INTEGRA LIFESCIENCES HOLDINGS CORP 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. Disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management has designed our disclosure controls and procedures to provide reasonable assurance of achieving the desired control objectives. As required by Exchange Act Rule 13a-15(b), we have carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2023. Based upon this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2023 to provide such reasonable assurance. Management’s Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934, as amended. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America (“GAAP”). We recognize that because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies and procedures may deteriorate. To evaluate the effectiveness of our internal control over financial reporting, management used the criteria described in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based upon this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2023. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein. Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION Not applicable. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. PART III INCORPORATION BY REFERENCE The information called for by Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities relating to equity compensation plans, Item 10. Directors, Executive Officers and Corporate Governance, Item 11. Executive Compensation, Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, Item 13. Certain Relationships and Related Transactions, and Director Independence and Item 14. Principal Accountant Fees and Services is incorporated herein by reference to the Company’s definitive proxy statement for its Annual Meeting of Stockholders scheduled to be held on May 9, 2024, which definitive proxy statement is expected to be filed with the Commission not later than 120 days after the end of the fiscal year to which this report relates. 53 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE (a) Documents filed as a part of this report: 1. Financial Statements. The following financial statements are filed as a part of this report: Report of Independent Registered Public Accounting Firm (PricewaterhouseCoopers LLP, Florham Park, New Jersey, PCAOB ID# 238 ) F-1 Consolidated Statements of Operations for the years ended December 31, 202 3 , 202 2 and 202 1 F- 3 Consolidated Statements of Comprehensive Income for the years ended December 31, 202 3 , 202 2 and 202 1 F- 4 Consolidated Balance Sheets as of December 31, 202 3 and 202 2 F- 5 Consolidated Statements of Cash Flows for the years ended December 31, 202 3 , 202 2 and 202 1 F- 6 Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 202 3 , 202 2 and 202 1 F- 7 Notes to Consolidated Financial Statements F- 8 All other schedules not listed above have been omitted, because they are not applicable or are not required, or because the required information is included in the consolidated financial statements or notes thereto. 3 . Exhibits required to be filed by Item 601 of Regulation S-K. 2.1(a) Put Option Agreement, dated September 29, 2020, between the Company and certain of its subsidiaries and Smith & Nephew USD Limited, a subsidiary of Smith+Nephew (including the Purchase and Sale Agreement attached as Appendix 1 thereto) (Incorporated by reference to Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020) 2.1(b) Agreement and Plan of Merger by among Integra LifeSciences Holdings Corporation and ACell Inc. dated as of December 15, 2020 (Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020) 2.1(c)+ Stock Purchase Agreement, dated December 12, 2023, among Ethicon, Inc., Integra LifeSciences Holdings Corporation and Integra LifeSciences Israel Ltd. 3.1(a) Amended and Restated Certificate of Incorporation of the Company dated February 16, 1993 (Incorporated by reference to Exhibit 3.1(a) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005) 3.1(b) Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Company dated May 22, 1998 (Incorporated by reference to Exhibit 3.1(b) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998) 3.1(c) Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Company dated May 17, 1999 (Incorporated by reference to Exhibit 3.1(c) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004) 3.1(d) Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Company dated December 21, 2016 (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on December 22, 2016) 3.2 Third Amended and Restated Bylaws of Integra LifeSciences Holdings Corporation, effective as of February 21, 2023 4.1 Indenture, dated as of February 7, 2020, by and between Integra LifeSciences Holdings Corporation and Citibank, N.A., as trustee (including Form of 0.50% Convertible Senior Notes due 2025) (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 54 4.2 First Supplemental Indenture, by and between Integra LifeSciences Holdings Corporation and Citibank, N.A., as trustee (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on December 9, 2020) 4.3 Integra LifeSciences Deferred Compensation Plan, effective as of May 16, 2019 (Incorporated by reference to Exhibit 4.13 to the Company's Current Form S-8 Registration Statement filed on May 23, 2019) 4.4+ Description of Securities 10.1(a) Lease Modification #3 entered into as of March 2, 2011, by and between Plainsboro Associates and Integra LifeSciences Corporation (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 3, 2011) 10.1(b) Lease Modification #4 entered into as of April 20, 2017, by and between Plainsboro Associates and Integra LifeSciences Corporation (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 25, 2017) 10.2(a)* Employee Stock Purchase Plan (as amended on May 17, 2004) (Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-8 (Registration No. 333-127488) filed on August 12, 2005) 10.2(b)* First Amendment to Employee Stock Purchase Plan, dated October 26, 2005 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 1, 2005) 10.3(a)* Second Amended and Restated 2003 Equity Incentive Plan effective May 19, 2010 (Incorporated by reference to Exhibit 10 to the Company’s Current Report on Form 8-K filed May 21, 2010) 10.3(b)* Amendment to the Second Amended and Restated 2003 Equity Incentive Plan effective May 17, 2012 (Incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012) 10.3(c)* Amendment to the Second Amended and Restated 2003 Equity Incentive Plan effective January 1, 2013 (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013) 10.3(d)* Third Amended and Restated 2003 Equity Incentive Plan effective May 22, 2015 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 29, 2015) 10.3(e)* Fourth Amended and Restated 2003 Equity Incentive Plan, effective May 23, 2017 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 25, 2017) 10.3(f)* Amendment to the Integra LifeSciences Holdings Corporation Fourth Amended and Restated 2003 Equity Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020) 10.3(g)* Integra LifeSciences Holdings Corporation Fifth Amended and Restated 2003 Equity Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 18, 2021) 10.3(h)* Form of Integra LifeSciences Holdings Corporation Fifth Amended and Restated 2003 Equity Incentive Plan Restricted Stock Award Agreement – Directors (Incorporated by reference to Exhibit 10.3(h) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022) 10.3(i)* Form of Integra LifeSciences Holdings Corporation Fifth Amended and Restated 2003 Equity Incentive Plan Restricted Stock Agreement – Executive Officers (Incorporated by reference to Exhibit 10.3(i) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022) 10.3(j)* Form of Integra LifeSciences Holdings Corporation Fifth Amended and Restated 2003 Equity Incentive Plan Performance Stock Unit Award Agreement (Incorporated by reference to Exhibit 10.3(j) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022) 10.3(k)* Form of Integra LifeSciences Holdings Corporation Fifth Amended and Restated 2003 Equity Incentive Plan Non-Qualified Stock Option Award Agreement (Incorporated by reference to Exhibit 10.3(k) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022) 10.3(l)* Form of Integra LifeSciences Holdings Corporation Fifth Amended and Restated 2003 Equity Incentive Plan Restricted Stock Award Agreement – OUS (Incorporated by reference to Exhibit 10.3(l) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 55 10.4* Form of Indemnification Agreement, by and between Integra LifeSciences Holdings Corporation and each of its directors and executive officers (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 19, 2022) 10.5* Annual Executive Physical Medical Exam Arrangement (Incorporated by reference to the Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 29, 2013) 10.6* 2018 Performance Incentive Compensation Plan, effective January 1, 2018 (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 25, 2017) 10.7* Integra LifeSciences Holdings Corporation Change in Control Severance Program (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 1 3 , 202 3 ) 10.8* Amended and Restated Management Incentive Compensation Plan, as of January 1, 2008 (Incorporated by reference to Exhibit 10.43(c) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007) 10.9* Employment Agreement, dated October 28, 2021, by and between Integra LifeSciences Holdings Corporation, Integra LifeSciences Corporation and Jan De Witte (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 28, 2021) 10.10* Davis Promotion Summary, effective December 1, 2016 (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 5, 2016) 10.11(a)* Coleman Promotion Summary, effective June 24, 2019 (Incorporated by reference to the Current Report on Form 8-K filed on June 24, 2019) 10.11(b)* Separation Agreement and General Release, dated September 23, 2022, by and between Glenn Coleman, Integra LifeSciences Corporation and Integra LifeSciences Holdings Corporation (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 23, 2022) 10.12(a) Receivables Financing Agreement, dated as of December 21, 2018, by and among Integra Receivables LLC, Integra LifeSciences Sales LLC, as Servicer, PNC Bank, National Association, as Administrative Agent, PNC Capital Markets LLC, as Structuring Agent, and certain lenders and group agents that are parties thereto from time to time (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 28, 2018) 10.12(b) Amendment No. 1 to Receivables Financing Agreement and Reaffirmation of Performance Guaranty, dated as of March 29, 2019, by and among Integra Receivables LLC, Integra LifeSciences Sales LLC, as Servicer, PNC Bank, National Associations, as Administrative Agent, Committed Lender and Group Agent, Mizuho Bank, Ltd., as Committed Lender and Group Agent and PNC Capital Markets LLC, as Structuring Agent, and certain lenders and group agents that are parties thereto from time to time (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021) 10.12(c) Amendment No. 2 to Receivables Financing Agreement and Reaffirmation of Performance Guaranty, dated as of July 17, 2020, by and among, Integra Receivables LLC, Integra LifeSciences Sales LLC, as Servicer, PNC Bank, National Associations, as Administrative Agent, Committed Lender and Group Agent, Mizuho Bank, Ltd., as Committed Lender and Group Agent and PNC Capital Markets LLC, as Structuring Agent, and certain lenders and group agents that are parties thereto from time to time (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021) 10.12(d) Amendment No. 3 to Receivables Financing Agreement and Reaffirmation of Performance Guaranty, dated as of May 28, 2021, by and among, Integra Receivables LLC, Integra LifeSciences Sales LLC, as Servicer, PNC Bank, National Associations, as Administrative Agent, PNC Capital Markets LLC, as Structuring Agent, Committed Lender and Group Agent, and certain lenders and group agents that are parties thereto from time to time (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021) 10.12(e) Amendment No. 4 to Receivables Financing Agreement and Reaffirmation of Performance Guaranty, dated as of April 17, 2023, by and among, Integra Receivables LLC, Integra LifeSciences Sales LLC, as Servicer, PNC Bank, National Associations, as Administrative Agent, PNC Capital Markets LLC, as Structuring Agent, Committed Lender and Group Agent, and certain lenders and group agents that are parties thereto from time to time (Incorporated by reference to Exhibit 10.4 to the Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2023) 56 10.12(f)+ Amendment No. 5 to Receivables Financing Agreement and Reaffirmation of Performance Guaranty, dated as of December 15, 2023, by and among, Integra Receivables LLC, Integra LifeSciences Sales LLC, as Servicer, PNC Bank, National Associations, as Administrative Agent, PNC Capital Markets LLC, as Structuring Agent, Committed Lender and Group Agent, The Bank of Nova Scotia, as Committed Lender and Group Agent, and certain lenders and group agents that are parties thereto from time to time 10.13 Purchase and Sale Agreement, dated as of December 21, 2018, by and among Integra LifeSciences Sales LLC, Integra LifeSciences Corporation and Integra Receivables LLC (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 28, 2018) 10.14 Seventh Amended and Restated Credit Agreement, dated as of March 24, 2023, among Integra LifeSciences Holdings Corporation, the lenders party thereto, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, Citibank N.A., JPMorgan Chase Bank, N.A., Morgan Stanley MUFG Loan Partners, LLC, PNC Bank, N.A., Truist Securities, Inc. and Wells Fargo Bank, N.A., as Co-Syndication Agents, and The Bank of Nova Scotia, BMO Harris Bank N.A., BNP Paribas, Capital One, National Association, Citizens Bank, N.A., DNB Bank ASA, New York Branch, Santander Bank, N.A. and TD Bank, N.A., as Co-Documentation (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 24, 2023) 10.15 Base Call Option Transaction Confirmation, dated as of February 4, 2020, between Integra LifeSciences Holdings Corporation and Citibank, N.A. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.16 Ratification Agreement, dated as of March 24, 2023, between Integra LifeSciences Holdings Corporation, the Subsidiary Guarantors of Integra LifeSciences Holdings Corporation and Bank of America, N.A., as Administrative Agent (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 24, 2023) 10.17 Base Call Option Transaction Confirmation, dated as of February 4, 2020, between Integra LifeSciences Holdings Corporation and Morgan Stanley & Co. International plc. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.18 Base Call Option Transaction Confirmation, dated as of February 4, 2020, between Integra LifeSciences Holdings Corporation and Wells Fargo, National Association. (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.19 Base Warrant Confirmation, dated as of February 4, 2020, between Integra LifeSciences Holdings Corporation and Citibank, N.A. (Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.20 Base Warrant Confirmation, dated as of February 4, 2020, between Integra LifeSciences Holdings Corporation and Goldman Sachs & Co. LLC. (Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.21 Base Warrant Confirmation, dated as of February 4, 2020, between Integra LifeSciences Holdings Corporation and Morgan Stanley & Co. International plc. (Incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.22 Base Warrant Confirmation, dated as of February 4, 2020, between Integra LifeSciences Holdings Corporation and Wells Fargo, National Association. (Incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.23 Additional Call Option Transaction Confirmation, dated as of February 5, 2020, between Integra LifeSciences Holdings Corporation and Citibank, N.A. (Incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.24 Additional Call Option Transaction Confirmation, dated as of February 5, 2020, between Integra LifeSciences Holdings Corporation and Goldman Sachs & Co. LLC. (Incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.25 Additional Call Option Transaction Confirmation, dated as of February 5, 2020, between Integra LifeSciences Holdings Corporation and Morgan Stanley & Co. International plc. (Incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.26 Additional Call Option Transaction Confirmation, dated as of February 5, 2020, between Integra LifeSciences Holdings Corporation and Wells Fargo, National Association. (Incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 57 10.27 Additional Warrant Confirmation, dated as of February 5, 2020, between Integra LifeSciences Holdings Corporation and Citibank, N.A. (Incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.28 Additional Warrant Confirmation, dated as of February 5, 2020, between Integra LifeSciences Holdings Corporation and Goldman Sachs & Co. LLC. (Incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.29 Additional Warrant Confirmation, dated as of February 5, 2020, between Integra LifeSciences Holdings Corporation and Morgan Stanley & Co. plc. (Incorporated by reference to Exhibit 10.15 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.30 Additional Warrant Confirmation, dated as of February 5, 2020, between Integra LifeSciences Holdings Corporation and Wells Fargo, National Association. (Incorporated by reference to Exhibit 10.16 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 10.31 Issuer Forward Repurchase Transaction Confirmation, dated as of February 5, 2020, between Integra LifeSciences Holdings Corporation and JPMorgan Chase Bank, National Association, New York Branch. (Incorporated by reference to Exhibit 10.17 to the Company’s Current Report on Form 8-K filed on February 7, 2020) 21.1+ Subsidiaries of the Company 23.1+ Consent of PricewaterhouseCoopers LLP 31.1+ Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2+ Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1+ Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2+ Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 97.1+ Integra LifeSciences Holdings Corporation Incentive Compensation Recovery Policy 101.INS+# Inline XBRL Instance Document 101.SCH+# Inline XBRL Taxonomy Extension Schema Document 101.CAL+# Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Definition Linkbase Document 101.LAB+# Inline XBRL Taxonomy Extension Labels Linkbase Document 101.PRE+# Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Indicates a management contract or compensatory plan or arrangement. + Indicates this document is filed as an exhibit herewith. # The financial information of Integra LifeSciences Holdings Corporation Annual Report on Form 10-K for the year ended December 31, 2023 filed on February 28, 2024 formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Operations, (ii) the Consolidated Statement of Comprehensive Income (Loss), (iii) the Consolidated Balance Sheets, (iv) Parenthetical Data to the Consolidated Balance Sheets, (v) the Consolidated Statements of Cash Flows, (vi) the Consolidated Statements of Changes in Stockholders’ Equity, and (vii) Notes to Consolidated Financial Statements, is furnished electronically herewith. The Company’s Commission File Number for Reports on Form 10-K, Form 10-Q and Form 8-K is 000-26224. ITEM 16. FORM 10-K SUMMARY None. 58 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INTEGRA LIFESCIENCES HOLDINGS CORPORATION By: /s/ Jan De Witte Jan De Witte President and Chief Executive Officer, and Director (Principal Executive Officer) By: /s/ Lea Knight Lea Knight Executive Vice President and Chief Financial Officer (Principal Financial Officer) By: /s/ Jeffrey A. Mosebrook Jeffrey A. Mosebrook Senior Vice President, Finance (Principal Accounting Officer) Date: February 28, 2024 59 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons, on behalf of the registrant in the capacities indicated. Signature Title Date /s/ Jan De Witte President and Chief Executive Officer, February 28, 2024 Jan De Witte and Director (Principal Executive Officer) /s/ Lea Knight Executive Vice President and Chief Financial Officer February 28, 2024 Lea Knight (Principal Financial Officer) /s/ Jeffrey A. Mosebrook Senior Vice President, Finance February 28, 2024 Jeffrey A. Mosebrook (Principal Accounting Officer) /s/ Stuart M. Essig, Ph.D. Chairman of the Board February 28, 2024 Stuart M. Essig, Ph.D. /s/ Keith Bradley, Ph.D. Director February 28, 2024 Keith Bradley, Ph.D. /s/ Shaundra Clay Director February 28, 2024 Shaundra Clay /s/ Jeffrey A. Graves Director February 28, 2024 Jeffrey A. Graves /s/ Barbara B. Hill Director February 28, 2024 Barbara B. Hill /s/ Renee W. Lo Director February 28, 2024 Renee W. Lo /s/ Raymond G. Murphy Director February 28, 2024 Raymond G. Murphy /s/ Christian S. Schade Director February 28, 2024 Christian S. Schade 60 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Integra LifeSciences Holdings Corporation Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Integra LifeSciences Holdings Corporation and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, of comprehensive income, of changes in stockholders’ equity, and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. F-1 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Interim Goodwill Impairment Assessment - Tissue Technologies Reporting unit As described in Notes 2 and 7 to the consolidated financial statements, the Company has three reporting units and the total goodwill balance was $1,055 million as of December 31, 2023, of which $388.5 million relates to the Tissue Technologies reporting unit. Goodwill is tested by management for impairment at the reporting unit level annually during the third quarter every year, or more frequently if impairment indicators arise. Management's assessment of the recoverability of goodwill is based upon a comparison of the carrying value of goodwill with its estimated fair value. As disclosed by management, in the second quarter of 2023, due to the voluntary global recall of all products manufactured at the Boston facility, as well as the associated drop in the Company's stock price in that quarter, management elected to perform a quantitative analysis, using a combination of a discounted cash flow method and