What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-02 compared with 2021-07-29 · 171 added, 139 removed, 310 unchanged (50% of the section changed)

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The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes thereto appearing elsewhere in this report and our consolidated financial statements for the year ended December 31, 2020 included in our Annual Report on Form 10-K.

We have made statements in this report which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”).

We have made statements in this report which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”).

These forward-looking statements are subject to a number of risks, uncertainties and assumptions about the Company and other matters.

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the risk that the COVID-19 pandemic could lead to further material delays and cancellations of, or reduced demand for, procedures;

curtailed or delayed capital spending by the Company's customers;

disruption to the Company's supply chain;

closures of our facilities;

delayed capital spending by the Company's customers;

disruption and/or higher costs to the Company’s supply chain;

staffing shortages in hospitals;

labor impacts in our facilities;

delays in gathering clinical evidence;

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the risk that the COVID-19 virus disrupts local economies and causes economies in our key markets to enter prolonged recessions.

The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those set forth under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, and under the heading "Risk Factors" in this report.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those set forth under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, under the heading "Risk Factors" in this report, and in other filings with the SEC.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by applicable law.

You can identify these forward-looking statements by forward-looking words such as “believe,” “may,” “might,” “could,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “seek,” “plan,” “expect,” “should,” “would” and similar expressions in this report.

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Codman Specialty Surgical and Tissue Technologies.

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

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

Acquisitions and Divestitures, for details.

Our Codman Specialty Surgical products comprise of specialty surgical implants and instrumentation for a broad range of specialties.

This segment includes products and solutions for dural access and repair, instruments, advanced energy, cerebral spinal fluid ("CSF") management and neuro monitoring including market leading product portfolios used in neurosurgery operation suites and critical care units.

This segment includes products and solutions for dural access and repair, instruments, advanced energy, cerebral spinal fluid management and neuro monitoring including market leading product portfolios used in neurosurgery operation suites and critical care units.

Codman Specialty Surgical products are sold through a combination of directly employed sales representatives, distributors and wholesalers, depending on the customer call point.

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The acquisition also supports our long-term growth and profitability strategy with a financial profile similar to Integra’s tissue products.

In 2021, we are focused on the integration of ACell Inc., into our Tissue Technologies business segment, while also continuing the development of regenerative tissue products for complex wound management that will benefit the expanded portfolio.

To date, all critical components of ACell Inc.

integrating into our Tissue Technologies business have been completed ahead of schedule.

See Note 2, Acquisitions and Divestitures , for details.

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We continue to identify ways of optimizing our portfolio including identifying low-growth, low-margin products and product franchises for discontinuation.

In January 2021, we completed the sale of our Extremity Orthopedics business for approximately $240 million in cash subject to finalization of working capital adjustments.

This transaction enables us to increase our investments in our core Neurosurgery and Tissue Technology businesses which will strengthen our existing leadership positions in both areas, fund pipeline opportunities to drive future growth and expand our addressable markets.

In January 2021, we completed the sale of our Extremity Orthopedics business for approximately $240 million in cash.

The Company finalized the net working capital and paid an additional $1.3 million to Smith & Nephew as of September 30, 2021.

This transaction enables us to increase our investments in our core Neurosurgery and Tissue Technology businesses that will strengthen our existing leadership positions in both areas and fund pipeline opportunities to drive future growth and expand our addressable markets.

See Note 2, Acquisitions and Divestitures for details.

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Internationally, we have increased our commercial resources significantly in key emerging markets and are making investments to support our sales organization and maximize our commercial opportunities.

These strong investments in our international sales channel position us well for expansion and long-term growth.

These investments in our international sales channel position us well for expansion and long-term growth.

In addition, we continue to build upon our leadership brands across our product franchises to enable us to engage customers through enterprise-wide contracts.

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We continue to invest in technologies, systems and processes to enhance the customer experience.

Additionally, we launched new digital programs, resources and virtual product training to drive continued customer familiarity with our growing portfolio of medical technologies globally.

Additionally, we launched new digital tools and programs, resources and virtual product training to drive continued customer familiarity with our growing portfolio of medical technologies globally.

Clinical and Product Development Activities

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In each area, we continue to benefit from products launched over the past several years.

Within our Codman Specialty Surgical segment, the Company received FDA clearance in 2020 to treat malignant and benign tumors, but not limited to meningiomas and gliomas, for its CUSA® Clarity Ultrasonic Surgical Aspirator System, the first and only ultrasonic tissue ablation system with this specific indication.

Within our Codman Specialty Surgical segment, the Company received U.S.

Food and Drug Administration ("FDA") clearance in 2020 to treat malignant and benign tumors, but not limited to meningiomas and gliomas, for its CUSA® Clarity Ultrasonic Surgical Aspirator System, the first and only ultrasonic tissue ablation system with this specific indication.

The FDA clearance is based on a wealth of peer-reviewed clinical publications and 40 years of surgical cases involving resection of brain and spinal tumors.

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We advanced the early-stage technology platforms we acquired during 2019.

Through the Arkis Biosciences acquisition, we added a platform technology, CerebroFlo® external ventricular drainage (EVD) catheter with Endexo® technology, a permanent additive designed to reduce the potential for catheter obstruction due to thrombus formation.

Through the Arkis Acquisition, we added a platform technology, CerebroFlo ® external ventricular drainage catheter with Endexo technology, a permanent additive designed to reduce the potential for catheter obstruction due to thrombus formation.

The CerebroFlo ® EVD Catheter has demonstrated an average of 99% less thrombus accumulation onto its surface, in vitro, compared to a market leading EVD catheter.

We acquired Rebound Therapeutics, a company that specialized in single-use medical devices that enable minimally invasive access with enhanced lighting and visualization to the neurosurgery suite and launched the MIRROR registry to collect data on this new device.

These new platforms provide us with the opportunity to expand into new, faster growth therapeutic areas such as intracerebral hemorrhage and minimally invasive neurosurgery.

Within our Tissue Technologies segment, we recently completed one of the largest diabetic foot ulcers (DFU) randomized controlled trials (RCTs) of PriMatrix® Dermal Repair Scaffold for the management of DFU.

