What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-10-26 compared with 2022-07-27 · 170 added, 151 removed, 281 unchanged (53% of the section changed)

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complex wound surgery, surgical reconstruction, and peripheral nerve repair.

We have key manufacturing and research facilities located in California, Indiana, Maryland, Massachusetts, New Jersey, Ohio, Puerto Rico, Tennessee, Utah, Canada, China, France, Germany, Ireland and Switzerland.

We have key manufacturing and research facilities located in California, Indiana, Maryland, Massachusetts, New Jersey, Ohio, Puerto Rico, Tennessee, Utah, France, Germany, Ireland and Switzerland.

We source most of our handheld surgical instruments and dural sealant products through specialized third-party vendors.

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An important part of the Company's strategy is pursuing strategic transactions and licensing agreements that increase relevant scale in the clinical areas in which Integra competes.

During 2021, the Company acquired ACell Inc.

("ACell"), an innovative regenerative medicine company specializing in the manufacturing of porcine urinary bladder extracellular matrices.

This acquisition not only expanded the Company’s product offering of regenerative technologies, but it is also expected to support the Company’s long-term growth and profitability strategy as this product line has a financial profile similar to Integra’s other regenerative tissue products.

All critical components of ACell have been integrated into the Company’s TT segment.

Our growth strategy includes the acquisition of businesses, assets or products lines to increase the breadth of our offerings, the reach of our product portfolios and drive relevant scale to our customers.

In 2022, we continued to advance the development of pioneering neurosurgical technologies from our 2019 acquisitions of Arkis Biosciences, Inc.

and Rebound Therapeutics Corporation and the expansion our product offering of regenerative technologies from our 2021 ACell acquisition.

See Note 2, Acquisitions and Divestitures , to the Notes to Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for additional details.

In 2022, we continued to advance the development of pioneering neurosurgical technologies from our 2019 acquisitions, Arkis Biosciences, Inc.

and Rebound Therapeutics Corporation

Portfolio Optimization and New Product Introductions.

We are investing in innovative product development to drive a multi-generational pipeline for our key product franchises.

Our product development efforts span across our key global franchises focused on potential for significant returns on investment.

Our product development efforts span across our key global franchises focused on potential technological innovations for significant returns on investment.

In addition to new product development, we are funding studies to gather clinical evidence to support launches, ensure market access and improve reimbursement for existing products.

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As such, we may opportunistically divest businesses or discontinue products where we see limited runway for future value creation in line with our aspirations due in part to changes in the market, business fundamentals or the regulatory environment.

On May 20, 2022, we entered into an agreement to sell our non-core traditional wound care ("TWC") business to Gentell, LLC for approximately $28.8 million, which consists of $27.8 million in cash plus $1.0 million in contingent consideration which may be received upon achieving certain revenue-based performance milestones.

The transaction is expected to close at or around August 31, 2022, subject to the satisfaction of customary conditions.

Revenues for the TWC business were approximately $27 million in 2021.

See Note 2, Assets and Liabilities Held for Sale, to the Notes to Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for details.

Our portfolio optimization actions over the past two years have allowed us to increase our focus on Integra’s core portfolio of market-leading products in neurosurgery, surgical instrumentation and regenerative tissue and moves us closer to achieving our long-term organic growth and profitability targets.

In August 2022, we completed the sale of our non-core traditional wound care ("TWC") business to Gentell, LLC for $28.8 million, which consists of $27.8 million in cash plus $1.0 million in contingent consideration which may be received upon achieving certain revenue-based performance milestones.

In January 2021, we completed the sale of our Extremity Orthopedics business to Smith & Nephew USD Limited ("Smith & Nephew"), a subsidiary of Smith & Nephew plc, for approximately $240 million in cash.

This transaction enables us to increase our investments in our core neurosurgery and tissue technologies businesses and fund pipeline opportunities to expand our addressable markets to strengthen our existing leadership positions in these segments and drive future growth.

See Note 2, Acquisitions and Divestitures , to the Notes to Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) 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.

Domestically, we have also increased our TT sales force in the United States to support the expanded regenerative tissue product portfolio that included ACell products.

Domestically, we have also increased our TT sales force in the United States to support the expanded regenerative tissue product portfolio that includes ACell products.

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

Customer Experience .

We aspire to be ranked as a best-in-class provider and are committed to strengthen our relationships with all customers.

We aspire to be ranked as a best-in-class provider and are committed to strengthening our relationships with all customers.

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

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

In addition, we announced plans to outsource certain transactional back-office finance and customer service activities to enhance customer quality, build scale for future growth, and capture cost efficiencies.

Clinical and Product Development Activities

In addition, we are in the process of outsourcing certain transactional back-office finance and customer service activities to enhance customer quality, build scale for future growth, and capture cost efficiencies and expect to complete the transition by year end 2022.

New Product Introductions and Research and Development Updates

We continue to invest in collecting clinical evidence to support the Company's existing products and new product launches, and to ensure that we obtain market access for broader and more cost-effective solutions.

In 2021, we launched our CereLink™ ICP Monitor System in the U.S.

and Europe direct markets.

CereLink provides enhanced accuracy, usability and advanced data presentation that provides clinicians with uncompromised, advanced continuous ICP monitoring that until now, has not been available when treating patients with traumatic brain injuries.

Through the first half of 2022, we have continued the global rollout of Cerelink with product launches in Australia and Canada, as well as several other indirect markets in EMEA.

We are focused on the development of core clinical applications in our electromechanical technologies portfolio.