guideline public company method for its Tissue Technologies reporting unit. The quantitative test utilized assumptions of revenue growth rate, terminal growth rate, discount rate, and the range and application of company guideline multiples. Management determined, after performing the quantitative analysis, that the fair value of the goodwill of the reporting unit was not less than the carrying amount. The principal considerations for our determination that performing procedures relating to the interim goodwill impairment assessment of the Tissue Technologies reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the reporting unit; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management's significant assumptions related to the revenue growth rate, terminal growth rate, discount rate, and the range and application of company guideline multiples; and (iii) the audit effort involved in the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management's goodwill impairment assessment, including controls over the valuation of the Tissue Technologies reporting unit. These procedures also included, among others (i) testing management's process for developing the fair value estimate of the Tissue Technologies reporting unit; (ii) evaluating the appropriateness of the discounted cash flow and guideline public company methods used by management; (iii) testing the completeness and accuracy of underlying data used by management in the discounted cash flow and guideline public company methods; and (iv) evaluating the reasonableness of the significant assumptions used by management in the discounted cash flow method related to the revenue growth rate, terminal growth rate, and discount rate, and the significant assumption used by management in the guideline public company method related to the range and application of company guideline multiples. Evaluating management's assumptions related to the revenue growth rates and terminal growth rate involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit; (ii) the consistency with external market and industry data; and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the discounted cash flow and guideline public company methods and (ii) the reasonableness of the discount rate and the range and application of company guideline multiples assumptions. /s/ PricewaterhouseCoopers LLP Florham Park, New Jersey February 28, 2024 We have served as the Company’s auditor since 1989. F-2 INTEGRA LIFESCIENCES HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) Years Ended December 31, 2023 2022 2021 Total revenue, net $ 1,541,573 $ 1,557,666 $ 1,542,448 Costs and expenses: Cost of goods sold 656,838 587,355 597,808 Research and development 104,192 101,193 93,051 Selling, general and administrative 656,641 616,316 637,445 Intangible asset amortization 12,376 13,882 16,914 Total costs and expenses 1,430,047 1,318,746 1,345,218 Operating income 111,526 238,920 197,230 Interest income 17,202 11,917 6,737 Interest expense ( 51,377 ) ( 49,594 ) ( 50,395 ) Gain from sale of businesses — 644 41,798 Other income, net 3,718 12,007 19,307 Income before income taxes 81,069 213,894 214,677 Provision for income taxes 13,328 33,344 45,602 Net income $ 67,741 $ 180,550 $ 169,075 Net income per share Basic $ 0.85 $ 2.18 $ 2.00 Diluted $ 0.84 $ 2.16 $ 1.98 Weighted average common shares outstanding (See Note 13): Basic 80,089 82,997 84,698 Diluted 80,337 83,516 85,485 The accompanying notes are an integral part of these consolidated financial statements. F-3 INTEGRA LIFESCIENCES HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in thousands) Years Ended December 31, 2023 2022 2021 Net income $ 67,741 $ 180,550 $ 169,075 Other comprehensive (loss) income, before tax: Change in foreign currency translation adjustments ( 20,821 ) ( 17,807 ) ( 17,362 ) Unrealized gain (loss) on derivatives Unrealized derivative gain (loss) arising during period ( 22,071 ) 104,351 68,192 Less: Reclassification adjustments for gain (loss) included in net income ( 13,423 ) 18,859 17,024 Unrealized gain (loss) on derivatives ( 8,648 ) 85,492 51,168 Defined benefit pension plan - net gain (loss) arising during period ( 6,610 ) 7,429 6,998 Total other comprehensive gain (loss), before tax ( 36,079 ) 75,114 40,804 Income tax (expense) benefit related to items in other comprehensive gain (loss) 10,708 ( 19,694 ) ( 11,900 ) Total other comprehensive gain (loss), net of tax ( 25,371 ) 55,420 28,904 Comprehensive income, net of tax $ 42,370 $ 235,970 $ 197,979 The accompanying notes are an integral part of these consolidated financial statements. F-4 INTEGRA LIFESCIENCES HOLDINGS CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts) December 31, 2023 2022 ASSETS Current Assets: Cash and cash equivalents $ 276,402 $ 456,661 Short-term investments 32,694 — Trade accounts receivable, net of allowances of $ 4,879 and $ 4,304 259,327 263,465 Inventories, net 389,608 324,583 Prepaid Expenses 67,362 85,757 Other Current Assets 32,643 31,032 Total current assets 1,058,036 1,161,498 Property, plant and equipment, net 340,199 311,302 Right of use asset - operating leases 156,184 148,284 Intangible assets, net 1,067,833 1,126,609 Goodwill 1,055,462 1,038,881 Deferred tax assets, net 46,080 45,994 Other assets 58,194 57,190 Total assets $ 3,781,988 $ 3,889,758 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Current portion of borrowings under senior credit facility $ 14,531 $ 38,125 Current portion of lease liability - operating leases 15,284 14,624 Accounts payable, trade 92,326 102,100 Contract liabilities 8,540 7,253 Accrued compensation 75,455 78,771 Accrued expenses and other current liabilities 100,844 80,033 Total current liabilities 306,980 320,906 Long-term borrowings under senior credit facility 825,563 733,149 Long-term borrowings under securitization facility 89,200 104,700 Long-term convertible securities 570,255 567,341 Lease liability - operating leases 166,849 157,420 Deferred tax liabilities 35,317 63,338 Other liabilities 199,940 138,501 Total liabilities 2,194,104 2,085,355 Stockholders’ Equity: Preferred Stock; no par value; 15,000 authorized shares; none outstanding — — Common stock; $ 0.01 par value; 240,000 authorized shares; 90,920 and 90,477 issued at December 31, 2023 and 2022, respectively 909 905 Additional paid-in capital 1,302,484 1,276,977 Treasury stock, at cost; 12,751 and 6,823 shares at December 31, 2023 and 2022, respectively ( 647,262 ) ( 362,862 ) Accumulated other comprehensive income (loss) ( 15,106 ) 10,265 Retained earnings 946,859 879,118 Total stockholders’ equity 1,587,884 1,804,403 Total liabilities and stockholders’ equity $ 3,781,988 $ 3,889,758 The accompanying notes are an integral part of these consolidated financial statements. F-5 INTEGRA LIFESCIENCES HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) Years Ended December 31, 2023 2022 2021 OPERATING ACTIVITIES: Net income $ 67,741 $ 180,550 $ 169,075 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 123,512 118,299 119,836 Non-cash impairment charges — — 2,754 Deferred income tax (benefit) provision ( 11,885 ) ( 4,585 ) ( 2,755 ) Share-based compensation 20,143 27,725 36,210 Amortization of debt issuance costs and expenses associated with debt refinancing 6,164 6,845 7,030 Non-cash lease expense 2,189 2,816 3,834 Loss (Gain) on disposal of property and equipment and construction in-progress 777 ( 6,813 ) 2,240 Gain from the sale of businesses — ( 644 ) ( 41,798 ) Change in fair value of contingent consideration and others 12,888 ( 20,304 ) ( 2,162 ) Changes in assets and liabilities: Accounts receivable 4,593 ( 33,905 ) 7,265 Inventories ( 59,773 ) ( 29,124 ) 5,374 Prepaid expenses and other current assets 2,652 8,612 ( 21,143 ) Other non-current assets ( 8,535 ) ( 2,182 ) 7,875 Accounts payable, accrued expenses and other current liabilities ( 20,229 ) 17,343 32,874 Contract liabilities 128 4,274 28 Other non-current liabilities ( 410 ) ( 4,438 ) ( 14,110 ) Net cash provided by operating activities 139,955 264,469 312,427 INVESTING ACTIVITIES: Purchases of property and equipment ( 66,865 ) ( 42,343 ) ( 48,022 ) Proceeds from sale of business — 23,960 190,468 Acquired in-process research and development and intangibles — ( 4,742 ) ( 58 ) Purchases of Investments ( 32,694 ) — — Cash paid for business acquisitions, net of cash acquired — ( 51,509 ) ( 303,910 ) Proceeds from sales of property and equipment — 11,145 3 Net proceeds on swaps designated as net investment hedges 5,381 4,909 76 Net cash used in investing activities ( 94,178 ) ( 58,580 ) ( 161,443 ) FINANCING ACTIVITIES: Proceeds from borrowings of long-term indebtedness 165,100 40,750 25,500 Payments on debt ( 110,600 ) ( 148,550 ) ( 125,500 ) Payment of debt issuance costs ( 7,879 ) — ( 249 ) Purchase of treasury stock ( 275,000 ) ( 125,000 ) — Proceeds from exercised stock options 4,317 5,465 6,824 Cash taxes paid in net equity settlement ( 5,863 ) ( 24,618 ) ( 4,801 ) Net cash used in financing activities ( 229,925 ) ( 251,953 ) ( 98,226 ) Effect of exchange rate changes on cash and cash equivalents 3,889 ( 10,723 ) ( 9,476 ) Net increase (decrease) in cash and cash equivalents ( 180,259 ) ( 56,787 ) 43,282 Cash and cash equivalents at beginning of period 456,661 513,448 470,166 Cash and cash equivalents at end of period $ 276,402 $ 456,661 $ 513,448 The accompanying notes are an integral part of these consolidated financial statements. F-6 INTEGRA LIFESCIENCES HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Dollars in thousands) Common Stock Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive Income Retained Earnings Total Equity Shares Amount Shares Amount Balance, January 1, 2021 89,251 $ 893 ( 4,914 ) $ ( 235,141 ) $ 1,290,908 $ ( 74,059 ) $ 532,266 $ 1,514,867 Net income — — — — — — 169,075 169,075 Other comprehensive income (loss), net of tax — — — — — 28,904 — 28,904 Treasury shares retirement — — — — — — — — Issuance of common stock through employee stock purchase plan 18 — — — 1,127 — — 1,127 Issuance of common stock for vesting of share-based awards, net of shares withheld for taxes 331 1 15 693 201 — — 895 Share-based compensation — 2 — — 35,981 — — 35,983 Adoption of Update No. 2020-06 — — — — ( 63,274 ) — ( 2,773 ) ( 66,047 ) Balance, December 31, 2021 89,600 896 ( 4,899 ) ( 234,448 ) 1,264,943 ( 45,155 ) 698,568 1,684,804 Net income — — — — — — 180,550 180,550 Other comprehensive income (loss), net of tax — — — — — 55,420 — 55,420 Issuance of common stock through employee stock purchase plan 17 — — 1,078 — — 1,078 Issuance of common stock for vesting of share-based awards, net of shares withheld for taxes 859 7 14 738 ( 20,974 ) — — ( 20,229 ) Share-based compensation — 2 — — 27,778 — — 27,780 Accelerated shares repurchased — — ( 1,938 ) ( 129,152 ) 4,152 — — ( 125,000 ) Balance, December 31, 2022 90,476 $ 905 ( 6,823 ) $ ( 362,862 ) $ 1,276,977 $ 10,265 $ 879,118 $ 1,804,403 Net income — — — — — — 67,741 67,741 Other comprehensive income (loss), net of tax — — — — — ( 25,371 ) — ( 25,371 ) Issuance of common stock through employee stock purchase plan 21 — — — 1,107 — — 1,107 Issuance of common stock for vesting of share-based awards, net of shares withheld for taxes 423 1 18 911 ( 3,566 ) — — ( 2,654 ) Share-based compensation — 3 — — 20,105 — — 20,108 Accelerated shares repurchased — — ( 5,946 ) ( 285,311 ) 7,861 — — ( 277,450 ) Balance, December 31, 2023 90,920 909 ( 12,751 ) ( 647,262 ) 1,302,484 ( 15,106 ) 946,859 1,587,884 The accompanying notes are an integral part of these consolidated financial statements. F-7 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS Integra LifeSciences Holdings Corporation (the “Company”) was incorporated in Delaware in 1989. The Company is a worldwide leader in medical technology. The Company was founded with the acquisition of an engineered collagen technology platform used to repair and regenerate tissue. Since then, Integra has developed numerous product lines from this technology for applications ranging from burn and deep tissue wounds to the repair of dura mater in the brain, as well as nerves and tendons. The Company has expanded its base regenerative technology business to include surgical instruments, neurosurgical products and advanced wound care through global acquisitions and product development to meet the evolving needs of its customers and enhance patient care. The Company sells its products directly through various sales forces and through a variety of other distribution channels. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION These financial statements and the accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America and conform to Regulation S-X under the Securities Exchange Act of 1934, as amended. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. See Note 4, Acquisitions and Divestitures , for details of new subsidiaries included in the consolidation. USE OF ESTIMATES The preparation of consolidated financial statements is in conformity with generally accepted accounting principles in the United States ("GAAP") which requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent liabilities, and the reported amounts of revenues and expenses. Significant estimates affecting amounts reported or disclosed in the consolidated financial statements include allowances for doubtful accounts receivable and sales returns and allowances, net realizable value of inventories, valuation of intangible assets including amortization periods for acquired intangible assets, discount rates and estimated projected cash flows used to value and test impairments of long-lived assets and goodwill, estimates of projected cash flows and depreciation and amortization periods for long-lived assets, computation of taxes, valuation allowances recorded against deferred tax assets, the valuation of stock-based compensation, valuation of derivative instruments, valuation of contingent liabilities, the fair value of debt instruments and loss contingencies. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the current circumstances. Actual results could differ from these estimates. CASH AND CASH EQUIVALENTS The Company considers all short-term, highly liquid investments purchased with original maturities of three months or less to be cash equivalents. These investments are carried at cost, which approximates fair value. SHORT TERM INVESTMENTS Short-term investments are securities with original maturities greater than 90 days that are available for use in our operations in the next twelve months. The short-term investments, primarily consisting of time deposits, are recorded at cost, which approximates fair value, which is estimated based on the net asset value of these investments. Interest and dividends are recorded in income when earned. TRADE ACCOUNTS RECEIVABLE AND ALLOWANCES FOR DOUBTFUL ACCOUNTS RECEIVABLE Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company grants credit to customers in the normal course of business, but generally does not require collateral or any other security to support its receivables. The Company evaluates the collectability of accounts receivable based on a combination of factors. The Company recognizes a provision for doubtful accounts that reflects the Company’s estimate of expected credit losses for trade accounts receivable. In circumstances where a specific customer is unable to meet its financial obligations to the Company, a provision to the allowances for doubtful accounts is recorded against amounts due to reduce the net recognized receivable to the amount that is reasonably expected to be collected. For all other customers, the Company evaluates measurement of all expected credit losses for trade receivables held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. F - 8 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The Company's exposure to credit losses may increase if its customers are adversely affected by changes in healthcare laws, coverage, and reimbursement, economic pressures or uncertainty associated with local or global economic recessions. Provisions to the allowances for doubtful accounts are recorded to selling, general and administrative expenses. Account balances are charged off against the allowance when it is probable that the receivable will not be recovered. Provision for doubtful accounts, net of recoveries, associated with accounts receivable, included in selling, general and administrative expense, was charges of $ 3.0 million for the year ended December 31, 2023, charges of $ 0.2 million, and recoveries of $ 1.1 million for the years ended December 31, 2022 and 2021, respectively. The below table shows the roll forward of the allowance for doubtful accounts for the years ended December 31, 2023, 2022 and 2021: Balance at Beginning of Period Charged to Costs and Expenses Other Deductions Balance at End of Period Dollars in thousands Year Ended: December 31, 2023 $ 4,304 2,963 — ( 2,388 ) $ 4,879 December 31, 2022 $ 4,735 238 — ( 669 ) $ 4,304 December 31, 2021 $ 6,439 ( 1,059 ) 341 ( 986 ) $ 4,735 (1) Deductions primarily relates to allowance for doubtful accounts written off during the year, net of recoveries and other adjustments. INVENTORIES Inventories, consisting of purchased materials, direct labor and manufacturing overhead, are stated at the lower of cost, the value determined by the first-in, first-out method, or net realizable value. Inventories consisted of the following: December 31, Dollars in thousands 2023 2022 Finished goods 196,402 $ 172,088 Work in process 74,035 70,598 Raw materials 119,171 81,897 Total inventories, net $ 389,608 $ 324,583 At each balance sheet date, the Company evaluates inventories for excess quantities, obsolescence or shelf life expiration. This evaluation includes analysis of historical sales levels by product, projections of future demand, the risk of technological or competitive obsolescence for products, general market conditions, a review of the shelf life expiration dates for products, as well as the feasibility of reworking or using excess or obsolete products or components in the production or assembly of other products that are not obsolete or for which there are not excess quantities in inventory. To the extent that management determines there are excess or obsolete inventory or quantities with a shelf life that is too near its expiration for the Company to reasonably expect that it can sell those products prior to their expiration, the Company adjusts the carrying value to estimated net realizable value. The Company capitalizes inventory costs associated with certain products prior to regulatory approval, based on management's judgment of probable economic benefit. The Company could be required to expense previously capitalized costs related to pre-approval inventory upon a change in such judgment, due to, among other potential factors, a denial or delay of approval by necessary regulatory bodies or a decision by management to discontinue the related development program. No such amounts were capitalized at December 31, 2023 or 2022. F-9 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) In the twelve months ended December 31, 2023, due to the Boston recall, the Company recorded a $ 24.6 million write off of inventory to cost of goods sold that was no longer able to be sold. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at historical cost less accumulated depreciation and any impairment charges. The Company provides for depreciation using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the lesser of the lease term or the useful life. The cost of major additions and improvements is capitalized, while maintenance and repair costs that do not improve or extend the lives of the respective assets are charged to operations as incurred. The cost of computer software developed or obtained for internal use is accounted for in accordance with the Accounting Standards Codification 350-40, Internal-Use Software. Property, plant and equipment balances and corresponding lives were as follows: December 31, Dollars in thousands 2023 2022 Useful Lives Land $ 978 $ 966 Buildings and building improvements 14,859 14,710 5 - 40 years Leasehold improvements 171,062 163,342 1 - 20 years Machinery and production equipment 198,127 182,730 3 - 20 years Demonstration equipment 3,896 3,792 4 - 5 years Information systems and hardware 160,899 151,330 1 - 7 years Furniture, fixtures, and office equipment 20,549 20,286 1 - 15 years Construction-in-progress 137,276 103,875 Total 707,646 641,031 Less: Accumulated depreciation ( 367,447 ) ( 329,729 ) Property, plant and equipment, net $ 340,199 $ 311,302 Depreciation expense associated with property, plant and equipmen t was $ 40.9 million , $ 40.1 million, and $ 39.4 million for the years ended December 31, 2023, 2022 and 2021, respectively. CAPITALIZED INTEREST The interest cost on capital projects, including facilities build-out and internal use software, is capitalized and included in the cost of the project. Capitalization commences with the first expenditure for the project and continues until the project is substantially complete and ready for its intended use. When no debt is incurred specifically for a project, interest is capitalized on project expenditures using the weighted average cost of the Company's outstanding borrowings. For the years ended December 31, 2023 and 2022, respectively, the Company capitalized $ 2.4 million and $ 1.4 million of interest expense into property, plant and equipment. ACQUISITIONS Results of operations of acquired companies are included in the Company’s results of operations as of the respective acquisition dates. The Company accounts for the acquisition of a business in accordance with ASC 805, Business Combinations ("ASC Topic 805"). Amounts paid to acquire a business are allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition. Any excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill. Transaction costs and costs to restructure the acquired company are expensed as incurred. Contingent consideration is recorded at fair value as measured on the date of acquisition. The value recorded is based on estimates of future financial projections under various potential scenarios using either a Monte Carlo simulation or the probability-weighted income approach derived from revenue estimates and probability assessment with respect to the likelihood of achieving contingent obligations. Contingent payments related to acquisitions consist of development, regulatory, and commercial milestone payments, in addition to sales-based payments, and are valued using discounted cash flow techniques. Each quarter until such contingent amounts are earned, the fair value of the liability is remeasured at each reporting period and adjusted as a component of operating expenses based on changes to the underlying assumptions. The change in the fair value of sales-based payments is based upon future revenue estimates and increases or decreases as revenue estimates or expectation of timing of payment charges. The estimates used to determine the fair value of the contingent consideration liability are subject to significant judgment and actual results are likely to differ from the amounts originally recorded. F-10 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The Company determi nes the fair value of acquired intangible assets based on detailed valuations that use certain information and assumptions provided by management. The Company allocates any excess purchase price over the fair value of the net tangible and intangible assets acquired to goodwill. Determining the fair value of these intangible assets acquired as part of a business combination requires the Company to make significant estimates. These estimates include the amount and timing of projected future cash flows, the discount rate used to discount those cash flows to present value, the assessment of the asset’s life cycle, and the consideration of legal, technical, regulatory, economic, and competitive risks. The fair value assigned to other intangible assets is determined by estimating the future cash flows of each project or technology and discounting the net cash flows back to their present values. The discount rate used is determined at the time of measurement in accordance with accepted valuation methodologies. Acquired IPR&D is recognized at fair value and initially characterized as an indefinite-lived intangible asset, irrespective of whether the acquired IPR&D has an alternative future use. The Company uses the income approach to determine the fair value of developed technology and IPR&D acquired in a business combination. This approach determines fair value by estimating the after-tax cash flows attributable to the respective asset over its useful life and then discounting these after-tax cash flows back to a present value. Some of the more significant assumptions inherent in the development of those asset valuations include the estimated net cash flows for each year for each product including net revenues, cost of sales, R&D costs, selling and marketing costs, the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, and competitive trends impacting the asset and each cash flow stream. The Company also uses the income approach, as described above, to determine the estimated fair value of certain other identifiable intangible assets including customer relationships, trade names and business licenses. Customer relationships represent established relationships with customers, which provide a ready channel for the sale of additional products and services. Trade names represent acquired company and product names. IPR&D acquired in a business combination is capitalized as an indefinite-lived intangible asset. Development costs incurred after the acquisition are expensed as incurred. Upon receipt of regulatory approval, the indefinite-lived intangible asset is then accounted for as a finite-lived intangible asset and amortized on a straight-line basis or accelerated basis, as appropriate, over its estimated useful life. If the research and development project is subsequently abandoned, the indefinite-lived intangible asset is charged to expense. IPR&D acquired outside of a business combination is expensed immediately. Due to the uncertainty associated with research and development projects, there is risk that actual results will differ materially from the original cash flow projections and that the research and development project will result in a successful commercial product. The risks associated with achieving commercialization include, but are not limited to, delay or failure to obtain regulatory approvals to conduct clinical trials, delay or failure to obtain required market clearances, delays or issues with patent issuance, or validity and litigation. If the acquired net assets do not constitute a business under the acquisition method of accounting, the transaction is accounted for as an asset acquisition and no goodwill is recognized. In an asset acquisition, the amount allocated to acquired IPR&D with no alternative future use is charged to expense at the acquisition date. Payments that would be recognized as contingent consideration in a business combination are recognized when probable in an asset acquisition. Refer to Note 4, Acquisitions and Divestitures for more information. GOODWILL AND OTHER INTANGIBLE ASSETS The excess of the cost over the fair value of net assets of acquired businesses is recorded as goodwill. Goodwill is not subject to amortization but is reviewed for impairment at the reporting unit level annually, or more frequently if impairment indicators arise. The Company's assessment of the recoverability of goodwill is based upon a comparison of the carrying value of goodwill with its estimated fair value. The Company reviews goodwill for impairment in the third quarter every year in accordance with ASC Topic 350, Intangibles - Goodwill and Other ("ASC Topic 350") and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. Refer to Note 7, Goodwill and Other Intangibles for more information. The Company has two reportable segments with three underlying reporting units. Refer to Note 16, Segment and Geographic Information for more information on reportable segments. Other intangible assets include patents, trademarks, purchased technology, and supplier and customer relationships. Identifiable intangible assets are initially recorded at fair market value at the time of acquisition generally using an income or cost approach. The Company capitalizes costs incurred to renew or extend the term of recognized intangible assets and amortizes those costs over their expected useful lives. F-11 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The Company tests intangible assets with indefinite lives for impairment annually in the third quarter in accordance with ASC Topic 350. Additionally, the Company may perform interim tests if an event occurs or circumstances change that could potentially reduce the fair value of an indefinite lived intangible asset below its carrying amount. The Company tests for impairment by either performing a qualitative evaluation or a quantitative test. The qualitative evaluation is an assessment of factors, including specific operating results as well as industry, market and general economic conditions, to determine whether it is more likely than not that the fair values of the intangible asset is less than its carrying amount. The Company may elect to bypass this qualitative evaluation and perform a quantitative test. Product rights and other definite-lived intangible assets are tested periodically for impairment in accordance with ASC Topic 360 when events or changes in circumstances indicate that an asset's carrying value may not be recoverable. The impairment testing involves comparing the carrying amount of the asset or asset group to the forecasted undiscounted future cash flows. In the event the carrying value of the asset exceeds the undiscounted future cash flows, the carrying value is considered not recoverable and impairment exists. An impairment loss is measured as the excess of the asset's carrying value over its fair value, calculated using discounted future cash flows. The computed impairment loss is recognized in the period that the impairment occurs. LONG-LIVED ASSETS Long-lived assets held and used by the Company, including property, plant and equipment, intangible assets, and leases are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets to be held and used, a recoverability test is performed using projected undiscounted net cash flows applicable to the long-lived assets. If an impairment exists, the amount of such impairment is calculated based on the estimated fair value of the asset. Impairments to long-lived assets to be disposed of are recorded based upon the difference between the carrying value and the fair value of the applicable assets. INTEGRA FOUNDATION The Company may periodically make contributions to the Integra Foundation, Inc. The Integra Foundation was incorporated in 2002 exclusively for charitable, educational, and scientific purposes and qualifies under IRC 501(c)(3) as an exempt private foundation. Under its charter, the Integra Foundation engages in activities that promote health, the diagnosis and treatment of disease, and the development of medical science through grants, contributions and other appropriate means. The Integra Foundation is a separate legal entity and is not a subsidiary of the Company; therefore, its results are not included in these consolidated financial statements. The Company made no contributions to the Integra Foundation during the years ended December 31, 2023 and 2022 and $ 1.2 million during the year ended December 31, 2021. These contributions were recorded in selling, general, and administrative expense. DERIVATIVES The Company develops, manufactures, and sells medical devices globally and its earnings and cash flows are exposed to market risk from changes in interest rates and currency exchange rates. The Company addresses these risks through a risk management program that includes the use of derivative financial instruments and operates the program pursuant to documented corporate risk management policies. All derivative financial instruments are recognized in the financial statements at fair value in accordance with the authoritative guidance. Under the guidance, for those instruments that are designated and qualify as hedging instruments, the hedging instrument must be designated as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation, based on the exposure being hedged. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. The Company's derivative instruments do not subject its earnings or cash flows to material risk, and gains and losses on these derivatives generally offset losses and gains on the item being hedged. The Company has not entered into derivative transactions for speculative purposes. From time to time, the Company may enter into derivatives that are not designated as hedging instruments in order to protect itself from currency volatility due to intercompany balances. All derivative instruments are recognized at the fair values as either assets or liabilities on the balance sheet. The Company determines the fair value of its derivative instruments using the framework prescribed by the authoritative guidance, by considering the estimated amount the Company would receive to sell or transfer these instruments at the reporting date and by taking into account expected forward interest rates, currency exchange rates, the creditworthiness of the counterparty for assets, and its creditworthiness for liabilities. In certain instances, the Company utilizes a discounted cash flow model to measure fair value. Generally, the Company uses inputs that include quoted prices for similar assets or liabilities in active markets, other observable inputs for the asset or liability and inputs derived principally from, or corroborated by, observable market data by correlation or other means. The Company has classified all of its derivative assets and liabilities within Level 2 of the fair value hierarchy because observable inputs are available for substantially the full term of its derivative instruments. The Company classifies derivatives designated as hedges in the same category as the item being hedged for cash flow presentation purposes. F-12 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The Company entered into foreign currency forward and foreign currency swap contracts that are not designated as hedging instruments for accounting purposes. These contracts are recorded at fair value, with the changes in fair value recognized into other income, net, on the consolidated financial statements. Refer to Note 6, Derivative Instruments for more information. FOREIGN CURRENCY All assets and liabilities of foreign subsidiaries which have a functional currency other than the U.S. dollar are translated at the rate of exchange at year-end, while elements of the income statement are translated at the average exchange rates in effect during the year. The net effect of these translation adjustments is shown as a component of accumulated other comprehensive income (loss). These currency translation adjustments are not currently adjusted for income taxes as they relate to permanent investments in non-U.S. subsidiaries. Foreign currency transaction net losses of $ 4.4 million, net losses of $ 3.3 million, and net gains of less than $ 0.1 million are reported in other income, net in the statements of operations, for the year ended December 31, 2023, 2022 and 2021, respectively. INCOME TAXES Income taxes are accounted for by using the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted. The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not to be sustained upon examination based on the technical merits of the position. Reserves are established for positions that don't meet this recognition threshold. The reserve is measured as the largest amount of benefit determined on a cumulative probability basis that the Company believes is more likely than not to be realized upon ultimate settlement of the position. These reserves are classified as long-term liabilities in the consolidated balance sheets of the Company, unless the reserves are expected to be paid in cash during the next twelve months, in which case they are classified as current liabilities. The Company also records interest and penalties accrued in relation to uncertain tax benefits as a component of income tax expense. While the Company believes it has identified all reasonable exposures and the reserve it has established is appropriate under the circumstances, it is possible that additional exposures exist and that exposures may be settled at amounts different than the amounts reserved. It is also possible that changes in facts and circumstances could cause the Company to either materially increase or reduce the carrying amount of its tax reserve. The Company continues to indefinitely reinvest substantially all of its foreign earnings unless there is a manner under which to remit the earnings without a material tax cost. The current provisional analysis indicates that the Company has sufficient U.S. liquidity, including borrowing capacity, to fund foreseeable U.S. cash needs without requiring the repatriation of foreign cash. One time or unusual items that may impact the ability or intent to keep the foreign earnings and cash indefinitely reinvested include significant U.S. acquisitions, loans from a foreign subsidiary and changes in tax laws. REVENUE RECOGNITION Revenue is recognized upon the transfer of control of promised products or services to the customers in an amount that reflects the consideration the Company expects to receive in exchange for those products and services. Total revenue, net, includes product sales, product royalties and other revenues, such as fees received from services. For products shipped with FOB shipping point terms, the control of the product passes to the customer at the time of shipment. For shipments in which the control of the product is transferred when the customer receives the product, the Company recognizes revenue upon receipt by the customer. Certain products that the Company produces for private label customers have no alternative use and the Company has a right of payment for performance to date. Revenues from those products are recognized over the period that the Company manufactures these products, which is typically one month to three months . The Company uses the input method to measure the manufacturing activities completed to date, which depicts the progress of the Company's performance obligation of transferring control of goods being manufactured for private label customers. A portion of the Company's product revenue is generated from consigned inventory maintained at hospitals and distributors, and also from inventory physically held by field sales representatives. For these types of products sales, the Company retains control until the product has been used or implanted, at which time revenue is recognized. F-13 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Revenues from sale of products and services are evidenced by either a contract with the customer or a valid purchase order and an invoice which includes all relevant terms of sale. For product sales, invoices are generally issued upon the transfer of control (or upon the completion of the manufacturing in the case of the private label transactions recognized over time) and are typically payable 30 days after the invoice date. The Company performs a review of each specific customer's creditworthiness and ability to pay prior to acceptance as a customer. Further, the Company performs periodic reviews of its customers' creditworthiness prospectively. Refer to Note 3, Revenue From Contracts With Customers for more information. The Company also maintains a provision for estimated returns and allowances in the same period that the related revenue is recorded. This reserve is based upon an analysis of actual credit memos issued for pricing issues or returned goods over an extended period, as well as assumptions about outstanding accounts receivable and judgment in interpreting the data. RESEARCH AND DEVELOPMENT Research and development costs, including salaries, depreciation, consultant and other external fees, and facility costs directly attributable to research and development activities, are expensed in the period in which they are incurred. EMPLOYEE TERMINATION BENEFITS The Company does not have a written severance plan, but has a history of providing benefits for employees in the case of involuntary termination. In situations outside the US, there are minimum statutory termination benefits requirements by country that must be paid to the affected employees. The Company records employee severance costs associated with these restructuring activities in accordance with the authoritative guidance for non-retirement post-employment benefits. Charges associated with these activities are recorded when the payment of benefits is probable and can be reasonably estimated. In situations where the Company pays out termination benefits in excess of statutory minimum amounts based on management's discretion, the Company records these termination costs once communication is made to the affected employees. The timing of the recognition of charges for employee severance costs other than minimum statutory benefits depends on whether the affected employees are required to render service beyond their legal notification period in order to receive the benefits. If affected employees are required to render service beyond their legal notification period, charges are recognized over the future service period. Otherwise, charges are recognized when management has approved a specific plan and employee communication requirements have been met. The Company incurred employee termination costs on sales force restructuring activities in the consolidated statement of operations for the year ended December 31, 2023. In addition, the Company incurred employee termination costs on restructuring activities associated with a closure of a manufacturing facility in France and other reorganization projects in the consolidated statement of operations for the year ended December 31, 2022. The following table summarizes the restructuring related accrual balances included within accrued expenses and other current liabilities in the consolidated balance sheet for the year ended December 31, 2023 and 2022. Years Ended December 31, (Dollars in thousands) 2023 2022 Balance, beginning of the year $ 5,107 $ 10,226 Charges: Cost of Goods Sold — 1,494 Research and development — 72 Selling, general and administrative 1,048 5,582 Payments and other adjustments ( 4,042 ) ( 12,267 ) Balance, end of the year $ 2,113 $ 5,107 STOCK-BASED COMPENSATION Relevant authoritative guidance requires companies to recognize the expense related to the fair value of their stock-based compensation awards. Stock-based compensation expense for stock option awards are based on the grant date fair value using the binomial distribution model. The Company recognizes compensation expense for stock option awards, restricted stock awards, performance stock awards and contract stock awards over the requisite service period of the award. All excess tax benefits and taxes and tax deficiencies from stock-based compensation are included in provision for income taxes in the consolidated statement of operations. Refer to Note 9, Stock-based Compensation for more information. PENSION BENEFITS The Company maintains defined benefit pension plans that cover certain employees in France, Japan, Germany and Switzerland. Various factors are considered in determining the pension liability, including the number of employees expected to be paid their salary levels and years of service, the expected return on plan assets, the discount rate used to determine the benefit obligations, the timing of benefit payments and other actuarial assumptions. F-14 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Retirement benefit plan assumptions are reassessed on an annual basis or more frequently if changes in circumstances indicate a re-evaluation of assumptions are required. The key benefit plan assumptions are the discount rate and expected rate of return on plan assets. The discount rate is based on average rates on bonds that matched the expected cash outflows of the benefit plans. The expected rate of return is based on historical and expected returns on the various categories of plan assets. The Company uses the corridor approach in measuring the amount of net periodic benefit pension cost to recognize each period. The corridor approach defers all actuarial gains and losses resulting from variances between actual results and actuarial assumptions. Those unrecognized gains and losses are amortized when the net gains and losses exceed 10% of the greater of the market-related value of plan assets or the projected benefit obligation at the beginning of the year. The amount in excess of the corridor is amortized over the average remaining service period to retirement date of active plan participants. Deferred Compensation Plan The Company maintains a deferred compensation plan in which certain employees of the Company may defer the payment and taxation of up to 75 % of their base salary and up to 100 % of bonus amounts and other eligible cash compensation. This deferred compensation is invested in funds offered under the Plan and is valued based on Level 1 measurements in the fair value hierarchy. The purpose of the plan is to retain key employees by providing them with an opportunity to defer a portion of their compensation as elected by the participant in accordance with the plan. Any amounts set aside to defray the liabilities assumed by the Company will remain the general assets of the Company until such amounts are distributed to the participants. Assets of the Company's deferred compensation plan are included in Other current assets and recorded at fair value based on their quoted market prices. CONCENTRATION OF CREDIT RISK Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents, which are held at major financial institutions, investment-grade marketable debt securities and trade receivables. The Company's products are sold on an uncollateralized basis and on credit terms based upon a credit risk assessment of each customer. A portion of the Company's trade receivables to customers outside the United States includes sales to foreign distributors, who then sell to government owned or supported healthcare systems. No ne of the Company's customers accounted for 10 % or more of the consolidated net sales during the years ended December 31, 2023, 2022 and 2021 . RECENT ACCOUNTING PRONOUNCEMENTS In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures which enhances the transparency of income tax disclosures by expanding annual disclosure requirements related to the rate reconciliation and income taxes paid. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating this ASU to determine its impact on the Company's disclosures. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company does not plan to early adopt, but is currently evaluating this ASU to determine its impact on the Company's disclosures. F-15 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04, Reference Rate Reform (Topic 848), and subsequent amendment to the initial guidance: ASU 2021-01, Reference Rate Reform (Topic 848): Scope (collectively, “Topic 848”). Topic 848 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference London Inter-Bank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. The guidance generally can be applied through December 31, 2024. The Alternative Reference Rates Committee, a group of private-market participants convened by the U.S. Federal Reserve Board and the New York Federal Reserve, has recommended the use of the Secured Overnight Financing Rate ("SOFR") as a more robust reference rate alternative to LIBOR. On March 24, 2023, the Company entered into the seventh amendment and restatement (the "March 2023 Amendment") of its Senior Credit Facility (the “Senior Credit Facility”) with a syndicate of lending banks with Bank of America, N.A., as Administrative Agent. In connection with the March 2023 Amendment, the Company replaced all LIBOR-based contracts with SOFR, which is calculated based on overnight transactions under repurchase agreements backed by Treasury securities. In addition, on April 17, 2023 the Company entered into an amendment (the "April 2023 Amendment") of the Securitization Facility (as defined below) and amended the interest rate from LIBOR to SOFR indexed rate. (See Note 6). In March 2023, the Company entered into a basis swap where the Company receives Term SOFR and pays LIBOR to convert the portfolio of interest rate swaps from LIBOR to SOFR. Integra has elected to adopt the optional expedient under ASC 848, which will allow the interest rate swap hedging relationship to continue, without de-designation, due to the change in the indexed rate from LIBOR to SOFR. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for interest during the years ended December 31, 2023, 2022 and 2021 was $ 44.3 million (net of $ 2.4 million that was capitalized into construction in progress), $ 42.2 million (net of $ 1.4 million that was capitalized into construction in progress) and $ 43.2 million (net of $ 1.2 million that was capitalized into construction in progress), respectively. Cash paid for income taxes, net of refunds, for the years ended December 31, 2023, 2022 and 2021 was $ 23.6 million, $ 35.9 million and $ 49.5 million, respectively. NON-CASH INVESTING AND FINANCING ACTIVITIES Property and equipment purchases included in liabilities at December 31, 2023, 2022 and 2021 were $ 10.0 million, $ 10.5 million and $ 4.7 million, respectively. During the fourth quarter of 2021, the Company achieved its final developmental milestone which triggered a $ 5.0 million obligation to be paid to former shareholders of Rebound Therapeutics Corporation ("Rebound"). The Company recorded $ 5.0 million as an intangible asset in the consolidated balance sheet upon achieving the milestone. The remaining obligation was included in accrued liabilities at December 31, 2021 in the consolidated balance sheets. The milestone was fully paid in 2022. 3. REVENUES FROM CONTRACTS WITH CUSTOMERS Summary of Accounting Policies on Revenue Recognition Revenue is recognized upon the transfer of control of promised products or services to the customers in an amount that reflects the consideration the Company expects to receive in exchange for those products and services. Performance Obligations The Company's performance obligations consist mainly of transferring control of goods and services identified in the contracts, purchase orders, or invoices. The Company has no significant multi-element contracts with customers. Significant Estimates Usage-based royalties and licenses are estimated based on the provisions of contracts with customers and recognized in the same period that the royalty-based products are sold by the Company's strategic partners. The Company estimates and recognizes royalty revenue based upon communication with licensees, historical information, and expected sales trends. Differences between actual reported licensee sales and those that were estimated are adjusted in the period in which they become known, which is typically the following quarter. Historically, such adjustments have not been significant. The Company estimates returns, price concessions, and discount allowances using the expected value method based on historical trends and other known factors. Rebate allowances are estimated using the most likely method based on each customer contract. The Company's return policy, as set forth in its product catalogs and sales invoices, requires review and authorization in advance prior to the return of product. Upon the authorization, a credit will be issued for the goods returned within a set amount of days from the shipment, which is generally 90 days. F-16 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Due to the voluntary recall in 2023 of all products manufactured at the Boston facility, including Primatrix®, Surgimend®, Revize™, and TissueMend™, the Boston recall, the Company recorded a total of $ 18.7 million provision for product returns, as a reduction of net revenue, and has credited $ 9.9 million to customers during the year ended December 31, 2023. As of December 31, 2023, the return reserve was $ 8.8 million. The Company disregards the effects of a financing component if the Company expects, at contract inception, that the period between the transfer and customer payment for the goods or services will be one year or less. The Company has no significant revenues recognized on payments expected to be received more than one year after the transfer of control of products or services to customers. Contract Asset and Liability Revenues recognized from the Company's private label business that are not invoiced to the customers as a result of recognizing revenue over time are recorded as a contract asset included in the prepaid expenses and other current assets account in the consolidated balance sheet. Upon invoicing to the customer, the balance is recorded in trade receivable, net in the consolidated balance sheet. Other operating revenues may include fees received under service agreements. Non-refundable fees received under multiple-period service agreements are recognized as revenue as the Company satisfies the performance obligations to the other party. A portion of the transaction price allocated to the performance obligations to be satisfied in the future periods is recognized as a contract liability. The following table summarized the changes in the contract asset and liability balances for the year ended December 31, 2023: Dollars in thousands Total Contract Asset Contract asset, January 1, 2023 $ 10,122 Transferred to trade receivable from contract asset included in beginning of the year contract asset ( 7,743 ) Written off from beginning of the year contract asset due to Boston recall ( 2,379 ) Contract asset, net of transferred to trade receivables on contracts during the period 9,233 Contract asset, December 31, 2023 $ 9,233 Contract Liability Contract liability, January 1, 2023 $ 16,127 Recognition of revenue included in beginning of year contract liability ( 6,834 ) Contract liability, net of revenue recognized on contracts during the period 6,951 Foreign currency translation 8 Contract liability, December 31, 2023 $ 16,252 At December 31, 2023, the short-term portion of the contract liability of $ 8.5 million and the long-term portion of $ 7.7 million is included in current liabilities and other liabilities, respectively, in the consolidated balance sheet. As of December 31, 2023, the Company is expected to recognize revenue from unsatisfied or partially satisfied performance obligations of approximately $ 8.5 million in 2024, $ 4.2 million in 2025, $ 2.1 million in 2026, $ 1.1 million in 2027, $ 0.2 million in 2028, and $ 0.1 million thereafter. Shipping and Handling Fees The Company elected to account for shipping and handling activities as a fulfillment cost rather than a separate performance obligation. Amounts billed to customers for shipping and handling are included as part of the transaction price and recognized as revenue when control of underlying products is transferred to the customer. The related shipping and freight charges incurred by the Company are included in the cost of goods sold. F-17 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Product Warranties Certain of the Company's medical devices, including monitoring systems and neurosurgical systems, are designed to operate over long periods of time. These products are sold with warranties which may extend for up to two years from the date of purchase. The warranties are not considered a separate performance obligation. The Company estimates its product warranties using the expected value method based on historical trends and other known factors. The Company includes them in accrued expenses and other current liabilities in the consolidated balance sheet. Taxes Collected from Customers The Company elected to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer. Disaggregated Revenue The following table presents revenues disaggregated by the major sources of revenues for years-ended December 31, 2023, 2022 and 2021 (dollar amounts in thousands): Year Ended December 31, 2023 Year Ended December 31, 2022 Year Ended December 31, 2021 Neurosurgery $ 818,101 $ 794,017 $ 802,959 Instruments 240,892 225,547 222,273 Total Codman Specialty Surgical 1,058,993 1,019,564 1,025,232 Wound Reconstruction and Care (1)(2) 373,986 406,689 392,463 Private Label 108,594 131,413 124,753 Total Tissue Technologies 482,580 538,102 517,216 Total revenue $ 1,541,573 $ 1,557,666 $ 1,542,448 (1) See Note 4. Acquisitions and Divestitures, for details around the ACell and SIA acquisitions. (2) On August 31, 2022, the Company completed the sale of its non-core traditional wound care ("TWC") business. See Note 4, Acquisitions and Divestitures See Note 16, Segment and Geographical Information , for details of revenues based on the location of the customer. 4. ACQUISITIONS AND DIVESTITURES Surgical Innovation Associates, Inc. Acquisition On December 6, 2022, the Company completed its acquisition of Surgical Innovation Associates, Inc. ("SIA") for an acquisition purchase price of $ 51.5 million (the "SIA Acquisition") plus contingent consideration of up to $ 90.0 million. In addition to the purchase price, the acquisition includes two separate contingent considerations payments, which are dependent on 1) achieving certain revenue-based performance milestones in 2023, 2024, and 2025 (up to $ 50.0 million in additional payments), as well as 2) the approval by the FDA of the Premarket Approval (“PMA”) Application for DuraSorb for certain uses by certain timing targets (up to $ 40.0 million in additional payments). SIA's core technology, DuraSorb, is a fully resorbable scaffold of a globally accepted polymer, which is cleared for use in hernia repair, abdominal wall, and other soft tissue reinforcement. DuraSorb sales will be reported within Integra’s Tissue Technologies segment as part of its Wound Reconstruction and Care franchise. Assets Acquired and Liabilities Assumed at Fair Value The SIA Acquisition has been accounted for using the acquisition method of accounting. This method requires that assets acquired, and liabilities assumed in a business combination to be recognized at their fair values as of the acquisition date. F-18 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date: Dollars in thousands Final Valuation Weighted Average Life Current assets: Cash $ 4,438 Trade accounts receivable, net 1,551 Inventories, net 2,900 Prepaid expenses and other current assets 1,654 Total current assets $ 10,543 Intangible assets 75,000 14 years Goodwill 41,380 Total assets acquired $ 126,923 Current liabilities: Accounts payable and accrued expenses $ 2,044 Total current liabilities $ 2,044 Deferred Tax Liability 11,325 Contingent consideration 57,607 Total liabilities assumed 70,976 Net assets acquired $ 55,947 Developed Technology The estimated fair value of the developed technology was determined using the multi-period excess earnings method of the income approach, which estimates value based on the present value of future economic benefits. Some of the more significant assumptions inherent in the development of those asset valuations include the estimated net cash flows for each year for each product including net revenues, cost of sales, R&D costs, selling and marketing costs, working capital, and contributory asset charges, the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of the asset’s life cycle, and competitive trends impacting the asset and the cash flow stream. The Company used a discount rate of 18 % to arrive at the present value for the acquired intangible assets to reflect the rate of return a market participant would expect to earn and incremental commercial uncertainty in the cash flow projections. No assurances can be given that the underlying assumptions used to prepare the discounted cash flow analysis will not change. For these and other reasons, actual results may vary significantly from estimated results. Goodwill The Company allocated goodwill related to the SIA Acquisition to the Tissue Technologies segment. Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce. A key factor that contributes to the recognition of goodwill, and a driver for the Company’s acquisition of SIA, is the attractive growth opportunities presented by the surgical matrix business in the breast reconstruction market. Goodwill recognized as a result of this acquisition is non-deductible for income tax purposes. Contingent Consideration The Company determines the acquisition date fair value of contingent consideration obligations based on a probability-weighted income approach derived from revenue estimates and a probability assessment with respect to the likelihood of achieving contingent obligations. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined using the fair value concepts in ASC 820. The resulting most likely payouts are discounted using an appropriate effective annual interest rate. At each reporting date, the contingent consideration obligation will be revalued to estimated fair value and changes in fair value will be reflected as income or expense in the consolidated statement of operations. Changes in the fair value of the contingent considerations may result from changes in discount periods and rates and changes in the timing and amount of revenue estimates. Changes in assumptions utilized in the contingent consideration fair value estimates could result in an increase in the contingent consideration obligation and a corresponding charge to operating results. As part of the acquisition, the Company is required to pay to the shareholder of SIA up to $ 90.0 million for two separate payments, which are dependent on 1) achieving certain revenue-based performance milestones in 2023, 2024, and 2025 (up to $ 50.0 million in additional payments), as well as 2) the approval by the FDA of the PMA for DuraSorb for certain uses by certain timing targets (up to $ 40.0 million in additional payments). The Company used iterations of the Monte Carlo simulation F-19 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) to calculate the fair value of the contingent consideration for the revenue-based milestone that considered the possible outcomes of scenarios related to each specific milestone for the revenue based performance milestone. The Company used probabilities of achieving the conditions to calculate the fair value of the contingent consideration for the PMA approval milestone. For the twelve-month period ended December 31, 2023, the company estimates the fair value of contingent consideration for the revenue based milestone to be $ 41.8 million and PMA approval to be $ 26.9 million. This is compared to $ 32.6 million and $ 25.0 million, respectively at the acquisition date. Deferred Tax Liabilities Deferred tax liabilities result from identifiable intangible assets’ fair value adjustments. These adjustments create excess book basis over tax basis which is tax-effected by the statutory tax rates of applicable jurisdictions. Sale of non-core traditional wound care business On August 31, 2022, the Company completed its 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. The divestiture did not represent a strategic shift that had a major effect on the Company's operations and financial statements. Goodwill was allocated to the assets and liabilities divested using the relative fair value method of the TWC business to the Company's Tissue Technologies reportable business segment. In connection with the sale, the Company recognized $ 0.6 million as a gain from the sale of the business in the consolidated statement of operations for the year ended December 31, 2022. The transaction is subject to final working capital adjustments. In addition to the purchase and sale agreement, the Company also entered into a contract manufacturing agreement with Gentell. Under the terms of the agreement, Gentell received inventory, equipment, and tooling to manufacture certain MediHoney® and TCC-EZ® products on behalf of the Company. On the close date of this transaction, the Company transferred all inventory associated with these products to Gentell and recognized an asset of $ 11.1 million, as a form of a deposit for the inventory transferred, which based on the expected timing of inventory purchases, was primarily included within prepaid expenses and other current assets in the consolidated balance sheet. This deposit will be utilized by the Company on future orders placed to Gentell for such products. As of December 31, 2023, the Company had a deposit remaining of $ 0.4 million which is included in prepaid assets. In addition, there are outstanding balances related to the Company's ongoing purchase of MediHoney® and TCC-EZ® products subsequent to the close of the TWC divestiture.. Definitive Agreement to Acquire Acclarent Inc. In December 2023, the Company entered into a definitive agreement to acquire Acclarent, Inc. from Ethicon, Inc., a Johnson & Johnson MedTech company for $ 275 million in cash at closing, subject to customary purchase price adjustments, and an additional $ 5 million upon the achievement of certain regulatory milestones. Acclarent is an innovator and market leader in Ear, Nose, Throat ("ENT") procedures and upon closing, Integra will be one of the leading providers of ENT products and technologies. The transaction is expected to close by the second quarter of 2024 . Sale of Extremity Orthopedics Business On January 4, 2021, the Company completed the sale of its Extremity Orthopedics business to Smith & Nephew USD Limited ("Smith & Nephew"). The transaction included the sale of the Company's upper and lower Extremity Orthopedics product portfolio, including ankle and shoulder arthroplasty and hand and wrist product lines. The Company received an aggregate purchase price of $ 240.0 million from Smith & 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 divestiture did not represent a strategic shift that had a major effect on the Company's operations and financial statements. Goodwill was allocated to the assets and liabilities divested using the relative fair value method of the Extremity Orthopedics business to the Company's Tissue Technologies reporting unit. In connection with the sale, the Company recognized a gain of $ 41.8 million that is presented in 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 to Smith & Nephew as of December 31, 2021. F-20 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) ACell, Inc. Acquisition On January 20, 2021, the Company acquired ACell, Inc. (the "ACell Acquisition") for an acquisition purchase price of $ 306.9 million plus contingent considerations of up to $ 100 million, that may be payable upon achieving certain revenue-based performance milestones in 2022, 2023 and 2025. The final working capital adjustments of $ 1.3 million was finalized and paid as of June 30, 2021. 