We acquired Rebound Therapeutics, a Company that specialized in single-use medical device, known as Aurora® Surgiscope®, which is the only tubular retractor system designed for cranial surgery with an integrated access channel, camera and lighting.

In the third quarter of 2021, we conducted a limited clinical launch of the Aurora® Surgiscope® for use in minimally invasive neurosurgery as well as initiated a registry called MIRROR to collect data on early surgical intervention using Aurora for the treatment of intracerebral hemorrhage (ICH).

In the third quarter of 2021, the CereLink ™ ICP Monitor System was launched in the U.S.

and Europe to gather user data and feedback.

CereLink ™ provides clinicians with uncompromised, advanced continuous ICP monitoring that until now, has not been available when treating patients with traumatic brain injuries.

Within our Tissue Technologies segment, we recently completed one of the largest diabetic foot ulcers (DFU) randomized controlled trials (RCTs) of the PriMatrix® Dermal Repair Scaffold for the management of DFU.

This multi-center study enrolled more than 225 patients with chronic DFU's over the course of 12-week treatments and 4-week follow-up phases.

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During the second half of 2020, the Company's revenues were still impacted due to COVID-19 resurgences, though not to the levels seen in the first half of 2020.

During the first half of 2021, our business segments were well positioned to capitalize on the improving demand driven by the ongoing global market recovery.

We saw particularly healthy order activity in products used in neurosurgery, instruments, burn, trauma and surgical reconstruction as markets gradually recovered.

Areas such as capital equipment and our international indirect markets are still early in their recovery, but are reporting encouraging trends.

We remain confident that the underlying markets in which the Company competes remain attractive over the long term.

During 2021, our business segments have benefited from the improving demand compared to 2020, driven by the ongoing global market recovery.

We have seen improving order activity in products used in neurosurgery, instruments, burn and trauma as markets continue to recovery from 2020 levels.

However, the COVID-19 Delta variant has impacted the pace of recovery in our business as we experienced regional variability driven in part by vaccination rates and local re-opening policies.

The pace of recovery has also been more recently impacted by staffing shortages in hospitals and surgical centers.

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

We remain confident that the underlying markets in which the Company competes remain attractive.

We also remain focused on managing the business for the long-term, including preserving full time jobs needed to support the rebound in surgical procedure volumes.

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Any such economic recession could have a material adverse effect on the Company's long-term business as hospitals curtail and reduce capital as well as overall spending.

The COVID-19 pandemic and local actions, such as “shelter-in-place” orders and restrictions on travel and access to our customers or temporary closures of our facilities or the facilities of our suppliers and their contract manufacturers, could further significantly impact our sales and our ability to ship our products and supply our customers.

The COVID-19 pandemic and local actions, such as “shelter-in-place” orders and restrictions on travel and access to our customers or temporary closures of our facilities or the facilities of our suppliers and their contract manufacturers, disruption and/or higher costs to the Company’s supply chain, staffing shortages in hospitals and labor constraints in our facilities, could further impact our sales and our ability to ship our products and supply our customers.

Any of these events could negatively impact the number of surgical and medical intervention procedures performed and have a material adverse effect on our business, financial condition, results of operations, or cash flows.

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The revised final guidance of July 2020 maintained this approach and extended the discretionary enforcement period to May 31, 2021.

Rather than the risk of enforcement action, the Company discontinued manufacturing all morselized amniotic membrane tissue-based products prior to May 31, 2021.

Considering the risk of enforcement action, the Company discontinued the manufacturing of all morselized amniotic membrane tissue-based products prior to May 31, 2021.

We no longer distribute these products.

As of June 30, 2021, the Company has not received any further notice of enforcement action from the FDA regarding its morselized amniotic membrane tissue-based products.

Revenues from the now discontinued BioD morselized amniotic membrane-based products for the six months ended June 30, 2021 were less than 1.0% of consolidated revenues.

As of September 30, 2021, the Company has not received any further notice of enforcement action from the FDA regarding its morselized amniotic membrane tissue-based products.

Revenues from the now discontinued BioD morselized amniotic membrane-based products for the nine months ended September 30, 2021 were less than 1.0% of consolidated revenues.

On March 7, 2019, TEI Biosciences, Inc.

a subsidiary of the Company received a Warning Letter (the “Warning Letter”), dated March 6, 2019, from the FDA.

The warning letter relates to quality systems issues at our manufacturing facility located in Boston, Massachusetts.

("TEI"), a subsidiary of the Company received a Warning Letter (the “Warning Letter”), dated March 6, 2019, from the FDA.

The warning letter relates to quality systems issues at TEI's manufacturing facility located in Boston, Massachusetts.

The letter resulted from an inspection held at that facility in October and November 2018 and did not identify any new observations that were not already provided in the Form 483 that followed the inspection.

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The letter states that requests for Certificates to Foreign Governments would not be granted.

However, due to our progress reports, the FDA agreed to resume issuing Certificates to Foreign Governments to TEI due to substantial progress and the length of time it takes to resolve the Warning Letter.

However, due to our monthly progress reports, the FDA agreed to issue Certificates to Foreign Governments for the products manufactured at TEI due to substantial progress and the length of time it takes to resolve the Warning Letter.

Additionally, premarket approval applications for Class III devices to which the Quality System regulation violations are reasonably related will not be approved until the violations have been corrected.

The TEI Boston facility manufactures extracellular bovine matrix (EBM) products.

The TEI Boston facility manufactures extracellular bovine matrix products.

The Company does not expect to incur material incremental expense for remediation activities.

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Any adverse regulatory action, depending on its magnitude, may restrict us from effectively manufacturing, marketing and selling our products and could have a material adverse effect on our business, financial condition and results of operations.

Revenues of products manufactured in the TEI Boston facility for the six months ended June 30, 2021 were approximately 4.5% of consolidated revenues.

Revenues of products manufactured in the TEI Boston facility for the nine months ended September 30, 2021 were approximately 4.6% of consolidated revenues.

ACQUISITIONS & 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.

