UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NO. ~~0-26224~~000-26224

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Delaware

51-0317849

(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)

(I.R.S. EMPLOYER
IDENTIFICATION NO.)

1100 Campus Road

08540

Princeton

New Jersey

(ZIP CODE)

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

Registrant's Telephone Number, Including Area Code: (609) 275-0500

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report:

Securities registered pursuant to Section 12(b) of the Act:


TITLE OF EACH CLASS	TRADING SYMBOL	NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, Par Value $.01 Per Share	IART	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The number of shares of the registrant’s Common Stock, $0.01 par value, outstanding as of April 25, ~~2022~~2023 was ~~83,135,133.~~81,904,442.

Table of Contents

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

INDEX


			Page Number
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements			4

Condensed Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, ~~2022~~202 3 and ~~2021~~202 2 (Unaudited)			4

Condensed Consolidated Balance Sheets as of March 31, ~~2022~~202 3 and December 31, ~~2021~~202 2 (Unaudited)			5

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, ~~2022~~202 3 and ~~2021~~202 2 (Unaudited)			6

Condensed Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, ~~2022~~202 3 and ~~2021~~202 2 (Unaudited)			7

Notes to Unaudited Condensed Consolidated Financial Statements			8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			3130

Item 3. Quantitative and Qualitative Disclosures About Market Risk			4140

Item 4. Controls and Procedures			4240

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			4241

Item 1A. Risk Factors			4241

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4341

Item 4. Mine Safety Disclosures			4341

Item 5. Other Information			4341

Item 6. Exhibits			4442

SIGNATURES			4544

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(UNAUDITED)

(Dollars in thousands, except per share amounts)


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022
Total revenue, net	Total revenue, net	$	376,638	$	360,071		Total revenue, net	$	380,846	$	376,638

Costs and expenses:	Costs and expenses:						Costs and expenses:
Cost of goods sold	Cost of goods sold	142,569		145,823			Cost of goods sold	147,975		142,569
Research and development	Research and development	24,085		22,374			Research and development	26,724		24,085
Selling, general and administrative	Selling, general and administrative	159,926		156,633			Selling, general and administrative	166,657		159,926
Intangible asset amortization	Intangible asset amortization	3,894		4,527			Intangible asset amortization	3,108		3,894
Total costs and expenses	Total costs and expenses	330,474		329,357			Total costs and expenses	344,464		330,474
Operating income	Operating income	46,164		30,714			Operating income	36,382		46,164
Interest income	Interest income	1,377		1,748			Interest income	4,107		1,377
Interest expense	Interest expense	(11,655)		(12,929)			Interest expense	(12,100)		(11,655)
Gain from the sale of business		—		42,876
Other income, net	Other income, net	3,429		4,869			Other income, net	1,389		3,429
Income before income taxes	Income before income taxes	39,315		67,278			Income before income taxes	29,778		39,315
Provision for income taxes	Provision for income taxes	6,414		21,884			Provision for income taxes	5,552		6,414
Net income	Net income	$	32,901	$	45,394		Net income	$	24,226	$	32,901

Net income per share	Net income per share						Net income per share
Basic	Basic	$	0.39	$	0.54		Basic	$	0.30	$	0.39
Diluted	Diluted	$	0.39	$	0.53		Diluted	$	0.29	$	0.39

Weighted average common shares outstanding (See Note 13):	Weighted average common shares outstanding (See Note 13):						Weighted average common shares outstanding (See Note 13):
Basic	Basic	83,632		84,500			Basic	81,871		83,632
Diluted	Diluted	84,276		85,258			Diluted	82,323		84,276
Comprehensive income (See Note 14)	Comprehensive income (See Note 14)	57,031		75,826			Comprehensive income (See Note 14)	21,028		57,031

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

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INTEGRA LIFESCIENCES HOLDINGS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in thousands, except per share amounts)


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	407,092	$	513,448	Cash and cash equivalents	$	307,367	$	456,661
Trade accounts receivable, net of allowances of $3,895 and $4,735		234,010		231,831
Trade accounts receivable, net of allowances of $3,544 and $4,304						Trade accounts receivable, net of allowances of $3,544 and $4,304	253,995		263,465
Inventories, net	Inventories, net	328,005		317,386		Inventories, net	351,275		324,583
Prepaid expenses and other current assets	Prepaid expenses and other current assets	96,946		91,051		Prepaid expenses and other current assets	116,845		116,789
Total current assets	Total current assets	1,066,053		1,153,716		Total current assets	1,029,482		1,161,498
Property, plant and equipment, net	Property, plant and equipment, net	309,209		311,703		Property, plant and equipment, net	315,175		311,302
Right of use asset - operating leases	Right of use asset - operating leases	81,644		84,543		Right of use asset - operating leases	146,514		148,284
Intangible assets, net	Intangible assets, net	1,121,971		1,145,573		Intangible assets, net	1,108,759		1,126,609
Goodwill	Goodwill	1,008,928		1,013,458		Goodwill	1,041,606		1,038,881
Deferred tax assets, net	Deferred tax assets, net	54,679		56,950		Deferred tax assets, net	44,680		45,994
Other assets	Other assets	29,513		16,440		Other assets	56,183		57,190
Total assets	Total assets	$	3,671,997	$	3,782,383	Total assets	$	3,742,399	$	3,889,758
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of borrowings under senior credit facility	Current portion of borrowings under senior credit facility	$	45,000	$	45,000	Current portion of borrowings under senior credit facility	$	—	$	38,125
Current portion of lease liability - operating leases	Current portion of lease liability - operating leases	14,300		14,775		Current portion of lease liability - operating leases	14,792		14,624
Accounts payable, trade	Accounts payable, trade	88,371		61,837		Accounts payable, trade	112,785		102,100
Contract liabilities	Contract liabilities	5,343		5,295		Contract liabilities	7,743		7,253
Accrued compensation	Accrued compensation	57,477		92,656		Accrued compensation	53,611		78,771
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	105,342		120,458		Accrued expenses and other current liabilities	93,362		80,033
Total current liabilities	Total current liabilities	315,833		340,021		Total current liabilities	282,293		320,906
Long-term borrowings under senior credit facility	Long-term borrowings under senior credit facility	824,772		824,257		Long-term borrowings under senior credit facility	769,143		733,149
Long-term borrowings under securitization facility	Long-term borrowings under securitization facility	112,000		112,500		Long-term borrowings under securitization facility	102,500		104,700
Long-term convertible securities	Long-term convertible securities	565,155		564,426		Long-term convertible securities	568,069		567,341
Lease liability - operating leases	Lease liability - operating leases	87,806		90,329		Lease liability - operating leases	156,910		157,420
Deferred tax liabilities	Deferred tax liabilities	56,633		45,788		Deferred tax liabilities	61,693		63,338
Other liabilities	Other liabilities	94,601		120,258		Other liabilities	126,853		138,501
Total liabilities	Total liabilities	2,056,800		2,097,579		Total liabilities	2,067,461		2,085,355
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock; no par value; 15,000 authorized shares; none outstanding	Preferred stock; no par value; 15,000 authorized shares; none outstanding	—		—		Preferred stock; no par value; 15,000 authorized shares; none outstanding	—		—
Common stock; $0.01 par value; 240,000 authorized shares; 89,956 and 89,600 issued at March 31, 2022 and December 31, 2021, respectively		900		896
Common stock; $0.01 par value; 240,000 authorized shares; 90,813 and 90,477 issued at March 31, 2023 and December 31, 2022, respectively						Common stock; $0.01 par value; 240,000 authorized shares; 90,813 and 90,477 issued at March 31, 2023 and December 31, 2022, respectively	908		905
Additional paid-in capital	Additional paid-in capital	1,266,739		1,264,943		Additional paid-in capital	1,245,297		1,276,977
Treasury stock, at cost; 6,823 shares and 4,899 shares at March 31, 2022 and December 31, 2021, respectively		(362,886)		(234,448)
Treasury stock, at cost; 8,918 shares and 6,823 shares at March 31, 2023 and December 31, 2022, respectively						Treasury stock, at cost; 8,918 shares and 6,823 shares at March 31, 2023 and December 31, 2022, respectively	(481,678)		(362,862)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(21,025)		(45,155)		Accumulated other comprehensive loss	7,067		10,265
Retained earnings	Retained earnings	731,469		698,568		Retained earnings	903,344		879,118
Total stockholders’ equity	Total stockholders’ equity	1,615,197		1,684,804		Total stockholders’ equity	1,674,938		1,804,403
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	3,671,997	$	3,782,383	Total liabilities and stockholders’ equity	$	3,742,399	$	3,889,758

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

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INTEGRA LIFESCIENCES HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(Dollars in thousands)


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
OPERATING ACTIVITIES:	OPERATING ACTIVITIES:					OPERATING ACTIVITIES:
Net income	Net income	$	32,901	$	45,394	Net income	$	24,226	$	32,901
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	29,724		29,214		Depreciation and amortization	31,143		29,724
Non-cash impairment charges		—		2,754
Deferred income tax provision (benefit)		3,544		(1,234)
Deferred income tax provision						Deferred income tax provision	1,953		3,544
Share-based compensation	Share-based compensation	6,291		6,334		Share-based compensation	3,620		6,291
Amortization of debt issuance costs and expenses associated with debt refinancing	Amortization of debt issuance costs and expenses associated with debt refinancing	1,724		1,721		Amortization of debt issuance costs and expenses associated with debt refinancing	1,890		1,724
Non-cash lease expense	Non-cash lease expense	(17)		1,522		Non-cash lease expense	1,260		(17)
Loss on disposal of property and equipment		712		(2)
Gain from the sale of business		—		(42,876)
Loss (gain) on disposal of property and equipment						Loss (gain) on disposal of property and equipment	(23)		712
Change in fair value of contingent consideration and others	Change in fair value of contingent consideration and others	(765)		281		Change in fair value of contingent consideration and others	4,699		(765)
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts receivable	Accounts receivable	(3,116)		16,756		Accounts receivable	10,041		(3,116)
Inventories	Inventories	(11,561)		(2,332)		Inventories	(25,423)		(11,561)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(5,046)		(3,574)		Prepaid expenses and other current assets	(2,164)		(5,046)
Other non-current assets	Other non-current assets	2,283		10,419		Other non-current assets	(6,009)		2,283
Accounts payable, accrued expenses and other current liabilities	Accounts payable, accrued expenses and other current liabilities	(9,754)		14,449		Accounts payable, accrued expenses and other current liabilities	(4,984)		(9,754)
Contract liabilities		—		(83)
Other non-current liabilities	Other non-current liabilities	(2,576)		(9,662)		Other non-current liabilities	(14,073)		(2,576)
Net cash provided by operating activities	Net cash provided by operating activities	44,344		69,081		Net cash provided by operating activities	26,156		44,344
INVESTING ACTIVITIES:	INVESTING ACTIVITIES:					INVESTING ACTIVITIES:
Purchases of property and equipment	Purchases of property and equipment	(9,325)		(6,675)		Purchases of property and equipment	(13,704)		(9,325)
Proceeds from sale of Extremity Orthopedics business		—		191,736
Acquired in-process research and development milestone	Acquired in-process research and development milestone	(4,742)		—		Acquired in-process research and development milestone	—		(4,742)
Cash paid for business acquisitions, net of cash acquired		—		(302,627)
Net cash used in investing activities	Net cash used in investing activities	(14,067)		(117,566)		Net cash used in investing activities	(13,704)		(14,067)
FINANCING ACTIVITIES:	FINANCING ACTIVITIES:					FINANCING ACTIVITIES:
Proceeds from borrowings of long-term indebtedness	Proceeds from borrowings of long-term indebtedness	11,250		600		Proceeds from borrowings of long-term indebtedness	10,200		11,250
Payments on debt	Payments on debt	(11,750)		(2,200)		Payments on debt	(12,400)		(11,750)
Payment of debt issuance costs						Payment of debt issuance costs	(7,578)		—
Purchases of treasury stock	Purchases of treasury stock	(125,000)		—		Purchases of treasury stock	(150,000)		(125,000)
Proceeds from exercised stock options	Proceeds from exercised stock options	1,239		2,222		Proceeds from exercised stock options	2,326		1,239
Cash taxes paid in net equity settlement	Cash taxes paid in net equity settlement	(9,204)		(3,637)		Cash taxes paid in net equity settlement	(5,231)		(9,204)
Net cash used in financing activities	Net cash used in financing activities	(133,465)		(3,015)		Net cash used in financing activities	(162,683)		(133,465)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(3,168)		(9,690)		Effect of exchange rate changes on cash and cash equivalents	937		(3,168)
Net decrease in cash and cash equivalents	Net decrease in cash and cash equivalents	(106,356)		(61,190)		Net decrease in cash and cash equivalents	(149,294)		(106,356)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	513,448		470,166		Cash and cash equivalents at beginning of period	456,661		513,448
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	407,092	$	408,976	Cash and cash equivalents at end of period	$	307,367	$	407,092

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

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INTEGRA LIFESCIENCES HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(UNAUDITED)

(Dollars in thousands)


		Three Months Ended March 31, 2022															Three Months Ended March 31, 2023
		Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Equity			Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Equity
		Shares	Amount		Shares	Amount											Shares	Amount		Shares	Amount
Balance, January 1, 2022		89,600	$	896	(4,899)	$	(234,448)	$	1,264,943	$	(45,155)	$	698,568	$	1,684,804
Balance, January 1, 2023																Balance, January 1, 2023	90,476	$	905	(6,823)	$	(362,862)	$	1,276,977	$	10,265	$	879,118	$	1,804,403
Net income	Net income	—	—		—	—		—		—		32,901		32,901		Net income	—	—		—	—		—		—		24,226		24,226
Other comprehensive income, net of tax		—	—		—	—		—		24,130		—		24,130
Other comprehensive income (loss), net of tax																Other comprehensive income (loss), net of tax	—	—		—	—		—		(3,198)		—		(3,198)
Issuance of common stock through employee stock purchase plan	Issuance of common stock through employee stock purchase plan	17	—		—	—		1,078		—		—		1,078		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	Issuance of common stock for vesting of share based awards, net of shares withheld for taxes	339	4		14	714		(9,758)		—		—		(9,040)		Issuance of common stock for vesting of share based awards, net of shares withheld for taxes	316	1		16	846		(4,858)		—		—		(4,011)
Share-based compensation	Share-based compensation	—	—		—	—		6,324		—		—		6,324		Share-based compensation	—	2		—	—		3,609		—		—		3,611
Accelerated shares repurchased	Accelerated shares repurchased	—	$	—	(1,938)	$	(129,152)	$	4,152	$	—	$	—	$	(125,000)	Accelerated shares repurchased	—	$	—	(2,111)	$	(119,662)	$	(31,538)	$	—	$	—	$	(151,200)
Balance, March 31, 2022		89,956	$	900	(6,823)	$	(362,886)	$	1,266,739	$	(21,025)	$	731,469	$	1,615,197
Balance, March 31, 2023																Balance, March 31, 2023	90,813	$	908	(8,918)	$	(481,678)	$	1,245,297	$	7,067	$	903,344	$	1,674,938


		Three Months Ended March 31, 2021															Three Months Ended March 31, 2022
		Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Equity			Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Equity
		Shares	Amount		Shares	Amount											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
Balance, January 1, 2022																Balance, January 1, 2022	89,600	$	896	(4,899)	$	(234,448)	$	1,264,943	$	(45,155)	$	698,568	$	1,684,804
Net income	Net income	—	—		—	—		—		—		45,394		45,394		Net income	—	—		—	—		—		—		32,901		32,901
Other comprehensive income, net of tax		—	—		—	—		—		30,432		—		30,432
Other comprehensive income (loss), net of tax																Other comprehensive income (loss), net of tax	—	—		—	—		—		24,130		—		24,130
Issuance of common stock through employee stock purchase plan	Issuance of common stock through employee stock purchase plan	18	—		—	—		1,127		—		—		1,127		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	Issuance of common stock for vesting of share based awards, net of shares withheld for taxes	137	1		15	680		(3,222)		—		—		(2,541)		Issuance of common stock for vesting of share based awards, net of shares withheld for taxes	339	4		14	714		(9,758)		—		—		(9,040)
Share-based compensation	Share-based compensation	—	—		—	—		6,098		—		—		6,098		Share-based compensation	—	—		—	—		6,324		—		—		6,324
Adoption of Update No. 2020-06		—	—		—	—		(63,274)		—		(2,772)		(66,046)
Balance, March 31, 2021		89,406	$	894	(4,899)	$	(234,461)	$	1,231,637	$	(43,627)	$	574,888	$	1,529,331
Accelerated shares repurchased																Accelerated shares repurchased	—	—		(1,938)	(129,152)		4,152		—		—		(125,000)
Balance, March 31, 2022																Balance, March 31, 2022	89,956	$	900	(6,823)	$	(362,886)	$	1,266,739	$	(21,025)	$	731,469	$	1,615,197

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

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INTEGRA LIFESCIENCES HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PRESENTATION

General

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

In the opinion of management, the March 31, ~~2022~~2023 unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the financial position, statement of changes in shareholders' equity, results of operations and cash flows of the Company. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States ("GAAP") have been condensed or omitted in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, ~~2021~~2022 included in the Company’s Annual Report on Form 10-K. The December 31, ~~2021~~2022 consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by ~~accounting principles generally accepted in the United States.~~GAAP. Operating results for the three-month period ended March 31, ~~2022~~2023 are not necessarily indicative of the results to be expected for the entire year.

The preparation of consolidated financial statements is in conformity with ~~generally accepted accounting principles in the United States ("GAAP")~~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 condensed 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.

~~Risks and Uncertainties~~

The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic, including reductions in capital and overall spending by our customers, increased freight costs, decreased availability of certain raw materials used in certain of our products and labor constraints. The COVID-19 pandemic has had, and may continue to have, an adverse effect on the Company’s business, results of operations, financial condition, and cash flows, and its future impacts remain highly uncertain and unpredictable. Although there was not a material impact to the Company’s consolidated financial statements as of and for the three months ended March 31, 2022, changes in the Company’s assessment about the length and severity of the pandemic, as well as other factors, could result in actual results differing from estimates. The severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, duration of the pandemic, including resurgences, new variants or strains, impact of government regulations, the speed and effectiveness of vaccine distribution, vaccine adoption rates and the duration of direct and indirect economic effects of the pandemic and containment measures. Even after the COVID-19 pandemic and government responses thereto have subsided, residual economic and other effects may have an impact on the demand for post-pandemic surgery levels that are difficult to predict.