In June 2022, we launched the Neutus ® EVD system, our first external ventricular drain (“EVD") in China.

The Neutus EVD system is manufactured in China by Shanghai Haoju Medical Technology Co., Ltd.

under an exclusive distribution arrangement.

The device is used in the management of cerebrospinal fluid and is highly complementary to our Bactiseal ® catheter and advanced intercranial pressure monitoring products.

Also, we continue to update our CUSA Clarity platform by incorporating new ultrasonic handpiece, surgical tips and integrated electrosurgical capabilities.

We continue to work with several instrument partners to bring new surgical instrument platforms to the market.

In the third quarter of 2022, we made progress to several enhancements to our CUSA ® Clarity Tissue Ablation System.

The extended laparoscopic tip was launched in the U.S.

to enhance laparoscopic liver procedures.

In addition, a single-sided bone tip received 510(k) approval.

Commercial launch is expected in the first quarter of 2023.

We continue to update our CUSA Clarity platform by incorporating new ultrasonic handpiece and integrated electrosurgical capabilities.

In 2022, we continued to advance the two early-stage technology platforms we acquired in 2019.

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In 2021, we began and continued to conduct 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 this same technology platform for the treatment of intracerebral hemorrhages ("ICH").

In the second quarter of 2022, we have continued to execute on our growth initiatives.

In 2022, we have continued to execute on our growth initiatives.

We launched the Aurora ® Evacuator with Coagulation device in the U.S., designed to be used in conjunction with our Aurora Surgiscope to safely address and evacuate blood in the brain caused by hemorrhagic stroke.

Within our TT segment, in the first half of 2022, we launched NeuraGen ® 3D Nerve Guide Matrix, a resorbable implant for repair of peripheral nerve discontinuities and designed to optimize the environment for nerve regeneration to allow for more complete functional recovery.

We are focused on the development of core clinical applications in our electromechanical technologies portfolio.

In June 2022, we launched the Neutus ® EVD system, our first external ventricular drain (“EVD") in China.

The Neutus EVD system is manufactured in China by Shanghai Haoju Medical Technology Co., Ltd.

under an exclusive distribution arrangement.

The device is used in the management of cerebrospinal fluid and is highly complementary to our Bactiseal ® catheter and advanced intercranial pressure monitoring products.

In 2021, we launched our CereLink ® ICP Monitor System in the U.S.

and Europe direct markets and continued the global rollout in the first half of 2022.

Refer below to the FDA Matters for further consideration on the recall of the CereLink ICP Monitor System.

Within our TT segment, in 2022, we launched NeuraGen ® 3D Nerve Guide Matrix, a resorbable implant for repair of peripheral nerve discontinuities and designed to optimize the environment for nerve regeneration to allow for more complete functional recovery.

During 2021, we completed one of the largest diabetic foot ulcers ("DFU"), randomized controlled trials of the PriMatrix ® Dermal Repair Scaffold for the management of DFU.

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COVID-19 Pandemic and the Economic Recession

During this global crisis, the Company's focus remained on supporting patients, providing customers with life-saving products, and protecting the well-being of our employees.

The rapid and evolving spread of the virus and subsequent variants have resulted in unprecedented challenges to the global healthcare industry.

In response to the pandemic, we acted swiftly by implementing protocols to ensure continuity of our manufacturing and distribution sites around the world and to provide for the safety of our employees.

We remain confident that the underlying markets in which the Company competes remain attractive and we remain focused on managing the business for the long-term.

The COVID-19 pandemic and actions taken by governmental authorities, private businesses and individuals, such as “shelter-in-place” orders and restrictions on travel and access to our customers or temporary closures of our facilities or the facilities o f our suppliers, 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 margins and our ability to ship our products and supply our customers.

While COVID variants continue to contribute to an uncertain business environment, effects resulting from the pandemic such as inflationary pressures and global central bank actions to contain high inflation levels could cause a local and/or global economic recession.

The global healthcare system is continuing to respond to the unprecedented challenge posed by the COVID-19 (including new variants of COVID-19) pandemic ("COVID-19" or the "pandemic").

The pandemic has caused a severe global health crisis, along with economic and societal disruptions and uncertainties, which have negatively impacted business and healthcare activity globally.

The COVID-19 pandemic continues to cause significant volatility and uncertainty in the global and regional economies, leading to changes in consumer and business behavior, market fluctuations, materials and product shortages and restrictions on business and individual activities, all of which are materially impacting supply and demand in broad sectors of the world markets.

Additionally, the COVID-19 pandemic and general macroeconomic conditions have led to disruptions in the global supply chain, primarily through a lack of availability of raw materials and electronic components.

We have experienced challenges associated with material and component availability for certain product lines, longer shipping and delivery times for raw materials and components, constrained logistics capacity related to the movement of our products, availability of skilled labor and increased costs of raw materials, components, labor, and freight and courier services.

Regional COVID-19 case volumes (including those related to subsequent variants), actions taken by governmental authorities, private businesses and individuals, 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, 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 margins and our ability to ship our products and supply our customers.

COVID variants continue to contribute to an uncertain business environment and the effects resulting from the pandemic, such as inflationary pressures and global central bank actions to contain high inflation levels, could cause or contribute to a local and/or global economic recession.

Capital markets and worldwide economies have also been significantly impacted and such economic recession could have a material adverse effect on the Company’s long-term business as hospitals reduce capital, as well as overall spending.

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.

The emergence of new variants, vaccinations and public health measures are driving the pace of economic recovery unevenly in various regions.

The direct and indirect disruptions caused by the pandemic and the responses of both governments and individuals 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.

