and six months ended June 30, 2020, respectively, are included in other income (expense), net in the consolidated statements of operations.

The estimated fair values of plan assets were $ 33.8 million and $ 37.8 million as of June 30, 2021 and December 31, 2020, respectively.

The net plan assets of the pension plans are invested in common trusts as of June 30, 2021 and December 31, 2020.

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

6 unchanged sentences

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 March 31, 2021 was $ 2.9 million.

The fair value of these assets were $ 3.2 million and $ 2.0 million as of June 30, 2021 and December 31, 2020, respectively.

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

1 unchanged sentence

The Company leases administrative, manufacturing, research and distribution facilities and vehicles through operating lease agreements.

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

The Company has no finance leases as of June 30, 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).

For vehicles, the Company has elected the practical expedient to group lease and non-lease components.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

Most facility leases include one or more options to renew.

2 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 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.

Total operating lease expense for the six months ended June 30, 2021 and June 30, 2020 was $ 10.6 million and $ 9.7 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

Dollars in thousands, except lease term and discount rate June 30, 2021

December 31, 2020

(In thousands, except lease term and discount rate)

ROU assets $ 89,174 $ 83,635

8 unchanged sentences

Leased vehicles 2.7 % 2.3 %

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)

Supplemental cash flow information related to leases for the six months ended June 30, 2021 and 2020 were as follows:

Dollars in thousands June 30, 2021 June 30, 2020

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

2 unchanged sentences

Operating leases $ 10,528 $ 6,007

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

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

Third Parties Related Parties Total

(In thousands)

Future minimum lease payments under operating leases at June 30, 2021 were as follows:

Dollars in thousands Related Parties Third Parties Total

2021 $ 148 $ 7,973 $ 8,121

10 unchanged sentences

Long-term lease liabilities 95,196

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

Related Party Leases

3 unchanged sentences

TREASURY 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 .

As of June 30, 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.

10 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Reported tax rate 21.8 % 122.4 % 28.2 % 32.7 %

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

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.

The Company’s effective income tax rates for the three months ended June 30, 2021 and 2020 w ere 21.8 % and 122.4 %, respectively.

For the three months ended June 30, 2021, the primary driver of the lower tax rate is due to mix of income impacted by the COVID-19 pandemic.

For the three months ended June 30, 2020, the primary drivers of the higher tax rate was lower income impacted by the COVID-19 pandemic and a $ 3.4 million valuation allowance on certain foreign deferred tax assets.

The Company's effective income tax rates for the six months ended June 30, 2021 and 2020 were 28.2 % and 32.7 %, respectively.

For the six months ended June 30, 2021, the primary drivers of the lower tax rate were mix of income in lower-taxes jurisdictions, offset by the tax impact of the gain on the sale of the Extremity and Orthopedics business which was completed during the first quarter of 2021.

For the six months ended June 30, 2020, the primary drivers of the higher tax rate were lower book income in low er-taxed jurisdictions and a $ 3.4 million valuation allowance on certain foreign deferred tax assets as the Company determined that it was no longer more likely than not that these foreign deferred tax assets would be realized due to the adverse impact of the COVID-19 pandemic in certain jurisdictions.

As of June 30, 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 March 31, 2021.

As such, the Company has determined the tax impact of repatriating these earnings would not be material as of June 30, 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.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

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)

Three Months Ended June 30, Six Months Ended June 30,

Dollars in thousands, except per share amounts 2021 2020 2021 2020

Basic net income per share:

Net income $ 45,394 $ 9,180

Net income (loss) $ 35,068 $ ( 369 ) $ 80,462 $ 8,811

Weighted average common shares outstanding 84,687 84,706 84,593 84,955

1 unchanged sentence

Diluted net income per share:

Net income $ 45,394 $ 9,180

Net income (loss) $ 35,068 $ ( 369 ) $ 80,462 $ 8,811

Weighted average common shares outstanding — Basic 84,687 84,706 84,593 84,955

3 unchanged sentences

Diluted net income per common share $ 0.41 $ 0.00 $ 0.94 $ 0.10

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.