~~INTEGRA LIFESCIENCES HOLDINGS CORPORATION~~

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

~~Employee Termination Benefits~~

~~The Company incurred restructuring costs related to employee terminations associated with a future plant closure in the consolidated statement of operations for the three months ended~~
~~March 31, 2022.~~ ~~Restructuring liability is included in accrued expenses and other current liabilities in the consolidated balance sheet for the three months ended March 31, 2022 and~~ ~~December 31, 2021, respectively. Restructuring liability activity for the three months ended March 31, 2022 were as follows:~~


~~(Dollars in thousands)~~	~~Amount~~
~~Balance at December 31, 2021~~	$	~~10,226~~
~~Charges:~~
~~Cost of Goods Sold~~	$	~~984~~
~~Research and development~~	79
~~Selling, general and administrative~~	~~195~~
~~Adjustments~~	$	~~(365)~~
~~Balance at March 31, 2022~~	$	~~11,119~~

Recent Accounting Pronouncements

~~In December 2019, the FASB issued ASU 2019-12,~~ ~~Income Taxes~~: Simplifying the Accounting for Income Taxes, intended to simplify the accounting for income taxes by eliminating certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for annual periods beginning after December 15, 2020 and interim periods within, with early adoption permitted. The Company adopted ASU 2019-12 as of January 1, 2021. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. The adoption of this guidance did not have a significant impact on the Company's consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform(Topic 848), ~~which~~and subsequent amendment to the initial guidance: ASU 2021-01, Reference Rate Reform (Topic 848): Scope (collectively, “Topic 848”). Topic 848 provides optional ~~guidance~~expedients and exceptions for ~~a limited period of time~~applying GAAP to ~~ease the potential burden in accounting for (or recognizing the effects of)~~contracts, hedging relationships, and other transactions affected by reference rate reform ~~on financial reporting. This amendment applies to all entities, subject to meeting~~if certain criteria ~~that have~~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. ~~This ASU~~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. The use of SOFR as a substitute for LIBOR is, ~~effective immediately~~however, voluntary and may not be ~~applied prospectively~~suitable for all market participants. There can be no assurance that the replacement rate will be economically equivalent to ~~contract modifications made~~LIBOR, which could result in higher interest rates for us under our debt facilities. There is no guarantee that a transition from LIBOR to SOFR will not result in financial market disruptions, significant increases in benchmark rates, or our borrowing costs, any of which could have an adverse effect on our business, results of operations and ~~hedging relationships~~financial condition. On March 24, 2023, the Company entered into ~~or evaluated~~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 ~~or before December 31, 2022.~~overnight transactions under repurchase agreements backed by Treasury securities (See Note 6). In ~~January 2021,~~March 2023, the ~~FASB also issued ASU 2021-01,~~ ~~Reference Rate Reform- Scope~~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 ~~clarified certain optional expedients and exceptions~~will allow the interest rate swap hedging relationship to ~~entities that are affected because of~~continue, without de-designation, due to the ~~reference rate reform. The amendments in this ASU affect the guidance in ASU 2020-04 and are effective~~change in the ~~same timeframe as ASU 2020-04. The Company currently has contracts that are~~ indexed rate from LIBOR to LIBOR and are continuing to monitor this activity and evaluate the associated risk. The Company is continuing to evaluate the scope of impacted contracts and the potential impact. The Company is also monitoring the developments regarding alternative rates and may amend certain contracts to accommodate those rates if the contract does not already specify a replacement rate. While the notional value of agreements potentially indexed to LIBOR is material, the Company does not expect a material impact to the consolidated financial statements and related disclosures associated with this transition.

~~In August 2020, the FASB issued ASU 2020-06,~~ Debt- Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40):Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. The guidance simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify. The guidance also simplifies the diluted net income per share calculation in certain areas. The ASU will be effective for annual and interim periods beginning after December 15, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years using either the modified retrospective or full retrospective method.

~~INTEGRA LIFESCIENCES HOLDINGS CORPORATION~~

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

~~As detailed in Note 6,~~ ~~Debt~~, on February 4, 2020, the Company issued $575.0 million aggregate principal amount of its 0.5% Convertible Senior Notes due 2025 (the "2025 Notes"). The 2025 Notes are subject to the guidance included in ASU 2020-06. The Company adopted this guidance on January 1, 2021 using the modified retrospective approach which resulted in a cumulative-effect adjustment that increased (decreased) the following consolidated balance sheet accounts:

~~Adjustment~~

~~Consolidated Balance Sheet Classification~~

Amount
(in millions)

~~Deferred tax impact of cumulative-effect adjustment~~

~~Deferred tax liabilities~~

~~(20.6)~~

~~Debt discount reclassification~~

~~Long-term convertible securities~~

~~89.1~~

~~Equity issuance costs reclassification~~

~~Long-term convertible securities~~

~~(2.5)~~

~~Debt discount amortization and equity costs reclassification, net of tax~~

~~Retained Earnings~~

~~(2.8)~~

~~Net impact of cumulative-effect adjustment~~

~~Additional paid-in capital~~

~~(63.3)~~

On December 9, 2020, the Company made an irrevocable election under the indenture to require the principal portion of its 2025 Notes to be settled in cash and any excess in shares. Following the irrevocable notice, only the amounts settled in excess of the principal will be considered in diluted earnings per share under the “if-converted” method. Upon adoption of ASU 2020-06, the Company’s 2025 Notes were reflected entirely as a liability since the embedded conversion feature will no longer be separately presented within stockholders’ equity. Additionally, from January 1, 2021, the Company is no longer incurring non-cash interest expense for the amortization of debt discount.

~~In October 2020, the FASB issued ASU 2020-10,~~ ~~Codification Improvements~~, which updates various codification topics by clarifying or improving disclosure requirements to align with the regulations of the U.S. Securities and Exchange Commission (the "SEC"). The ASU has been effective for the Company for annual and interim periods beginning after January 1, 2021. The Company adopted this standard on the January 1, 2021. The adoption of this guidance did not have a significant impact on the Company's consolidated financial statements and related disclosures.

~~In May 2021, the FASB issued ASU 2021-04,~~ Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options which provides guidance to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in this ASU No. 2021-04 are effective for all entities for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted, including interim periods within those fiscal years. The amendment had no impact to the Company as the effect will largely depend on the terms of written call options or financings issued or modified in the future.SOFR.

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

~~2. ACQUISITIONS AND DIVESTITURES~~

~~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 the CFO relating to the development of shoulder arthroplasty products.

The divestiture does not represent a strategic shift that will have a major effect on the Company's operations and financial statements. Goodwill was allocated to the assets and liabilities divested using the relative fair value method of the Extremity Orthopedics business to the Company's Tissue Technologies reportable business segment. In connection with the sale, the Company recognized a preliminary gain of $42.9 million that was presented in Gain from the sale of business in the consolidated statement of operations for the three months ended March 31, 2021. The gain was finalized at $41.8 million as Gain from the sale of business for the year ended December 31, 2021. The Company finalized the net working capital and paid an additional $1.3 million to Smith & Nephew as of December 31, 2021.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

2. ACQUISITIONS AND DIVESTITURES

Surgical Innovation Associates, Inc. Acquisition

~~The Company also entered into a transition services agreement with Smit~~
~~h & Nephew which requires the Company to provide certain services on behalf~~ of Smith & Nephew for the duration of the period subsequent to the sale of the business as defined in the transition services agreement. The Company also recognized a payable due to Smith & Nephew of $8.5 million for invoicing and cash collection from customers on behalf of Smith & Nephew, pursuant to the transition services agreement, as of March 31, 2022, which is included in the consolidated balance sheets within accrued expenses and other current liabilities. In April

On December 6, 2022, the Company ~~and Smith & Nephew~~ completed ~~a significant portion~~its acquisition of ~~the transition service agreement, including order-to-cash.~~

~~ACell,~~Surgical Innovation Associates, Inc. ~~Acquisition~~

~~On January 20, 2021, the Company acquired ACell, Inc. (the "ACell Acquisition"~~("SIA") for ~~a total~~an acquisition purchase price of ~~$306.9~~$51.5 million ~~plus~~(the "SIA Acquisition"). In addition to the purchase price, the acquisition includes two separate contingent ~~consideration of up to $100 million,~~considerations payments, which ~~may be payable upon the Company~~are dependent on 1) achieving certain revenue-based performance milestones in ~~2022,~~ 2023, 2024, and ~~2025. The final working capital adjustments~~2025 (up to $50.0 million in additional payments), as well as 2) the approval by the FDA of ~~$1.3~~the Premarket Approval (“PMA”) Application for DuraSorb for certain uses by certain timing targets (up to $40.0 million ~~was finalized~~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 ~~paid~~other soft tissue reinforcement. DuraSorb sales will be reported within Integra’s Tissue Technologies ("TT") segment as part of ~~June 30, 2021. Prior to the acquisition, ACell was a privately-held company that offered a portfolio of regenerative products for complex wound management, including developing~~its Wound Reconstruction and ~~commercializing products based on MatriStem Urinary Bladder Matrix, a technology platform derived from porcine urinary bladder extracellular matrix.~~Care franchise.

Assets Acquired and Liabilities Assumed at Fair Value

The ~~ACell~~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 ~~are~~to be recognized at their fair values as of the acquisition date.

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

Dollars in thousands

~~Final~~Preliminary Valuation

Weighted Average Life

Current assets:

Cash

~~2,726~~4,438

Trade accounts receivable, net

~~16,469~~1,551

Inventories, net

~~18,299~~2,900

Prepaid expenses and other current assets

~~1,498~~1,654

Total current assets

~~38,992~~

~~Property, plant and equipment, net~~

~~13,769~~10,543

Intangible assets

~~245,000~~75,000

~~13-14~~14 years

Goodwill

~~94,147~~

~~Right of use asset - operating leases~~

~~9,259~~

~~Deferred tax assets~~

~~7,465~~

~~Other assets~~

~~148~~41,854

Total assets acquired

~~408,780~~127,397

Current liabilities:

Accounts payable and accrued expenses

~~718~~

~~Accrued expenses~~

~~5,966~~

~~Current portion of lease liability - operating leases~~

~~1,673~~2,044

Total current liabilities

~~8,357~~

~~Other long-term liability~~

~~276~~

~~Lease liability - operating leases~~

~~7,585~~2,044

Deferred ~~tax liability~~Tax Liability

~~61,724~~11,799

Contingent consideration

~~23,900~~57,607

Total liabilities assumed

~~101,842~~71,450

Net assets acquired

~~306,938~~55,947

~~INTEGRA LIFESCIENCES HOLDINGS CORPORATION~~

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

Developed Technology

~~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, working capital, and contributory asset charges, the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of ~~each~~the asset’s life cycle, and competitive trends impacting the asset and ~~each~~the cash flow stream.

The Company used a discount rate of ~~8.5%~~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.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

Goodwill

The Company allocated goodwill related to the ~~ACell acquisition~~SIA Acquisition to the ~~Tissue Technologies reportable business~~TT 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

As part of the ACell Acquisition, the Company is required to make payments to the former shareholders of ACell up to $100 million based on the achievement by the Company of certain revenue-based performance milestones in 2022, 2023, and 2025. T~~he Company used iterations of the Monte Carlo simulation to calculate the~~ fair value of the contingent consideration that considered the possible outcomes of scenarios related to each specific milestone. The Company estimated the fair value of the contingent consideration to be $23.9 million at the acquisition date. The estimated fair value as of March 31, 2022 was $22.1 million. ~~The Company recorded $17.2 million~~ ~~and~~ ~~$23.9 million~~ in ~~other liabilities~~ ~~at March 31, 2022~~ ~~and March 31, 2021, respectively, and $4.9 million in as~~ ~~accrued expenses and other current liabilities~~ at ~~March 31, 2022~~ ~~in the consolidated balance sheet of the Company.~~

The Company ~~determined~~determines the acquisition date fair value of contingent consideration obligations ~~using~~based on a ~~Monte Carlo simulation, as well as significant unobservable inputs, reflecting~~probability-weighted income approach derived from revenue estimates and a probability assessment with respect to the ~~Company’s assessment~~likelihood of ~~the assumptions market participants would use to value these liabilities.~~achieving contingent obligations. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined using the fair value concepts in ASC 820. The ~~resultant~~resulting most likely payouts are discounted using an appropriate effective annual interest rate. At each reporting date, the contingent consideration ~~obligations are~~obligation will be revalued to estimated fair value and changes in fair value will be reflected as income or expense in ~~our~~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 SIA 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 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. The Company estimated the fair value of the contingent consideration for the revenue based milestone to be $32.6 million at the acquisition date and $25.0 million for the PMA approval milestone as of December 31, 2022. The company recorded a total of $48.7 million in other liabilities as of March 31, 2023 and $12.5 million in accrued expenses and other current liabilities at March 31, 2023 in the consolidated balance sheet of the company. The change in the fair value of the contingent obligation was primarily as a result of changes in the timing.

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.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

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 TT 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 condensed 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 March 31, 2023, the Company had a deposit remaining of $7.3 million which is included in prepaid assets and recognized a payable due to Gentell of $0.7 million, which is included in the condensed consolidated balance sheet within accrued expenses and other current liabilities.

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 ~~Judgments~~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.

~~INTEGRA LIFESCIENCES HOLDINGS CORPORATION~~

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

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 ~~ninety~~90 days.

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.~~sheets.

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 contract liability.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

The following table summarized the changes in the contract asset and liability balances for the three months ended March 31, ~~2022:~~2023:

Dollars in thousands

Total

Contract Asset

Contract asset, January 1, ~~2022~~2023

~~11,412~~10,122

Transferred to trade receivable offrom contract asset included in beginning of the year contract asset

~~(11,412)~~(9,765)

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

~~12,217~~9,713

Contract asset, March 31, ~~2022~~2023

~~12,217~~10,070

Contract Liability

Contract liability, January 1, ~~2022~~2023

~~11,946~~16,127

Recognition of revenue included in beginning of year contract liability

~~(1,702)~~(2,492)

Contract liability, net of revenue recognized on contracts during the period

~~1,981~~2,921

Foreign currency translation

~~(8)~~3

Contract liability, March 31, ~~2022~~2023

~~12,217~~16,559

At March 31, ~~2022,~~2023, the short-term portion of the contract liability of ~~$5.3~~$7.7 million and the long-term portion of ~~$6.9~~$8.8 million is included in current liabilities and other liabilities, respectively, in the consolidated balance sheets.

As of March 31, ~~2022,~~2023, the Company is expected to recognize revenue of approximately ~~44%~~47% of unsatisfied (or partially unsatisfied) performance obligations as revenue within ~~twelve~~12 months, with the remaining balance to be recognized thereafter.

Shipping and Handling Fees

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

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.

~~INTEGRA LIFESCIENCES HOLDINGS CORPORATION~~

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

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.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

Disaggregated Revenue

The following table presents revenues disaggregated by the major sources of revenues for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (dollar amounts in thousands):


		Three Months Ended March 31, 2022		Three Months Ended March 31, 2021			Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
Neurosurgery	Neurosurgery	$	194,675	$	189,254	Neurosurgery	$	192,870	$	194,675
Instruments	Instruments	52,633		51,987		Instruments	55,266		52,633
Total Codman Specialty Surgical	Total Codman Specialty Surgical	247,308		241,241		Total Codman Specialty Surgical	248,136		247,308

Wound Reconstruction and Care	Wound Reconstruction and Care	94,630		88,698		Wound Reconstruction and Care	100,940		94,630
Private Label	Private Label	34,700		30,132		Private Label	31,770		34,700
Total Tissue Technologies	Total Tissue Technologies	129,330		118,830		Total Tissue Technologies	132,710		129,330
Total revenue	Total revenue	$	376,638	$	360,071	Total revenue	$	380,846	$	376,638

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

4. INVENTORIES

Inventories, net consisted of the following:


Dollars in thousands	Dollars in thousands	March 31, 2022		December 31, 2021		Dollars in thousands	March 31, 2023		December 31, 2022
Finished goods	Finished goods	$	165,186	$	162,528	Finished goods	$	178,626	$	172,088
Work in process	Work in process	70,901		65,323		Work in process	80,532		70,598
Raw materials	Raw materials	91,918		89,535		Raw materials	92,117		81,897
Total inventories, net	Total inventories, net	$	328,005	$	317,386	Total inventories, net	$	351,275	$	324,583

5. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Changes in the carrying amount of goodwill for the three-month period ended March 31, ~~2022~~2023 were as follows:


Dollars in thousands	Dollars in thousands	Codman Specialty Surgical		Tissue Technologies		Total		Dollars in thousands	Codman Specialty Surgical		Tissue Technologies		Total
Goodwill at December 31, 2021		$	663,428	$	350,030	$	1,013,458
Goodwill at December 31, 2022								Goodwill at December 31, 2022	$	656,219	$	382,662	$	1,038,881
SIA Acquisition Working Capital Adjustment								SIA Acquisition Working Capital Adjustment	—		129		129
Foreign currency translation	Foreign currency translation	(2,965)		(1,565)		(4,530)		Foreign currency translation	1,639		957		2,596
Goodwill at March 31, 2022		$	660,463	$	348,465	$	1,008,928
Goodwill at March 31, 2023								Goodwill at March 31, 2023	$	657,858	$	383,748	$	1,041,606

1413

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

Other Intangible Assets

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


		March 31, 2022								March 31, 2023
Dollars in thousands	Dollars in thousands	Weighted Average Life	Cost		Accumulated Amortization		Net		Dollars in thousands	Weighted Average Life	Cost		Accumulated Amortization		Net
Completed technology	Completed technology	18 years	$	1,130,190	$	(322,436)	$	807,754	Completed technology	18 years	$	1,206,748	$	(389,297)	$	817,451
Customer relationships	Customer relationships	12 years	$	210,904	$	(145,140)	$	65,764	Customer relationships	12 years	$	193,297	$	(146,098)	$	47,199
Trademarks/brand names	Trademarks/brand names	28 years	$	97,907	$	(32,285)	$	65,622	Trademarks/brand names	28 years	$	97,554	$	(35,665)	$	61,889
Codman tradename	Codman tradename	Indefinite	$	166,849	$	—	$	166,849	Codman tradename	Indefinite	$	167,529	$	—	$	167,529
Supplier relationships	Supplier relationships	30 years	$	30,211	$	(16,437)	$	13,774	Supplier relationships	30 years	$	30,211	$	(17,415)	$	12,796
All other	All other	11 years	$	6,125	$	(3,917)	$	2,208	All other	11 years	$	6,024	$	(4,129)	$	1,895
			$	1,642,186	$	(520,215)	$	1,121,971			$	1,701,363	$	(592,604)	$	1,108,759


		December 31, 2021								December 31, 2022
Dollars in thousands	Dollars in thousands	Weighted Average Life	Cost		Accumulated Amortization		Net		Dollars in thousands	Weighted Average Life	Cost		Accumulated Amortization		Net
Completed technology	Completed technology	18 years	$	1,132,954	$	(307,013)	$	825,941	Completed technology	18 years	$	1,204,325	$	(370,968)	$	833,357
Customer relationships	Customer relationships	12 years	211,344		(142,755)		68,589		Customer relationships	12 years	193,081		(144,040)		49,041
Trademarks/brand names	Trademarks/brand names	28 years	98,367		(31,468)		66,899		Trademarks/brand names	28 years	97,265		(34,674)		62,591
Codman tradename	Codman tradename	Indefinite	167,758		—		167,758		Codman tradename	Indefinite	166,693		—		166,693
Supplier relationships	Supplier relationships	30 years	30,211		(16,192)		14,019		Supplier relationships	30 years	30,211		(17,170)		13,041
All other	All other	11 years	6,258		(3,891)		2,367		All other	11 years	5,957		(4,071)		1,886
			$	1,646,892	$	(501,319)	$	1,145,573			$	1,697,532	$	(570,923)	$	1,126,609

Based on quarter-end exchange rates, amortization expense (including amounts reported in cost of goods sold) is expected to be approximately ~~$58.9~~$61.8 million for the remainder of ~~2022, $78.2 million in~~ 2023, ~~$77.6~~$81.8 million in 2024, ~~$77.5~~$81.8 million in 2025, ~~$77.4~~$81.6 million in 2026, ~~$75.4~~$79.7 million in 2027, $78.1 million in 2028 and ~~$509.1~~$474.4 million thereafter.