Further discussion of the potential impacts on our business from the COVID-19 pandemic and global macroeconomic conditions is provided under Item 1A - Risk Factors of Part I of our Annual Report on Form 10-K for the year ended December 31, 2021.

On August 18, 2022, the Company, after consultation with the FDA and other regulatory authorities outside of the United States, initiated an immediate voluntary global product removal of all CereLink intracranial pressure monitors as a result of customer reports about monitors whose pressure readings were out of range.

The Company believes that the out-of-range readings are principally caused by electrical interference from the external environment and/or interference from a component on the circuit board of the monitor.

These out-of-range readings have occurred at a low incidence rate and at a limited number of sites;

however, out of an abundance of caution, the Company removed all CereLink monitors from the field.

The Company is continuing its investigation into the matter in order to remedy the observed issue and plans to resume shipment of the CereLink monitors as soon as any such issues have been resolved.

Based on outlook for returning the product to market and feedback from customers, the Company recorded a $1.5 million provision for product returns, as a reduction of net revenue, and a $0.8 million rework accrual in cost of goods sold in the third quarter of 2022.

We manufacture and distribute products derived from human tissue for which FDA has specific regulations governing human cells, tissues and cellular and tissue-based products ("HCT/Ps").

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We no longer distribute these products.

As of June 30, 2022, the Company has not received any further notice of enforcement action from the FDA regarding its morselized amniotic membrane tissue-based products.

As of September 30, 2022, the Company has not received any further notice of enforcement action from the FDA regarding its morselized amniotic membrane tissue-based products.

As the FDA continues to review various 361 HCT/P products currently on the market over time, there is the risk of continued upregulation by FDA based on their interpretation of criteria applied to specific 361 HCT/P products and the new clinical applications of these products by Health Care Professionals that may be viewed by FDA as higher risk uses.

Additionally, the Center for Medicare & Medicaid Services (CMS), which is part of the Department of Health and Human Services (HHS), will be requiring all amniotic products to obtain new reimbursement codes by 2024, where qualification includes a detailed review by the FDA’s Tissue Reference Group (TRG) of the 361 HCT/P’s uses, processing and relevant characteristics followed by a written recommendation that the HCT/P, in their opinion, meets the criteria of a 361 HCT/P.

There is the risk that although the TRG provided letters in the past confirming the 361 HCT/P status of our amniotic products, they may not do so again due to changes in their interpretation and application of the 361 HCT/P criteria and/or the practices of clinicians for specific uses which could be considered higher risk uses.

Any of these outcomes could negatively impact the ability to obtain third party reimbursement for these products as well as negatively impact the volume of these products utilized by Health Care Professionals and have a material adverse effect on our business, financial condition, results of operations, or cash flows.

On March 7, 2019, TEI Biosciences, Inc.

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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, 2022 were approximately 6.0% of consolidated revenues.

Revenues of products manufactured in the TEI Boston facility for the nine months ended September 30, 2022 were approximately 5.5% of consolidated revenues.

ACQUISITIONS & DIVESTITURES

On August 31, 2022, the Company completed the sale of its previously announced sale of its non-core traditional wound care ("TWC") business to Gentell, LLC ("Gentell") for $28.8 million, which consists of $27.8 million in cash plus $1.0 million in contingent consideration which may be received upon achieving certain revenue-based performance milestones two years after the closing date.

The proceeds from the sale of the TWC business of $27.8 million is presented in the consolidated statement of cash flows net of cash transferred of $3.5 million and other transaction fees .

The transaction included the sale of the Company's TWC products, such as sponges, gauze and conforming bandages, and certain advanced wound care dressings, such as supportive, calcium alginate, hydrogel, and foam dressings.

In connection with the sale, the Company recognized $0.6 million as a gain from the sale of business in the consolidated statement of operations for the nine months ended September 30, 2022.

The transaction is subject to final working capital adjustments.

See Note 2, Acquisitions and Divestitures , to the Notes to Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for details.

On January 4, 2021, the Company completed its sale of its Extremity Orthopedics business to Smith & Nephew.

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In connection with the sale, the Company recognized a $41.8 million as Gain from the sale of business in the consolidated statement of operations for the year ended December 31, 2021.

The Company finalized the net working capital and paid an additional $1.3 million to Smith & Nephew as of December 31, 2021.

See Note 2, Acquisitions and Divestitures , to the Notes to Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for details.

Our growth strategy includes the acquisition of businesses, assets or products lines to increase the breadth of our offerings and the reach of our product portfolios and drive relevant scale to our customers.

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

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As a result of our ongoing acquisition strategy and significant growth in recent years, we have undertaken cost-saving initiatives to consolidate manufacturing operations, distribution facilities and transfer activities, implement a common ERP system, eliminate duplicative positions, realign various sales and marketing activities, and expand and upgrade production c apacity for our regenerative technology products.

These efforts are expected to continue and while we expect a positive impact from ongoing restructuring, integration, and manufacturing transfer and expansion activities, such results remain uncertain.

These efforts are expe cted to continue and while we expect a positive impact from ongoing restructuring, integration, and manufacturing transfer and expansion activities, such results remain uncertain.

In support of our continued focus on product margins during 2022, we closed a manufacturing facility located in France and began the transfer of production to the Company’s existing Switzerland facility .

The transfer is expected to be completed by the fourth quarter of 2022.

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Executive Summary

Net income for the three months ended June 30, 2022 was $44.8 million, or $0.54 per diluted share, as compared to $35.1 million or $0.41 per diluted share for the three months ended June 30, 2021.