The Company recognized a gain of $42.2 million in connection with the sale that is presented in Gain from the sale of business in the consolidated statement of operations for the year ended June 30, 2021.

The Company recognized a gain of $42.0 million in connection with the sale that is presented in Gain from the sale of business in the consolidated statement of operations for the year ended September 30, 2021.

See Note 2- Acquisitions and Divestitures for details.

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

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 .

for an acquisition purchase price of $306.9 million plus contingent consideration obligations of up to $100 million, that may be payable upon achieving certain revenue-based performance milestones in 2022, 2023 and 2025 .

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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Executive Summary

Net income for the three months ended June 30, 2021 was $35.1 million, or $0.41 per diluted share, as compared to $(0.4) million or $(0.00) per diluted share for the three months ended June 30, 2020.

The net income for the three months ended June 30, 2021, was primarily driven by increase in revenues due to procedure recovery experienced in the current year as compared to the height of the COVID-19 pandemic in the first half of 2020.

Net income for the six months ended June 30, 2021 was $80.5 million, or $0.94 per diluted share, as compared to $8.8 million or $0.10 per diluted share for the six months ended June 30, 2020.

The net income for the six months ended June 30, 2021 was primarily driven by higher revenue relating to surgical procedure recovery for the first half of 2021 and increase in non-operating income due to the gain of $42.2 million recognized in the first quarter of 2021 as a result of the sale of the Extremity Orthopedics business.

Net income for the three months ended September 30, 2021 was $43.2 million, or $0.51 per diluted share, as compared to $32.3 million or $0.38 per diluted share for the three months ended September 30, 2020.

The increase in net income for the three months ended September 30, 2021, was primarily driven by higher revenues across most franchises compared to the prior year due to continuing recovery in surgical procedure volumes experienced from the COVID-19 pandemic, partially offset by higher operating expenses as costs continued to normalized after 2020 cost reduction actions.

Within non-operating income and expense, the Company benefited from lower interest expense and higher other income.

Net income for the nine months ended September 30, 2021 was $123.7 million, or $1.45 per diluted share, as compared to $41.1 million or $0.48 per diluted share for the nine months ended September 30, 2020.

The increase in net income for the nine months ended September 30, 2021 was primarily driven by higher revenue relating to surgical procedure recovery and increase in non-operating income due to the gain of $42.0 million recognized in the first quarter of 2021 as a result of the sale of the Extremity Orthopedics business.

Special Charges

Income before taxes includes the following special charges :

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

Three Months Ended September 30, Nine Months Ended September 30,

Dollars in thousands 2021 2020 2021 2020

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Total $ 16,433 $ 22,620 $ 18,062 $ 60,714

(1) The Company completed its sale of its Extremity Orthopedics business and recognized a gain of $42.2 million for the six months ended June 30, 2021 which was partially offset by other acquisition, divestiture and integration-related charges.

Acquisitions and Divestitures for details.

(1) The Company completed its sale of its Extremity Orthopedics business and recognized a gain of $42.0 million for the nine months ended September 30, 2021 which was partially offset by other acquisition, divestiture and integration-related charges.

See Note 2- Acquisitions and Divestitures for details.

(2) Charges relate to business interruptions and costs associated with the COVID-19 pandemic which impacted the Company's operations globally, partially offset by Coronavirus government relief programs in the prior year.

The items reported above are reflected in the condensed consolidated statements of operations as follows:

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

Three Months Ended September 30, Nine Months Ended September 30, 2021

Dollars in thousands 2021 2020 2021 2020

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2020-06, the Company will no longer incur non-cash interest expense for the amortization of debt discount.

Basis of Presentation, for details.

See Note 1- Basis of Presentation , for details.

We typically define special charges as items for which the amounts and/or timing of such expenses may vary significantly from period to period, depending upon our acquisition, divestiture, integration and restructuring activities, and for which the amounts are non-cash in nature, or for which the amounts are not expected to recur at the same magnitude.

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The Company's revenues and gross margin on product revenues were as follows:

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

Three Months Ended September 30, Nine Months Ended September 30,

Dollars in thousands 2021 2020 2021 2020

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Gross margin as a percentage of total revenues 62.7 % 63.6 % 61.2 % 62.0 %

Three Months Ended June 30, 2021 as Compared to Three Months Ended June 30, 2020

For the three months ended June 30, 2021, total revenues increased by $131.3 million to $390.0 million from $258.7 million for the same period in 2020.

Dom estic revenues increased by $96.3 million, or 53.0%, to $278.2 million and were 71.3% of total revenues for the three months ended June 30, 2021 compared to $181.9 million during the same period in the prior year.

International revenues increased by $35.0 million or 45.6% to $111.8 million for the three months ended June 30, 2021 compared to $76.8 million during the same period in the prior year.

The increase in revenues globally were primarily as a result of the recovery experienced from the COVID-19 pandemic across all franchises compared to the prior year due to rebound in surgical procedure volumes.

Three Months Ended September 30, 2021 as Compared to Three Months Ended September 30, 2020

For the three months ended September 30, 2021, total revenues increased by $16.6 million to $386.9 million from $370.2 million for the same period in 2020.

Dom estic revenues increased by $9.3 million, or 3.5%, to $275.8 million and were 71.3% of total revenues for the three months ended September 30, 2021 compared to $266.5 million during the same period in the prior year.

International revenues increased by $7.3 million or 7.0% to $111.1 million for the three months ended September 30, 2021 compared to $103.8 million during the same period in the prior year.

The increase in revenues was primarily driven by the recovery experienced from the COVID-19 pandemic across most franchises due to continuing recovery in surgical procedure volumes compared to the prior period, as well as the launch of the CereLink ™ ICP Monitor which occurred in the third quarter.

Foreign exchange fluctuations had a favorable impact of $1.0 million on revenues for the quarter.

In the Codman Specialty Surgical segment ("CSS"), revenues were $256.5 million which was an increase of $17.2 million, or 7.2% as compared to the prior-year period.

The Neurosurgery and Instrument portfolios increased high-double digits as a result of the recovery experienced from the COVID-19 pandemic.