6. DEBT

Amendment to the ~~Sixth~~Seventh Amended and Restated Senior Credit Agreement

On ~~February 3, 2020,~~March 24, 2023, the Company entered into the ~~sixth amendment and restatement (the "February 2020 Amendment")~~March 2023 Amendment of ~~its~~the Senior Credit Facility ~~(the "Senior Credit Facility")~~ with a syndicate of lending banks with Bank of America, N.A., as Administrative Agent. The ~~February 2020~~March 2023 Amendment extended the maturity date to ~~February 3, 2025.~~March 24, 2028, amended the contractual repayments of Term loan A, and amended the interest rate from LIBOR to SOFR-indexed interest. The Company continues to have the aggregate principal amount of up to approximately ~~$2.2~~$2.1 billion available to it through the following facilities: (i) a ~~$877.5~~$775.0 million ~~Term Loan~~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.

On July 14, 2020, the Company entered into an amendment (the "July 2020 Amendment") to the February 2020 Amendment of the Senior Credit Facility to increase financial flexibility through June 30, 2021, in light of the unprecedented impact and uncertainty of the COVID-19 pandemic on the global economy. The ~~July 2020 amendment did not increase the Company’s total indebtedness.~~

~~In connection with the July 2020 amendment, the~~ Company’s maximum consolidated total leverage ratio in the financial covenants (as defined in the Senior Credit Facility) was modified to the following:


Fiscal Quarter						Maximum Consolidated Total Leverage Ratio
~~Execution of July 2020 Amendment~~March 31, 2023 through ~~June 30, 2021~~						~~5.50 to 1.00~~
~~September 30, 2021 through June 30, 2022~~						~~5.00 to 1.00~~
~~September 30, 2022 through June 30, 2023~~December 31, 2024						4.50 to 1.00
March 31, 2025 through June 30, 2026						4.25 to 1.00
September 30, ~~2023~~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:

~~INTEGRA LIFESCIENCES HOLDINGS CORPORATION~~

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

i.~~the Eurodollar Rate (as defined in the amendment and restatement)~~term SOFR in effect from time to time plus 0.10% plus the applicable rate (ranging from 1.00% to ~~2.25%~~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%

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

2.the prime lending rate of Bank of America, N.A. or

3.the one-month ~~Eurodollar Rate~~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 ~~July 2020 amendment)~~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.

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 March 31, ~~2022,~~2023, the Company was in compliance with all such covenants. The Company capitalized $7.6 million in 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 first quarter of 2023.

At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022 there was ~~$42.5 million and $31.3 million, respectively,~~ no balance outstanding under the revolving portion of the Senior Credit ~~Facility at weighted average interest rates of 1.7% and 1.4%, respectively.~~Facility. At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, there was ~~$832.5~~$775.0 million ~~and $843.8 million, respectively,~~ outstanding under the ~~Term Loan~~term loan component of the Senior Credit Facility at a weighted average interest rate of ~~1.7%~~6.3% and ~~1.4%~~5.6%, respectively. ~~At both~~As of March 31, ~~2022 and~~2023 there was no portion of the Term Loan component of the Senior Credit Facility classified as current on the condensed consolidated balance sheet. As of December 31, ~~2021,~~2022, there was ~~$45.0~~$38.1 million of the Term Loan component of the Senior Credit Facility classified as current on the consolidated balance ~~sheets.~~sheets under the prior terms of the agreement.

The fair value of outstanding borrowings of the Senior Credit Facility's ~~revolving credit and~~ Term Loan ~~components~~component at March 31, ~~2022~~2023 ~~wer~~was~~e $43.4 million and $847.4 million, re~~sp~~ectively. These~~ $750.9 million. This fair ~~values were~~value was 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 March 31, ~~2022~~2023 and December 31, ~~2021~~2022 totaled $1.6 million. There were no amounts drawn as of March 31, ~~2022.~~2023.

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


Quarter Ended March 31, 2022		Principal Repayment
Quarter Ended March 31, 2023				Quarter Ended March 31, 2023	Principal Repayment
Dollars in thousands	Dollars in thousands			Dollars in thousands
Remainder of 2022		$	33,750
2023		$	61,875
Remainder of 2023				Remainder of 2023	$	—
2024	2024	$	67,500	2024	$	14,531
2025	2025	$	669,375	2025	$	33,906
2026				2026	$	38,750
Thereafter				Thereafter	687,813
		$	832,500		$	775,000

Future interest payments on the term loan component of the Senior Credit Facility based on current interest rates are expected to approximate ~~$10.4~~$35.9 million for remainder of ~~2022, $13.0 million in~~ 2023, ~~$11.9~~$38.1 million in 2024, ~~and $1.1~~$32.6 million in ~~2025.~~2025, $30.0 million in 2026, and $34.5 million thereafter . Interest is calculated on the term loan portion of the Senior Credit Facility based on ~~LIBOR~~SOFR plus the certain amounts set forth in the ~~Sixth Amended and Restated~~ Credit Agreement. As the revolving credit facility and Securitization Facility can be repaid at any time, no interest has been included in the calculation.

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

~~INTEGRA LIFESCIENCES HOLDINGS CORPORATION~~

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

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 portion of debt proceeds that was classified as equity at the time of the offering was $104.5 million. The effective interest rate implicit in the liability component was 4.2%.~~ In connection with this offering, the Company capitalized $13.2 million of financing fees.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

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) at any time on or after February 20, 2023; or (4) if specified corporate transactions occur. As of March 31, ~~2022,~~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 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, 2020,~~ ~~the carrying amount of the liability component was~~ ~~$485.9 million, the remaining unamortized discount was $89.1 million, and the principal amount outstanding~~ ~~was $575.0 million. On January 1, 2021, the Company adopted ASU 2020-06 using the modified retrospective method. See Note 1,~~ ~~Basis of Presentation,~~ ~~for further details. At~~ March 31, ~~2022~~2023, the carrying amount of the liability was $575.0 million. The fair value of the 2025 Notes at March 31, ~~2022~~2023 was $~~613.7~~561.7 million. Factors that the Company considered when estimating the fair value of the 2025 Notes included recent quoted market prices or dealer quote. The level of the 2025 Notes is considered as Level 1.

As a result of the adoption of ASU 2020-06, the Company recognized only cash interest related to the contractual interest coupon of $0.7 million on the 2025 Notes for the three months ended March 31, 2022 and March 31, 2021.

Securitization Facility

~~During the fourth quarter of~~In 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 March 31, ~~2022,~~2023, the Company was in compliance with the covenants and none of the termination events had occurred.

~~INTEGRA LIFESCIENCES HOLDINGS CORPORATION~~

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

On May 28, 2021, the Company entered into an amendment (the "May 2021 Amendment") of the Securitization Facility which extended the maturity date from December 21, 2021 to May 28, 2024. The May 2021 Amendment does not increase the Company’s total indebtedness.

The Securitization Facility is currently indexed to LIBOR. At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had ~~$112.0~~$102.5 million and ~~$112.5~~$104.7 million, respectively, of outstanding borrowings under its Securitization Facility at a weighted average interest rate of ~~1.2%~~5.8% and ~~1.1%~~5.0%, respectively. In April 2023, we amended the facility to replace LIBOR with SOFR-indexed interest. The fair value of the outstanding borrowing of the Securitization Facility at March 31, ~~2022~~2023 was ~~$113.0~~$102.2 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.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

7. 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 ~~LIBOR-indexed floating-rate~~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 LIBOR to convert the portfolio of swaps from LIBOR to SOFR.

The Company held the following interest rate swaps as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (dollar amounts in thousands):

March 31, 2022 December 31, 2021 March 31, 2022 December 31, 2021
Hedged Item Notional Amount Designation Date Effective Date Termination Date Fixed Interest Rate Estimated Fair Value
Asset (Liability)
1-month USD LIBOR Loan 300,000 300,000 December 13, 2017 January 1, 2018 December 31, 2022 2.201 % (1,619) (5,268)
1-month USD LIBOR Loan 150,000 150,000 December 13, 2017 July 1, 2019 June 30, 2024 2.423 % (138) (5,520)
1-month USD LIBOR Loan 200,000 200,000 December 13, 2017 January 1, 2018 December 31, 2024 2.313 % 743 (7,421)
1-month USD LIBOR Loan 75,000 75,000 October 10, 2018 July 1, 2020 June 30, 2025 3.220 % (1,898) (5,512)
1-month USD LIBOR Loan 75,000 75,000 October 10, 2018 July 1, 2020 June 30, 2025 3.199 % (1,937) (5,464)
1-month USD LIBOR Loan 75,000 75,000 October 10, 2018 July 1, 2020 June 30, 2025 3.209 % (1,843) (5,494)
1-month USD LIBOR Loan 100,000 100,000 December 18, 2018 December 30, 2022 December 31, 2027 2.885 % (1,984) (6,886)
1-month USD LIBOR Loan 100,000 100,000 December 18, 2018 December 30, 2022 December 31, 2027 2.867 % (2,140) (6,764)
1-month USD LIBOR Loan 575,000 575,000 December 15, 2020 July 31, 2025 December 31, 2027 1.415 % 11,026 3,552
1-month USD LIBOR Loan 125,000 125,000 December 15, 2020 July 1, 2025 December 31, 2027 1.404 % 2,722 821
$ 1,775,000 $ 1,775,000 $ 2,932 $ (43,957)


	March 31, 2023												March 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	%		4,022
1-month Term SOFR Loan	200,000			December 13, 2017		January 1, 2018		December 31, 2024		2.313	%		6,738
1-month Term SOFR Loan	75,000			October 10, 2018		July 1, 2020		June 30, 2025		3.220	%		1,329
1-month Term SOFR Loan	75,000			October 10, 2018		July 1, 2020		June 30, 2025		3.199	%		1,539
1-month Term SOFR Loan	75,000			October 10, 2018		July 1, 2020		June 30, 2025		3.209	%		1,441
1-month Term SOFR Loan	100,000			December 18, 2018		December 30, 2022		December 31, 2027		2.885	%		2,770
1-month Term SOFR Loan	100,000			December 18, 2018		December 30, 2022		December 31, 2027		2.867	%		2,708
1-month Term SOFR Loan	575,000			December 15, 2020		July 31, 2025		December 31, 2027		1.415	%		19,406
1-month Term SOFR Loan	125,000			December 15, 2020		July 1, 2025		December 31, 2027		1.404	%		4,567
Basis Swap (1)	—			March 31, 2023		March 24, 2023		December 31, 2027		N/A			(1,842)
	$	1,475,000											$	42,678
(1) The notional of the basis swap amortizes to match the total notional of the interest rate swap portfolio over time

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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


		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

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 accumulated other comprehensive loss (“AOCL”), 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 AOCL to interest expense at that time.

~~INTEGRA LIFESCIENCES HOLDINGS CORPORATION~~

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

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 AOCL, net of tax. Those amounts are subsequently reclassified to earnings from AOCL as impacted by the hedged item when the hedged item affects earnings. If the hedged forecasted transaction does not occur or if it becomes probable that it will not occur, the Company will reclassify the amount of any gain or loss on the related cash flow hedge to earnings at that time. For contracts not designated as hedging instruments, the changes in fair value of the contracts are recognized in other income, net in the consolidated statements of operation, along with the offsetting foreign currency gain or loss on the underlying assets or liabilities.

During the fourth quarter of 2020, the Company entered into foreign currency forward contracts, with a notional amount of $9.7 million, to mitigate the foreign exchange risk related to certain intercompany loans denominated in Canadian Dollar ("CAD") and intercompany receivables denominated in Japanese Yen ("JPY"). The contracts are not designated as hedging instruments. The Company subsequently settled its foreign currency forward contracts associated with the intercompany receivables denominated in JPY during the first quarter of 2021. The Company recognized a $0.2 million loss from the change in fair value of the contracts, which was included in other income, net in the consolidated statement of operations as of March 31, 2022 and March 31, 2021. The fair value of the foreign currency forward contracts denominated in CAD was $0.2 million as of March 31, 2022 and December 31, 2021.

During the second quarter of 2021, the Company entered into a foreign currency swap, with a notional of $7.3 million to mitigate the risk from fluctuations in foreign currency exchange rates associated with certain intercompany loan denominated in Japanese Yen ("JPY"). In a foreign currency swap transaction, the Company agrees with another party to exchange, at specified intervals, the difference between one currency and another currency at a fixed exchange rate, generally set at inception, calculated by reference to an agreed upon notional amount. The notional amount of each currency is exchanged at the inception and termination of the currency swap by each party. The change in fair value of the foreign currency swap was $1.0 million as of March 31, 2022.

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~~anticipated 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

On ~~October 2, 2017,~~September 26, 2022, the Company amended the CHF-denominated intercompany loan to extend the termination date to September 2023 and as a result, the Company early terminated the cross-currency swap designated as cash flow hedge of an intercompany loan with aggregate notional amount of 50.0 million. Simultaneously, the Company entered into a cross-currency swap ~~agreements~~agreement to convert a notional amount of ~~$300.0~~CHF 48.5 million equivalent to ~~291.2~~49.1 million of ~~Swiss Francs ("CHF") denominated~~this amended intercompany ~~loans~~loan into U.S. dollars. The ~~CHF-denominated intercompany loans were~~loss recorded by the ~~result~~Company upon the settlement of the ~~purchase of intellectual property by a subsidiary in Switzerland as part of an acquisition.~~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.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

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.

~~INTEGRA LIFESCIENCES HOLDINGS CORPORATION~~

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

The Company held the following cross-currency rate swaps as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (dollar amounts in thousands):

March 31, 2022 December 31, 2021 March 31, 2022 December 31, 2021
Effective Date Termination Date Fixed Rate Aggregate Notional Amount Fair Value
Asset (Liability)
Pay CHF October 2, 2017 October 2, 2022 1.95% CHF 145,598 145,598 (7,354) (8,283)
Receive U.S.$ 4.52% $ 150,000 150,000
Pay CHF December 21, 2020 December 22, 2025 3.00% CHF 391,387 397,137 (2,421) 41
Receive U.S.$ 3.98% $ 439,366 445,821
Total $ (9,775) $ (8,242)

On October 4, 2021 in accordance with the termination date, the Company settled a cross-currency swap designated as a cash flow hedge of an intercompany loan with an aggregate notional amount of $50.0 million. The gain recorded by the Company upon the settlement of the swap was not material for the period.


					March 31, 2023	December 31, 2022	March 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	373,227	397,137	(3,033)		(4,241)
Receive U.S.$			3.98%	$	418,980	445,821

Pay CHF	September 28, 2022	September 29, 2023	1.95%	CHF	48,533	48,532	(4,011)		(3,528)
Receive U.S.$			5.32%	$	49,142	49,142

Total							$	(7,044)	$	(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 AOCL. For the three months ended March 31, ~~2022,~~2023, and ~~2021,~~2022, the Company recorded a ~~gain~~loss of ~~$6.5~~$4.9 million and ~~$42.9~~a gain $6.5 million, respectively, in other income, net related to change in fair value related to the foreign currency rate translation to offset the losses recognized on the intercompany loans.

For the three months ended March 31, ~~2022,~~2023, and ~~2021,~~2022, the Company recorded a gain of ~~$7.9~~$7.5 million and ~~$40.2~~$7.9 million in AOCL, respectively, related to change in fair value of the cross-currency swaps.

For the three months ended March 31, ~~2022,~~2023, and ~~2021,~~2022, the Company recorded a gain of ~~$1.8~~$1.5 million and ~~$1.3~~$1.8 million, respectively, in other income, net included in the consolidated statements of operations related to the interest rate differential of the cross-currency swaps.

The estimated gain that is expected to be reclassified to other income (expense), net from AOCL as of March 31, ~~2022~~2023 within the next twelve months is ~~$2.4~~$0.1 million. As of March 31, ~~2022,~~2023, the Company does not expect any gains or losses will be reclassified into earnings as a result of the discontinuance of these cash flow hedges because the original forecasted transaction will not occur.

Net Investment Hedges

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. On October 1, 2018 and December 16, 2020, the Company entered into cross-currency swap agreements designated as net investment hedges to partially offset the effects of foreign currency on foreign subsidiaries.

~~The Company held the following cross-currency rate swaps designated as net investment hedges as of March 31, 2022 and December 31, 2021, respectively (dollar amounts in thousands):~~

March 31, 2022 December 31, 2021
Effective Date Termination Date Fixed Rate Aggregate Notional Amount Fair Value
Asset (Liability)
Pay EUR October 3, 2018 September 30, 2023 —% EUR 51,760 3,035 2,503
Receive U.S.$ 2.57% $ 60,000
Pay EUR October 3, 2018 September 30, 2025 —% EUR 38,820 2,452 2,147
Receive U.S.$ 2.19% $ 45,000
Pay CHF December 16, 2020 December 16, 2027 —% CHF 222,300 (1,716) (792)
Receive U.S.$ 1.10% $ 250,000
Total $ 3,771 $ 3,858

2019

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

~~On September 30, 2021, in accordance with~~The Company held the ~~termination date, the Company settled~~following cross-currency rate swaps designated as net investment ~~hedge with an aggregate notional amount~~hedges as of ~~$52 million~~ ~~equivalent to~~ ~~44.9 million Euros based on the termination date. As a result of the settlement, the Company recorded a gain of $0.1 million~~March 31, 2023 and December 31, 2022, respectively (dollar amounts in ~~AOCL.~~thousands):


					March 31, 2023	December 31, 2022	March 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	51,760	3,989		4,713
Receive U.S.$			2.57%	$	60,000	60,000

Pay EUR	October 3, 2018	September 30, 2025	—%	EUR	38,820	38,820	3,932		4,307
Receive U.S.$			2.19%	$	45,000	45,000

Pay CHF	May 26, 2022	December 16, 2028	—%	CHF	288,210	288,210	(14,711)		(14,663)
Receive U.S.$			1.94%	$	300,000	300,000

Total							$	(6,790)	$	(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 AOCL. For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, the Company recorded ~~gains~~a loss of ~~$1.3~~$1.1 million and ~~$40.2~~a gain $1.3 million, respectively, in AOCL related to the change in fair value of the cross-currency swaps.

