INTEGRA LIFESCIENCES HOLDINGS CORP MANAGEMENT REPORT OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

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

We have made statements in this report which constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934 (the "Exchange
Act"). These forward-looking statements are subject to a number of risks,
uncertainties and assumptions about the Company and other matters. These
forward-looking statements include, but are not limited to, statements related
to the Company's expectations regarding the potential impacts of the COVID-19
pandemic on our business, financial condition, and results of operations. These
statements should, therefore, be considered 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 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 impacts in our facilities; delays in gathering clinical
evidence; diversion of management and other resources to respond to the COVID-19
outbreak; the impact of global and regional economic and credit market
conditions 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 a result of many factors,
including but not limited to those set forth under the heading "Risk Factors" in
our Annual Report on Form 10-K for the year ended December 31, 2021, under the
heading "Risk Factors" in this report, and in other filings with the SEC. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise,
except to the extent required by applicable law.

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

GENERAL

Integra, headquartered in Princeton, New Jersey, is a world leader in medical
technology. 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 peripheral nerves and tendons. The Company has
expanded its base regenerative technology business to include surgical
instruments, neurosurgical products and advanced wound care through global
acquisitions and product development to meet the evolving needs of its customers
and enhance patient care.

Integra manufactures and sells medical technologies and products in two
reportable business segments: Codman Specialty Surgical ("CSS") and Tissue
Technologies ("TT"). The CSS segment, which represents 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, 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 products that positively impact
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 leadership team has established the following key priorities aligned with the following focus areas:

Strategic Acquisitions. An important part of the Company's strategy is pursuing
strategic transactions and licensing agreements that increase relevant scale in
the clinical areas in which Integra competes. Our growth strategy includes the
acquisition of businesses, assets or products lines to increase the breadth of
our offerings, the reach of our product portfolios and drive relevant scale to
our customers. In 2022, we continued to advance the development of pioneering
neurosurgical technologies from our 2019 acquisitions of Arkis Biosciences, Inc.
and Rebound Therapeutics Corporation and the expansion our product offering of
regenerative technologies from our 2021 ACell acquisition. See Note 2,
Acquisitions and Divestitures, to the Notes to Consolidated Financial Statements
(Part I, Item 1 of this Form 10-Q) for additional details.

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 technological innovations for significant
returns on investment. In addition to new product development, we are funding
studies to gather clinical evidence to support launches, ensure market access
and improve reimbursement for existing products. 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 August 2022, we completed the sale of our non-core traditional wound care
("TWC") business to Gentell, LLC for $28.8 million, which consists of $27.8
million in cash plus $1.0 million in contingent consideration which may be
received upon achieving certain revenue-based performance milestones. In January
2021, we completed the sale of our Extremity Orthopedics business to Smith &
Nephew USD Limited ("Smith & Nephew"), a subsidiary of Smith & Nephew plc, for
approximately $240 million in cash. Our portfolio optimization actions over the
past two years have allowed us to increase our focus on Integra's core portfolio
of market-leading products in neurosurgery, surgical instrumentation and
regenerative tissue and moves us closer to achieving our long-term organic
growth and profitability targets. See Note 2, Acquisitions and Divestitures, to
the Notes to Consolidated Financial Statements (Part I, Item 1 of this Form
10-Q) for details.

Commercial Channel Investments. Investing 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 organizations in the United
States. Internationally, we have increased our commercial resources
significantly in key emerging markets and are making investments to support our
sales organization and maximize our commercial opportunities. Domestically, we
have also increased our TT sales force in the United States to support the
expanded regenerative tissue product portfolio that includes ACell products.
These investments in our international and domestic sales channel position us
well for expansion and long-term growth.

Customer Experience. We aspire to be ranked as a best-in-class provider and are
committed to strengthening our relationships with all customers. We continue to
invest in technologies, systems and processes to enhance the customer
experience. We also launched digital tools and programs, resources and virtual
product training to drive continued customer familiarity with our growing
portfolio of medical technologies globally. In addition, we are in the process
of outsourcing certain transactional back-office finance and customer service
activities to enhance customer quality, build scale for future growth, and
capture cost efficiencies and expect to complete the transition by year end
2022.

New product launches and research and development updates

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

In the third quarter of 2022, we made progress to several enhancements to our
CUSA® Clarity Tissue Ablation System. The extended laparoscopic tip was launched
in the U.S. to enhance laparoscopic liver procedures. In addition, a
single-sided bone tip received 510(k) approval. Commercial launch is expected in
the first quarter of 2023. We continue to update our CUSA Clarity platform by
incorporating new ultrasonic handpiece and integrated electrosurgical
capabilities.