In the Tissue Technologies ("TT") segment, revenues were $133.2 million which was an increase of $44.3 million, or 49.8% from the prior-year period.

The Wound Reconstruction and Private Label portfolios increased high-double digits as a result of the recovery experienced from the COVID-19 pandemic.

Additionally, our TT segment revenue reflect the acquisition of ACell Inc.

which was completed on January 20, 2021 and the sale of the Company's Extremity Orthopedics product portfolio which occurred on January 4, 2021.

The Company saw growth within our Neurosurgery portfolio primarily with sales in neuromonitoring increasing low double digits due to the launch of the CereLink™ ICP Monitor as well as sales in advanced energy increasing high single digits and dural access and repair increasing mid-single digits.

Sales in our instruments portfolio increased low double digits as compared to the same period in the prior year driven by order recovery.

In the Tissue Technologies ("TT") segment, revenues were $130.4 million which was a decrease of $0.5 million, or 0.4% from the prior-year period.

Within TT, our Extremity Orthopedics business was divested on January 4, 2021.

Our Wound Reconstruction business, excluding the impact of acquisitions, increased low single digits and sales in our Private Label business increased low double digits as a result of continuing recovery in order trends from our customers.

We continue to closely monitor local, regional, and global COVID-19 surges as well as new variants of the virus for an impact on procedures during Q4 2021 and beyond.

The reallocation of hospital resources to treat COVID-19 may continue to cause a financial strain on healthcare systems and reduce procedural volumes.

The reallocation of hospital resources to treat COVID-19 and staffing shortages may continue to cause a financial strain on healthcare systems and reduce procedural volumes.

Additionally, the Company does not expect all markets and product lines to improve at the same rate based on the level of recurrence of COVID-19 and its associated impact on the pace of procedure recovery and economic normalization.

Gross margin increased to $238.7 million for the three months ended June 30, 2021, an increase of $85.5 from $153.2 million for the sa me period in 2020.

Gross margin as a percentage of revenues increased to 61.2% for the second quarter of 2021 from 59.2% in the same period last year.

This increase was mainly attributable to our strong revenue recovery from the disruption caused by the COVID-19 pandemic during the same period in the prior year, as well as due to favorable U.S.

product mix and improved manufacturing utilization.

Gross margin increased to $242.4 million for the three months ended September 30, 2021, an increase of $7.0 million from $235.4 million for the sa me period in 2020.

Gross margin as a percentage of revenues decreased to 62.7% from 63.6% in the same period last year.

This decrease was mainly attributable to increased amortization associated with technology-based intangible assets.

Operating Expenses

The following is a summary of operating expenses as a percent of total revenues:

Three Months Ended June 30,

Three Months Ended September 30,

Research and development 6.7 % 5.3 %

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Total operating expenses 48.1 % 48.1 %

Total operating expenses, which consist of research and development, selling, general and administrative, and amortization expenses, increased by $47.8 million, or 34.4% to $186.9 million in the three months ended June 30, 2021, compared to $139.1 million in the same period in 2020.

The increase in operating expenses compared to the prior year was primarily due to an increase in research and development, selling, general and administrative costs partially offset by a decrease in amortization expense.

The Company continues to manage and prioritize it operating costs closely given the continued uncertainty of COVID-19.

We also benefited from cost synergies as a result of the ACell Inc.

acquisition the sale of the Extremity Orthopedic business.

Total operating expenses, which consist of research and development, selling, general and administrative, and amortization expenses, increased by $8.1 million, or 4.6% to $186.0 million in the three months ended September 30, 2021, compared to $177.9 million in the same period in 2020.

The increase in operating expenses compared to the prior year reflects costs associated with higher employee related costs, increased research and development as well as increased outside spending as revenue recovered.

T he Company continues to manage and prioritize it operating costs closely given the continued uncertainty of COVID-19.

We also benefited from cost synergies as a result of the acquisition of ACell and the sale of the Extremity Orthopedics business.

Research and Development

Research and development expenses for the three months ended June 30, 2021 increased by $5.2 million as compared to the same period in the prior year.

Research and development expenses for the three months ended September 30, 2021 increased by $6.4 million as compared to the same period in the prior year.

This increase in spending resulted from additional spending on new product development, clinical studies and additional spending due to the European Union Medical Device Regulation compliance.

Selling, General and Administrative

Selling, general and administrative costs increased by $46.4 million as compared to the same period in the prior year driven primarily due to costs associated with higher employee related costs, higher incentive and stock-based compensation, increased variable selling costs, as well as increased outside spending as revenue recovered.

Selling, general and administrative costs increased by $5.9 million as compared to the same period in the prior year driven primarily due to costs associated with higher employee related costs as well as increased outside spending as revenue recovered.

Intangible Asset Amortization

A mortization expense (excludin g amounts reported in cost of product revenues for technology-based intangible assets) for the three months ended June 30, 2021 was $4.2 million compared to $8.1 million for the same period in prior year primarily due to a reduction in amortization expense associated with intangible assets sold in conjunction with the sale of the Extremity and Orthopedics business during the current year.

A mortization expense (excludin g amounts reported in cost of product revenues for technology-based intangible assets) for the three months ended September 30, 2021 was $4.1 million compared to $8.3 million for the same period in prior year primarily due to a reduction in amortization expense associated with intangible assets sold in conjunction with the sale of the Extremity Orthopedics business during the current year.

Non-Operating Income and Expenses

The following is a summary of non-operating income and expenses:

Three Months Ended June 30,

Three Months Ended September 30,

Dollars in thousands 2021 2020

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Interest Income

Interest income for the three months ended June 30, 2021 decreased by $0.5 million as compared to the same period last year.

Interest income for the three months ended September 30, 2021 decreased by $0.5 million as compared to the same period last year.

Interest Expense

Interest expense for the three months ended June 30, 2021 decreased by $2.5 million as compared to the same period in the prior year primarily due to the elimination of the non-cash interest expense as the result of the adoption ASU 2020-06 and the expenses associated with Amended and Restated Senior Credit Agreement which occurred in the prior period.