For the three months ended March 31, ~~2022,~~2023, and ~~2021,~~2022, the Company recorded gains of ~~$1.3~~$2.1 million and ~~$1.7~~$1.3 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 AOCL as of March 31, ~~2022~~2023 within the next twelve months is ~~$5.3~~$10.9 million.

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 not included in accumulated comprehensive loss. These changes in fair value will be recognized into earnings as a component of cost of sales when the forecasted-transaction occurs.

During the first quarter of 2023 the Company entered into Foreign Currency Forward Contracts with a notional amount of $10.8 million to mitigate the risk of foreign currency on intercompany purchases in CHF. During the three months ended March 31, 2023 the Company recorded an immaterial loss in AOCL related to the change in fair value of 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.

2120

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

The following table summarizes the fair value for derivatives designated as hedging instruments in the condensed consolidated balance sheets as of March 31, ~~2022~~2023 and December 31, ~~2021:~~2022:


		Fair Value as of					Fair Value as of
Location on Balance Sheet (1):	Location on Balance Sheet (1):	March 31, 2022		December 31, 2021				Location on Balance Sheet (1):	March 31, 2023		December 31, 2022
Dollars in thousands	Dollars in thousands					Dollars in thousands
Derivatives designated as hedges — Assets:	Derivatives designated as hedges — Assets:							Derivatives designated as hedges — Assets:
Prepaid expenses and other current assets	Prepaid expenses and other current assets							Prepaid expenses and other current assets
Cash Flow Hedges	Cash Flow Hedges							Cash Flow Hedges
Interest rate swap(2)								Interest rate swap(2)	$	15,659	$	16,682
Cross-currency swap	Cross-currency swap	$	4,943	$	4,900			Cross-currency swap	4,139		4,497
Net Investment Hedges	Net Investment Hedges							Net Investment Hedges
Cross-currency swap	Cross-currency swap	5,299		5,120				Cross-currency swap	10,942		11,653
Other assets	Other assets							Other assets
Cash Flow Hedges	Cash Flow Hedges							Cash Flow Hedges
Interest rate swap(2)	Interest rate swap(2)	16,393		4,373				Interest rate swap(2)	28,861		40,030
Cross-currency swap	Cross-currency swap	—		—				Cross-currency swap	—		—
Net Investment Hedges	Net Investment Hedges							Net Investment Hedges
Cross-currency swap	Cross-currency swap	2,953		2,104				Cross-currency swap	2,940		3,311
Total derivatives designated as hedges — Assets	Total derivatives designated as hedges — Assets	$	29,588	$	16,497			Total derivatives designated as hedges — Assets	$	62,541	$	76,173

Derivatives designated as hedges — Liabilities:	Derivatives designated as hedges — Liabilities:							Derivatives designated as hedges — Liabilities:
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities							Accrued expenses and other current liabilities
Cash Flow Hedges	Cash Flow Hedges							Cash Flow Hedges
Interest rate swap(2)	Interest rate swap(2)	$	7,045	$	18,187			Interest rate swap(2)	$	762	$	—
Cross-currency swap	Cross-currency swap	$	7,354	8,283				Cross-currency swap	4,011		3,528
Foreign currency forward contracts								Foreign currency forward contracts	69
Net Investment Hedges	Net Investment Hedges							Net Investment Hedges
Cross-currency swap	Cross-currency swap	$	—	—				Cross-currency swap	—		—
Other liabilities	Other liabilities							Other liabilities
Cash Flow Hedges	Cash Flow Hedges							Cash Flow Hedges
Interest rate swap(2)	Interest rate swap(2)	$	6,416	30,143				Interest rate swap(2)	1,080		—
Cross-currency swap	Cross-currency swap	$	7,364	4,859				Cross-currency swap	7,172		8,738
Net Investment Hedges	Net Investment Hedges							Net Investment Hedges
Cross-currency swap	Cross-currency swap	$	4,481	3,366				Cross-currency swap	20,672		20,608
Total derivatives designated as hedges — Liabilities	Total derivatives designated as hedges — Liabilities	$	32,660	$	64,838			Total derivatives designated as hedges — Liabilities	$	33,766	$	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 March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the total notional amounts related to the Company’s interest rate swaps were both ~~$1.8~~$1.5 billion, respectively.

2221

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

The following presents the effect of derivative instruments designated as cash flow hedges and net investment hedges on the accompanying condensed consolidated statement of operations during the three months ended March 31, ~~2022~~2023 and ~~2021:~~2022:


Dollars in thousands	Dollars in thousands	Balance in AOCL Beginning of Quarter		Amount of Gain (Loss) Recognized in AOCL		Amount of Gain (Loss) Reclassified from AOCL into Earnings		Balance in AOCL End of Quarter		Location in Statements of Operations	Dollars in thousands	Balance in AOCL Beginning of Quarter		Amount of Gain (Loss) Recognized in AOCL		Amount of Gain (Loss) Reclassified from AOCL into Earnings		Balance in AOCL End of Quarter		Location in Statements of Operations
Three Months Ended March 31, 2022
Three Months Ended March 31, 2023											Three Months Ended March 31, 2023
Cash Flow Hedges	Cash Flow Hedges										Cash Flow Hedges
Interest rate swap	Interest rate swap	$	(43,956)	$	41,675	$	(5,213)	$	2,932	Interest expense	Interest rate swap	$	56,712	$	(10,534)	$	3,500	$	42,678	Interest expense
Cross-currency swap	Cross-currency swap	(9,688)		316		8,331		(17,703)		Other income, net	Cross-currency swap	(20,271)		2,191		(3,504)		(14,576)		Other income, net
Foreign Currency Forward Contract											Foreign Currency Forward Contract	—		(69)		—		(69)		Cost of Sales
Net Investment Hedges	Net Investment Hedges										Net Investment Hedges
Cross-currency swap	Cross-currency swap	(2,321)		1,309		1,320		(2,332)		Interest income	Cross-currency swap	(6,914)		950		2,096		(8,060)		Interest income
		$	(55,965)	$	43,300	$	4,438	$	(17,103)			$	29,527	$	(7,462)	$	2,092	$	19,973
Three Months Ended March 31, 2021
Three Months Ended March 31, 2022											Three Months Ended March 31, 2022
Cash Flow Hedges	Cash Flow Hedges										Cash Flow Hedges
Interest rate swap	Interest rate swap	$	(93,769)	$	34,518	$	(5,705)	$	(53,546)	Interest expense	Interest rate swap	$	(43,956)	$	41,675	$	(5,213)	$	2,932	Interest expense
Cross-currency swap	Cross-currency swap	(1,073)		40,194		44,150		(5,029)		Other income, net	Cross-currency swap	(9,688)		316		8,331		(17,703)		Other income, net
Net Investment Hedges	Net Investment Hedges										Net Investment Hedges
Cross-currency swap	Cross-currency swap	(12,291)		13,573		1,711		(429)		Interest income	Cross-currency swap	(2,312)		1,309		1,320		(2,323)		Interest income
		$	(107,133)	$	88,285	$	40,156	$	(59,004)			$	(55,956)	$	43,300	$	4,438	$	(17,094)

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, bringing the notional amount down to $6.4 million.

The following table summarizes the gains (losses) of derivative instruments not designated as hedges on the condensed consolidated statements of income, which was included in other income:


Dollars in thousands	Three Months Ended March 31,
		2023		2022

Foreign currency swaps		55		360
Total		$	55	$	360

8. STOCK-BASED COMPENSATION

As of March 31, ~~2022,~~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.

Stock options issued under the 2003 Plan become exercisable over specified periods, generally within four years from the date of grant for officers and employees, within one year from date of grant for directors which generally expire eight years from the grant date for employees, and from six to ten years for directors and certain executive officers, except in certain instances that result in accelerated vesting due to death, disability, retirement age or change in-control provisions within their grant agreements. The Company values stock option grants using the binomial distribution model. Restricted stock issued under the Plans vests over specified periods, generally three years after the date of grant. The vesting of performance stock issued under the Plans is subject to service and performance conditions.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

Stock Options

As of March 31, ~~2022,~~2023, there were approximately ~~$5.8~~$5.6 million of total unrecognized compensation costs related to unvested stock options. These costs are expected to be recognized over a weighted-average period of approximately three years. There were ~~145,565~~151,293 stock options granted during the three months ended March 31, ~~2022.~~2023. For the three months ended March 31, ~~2022,~~2023, the weighted average grant date fair value for stock options granted was ~~$23.15~~$21.58 per option.

Awards of Restricted Stock and Performance Stock

Performance stock and restricted stock awards generally have requisite service periods of three years, except in certain instances that result in accelerated vesting due to death, disability, retirement age provision or change in-control provisions in their grant agreements. Performance stock units are subject to graded vesting conditions based on revenue goals of the Company. The Company expenses the fair value of restricted stock awards on a straight-line basis over the requisite service period. As of March 31, ~~2022,~~2023, there was approximately ~~$44.6~~$48.6 million of total unrecognized compensation costs related to these unvested awards. The Company expects to recognize these costs over a weighted-average period of approximately two years. The Company granted ~~320,385~~346,745 restricted stock awards and ~~130,753~~161,218 performance stock awards during the three months ended March 31, ~~2022.~~2023. For the three months ended March 31, ~~2022,~~2023, the weighted average grant date fair value for restricted stock awards and performance stock units granted was ~~$65.27~~$53.37 and ~~$65.11~~$52.87 per award, respectively.

~~INTEGRA LIFESCIENCES HOLDINGS CORPORATION~~

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

The Company also maintains an Employee Stock Purchase Plan (the “ESPP”), which provides eligible employees with the opportunity to acquire shares of common stock at periodic intervals by means of accumulated payroll deductions. The ESPP is a non-compensatory plan based on its terms.

9. RETIREMENT PLANS

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

Net periodic benefit costs for the Company’s defined benefit pension plans for the three months ended March 31, 2023 were $0.3 million. The components of the net periodic benefit costs other than the service cost component of $0.5 million for the three months ended March 31, 2023 are included in other income, net in the consolidated statements of operations.

Net periodic benefit costs for the Company’s defined benefit pension plans for the three months ended March 31, 2022 were $0.3 million. The components of the net periodic benefit costs other than the service cost component of $0.7 million for the three months ended March 31, 2022 are included in other income, net in the consolidated statements of operations.

Net periodic benefit costs for the Company’s defined benefit pension plans for the three months ended March 31, 2021 were $0.6 million. The components of the net periodic benefit costs other than the service cost component of $0.8 million for the three months ended March 31, 2021 are included in other income, net in the consolidated statements of operations.

The estimated fair values of plan assets were ~~$34.9~~$36.4 million and ~~$39.9~~$38.1 million as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. The net plan assets of the pension plans are invested in common trusts as of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022. Common trusts are classified as Level 2 in the fair value hierarchy. The fair value of common trusts is valued at the 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 an appropriate risk profile.

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.

~~During the first quarter of 2020, employees participating in the Company's deferred compensation plan began to defer their compensation.~~ This deferred compensation is invested in funds offered under this plan and is valued based on Level 1 measurements in the fair value hierarchy. Assets of the Company's deferred compensation plan are included in other current assets and recorded at fair value based on their quoted market prices. The fair value of these assets ~~at March 31, 2022~~ were ~~$4.7~~$5.0 million and ~~$3.8~~$4.7 million as of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022, respectively. Offsetting liabilities relating to the deferred compensation plan are included in Other liabilities.

10. 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 March 31, ~~2022.~~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.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

Most facility leases include 1one 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 Right of Use ("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 three months ended March 31, ~~2022~~2023 and March 31, ~~2021~~2022 was ~~$4.9~~$6.0 million and ~~$5.3~~$4.9 million respectively, which includes $0.1 million, in related party operating lease expense.

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


Dollars in thousands, except lease term and discount rate	March 31, 2023			December 31, 2022
ROU assets	$	146,514		$	148,284

Current lease liabilities	14,792			14,624
Non-current lease liabilities	156,910			157,420
Total lease liabilities	$	171,702		$	172,044

Weighted average remaining lease term (in years):
Leased facilities	17.1 years			16.9 years
Leased vehicles	2.0 years			2.0 years

Weighted average discount rate:
Leased facilities	5.4		%	5.4		%
Leased vehicles	2.8		%	2.7		%

Supplemental cash flow information related to leases for the three months ended March 31, 2023 and 2022 were as follows:


Dollars in thousands	March 31, 2023		March 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	4,319	$	4,696

ROU assets obtained in exchange for lease liabilities:
Operating leases	$	1,721	$	507

Future minimum lease payments under operating leases at March 31, 2023 were as follows:


Dollars in thousands	Related Parties		Third Parties		Total
Remainder of 2023	$	222	$	15,870	$	16,092
2024	296		21,086		21,382
2025	296		19,753		20,049
2026	296		17,148		17,444
2027	296		16,205		16,501
2028	296		13,951		14,247
Thereafter	246		151,206		151,452
Total minimum lease payments	$	1,948	$	255,219	$	257,167
Less: Imputed interest					85,465
Total lease liabilities					171,702
Less: Current lease liabilities					14,792
Long-term lease liabilities					156,910

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

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

Dollars in thousands, except lease term and discount rate March 31, 2022 December 31, 2021
ROU assets $ 81,644 $ 84,543
Current lease liabilities 14,300 14,775
Non-current lease liabilities 87,806 90,329
Total lease liabilities $ 102,106 $ 105,104
Weighted average remaining lease term (in years):
Leased facilities 10.8 years 10.4 years
Leased vehicles 2.1 years 2.1 years
Weighted average discount rate:
Leased facilities 5.2 % 5.1 %
Leased vehicles 2.7 % 2.6 %

~~Supplemental cash flow information related to leases for the three months ended March 31, 2022 and 2021 were as follows:~~

Dollars in thousands March 31, 2022 March 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 4,696 $ 3,761
ROU assets obtained in exchange for lease liabilities:
Operating leases $ 507 $ 9,662

~~Future minimum lease payments under operating leases at March 31, 2022 were as follows:~~

Dollars in thousands Related Parties Third Parties Total
Remainder of 2022 $ 222 $ 13,012 $ 13,234
2023 296 15,254 15,550
2024 296 13,180 13,476
2025 296 11,422 11,718
2026 296 9,825 10,121
2027 296 9,239 9,535
Thereafter 246 59,223 59,469
Total minimum lease payments $ 1,948 $ 131,155 $ 133,103
Less: Imputed interest 30,997
Total lease liabilities 102,106
Less: Current lease liabilities 14,300
Long-term lease liabilities 87,806

There were no future minimum lease payments under finance leases at March 31, ~~2022.~~2023.

Related Party Leases

The Company leases its manufacturing facility in Plainsboro, New Jersey, from Plainsboro Associates, a New Jersey general ~~partnership that~~partnership. Ocirne, Inc., a subsidiary of Provco Industries, owns a 50% % interest in Plainsboro Associates. Provco Industries is ~~50% owned by~~the corporate general partner of Tru St. Partnership LLP, a ~~corporation whose stockholders are trusts, whose beneficiaries include family members~~principal stockholder of the ~~Company’s principal stockholder and former director.~~Company. The term of the current lease agreement is through October 31, 2029 at an annual rate of approximately $0.3 million per year. 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.

~~INTEGRA LIFESCIENCES HOLDINGS CORPORATION~~

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

11. TREASURY STOCK

As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, there were ~~6.8~~8.9 million and ~~4.9~~6.8 million shares of treasury stock outstanding with a cost of ~~$362.9~~$481.7 million and ~~$234.4~~$362.9 million, at a weighted average cost per share of ~~$53.18~~$54.01 and ~~$47.86,~~$53.18, respectively.

On ~~December 7, 2020, the Board of Directors authorized~~January 26, 2023, the Company toentered into a $150 million accelerated share repurchase ~~up to $225.0~~("2023 ASR") and received 2.1 million shares of the ~~Company’s~~Company common ~~stock. The program allows~~stock at inception of the ~~Company to repurchase its~~2023 ASR, which represented approximately 80% of the expected total shares ~~opportunistically from time to time. The repurchase authorization expires in December 2022. The price and timing of any future purchases~~ under the 2023 ASR. The remaining repurchase transactions are expected to be completed in the second quarter of 2023.

On August 16, 2022, the Inflation Reduction Act of 2022 (the “Act”) was signed into law. The Act implements a new excise tax of 1% on the net share ~~repurchase program will depend on factors such as levels of cash generation from operations,~~repurchases made by the ~~volume of stock option exercises by employees, cash requirements~~company effective for ~~acquisitions, dividends, economic and market conditions and stock price, and such~~share repurchases ~~may be discontinued at any time.~~performed January 1, 2023, or after. The company accrued $1.2 million regarding the excise tax in Q-1 related to the ASR mentioned above.

On January 12, 2022, the Company entered into a ~~$125.0~~$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. On March 24, 2022, the early exercise provision under the 2022 ASR was exercised by 2022 ASR counterparty. Upon settlement ~~of the 2022 ASR~~ 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.

On April 26 2022, the Board of Directors authorized the Company to repurchase up to $225.0 million of the Company’s common stock. The program allows the Company to repurchase its shares opportunistically from time to time. The repurchase authorization expires in December 2024. This stock repurchase authorization replaces the previous $225 million stock repurchase authorization, of which $100 million remained authorized at the time of its replacement, and which was otherwise set to expire on December 31, 2022. Purchases may be affected through one or more open market transactions, privately negotiated transactions, transactions structured through investment banking institutions, or a combination of the foregoing.

12. INCOME TAXES

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

Three Months Ended March 31,
2022 2021
Reported tax rate 16.3 % 32.5 %


	Three Months Ended March 31,
	2023		2022
Reported tax rate	18.6	%	16.3	%

The Company’s effective income tax rates for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 were ~~16.3%~~18.6% and ~~32.5%~~16.3%, respectively. For the three months ended March 31, ~~2022, the primary drivers of the tax rate are a favorable jurisdictional mix of income, as well as a $0.8M benefit related to excess tax benefits from stock compensation. For the~~ ~~three months ended March 31, 2021~~,2023, the primary driver of the higher tax rate ~~is the~~relates to a reduction of excess tax ~~impact of the gain on the sale of the Extremity Orthopedics business, which closed during the first quarter of 2021.~~benefits from stock compensation.

Changes to income tax laws and regulations, in any of the tax jurisdictions in which the Company operates, could impact the effective tax rate. Various governments, both U.S. and non-U.S., are increasingly focused on tax reform and revenue-raising legislation. ~~The current U.S. administration has proposed tax reform which, if enacted, may increase the Company’s U.S. federal income tax liability.~~ Further, legislation in foreign jurisdictions may be enacted, in response to the base erosion and profit-sharing project begun by the Organization for Economic Cooperation and Development ("OECD"). The OECD recently finalized major reform of the international tax system with respect to a global minimum tax rate. Such changes in U.S. and non-U.S. jurisdictions could have an adverse effect on the Company’s effective tax rate.