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, a technology platform derived from porcine urinary bladder extracellular matrix. Assets Acquired and Liabilities Assumed at Fair Value The ACell Acquisition has been accounted for using the acquisition method of accounting. This method requires that assets acquired and liabilities assumed in a business combination are recognized at their fair values as of the acquisition date. The following table summarizes the final fair values of the assets acquired and liabilities assumed at the acquisition date: Dollars in thousands Final Valuation Weighted Average Life Current assets: Cash $ 2,726 Trade accounts receivable, net 16,469 Inventories, net 18,299 Prepaid expenses and other current assets 1,498 Total current assets $ 38,992 Property, plant and equipment, net 13,769 Intangible assets 245,000 13 - 14 years Goodwill 94,147 Right of use asset - operating leases 9,259 Deferred tax assets 7,465 Other assets 148 Total assets acquired $ 408,780 Current liabilities: Accounts payable $ 718 Accrued expenses 5,966 Current portion of lease liability - operating leases 1,673 Total current liabilities $ 8,357 Other long-term liability 276 Lease liability - operating leases 7,585 Deferred tax liability 61,724 Contingent consideration 23,900 Total liabilities assumed 101,842 Net assets acquired $ 306,938 Intangible Assets The estimated fair value of the developed technology acquired was determined using the multi-period excess earnings method of the income approach, which estimates value based on the present value of future economic benefits. Some of the more significant assumptions inherent in the development of those asset valuations include the estimated net cash flows for each year for each product including net revenues, cost of sales, R&D costs, selling and marketing costs, the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, and competitive trends impacting the asset and each cash flow stream. The Company used a discount rate of 8.5 % to arrive at the present value for the acquired intangible assets to reflect the rate of return a market participant would expect to earn and incremental commercial uncertainty in the cash flow projections. No assurances can be given that the underlying assumptions used to prepare the discounted cash flow analysis will not change. For these and other reasons, actual results may vary significantly from estimated results. F-21 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Goodwill The Company allocated goodwill related to the ACell acquisition to the Tissue Technologies segment. Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected synergies of the combined company and assembled workforce. Goodwill recognized as a result of this acquisition is non-deductible for income tax purposes. Contingent Consideration As part of the acquisition of ACell (the "ACell Acquisition"), the Company is required to make payments to the former shareholders of ACell up to $ 50 million based on the achievement by the Company of certain revenue-based performance milestones in 2023 and $ 50 million in 2025. The 2023 milestone was not achieved, leaving only one contingent milestone remaining. The Company used iterations of the Monte Carlo simulation to calculate the fair value of the contingent consideration that considered the possible outcomes of scenarios related to each specific milestone. For the twelve-month period ended December 31, 2023, the company estimates the fair value of the contingent obligation to be $ 0.3 million. This is compared to $ 23.9 million at the acquisition date, and $ 3.7 million at December 31, 2022. Deferred Tax Liabilities Deferred tax liabilities result from identifiable intangible assets’ fair value adjustments. These adjustments create excess book basis over tax basis which is tax-effected by the statutory tax rates of applicable jurisdictions. 5. DEBT Amendment to the Seventh Amended and Restated Senior Credit Agreement On March 24, 2023, the Company entered into the seventh amendment and restatement (the "March 2023 Amendment") of the Senior Credit Facility (the "Senior Credit Facility") with a syndicate of lending banks with Bank of America, N.A., as Administrative Agent. The March 2023 Amendment extended the maturity date to March 24, 2028, amended the contractual repayments of the term loan component, and amended the interest rate from LIBOR to SOFR-indexed interest. The Company continues to have the aggregate principal amount of up to approximately $ 2.1 billion available to it through the following facilities: (i) a $ 775.0 million term loan facility, and (ii) a $ 1.3 billion revolving credit facility, which includes a $ 60 million sublimit for the issuance of standby letters of credit and a $ 60 million sublimit for swingline loans. The Company’s maximum consolidated total leverage ratio in the financial covenants (as defined in the Senior Credit Facility) is the following: Fiscal Quarter Ending Maximum Consolidated Total Leverage Ratio March 31, 2023 through December 31, 2024 4.50 to 1.00 March 31, 2025 through June 30, 2026 4.25 to 1.00 September 30, 2026 and the last day of each fiscal quarter thereafter 4.00 to 1.00 Borrowings under the Senior Credit Facility bear interest, at the Company’s option, at a rate equal to the following: i. Term SOFR in effect from time to time plus 0.10 % plus the applicable rate (ranging from 1.00 % to 1.75 %), or ii. the highest of: 1. the weighted average overnight Federal funds rate, as published by the Federal Reserve Bank of New York, plus 0.50 % 2. the prime lending rate of Bank of America, N.A. or 3. the one-month Term SOFR plus 1.00 % The applicable rates are based on the Company’s consolidated total leverage ratio (defined as the ratio of (a) consolidated funded indebtedness as of such date less cash that is not subject to any restriction on the use or investment thereof to (b) consolidated EBITDA (as defined by the amended Seventh Amended and Restated Credit Agreement (the "Credit Agreement")), for the period of four consecutive fiscal quarters ending on such date). The Company will pay an annual commitment fee (ranging from 0.15 % to 0.30 %), based on the Company's consolidated total leverage ratio, on the amount available for borrowing under the revolving credit facility. F-22 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The Senior Credit Facility is collateralized by substantially all of the assets of the Company’s U.S. subsidiaries, excluding intangible assets. The Senior Credit Facility is subject to various financial and negative covenants and at December 31, 2023, the Company was in compliance with all such covenants. The Company capitalized $ 7.6 million deferred financing costs in connection with the modification of the Senior Credit Facility and wrote off $ 0.2 million of previously capitalized financing costs during the year ended 2023. There was $ 70.0 million outstanding at December 31, 2023 under the revolving portion of the Senior Credit Facility at a weighted average interest rate of 6.8 %. As of December 31, 2022 , there was no balance outstanding under the revolving portion of the Senior Credit Facility. At December 31, 2023 and 2022, there was $ 775.0 million outstanding under the Term Loan component of the Senior Credit Facility at weighted average interest rate of 6.8 % and 5.6 % , respectively. At December 31, 2023 and 2022, there was $ 14.5 million and $ 38.1 million, respectively, of the Term Loan component of the Senior Credit Facility was classified as current on the consolidated balance sheets. The fair value of outstanding borrowings of the Senior Credit Facility's Term Loan components at December 31, 2023 was $ 762.9 million . This fair values were determined by using a discounted cash flow model based on current market interest rates available to the Company. These inputs are corroborated by observable market data for similar liabilities and therefore classified within Level 2 of the fair value hierarchy. Level 2 inputs represent inputs that are observable for the asset or liability, either directly or indirectly, and are other than active market observable inputs that reflect unadjusted quoted prices for identical assets or liabilities Letters of credit outstanding as of December 31, 2023 and 2022 totaled $ 1.7 million, and $ 1.6 million respectively. Ther e were no amounts drawn as of December 31, 2023. Contractual repayments of the Term Loan component of the Senior Credit Facility are due as follows: Year Ended December 31, 2023 Principal Repayment Dollars in thousands 2024 $ 14,531 2025 $ 33,906 2026 $ 38,750 Thereafter $ 687,813 $ 775,000 Future interest payments on the term loan component of the Senior Credit Facility based on current interest rates are expected to approximate $ 52.4 million in 2024, $ 50.5 million in 2025, $ 47.9 million in 2026, and $ 54.7 million thereafter. Interest is calculated on the term loan portion of the Senior Credit Facility based on SOFR plus the certain amounts set forth in the Credit Agreement. As the revolving credit facility and Securitization Facility (defined below) can be repaid at any time, no interest has been included in the calculation. Any outstanding borrowings on the revolving credit component of the Senior Credit Facility is due on March 24, 2028. Convertible Senior Notes On February 4, 2020, the Company issued $ 575.0 million aggregate principal amount of its 0.5 % Convertible Senior Notes due 2025 (the "2025 Notes"). The 2025 Notes will mature on August 15, 2025 and bear interest at a rate of 0.5 % per annum payable semi-annually in arrears, unless earlier converted, repurchased or redeemed in accordance with the terms of the 2025 Notes. The 2025 Notes are senior, unsecured obligations of the Company, and are convertible into cash and shares of its common stock based on initial conversion rate, subject to adjustment of 13.5739 shares per $1,000 principal amounts of the 2025 Notes (which represents an initial conversion price of $ 73.67 per share). The 2025 Notes convert only in the following circumstances: (1) if the closing price of the Company's common stock has been at least 130 % of the conversion price during the period; (2) if the average trading price per $1,000 principal amount of the 2025 Notes is less than or equal to 98 % of the average conversion value of the 2025 Notes during a period as defined in the indenture; (3) if the Company calls the notes for optional redemption as defined in the indenture; or (4) if specified corporate transactions occur. As of December 31, 2023, none of these conditions existed with respect to the 2025 Notes and as a result the 2025 Notes are classified as long term. On December 9, 2020, the Company entered into the First Supplemental Indenture to the original agreement dated as of February 4, 2020 between the Company and Citibank, N.A., as trustee, governing the Company’s outstanding 2025 Notes. The Company irrevocably elected (1) to eliminate the Company’s option to choose physical settlement on any conversion of the 2025 Notes that occurs on or after the date of the First Supplemental Indenture and (2) with respect to any Combination F-23 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Settlement for a conversion of the 2025 Notes, the Specified Dollar Amount that will be settled in cash per $1,000 principal amount of the 2025 Notes shall be no lower than $ 1,000 . Holders of the Notes will have the right to require the Company to repurchase for cash all or a portion of their Notes at 100 % of their principal amount, plus any accrued and unpaid interest, upon the occurrence of a fundamental change (as defined in the indenture relating to the Notes). The Company will also be required to increase the conversion rate for holders who convert their Notes in connection with certain fundamental changes occurring prior to the maturity date or following delivery by the Company of a notice of redemption. In connection with the issuance of the 2025 Notes, the Company entered into call transactions and warrant transactions, primarily with affiliates of the initial purchasers of the 2025 Notes (the “hedge participants”). The cost of the call transactions was $ 104.2 million for the 2025 Notes. The Company received $ 44.5 million of proceeds from the warrant transactions for the 2025 Notes. The call transactions involved purchasing call options from the hedge participants, and the warrant transactions involved selling call options to the hedge participants with a higher strike price than the purchased call options. The initial strike price of the call transactions was $ 73.67 , subject to anti-dilution adjustments substantially similar to those in the 2025 Notes. The initial strike price of the warrant transactions was $ 113.34 for the 2025 Notes, subject to customary anti-dilution adjustments. At December 31, 2023 , the carrying amount of the liability was $ 575.0 million. The fair value of the 2025 Notes at December 31, 2023 wa s $ 541.2 million. Factors that the Company considered when estimating the fair value of the 2025 Notes included recent quoted market prices or dealer quote. The level of the 2025 Notes is considered as Level 1. Securitization Facility On December 15, 2023, the Company entered into an amendment (the "December 2023 Amendment") of the Securitization Facility which extended the maturity date from May 28, 2024 to December 15, 2026. The company incurred approximately $ 0.3 million of new issuance costs associated with the amendment which will be amortized over 3 years, the length of the agreement. Due to the increase in borrowing capacity, the remaining $ 0.1 million of unamortized costs from the previous agreement will be amortized over the length of the amended agreement, 3 years. In addition, on April 17, 2023 the company entered into an amendment (the "April 2023 Amendment") of the Securitization Facility and amended the interest rate from LIBOR to SOFR indexed rate. The December 2023 and April 2023 Amendments do not increase the Company’s total indebtedness. During the fourth quarter of 2018, the Company entered into an accounts receivable securitization facility (the "Securitization Facility") under which accounts receivable of certain domestic subsidiaries are sold on a non-recourse basis to a special purpose entity (“SPE”), which is a bankruptcy-remote, consolidated subsidiary of the Company. Accordingly, the assets of the SPE are not available to satisfy the obligations of the Company or any of its subsidiaries. From time to time, the SPE may finance such accounts receivable with a revolving loan facility secured by a pledge of such accounts receivable. The amount of outstanding borrowings on the Securitization Facility at any one time is limited to $ 150.0 million. The Securitization Facility Agreement ("Securitization Agreement") governing the Securitization Facility contains certain covenants and termination events. An occurrence of an event of default or a termination event under this Securitization Agreement may give rise to the right of its counterparty to terminate this facility. As of December 31, 2023, the Company was in compliance with the covenants and none of the termination events had occurred. At December 31, 2023 and 2022, the Company had $ 89.2 million and $ 104.7 million, of outstanding borrowings under its Securitization Facility at a weighted average interest rate of 5.9 % and 5.0 %, respectively. The fair value of the outstanding borrowing of the Securitization Facility at December 31, 2023 was $ 87.1 million. These fair values were determined by using a discounted cash flow model based on current market interest rates available to the Company. These inputs are corroborated by observable market data for similar liabilities and therefore classified within Level 2 of the fair value hierarchy. Level 2 inputs represent inputs that are observable for the asset or liability, either directly or indirectly, and are other than active market observable inputs that reflect unadjusted quoted prices for identical assets or liabilities. F-24 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 6. DERIVATIVE INSTRUMENTS Interest Rate Hedging The Company’s interest rate risk relates to U.S. dollar denominated variable interest rate borrowings. The Company uses interest rate swap derivative instruments to manage earnings and cash flow exposure resulting from changes in interest rates. These interest rate swaps apply a fixed interest rate on a portion of the Company's expected SOFR-indexed borrowings. In connection with the March 2023 Amendment to the Senior Credit Facility, the Company amended its interest rate from LIBOR to SOFR-indexed interest. In March 2023, the Company entered into a basis swap where the Company receives Term SOFR and pays daily compounded SOFR to convert the portfolio of swaps from daily compounded SOFR to term SOFR. The Company held the following interest rate swaps as of December 31, 2023 and 2022 (dollar amounts in thousands): December 31, 2023 December 31, 2023 Hedged Item Notional Amount Designation Date Effective Date Termination Date Fixed Interest Rate Estimated Fair Value Asset (Liability) 1-month Term SOFR Loan 150,000 December 13, 2017 July 1, 2019 June 30, 2024 2.423 % 2,105 1-month Term SOFR Loan 200,000 December 13, 2017 January 1, 2018 December 31, 2024 2.313 % 4,978 1-month Term SOFR Loan 75,000 October 10, 2018 July 1, 2020 June 30, 2025 3.220 % 1,349 1-month Term SOFR Loan 75,000 October 10, 2018 July 1, 2020 June 30, 2025 3.199 % 1,312 1-month Term SOFR Loan 75,000 October 10, 2018 July 1, 2020 June 30, 2025 3.209 % 1,346 1-month Term SOFR Loan 100,000 December 18, 2018 December 30, 2022 December 31, 2027 2.885 % 3,015 1-month Term SOFR Loan 100,000 December 18, 2018 December 30, 2022 December 31, 2027 2.867 % 3,052 1-month Term SOFR Loan 575,000 December 15, 2020 July 31, 2025 December 31, 2027 1.415 % 22,965 1-month Term SOFR Loan 125,000 December 15, 2020 July 1, 2025 December 31, 2027 1.404 % 5,263 Basis Swap (1) — March 31, 2023 March 24, 2023 December 31, 2027 N/A ( 1,829 ) $ 1,475,000 $ 43,556 (1) The notional of the basis swap amortizes to match the total notional of the interest rate swap portfolio over time December 31, 2022 December 31, 2022 Hedged Item Notional Amount Designation Date Effective Date Termination Date Fixed Interest Rate Estimated Fair Value Asset (Liability) 1-month USD LIBOR Loan 150,000 December 13, 2017 July 1, 2019 June 30, 2024 2.423 % 5,012 1-month USD LIBOR Loan 200,000 December 13, 2017 January 1, 2018 December 31, 2024 2.313 % 8,380 1-month USD LIBOR Loan 75,000 October 10, 2018 July 1, 2020 June 30, 2025 3.220 % 1,831 1-month USD LIBOR Loan 75,000 October 10, 2018 July 1, 2020 June 30, 2025 3.199 % 1,905 1-month USD LIBOR Loan 75,000 October 10, 2018 July 1, 2020 June 30, 2025 3.209 % 1,970 1-month USD LIBOR Loan 100,000 December 18, 2018 December 30, 2022 December 31, 2027 2.885 % 4,252 1-month USD LIBOR Loan 100,000 December 18, 2018 December 30, 2022 December 31, 2027 2.867 % 4,153 1-month USD LIBOR Loan 575,000 December 15, 2020 July 31, 2025 December 31, 2027 1.415 % 23,742 1-month USD LIBOR Loan 125,000 December 15, 2020 July 1, 2025 December 31, 2027 1.404 % 5,467 $ 1,475,000 $ 56,712 F-25 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The interest rate swaps were carried on the consolidated balance sheet at fair value and changes in the fair values were recorded as unrealized gains or losses in accumulated other comprehensive income (“AOCI”). For the years ended December 31, 2023 and 2022, the Company recorded gains of $ 4.9 million and $ 93.3 million, respectively, in AOCI related to the change in fair value of the interest rate swaps. For the years ended December 31, 2023 and 2022, the Company recorded a gain of $ 18.1 million and a loss of $ 7.4 million, respectively, in interest income included in the consolidated statements of operations related to the interest rate differential of the interest rate swaps. The estimated gain that is expected to be reclassified to interest income from AOCI as of December 31, 2023 within the next twelve months is $ 14.1 million. The Company has designated these derivative instruments as cash flow hedges. The Company assesses the effectiveness of these derivative instruments and has recorded the changes in the fair value of the derivative instrument designated as a cash flow hedge as unrealized gains or losses in AOCI, net of tax, until the hedged item affected earnings, at which point any gain or loss was reclassified to earnings. If the hedged cash flow does not occur, or if it becomes probable that it will not occur, the Company will reclassify the remaining amount of any gain or loss on the related cash flow hedge recorded in AOCI to interest expense at that time. Foreign Currency Hedging From time to time, the Company enters into foreign currency hedge contracts intended to protect the U.S. dollar value of certain forecasted foreign currency denominated transactions. The Company assesses the effectiveness of the contracts that are designated as hedging instruments. The changes in fair value of foreign currency cash flow hedges are recorded in AOCI, net of tax. Those amounts are subsequently reclassified to earnings from AOCI as impacted by the hedged item when the hedged item affects earnings. If the hedged forecasted transaction does not occur, or if it becomes probable that it will not occur, the Company will reclassify the amount of any gain or loss on the related cash flow hedge to earnings at that time. For contracts not designated as hedging instruments, the changes in fair value of the contracts are recognized in other income, net in the consolidated statements of operation, along with the offsetting foreign currency gain or loss on the underlying assets or liabilities. The success of the Company’s hedging program depends, in part, on forecasts of certain activity denominated in foreign currency. The Company may experience unanticipated currency exchange gains or losses to the extent that there are differences between forecasted and actual activities during periods of currency volatility. In addition, changes in currency exchange rates related to any unhedged transactions may affect earnings and cash flows. Cross-Currency Rate Swaps The objective of these cross-currency swaps is to reduce volatility of earnings and cash flows associated with changes in the foreign currency exchange rate. Under the terms of these contracts, which have been designated as cash flow hedges, the Company will make interest payments in Swiss Francs and receive interest in U.S. dollars. Upon the maturity of these contracts, the Company will pay the principal amount of the loans in Swiss Francs and receive U.S. dollars from the counterparties. On September 22, 2023, the Company amended the Swiss Franc ("CHF")-denominated intercompany loan to partially settle CHF 20.0 million and extend the termination date to September 2024 and as a result, the Company terminated the cross-currency swap designated as cash flow hedge of an intercompany loan with aggregate notional amount of $ 48.5 million. Simultaneously, the Company entered into a cross-currency swap agreement to hedge a notional amount of CHF 28.5 million equivalent to $ 31.5 million of this amended intercompany loan into U.S. dollars. The loss recorded by the Company upon the settlement of the swap was not material for the period. On December 21, 2020, the Company entered into cross-currency swap agreements to convert a notional amount of $ 471.6 million equivalent to 420.1 million of a CHF-denominated intercompany loan into U.S. dollars. The CHF-denominated intercompany loan was the result of an intra-entity transfer of certain intellectual property rights to a subsidiary in Switzerland completed during the fourth quarter of 2020. The intercompany loan requires quarterly payments of CHF 5.8 million plus accrued interest. As a result, the aggregate notional amount of the related cross-currency swaps will decrease by a corresponding amount. F-26 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The Company held the following cross-currency rate swaps as of December 31, 2023 and 2022 (dollar amounts in thousands): December 31, 2023 December 31, 2022 December 31, 2023 December 31, 2022 Effective Date Termination Date Fixed Rate Aggregate Notional Amount Fair Value Asset (Liability) Pay CHF December 21, 2020 December 22, 2025 3.00 % CHF 351,137 374,137 ( 38,324 ) ( 4,241 ) Receive U.S.