Basis of Presentation for details in relation to the adoption of ASU 2020-06.

Interest expense for the three months ended September 30, 2021 decreased by $8.6 million as compared to the same period in the prior year primarily due the elimination of the non-cash interest expense as the result of the adoption ASU 2020-06 and the expenses associated with Amended and Restated Senior Credit Agreement which occurred in the prior period.

See Note 1- Basis of Presentation for details in relation to the adoption of ASU 2020-06.

Other Income, net

Other income, net for the three months ended June 30, 2021 increased by $4.1 million compared to the same period in the prior year primarily due to income associated with the transition services agreement from the divestiture of the Extremity Orthopedics business and and higher income from additional cross currency swaps that were entered into during Q4 2020.

Three Months Ended June 30,

Other income, net for the three months ended September 30, 2021 increased by $2.5 million compared to the same period in the prior year primarily due to income associated with the transition services agreement from the divestiture of the Extremity Orthopedics business which was partially offset by an unfavorable impact of foreign exchange in the prior year.

Three Months Ended September 30,

Dollars in thousands 2021 2020

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Effective tax rate 14.9 % 22.1 %

The Company’s effective income tax rates for the three months ended June 30, 2021 and 2020 were 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 were lower income impacted by the COVID-19 pandemic, in addition to a $3.4 million valuation allowance on certain foreign deferred tax assets.

The Company’s effective income tax rates for the three months ended September 30, 2021 and 2020 were 14.9% and 22.1%, respectively.

For the three months ended September 30, 2021, the primary drivers of the tax rate is due to the jurisdictional mix of income and a benefit related to excess tax benefits from stock compensation.

For the three months ended September 30, 2020, the primary drivers of the tax rate are due to the jurisdictional mix of income and 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 the reversal of $3.2 million valuation allowance on certain foreign deferred tax assets as the Company determined that it was more likely than not that these foreign deferred tax assets would be realized.

The effective tax rate may vary from period to period depending on, among other factors, the geographic and business mix of taxable earnings and losses, tax planning and settlements with various taxing authorities.

We consider these factors and others, including the Company's history of generating taxable earnings, in assessing our ability to realize tax assets on a quarterly basis.

Additionally, changes to income tax laws and regulations, in any of the tax jurisdictions in which the Company operates, could impact the effective tax rate.

Various governments, both U.S.

and non-U.S., are increasingly focused on tax reform and revenue-raising legislation.

The current U.S.

administration has proposed tax reform which, if enacted, would increase the Company’s U.S.

federal income tax liability.

Further, legislation in foreign jurisdictions may be enacted, in response to the base erosion and profit-shifting (BEPS) project begun by the Organization for Economic Cooperation and Development (OECD).

The OECD recently finalized major reform of the international tax system with respect to a minimum tax rate.

Such changes in U.S.

jurisdictions could have an adverse effect on the Company’s effective tax rate.

While it is often difficult to predict the outcome or the timing of the resolution of a particular matter with the various federal, state, and foreign tax authorities, we believe that our reserves reflect the most probable outcome of known tax contingencies.

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The Company's tax reserves are presented in the balance sheet within other liabilities, except for amounts relating to items that we expect to pay in the coming year, which would be classified as current income taxes payable.

Six Months Ended June 30, 2021 as Compared to Six Months Ended June 30, 2020

Nine Months Ended September 30, 2021 as Compared to Nine Months Ended September 30, 2020

Revenues and Gross Margin

For the six months ended June 30, 2021, total revenues increased by $137.1 million to $750.1 million from $613.0 million for the same period in 2020.

Domestic revenues increased by $97.3 million, or 23%, to $526.0 million and were 70% of total revenues for the six months ended June 30, 2021.

International revenues increased by $39.8 million, or 22% to $224.1 million for the six months ended June 30, 2021 compared to $184.3 million during the same period in the prior year.

The net increase of $137.1 million was a result of the recovery experienced from the COVID-19 pandemic across all franchises compared to the prior year due to rebound in surgical procedure volumes.

For the nine months ended September 30, 2021, total revenues increased by $153.7 million to $1,136.9 million from $983.2 million for the same period in 2020.

Domestic revenues increased by $106.6 million, or 15.3%, to $801.8 million and were 70.5% of total revenues for the nine months ended September 30, 2021.

International revenues increased by $47.1 million, or 16.4% to $335.2 million for the nine months ended September 30, 2021 compared to $288.0 million during the same period in the prior year.

The net increase of $153.7 million was a result of continuing recovery in surgical procedure volumes experienced from the COVID-19 pandemic across all franchises.

Foreign exchange fluctuations had a favorable impact of $12.9 million on revenues for the year.

Codman Specialty Surgical revenues were $754.6 million, an increase of $114.0 million, or 17.8% from the prior-year period.

The Neurosurgery and Instrument portfolios increased high-double digits as a result of the recovery experienced from the COVID-19 pandemic.

The Neurosurgery and Instrument portfolios increased low-double digits as a result of the continued recovery experienced from the COVID-19 pandemic.

Tissue Technologies revenues were $382.3 million, an increase of $39.7 million, or 11.6% from the prior-year period.

The Wound Reconstruction and Private Label portfolios increased high-double digits as a result of the recovery experienced from the COVID-19 pandemic.

Additionally, our TT segment revenue reflect the acquisition of ACell Inc.

which was completed on January 20, 2021 and the sale of the Company's Extremity Orthopedics product portfolio which occurred on January 4, 2021.

Gross margin was $453.0 million for the six-month period ended June 30, 2021, an increase of $78.9 million from $374.0 million for the same period last year.

Gross margin as a percentage of total revenue decreased to 60.4% for the six months ended June 30, 2021 from 61.0% in the same period last year.

The decrease in gross margin percentage was due to increased amortization associated with technology-based intangible assets and inventory step-up amortization in connection with the ACell Inc.

Within TT, our Extremity Orthopedics business was divested on January 4, 2021.

Sales in our Wound Reconstruction business, excluding the impact of acquisitions, and sales in our Private Label business both increased low double digits as a result of continued recovery experienced from the COVID-19 pandemic.