As of March 31, ~~2022,~~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 there is no material cost to bring the earnings back to the United States. Reinvestment considerations would include future acquisitions, transactions, and capital expenditure plans. ~~As such, the Company has determined the tax impact of repatriating these foreign earnings would not be material as of March 31, 2022.~~

2625

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

13. NET INCOME PER SHARE

Basic and diluted net income per share was as follows:


		Three Months Ended March 31,				Three Months Ended March 31,
Dollars in thousands, except per share amounts	Dollars in thousands, except per share amounts	2022		2021			Dollars in thousands, except per share amounts	2023		2022
Basic net income per share:	Basic net income per share:						Basic net income per share:
Net income	Net income	$	32,901	$	45,394		Net income	$	24,226	$	32,901
Weighted average common shares outstanding	Weighted average common shares outstanding	83,632		84,500			Weighted average common shares outstanding	81,871		83,632

Basic net income per common share	Basic net income per common share	$	0.39	$	0.54		Basic net income per common share	$	0.30	$	0.39

Diluted net income per share:	Diluted net income per share:						Diluted net income per share:
Net income	Net income	$	32,901	$	45,394		Net income	$	24,226	$	32,901

Weighted average common shares outstanding — Basic	Weighted average common shares outstanding — Basic	83,632		84,500			Weighted average common shares outstanding — Basic	81,871		83,632
Effect of dilutive securities:	Effect of dilutive securities:						Effect of dilutive securities:
Stock options and restricted stock	Stock options and restricted stock	644		758			Stock options and restricted stock	452		644
Weighted average common shares for diluted earnings per share	Weighted average common shares for diluted earnings per share	84,276		85,258			Weighted average common shares for diluted earnings per share	82,323		84,276

Diluted net income per common share	Diluted net income per common share	$	0.39	$	0.53		Diluted net income per common share	$	0.29	$	0.39

Common stock of approximately ~~0.2~~0.3 million and ~~0.5~~0.2 million shares at March 31, ~~2022,~~2023, and ~~2021,~~2022, respectively that are issuable through exercise of dilutive securities were not included in the computation of diluted net income per share because their effect would have been anti-dilutive.

Performance Shares and Restricted Units that entitle the holders to approximately 0.5 million shares of common stock are included in the basic and diluted weighted average shares outstanding calculation from their date of issuance because no further consideration is due related to the issuance of the underlying common shares.

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

14. ACCUMULATED OTHER COMPREHENSIVE ~~LOSS~~INCOME (LOSS)

Comprehensive income for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 was as follows:


		Three Months Ended March 31,				Three Months Ended March 31,
Dollars in thousands	Dollars in thousands	2022		2021			Dollars in thousands	2023		2022
Net income	Net income	$	32,901	$	45,394		Net income	$	24,226	$	32,901
Foreign currency translation adjustment	Foreign currency translation adjustment	(5,683)		(6,802)			Foreign currency translation adjustment	4,076		(5,683)
Change in unrealized loss on derivatives, net of tax		29,822		36,915
Change in unrealized loss/(gain) on derivatives, net of tax							Change in unrealized loss/(gain) on derivatives, net of tax	(7,377)		29,822
Pension liability adjustment, net of tax	Pension liability adjustment, net of tax	(9)		319			Pension liability adjustment, net of tax	103		(9)
Comprehensive income, net	Comprehensive income, net	$	57,031	$	75,826		Comprehensive income, net	$	21,028	$	57,031

Changes in accumulated other comprehensive income by component between December 31, 2022 and March 31, 2023 are presented in the table below, net of tax:


Dollars in thousands	Gains and Losses on Derivatives		Defined Benefit Pension Items		Foreign Currency Items		Total
Balance at January 1, 2023	$	22,817	$	9,322	$	(21,874)	$	10,265
Other comprehensive gain (loss)	(5,754)		103		4,076		(1,575)
Less: Amounts reclassified from accumulated other comprehensive income, net	1,623		—		—		1,623
Net current-period other comprehensive gain (loss)	(7,377)		103		4,076		(3,198)
Balance at March 31, 2023	$	15,440	$	9,425	$	(17,798)	$	7,067

For the three months ended March 31, 2023, the Company reclassified a gain of $4.3 million and a loss of $2.7 million from accumulated other comprehensive income to other income, net and interest income, respectively.

2726

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

~~Changes in accumulated other comprehensive loss by component between December 31, 2021 and March 31, 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 January 1, 2022 $ (42,981) $ 1,893 $ (4,067) $ (45,155)
Other comprehensive gain (loss) 33,234 (9) (5,683) 27,542
Less: Amounts reclassified from accumulated other comprehensive income, net 3,412 — — 3,412
Net current-period other comprehensive gain (loss) 29,822 (9) (5,683) 24,130
Balance at March 31, 2022 $ (13,159) $ 1,884 $ (9,750) $ (21,025)

For the three months ended March 31, 2022, the Company reclassified a gain of $6.4 million and a loss of $3.0 million from accumulated other comprehensive loss to other income, net and interest income, respectively.

15. SEGMENT AND GEOGRAPHIC INFORMATION

The Company internally manages 2two global reportable segments and reports the results of its businesses to its chief operating decision maker. The 2two 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 solutions for use in minimally invasive neurosurgery and in the management of intracerebral hemorrhages,~~ 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~~TT segment includes ~~a large, complementary portfolio of~~such offerings as skin and wound repair, plastics & surgical reconstruction products, ~~to address plastic and surgical reconstructive procedures such as complex and traumatic wounds, hernia and abdominal wall repair, breast reconstruction,~~bone grafts, and nerve ~~repair. The Tissue Technologies segment has four unique technology platforms, including bovine engineered collagen matrix, bovine dermal matrix, amniotic technology~~ and ~~porcine bladder matrix technology, to address regenerative soft tissue reconstruction procedures.~~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.

The operating results of the various reportable segments as presented are not comparable to one another because (i) certain operating segments are more dependent than others on corporate functions for unallocated general and administrative and/or operational manufacturing functions, and (ii) the Company does not allocate certain manufacturing costs and general and administrative costs to the operating segment results. Net sales and profit by each reportable segment for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 are as follows:

Three Months Ended March 31,
Dollars in thousands 2022 2021
Segment Net Sales
Codman Specialty Surgical $ 247,308 $ 241,241
Tissue Technologies
129,330 118,830
Total revenues $ 376,638 $ 360,071
Segment Profit
Codman Specialty Surgical $ 110,160 $ 106,778
Tissue Technologies
53,893 50,011
Segment profit 164,053 156,789
Amortization (3,894) (4,527)
Corporate and other (113,995) (121,548)
Operating income $ 46,164 $ 30,714

~~INTEGRA LIFESCIENCES HOLDINGS CORPORATION~~

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


	Three Months Ended March 31,
Dollars in thousands	2023		2022
Segment Net Sales
Codman Specialty Surgical	$	248,136	$	247,308
Tissue Technologies	132,710		129,330
Total revenues	$	380,846	$	376,638
Segment Profit
Codman Specialty Surgical	$	110,933	$	110,160
Tissue Technologies	52,281		53,893
Segment profit	163,214		164,053
Amortization	(3,108)		(3,894)
Corporate and other	(123,724)		(113,995)
Operating income	$	36,382	$	46,164

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 revenues to geographic areas based on the location of the customer. Total revenue by major geographic area consisted of the following:


		Three Months Ended March 31,				Three Months Ended March 31,
Dollars in thousands	Dollars in thousands	2022		2021			Dollars in thousands	2023		2022
United States	United States	$	263,351	$	247,793		United States	$	271,002	$	263,351
Europe	Europe	43,744		45,819			Europe	41,064		43,744
Asia Pacific	Asia Pacific	47,717		47,295			Asia Pacific	50,473		47,717
Rest of World	Rest of World	21,826		19,164			Rest of World	18,307		21,826
Total Revenues	Total Revenues	$	376,638	$	360,071		Total Revenues	$	380,846	$	376,638

16. 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.

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

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.

Contingent Consideration

The Company determined the fair value of contingent consideration during the three month period ended March 31, ~~2022~~2023 and March 31, ~~2021~~2022 to reflect the change in estimate, additions, payments, transfers and the time value of money during the period.

~~INTEGRA LIFESCIENCES HOLDINGS CORPORATION~~

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

A reconciliation of the opening balances to the closing balances of these Level 3 measurements for the three months ended March 31, ~~2022~~2023 and March 31, ~~2021~~2022 is as follows (in thousands):

Three Months Ended March 31, 2022 Contingent Consideration Liability Related to Acquisition of:
Arkis Location in Financial Statements Derma Sciences ACell Inc.
(See Note 2) Location in Financial Statements
Short-term Long-term Long-term Short-term Long-term
Balance as of January 1, 2022 $ 3,691 $ 11,408 $ 230 $ — $ 21,800
Transfers 59 (59) — 4,885 (4,885)
Change in fair value of contingent consideration liabilities — $ (1065) Research and development — — 300 Selling, general and administrative
Balance as of March 31, 2022 $ 3,750 $ 10,284 $ 230 $ 4,885 $ 17,215


Three Months Ended March 31, 2023	Contingent Consideration Liability Related to Acquisition of:
	Arkis				Location in Financial Statements	Derma Sciences		ACell		Surgical Innovations Associates, Inc. (FN 2)				Location in Financial Statements
	Short-term		Long-term			Long-term		Long-term		Short-term		Long-term
Balance as of January 1, 2023	$	2,845	$	10,050		$	230	$	3,700	$	—	$	57,607
Transfers	—		—			—		—		12,500		(12,500)
Change in fair value of contingent consideration liabilities	1,543		1,756		Research and development	—		(2,200)		—		3,600		Selling, general and administrative
Balance as of March 31, 2023	4,388		11,806			230		1,500		12,500		48,707

Three Months Ended March 31, 2021 Contingent Consideration Liability Related to Acquisition of:
Arkis Derma Sciences ACell Inc.
(See Note 2) Location in Financial Statements
Short-term Long-term Long-term Long-term
Balance as of January 1, 2021 $ 3,415 $ 11,746 $ 230 $ —
Additions from acquisition of ACell — — — 23,900
Change in fair value of contingent consideration liabilities 17 265 — — Research and development
Balance as of March 31, 2021 $ 3,432 $ 12,011 $ 230 $ 23,900


Three Months Ended March 31, 2022	Contingent Consideration Liability Related to Acquisition of:
	Arkis				Location in Financial Statements	Derma Sciences		ACell Inc.				Location in Financial Statements
	Short-term		Long-term			Long-term		Short-term		Long-term
Balance as of January 1, 2022	$	3,691	$	11,408		$	230	$	—	$	21,800

Transfers	59		(59)			—		4,885		(4,885)
Change in fair value of contingent consideration liabilities	—		(1,065)		Research and development	—		—		300		Selling, general and administrative
Balance as of March 31, 2022	$	3,750	$	10,284		$	230	$	4,885	$	17,215

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

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

Arkis BioSciences Inc.

On July 29, 2019, the Company acquired Arkis BioSciences Inc. ("Arkis") for an acquisition purchase price of $30.6 million (the "Arkis Acquisition") plus contingent consideration of up to $25.5 million, that may be payable based on the successful completion of certain development and commercial milestones. Arkis was a privately-held company that marketed the CerebroFlo® ~~external ventricular drainage catheter with Endexo~~® ~~technology, a permanent additive designed to reduce the potential for catheter obstruction due to thrombus formation.~~

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. The estimated fair value as of March 31, ~~2022~~2023 and March 31, ~~2021~~2022 was ~~$14.0~~$16.2 million and ~~$15.4~~$14.0 million, respectively. The Company recorded ~~$10.3~~$11.8 million and ~~$12.0~~$10.3 million in other liabilities at March 31, ~~2022~~2023 and March 31, ~~2021,~~2022, respectively, and ~~$3.8~~$4.4 million and ~~$3.4~~$3.8 million in accrued expenses and other current liabilities at March 31, ~~2022~~2023 and March 31, ~~2021,~~2022, respectively, in the consolidated balance sheet of the Company.

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. ~~NaN~~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. The estimated fair value as of March 31, ~~2022~~2023 and March 31, ~~2021~~2022 was $0.2 million.

ACell Inc.

As part of the ACell Acquisition, the Company is required to make payments to the former shareholders of ACell up to $100 million based on the achievement by the Company of certain revenue-based performance milestones in 2023 and 2025. 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. The Company estimated the fair value of the contingent consideration to be $23.9 million at the acquisition date. The estimated fair value as of March 31, 2023 was $1.5 million. The Company recorded $1.5 million and $17.2 million in other liabilities at March 31, 2023 and March 31, 2022, respectively, and $4.9 million in accrued expenses and other current liabilities at March 31, 2022 in the consolidated balance sheets of the Company. The change in the fair value of the contingent obligation was primarily as a result of changes in the timing and amount of revenue estimates.

Table of Contents"

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes thereto appearing elsewhere in this report and our consolidated financial statements for the year ended December 31, ~~2021~~2022 included in our Annual Report on Form 10-K.

We have made statements in this report ~~which~~that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q (this “Quarterly Report”), including statements regarding our future results of operations and financial position, business strategy and plans, objectives of management for future operations and current expectations or forecasts of future results, are forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and assumptions about the Company and other ~~matters.~~ matters that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Our forward-looking statements may include statements related to our growth and growth strategies, developments in the markets for our products and services, financial results, development launches and effectiveness, research and development strategy, regulatory approvals, competitive strengths, the potential or anticipated direct or indirect impact of the Coronavirus pandemic on our business, results of operations, and/or financial condition, restructuring and cost-saving initiatives, intellectual property rights, litigation and tax matters, governmental proceedings and investigations, mergers and acquisitions, divestitures, market acceptance of our products and services, accounting estimates, financing activities, ongoing contractual obligations, working capital adequacy, value of our investments, our effective tax rate, our expected returns to shareholders, and sales efforts.

In some cases, these forward-looking statements may be identified by forward-looking words such as “believe,” “may,” “might,” “could,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “seek,” “plan,” “expect,” “should,” “would” and similar words and expressions in this report. Forward-looking statements in this Quarterly Report include, but are not limited to, statements ~~related~~regarding our ability to drive long-term shareholder value, development and future launches of products and continued or future acceptance of products and services in our segments; our ability to navigate and mitigate any on-going or future impact associated with economic disruptions, including supply chain constraints and inflation; expected timing for completion of research studies relating to our products; market positioning and performance of our products; divestitures and the ~~Company's~~potential benefits thereof; the costs and benefits of integrating previous acquisitions; anticipated timing for Food and Drug Administration (“FDA”) in the U.S., as well as for non-U.S. regulatory approval of new products; increased presence in new markets, including markets outside the U.S.; changes in the market and our market share; acquisitions and investment initiatives, including the timing of regulatory approvals as well as integration of acquired companies into our operations; the resolution of tax matters; the effectiveness of our development activities in reducing patient care costs and hospital stay lengths; our approach towards cost containment; our expectations regarding healthcare costs; general economic conditions; and the potential ~~impacts~~impact of our compliance with governmental regulations and accounting guidance.

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, results of operations, financial condition, and/or cash flows. These forward-looking statements speak only as of the ~~COVID-19 pandemic on our business, financial condition,~~date of this Quarterly Report and ~~results~~are subject to a number of ~~operations. These statements should, therefore, be considered~~risks, uncertainties and assumptions described in ~~light of various important factors, including, but not limited to,~~ the ~~following: risk of the COVID-19 pandemic could lead to further material delays~~“Risk Factors” section and cancellations of, or reduced demand for, procedures; delayed capital spending by the Company's customers; disruption and/or higher costs to the Company’s supply chain; staffing shortages in hospitals; labor impactselsewhere in our ~~facilities; delays in gathering clinical evidence; diversion~~Annual Report on Form 10-K for the year ended December 31, 2022. As forward-looking statements are inherently subject to risks and uncertainties, some of ~~management and other resources to respond to the COVID-19 outbreak; the impact of global and regional economic and credit market conditions~~which cannot be predicted or quantified, you should not rely on healthcare spending; the risk that the COVID-19 virus disrupts local economies and causes economies in our key markets to enter prolonged recessions. The Company's actual results could differ materially from those anticipated in these forward-looking statements as predictions of future events. One must carefully consider forward-looking statements and understand that such forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, and involve a ~~result~~variety of ~~many factors,~~risks and uncertainties, known and unknown, including, ~~but not limited to~~among others, those ~~set forth under~~discussed in the ~~heading “Risk~~sections entitled “Government Regulation” within “Item 1. Business” and “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2021, under the heading "Risk Factors" in this report, and in other filings with the SEC.~~2022. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by applicable law.

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

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GENERAL

Integra, headquartered in Princeton, New Jersey, is a world leader in ~~medical technology.~~neurosurgical solutions and regenerative tissue technologies. The Company was founded in 1989 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~~We have expanded ~~its~~our 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. Integra LifeSciences Holdings Corporation common stock trades on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “IART.”

~~Integra~~We manufacture and sell medical technologies and products in two reportable business segments: Codman Specialty Surgical ("CSS") and Tissue Technologies ("TT"). The CSS segment, which represents approximately two-thirds of our total revenue, consists of market-leading technologies and instrumentation used for a wide range of specialties, such as neurosurgery, neurocritical care and otolaryngology. We are the world leader in neurosurgery and one of the top three providers in instruments used in precision, specialty, and general surgical procedures. Our TT segment generates about one-third of our overall revenue and focuses on three main areas: complex wound surgery, surgical reconstruction, and peripheral nerve repair.

We have key manufacturing and research facilities located in California, Indiana, Maryland, Massachusetts, New Jersey, Ohio, Puerto Rico, Tennessee, Utah, ~~Canada, China,~~ France, Germany, Ireland and Switzerland. We source most of our handheld surgical instruments and ~~dural~~ sealant products through specialized third-party vendors.

Integra is committed to ~~delivering high quality~~restoring patients’ lives through transformative technologies and products ~~that positively~~in the segments in which we compete. Our mission is to innovate treatment pathways to advance patient outcomes and set new standards of care. We refocused our strategies around five pillars, specifically three core growth drivers -- innovating for outcomes, growing internationally, broadening our impact on care pathways – enabled by two key levers: driving operational and customer excellence and cultivating a high-performance culture. These five pillars drive how and where we aim to accelerate in 2023 and in the lives of millions of patients and their families. We focus on four key pillars of our strategy: 1) enabling an execution-focused culture, 2) optimizing relevant scale, 3) advancing innovation and agility, and 4) leading in customer experience. We believe that by sharpening our focus on these areas through improved planning and communication, optimization of our infrastructure, and strategically aligned acquisitions, we can build scale, increase competitiveness, and achieve our long-term goals.