The increase in net income for the three months ended June 30, 2022, was primarily driven by higher revenues across most franchises.

Net income for the six months ended June 30, 2022 was $77.7 million, or $0.93 per diluted share, as compared to $80.5 million or $0.94 per diluted share for the six months ended June 30, 2021.

The decrease in net income for the six months ended June 30, 2022, was primarily driven by the increase in non-operating income in the prior period due to the gain of $42.2 million recognized as result of the sale of the Extremity Orthopedics business.

Excluding the impact of the gain, net income increased for the six months ended June 30, 2022, driven by higher revenues across most franchises.

Net income for the three months ended September 30, 2022 was $49.9 million, or $0.60 per diluted share, as compared to $43.2 million or $0.51 per diluted share for the three months ended September 30, 2021.

Net income for the nine months ended September 30, 2022 was $127.6 million, or $1.53 per diluted share, as compared to $123.7 million or $1.45 per diluted share for the nine months ended September 30, 2021.

The increase in net income for the nine months ended September 30, 2022, was primarily driven by an increase in revenue as well as a decrease in the income tax provision as compared to prior year.

This increase was partially offset by an increase in non-operating income in the prior period due to the gain of $42.0 million recognized as 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 2022 2021 2022 2021

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Total $ 9,478 $ 16,433 $ 38,022 $ 18,062

(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.

(1) See Note 2 , Acquisitions and Divestitures for details.

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,

Dollars in thousands 2022 2021 2022 2021

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Selling, general and administrative 877 6,386 12,440 24,443

Gain from the sale of business (1)

Gain from the sale of businesses (1)

(644) 230 (644) (41,967)

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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 2022 2021 2022 2021

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Gross margin as a percentage of total revenues 61.5 % 62.7 % 62.1 % 61.2 %

Three Months Ended June 30, 2022 as Compared to Three Months Ended June 30, 2021

For the three months ended June 30, 2022, total revenues increased by $7.8 million to $397.8 million from $390.0 million for the same period in 2021, inclusive of a unfavorable foreign currency impact of $10.3 million on revenues.

Dom estic revenues increased by $9.2 million, or 3.3%, to $287.3 million and were 72.2% of total revenues for the three months ended June 30, 2022 compared to $278.2 million during the same period in the prior year.

International revenues decreased by $1.4 million or 1.2% to $110.5 million for the three months ended June 30, 2022 compared to $111.8 million during the same period in the prior year, which is inclusive of a unfavorable foreign currency impact of $10.3 million.

In the CSS segment, revenues were $257.9 million which was an increase of $1.0 million, or 0.4% as compared to the prior-year period, inclusive of a $9.2 million unfavorable foreign currency impact on revenue.

The increase was as a result of the continued broad demand recovery we have seen across many CSS franchises as well as our ability to maintain pace with customer deliveries.

Excluding the impact of foreign currency, Neurosurgery portfolio grew low single digits primarily driven by sales in advanced energy and CSF management.

Sales in our instruments portfolio increased mid single digits as compared to the same period in the prior year.

In the TT segment, revenues were $140.0 million which was an increase of $6.8 million, or 5.1% from the prior-year period, inclusive of a $1.1 million unfavorable foreign curren cy impact on revenue .

Sales in our Wound Reconstruction business, increased low single digits, led by Integra ® Dermal Matrices and SurgiMend ® .

Sales in our Private Label business increased low double digits driven by higher customer demand and favorable order timing.

Gross margin was $249.4 million for the three months ended June 30, 2022, an increase of $10.7 million from $238.7 million for the same period in 2021.

Gross margin as a percentage of revenues was 62.7% for the three months ended June 30, 2022 and 61.2% or the same period in 2021.

This increase in gross margin was due to higher revenues and a decrease in amortization associated with reduction of inventory step-up amortization in connection with the acquisition of ACell in the prior year.

Three Months Ended September 30, 2022 as Compared to Three Months Ended September 30, 2021

For the three months ended September 30, 2022, total revenues decreased by $1.7 million to $385.2 million from $386.9 million for the same period in 2021, inclusive of a unfavorable foreign currency impact of $11.8 million on revenues.

Domestic revenues increased by $6.2 million, or 2.3%, to $282.0 million and were 73.2% of total revenues for the three months ended September 30, 2022 compared to $275.8 million during the same period in the prior year.

International revenues decreased by $7.9 million or 7.1% to $103.2 million for the three months ended September 30, 2022 compared to $111.1 million during the same period in the prior year, which is inclusive of a unfavorable foreign currency impact of $11.8 million.

In the CSS segment, revenues were $249.8 million which was a decrease of $6.7 million, or 2.6% as compared to the prior-year period, inclusive of $10.5 million unfavorable foreign currency impact on revenue.

Excluding the impact of foreign currency, the CSS segment revenues in the third quarter increased $3.8 million as compared to the prior year period.

The increase was driven primarily by low single digits growth in our Neurosurgery portfolio, partially offset by low single digits declines in our our Instruments business.

This increase in our Neurosurgery portfolio was primarily driven by the growth in advanced energy, CSF management, and dural access and repair, partially offset by declines in neuro monitoring which was impacted by the voluntary recall of the CereLink ICP monitoring system.

In the TT segment, revenues were $135.4 million which was an increase of $5.0 million, or 3.9% from the prior-year period, inclusive of a $1.2 million unfavorable foreign currency impact on revenue.

Excluding the impact of foreign currency of $1.2 million and the divestiture impact of TWC of $2.9 million, the TT segment revenues in the third quarter increased by $9.1 million.