Gross margin was $695.4 million for the nine months period ended September 30, 2021, an increase of $85.9 million from $609.5 million for the same period last year.

Gross margin as a percentage of total revenue decreased to 61.2% for the nine months ended September 30, 2021 from 62.0% in the sam e period last year.

The decrease in gross margin percentage was due to increased amortization associated with technology-based intangible assets and inventory step-up amortization in connection with the ACell Acquisition.

Operating Expenses

The following is a summary of operating expenses as a percent of total revenues:

Six Months Ended June 30,

Nine Months Ended September 30,

Research and development 6.0 % 5.6 %

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Total operating expenses 48.9 % 52.0 %

Total operating expenses, which consist of selling, general and administrative expenses, research and development expenses, IPR&D expense and amortization expenses, increased by $37.6 million, or 11.3% to $370.4 million in the six months ended June 30, 2021, compared to $332.9 million in the same period in 2020.

Total operating expenses, which consist of selling, general and administrative expenses, research and development expenses, and amortization expenses, increased by $45.6 million, or 8.9% to $556.4 million in the nine months ended September 30, 2021, compared to $510.7 million in the same period in 2020.

Research and Development

Research and development expenses for the nine months ended September 30, 2021 increased by $13.1 million as compared to the same period in the prior year.

This increase in spending resulted from additional spending on new product development, clinical studies and additional spending due to the European Union Medical Device Regulation compliance.

Selling, General and Administrative

Selling, general and administrative costs increased by $37.1 million as compared to the same period in the prior year driven primarily due to costs associated with higher employee related costs, higher incentive and stock-based compensation, increased variable selling costs, as well as increased outside spending as revenue recovered.

Selling, general and administrative costs increased by $43.1 million as compared to the same period in the prior year driven primarily due to higher employee related costs, higher incentive and stock-based compensation, as well as increased outside spending as revenue recovered.

Intangible Asset Amortization

A mortization expense (excludin g amounts reported in cost of product revenues for technology-based intangible assets) for the six months ended June 30, 2021 was $8.7 million compared to $15.1 million for the same period in prior year primarily due to a reduction in amortization expense associated with intangible assets sold in conjunction with the sale of the Extremity and Orthopedics business during the current year and accelerated amortization expense associated with an intangible asset recorded in the prior year.

A mortization expense (excludin g amounts reported in cost of product revenues for technology-based intangible assets) for the nine months ended September 30, 2021 was $12.8 million compared to $23.4 million for the same period in prior year primarily due to a reduction in amortization expense associated with intangible assets sold in conjunction with the sale of the Extremity Orthopedics business during the current year as well as accelerated amortization expense associated with an intangible asset which was recorded in the prior year.

We expect total annual amortization expense to be app roximately $20.2 million for the remainder of 2021, $78.8 million in 2022, $78.1 million in 2023, $77.4 million in 2024, $77.4 million in 2025, $77.2 million in 2026 and $588.9 million thereafter.

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The following is a summary of non-operating income and expenses:

Six Months Ended June 30,

Nine Months Ended September 30,

Dollars in thousands 2021 2020

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Interest Income

Interest income for the six months ended June 30, 2021 decreased by $1.3 million as compared to the same period last year primarily due to the settlement of cross-currency swaps designated as net investment hedges during Q4 2020.

In terest income for the nine months ended September 30, 2021 decreased by $1.8 million as compared to the same period last year primarily due to the settlement of cross-currency swaps designated as net investment hedges during Q4 2020.

Interest Expense

Interest expense for the six months ended June 30, 2021 decreased by $7.4 million as compared to the same period last year primarily due to the elimination of the non-cash interest expense as the result of the adoption ASU 2020-06 and the expenses associated with Amended and Restated Senior Credit Agreement which occurred in the prior period.

Basis of Presentation for details in relation to the adoption of ASU 2020-06.

Interest expense for the nine months ended September 30, 2021 decreased by $16.0 million as compared to the same period last year primarily due to the elimination of the non-cash interest expense as the result of the adoption ASU 2020-06 and the expenses associated with Amended and Restated Senior Credit Agreement which occurred in the prior period.

See Note 1- Basis of Presentation for details in relation to the adoption of ASU 2020-06.

Gain from the sale of business

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Other Income, net

Other income, net for the six months ended June 30, 2021, increased by $9.4 million primarily due to income associated with the transition services agreement with Smith and Nephew and higher income from additional cross currency swaps that were entered into during Q4 2020.

Six Months Ended June 30,

Other income, net for the nine months ended September 30, 2021, increased by $11.9 million primarily due to income associated with the transition services agreement with Smith and Nephew which was partially offset by an unfavorable impact of foreign exchange in the prior year.

Nine Months Ended September 30,

Dollars in thousands 2021 2020

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Effective tax rate 24.1 % 24.6 %

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

For the six months ended June 30, 2021, the primary drivers of the lower tax rate was mix of income in lower-taxed jurisdictions, offset by the tax impact of the gain on sale of its Extremity 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 lower-taxed jurisdictions and a $3.4 million valuation allowance on certain foreign deferred tax assets, as the Company determined that it is 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.

The Company’s effective income tax rates for the nine months ended September 30, 2021 and 2020 were 24.1% and 24.6%, r espectively.

For the nine months ended September 30, 2021, the primary driver of the tax rate is due to the jurisdictional mix of income and a benefit related to excess tax benefits from stock compensation, offset by the tax impact of the gain on the sale of the Extremity Orthopedics business which was completed during the first quarter of 2021.

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

The Company expects its effective income tax rate for the full year to be approximately 24.1%, driven primarily by the jurisdictional mix of income and the tax impact of the gain from the sale of its Extremity Orthopedic business, which closed during the first quarter.

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We consider these factors and others, including the Company's history of generating taxable earnings, in assessing our ability to realize tax assets on a quarterly basis.

Additionally, changes to income tax laws and regulations, in any of the tax jurisdictions in which the Company operates, could impact the effective tax rate.