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~~To this end, the executive leadership team has established the following key priorities aligned to the following areas of focus:~~coming years.

~~Strategic Acquisitions.~~

Innovating for Outcomes.An important part of ~~the Company's~~Integra’s growth strategy is ~~pursuing strategic transactions~~introducing new products to strengthen and ~~licensing agreements that increase relevant scale in~~expand our portfolio. Additionally, we seek clinical evidence to support regulatory approval and strong reimbursement of our product portfolio around the ~~clinical areas in~~world, including new indications for existing technologies. On December 6, 2022, we completed the acquisition of Surgical Innovation Associates, Inc. (“SIA”), which Integra competes. During 2021, the Company acquired ACell Inc. ("ACell"), an innovative regenerative medicine company specializing in the manufacturing of porcine urinary bladder extracellular matrices.develops, markets and sells DuraSorb, a resorbable synthetic matrix for plastic and reconstructive surgery. This acquisition ~~not only expanded~~advances our global strategy in breast reconstruction, expanding plans to access the ~~Company’s product offering of regenerative technologies, but it~~U.S. market where SIA is also expected to support the Company’s long-term growth and profitability strategy as this product line has a financial profile similar to Integra’s other regenerative tissue products. All critical components of ACell have been integrated into the Company’s TT segment. See Note 2, ~~Acquisitions and Divestitures, to the Notes to Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q)~~pursuing pre-market approval for ~~additional details. In 2022, we~~use in implant-based breast reconstruction ("IBBR"). We also continued to advance the development of pioneering neurosurgical technologies ~~from~~with the expansion of our ~~2019 acquisitions, Arkis Biosciences, Inc.~~product offerings. In early 2023, the CUSA® Clarity Bone Tip was launched in U.S., which is used when controlled fragmentation, emulsification and ~~Rebound Therapeutics Corporation~~aspiration of bone is necessary. This follows the CUSA® Clarity extended laparoscopic tip, launched in the U.S. in late 2022 to enhance the benefits of ultrasonic ablation to minimally invasive laparoscopic liver surgery.

~~Portfolio Optimization and New Product Introductions.~~ We are investing in innovative product development to drive a multi-generational pipeline for our key product franchises. Our product development efforts span across our key global franchises focused on potential for significant returns on investment. In addition to new product development, we are funding studies to gather clinical evidence to support launches, ensure market access and improve reimbursement for existing products. In addition to acquisitions and organic reinvestment, we continually look to optimize our portfolio towards higher growth and higher margin businesses. As such, we may opportunistically divest businesses or discontinue products where we see limited runway for future value creation in line with our aspirations due in part to changes in the market, business fundamentals or the regulatory environment.

~~In January 2021,~~Growing International. Over the years, we ~~completed the sale of~~have been significantly expanding our Extremity Orthopedics business to Smith & Nephew USD Limited ("Smith & Nephew"), a subsidiary of Smith & Nephew plc, for approximately $240 million in cash. This transaction enables us to increase ourglobal footprint through investments in our ~~core neurosurgery~~commercial organization, expansion and ~~tissue technologies businesses~~development of international markets and ~~fund pipeline opportunities to expand our addressable markets to strengthen our existing leadership positions~~new product introductions. Several new products were introduced in ~~these segments~~2023, including MicroMatrix® and ~~drive future growth. See Note 2,~~ ~~Acquisitions~~Certas Plus® Programmable Valve which were launched in Europe, and ~~Divestitures, to the Notes to Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for details.~~CUSA Clarity Laparoscopic ("Lap") tip which was launched in Australia and New Zealand.

~~Commercial Channel Investments.~~

Broadening Impact on Care Pathways. ~~Investing~~Integra seeks ways to develop products and technologies that impact the lives of patients, starting with the journey that a patient takes from diagnosis and treatment planning to surgery and postoperative care. Integra is well-established in our sales channels is a core part of our strategy to create specialization and greater focus on reaching new and existing customers and addressing their needs. To support our commercial efforts in Tissue Technologies, we utilize a two-tier specialist model to increase our presence in focused segments by creating a virtual selling organization to help serve the evolving needs of our customers. In addition, we continue to build upon our leadership brands across our product franchises in both CSS and TT to engage customers through enterprise-wide contracts with leading hospitals, integrated delivery networks and global purchasing organizationsacute care in the ~~United States. Internationally, we have increased our commercial resources significantly~~hospital setting and plans to leverage that strong position to grow in ~~key emerging markets~~this segment and ~~are~~shape treatment pathways into preoperative care and additional sites of care.

Driving Operations and Customer Excellence. Integra has been making investments to ~~support~~build more responsive and scalable processes, enhance the reliability of our ~~sales organization~~supply chain, and ~~maximize our commercial opportunities. Domestically,~~drive productivity initiatives to further supply and lower costs. Additionally, we have also increased our TT sales force in the United States to support the expanded regenerative tissue product portfolio that included ACell products. These investments in our international and dometic sales channel position us well for expansion and long-term growth.

~~Customer Experience.~~ ~~We aspire to be ranked as a best-in-class provider and are committed to strengthen our relationships with all customers. We~~ continue to invest in technologies, systems and processes to enhance the customer experience. In 2022, certain transactional back-office finance and customer service activities were outsourced to enhance customer quality, build scale for future growth, and capture cost efficiencies.

Cultivating a High-Performance Culture. Creating a culture focused on empowerment and agility and building a diverse and inclusive workplace are cornerstones of our people strategy. These efforts resulted in Integra being named in several best workplace lists globally in 2022. Most recently, Integra China was recognized as a Great Place to Work in Greater China.

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Additionally, we ~~launched digital tools~~have been making great strides in advancing our environmental, social and ~~programs, resources and virtual product training~~governance ("ESG") agenda to drive ~~continued customer familiarity with~~sustainability across the organization and recently published our ~~growing portfolio of medical technologies globally.~~first ESG report in late 2022.

Clinical and Product Development Activities

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

In ~~the third quarter of 2021,~~2022, we ~~launched~~made progress to several enhancements to our ~~CereLink™ ICP Monitor System~~CUSA Clarity Tissue Ablation System. The extended laparoscopic tip was launched in the U.S. ~~and Europe direct markets. CereLink provides enhanced accuracy, usability and advanced data presentation that provides clinicians~~to enhance laparoscopic liver procedures. In addition, a single-sided bone tip received 510(k) clearance. In early 2023, we had our commercial launch with uncompromised, advanced continuous ICP monitoring that until now, has not been available when treating patients with traumatic brain injuries. Through the first quarter of 2022, we have continued the global rollout of Cerelink with product launches in Australia and Canada, as well as several other indirect markets in EMEA.initial surgeries successfully completed. We ~~are focused on the development of core clinical applications in our electromechanical technologies portfolio. Also, we~~ continue to update our CUSA Clarity platform by incorporating new ultrasonic handpiece ~~surgical tips~~ and integrated electrosurgical capabilities. ~~We continue to work with several instrument partners to bring new surgical instrument platforms to the market.~~

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In 2022, we continued to advance the early-stage technology platforms we acquired in 2019. Through the acquisition of Arkis Biosciences, Inc. ("Arkis") we added a platform technology, ~~CerebroFlo~~®CerebroFlo® external ventricular drainage ("EVD"), catheter with ~~Endexo~~®Endexo® technology, a permanent additive designed to reduce the potential for catheter obstruction due to thrombus formation. The CerebroFlo EVD Catheter has demonstrated an average of 99% less thrombus accumulation onto its surface, in vitro, compared to a market leading EVD catheter. Our work to combine our bactiseal antimicrobial technology with the Endexo anti-occlusive technology obtained through our 2019 acquisition of Arkis continues to progress for both a silicone-based hydrocephalus and EVD project.

In 2019, we also acquired Rebound Therapeutics Corporation ~~which~~("Rebound Therapeutics"), a company that specialized in a single-use medical device, known as Aurora Surgiscope, which is the only tubular retractor system designed for cranial surgery with an integrated access channel, camera and lighting. In the third quarter of 2021, we conducted a limited clinical launch of the Aurora Surgiscope for use in minimally invasive neurosurgery as well as initiated a registry called MIRROR to collect data on early surgical intervention using this same technology platform for the treatment of ~~intracerebral hemorrhages ("ICH").~~ICH. In 2022, we launched the Aurora® Evacuator with Coagulation device in the U.S., designed to be used in conjunction with our Aurora Surgiscope to safely address and evacuate blood in the brain caused by hemorrhagic stroke. 

We are focused on the development of core clinical applications in our electromechanical technologies portfolio. In June 2022, we launched the Neutus® EVD system, our first EVD in China. The Neutus EVD system is manufactured in China by Shanghai Haoju Medical Technology Co., Ltd. under an exclusive distribution arrangement. The device is used in the management of CSF and is highly complementary to our Bactiseal® catheter and advanced intercranial pressure monitoring products. In 2021, we launched our CereLink ICP Monitor System in the U.S. and Europe direct markets and continued the global rollout in the first half of 2022. CereLink provides enhanced accuracy, usability and advanced data presentation that provides clinicians with uncompromised, advanced continuous ICP monitoring that until now, has not been available when treating patients with traumatic brain injuries. Refer below to the information appearing in the "FDA Matters" section for additional information on the voluntary recall of the CereLink ICP Monitor System.

Within our TT segment, ~~during 2021, we completed one of the largest diabetic foot ulcers ("DFU"), randomized controlled trials of the PriMatrix~~® Dermal Repair Scaffold for the management of DFU. This multi-center study enrolled more than 225 patients with chronic DFU's over the course of 12-week treatments and 4-week follow-up phases. The results of this study, which was published in the Journal of Wound Care, demonstrated that PriMatrix plus standard of care ("SOC") consisting of sharp debridement, infection elimination, use of dressings and offloading was significantly more likely to achieve complete wound closure compared with SOC alone, with a median number of one application of the product. ~~In the first quarter of~~ 2022, we launched NeuraGen® 3D Nerve Guide Matrix, a resorbable implant for repair of peripheral nerve discontinuities and ~~designed~~engineered to ~~optimize the~~create an optimized environment for nerve ~~regeneration to allow~~regeneration. In the third quarter of 2021, we filed the PMA application for ~~more complete functional recovery.~~

~~COVID-19 Pandemic~~

During this global crisis, the Company's focus remained on supporting patients, providing customers with life-saving products, and protecting the well-being of our employees. The rapid and evolving spread of the virus and subsequent variants have resulted in an unprecedented challenges to the global healthcare industry. In response to the pandemic, we acted swiftly by implementing protocols to ensure continuity of our manufacturing and distribution sites around the world and to providea specific indication for ~~the safety of our employees.~~

The COVID-19 pandemic may continue to have widespread and unpredictable impacts and the Company has continued to manage risks in this uncertain environment. We remain confident that the underlying markets in which the Company competes remain attractive. We also remain focused on managing the business for the long-term. The Company's adaptability and resiliencySurgiMend in the ~~face~~use of ~~this unprecedented crisis is made possible~~post-mastectomy breast reconstruction, for which we hope to obtain FDA approval in ~~part by prior investments in technology infrastructure and operations, as well as our talented and committed global workforce.~~

~~Capital~~2024. On December 6, 2022, we completed the acquisition of SIA, which develops, markets and ~~worldwide economies have also been significantly impacted by~~sells DuraSorb®, a resorbable synthetic matrix for plastic and reconstructive surgery. This acquisition advances our global strategy in breast reconstruction, expanding plans to access the ~~COVID-19 pandemic, and it~~U.S. market where SIA is possible that the pandemic could cause a local and/or global economic recession. Any such economic recession could have a material adverse effect on the Company's long-term business as hospitals curtail and reduce capital as well as overall spending. The COVID-19 pandemic and local actions, such as “shelter-in-place” orders and restrictions on travel and access to our customers or temporary closures of our facilities or the facilities of our suppliers and their contract manufacturers, disruption and/or higher costs to the Company’s supply chain, staffing shortagespursuing pre-market approval for use in hospitals and labor constraints in our facilities, could further impact our sales margins and our ability to ship our products and supply our customers. Any of these events could negatively impact the number of surgical and medical intervention procedures performed and have a material adverse effect on our business, financial condition, results of operations, or cash flows.IBBR.

FDA Matters

We manufacture and distribute products derived from human tissue for which FDA has specific regulations governing human cells, tissues and cellular and tissue-based products ("HCT/Ps"). An HCT/P is a product containing or consisting of human cells or tissue intended for transplantation into a human patient. Refer to Item 1. Business and Item 1A. Risk Factors in our 2021 10-K report for further details around these FDA regulations and their potential effect on the Company's portfolio of morselized amniotic material-based products as well as the impact on consolidated revenues.

On ~~June 22, 2015,~~August 18, 2022, we, after consultation with the FDA ~~issued an Untitled Letter (the "Untitled Letter") alleging that BioD LLC's morselized amniotic membrane tissue-based products do not meet the criteria for regulation as HCT/Ps solely under Section 361~~and other regulatory authorities outside of the ~~Public Health Services Act ("Section 361") and that,~~United States, initiated an immediate voluntary global product removal of all CereLink intracranial pressure monitors as a result ~~BioD LLc ("BioD") would need~~of customer reports about monitors whose pressure readings were out of range. We believe that the out-of-range readings are principally caused by electrical interference from the external environment and/or interference from a ~~biologics license to lawfully market those morselized products. Since~~component on the ~~issuance~~circuit board of the ~~Untitled Letter, BioD~~monitor. These out-of-range readings have occurred at a low incidence rate and at a limited number of sites; however, out of an abundance of caution, we removed all CereLink monitors from the ~~Company have made known~~field.

We are continuing our investigation into the matter in order to remedy the ~~FDA their disagreement with the FDA’s assertion that certain products are more than minimally manipulated. The FDA has not changed its position that certain~~observed issue and plans to resume shipment of the ~~BioD acquired products are not eligible~~CereLink monitors as soon as any such issues have been resolved and required regulatory reviews have been completed. Based on the outlook for ~~marketing solely under Section 361.~~returning the product to market and feedback from customers, we recorded a $1.9 million provision for product returns, as a reduction of net revenue, and a $0.8 million rework accrual in cost of goods sold in 2022. In ~~July 2020,~~ the ~~FDA issued the final guidance document related to human tissue titled, “Regulatory Considerations~~first quarter of 2023 we recorded an additional $0.8M in provision for ~~Human Cells, Tissues,~~product returns as a reduction of net revenue, and ~~Cellular and Tissue-Based Products: Minimal Manipulation and Homologous Use” (the “2020 HCT/P Final Guidance”)~~no additional rework costs. ~~The 2020 HCT/P Final Guidance document supersedes the November 2017 guidance by the same title.~~

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The HCT/P Final Guidance maintains the FDA’s position that products such as the Company’s morselized amniotic membrane tissue-based products do not meet the criteria for regulation solely as HCT/Ps. In addition, in the November 2017 guidance, the FDA articulated a risk-based approach to enforcement and, while some uses for amniotic membrane tissue-based products would have as much as thirty-six months of enforcement discretion, other high risk uses could be subject to immediate enforcement action. The 2020 HCT/P Final Guidance maintained this approach and extended the discretionary enforcement period to May 31, 2021.

Considering the risk of enforcement action, the Company discontinued the manufacturing of all morselized amniotic membrane tissue-based products prior to May 31, 2021. We no longer distribute these products. As of March 31, 2022, the Company has not received any further notice of enforcement action from the FDA regarding its morselized amniotic membrane tissue-based products.

On March 7, 2019, TEI Biosciences, Inc. ("TEI"), a one of our wholly-owned ~~subsidiary of the Company~~subsidiaries , received a Warning Letter (the “Warning Letter”), dated March 6, 2019, from the FDA. The warning letter related to quality systems issues at TEI's manufacturing facility located in Boston, Massachusetts. The letter resulted from an inspection held at that facility in October and November 2018 and did not identify any new observations that were not already provided in the Form 483 that followed the inspection. ~~The Company~~We submitted ~~its~~our initial response to the FDA Warning Letter on March 28, 2019 and ~~provides~~provide regular progress reports to the FDA as to its corrective actions and, since the conclusion of the inspection, ~~has~~we have undertaken significant efforts to remediate the observations and ~~continues~~continue to do so. On October 28, 2021 the FDA initiated an inspection of the facility and at the conclusion of the inspection issued a FDA Form 483 on November 12, 2021 (the "2021 Form 483"). ~~The Company~~We provided an initial response to the inspection observations and will continue to provide responses to the FDA. On March 1, 2023, the FDA commenced an inspection of the facility, and we anticipate that the FDA will issue an FDA Form 483 at the conclusion of this inspection. The Warning Letter and the 2021 FDA Form 483 do not restrict ~~the Company’s~~our ability to manufacture or ship products or require the recall of any products, nor do they restrict our ability to seek FDA 510(k) clearance of products. Additionally, premarket approval applications for Class III devices to which the Quality System regulation violations are reasonably related will not be approved until the violations have been corrected. The TEI Boston facility manufactures extracellular bovine matrix products. We cannot give any assurances that the FDA will be satisfied with our response to the Warning Letter or as to the expected date of the resolution of the matters included in the letter. Until the issues cited in the letter are resolved to the FDA’s satisfaction, the FDA may initiate additional regulatory action without further notice. Any adverse regulatory action, depending on its magnitude, may restrict us from effectively manufacturing, marketing and selling our products and could have a material adverse effect on our business, financial condition and results of operations.

Revenues of products manufactured in the TEI Boston facility for the three months ended March 31, ~~2022~~2023 were approximately ~~5.1%~~4.4% of consolidated revenues.

~~ACQUISITIONS & DIVESTITURES~~

~~Divestiture~~

On January 4, 2021, the Company completed its sale of its Extremity Orthopedics business to 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 Company recognized a gain of $42.9 million in connection with the sale that is presented in "Gain from the sale of business" in the consolidated statement of operations for the year ended March 31, 2021, and was finalized at $41.8 million during the year ended December 31, 2021, as a result of $1.3 million in net working payments, pursuant to the divestiture agreement. See Note 2,
~~Acquisitions and Divestitures, to the Notes to Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for details.~~

~~Acquisition~~

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

On January 20, 2021, the Company acquired ACell, Inc. for an acquisition purchase price of $306.9 million plus contingent consideration obligations of up to $100 million, that may be payable upon achieving certain revenue-based performance milestones in 2022, 2023 and 2025. ACell was a privately-held company that offered a portfolio of regenerative products for complex wound management, including developing and commercializing products based on MatriStem Urinary Bladder Matrix ("UBM"), a technology platform derived from porcine urinary bladder extracellular matrix. See Note 2, ~~Acquisitions and Divestitures, to the Notes to Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for details.~~

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OPTIMIZATION AND INTEGRATION ACTIVITIES

As a result of our ongoing acquisition strategy and significant growth in recent years, we have undertaken cost-saving initiatives to consolidate manufacturing operations, distribution facilities and transfer activities, ~~implement a common ERP system,~~ eliminate duplicative positions, realign various sales and marketing activities, and expand and upgrade production capacity for our regenerative technology products. These efforts are expected to continue and while we expect a positive impact from ongoing restructuring, integration, and manufacturing transfer and expansion activities, such results remain uncertain. In support of our continued focus on product margins during 2022, we closed a manufacturing facility located in France and transferred production to our existing Switzerland facility. In 2022, we outsourced certain transactional back-office finance and customer service activities to enhance customer quality, build scale for future growth, and capture cost efficiencies.