This increase was driven by high single digits increases in our Wound Reconstruction business, led by Integra ® Dermal Matrices, amniotic tissue products and ACell MicroMatrix, and low single digit increases in our Private Label business as compared to the same period in the prior year.

Gross margin was $236.7 million for the three months ended September 30, 2022, a decrease of $5.6 million from $242.4 million for the same period in 2021.

Gross margin as a percentage of revenues was 61.5% for the three months ended September 30, 2022 and 62.7% or the same period in 2021.

This decrease in gross margin was driven by CereLink recall impacts, unfavorable regional mix, and higher material and labor costs, partially offset by favorable price and other procurement and margin improvement initiatives.

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 6.4 % 6.7 %

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Total operating expenses 44.5 % 48.1 %

Total operating expenses, which consist of research and development, selling, general and administrative, and amortization expenses, increased by $2.7 million, or 1.4% to $189.5 million in the three months ended June 30, 2022, compared to $186.9 million in the same period in 2021.

The increase in operating expenses compared to the prior year primarily reflects increased selling costs associated with higher revenue as well as higher spending for key growth initiatives in research and development.

Total operating expenses, which consist of research and development, selling, general and administrative, and amortization expenses, decreased by $14.3 million, or 7.7% to $171.7 million in the three months ended September 30, 2022, compared to $186.0 million in the same period in 2021.

The Company continues to prioritize its operating costs to increase organic investments that will drive long-term growth including the support of new product development and introductions, clinical studies, geographic expansion and targeted U.S.

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Research and Development

Research and development expenses for the three months ended June 30, 2022 increased by $5.5 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 spending related to the EU MDR compliance activities.

Research and development expenses for the three months ended September 30, 2022 decreased by $1.1 million as compared to the same period in the prior year due to a decrease in spending during the period associated with project supplies and materials, partially offset by an increase in professional services and costs associated with EU MDR compliance.

Selling, General and Administrative

Selling, general and administrative costs for the three months ended June 30, 2022 decreased by $1.9 million as compared to the same period in the prior year driven by lower incentive and stock-based compensation as well as lower acquisition related expenses partially offset by normalization of spending in selling and marketing.

Selling, general and administrative costs for the three months ended September 30, 2022 decreased by $12.2 million as compared to the same period in the prior year driven primarily due to the reduction of $13.1 million in the change in the fair value of contingent consideration for ACell.

Intangible Asset Amortization

Amortization expense (exclu din g amounts reported in cost of product revenues for technology-based intangible assets) for the three months ended June 30, 2022 was $3.3 million compared to $4.2 million for the same period in prior year.

Amortization expense (excluding amounts reported in cost of product revenues for technology-based intangible assets) for the three months ended September 30, 2022 was $3.1 million compared to $4.1 million for the same period in prior 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 2022 2021

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Other income, net 2,648 4,985

Gain (loss) from the sale of business — (679)

Gain (loss) from the sale of businesses 644 (230)

Total non-operating income and expense $ (6,253) $ (5,651)

Interest Income and Interest Expense

Interest income for the three months ended June 30, 2022 increased by $0.2 million as compared to the same period last year.

Interest expense for the three months ended June 30, 2022 decreased by $0.9 million as compared to the same period last year primarily from a lower outstanding borrowing on the Senior Secured Credit Facility.

Other income, net for the three months ended June 30, 2022 decreased by $3.1 million compared to the same period in the prior year primarily due to lower income associated with the transition services agreement from the divestiture of the Extremity Orthopedics business.

Three Months Ended June 30,

Interest Income

Interest income for the three months ended September 30, 2022 increased by $1.5 million as compared to the same period last year due to higher interest earned on higher cash balances and favorable rates on the net investment hedges entered into during the second quarter of 2022.

Interest Expense

Interest expense for the three months ended September 30, 2022 increased by $0.6 million as compared to the same period last year.

Gain from the sale of businesses

On August 31, 2022, the Company completed its previously announced sale of its TWC business to Gentell and recognized $0.6 million as a gain from the sale of the business f or the three months ended September 30, 2022 .

On January 4, 2021, the Company completed its sale of its Extremity Orthopedics business and recorded a decrease to the gain from the sale of the business of $0.2 million for the three months ended September 30, 2021 as a result of working capital adjustment.

Other Income, net

Other income, net for the three months ended September 30, 2022 decreased by $2.3 million compared to the same period in the prior year primarily due to lower income associated with the transition services agreement from the divestiture of the Extremity Orthopedics business.

Three Months Ended September 30,

Dollars in thousands 2022 2021

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Effective tax rate 15.1 % 14.9 %

The Company’s effective income tax rates for the three months ended June 30, 2022 and 2021 were 13.2% and 21.8%, respectively.

For the three months ended June 30, 2022, the primary driver of the tax rate is a $4.8 million benefit related to excess tax benefit from stock compensation.

The Company’s effective income tax rates for the three months ended September 30, 2022 and 2021 were 15.1% and 14.9%, respectively.

For the three months ended September 30, 2022, the primary driver of the higher tax rate is a decrease of income in lower-taxed jurisdictions, offset by a $1.2 million benefit related to prior year amended tax returns.

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.

Six Months Ended June 30, 2022 as Compared to Six Months Ended June 30, 2021

Nine Months Ended September 30, 2022 as Compared to Nine Months Ended September 30, 2021

Revenues and Gross Margin

For the six months ended June 30, 2022, total revenues increased by $24.4 million to $774.5 million from $750.1 million for the same period in 2021, inclusive of an unfavorable foreign currency impact of $14.9 million on revenues.