Various governments, both U.S.

and non-U.S., are increasingly focused on tax reform and revenue-raising legislation.

The current U.S.

administration has proposed tax reform which, if enacted, would increase the Company’s U.S.

federal income tax liability.

The OECD recently finalized major reform of the international tax system with respect to a minimum tax rate.

Such changes in U.S.

jurisdictions could have an adverse effect on the Company’s effective tax rate.

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Total revenue by major geographic area consisted of the following:

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

Three Months Ended September 30, Nine Months Ended September 30,

Dollars in thousands 2021 2020 2021 2020

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Local economic conditions, regulatory compliance or political considerations, the effectiveness of our sales representatives and distributors, local competition and changes in local medical practice all may combine to affect our sales into markets outside the U.S.

Domestic revenues increased by $96.3 million for the three months ended June 30, 2021 compared to the same period last year.

European sales increased by $16.4 million for the three months ended June 30, 2021 compared to the same period last year.

Sales to customers in Asia Pacific increased by $10.8 million for the three months ended June 30, 2021.

The Rest of the World for the three months ended June 30, 2021 increased by $7.8 million compared to the same period last year.

Domestic revenues increased by $97.3 million for the six months ended June 30, 2021 compared to the same period last year.

European sales increased by $16.3 million for the six months ended June 30, 2021 compared to the same period last year.

Sales to customers in Asia Pacific increased by $18.1 million for the six months ended June 30, 2021.

The Rest of the World for the six months ended June 30, 2021 increased by $5.3 million compared to the same period last year.

Domestic revenues increased by $9.3 million for the three months ended September 30, 2021 compared to the same period last year.

European sales increased by $0.5 million for the three months ended September 30, 2021 compared to the same period last year.

Sales to customers in Asia Pacific increased by $4.5 million for the three months ended September 30, 2021.

The Rest of World for the three months ended September 30, 2021 increased by $2.3 million compared to the same period last year.

The increase in revenues globally was primarily driven by the continued recovery experienced from the COVID-19 pandemic across all franchises compared to the prior year due to rebound in surgical procedure volumes as well as the launch of the CereLink ™ ICP Monitor which occurred in the third quarter.

Sales in China and Japan continue to drive international growth, and continue to see improving performance in several key markets in Europe, Canada and our indirect markets.

Domestic revenues increased by $106.6 million for the nine months ended September 30, 2021 compared to the same period last year.

European sales increased by $16.8 million for the nine months ended September 30, 2021 compared to the same period last year.

Sales to customers in Asia Pacific increased by $22.7 million for the nine months ended September 30, 2021.

The Rest of World for the nine months ended September 30, 2021 increased by $7.6 million compared to the same period last year.

The increase in revenues globally was primarily as a result of the continued recovery experienced from the COVID-19 pandemic across all franchises compared to the prior year due to rebound in surgical procedure volumes.

LIQUIDITY AND CAPITAL RESOURCES

Working Capital

The working capital as of June 30, 2021 and December 31, 2020 was $713.6 million and $836.2 million, respectively.

The working capital as of September 30, 2021 and December 31, 2020 was $770.9 million and $836.2 million, respectively.

Working capital consists of total current assets less total current liabilities as presented in the consolidated balance sheets.

Cash and Marketable Securities

The Company had cash and cash equivalents totaling approximately $397.4 million and $470.2 million at June 30, 2021 and December 31, 2020 respectively, which are valued based on Level 1 measurements in the fair value hierarchy.

At June 30, 2021, our non-U.S.

The Company had cash and cash equivalents totaling approximately $470.2 million at September 30, 2021 and December 31, 2020 respectively, which are valued based on Level 1 measurements in the fair value hierarchy.

At September 30, 2021, our non-U.S.

subsidiaries held approximately $265.6 million of cash and cash equivalents that are available for use outside the U.S.

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

Six Months Ended June 30,

Nine Months Ended September 30,

Dollars in thousands 2021 2020

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Cash Flows Provided by Operating Activities

Operating cash flows for the six months ended June 30, 2021 increased by $106.4 million compared to the same period in 2020.

Net income after removing the impact of the gain on sale of business and non-cash adjustments increased for the six months ended June 30, 2021 by approximately $32.9 million as compared to the same period in 2020 primarily due to the revenue recovery in the current year as compared to the height of the COVID-19 pandemic in the first half of the 2020 .

Operating cash flows for the nine months ended September 30, 2021 increased by $119.6 million compared to the same period in 2020.

Net income after removing the impact of the gain on sale of business and non-cash adjustments increased for the nine months ended September 30, 2021 by approximately $25.4 million as compared to the same period in 2020 primarily due to the continuing revenue recovery in the current year as compared to the height of the COVID-19 pandemic in the first half of the 2020.

The changes in assets and liabilities, net of business acquisitions, increased cash flows by $43.4 million as compared to the decrease of $50.8 million for the same period in 2020.

The increase in 2021 is attributable to a reduction in inventories mainly driven by higher revenues in the first half of 2021, an increase in accounts payables, accrued expenses and other current liabilities partially offset by an increase in accounts receivable due to continued collection efforts.

Operating cash flows for the six months ended June 30, 2020 decreased compared to the same period in 2019.

Net income after non-cash adjustments decreased for the six months ended June 30, 2020 by approximately $37.7 million compared to the same period in 2019 primarily due to adverse effects of the COVID-19 pandemic.

The changes in assets and liabilities, net of business acquisitions, decreased cash flows from operating activities by $36.1 million for the six months ended June 30, 2020 compared to a decrease of $49.8 million for the same period in 2019.

The decrease in 2020 is attributable to an increase in inventory to ensure an adequate safety stock of select products as surgical procedures continue to recover from levels experienced in the second quarter.

The improvement in 2021 working capital is attributable to a smaller increase in inventory of $3.6 million due to investments in building safety stock made in the prior year where inventory increased by $45.5 million.

Operating cash flows for the nine months ended September 30, 2020 decreased compared to the same period in 2019.