$ 3.98 % $ 394,183 420,001 Pay CHF September 28, 2022 September 29, 2023 1.95 % CHF — 48,532 — ( 3,528 ) Receive U.S.$ 5.32 % $ — 49,142 Pay CHF September 22, 2023 September 29, 2024 2.40 % CHF 28,500 — ( 2,348 ) — Receive U.S.$ 6.27 % $ 31,457 — Total $ ( 40,672 ) $ ( 7,769 ) The cross-currency swaps are carried on the consolidated balance sheet at fair value, and changes in the fair values are recorded as unrealized gains or losses in AOCI. For the years ended December 31, 2023 and 2022 the Company recorded a loss of $ 37.4 million and a gain of $ 11.1 million, respectively, in other income, net related to change in fair value related to the foreign currency rate translation to offset the losses recognized on the intercompany loans. For the years ended December 31, 2023 and 2022, the Company recorded a loss of $ 27.4 million and a gain of $ 8.8 million in AOCI, respectively, related to change in fair value of the cross-currency swaps. For the years ended December 31, 2023 and 2022, the Company recorded gains of $ 5.5 million and $ 8.4 million, respectively, in other income, net included in the consolidated statements of operations related to the interest rate differential of the cross-currency swaps. The estimated loss that is expected to be reclassified to other income (expense), net from AOCI as of December 31, 2023 within the next twelve months is $ 4.3 million. As of December 31, 2023, the Company does not expect any gains or losses will be reclassified into earnings because the original forecasted transactions will not occur. Net Investment Hedges The Company manages certain foreign exchange risks through a variety of strategies, including hedging. The Company is exposed to foreign exchange risk from its international operations through foreign currency purchases, net investments in foreign subsidiaries, and foreign currency assets and liabilities created in the normal course of business. F-27 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The Company held the following cross-currency rate swaps designated as net investment hedges as of December 31, 2023 and 2022 (dollar amounts in thousands): December 31, 2023 December 31, 2022 December 31, 2023 December 31, 2022 Effective Date Termination Date Fixed Rate Aggregate Notional Amount Fair Value Asset (Liability) Pay EUR October 3, 2018 September 30, 2023 — % EUR — 51,760 — 4,713 Receive U.S.$ 2.57 % $ — 60,000 Pay EUR October 3, 2018 September 30, 2025 — % EUR 38,820 38,820 2,475 4,307 Receive U.S.$ 2.19 % $ 45,000 45,000 Pay CHF May 26, 2022 December 16, 2028 — % CHF 288,210 288,210 ( 48,047 ) ( 14,663 ) Receive U.S.$ 1.94 % $ 300,000 300,000 Pay CHF November 21, 2023 December 17, 2029 — % CHF 66,525 — ( 4,037 ) — Receive U.S.$ 2.54 % $ 75,000 — Total $ ( 49,609 ) $ ( 5,643 ) The cross-currency swaps were carried on the consolidated balance sheet at fair value and changes in the fair values were recorded as unrealized gains or losses in AOCI. For the years ended December 31, 2023 and 2022, the Company recorded a loss of $ 30.7 million and a gain of $ 2.2 million, respectively, in AOCI related to the change in fair value of the cross-currency swaps. For the years ended December 31, 2023 and 2022, the Company recorded gains of $ 7.8 million and $ 6.8 million, respectively, in interest income included in the consolidated statements of operations related to the interest rate differential of the cross-currency swaps. The estimated gain that is expected to be reclassified to interest income from AOCI as of December 31, 2023 within the next twelve months is immaterial . Foreign Currency Forward Contract The Company has entered into a hedge for forecasted intercompany purchases denominated in foreign currencies through the use of forward contracts designated as cash flow hedges. To the extent these forward contracts meet hedge accounting criteria, changes in their fair value are included in AOCI. These changes in fair value will be recognized into earnings as a component of cost of sales when the forecasted-transaction occurs. During 2023, the Company entered into foreign currency forward contracts to mitigate the risk of foreign currency on intercompany purchases in CHF. These contracts typically settle at various dates within twelve months of execution. As of December 31, 2023 there were no outstanding foreign currency forward contracts. During the year ended December 31, 2023 the Company recorded a gain of $ 0.4 million in AOCI related to the change in fair value of the foreign currency forward contracts. During the year ended December 31, 2023 the company recorded a gain of $ 0.4 million in cost of goods sold included in the consolidated statements of operations related to the foreign currency forward contracts. Counterparty Credit Risk The Company manages its concentration of counterparty credit risk on its derivative instruments by limiting acceptable counterparties to a group of major financial institutions with investment grade credit ratings, and by actively monitoring their credit ratings and outstanding positions on an ongoing basis. Therefore, the Company considers the credit risk of the counterparties to be low. Furthermore, none of the Company’s derivative transactions are subject to collateral or other security arrangements, and none contain provisions that depend upon the Company’s credit ratings from any credit rating agency. Fair Value of Derivative Instruments The Company has classified all of its derivative instruments within Level 2 of the fair value hierarchy because observable inputs are available for substantially the full term of the derivative instruments. The fair values of the interest rate swaps and cross-currency swaps were developed using a market approach based on publicly available market yield curves and the terms of the swap. The Company performs ongoing assessments of counterparty credit risk. F-28 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Effects of Derivative Instruments on Financial Position and Results of Operations The following table summarizes the fair value for derivatives designated as hedging instruments in the consolidated balance sheets as of December 31, 2023 and 2022: Fair Value as of December 31, Dollars in thousands 2023 2022 Location on Balance Sheet (1) : Derivatives designated as hedges — Assets: Prepaid expenses and other current assets Cash Flow Hedges Interest rate swap (2) 14,675 16,682 Cross-currency swap 537 4,497 Net Investment Hedges Cross-currency swap 2,938 11,653 Other assets Cash Flow Hedges Interest rate swap (2) 30,710 40,030 Net Investment Hedges Cross-currency swap 1,470 3,311 Total derivatives designated as hedges — Assets $ 50,330 $ 76,173 Derivatives designated as hedges — Liabilities Accrued expenses and other current liabilities Cash Flow Hedges Interest rate swap (2) $ 579 $ — Cross-currency swap 4,813 3,528 Net Investment Hedges Cross-currency swap 2,903 — Other liabilities Cash Flow Hedges Interest rate swap (2) 1,250 — Cross-currency swap 36,396 8,738 Net Investment Hedges Cross-currency swap 51,114 20,608 Total derivatives designated as hedges — Liabilities 97,055 32,874 + (1) The Company classifies derivative assets and liabilities as current based on the cash flows expected to be incurred within the following 12 months. (2) At December 31, 2023 and 2022, the total notional amounts related to the Company’s interest rate swaps were $ 1.5 billion. F-29 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The following presents the effect of derivative instruments designated as cash flow hedges and net investment hedges on the accompanying consolidated statement of operations during the years ended December 31, 2023 and 2022: Dollars in thousands Balance in AOCI Beginning of Year Amount of Gain (Loss) Recognized in AOCI Amount of Gain (Loss) Reclassified from AOCI into Earnings Balance in AOCI End of Year Location in Statements of Operations Year Ended December 31, 2023 Cash Flow Hedges Interest rate swap $ 56,712 $ 4,899 $ 18,055 $ 43,556 Interest expense Cross-currency swap ( 20,271 ) ( 27,406 ) ( 31,914 ) ( 15,763 ) Other income, net Forward Currency Forward Contracts — 436 436 — Cost of sales Net Investment Hedges Cross-currency swap ( 6,914 ) ( 30,738 ) 7,846 ( 45,498 ) Interest income $ 29,527 $ ( 52,809 ) $ ( 5,577 ) $ ( 17,705 ) Year Ended December 31, 2022 Cash Flow Hedges Interest rate swap $ ( 43,956 ) $ 93,308 $ ( 7,360 ) $ 56,712 Interest expense Cross-currency swap ( 9,688 ) 8,847 19,430 ( 20,271 ) Other income, net Net Investment Hedges — Cross-currency swap ( 2,321 ) 2,196 6,789 ( 6,914 ) Interest income $ ( 55,965 ) $ 104,351 $ 18,859 $ 29,527 Derivative Instruments not designated hedges: During the second quarter of 2021, the Company entered into a foreign currency swap, with a notional amount of $ 7.3 million, to mitigate the risk from fluctuations in foreign currency exchange rates associated with an intercompany loan denominated in JPY. In a foreign currency swap transaction, the Company agrees with another party to exchange, at specified intervals, the difference between one currency and another currency at a fixed exchange rate, generally set at inception, calculated by reference to an agreed upon notional amount. The notional amount of each currency is exchanged at the inception and termination of the currency swap by each party. The Company subsequently paid down a portion of this swap in the second quarter of 2023, bringing the notional amount down to $ 5.5 million as of December 31, 2023. The following table summarizes the gains (losses) of derivative instruments not designated as hedges on the consolidated statements of income, which was included in other income: Dollars in thousands December 31, 2023 2022 Foreign currency swaps 566 1,258 Total $ 566 $ 1,258 7. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill The Company tests goodwill for impairment by either performing a qualitative evaluation or a quantitative test. The qualitative evaluation is an assessment of factors including reporting unit specific operating results as well as industry, market and general economic conditions, to determine whether it is more likely than not that the fair values of a reporting unit is less than its carrying amount, including goodwill. The Company may elect to bypass the qualitative assessment for its three reporting units and perform a quantitative test. The assumptions used in evaluating goodwill for impairment are subject to change and are tracked against historical results by management. The quantitative test estimates the fair value of the three reporting units using a discounted cash flow model, which incorporates significant estimates and assumptions made by management which, by their nature, are characterized by uncertainty. Inputs F-30 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) used to fair value the Company's reporting units are considered inputs of the fair value hierarchy. For Level 3 measurements, significant increases or decreases in long-term growth rates or discount rates in isolation or in combination could result in a significantly lower or higher fair value measurement. The key assumptions impacting the valuation included the following: • The reporting unit's financial projections, which are based on management's assessment of regional and macroeconomic variables, industry trends and market opportunities, and the Company's strategic objectives and future growth plans. • The projected terminal value for the reporting unit, which represents the present value of projected cash flows beyond the last period in the discounted cash flow analysis. The terminal value reflects the Company's assumptions related to long-term growth rates and profitability, which are based on several factors, including local and macroeconomic variables, market opportunities, and future growth plans. • The discount rate used to measure the present value of the projected future cash flows is set using a weighted-average cost of capital method that considers market and industry data as well as the Company's specific risk factors that are likely to be considered by a market participant. The weighted-average cost of capital is the Company's estimate of the overall after-tax rate of return required by equity and debt holders of a business enterprise. In the second quarter of 2023, due to the Boston recall, as well as the associated drop in the Company's stock price in that quarter, the Company elected to perform a quantitative analysis, using a combination of a discounted cash flow method and guideline public company method for its TT reporting unit. The quantitative test utilized key assumptions of revenue growth rate, a terminal growth rate of 2 %, a discount rate of 10 %, and the range and application of the company guideline multiples. The Company determined, after performing the quantitative analysis, that the fair value of the goodwill of the reporting unit was not less than the carrying amount, with more than 20 % headroom. During the third quarter of 2023, the Company elected to perform a qualitative analysis for its three reporting units. The Company determined, after performing the qualitative analysis, that there was no evidence that it is more likely than not that the fair value was less that the carrying amounts, therefore, it was not necessary to perform a quantitative impairment test. Changes in the carrying amount of goodwill in 2023 and 2022 were as follows: Dollars in thousands Codman Specialty Surgical Tissue Technologies Total Goodwill at January 1, 2022 $ 663,428 $ 350,030 $ 1,013,458 Sale of non-core traditional wound care business — ( 5,019 ) ( 5,019 ) SIA Acquisition — 41,855 41,855 Foreign currency translation ( 7,209 ) ( 4,204 ) ( 11,413 ) Balance at December 31, 2022 $ 656,219 $ 382,662 $ 1,038,881 Sale of non-core traditional wound care business — — — SIA Acquisition — ( 382 ) ( 382 ) Foreign currency translation 10,718 6,245 16,963 Balance at December 31, 2023 $ 666,937 $ 388,525 $ 1,055,462 F-31 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Other Intangible Assets The components of the Company's identifiable intangible assets were as follows: December 31, 2023 Dollars in thousands Weighted Average Life Cost Accumulated Amortization Net Completed technology 18 years $ 1,226,128 $ ( 448,519 ) $ 777,609 Customer relationships 12 years 193,895 ( 152,160 ) 41,735 Trademarks/brand names 28 years 98,892 ( 38,754 ) 60,138 Codman trade name Indefinite 174,531 — 174,531 Supplier relationships 30 years 30,211 ( 18,148 ) 12,063 All other 11 years 6,180 ( 4,423 ) 1,757 $ 1,729,837 $ ( 662,004 ) $ 1,067,833 December 31, 2022 Dollars in thousands Weighted Average Life Cost Accumulated Amortization Net Completed technology 18 years $ 1,204,325 $ ( 370,968 ) $ 833,357 Customer relationships 12 years 193,081 ( 144,040 ) 49,041 Trademarks/brand names 28 years 97,265 ( 34,674 ) 62,591 Codman trade name Indefinite 166,693 — 166,693 Supplier relationships 30 years 30,211 ( 17,170 ) 13,041 All other 11 years 5,957 ( 4,071 ) 1,886 $ 1,697,532 $ ( 570,923 ) $ 1,126,609 Intangible Assets with Indefinite Lives The Company tests intangible assets with indefinite lives for impairment annually in the third quarter in accordance with ASC Topic 350. Additionally, the Company may perform interim tests if an event occurs or circumstances change that could potentially reduce the fair value of a indefinite lived intangible asset below its carrying amount. The Company tests for impairment by either performing a qualitative evaluation or a quantitative test. The qualitative evaluation is an assessment of factors, including specific operating results as well as industry, market and general economic conditions, to determine whether it is more likely than not that the fair values of the intangible asset is less than its carrying amount. The Company may elect to bypass this qualitative evaluation and perform a quantitative test. During the third quarter of 2023, the Company elected to perform a qualitative analysis for its intangible asset with indefinite lives. The Company determined, after performing the qualitative analysis, that there was no evidence that it is more likely than not that the fair value was less that the carrying amounts, therefore, it was not necessary to perform a quantitative impairment test. Intangible Assets with Definite Lives Product rights and other definite-lived intangible assets are tested periodically for impairment in accordance with ASC Topic 360 when events or changes in circumstances indicate that an asset's carrying value may not be recoverable. The impairment testing involves comparing the carrying amount of the asset or asset group to the forecasted undiscounted future cash flows. In the event the carrying value of the asset exceeds the undiscounted future cash flows, the carrying value is considered not recoverable and impairment exists. An impairment loss is measured as the excess of the asset's carrying value over its fair value, calculated using discounted future cash flows. The computed impairment loss is recognized in the period that the impairment occurs. F-32 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) In the second quarter of 2023, due to the Boston recall, the Company elected to perform impairment testing on certain definite lived intangibles. The intangible components associated with the recalled products include completed technology and customer relationships with a net book value of $ 28.8 million and $ 7.6 million, respectively, as of December 31, 2023. The company used an undiscounted cash flow methodology and obtained revenue projections through the useful life of the intangibles. After performing the analysis, no impairment was noted. The Company will continue to monitor these intangibles as we return to the market and evaluate any changes that would impact our sales of these products. Amortization expense (including amounts reported in cost of product revenues) for the years ended December 31, 2023, 2022 and 2021 was $ 82.8 million, $ 78.3 million and $ 83.3 million, respectively. Annual amortization expense is expected to approximate $ 82.7 million in 2024, $ 82.7 million in 2025, $ 82.5 million in 2026, $ 80.6 million in 2027, $ 79.0 million in 2028 and $ 481.2 million thereafter. Amortization of product technology based intangible assets totaled $ 70.4 million, $ 64.4 million and $ 66.5 million for the years ended December 31, 2023, 2022 and 2021, respectively, and is presented by the Company within cost of goods sold. 8. TREASURY STOCK As of December 31, 2023 and 2022, there were 12.8 million and 6.8 million shares of treasury stock outstanding with a cost of $ 647.3 million and $ 362.9 million, respectively, at a weighted average cost per share of $ 50.76 and $ 53.18 , respectively. On August 15, 2023, the Company entered into a $ 125 million accelerated share repurchase ("August 2023 ASR") and received 2.3 million shares of the common stock at inception of the August 2023 ASR, which represented approximately 80 % of the expected total shares under the August 2023 ASR. On October 18, 2023 the early exercise provision was exercised by the August 2023 ASR counterparty. The Company received an additional 0.9 million shares determined using the volume-weighted average price of the Company's common stock during the term of the August 2023 ASR. On January 26, 2023, the Company entered