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In 2022, we continued to advance the two early-stage technology platforms we
acquired in 2019. Through the acquisition of Arkis Biosciences, we added a
platform technology, CerebroFlo® EVD, catheter with Endexo® technology, a
permanent additive designed to reduce the potential for catheter obstruction due
to thrombus formation. The CerebroFlo EVD Catheter has demonstrated an average
of 99% less thrombus accumulation onto its surface, in vitro, compared to a
market leading EVD catheter. In 2019, we also acquired Rebound Therapeutics
Corporation which 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 2021, we
began and continued to conduct a limited clinical launch of the Aurora
Surgiscope for use in minimally invasive neurosurgery as well as initiated a
registry called MIRROR to collect data on early surgical intervention using this
same technology platform for the treatment of intracerebral hemorrhages ("ICH").
In 2022, we have continued to execute on our growth initiatives. We launched the
Aurora® Evacuator with Coagulation device in the U.S., designed to be used in
conjunction with our Aurora Surgiscope to safely address and evacuate blood in
the brain caused by hemorrhagic stroke.

We are focused on the development of core clinical applications in our
electromechanical technologies portfolio. In June 2022, we launched the Neutus®
EVD system, our first external ventricular drain ("EVD") in China. The Neutus
EVD system is manufactured in China by Shanghai Haoju Medical Technology Co.,
Ltd. under an exclusive distribution arrangement. The device is used in the
management of cerebrospinal fluid and is highly complementary to our Bactiseal®
catheter and advanced intercranial pressure monitoring products. In 2021, we
launched our CereLink® ICP Monitor System in the U.S. and Europe direct markets
and continued the global rollout in the first half of 2022. 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 FDA Matters for further consideration on the recall
of the CereLink ICP Monitor System.

Within our TT segment, in 2022, we launched NeuraGen® 3D Nerve Guide Matrix, a
resorbable implant for repair of peripheral nerve discontinuities and designed
to optimize the environment for nerve regeneration to allow for more complete
functional recovery. During 2021, we completed one of the largest diabetic foot
ulcers ("DFU"), randomized controlled trials of the PriMatrix® Dermal Repair
Scaffold for the management of DFU. 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.

COVID-19 pandemic and economic recession

The global healthcare system is continuing to respond to the unprecedented
challenge posed by the COVID-19 (including new variants of COVID-19) pandemic
("COVID-19" or the "pandemic"). The pandemic has caused a severe global health
crisis, along with economic and societal disruptions and uncertainties, which
have negatively impacted business and healthcare activity globally. The COVID-19
pandemic continues to cause significant volatility and uncertainty in the global
and regional economies, leading to changes in consumer and business behavior,
market fluctuations, materials and product shortages and restrictions on
business and individual activities, all of which are materially impacting supply
and demand in broad sectors of the world markets. Additionally, the COVID-19
pandemic and general macroeconomic conditions have led to disruptions in the
global supply chain, primarily through a lack of availability of raw materials
and electronic components. We have experienced challenges associated with
material and component availability for certain product lines, longer shipping
and delivery times for raw materials and components, constrained logistics
capacity related to the movement of our products, availability of skilled labor
and increased costs of raw materials, components, labor, and freight and courier
services. Regional COVID-19 case volumes (including those related to subsequent
variants), actions taken by governmental authorities, private businesses and
individuals, such as "shelter-in-place" orders and restrictions on travel and
access to our customers or temporary closures of our facilities or the
facilities of our suppliers, disruption and/or higher costs to the Company's
supply chain, staffing shortages in hospitals and labor constraints in our
facilities, could further impact our sales margins and our ability to ship our
products and supply our customers.

COVID variants continue to contribute to an uncertain business environment and
the effects resulting from the pandemic, such as inflationary pressures and
global central bank actions to contain high inflation levels, could cause or
contribute to a local and/or global economic recession. Capital markets and
worldwide economies have also been significantly impacted and such economic
recession could have a material adverse effect on the Company's long-term
business as hospitals reduce capital, as well as overall spending.

The emergence of new variants, vaccinations and public health measures are
driving the pace of economic recovery unevenly in various regions. The direct
and indirect disruptions caused by the pandemic and the responses of both
governments and individuals could negatively impact the number of surgical and
medical intervention procedures performed and have a material adverse effect on
our business, financial condition, results of operations, or cash flows. Further
discussion of the potential impacts on our business from the COVID-19 pandemic
and global macroeconomic conditions is provided under Item 1A - Risk Factors of
Part I of our Annual Report on Form 10-K for the year ended December 31, 2021.

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FDA Questions

On August 18, 2022, the Company, after consultation with the FDA and other
regulatory authorities outside of the United States, initiated an immediate
voluntary global product removal of all CereLink intracranial pressure monitors
as a result of customer reports about monitors whose pressure readings were out
of range. The Company believes that the out-of-range readings are principally
caused by electrical interference from the external environment and/or
interference from a component on the circuit board of the monitor. These
out-of-range readings have occurred at a low incidence rate and at a limited
number of sites; however, out of an abundance of caution, the Company removed
all CereLink monitors from the field.

The Company is continuing its investigation into the matter in order to remedy
the observed issue and plans to resume shipment of the CereLink monitors as soon
as any such issues have been resolved. Based on outlook for returning the
product to market and feedback from customers, the Company recorded a $1.5
million provision for product returns, as a reduction of net revenue, and a
$0.8 million rework accrual in cost of goods sold in the third quarter of 2022.