For the nine months ended September 30, 2020, net income after non-cash adjustments decreased by approximately $21.3 million to $174.4 million from $195.7 million when compared to the same period in 2019 primarily due to adverse effects of the COVID-19 pandemic.

The changes in assets and liabilities, net of business acquisitions, decreased cash flows from operating activities by $50.8 million for the nine months ended September 30, 2020 compared to a decrease of $53.5 million for the same period in 2019.

The decrease in 2020 is attributable to an increase in inventory to improve safety stock of select products.

In addition, decreases were also driven by reduced payables offset by decreases in accounts receivable due to lower revenue and continued collection efforts.

Cash Flows Used in Investing Activities

During the six months ended June 30, 2021, we paid a net cash amount of $303.9 million in relation to the acquisition of ACell Inc.

and received net proceeds of $191.7 million for the sale of the Extremity Orthopedics business.

During the nine months ended September 30, 2021, we paid a net cash amount of $303.9 million in relation to the acquisition of ACell and received net proceeds of $190.5 million for the sale of the Extremity Orthopedics business.

The Company also paid for $20.6 million capital expenditures to support operations improvement initiatives at a number of our manufacturing facilities and other information technology investments.

During the six months ended June 30, 2020, the Company paid $23.7 million for capital expenditures, most of which were directed to our facilities located in Mansfield, MA, Boston, MA, Memphis, TN, and Princeton, NJ.

During the nine months ended September 30, 2020, the Company paid $30.5 million for capital expenditures, most of which were directed to our facilities located in Mansfield, MA;

and Princeton, NJ.

Cash Flows Used in Financing Activities

Uses of cash from financing activities in the six months ended June 30, 2021 were repayments of $102.2 million under our Senior Credit Facility and Securitization Facility.

In addition, the Company had $3.8 million in cash taxes paid in net equity settlement.

These uses were offset by $3.6 million proceeds from the exercise of stock options and $2.2 million borrowings under our Securitization Facility.

Sources of cash from financing activities in the six months ended June 30, 2020 were $515.3 million proceeds from the issuance of Convertible Senior Notes including the call and warrant transactions, $127.7 million borrowing under our Senior Credit Facility and Securitization Facility.

These were offset by repayments of $388.5 million on the revolving portion of our Senior Credit Facility and Securitization Facility, $20.3 million debt issuance costs related to the Amended and Restated Senior Credit Agreement and the issuance of Convertible Senior Notes and $100.0 million purchases of treasury stock.

Uses of cash from financing activities in the nine months ended September 30, 2021 were repayments of $114.3 million under our Senior Credit Facility and Securitization Facility.

In addition, the Company had $4.3 million in cash taxes paid in net equity settlements.

These uses were offset by $6.6 million proceeds from the exercise of stock options and $13.5 million borrowings under our Senior Credit Facility and Securitization Facility.

Sources of cash from financing activities in the nine months ended September 30, 2020 were $515.3 million proceeds from the issuance of Convertible Senior Notes including the call and warrant transactions, $151.3 million borrowing under our Senior Credit Facility and Securitization Facility.

These were offset by repayments of $441.0 million on the revolving portion of our Senior Credit Facility and Securitization Facility, $24.3 million debt issuance costs related to the Amended and Restated Senior Credit Agreement and the issuance of the 2025 Notes and $100.0 million purchases of treasury stock.

Amended and Restated Senior Credit Agreement, Convertible Senior Notes, Securitization and Related Hedging Activities

See Note 6, Debt to the current period’s condensed consolidated financial statements for a discussion of our Amended and Restated Senior Credit Agreement, Convertible Senior Notes and Securitization Facility and Note 7, Derivative Instruments for discussion of our hedging activities.

We are forecasting that for the next twelve months, sales and earnings will be sufficient to remain in compliance with our financial covenants under the terms of the February 2020 Amendment and July 2020 Amendment to the Senior Credit Facility.

See Note 6, Debt to the current period’s condensed consolidated financial statements for a discussion of our Amended and Restated Senior Credit Agreement, the 2025 Notes and Securitization Facility and Note 7- Derivative Instruments for discussion of our hedging activities.

We are forecasting that sales and earnings for the next twelve months will be sufficient to remain in compliance with our financial covenants under the terms of the February 2020 Amendment and July 2020 Amendment to the Senior Credit Facility.

Share Repurchase Plan

On December 7, 2020, the Board of Directors authorized the Company to repurchase up to $225 million of the Company’s common stock.

On December 7, 2020, the Board authorized the Company to repurchase up to $225 million of the Company’s common stock.

The program allows the Company to repurchase its shares opportunistically from time to time.

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During the year ended December 31, 2020, the Company repurchased 2.1 million shares of Integra’s common stock as a part of our 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.

The Company utilized $100.0 million of net proceeds from the offering of the 2025 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.

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Off-Balance Sheet Arrangements

We do not have any off–balance sheet financing arrangements during the six months ended June 30, 2021 that have or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our interests.

We do not have any off–balance sheet financing arrangements during the nine months ended September 30, 2021 that have or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our interests.

Contractual Obligations and Commitments

As of June 30, 2021, the Company is obligated to pay the following amounts under various agreements:

As of September 30, 2021, the Company is obligated to pay the following amounts under various agreements:

Payments Due by Calendar Year

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The Company has excluded its contingent consideration obligation related to prior and current year acquisitions from the contractual obligations table above;

this liability had a total estim ated fair value of $38.5 million at June 30, 2021.

this liability had a total estim ated fair value of $37.8 million at September 30, 2021.

This liability has been excluded because the amount to be paid or the potential payment date is not fixed.

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This has been excluded because the future amounts to be paid and the potential payment dates are not fixed.

The Company has excluded the liability for uncertain tax benefits from the contractual obligations table above, including i nterest and penalties, totaling $0.8 million at June 30, 2021.

The Company has excluded the liability for uncertain tax benefits from the contractual obligations table above, including i nterest and penalties, totaling $0.8 million at September 30, 2021.

This liabili ty for uncertain tax benefits has been excluded because we cannot make a reliable estimate of the period in which the uncertain tax benefits may be realized.

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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 2. Management’s Discussion and Analysis