Domestic revenues increased by $24.7 million, or 4.7%, to $550.7 million and were 71.1% of total revenues for the six months ended June 30, 2022.

International revenues decreased by $0.3 million, or 0.1% to $223.8 million for the six months ended June 30, 2022 compared to $224.1 million during the same period in the prior year.

For the nine months ended September 30, 2022, total revenues increased by $22.7 million to $1,159.6 million from $1,136.9 million for the same period in 2021, inclusive of an unfavorable foreign currency impact of $26.7 million on revenues.

Domestic revenues increased by $31.0 million, or 3.9%, to $832.7 million and were 71.8% of total revenues for the nine months ended September 30, 2022.

International revenues decreased by $8.2 million, or 2.5% to $326.9 million for the nine months ended September 30, 2022 compared to $335.2 million during the same period in the prior year, which is inclusive of a unfavorable foreign currency impact of $26.7 million.

In the CSS segment, revenues were $755.0 million, which was an increase of $0.4 million, or 0.1% from the prior-year period, inclusive of a $23.9 million unfavorable foreign currency impact on revenue.

The Neurosurgery portfo lio grew low single digits primarily due to sales in neuromonitoring and CSF management.

Sales in our instruments portfolio increased low single digits as compared to the same period in the prior year.

In the TT segment, revenues were $269.3 million, which was a increase of $17.3 million, or 6.9% from the prior-year period, inclusive of a $1.5 million unfavorable foreign currency impact on revenue.

Sales in our Wound Reconstruction business increased low single digits, led by Integra ® Dermal Matrices and SurgiMend ® .

Sales in our Private Label business increased low double digits driven by higher customer demand and favorable order timing.

Gross margin was $483.5 million for the six months ended June 30, 2022, an increase of $30.5 million from $453.0 million for the same period last year.

Gross margin as a percentage of total revenue increased to 62.4% for the six months ended June 30, 2022 from 60.4% in the same period last year.

Excluding the impact of foreign currency, the CSS segment revenues increased $24.3 million as compared to the prior year period.

This increase was primarily driven by low single digits growth in both our Neurosurgery and Instruments portfolios as compared to the same period in the prior year.

The increase in our Neurosurgery portfolio was primarily driven by growth in advanced energy and CSF management, partially offset by the voluntary recall of the CereLink ICP monitoring system.

In the TT segment, revenues were $404.7 million, which was an increase of $22.3 million, or 5.8% from the prior-year period, inclusive of a $2.7 million unfavorable foreign currency impact on revenue.

Excluding the impact of foreign currency of $2.7 million and the divestiture impact of TWC of $2.9 million, the TT segment revenues in the third quarter increased by $27.9 million.

This increase was driven by mid-single digit increases in our Wound Reconstruction business, led by Integra ® Dermal Matrices, SurgiMend ® and ACell MicroMatrix and low double digit increased in our Private Label business driven by higher customer demand and favorable order timing.

Gross margin was $720.2 million for the nine months ended September 30, 2022, an increase of $24.9 million from $695.4 million for the same period last year.

Gross margin as a percentage of total revenue increased to 62.1% for the nine months ended September 30, 2022 from 61.2% in the same period last year.

The increase in gross margin percentage was due to higher revenues and a reduction of inventory step-up amortization in connection with the acquisition of ACell in the prior year.

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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 6.4 % 6.0 %

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Total operating expenses 47.4 % 48.9 %

Total operating expenses, which consist of selling, general and administrative expenses, research and development expenses, and amortization expenses, increased by $7.0 million, or 1.9% to $377.4 million in the six months ended June 30, 2022, compared to $370.4 million in the same period in 2021.

Total operating expenses, which consist of selling, general and administrative expenses, research and development expenses, and amortization expenses, decreased by $7.2 million, or 1.3% to $549.1 million in the nine months ended September 30, 2022, compared to $556.4 million in the same period in 2021.

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Research and Development

Research and development expenses for the six months ended June 30, 2022 increased by $7.2 million as compared to the same period in the prior year.

Research and development expenses for the nine months ended September 30, 2022 increased by $6.1 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 EU MDR compliance.

Selling, General and Administrative

Selling, general and administrative costs increased by $1.4 million as compared to the same period in the prior year driven primaril y due to higher spending, including selling costs on commissions, investment in sales force expansion, and higher spend for key growth initiatives, offset by lower employee related costs, stock-based compensation and acquisition related costs.

Selling, general and administrative costs decreased by $10.8 million as compared to the same period in the prior year driven primarily by reduced employee related costs and stock-based compensation, partially offset by increased selling costs on commissions and investment in sales force expansion.

Additionally, the decrease in the nine months ended September 30, 2022 as compared to the same period in the prior year was also due to the reduction of $16.8 million in the change in fair value of contingent consideration for ACell, partially offset by increased spending in acquisition related costs for acquiring ACell as well as the sale of its Extremity Orthopedics business to Smith & Nephew.

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, 2022 was $7.2 million compared to $8.7 million for the same period in prior year.

We expect total annual amortization expense to be app roximately $38.4 million for the remainder of 2022, $76.5 million in 2023, $75.8 million in 2024, $75.8 million in 2025, $75.7 million in 2026, $73.7 million in 2027 and $499.8 million thereafter.

Amortization expense (excluding amounts reported in cost of product revenues for technology-based intangible assets) for the nine months ended September 30, 2022 was $10.3 million compared to $12.8 million for the same period in prior year.