RESULTS OF OPERATIONS

Executive Summary

Net income for the three months ended March 31, ~~2022~~2023 was ~~$32.9~~$24.2 million, or ~~$0.39~~$0.29 per diluted share, as compared to ~~$45.4~~$32.9 million or ~~$0.53~~$0.39 per diluted share for the three months ended March 31, ~~2021.~~2022. The decrease in net income for the three months ended March 31, ~~2022,~~2023, was primarily driven by impacts from the prior year gain of $42.9 million as a result of the sale of its Extremity Orthopedics business to Smith & Nephew. Excluding this gain, net income increased for the three months period ended March 31, 2022, principally driven by earnings from higher revenues compared to the prior period, partially offset by an increase in operating expenses for key growth priorities inSIA acquisition, including additional amortization, research and development, ~~selling~~ and ~~marketing areas.~~other costs.

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Special Charges

Income before taxes includes the following special charges:

Three Months Ended March 31,
Dollars in thousands 2022 2021
Acquisition, divestiture and integration-related charges(1)
$ 574 $ (27,001)
Structural optimization charges 6,320 3,979
EU medical device regulation 9,513 5,748
Total $ 16,407 $ (17,274)

~~(1)~~The Company completed its sale of its Extremity Orthopedics business and recognized a gain of $42.9 million for the three months ended March 31, 2021 which was partially offset by other acquisition, divestiture and integration-related charges. See Note 2, ~~Acquisitions and Divestitures~~ ~~for details.~~


	Three Months Ended March 31,
Dollars in thousands	2023		2022
Acquisition, divestiture and integration-related charges	$	8,776	$	574
Structural optimization charges	4,335		6,320
EU medical device regulation	11,404		9,513
Total	$	24,515	$	16,407

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

Three Months Ended March 31,
Dollars in thousands 2022 2021
Cost of goods sold $ 4,530 $ 10,179
Research and development 4,267 5,515
Selling, general and administrative 8,902 11,494
Gain from the sale of business(1)
— (42,876)
Other income (1,292) (1,586)
Total $ 16,407 $ (17,274)

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


	Three Months Ended March 31,
Dollars in thousands	2023		2022
Cost of goods sold	$	6,066	$	4,530
Research and development	4,218		4,267
Selling, general and administrative	14,730		8,902

Other income	(499)		(1,292)
Total	$	24,515	$	16,407

We typically define special charges as items for which the amounts and/or timing of such expenses may vary significantly from period to period, depending upon our acquisition, divestiture, integration and restructuring activities, and for which the amounts are non-cash in nature, orand for which the amounts are not expected to recur at the same magnitude. We believe that given our ongoing strategy of seeking acquisitions, our continuing focus on rationalizing our existing manufacturing and distribution infrastructure and our continuing review of various product lines in relation to our current business strategy, some of the special charges discussed above could recur with similar materiality in the future.

We believe that the separate identification of these special charges provides important supplemental information to investors regarding financial and business trends relating to our financial condition and results of operations. Investors may find this information useful in assessing comparability of our operating performance from period to period, against the business model objectives that management has established, and against other companies in our industry. We provide this information to investors so that they can analyze our operating results in the same way that management does and to use this information in their assessment of our core business and valuation of Integra.

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Revenues and Gross Margin

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


		Three Months Ended March 31,							Three Months Ended March 31,
Dollars in thousands	Dollars in thousands	2022			2021					Dollars in thousands	2023			2022
Segment Net Sales	Segment Net Sales							Segment Net Sales
Codman Specialty Surgical	Codman Specialty Surgical	$	247,308		$	241,241				Codman Specialty Surgical	$	248,136		$	247,308
Tissue Technologies	Tissue Technologies	129,330			118,830					Tissue Technologies	132,710			129,330
Total revenues	Total revenues	$	376,638		$	360,071				Total revenues	$	380,846		$	376,638
Cost of goods sold	Cost of goods sold	142,569			145,823					Cost of goods sold	147,975			142,569
Gross margin on total revenues	Gross margin on total revenues	$	234,069		$	214,248				Gross margin on total revenues	$	232,871		$	234,069
Gross margin as a percentage of total revenues	Gross margin as a percentage of total revenues	62.1		%	59.5		%			Gross margin as a percentage of total revenues	61.1		%	62.1		%

Three Months Ended March 31, ~~2022~~2023 as Compared to Three Months Ended March 31, ~~2021~~2022

Revenues

For the three months ended March 31, ~~2022,~~2023, total revenues increased by ~~$16.6~~$4.2 million to ~~$376.6~~$380.8 million from ~~$360.1~~$376.6 million for the same period in ~~2021,~~2022, inclusive of a unfavorable foreign currency impact of ~~$4.6~~$7.0 million on ~~revenues. Domestic~~revenues, as well as a $4.5 million decrease that impacts both domestic and international revenues related to the divestiture of the TWC business. This also includes an increase of $1.8 million related to the SIA acquisition. Excluding the impacts of these items, domestic revenues increased by ~~$15.6~~$6.8 million, or ~~6.3%, to $263.4 million and were 69.9% of total revenues for the three months ended March 31, 2022~~2.6% as compared to ~~$247.8 million during the same period in~~ the prior ~~year.~~year period. International revenues increased by ~~$1.0~~$7.1 million or ~~0.9% to $113.3 million for the three months ended March 31, 2022~~6.5% as compared to ~~$112.3 million during the same period in~~ the prior ~~year.~~period. The increase in domestic revenues was primarily driven by strong ~~recovery~~sales in our TT segment. The increase in international revenues was primarily driven by Advanced Energy.

Table of ~~surgical procedures as well as favorable order timing for our private label business.~~Contents"

In the CSS segment, revenues were ~~$247.3~~$248.1 million which was an increase of ~~$6.1~~$0.8 million, or ~~2.5%~~0.3% as compared to the prior-year period, inclusive of a ~~$4.2~~$6.4 million unfavorable foreign currency impact on revenue. ~~The increase was as a result of the continued procedure recovery across neurosurgery and capital sales from the recent launch of the CereLink ICP monitoring system.~~ Excluding the impact of foreign exchange, Neurosurgery portfolio grew ~~mid~~low single digits primarily due to sales in ~~neuromonitoring and CSF Management.~~Advanced Energy. Sales in our instruments portfolio increased mid-~~low~~ single digits as compared to the same period in the prior year.

In the TT segment, revenues were ~~$129.3~~$132.7 million which was an increase of ~~$10.5~~$3.4 million, or ~~8.8%~~2.6% from the prior-year period, inclusive of a ~~$0.4~~$0.6 million unfavorable foreign currency impact on ~~revenue. Sales in~~revenue, as well as a $4.5 million decrease that impacts both domestic and international revenues related to the divestiture of the TWC business. This also includes an increase of $1.8 million related to the SIA acquisition. Excluding the impact of these items, our ~~Wound Reconstruction business, after adjusting for comparative number of selling days for ACell revenue,~~sales increased ~~low~~ mid single ~~digits, led by Integra Skin and PriMatrix. Sales in our Private Label business increased~~ ~~low double~~ digits, driven by ~~continued COVID-19 recovery for our private label partners~~ strong customer demand and ~~timing of orders.~~increased burn cases.

Gross Margin

Gross margin was ~~$234.1~~$232.9 million for the three months ended March 31, ~~2022, an increase~~2023, a decrease of ~~$19.8~~$1.2 million from ~~$214.2~~$234.1 million for the same period in ~~2021.~~2022. Gross margin as a percentage of revenues was ~~62.1%~~61.1% for the three months ended March 31, ~~2022~~2023 and ~~59.5%~~ 62.1% for the same period in ~~2021.~~2022. This ~~increase~~decrease in gross margin ~~was due to higher revenues, favorable~~is a result of unfavorable product mix ~~a decrease~~and an increase in ~~amortization associated with technology-based intangible assets and a reduction of~~ ~~inventory step-up amortization in~~ ~~connection with the acquisition of ACell in 2021.~~manufacturing costs.

Operating Expenses

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

Three Months Ended March 31,
2022 2021
Research and development 6.4 % 6.2 %
Selling, general and administrative 42.5 % 43.5 %
Intangible asset amortization 1.0 % 1.3 %
Total operating expenses 49.9 % 51.0 %

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	Three Months Ended March 31,
	2023		2022
Research and development	7.0	%	6.4	%
Selling, general and administrative	43.8	%	42.5	%
Intangible asset amortization	0.8	%	1.0	%
Total operating expenses	51.6	%	49.9	%

Total operating expenses, which consist of research and development, selling, general and administrative, and amortization expenses, increased by ~~$4.4~~$8.6 million, or ~~2.4%~~4.6% to ~~$187.9~~$196.5 million in the three months ended March 31, ~~2022,~~2023, compared to ~~$183.5~~$187.9 million in the same period in ~~2021.~~2022. The increase in operating expenses compared to the prior year is primarily ~~reflects increased~~a result of the SIA acquisition combined with increases in selling costs associated with higher ~~revenue, as well as higher spending for key growth initiatives in research and development, selling and marketing areas.~~revenue.

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

Research and Development

Research and development expenses for the three months ended March 31, ~~2022~~2023 increased by ~~$1.7~~$2.6 million as compared to the same period in the prior year. This increase in spending resulted from additional spending onrelated to the SIA acquisition, new product development and clinical ~~studies and spending related to the European Union Medical Device Regulation compliance activities.~~studies.

Selling, General and Administrative

Selling, general and administrative costs for the three months ended March 31, ~~2022~~2023 increased by ~~$3.3~~$6.7 million as compared to the same period in the prior year driven primarily due to increased selling costs associated with ~~higher revenue, as well as increases to support key growth initiatives.~~SIA acquisition and costs associated with consulting activities.

Intangible Asset Amortization

Amortization expense (excluding amounts reported in cost of product revenues for technology-based intangible assets) for the three months ended March 31, ~~2022~~2023 was ~~$3.9~~$3.1 million compared to ~~$4.5~~$3.9 million for the same period in the prior year.

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Non-Operating Income and Expenses

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


		Three Months Ended March 31,					Three Months Ended March 31,
Dollars in thousands	Dollars in thousands	2022		2021		Dollars in thousands	2023		2022
Interest income	Interest income	$	1,377	$	1,748	Interest income	$	4,107	$	1,377
Interest expense	Interest expense	(11,655)		(12,929)		Interest expense	(12,100)		(11,655)
Gain (loss) from the sale of business		—		42,876

Other income, net	Other income, net	3,429		4,869		Other income, net	1,389		3,429
Total non-operating income and expense	Total non-operating income and expense	$	(6,849)	$	36,564	Total non-operating income and expense	$	(6,604)	$	(6,849)

Interest Income

Interest income for the three months ended March 31, ~~2022 decreased~~2023 increased by ~~$0.4~~$2.7 million as compared to the same period ~~last year.~~in the prior year due to higher interest rates.

Interest Expense

Interest expense for the three months ended March 31, ~~2022~~2023 decreased by ~~$1.3~~$0.4 million as compared to the same period in the prior ~~year primarily due to the impact of a $100 million interest rate swap that matured in second quarter of 2021 and related pay down on the revolving credit component of the Senior Credit Facility.~~

~~Gain from the sale of business~~

~~On January 4, 2021, the Company completed its sale of its Extremity Orthopedics business and recognized a gain of $42.9 million for the three months ended March 31, 2021.~~year.

Other Income, net

Other income, net for the three months ended March 31, ~~2022~~2023 decreased by ~~$1.4~~$2.0 million compared to the same period in the prior ~~year~~year. The decrease is primarily ~~due to less~~driven by lower Transition Service Agreement ("TSA") income ~~associated with the transition services agreement~~ from the ~~divestiture~~sale of our Extremity orthopedics business, offset by additional TSA income from the ~~Extremity Orthopedics business and by a unfavorable impact~~sale of ~~foreign exchange as compared to the prior year.~~

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our TWC business.

Income Taxes


		Three Months Ended March 31,							Three Months Ended March 31,
Dollars in thousands	Dollars in thousands	2022			2021			Dollars in thousands	2023			2022
Income before income taxes	Income before income taxes	$	39,315		$	67,278		Income before income taxes	$	29,778		$	39,315
Income tax (benefit) expense	Income tax (benefit) expense	6,414			21,884			Income tax (benefit) expense	5,552			6,414
Effective tax rate	Effective tax rate	16.3		%	32.5		%	Effective tax rate	18.6		%	16.3		%

~~The Company’s~~Our effective income tax rates for the three months ended March 31, 2023 and 2022 were 18.6% and ~~2021 were~~ 16.3% ~~and 32.5%~~, respectively.

For the three months ended March 31, 2022, the primary drivers of the tax rate are a favorable jurisdictional mix of income, as well as a $0.8M benefit related to excess tax benefit from stock compensation. For the three months ended March 31, 2021,2023, the primary driver of the higher tax rate ~~is the~~relates to a reduction of excess tax ~~impact of the gain on the sale of the Extremity Orthopedics business, which closed during the first quarter of 2021.~~benefits from stock compensation.

The effective tax rate may vary from period to period depending on, among other factors, the geographic and business mix of taxable earnings and losses, tax planning and settlements with various taxing authorities. We consider these factors and others, including the Company's history of generating taxable earnings, in assessing our ability to realize tax assets on a quarterly basis.

Additionally, changes to income tax laws and regulations, in any of the tax jurisdictions in which ~~the Company operates,~~we operate, could impact the effective tax rate. Various governments, both U.S. and non-U.S., are increasingly focused on tax reform and revenue-raising legislation. ~~The current U.S. administration has proposed tax reform which, if enacted, may increase the Company’s U.S. federal income tax liability.~~ Further, legislation in foreign jurisdictions may be enacted, in response to the base erosion and profit-shifting project begun by the Organization for Economic Cooperation and Development ("OECD"). The OECD recently finalized major reform of the international tax system with respect to a implementing a global minimum tax rate. Such changes in U.S. and non-U.S. jurisdictions could have an adverse effect on the Company’s effective tax rate.

While it is often difficult to predict the outcome or the timing of the resolution of a particular matter with the various federal, state, and foreign tax authorities, we believe that our reserves reflect the most probable outcome of known tax contingencies. Settlement of a particular issue would usually require the use of cash. A favorable resolution would be recognized as a reduction to our annual effective tax rate in the year of resolution. ~~The Company's~~Our tax reserves are presented in the balance sheet within other liabilities, except for amounts relating to items that we expect to pay in the coming year, which would be classified as current income taxes payable.

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GEOGRAPHIC PRODUCT REVENUES AND OPERATIONS

~~The Company attributes~~We attribute revenues to geographic areas based on the location of the customer. Total revenue by major geographic area consisted of the following:


		Three Months Ended March 31,				Three Months Ended March 31,
Dollars in thousands	Dollars in thousands	2022		2021			Dollars in thousands	2023		2022
United States	United States	$	263,351	$	247,793		United States	$	271,002	$	263,351
Europe	Europe	43,744		45,819			Europe	41,064		43,744
Asia Pacific	Asia Pacific	47,717		47,295			Asia Pacific	50,473		47,717
Rest of World	Rest of World	21,826		19,164			Rest of World	18,307		21,826
Total Revenues	Total Revenues	$	376,638	$	360,071		Total Revenues	$	380,846	$	376,638

~~The Company generates~~We generate significant revenues outside the U.S., a portion of which are U.S. dollar-denominated transactions conducted with customers that generate revenue in currencies other than the U.S. dollar. As a result, currency fluctuations between the U.S. dollar and the currencies in which those customers do business could have an impact on the demand for ~~the Company's~~our products in foreign countries. Local economic conditions, regulatory compliance or political considerations, the effectiveness of our sales representatives and distributors, local competition and changes in local medical practice all may combine to affect our sales into markets outside the U.S.

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Domestic revenues increased by ~~$15.6~~$7.7 million for the three months ended March 31, ~~2022~~2023 compared to the same period last year. European sales decreased by ~~$2.1~~$2.7 million for the three months ended March 31, ~~2022~~2023 compared to the same period last year. Sales to customers in Asia Pacific increased by ~~$0.4~~$2.8 million for the three months ended March 31, ~~2022.~~2023. The Rest of World for the three months ended March 31, ~~2022 increased~~2023 decreased by ~~$2.7~~$3.5 million compared to the same period last year. The international revenues were impacted by ~~$4.6~~$7.0 million of unfavorable foreign exchange impact, with the larger impact in Europe. The increase in global revenues, inclusive of a ~~$4.6~~$7.0 million unfavorable foreign exchange impact on revenue, ~~was primarily driven by the~~is a result of strong ~~recovery of procedures as well as favorable order timing for~~sales in our ~~private label business.~~TT division and our international businesses. Sales in Japan, China, ~~Japan,~~ Europe, Canada and our indirect markets continue to drive international growth.

LIQUIDITY AND CAPITAL RESOURCES

Working Capital

The Company's working capital as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 was ~~$750.2~~$747.2 million and ~~$813.7~~$840.6 million, respectively. Working capital consists of total current assets less total current liabilities as presented in the consolidated balance sheets.

Cash and Marketable Securities

The Company had cash and cash equivalents totaling approximately ~~$407.1~~$307.4 million and ~~$513.4~~$456.7 million at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 respectively, which are valued based on Level 1 measurements in the fair value hierarchy. At March 31, ~~2022,~~2023, our non-U.S. subsidiaries held approximately ~~$260.5~~$242.2 million of cash and cash equivalents that are available for use outside the U.S. The Company asserts that it has the ability and intends to indefinitely reinvest the undistributed earnings from its foreign operations unless there is no material tax cost to remit the earnings into the ~~U.S.~~U.S..

Cash Flows


		Three Months Ended March 31,					Three Months Ended March 31,
Dollars in thousands	Dollars in thousands	2022		2021		Dollars in thousands	2023		2022
Net cash provided by operating activities	Net cash provided by operating activities	$	44,344	$	69,081	Net cash provided by operating activities	$	26,156	$	44,344
Net cash used in investing activities	Net cash used in investing activities	(14,067)		(117,566)		Net cash used in investing activities	(13,704)		(14,067)
Net cash used in financing activities	Net cash used in financing activities	(133,465)		(3,015)		Net cash used in financing activities	(162,683)		(133,465)
Effect of exchange rate fluctuations on cash	Effect of exchange rate fluctuations on cash	(3,168)		(9,690)		Effect of exchange rate fluctuations on cash	937		(3,168)

Cash Flows Provided by Operating Activities

Operating cash flows for the three months ended March 31, ~~2022~~2023 decreased by ~~$24.7~~$18.2 million compared to the same period in ~~2021.~~2022. Net income after removing the ~~impact of the gain on sale of business and~~ non-cash adjustments ~~increased~~decreased for the three months ended March 31, ~~2022~~2023 by approximately ~~$31.0~~$5.3 million as compared to the same period in ~~2021~~2022 primarily due to ~~earnings from~~ higher ~~revenues, partially offset by~~ ~~higher expense~~product costs and expenses related to support for key growth initiatives in research and development, selling and marketing areas.