Common stock of approximately 0.1 million and 0.5 million shares at June 30, 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)

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 $ 45,394 $ 9,180

Comprehensive income (loss) for the six months ended June 30, 2021 and 2020 was as follows:

Three Months Ended June 30, Six Months Ended June 30,

Dollars in thousands 2021 2020 2021 2020

Net income (loss) $ 35,068 $ ( 369 ) $ 80,462 $ 8,811

Foreign currency translation adjustment 1,558 10,433 ( 5,243 ) 3,620

2 unchanged sentences

Comprehensive income (loss), net $ 28,731 $ 1,095 $ 104,558 $ ( 17,912 )

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)

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

Changes in accumulated other comprehensive loss by component between December 31, 2020 and June 30, 2021 are presented in the table below, net of tax:

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

Balance at January 1, 2021 $ ( 82,249 ) $ ( 5,105 ) $ 13,295 $ ( 74,059 )

1 unchanged sentence

Amounts reclassified from accumulated other comprehensive loss 18,774 — — 18,774

30,861 — — 30,861

Net current-period other comprehensive income (loss) 29,111 228 ( 5,243 ) 24,096

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.

Balance at June 30, 2021 $ ( 53,138 ) $ ( 4,877 ) $ 8,052 $ ( 49,963 )

For the six months ended June 30, 2021, the Company reclassified a gain of $ 25.0 million and a loss of $ 6.2 million from accumulated other comprehensive loss to other income (expense), net and interest income.

SEGMENT AND GEOGRAPHIC INFORMATION

6 unchanged sentences

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 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 March 31,

(In thousands)

Net sales and profit by each reportable segment for the three and six months ended June 30, 2021 and 2020 are as follows :

Three Months Ended June 30, Six Months Ended June 30,

Dollars in thousands 2021 2020 2021 2020

Segment Net Sales

13 unchanged sentences

No asset information is reported to the chief operating decision maker and disclosed in the financial information for each segment.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

The Company attributes revenues to geographic areas based on the location of the customer.

Total revenue by major geographic area consisted of the following:

Three Months Ended March 31,

(In thousands)

Three Months Ended June 30, Six Months Ended June 30,

Dollars in thousands 2021 2020 2021 2020

United States $ 278,186 $ 181,850 $ 525,979 $ 428,702

12 unchanged sentences

The Company consistently accrues legal fees expected to be incurred in connection with loss contingencies as those fees are incurred by outside counsel as a period cost.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

Contingent Consideration

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.

The Company determined the fair value of contingent consideration during the six month period ended June 30, 2021 and June 30, 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 six months ended June 30, 2021 and June 30, 2020 is as follows (in thousands):

Six Months Ended June 30, 2021 Contingent Consideration Liability Related to Acquisition of:

Arkis Location in Financial Statements Derma Sciences ACell Inc.

(See Note 2) Location in Financial Statements

2 unchanged sentences

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:

Transfers ( 3,432 ) 3,432 — —

Gain (loss) from change in fair value of contingent consideration liabilities 17 $ ( 402 ) Research and development — ( 400 ) Selling, general and administrative

Balance as of June 30, 2021 $ — $ 14,776 $ 230 $ 23,500

Six Months Ended June 30, 2020 Contingent Consideration Liability Related to Acquisition of:

Arkis Derma Sciences Location in Financial Statements

2 unchanged sentences

Loss from change in fair value of contingent consideration liabilities ( 708 ) — Research and development

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

Balance as of June 30, 2020 $ 13,502 $ 230

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

Arkis BioSciences Inc.

5 unchanged sentences

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.

The estimated fair value as of June 30, 2021 and June 30, 2020 was $ 14.8 million and $ 13.5 million, respectively.

The Company recorded $ 14.8 million and $ 13.5 million in other liabilities at June 30, 2021 and June 30, 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 March 31, 2021 and March 31, 2020 was $ 0.2 million.

The estimated fair value as of June 30, 2021 and June 30, 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