We expect total annual amortization expense to be approximately $19.1 million for the remainder of 2022, $76.3 million in 2023, $75.7 million in 2024, $75.7 million in 2025, $75.5 million in 2026, $73.6 million in 2027 and $499.0 million thereafter.

Non-Operating Income and Expenses

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

Six Months Ended June 30,

Nine Months Ended September 30,

Dollars in thousands 2022 2021

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Interest expense (36,700) (38,270)

Gain from the sale of business — 42,197

Gain from the sale of businesses 644 41,967

Other income, net 8,056 14,888

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Interest Income

In terest income for the six months ended June 30, 2022 decreased by $0.2 million as compared to the same period last year.

In terest income for the nine months ended September 30, 2022 increased by $1.3 million as compared to the same period last year due to higher interest earned on higher cash balances.

Interest Expense

Interest expense for the six months ended June 30, 2022 decreased by $2.2 million as compared to the same period last year primarily from a lower outstanding borrowing on the Senior Secured Credit Facility.

Gain from the sale of business

On January 4, 2021, 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.

Interest expense for the nine months ended September 30, 2022 decreased by $1.6 million as compared to the same period last year primarily from a lower outstanding borrowing on the Senior Secured Credit Facility.

Gain from the sale of businesses

On August 31, 2022, the Company completed its previously announced sale of its TWC business to Gentell and recognized $0.6 million as a gain from the sale of the business f or the nine months ended September 30, 2022 .

On January 4, 2021, 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.

Other Income, net

Other income, net for the six months ended June 30, 2022, increased by $4.5 million compared to the same period in the prior year primarily due to lower income associated with the transition services agreement from the divestiture of the Extremity Orthopedics business.

Six Months Ended June 30,

Other income, net for the nine months ended September 30, 2022, decreased by $6.8 million compared to the same period in the prior year primarily due unfavorable impact of foreign exchange, as well as lower income associated with the transition services agreement from the divestiture of the Extremity Orthopedics business.

Nine Months Ended September 30,

Dollars in thousands 2022 2021

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Effective tax rate 14.8 % 24.1 %

The Company’s effective income tax rates for the six months ended June 30, 2022 and 2021 were 14.5% and 28.2%, r espectively.

For the six months ended June 30, 2022, the primary driver of the tax rate is a $5.7 million benefit related to excess tax benefits from stock compensation.

For the six months ended June 30, 2021, the primary driver of the higher tax rate is the tax impact of the gain on sale of the Extremity Orthopedics business,which closed during the first quarter of 2021.

The Company’s effective income tax rates for the nine months ended September 30, 2022 and 2021 were 14.8% and 24.1%, respectively.

For the nine months ended September 30, 2022, the primary driver of the lower tax rate is a $5.5 million benefit related to excess tax benefits from stock compensation, offset by the prior year tax impact of the gain on the sale of the Extremity Orthopedics business, which was completed during the first quarter of 2021.

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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 BEPS project begun by the OECD.

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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 2022 2021 2022 2021

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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 $9.2 million for the three months ended June 30, 2022 compared to the same period last year.

European sales decreased by $1.6 million for the three months ended June 30, 2022 compared to the same period last year.

Sales to customers in Asia Pacific decreased by $0.9 million for the three months ended June 30, 2022.

The Rest of World for the three months ended June 30, 2022 increased by $1.2 million compared to the same period last year.

The international revenues were impacted by a $10.3 million unfavorable foreign e xchange impact.

Sales in Japan, China, Canada and Europe continue to drive international growth.

Domestic revenues increased by $24.7 million for the six months ended June 30, 2022 compared to the same period last year.

European sales decreased by $3.7 million for the six months ended June 30, 2022 compared to the same period last year.

Sales to customers in Asia Pacific decreased by $0.5 million for the six months ended June 30, 2022.

The Rest of World for the six months ended June 30, 2022 increased by $3.8 million compared to the same period last year.

Domestic revenues increased by $6.2 million for the three months ended September 30, 2022 compared to the same period last year.

European sales decreased by $8.2 million for the three months ended September 30, 2022 compared to the same period last year.

Sales to customers in Asia Pacific decreased by $2.2 million for the three months ended September 30, 2022 compared to the same period last year.

The Rest of World for the three months ended September 30, 2022 increased by $2.5 million compared to the same period last year.

The international revenues were impacted by a $11.7 million unfavorable foreign exchange impact.

Sales in Japan, China, Canada and Europe continue to drive international growth.

Sales in China, Japan and Canada were the primary drivers of international growth.

Domestic revenues increased by $31.0 million for the nine months ended September 30, 2022 compared to the same period last year.

European sales decreased by $11.8 million for the nine months ended September 30, 2022 compared to the same period last year.

Sales to customers in Asia Pacific decreased by $2.8 million for the nine months ended September 30, 2022 compared to the same period last year.

The Rest of World for the nine months ended September 30, 2022 increased by $6.3 million compared to the same period last year.

The international revenues were impacted by a $26.6 million unfavorable foreign exchange impact.

Sales in Japan, China, and Canada were the primary drivers of international growth.

LIQUIDITY AND CAPITAL RESOURCES

Working Capital

The Company's working capital as of June 30, 2022 and December 31, 2021 was $841.8 million and $813.7 million, respectively.

The Company's working capital as of September 30, 2022 and December 31, 2021 was $892.0 million and $813.7 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 $447.2 million and $513.4 million at June 30, 2022 and December 31, 2021 respectively, which are valued based on Level 1 measurements in the fair value hierarchy.