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The changes in assets and liabilities in the first quarter of 2023, net of business acquisitions, decreased cash flows by ~~$29.8~~$42.6 million, ~~as compared to the increase of $26.0 million for the same period in~~ ~~2021~~. ~~The change in 2022 is~~ mainly attributable to increases in inventory to support increased sales and ~~decrease~~decreases in accrued expenses and other current liabilities due to increased payments processed in the quarter.

The changes in assets and liabilities in the first quarter of 2022, net of business acquisitions, decreased cash flows by $29.8 million, primarily due to increases in inventory to support increased sales and decreases in accounts payable, accrued expenses and other current liabilities due to increased payments processed in the quarter. ~~The changes~~

Cash Flows Used in ~~2021 were primarily due to reduction in accounts receivable due to strong cash collections and increases in accounts payable, accrued expenses and other current liabilities.~~Investing Activities

~~Operating cash flows for~~During the three months ended March 31, ~~2021 increased by $48.3~~2023, we paid $13.7 million ~~compared~~for capital expenditures to ~~the same period in 2020. For the three months ended March 31, 2021, net income after removing the impact~~support operations improvement initiatives at a number of the gain on sale of business and non-cash adjustments decreased by approximately $10.1 million. The changes in assets and liabilities increased cash flows by $26.0 million primarily due to operating cash flow contributions of accounts receivable for the three months ended March 31, 2021 when compared to the prior year. In addition, the increase was also driven by an increase in accounts payables, accrued expensesour manufacturing facilities and other ~~current liabilities for the three months ended March 31, 2021.~~

~~Cash Flows Used in Investing Activities~~information technology investments.

During the three months ended March 31, 2022, ~~the Company~~we paid $9.3 million for capital expenditures to support operations improvement initiatives at a number of our manufacturing facilities and other information technology investments as well as the final $4.7 million payment related to the final developmental milestone for Rebound Therapeutics Corporation.

39Cash Flows Used in Financing Activities

~~Table~~Uses of ~~Contents~~

~~During~~cash from financing activities in the three months ended March 31, ~~2021, we paid a net cash amount~~2023 related to the repurchase of ~~$302.6~~treasury stock of $150.0 million under the 2023 accelerated share repurchase agreement, repayments of $12.4 million under our Senior Credit Facility and Securitization Facility. We also had $7.6 million in ~~relation to~~payment of debt issuance costs. In addition, the ~~acquisition~~Company had $5.2 million in cash taxes paid for net equity settlements.

Sources of ~~ACell Inc. and received net proceeds of $191.7 million~~cash from financing activities for the ~~sale~~three months ended March 31, 2023 were $10.2 million borrowing under our Senior Credit Facility and Securitization Facility and $2.3 million proceeds from the exercise of the Extremity Orthopedics business. The Company also paid for $6.7 million capital expenditures to support operations improvement initiatives at a number of our manufacturing facilities and other information technology investments

~~Cash Flows Used in Financing Activities~~stock options.

Uses of cash from financing activities in the three months ended March 31, 2022 related to the repurchase of treasury stock of $125.0 million under the 2022 accelerated share repurchase agreement, repayments of $11.8 million under our Senior Credit Facility and Securitization Facility. In addition, ~~the Company~~we had $9.2 million in cash taxes paid for net equity settlements.

Sources of cash from financing activities for the three months ended March 31, 2022 were $11.3 million borrowing under our Senior Credit Facility and Securitization Facility and $1.2 million proceeds from the exercise of stock options.

Uses of cash from financing activities in the three months ended March 31, 2021 were $2.2 million proceeds from the exercise of stock options which was partially offset by net repayments of $1.6 million on the Securitization Facility offset and $3.6 million cash taxes paid in net equity settlement.

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

See Note 66., Debt, to the Notes to Consolidated Financial Statements (Part I, Item 1 of this ~~Form 10-Q)~~Quarterly Report) for a discussion of our Amended and Restated Senior Credit Agreement, the 2025 Notes and Securitization Facility and Note 7, Derivative Instruments, to the Notes to Consolidated Financial Statements (Part I, Item 1 of this ~~Form 10-Q)~~Quarterly Report) for discussion of our hedging activities. We are forecasting that sales and earnings for the next twelve months will be sufficient to remain in compliance with our financial covenants under the terms of the ~~February 2020 Amendment and July 2020~~March 2023 Amendment to the Senior Credit Facility.

Share Repurchase Plan

On January 26, 2023, we entered into ("the 2023 ASR") and received 2.1 million shares of our common stock at inception of the 2023 ASR, which represented approximately 80% of the expected total shares under the 2023 ASR. The remaining repurchase transactions are expected to be completed in the second quarter of 2023.

On January 12, 2022, ~~the Company~~we entered into a $125.0 million accelerated share repurchase ("2022 ASR") and received 1.48 million shares of ~~the Company~~our common stock at inception of the 2022 ASR, which represented approximately 80% of the expected total shares under the 2022 ASR. On March 24, 2022, the early exercise provision under the 2022 ASR was exercised by 2022 ASR counterparty. Upon settlement of the 2022 ASR on March 24, 2022, ~~the Company~~we received an additional 0.46 million shares determined using the volume-weighted average price of ~~the Company's~~our common stock during the term of the 2022 ASR.

On April 26, 2022, the Board of Directors authorized the Company to repurchase up to $225.0 million of the Company’s common stock. The program allows the Company to repurchase its shares opportunistically from time to time. The repurchase authorization expires in December 2024. This stock repurchase authorization replaces the previous $225 million stock repurchase authorization, of which $100 million remained authorized at the time of its replacement, and which was otherwise set to expire on December 31, 2022. Purchases may be affected through one or more open market transactions, privately negotiated transactions, transactions structured through investment banking institutions, or a combination of the foregoing

See Note ~~11,~~ 11. Treasury Stock, ofto the Notes to Consolidated Financial Statements (Part I, Item 1 of this ~~Form 10-Q)~~Quarterly Report) for further details.

Dividend Policy

We have not paid any cash dividends on our common stock since our formation. Our Senior Credit Facility limits the amount of dividends that we may pay. Any future determinations to pay cash dividends on our common stock will be at the discretion of the Board and will depend upon our financial condition, results of operations, cash flows and other factors deemed relevant by the Board.

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Capital Resources

We believe that our cash and available borrowings under the Senior Credit Facility are sufficient to finance our operations and capital expenditures for the foreseeable future. Our future capital requirements will depend on many factors, including the growth of our business, the timing and introduction of new products and investments, strategic plans and acquisitions, among others. Additional sources of liquidity available to us include short term borrowings and the issuance of long term debt and equity securities.

Off-Balance Sheet Arrangements

We do not have any off–balance sheet financing arrangements during the three months ended March 31, ~~2022~~2023 that have or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our interests.

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Contractual Obligations and Commitments

We will continue to have cash requirements to support seasonal working capital needs and capital expenditures, to pay interest, to service debt, and to fund acquisitions. As part of our ongoing operations, we enter into contractual arrangements that obligate us to make future cash payments.

Our primary obligations include principal and interest payments on revolving portion and Term Loan component of the Senior Credit Facility, Securitization Facility and Convertible Securities. See Note 6,6. Debt, to the Notes to Consolidated Financial Statements (Part I, Item 1 of this ~~Form 10-Q)~~Quarterly Report) for details. ~~The Company~~We also ~~leases~~lease some of our manufacturing facilities and office buildings which have future minimum lease payments associated. See Note ~~10,~~ 10. Leases and Related Party Leases, to the Notes to Consolidated Financial Statements (Part I, Item 1 of this ~~Form 10-Q)~~Quarterly Report) for a schedule of our future minimum lease payments. Amounts related to ~~the Company's~~our other obligations, including employment agreements and purchase obligations were not material.

The Company has contingent consideration obligation related to prior and current year acquisitions and future pension contribution obligations. See Note 9, 9. Retirement Plans~~Defined Benefit Plans~~, and ~~and~~ Note ~~16,~~ 16. Commitments and Contingencies, to the Notes to Consolidated Financial Statements (Part I, Item 1 of this ~~Form 10-Q)~~Quarterly Report) for details. The associated obligations are not fixed. ~~The Company~~We also ~~has~~have a liability for uncertain tax benefits including interest and penalties. ~~See Note 12,~~ ~~Income Taxesto the Notes to Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for details.~~ ~~The Company~~We cannot make a reliable estimate of the period in which the uncertain tax benefits may be realized.

~~Employee Termination Benefits~~

~~The Company incurred restructuring costs related to employee terminations associated with a future plant closure in the consolidated statement of operations for the three months ended~~ ~~March 31, 2022,~~ ~~Restructuring costs were included in accrued expenses and other current liabilities in the consolidated balance sheet for the three months ended March 31, 2022 and year ended~~ ~~December 31, 2021. See Note 1,~~ ~~Basis of Presentation~~ ~~of the Notes to Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for additional details.~~

OTHER MATTERS

Critical Accounting Estimates

The critical accounting estimates included in ~~the Company's~~our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 have not materially changed.

Recently Issued Accounting Standards

Information regarding new accounting pronouncements is included in Note 1,1. Basis of Presentation, to the Notes to Consolidated Financial Statements (Part I, Item 1 of this Quarterly Report) to the current period’s condensed consolidated financial statements.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, including changes in foreign currency exchange rates and interest rates that could adversely affect our results of operations and financial condition. To manage the volatility relating to these typical business exposures, we may enter into various derivative transactions when appropriate. We do not hold or issue derivative instruments for trading or other speculative purposes.

Foreign Currency Exchange and Other Rate Risks

We operate on a global basis and are exposed to the risk that changes in foreign currency exchange rates could adversely affect our financial condition, results of operations and cash flows. We are primarily exposed to foreign currency exchange rate risk with respect to transactions and net assets denominated in Euros, British pounds, Swiss francs, Canadian dollars, Japanese yen, Mexican pesos, Brazilian reais, Australian dollars and Chinese yuan. We manage the foreign currency exposure centrally, on a combined basis, which allows us to net exposures and to take advantage of any natural offsets. To mitigate the impact of currency fluctuations on transactions denominated in nonfunctional currencies, we periodically enter into derivative financial instruments in the form of foreign currency exchange forward contracts with major financial institutions. We temporarily record realized and unrealized gains and losses on these contracts that qualify as cash flow hedges in other comprehensive income, and then recognize them in other income or expense when the hedged item affects net earnings.

From time to time, we enter into foreign currency forward exchange contracts to manage currency exposures for transactions denominated in a currency other than an entity’s functional currency. As a result, the impact of foreign currency gains/losses recognized in earnings are partially offset by gains/losses on the related foreign currency forward exchange contracts in the same reporting period. Refer to Note 7, 7. Derivative Instruments~~of the~~, to Notes to Consolidated Financial Statements (Part I, Item 1 of this ~~Form 10-Q)~~Quarterly Report) for further information.

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We maintain written policies and procedures governing our risk management activities. With respect to derivatives, changes in hedged items are generally expected to be completely offset by changes in the fair value of hedge instruments. Consequently, foreign currency exchange contracts would not subject us to material risk due to exchange rate movements, because gains and losses on these contracts offset gains and losses on the assets, liabilities or transactions being hedged.

The results of operations discussed herein have not been materially affected by inflation.

Interest Rate Risk

Cash and Cash Equivalents - We are exposed to the risk of interest rate fluctuations on the interest income earned on our cash and cash equivalents. A hypothetical 100 basis points movement in interest rates applicable to our cash and cash equivalents outstanding at March 31, ~~2022~~2023 would ~~increase~~impact interest income by approximately ~~$4.1~~$3.1 million on an annual basis. ~~No significant decrease in interest income would be expected based on our current earnings on our cash balances.~~ We are subject to foreign currency exchange risk with respect to cash balances maintained in foreign currencies.

Debt - Our interest rate risk relates primarily to U.S. dollar ~~LIBOR-indexed~~SOFR-indexed borrowings. We use interest rate swap derivative instruments to manage our earnings and cash flow exposure to changes in interest rates. These interest rate swaps fix the interest rate on a portion of our expected ~~LIBOR-indexed~~SOFR-indexed floating-rate borrowings. These interest rate swaps were designated as cash flow hedges as of March 31, ~~2022.~~2023. The total notional amounts related to the Company’s interest rate swaps were ~~$1.8~~$1.5 billion with ~~$875.0~~$775.0 million effective as of March 31, ~~2022.~~2023. Based on our outstanding borrowings at March 31, ~~2022,~~2023, a 100 basis points change in interest rates would have impacted interest expense on the unhedged portion of the debt by ~~$1.1~~$1.0 million on an annualized basis. See Note 7, 7. Derivative Instruments, to the Notes to Consolidated Financial Statements (Part I, Item 1 of this Quarterly Report) for ~~the details of~~further information regarding interest rate swaps.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

~~The Company maintains~~We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act report is recorded, processed, summarized and reported within the time periods specified in the SEC’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 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.

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As required by Exchange Act Rule 13a-15(b), ~~the Company has~~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 March 31, ~~2022.~~2023. Based upon this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, ~~2022~~2023 to provide such reasonable assurance.

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 March 31, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In response to business integration activities, ~~the Company has~~we have and will continue to further align and streamline the design and operation of the financial control environment to be responsive to the changing business model.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information pertaining to legal proceedings can be found in Note 16, Commitment and Contingencies, to the Notes to Consolidated Financial Statements (Part I, Item 1 of this Quarterly Report).

ITEM 1A. RISK FACTORS

There have been no material changes in ~~the Company's~~our risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 and subsequent periodic reports filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act").

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information about purchases by ~~the Company~~us during the quarter ended March 31, ~~2022~~2023 of equity securities that are registered by ~~the Company~~us pursuant to Section 12 of the Exchange Act. Subject to applicable law, share repurchases may be made from time to time in open market transactions, privately negotiated transactions including accelerated share repurchase agreements, or pursuant to instruments and plans complying with Rule 10b5-1 under the Exchange Act, among other types of transactions and arrangements.

Issuer purchases of equity securities
Period Total number of shares purchased by month Average price paid per share Total number of shares purchased by month as part of publicly announced repurchase programs Approximate dollar value of shares that may yet be purchased under the plans or program
01/01/22 - 01/31/22 1,477,760 64.50 1,477,760 100,000,000
02/01/22 - 02/28/22 — — — 100,000,000
03/01/22 - 03/31/22 460,250 64.50 460,250 100,000,000
1,938,010 $ 64.50 1,938,010 100,000,000


Issuer purchases of equity securities
Period	Total number of shares purchased by month	Average price paid per share		Total number of shares purchased by month as part of publicly announced repurchase programs	Approximate dollar value of shares that may yet be purchased under the plans or program

01/01/23 - 01/31/23	2,111,189	$	56.68	2,111,189	30,000,000
02/01/23 - 02/28/23	—	—		—	—
03/01/23 - 03/31/23	—	—		—	—
	2,111,189	$	56.68	2,111,189	30,000,000

On ~~December 7, 2020, the Board of Directors authorized~~January 26, 2023, the Company ~~to repurchase up to $225.0 million of the Company’s common stock (the “repurchase program”). As part of the repurchase program, we~~ entered into ~~an accelerated share repurchase agreement with a bank in January 2022 to repurchase an aggregate of $125 million of our common stock (the “2022 ASR”). In January 2022, we~~the 2023 ASR and received ~~1.48~~2.1 million shares of ~~Company~~our common stock at inception of the ~~2022~~2023 ASR, which represented approximately 80% of the expected total shares under the ~~2022~~2023 ASR. ~~In March 2022,~~The remaining repurchase transactions are expected to be completed in the 2022 ASR transaction was completed, and an additional 0.46 million shares were delivered pursuant to the accelerated share repurchase agreement. The 1.9 million shares delivered in connection with the 2022 ASR were the only shares of Integra common stock we repurchased during the firstsecond quarter of ~~2022.~~2023.

See Note 11, Treasury Stock, ofto the Notes to Consolidated Financial Statements (Part I, Item 1 of this ~~Form 10-Q)~~Quarterly Report) for additional information regarding our share repurchase program and the ~~2022~~2023 ASR.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

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ITEM 6. EXHIBITS


Exhibits




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 fiscal 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 fiscal 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 fiscal 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						Second Amended and Restated Bylaws of Integra LifeSciences Holdings Corporation, effective as of December 11, 2018 (Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-k filed on December 12, 2018)

3.3						Third Amended and Restated Bylaws of Integra LifeSciences Holdings Corporation, effective as of February 21, 2023 (Incorporated by reference to Exhibit 3.3 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed on February 22, 2023)

10.1						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 Agents (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 24, 2023).

10.2						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).

10.3(a)						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 filed on February 22, 2023) #

10.3(b)						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 filed on February 22, 2023) #

10.3(c)						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 filed on February 22, 2023) +

10.3(d)						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 filed on February 22, 2023) +

10.3(e)						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 filed on February 22, 2023) +

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*10.4						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

*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

*†101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

*†101.SCH						XBRL Taxonomy Extension Schema Document

*†101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

*†101.DEF						XBRL Definition Linkbase Document

*†101.LAB						XBRL Taxonomy Extension Labels Linkbase Document

*†101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


*			Filed herewith
#			Indicates a management contract or compensatory plan or arrangement.
†			The financial information of Integra LifeSciences Holdings Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2022~~2023 filed on April ~~27, 2022~~26, 2023 formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations and Comprehensive Income, (ii) the Condensed Consolidated Balance Sheets, (iii) Parenthetical Data to the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements, is furnished electronically herewith.

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SIGNATURES

Pursuant to the requirements 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

Date:	April ~~27, 2022~~26, 2023	/s/ Jan De Witte
		Jan De Witte
		President and Chief Executive Officer
		(Principal Executive Officer)

Date:	April ~~27, 2022~~	~~/s/ Carrie L. Anderson~~
		~~Carrie L. Anderson~~
		~~Executive Vice President and Chief Financial Officer~~
		~~(Principal Financial Officer)~~

~~Date:~~	~~April 27, 2022~~26, 2023	/s/ Jeffrey A. Mosebrook
		Jeffrey A. Mosebrook
		Senior Vice President, Finance
		(Principal Financial Officer and Principal Accounting Officer)

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Dollars in thousands	March 31, 2022		March 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	4,696	$	3,761

ROU assets obtained in exchange for lease liabilities:
Operating leases	$	507	$	9,662