into a $ 150 million accelerated share repurchase ("January 2023 ASR") and received 2.1 million shares of common stock at inception of the January 2023 ASR, which represented approximately 80 % of the expected total shares under the January 2023 ASR. The settlement of the January ASR agreement was completed in two separate transactions on April 26, 2023 and May 4, 2023, where the Company received an additional 0.30 million and 0.31 million shares respectively, determined using the volume-weighted average price of the Company's common stock during the term of the January 2023 ASR. On August 16, 2022, the Inflation Reduction Act of 2022 (the “Act”) was signed into law. The Act implemented a new excise tax of 1% on the net share repurchases made by the Company effective for share repurchases performed January 1, 2023, or after. The Company accrued $ 2.5 million of excise tax related to the two ASR agreements during 2023. On July 18, 2023, the Board of Directors authorized a new $ 225 million share repurchase program, replacing the existing $ 225 million program authorized in April 2022. A s of December 31, 2023, $ 100 million remained authorized . The program authorized in July 2023, and which expires on December 31, 2025, allows the Company to repurchase its shares opportunistically from time to time. The Company may utilize various methods to effect any repurchases, including open market transactions, privately negotiated transactions, transactions structured through investment banking institutions, including accelerated share repurchases, or a combination of the foregoing, some of which may be effected through Rule 10b5-1 plans. The price and timing of any future purchases under the share repurchase program will depend on factors such as levels of cash generation from operations, the volume of stock option exercises by employees, cash requirements for acquisitions, dividends, economic and market conditions and stock price, and such repurchases may be discontinued at any time. On January 12, 2022, the Company entered into a $ 125 million accelerated share repurchase ("2022 ASR") and received 1.48 million shares of Company common stock at inception of the 2022 ASR, which represented approximately 80 % of the expected total shares under the 2022 ASR. I n March 24, 2022, the early exercise provision was exercised by the 2022 ASR counterparty. Upon settlement on March 24, 2022, the Company received an additional 0.46 million shares determined using the volume-weighted average price of the Company's common stock during the term of the 2022 ASR. F-33 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 9. STOCK-BASED COMPENSATION Stock-based compensation expense - all related to employees and members of the Board of Directors - recognized under the authoritative guidance was as follows: Years Ended December 31, Dollars in thousands 2023 2022 2021 Cost of goods sold 588 549 470 Research and development 2,071 1,739 1,644 Selling, general and administrative $ 17,483 $ 25,437 $ 34,096 Total stock-based compensation expense 20,142 27,725 36,210 Total estimated tax benefit related to stock-based compensation expense 5,223 10,574 13,804 Net effect on net income $ 14,919 $ 17,151 $ 22,406 EQUITY AWARD PLANS As of December 31, 2023, the Company had stock options, restricted stock awards, performance stock awards, contract stock awards and restricted stock unit awards outstanding under the Integra LifeSciences Holdings Corporation Fifth Amended and Restated 2003 Equity Incentive Plan (the “2003 Plan”). The 2000 and 2001 Equity Incentive Plans were terminated as of February 19, 2021, and no further awards may be issued under the plans. In May 2010 and May 2017, the stockholders of the Company approved amendments to the 2003 Plan to increase by 3.5 million and 1.7 million, respectively, the number of shares of common stock that may be issued under the 2003 Plan. The Company has reserved 4.0 million shares under each of the 2000 Plan and the 2001 Plan, and 14.7 million shares under the 2003 Plan. The Plans permit the Company to grant incentive and non-qualified stock options, stock appreciation rights, restricted stock, contract stock, performance stock, or dividend equivalent rights to designated directors, officers, employees and associates of the Company. Stock options issued under the 2003 Plan became exercisable over specified periods, generally within four years from the date of grant for officers and employees, and within one year from the date of the grant for members of the Board of Directors. The awards generally expire eight years from the grant date for employees and from six to ten years for directors and certain executive officers, except in certain instances that result in accelerated vesting due to death, disability, retirement age or change in control provisions within their grant agreements. Restricted stock issued under the 2003 Plan vests ratably over specified periods, generally three years after the date of grant. The vesting of performance stock issued under the 2003 Plan is subject to service and performance conditions. Stock Options The Company values stock option grants using the binomial distribution model. Management believes that the binomial distribution model is preferable to the Black-Scholes model because it is a more flexible model that gives consideration to the impact of non-transferability and vesting provisions in valuing employee stock options. In determining the value of stock options granted, the Company considered that it has never paid cash dividends and does not currently intend to pay cash dividends, and thus has assumed a 0 % dividend yield. Expected volatilities are based on the historical volatility of the Company’s stock price. The expected life of stock options is estimated based on historical data on exercise of stock options, post-vesting forfeitures and other factors to estimate the expected term of the stock options granted. The risk-free interest rates are derived from the U.S. Treasury yield curve in effect on the date of grant for instruments with a remaining term similar to the expected life of the options. The Company accounts for forfeitures as they occur. F-34 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The following weighted-average assumptions were used in the calculation of fair value: Years Ended December 31, 2023 2022 2021 Dividend yield 0 % 0 % 0 % Expected volatility 30 % 30 % 29 % Risk free interest rate 3.86 % 2.01 % 1.30 % Expected life of option from grant date 7 years 7 years 7 years Weighted average grant date fair value of options granted $ 21.58 $ 23.15 $ 22.59 The following table summarizes the Company’s stock option activity. Shares Weighted Average Exercise Price Weighted Average Contractual Term in Years Aggregate Intrinsic Value Stock Options (In thousands) (In thousands) Outstanding at January 1, 2023 1,202 $ 49.63 4.14 $ 10,772 Granted 151 52.87 — — Exercised ( 93 ) 34.59 — — Forfeited or Expired ( 82 ) 58.02 — — Outstanding at December 31, 2023 1,178 $ 50.64 3.65 $ 1,766 Exercisable at December 31, 2023 888 $ 48.43 2.75 $ 1,762 The Company recognized $ 1.4 million, $ 3.5 million and $ 5.0 million in expense related to stock options during the years ended December 31, 2023, 2022 and 2021, respectively. The intrinsic value of options exercised for the years ended December 31, 2023, 2022 and 2021 were $ 1.8 million, $ 4.0 million and $ 11.1 million, respectively. Cash received from option exercises and employee stock purchase plan was $ 4.3 million, $ 5.5 million and $ 6.8 million, for the years ended December 31, 2023, 2022 and 2021, respectively. The realized tax benefit from options exercised were $ 0.1 million, $ 0.6 million and $ 2.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, there was approximately $ 3.8 million of total unrecognized compensation costs related to unvested stock options. These costs are expected to be recognized over a weighted-average period of approximately three years . Awards of Restricted Stock, Performance Stock and Contract Stock The following table summarizes the Company’s awards of restricted stock, performance stock and contract stock for the year ended December 31, 2023. Restricted Stock Awards Performance Stock and Contract Stock Awards Shares Weighted Average Grant Date Fair Value Per Share Shares Weighted Average Grant Date Fair Value Per Share (In thousands) (In thousands) Unvested, January 1, 2023 483 $ 61.63 407 62.88 Granted 411 51.01 229 52.29 Adjustments for performance achievement related to award target — — ( 78 ) 62.26 Cancellations ( 99 ) 60.17 ( 77 ) 63.74 Released ( 211 ) 58.85 ( 146 ) 60.14 Unvested, December 31, 2023 584 $ 55.37 335 57.53 The Company recognized $ 18.7 million, $ 24.3 million and $ 31.2 million in expense related to such awards during the years ended December 31, 2023, 2022 and 2021, respectively. The total fair market value of shares vested and released in 2023, 2022 F-35 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) and 2021 was $ 18.2 million, $ 65.0 million and $ 15.7 million, respectively. Vested awards include shares that have been fully earned but had not been delivered as of December 31, 2023. Performance stock awards have performance features associated with them. Performance stock, restricted stock and contract stock awards generally have requisite service periods of three years . The fair value of these awards is being expensed on a straight-line basis over the vesting period. As of December 31, 2023, there were 51,241 performance stock units ("PSU's") granted in 2021 subject to vest and be released in 2024 based on PSU catch-up opportunity. No additional PSU's were subject to vest based on 2023 performance achievement. As of December 31, 2023, there was approximately $ 30.5 million of total unrecognized compensation costs related to unvested restricted stock, performance stock and contract stock awards. These costs are expected to be recognized over a weighted-average period of approximately two years . At December 31, 2023, there were approximately 2.7 million shares available for grant under the 2003 Plan. The Company capitalized into inventory, share based compensation costs of $ 0.6 million, $ 0.6 million and $ 0.5 million for the years ended December 31, 2023, 2022 and 2021, respectively. Such share-based compensation was recognized as cost of goods sold when related inventory was sold. EMPLOYEE STOCK PURCHASE PLAN The purpose of the Employee Stock Purchase Plan (the “ESPP”) is to provide eligible employees of the Company with the opportunity to acquire shares of common stock at periodic intervals by means of accumulated payroll deductions. The ESPP is a non-compensatory plan. Under the ESPP, a total of 3.0 million shares of common stock are reserved for issuance. These shares will be made available either from the Company’s authorized but unissued shares of common stock or from shares of common stock reacquired by the Company as treasury stock. At December 31, 2023, 1.9 million shares remain available for purchase under the ESPP. During the years ended December 31, 2023, 2022 and 2021, the Company issued 23,337 shares, 20,780 shares and 16,948 shares under the ESPP for $ 1.0 million, $ 1.1 million and $ 1.1 million, respectively. 10. RETIREMENT BENEFIT PLANS DEFINED BENEFIT PLANS The Company has various defined benefit plans which covers certain employees in France, Japan, Germany and Switzerland. Net periodic benefit costs for the Company’s defined benefit pension plans for the years ended December 31, 2023 and 2022 included the following (amounts in thousands): Year ended December 31, 2023 2022 Service cost $ 2,226 $ 2,419 Interest cost 1,157 194 Expected return on plan assets ( 1,450 ) ( 1,381 ) Amortization of prior service cost (credit) ( 389 ) ( 326 ) Recognized actuarial losses ( 391 ) 9 Settlements — — Net period benefit cost $ 1,153 $ 915 The following weighted average assumptions were used to develop net periodic pension benefit costs and the actuarial present values of projected pension benefit obligations for the years ended December 31, 2023 and 2022, respectively: As of December 31, 2023 2022 Discount rate 1.51 % 2.44 % Expected return on plan assets 3.67 % 3.61 % Rate of compensation increase 2.00 % 1.97 % Interest crediting rate for cash balance plans 1.00 % 1.00 % The Company’s discount rates are determined by considering current yield curves representing high quality, long-term fixed income instruments. The resulting discount rates are consistent with the duration of plan liabilities. In 2023 and 2022, the F-36 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) discount rates were prescribed as the current yield on corporate bonds with an average rating of AA or AAA of equivalent currency and term to the liabilities. The expected returns on plan assets represent the average rate of return expected to be earned on plan assets over the period the benefits included in the benefit obligation are to be paid. In developing the expected rates of return, the Company considers returns of historical market data as well as actual returns on the plan assets. Using this reference information, the long-term return expectations for each asset category are developed according to the allocation among those investment categories. The assessment is determined using projections from external financial sources, long-term historical averages, actual returns by asset class and the various asset class allocations by market. The following sets forth the change in projected benefit obligations and the change in plan assets for the years ended December 31, 2023 and 2022 and a reconciliation of the funded status at December 31, 2023 and 2022, respectively (amounts in thousands): Year Ended December 31, 2023 2022 Change In Projected Benefit Obligations Projected benefit obligations, beginning of year $ 50,364 $ 65,184 Interest cost 1,157 194 Service cost 2,226 2,419 Actuarial (gain) loss 8,229 ( 14,822 ) Plan amendments ( 1,772 ) ( 390 ) Plan settlements ( 25 ) ( 20 ) Employee contribution 1,182 999 Premiums paid ( 406 ) ( 391 ) Benefit payment ( 812 ) ( 999 ) Effect of foreign currency exchange rates 4,958 ( 1,810 ) Projected benefit obligations, end of year $ 65,101 $ 50,364 Year Ended December 31, 2023 2022 Change In Plan Assets Plan assets at fair value, beginning of year $ 38,053 $ 39,914 Actual return on plan assets 1,350 ( 2,863 ) Employer contributions 2,700 2,356 Employee contributions 1,182 999 Plan settlements — — Benefits paid ( 812 ) ( 998 ) Premiums paid ( 406 ) ( 391 ) Effect of foreign currency exchange rates 3,657 ( 964 ) Plan assets at fair value, end of year $ 45,724 $ 38,053 Year Ended December 31, 2023 2022 Reconciliation Of Funded Status Fair value of plan assets $ 45,724 $ 38,053 Benefit obligations 65,101 50,364 Unfunded benefit obligations $ 19,377 $ 12,311 The unfunded benefit obligations are included in other liabilities in the consolidated balance sheets at December 31, 2023 and 2022, respectively. During the periods ended December 31, 2023 and 2022 , the Company had a net loss of $ 6.6 million and a net gain of $ 7.4 million, respectively, recognized within accumulated other comprehensive loss that has not been recognized as a component of net periodic benefit cost. The combined accumulated benefit obligations for the defined benefit plans was $ 62.8 million and $ 46.4 million as of December 31, 2023 and 2022, respectively. F-37 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Unrecognized gains and losses are amortized over the average remaining future service for each plan. For plans with no active employees, they are amortized over the average life expectancy. The amortization of gains and losses is determined by using a 10% corridor of the greater of the market value of assets or the accumulated benefit obligation. Total unamortized gains and losses in excess of the corridor are amortized over the average remaining future service. Prior service costs/benefits for the pension plans are amortized over the average remaining future service of plan participants at the time of the plan amendment. The net plan assets of the pension plans are invested in common trusts. Common trusts are classified as Level 2 in fair value hierarchy. The fair value of common trusts is valued at net asset value based on the fair values of the underlying investments of the trusts as determined by the sponsor of the trusts. The investment strategy of the Company's defined benefit plans is both to meet the liabilities of the plans as they fall due and to maximize the return on invested assets within appropriate risk profile. The benefit plans in France and Germany had no assets at December 31, 2023. As of December 31, 2023, no plan assets are expected to be returned to the Company in the next twelve months. The following table is the summary of expected future benefit payments (in thousands): 2024 $ 2,457 2025 $ 2,618 2026 $ 2,251 2027 $ 2,193 2028 $ 2,388 Next five years $ 12,953 As of December 31, 2023, contributions expected to be paid to the plan in 2024 is $ 3.0 million. DEFINED CONTRIBUTION PLANS The Company also has various defined contribution savings plans that cover substantially all employees in the United States, Belgium, Canada, France, Japan, Netherlands, the U.K. and Puerto Rico. The Company matches a certain percentage of each employee’s contributions as per the provisions of the plans. Total contributions by the Company to the plans were $ 10.4 million, $ 9.8 million and $ 8.8 million for the years ended December 31, 2023, 2022 and 2021, respectively. DEFERRED COMPENSATION PLAN The Company maintains a Deferred Compensation Plan in which certain employees of the Company may defer the payment and taxation of up to 75 % of their base salary and up to 100 % of bonus amounts and other eligible cash compensation. This deferred compensation is invested in funds offered under this plan and is valued based on Level 1 measurements in the fair value hierarchy. Assets of the Company's deferred compensation plan are included in Other current assets and recorded at fair value based on their quoted market prices. The fair value of these assets at December 31, 2023 and 2022 was $ 6.1 million and $ 4.7 million. Offsetting liabilities relating to the deferred compensation plan are included in Other liabilities. 11. LEASES AND RELATED PARTY LEASES The Company leases administrative, manufacturing, research and distribution facilities and vehicles through operating lease agreements. The Company has no finance leases as of December 31, 2023. Many of the Company's leases include both lease (e.g., fixed payments including rent) and non-lease components (e.g., common-area or other maintenance costs). For vehicles, the Company has elected the practical expedient to group lease and non-lease components. Most facility leases include one or more options to renew. The exercise of lease renewal options is typically at the Company's sole discretion, therefore, the majority of renewals to extend the lease terms are not included in the ROU assets and lease liabilities as they are not reasonably certain of exercise. The Company regularly evaluates renewal options and when they are reasonably certain of exercise, the renewal period is included in the lease term. As most of the Company's leases do not provide an implicit rate, the Company uses a collateralized incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. Total operating lease expense for the year ended December 31, 2023 and 2022, was $ 24.0 million and $ 22.6 million, respectively, which includes $ 0.3 million, in related party operating lease expense. F-38 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Supplemental balance sheet information related to operating leases at December 31, 2023 were as follows: December 31, 2023 December 31, 2022 (In thousands, except lease term and discount rate) ROU assets $ 156,184 $ 148,284 Current lease liabilities 15,284 14,624 Non-current lease liabilities 166,849 157,420 Total lease liabilities $ 182,133 $ 172,044 Weighted average remaining lease term (in years): Leased facilities 16.3 years 16.9 years Leased vehicles 1.9 years 2.0 years Weighted average discount rate: Leased facilities 5.9 % 5.4 % Leased vehicles 2.7 % 2.7 % Supplemental cash flow information related to leases was as follows: December 31, 2023 December 31, 2022 (In thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 20,655 $ 17,442 ROU assets obtained in exchange for lease liabilities: Operating leases 9,843 72,169 Future minimum lease payments under operating leases at December 31, 2023 were as follows: Related Parties Third Parties Total (In thousands) 2024 296 22,625 22,921 2025 296 21,843 22,139 2026 296 19,166 19,462 2027 296 18,013 18,309 2028 296 15,769 16,065 Thereafter 246 173,562 173,808 Total minimum lease payments $ 1,726 $ 270,978 $ 272,704 Less: Imputed interest $ 90,571 Total lease liabilities 182,133 Less: Current lease liabilities 15,284 Long-term lease liabilities 166,849 There were no future minimum lease payments under finance leases at December 31, 2023. F-39 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Related Party Leases The Company leases its manufacturing facility in Plainsboro, New Jersey, from a general partnership that is 50 % owned by a principal stockholder of the Company. The term of the current lease agreement is through October 31, 2029 at an annual rate of approximately $ 0.3 million. The current lease agreement also provides (i) a 5-year renewal option for the Company to extend the lease from November 1, 2029 through October 31, 2034 at the fair market rental rate of the premises, and (ii) another 5-year renewal option to extend the lease from November 1, 2034 through October 31, 2039 at the fair market rental rate of the premises. 