At June 30, 2022, our non-U.S.

The Company had cash and cash equivalents totaling approximately $511.9 million and $513.4 million at September 30, 2022 and December 31, 2021 respectively, which are valued based on Level 1 measurements in the fair value hierarchy.

At September 30, 2022, our non-U.S.

subsidiaries held approximately $317.7 million of cash and cash equivalents that are available for use outside the U.S.

The Company asserts that it has the ability and intends to indefinitely reinvest the undistributed earnings from its foreign operations unless there is no material tax cost to remit the earnings into the U.S.

Six Months Ended June 30,

On October 3, 2022, the Company settled cross-currency swaps designated as cash flow hedges of intercompany loans and approximately $100 million of cash was repatriated to the U.S.

Refer to See Note 7, Derivative Instruments of the Notes to Consolidated Financial Statements ( Part I, Item 1 of this Form 10-Q) for additional details The Company asserts that it has the ability and intends to indefinitely reinvest the undistributed earnings from its foreign operations unless there is no material tax cost to remit the earnings into the U.S.

Nine Months Ended September 30,

Dollars in thousands 2022 2021

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Cash Flows Provided by Operating Activities

Operating cash flows for the six months ended June 30, 2022 decreased by $49.5 million compared to the same period in 2021.

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, 2022 by approximately $34.4 million as compared to the same period in 2021 primarily due to earnings from higher revenues.

The ch anges in assets and liabilities, net of business acquisitions, decreased cash flows by $46.5 million in 2022 as compared to the increase of $37.5 million for the same period in 2021.

The change in 2022 is mainly attributable to increases in inventory and accounts receivable due to higher revenues and decrease in accrued expenses and other current liabilities due to increased payments processed in the quarter.

The changes in 2021 were primarily 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, 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.

The changes in assets and liabilities, net of business acquisitions, increased cash flows by $37.5 million in 2021 as compared to the decrease of $36.1 million for the same period in 2020.

Operating cash flows for the nine months ended September 30, 2022 decreased by $64.0 million compared to the same period in 2021.

Net income after removing the impact of the gain on sale of businesses and non-cash adjustments increased for the nine months ended September 30, 2022 by approximately $29.1 million as compared to the same period in 2021 primarily due to earnings from higher revenues.

The changes in assets and liabilities, net of business acquisitions, decreased cash flows by $49.7 million in 2022 as compared to the increase in cash flows of $43.4 million for the same period in 2021.

The change in 2022 is mainly attributable to increases in inventory, increases in accounts receivable due to higher revenues and decreases in accrued expenses and other current liabilities due to the Company being in an income tax refund position in the current year.

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 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.

Cash Flows Used in Investing Activities

During the six months ended June 30, 2022, the Company paid $18.7 million for capital expenditures to support operations improvement initiatives at a number of our manufacturing facilities and other information technology investments as well as the final $4.7 million payment related to the final developmental milestone for Rebound Therapeutics Corporation.

This was partially offset by $4.9 million proceeds on cross-currency swaps designated as net investment hedge.

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, 2022, the Company paid $27.9 million for capital expenditures to support operations improvement initiatives at a number of our manufacturing facilities and other information technology investments as well as the $4.7 million payment related to the final developmental milestone for Rebound Therapeutics Corporation.

This was partially offset by the net proceeds from the sale of the TWC business of $24.0 million.

The proceeds from the sale of the TWC business of $27.8 million is presented net of cash transferred of $3.5 million and other transaction fees.

Additionally, the Company also received $4.9 million proceeds on cross-currency swaps designated as net investment hedge.

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.

Cash Flows Used in Financing Activities

Uses of cash from financing activities in the six months ended June 30, 2022 related to the repurchase of treasury stock of $125.0 million under the 2022 accelerated share repurchase agreement.

Uses of cash from financing activities in the nine months ended September 30, 2022 primarily related to the repurchase of treasury stock of $125.0 million under the 2022 accelerated share repurchase agreement that was completed in the first quarter of 2022.

In addition, the Company had $24.3 million in cash taxes paid for net equity settlements as a result of the departure of the former chief executive officer of the Company.

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.

The Company also had repayments of $40.8 million under our Senior Credit Facility and Securitization Facility offset by $34.3 million borrowings under our Senior Credit Facility and Securitization Facility.

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.

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

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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, 2022 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, 2022 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

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The Company has contingent consideration obligation related to prior and current year acquisitions and future pension contribution obligations.

See Note 10, Defined Benefit Plans and Note 17, Commitments and Contingencies to the Notes to Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for details.

See Note 9, Retirement Plans and Note 16, Commitments and Contingencies to the Notes to Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for details.

The associated obligations are not fixed.

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Employee Termination Benefits

The Company incurred restructuring costs related to employee terminations associated with a plant closure and with future outsourcing plans for select transactional back office activities in the consolidated statement of operations for the six months ended June 30, 2022.

Restructuring costs were included in accrued expenses and other current liabilities in the consolidated balance sheet for the six months ended June 30, 2022 and year ended December 31, 2021 .

The Company incurred employee termination costs on restructuring activities associated with a closure of a manufacturing facility located in France, outsourcing plans for select transactional back office activities, and executive reorganization in the consolidated statement of operations for the nine months ended September 30, 2022.

Restructuring costs were included in accrued expenses and other current liabilities in the consolidated balance sheet for the nine months ended September 30, 2022 and year ended December 31, 2021 .

See Note 1, Basis of Presentation of the Notes to Consolidated Financial Statements ( Part I, Item 1 of this Form 10-Q) for additional details.

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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