12. INCOME TAXES Income before income taxes consisted of the following: Years Ended December 31, Dollars in thousands 2023 2022 2021 United States operations $ ( 31,649 ) $ 92,642 $ 91,150 Foreign operations 112,718 121,252 123,527 Total $ 81,069 $ 213,894 $ 214,677 A reconciliation of the U.S. Federal statutory rate to the Company’s effective tax rate is as follows: Years Ended December 31, 2023 2022 2021 Federal statutory rate 21.0 % 21.0 % 21.0 % Increase (decrease) in income taxes resulting from: State income taxes, net of federal tax benefit 2.9 % 0.1 % 1.9 % Benefit derived from foreign operations ( 17.2 ) % ( 1.6 ) % ( 3.3 ) % Nondeductible meals and entertainment 1.1 % 0.1 % 0.1 % Intercompany profit in inventory 3.3 % 0.3 % ( 0.2 ) % Research and development credit ( 5.7 ) % ( 1.4 ) % ( 1.2 ) % Nondeductible executive compensation & stock compensation shortfall 2.3 % ( 0.6 ) % ( 0.3 ) % Transaction and deal related costs 3.3 % ( 1.8 ) % 0.1 % Gain from sale of business - book to tax differences — % — % 3.9 % Changes in valuation allowances 4.9 % — % 0.1 % Other 0.5 % ( 0.5 ) % ( 0.9 ) % Effective tax rate 16.4 % 15.6 % 21.2 % Our effective tax rate was 16.4 % and 15.6 % of income before income taxes for the years ended December 31, 2023 and December 31, 2022, respectively. In 2023, the Company’s higher effective tax rate was driven by the the inclusion of Global Intangible Low-Taxed Income ("GILTI"), offset by a $ 5.8 million income tax benefit related to a four-year tax credit received by a Swiss subsidiary. The Company received an extension of the 2018 Swiss tax grant for three years, until the 2027 tax year. The net benefit of the tax credit, recorded as of December 31, 2023, was based on projections of use of the incremental tax grant. The Company’s Swiss subsidiary may offset the tax credit against cantonal and communal income and capital taxes during tax years 2024 through 2027. Any unused balance at the end of the 2027 tax period will be forfeited. In 2022, the Company’s lower effective tax rate was driven by a $ 5.1 million income tax benefit related to stock compensation and a $ 2.4 million income tax benefit related to the filing of amended federal and state returns for prior years. In 2021, the Company's higher effective tax rate was driven in part by an $ 8.5 million income tax expense for nondeductible goodwill related to the sale of the Extremity Orthopedics business, offset by a $ 3.1 million income tax benefit related to excess tax benefits from stock compensation. During 2023, the Company’s foreign operations generated a $ 0.7 million decrease in income tax expense when compared to the same period in 2022, because of geographic and business mix of taxable earnings and losses, among other factors. The 2023 foreign effective tax rate is 16.4 %, compared to 15.9 % in 2022. F-40 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) During 2022, the Company’s foreign operations generated a $ 0.4 million increase in income tax expense when compared to the same period in 2021, because of geographic and business mix of taxable earnings and losses, among other factors. The 2022 foreign effective tax rate is 15.9 %, compared to 15.2 % in 2021. The Company’s foreign tax rate is primarily based upon statutory rates. 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. On August 16, 2022, the Inflation Reduction Act of 2022 (the “Act”) was signed into law, for which the company did not experience a material impact on the company’s effective tax rate. Further, legislation in foreign jurisdictions may be enacted, in continued response to the base erosion and profit-sharing (BEPS) project begun by the Organization for Economic Cooperation and Development (OECD). The OECD released model rules related to a new 15% global minimum tax regime (“Pillar 2”). Several of the jurisdictions that we operate in have already adopted some form of the model rules, which could impact the amount of taxes that the Company pays after 2023. However, the rules are complex and provide for delays during the early transition years, if certain conditions are met. The Company will continue to analyze the law to determine potential impacts. At this time, the Company does not expect the Pillar 2 legislation to have a material impact on its consolidated financial statements. Such changes in U.S. and Non-U.S. jurisdictions could have an adverse effect on the Company’s effective tax rate. The provision for income taxes consisted of the following: Years Ended December 31, Dollars in thousands 2023 2022 2021 Current: Federal $ 10,973 $ 24,201 $ 31,938 State 2,851 3,835 11,377 Foreign 11,389 9,893 5,042 Total current $ 25,213 $ 37,929 $ 48,357 Deferred: Federal ( 19,060 ) ( 11,591 ) ( 12,830 ) State 93 ( 2,316 ) ( 3,688 ) Foreign 7,082 9,322 13,763 Total deferred $ ( 11,885 ) $ ( 4,585 ) $ ( 2,755 ) Provision for income taxes $ 13,328 $ 33,344 $ 45,602 F-41 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The income tax effects of significant temporary differences that give rise to deferred tax assets and liabilities, shown before jurisdictional netting, are presented below: December 31, Dollars in thousands 2023 2022 Assets: Doubtful accounts $ 2,581 $ 2,261 Inventory related items 41,466 31,950 Tax credits 18,859 13,084 Accrued vacation 2,184 2,175 Accrued bonus 4,259 4,944 Stock compensation 9,117 10,175 Deferred revenue 1,849 2,130 Net operating loss carryforwards 28,799 30,707 Capitalization of research and development expenses 61,138 51,542 Unrealized foreign exchange gain 13,907 6,228 Charitable contributions carryforward 206 180 Leases and Other 55,271 55,228 Total deferred tax assets 239,636 210,604 Less valuation allowance ( 12,486 ) ( 9,651 ) Deferred tax assets after valuation allowance $ 227,150 $ 200,953 Liabilities: Intangible and fixed assets ( 168,229 ) ( 166,891 ) Unrealized foreign exchange loss ( 10,024 ) ( 12,991 ) Leases and Other ( 38,134 ) ( 38,415 ) Total deferred tax liabilities $ ( 216,387 ) $ ( 218,297 ) Total net deferred tax assets (liabilities) $ 10,763 $ ( 17,344 ) Prior period amounts were re-classed, as it relates to Leases and Other, between tax assets and liabilities within this table, to conform to the current period presentation. The 2017 U.S. Tax Cuts and Jobs Act contained a provision which requires, for tax purposes, the capitalization and amortization of research and development expenses; effective for years beginning after December 31, 2021. The Company’s deferred tax assets increased by $ 14.4 million and $ 20.3 million at December 31, 2023 and December 31, 2022 respectively within the table above, related to the 2017 Tax Act. At December 31, 2023, the Company had net operating loss carryforwards of $ 64.7 million for federal income tax purposes, $ 98.4 million for foreign income tax purposes and $ 19.2 million for state income tax purposes to offset future taxable income. For the federal net operating loss carryforwards, $ 55.8 million will expire through 2037; while $ 8.9 million have an indefinite carry forward period. For foreign net operating loss carryforwards, $ 81.0 million will expire through 2028, while the remaining $ 17.4 million have an indefinite carry forward period. The state net operating loss carryforwards expire through 2036. The valuation allowance relates to deferred tax assets for certain items that will be deductible for income tax purposes under very limited circumstances and for which the Company believes it will not satisfy the more likely than not threshold for realization of the associated tax benefit. In the event that the Company determines that it would be able to realize more or less than the recorded amount of net deferred tax assets, an adjustment to the deferred tax asset valuation allowance would be recorded in the period such a determination is made. The valuation allowance at December 31, 2023 increased by $ 2.8 million, as compared to 2022, primarily driven by a $ 3.3 million increase related to the new Swiss tax credit. The valuation allowance for 2022 had remained substantially unchanged, as compared to 2021. F-42 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Balance at Beginning of Period Charged to Costs and Expenses Other Deductions Balance at End of Period Description Dollars in thousands Year ended December 31, 2023 Deferred tax assets valuation allowance 14,672 3,069 26 56 17,823 Year ended December 31, 2022 Deferred tax assets valuation allowance 15,258 ( 515 ) — ( 71 ) 14,672 Year ended December 31, 2021 Deferred tax assets valuation allowance 13,825 1,444 89 ( 100 ) 15,258 As of December 31, 2023, the Company has not provided deferred income taxes on unrepatriated earnings from foreign subsidiaries as they are deemed to be indefinitely reinvested unless there is a manner under which to remit the earnings with no material tax cost. Material taxes would primarily be attributable to foreign withholding taxes and local income taxes when such earnings are distributed. The Company will repatriate foreign earnings when there is no need for reinvestment overseas and no material tax cost to bring the earnings back to the United States. Reinvestment considerations would include future acquisitions, transactions, and capital expenditure plans. A reconciliation of the beginning and ending amount of uncertain tax benefits is as follows: Years Ended December 31, Dollars in thousands 2023 2022 2021 (In thousands) Balance, beginning of year $ 713 $ 676 $ 702 Gross increases: Current year tax positions — 37 — Prior years' tax positions 372 — — Lapse of statute ( 273 ) — — Other — — ( 26 ) Balance, end of year $ 812 $ 713 $ 676 Approximately $ 0.8 million of the balance at December 31, 2023 relates to uncertain tax positions that, if recognized, would affect the annual effective tax rate. The Company has no uncertain tax positions at December 31, 2023 related to tax positions for which it is reasonably possible that the amounts could be reduced during the twelve months following December 31, 2023. The Company recognizes interest and penalties relating to uncertain tax positions in income tax expense. The Company recognized a minimal expense for the years ended December 31, 2023, 2022 and 2021. The Company had minimal interest and penalties accrued for the years ended December 31, 2023 and 2022 and 2021. The Company files Federal income tax returns, as well as multiple state, local and foreign jurisdiction tax returns. The Company is no longer subject to examinations of its U.S. consolidated Federal income tax returns by the IRS through fiscal year 2017. All significant state and local matters have been concluded through fiscal year 2018. All significant foreign matters have been settled through fiscal 2017. F-43 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 13. NET INCOME PER SHARE Basic and diluted net income per share was as follows: Years Ended December 31, Dollars in thousands, except per share amounts 2023 2022 2021 Basic net income per share: Net income $ 67,741 $ 180,550 $ 169,075 Weighted average common shares outstanding 80,089 82,997 84,698 Basic net income per common share $ 0.85 $ 2.18 $ 2.00 Diluted net income per share: Net income $ 67,741 $ 180,550 $ 169,075 Weighted average common shares outstanding — Basic 80,089 82,997 84,698 Effect of dilutive securities: Stock options and restricted stock 248 519 787 Weighted average common shares for diluted earnings per share 80,337 83,516 85,485 Diluted net income per common share $ 0.84 $ 2.16 $ 1.98 Common stock of approximately 0.6 million and 0.3 million shares at December 31, 2023, and 2022 that are issuable through exercise of dilutive securities, respectively, and were not included in the computation of diluted net income per share because their effect would have been anti-dilutive. 014. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Comprehensive income for the years ended December 31, 2023 and 2022: Dollars in thousands 2023 2022 2021 Net income $ 67,741 $ 180,550 $ 169,075 Foreign currency translation adjustment, net of tax ( 12,103 ) ( 17,807 ) ( 17,362 ) Change in unrealized loss/(gain) on derivatives, net of tax ( 6,658 ) 65,798 39,268 Pension liability adjustment, net of tax ( 6,610 ) 7,429 6,998 Comprehensive income, net 42,370 235,970 197,979 Changes in accumulated other comprehensive loss by component between December 31, 2023 and 2022 are presented in the table below, net of tax: Dollars in thousands Gains and Losses on Derivatives Defined Benefit Pension Items Foreign Currency Items Total Balance at December 31, 2022 $ 28,147 $ 9,322 $ ( 27,204 ) $ 10,265 Other comprehensive gain (loss) ( 16,991 ) ( 6,610 ) ( 5,901 ) ( 29,502 ) Less: Amounts reclassified from accumulated other comprehensive income, net ( 10,333 ) — 6,202 ( 4,131 ) Net current-period other comprehensive gain (loss) ( 6,658 ) ( 6,610 ) ( 12,103 ) ( 25,371 ) Balance at December 31, 2023 $ 21,489 $ 2,712 $ ( 39,307 ) $ ( 15,106 ) For the year ended December 31, 2023, the Company reclassified a loss of $ 24.2 million and a gain of $ 20.1 million from accumulated other comprehensive loss to other income, net and interest income, respectively. F-44 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 15. COMMITMENTS AND CONTINGENCIES In consideration for certain technology, manufacturing, distribution, and selling rights and licenses granted to the Company, the Company has agreed to pay royalties on sales of certain products that it sells. The royalty payments that the Company made under these agreements were not significant for any of the periods presented. The Company is subject to various claims, lawsuits and proceedings in the ordinary course of the Company's business, including claims by current or former employees, distributors and competitors and with respect to its products and product liability claims, lawsuits and proceedings, some of which have been settled by the Company. In the opinion of management, such claims are either adequately covered by insurance or otherwise indemnified, or are not expected, individually or in the aggregate, to result in a material, adverse effect on the Company's financial condition. However, it is possible that the Company's results of operations, financial position and cash flows in a particular period could be materially affected by these contingencies. The Company accrues for loss contingencies when it is deemed probable that a loss has been incurred and that loss is estimable. The amounts accrued are based on the full amount of the estimated loss before considering insurance proceeds and do not include an estimate for legal fees expected to be incurred in connection with the loss contingency. The Company consistently accrues legal fees expected to be incurred in connection with loss contingencies as those fees are incurred by outside counsel as a period cost. On December 21, 2023, Fortis Advisors, LLC (representative of the securityholders of ACell, Inc.) filed for arbitration against Integra Life Sciences claiming breach of contract related to the earnout consideration from the 2021 acquisition of Acell. Refer to Note 4, Acquisitions and Divestitures, for additional information on the ACell Contingent Considerations. The Company believes that it has strong defenses to the allegations in the arbitration and intends to defend the matter vigorously. On September 12, 2023, a securities class action complaint, captioned Pembroke Pines Firefighters & Police Officers Pension Fund v. Integra LifeSciences Holdings Corporation , No. 23-cv-20321 (D.N.J.), was filed by a purported stockholder of the Company in the United States District Court for the District of New Jersey (the “Pembroke Litigation”) against the Company and certain of the Company’s current and former executive officers. The Pembroke Litigation, filed on behalf of a putative class of stockholders who purchased or acquired the Company’s common stock between March 11, 2019 and May 22, 2023, inclusive, alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder, on the basis of purportedly materially false and misleading statements and omissions relating to certain quality systems issues identified by the U.S. Food and Drug Administration at the Company’s Boston, Massachusetts manufacturing facility, the Company’s efforts to remediate those issues, and the Company’s forecasts for certain products in its Tissue Technologies segment. The complaint seeks, among other things, compensatory damages, attorneys’ fees, expert fees, and other costs. The Company believes that it has strong defenses to the allegations in the Pembroke Litigation, as we intend to defend the matter vigorously. Contingent Consideration The Company determined the fair value of contingent consideration during the twelve-month period ended December 31, 2023 and 2022 to reflect the change in fair value during the period. A reconciliation of the opening balances to the closing balances of these Level 3 measurements for the years ended December 31, 2023 and 2022 is as follows (in thousands): Contingent Consideration Liability Related to Acquisition of: Arkis Location in Financial Statements Derma Sciences ACell Surgical Innovations Associates, Inc. (FN 4) Location in Financial Statements Balance as of January 1, 2023 $ 12,895 $ 230 $ 3,700 57,607 Change in fair value of contingent consideration liabilities 2,860 Research and development 2,327 ( 3,400 ) 11,093 Selling, general and administrative Balance as of December 31, 2023 15,755 2,557 300 68,700 Short-Term $ 7,778 $ — $ — $ 13,400 Accrued expenses and other current liabilities Long-Term 7,977 2,557 300 55,300 Other liabilities Total $ 15,755 $ 2,557 $ 300 $ 68,700 F-45 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Contingent Consideration Liability Related to Acquisition of: Arkis Location in Financial Statements Derma Sciences ACell Inc. (FN 4) Surgical Innovations Associates, Inc. (FN 4) Location in Financial Statements Balance as of January 1, 2022 $ 15,099 $ 230 $ 21,800 $ — Additions — — — 57,607 Change in fair value of contingent consideration liabilities ( 2,204 ) Research and development — ( 18,100 ) Selling, general and administrative Balance as of December 31, 2022 $ 12,895 $ 230 $ 3,700 $ 57,607 Short-Term $ 2,845 $ — $ — $ — Long-Term 10,050 230 3,700 57,607 Accrued expenses and other current liabilities Total $ 12,895 $ 230 $ 3,700 $ 57,607 Other liabilities Arkis BioSciences Inc. As part of the acquisition of Arkis BioSciences Inc. ("Arkis"), the Company is required to pay the former shareholders of Arkis up to $ 25.5 million based on the timing of certain development milestones of $ 10.0 million and commercial sales milestones of $ 15.5 million, respectively. The Company used a probability weighted income approach to calculate the fair value of the contingent consideration that considered the possible outcomes of scenarios related to each specified milestone. The Company estimated the fair value of the contingent consideration to be $ 13.1 million at the acquisition date. Derma Sciences The Company assumed contingent consideration incurred by Derma Sciences, Inc. ("Derma Sciences") related to its acquisitions of BioD and the intellectual property related to Medihoney products. The Company accounted for the contingent liabilities by recording their fair value on the date of the acquisition based on a probability weighted income approach. The Company has already paid $ 33.3 million related to the aforementioned contingent liabilities. One contingent milestone remains which relates to net sales of Medihoney™ products exceeding certain amounts defined in the agreement between the Company and Derma Sciences. The potential maximum undiscounted payment amounts to $ 3.0 million. 16. SEGMENT AND GEOGRAPHIC INFORMATION The Company internally manages two global reportable segments and reports the results of its businesses to its chief operating decision maker. The two reportable segments and their activities are described below. • The Codman Specialty Surgical segment includes (i) the Neurosurgery business, which sells a full line of products for neurosurgery and neuro critical care such as tissue ablation equipment, dural repair products, cerebral spinal fluid management devices, intracranial monitoring equipment, and cranial stabilization equipment and (ii) the Instruments business, which sells more than 40,000 instrument patterns and surgical and lighting products to hospitals, surgery centers, dental, podiatry, and veterinary offices. • The Tissue Technologies segment includes such offerings as skin and wound repair, plastics & surgical reconstruction products, bone grafts, and nerve and tendon repair products. The Corporate and other category includes (i) various executive, finance, human resource, information systems and legal functions, (ii) brand management, and (iii) share-based compensation costs. F-46 INTEGRA LIFESCIENCES HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The operating results of the various reportable segments as presented are not comparable to one another because (i) certain operating segments are more dependent than others on corporate functions for unallocated general and administrative and/or operational manufacturing functions, and (ii) the Company does not allocate certain manufacturing costs and general and administrative costs to the operating segment results. Net sales and profit by reportable segment for the years ended December 31, 2023, 2022 and 2021 are as follows: Years Ended December 31, Dollars in thousands 2023 2022 2021 Segment Net Sales Codman Specialty Surgical $ 1,058,993 $ 1,019,564 $ 1,025,232 Tissue Technologies 482,580 538,102 517,216 Total revenues $ 1,541,573 $ 1,557,666 $ 1,542,448 Segment Profit Codman Specialty Surgical $ 450,530 $ 417,873 $ 439,471 Tissue Technologies 134,048 233,802 228,199 Segment profit 584,578 651,675 667,670 Amortization ( 12,376 ) ( 13,882 ) ( 16,914 ) Corporate and other ( 460,676 ) ( 398,873 ) ( 453,526 ) Operating income $ 111,526 $ 238,920 $ 197,230 The Company does not allocate any assets to the reportable segments. No asset information is reported to the chief operating decision maker and disclosed in the financial information for each segment. The Company attributes revenue to geographic areas based on the location of the customer. Total revenue, net and long-lived assets (tangible) by major geographic area are summarized below: Dollars in thousands United States (1) Europe Asia Pacific Rest of the World Consolidated Total revenue, net: 2023 $ 1,100,730 $ 165,221 $ 193,096 $ 82,526 $ 1,541,573 2022 1,126,810 170,903 176,477 83,476 1,557,666 2021 1,089,526 191,327 182,034 79,561 1,542,448 Total long-lived assets: 2023 $ 481,508 $ 51,730 $ 19,842 $ 1,497 $ 554,577 2022 440,223 60,857 12,975 2,721 516,776 F-47