We manufacture and distribute products derived from human tissue for which FDA
has specific regulations governing human cells, tissues and cellular and
tissue-based products ("HCT/Ps"). 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, 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 of the
Public Health Services Act ("Section 361") and that, as a result, BioD LLC
("BioD") would need a biologics license to lawfully market those morselized
products. Since the issuance of the Untitled Letter, BioD and the Company have
made known to 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 of the BioD acquired products are not eligible for
marketing solely under Section 361. In July 2020, the FDA issued the final
guidance document related to human tissue titled, "Regulatory Considerations for
Human Cells, Tissues, and Cellular and Tissue-Based Products: Minimal
Manipulation and Homologous Use" (the "2020 HCT/P Final Guidance"). The 2020
HCT/P Final Guidance document supersedes the November 2017 guidance by the same
title.

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

As the FDA continues to review various 361 HCT/P products currently on the
market over time, there is the risk of continued upregulation by FDA based on
their interpretation of criteria applied to specific 361 HCT/P products and the
new clinical applications of these products by Health Care Professionals that
may be viewed by FDA as higher risk uses. Additionally, the Center for Medicare
& Medicaid Services (CMS), which is part of the Department of Health and Human
Services (HHS), will be requiring all amniotic products to obtain new
reimbursement codes by 2024, where qualification includes a detailed review by
the FDA's Tissue Reference Group (TRG) of the 361 HCT/P's uses, processing and
relevant characteristics followed by a written recommendation that the HCT/P, in
their opinion, meets the criteria of a 361 HCT/P. There is the risk that
although the TRG provided letters in the past confirming the 361 HCT/P status of
our amniotic products, they may not do so again due to changes in their
interpretation and application of the 361 HCT/P criteria and/or the practices of
clinicians for specific uses which could be considered higher risk uses. Any of
these outcomes could negatively impact the ability to obtain third party
reimbursement for these products as well as negatively impact the volume of
these products utilized by Health Care Professionals and have a material adverse
effect on our business, financial condition, results of operations, or cash
flows.

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On March 7, 2019, TEI Biosciences, Inc. ("TEI"), a wholly-owned subsidiary of
the Company 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 submitted its initial
response to the FDA Warning Letter on March 28, 2019 and provides regular
progress reports to the FDA as to its corrective actions and, since the
conclusion of the inspection, has undertaken significant efforts to remediate
the observations and continues 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 provided an
initial response to the inspection observations and will continue to provide
responses to FDA. The Warning Letter and the 2021 FDA Form 483 do not restrict
the Company's 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.

Sales of products manufactured at TEI’s Boston plant for the nine months ended September 30, 2022 represent approximately 5.5% of consolidated sales.

ACQUISITIONS & DISPOSALS

Disposals

On August 31, 2022, the Company completed the sale of its previously announced
sale of its non-core traditional wound care ("TWC") business to Gentell, LLC
("Gentell") for $28.8 million, which consists of $27.8 million in cash plus $1.0
million in contingent consideration which may be received upon achieving certain
revenue-based performance milestones two years after the closing date. The
proceeds from the sale of the TWC business of $27.8 million is presented in the
consolidated statement of cash flows net of cash transferred of $3.5 million and
other transaction fees. The transaction included the sale of the Company's TWC
products, such as sponges, gauze and conforming bandages, and certain advanced
wound care dressings, such as supportive, calcium alginate, hydrogel, and foam
dressings. In connection with the sale, the Company recognized $0.6 million as a
gain from the sale of business in the consolidated statement of operations for
the nine months ended September 30, 2022. The transaction is subject to final
working capital adjustments. See Note 2, Acquisitions and Divestitures, to the
Notes to Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q)
for details.

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

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.

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 began the transfer of production to the Company's
existing Switzerland facility. The transfer is expected to be completed by the
fourth quarter of 2022. In addition, we announced plans to outsource certain
transactional back-office finance and customer service activities to enhance
customer quality, build scale for future growth, and capture cost efficiencies.
We expect this transition to be completed by the fourth quarter of 2022.

RESULTS OF OPERATIONS

Summary

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

Net income for the nine months ended September 30, 2022 was $127.6 million, or
$1.53 per diluted share, as compared to $123.7 million or $1.45 per diluted
share for the nine months ended September 30, 2021. The increase in net income
for the nine months ended September 30, 2022, was primarily driven by an
increase in revenue as well as a decrease in the income tax provision as
compared to prior year. This increase was partially offset by an increase in
non-operating income in the prior period due to the gain of $42.0 million
recognized as result of the sale of the Extremity Orthopedics business.

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Special charges

Pre-tax income includes the following special charges:

                                                 Three Months Ended 

September 30nine months ended September 30Dollars in thousands

                                 2022                2021               2022                2021
Acquisition, divestiture and integration-related
charges(1)                                       $  (13,842)         $   2,637          $  (19,552)         $ (13,588)
Structural optimization charges                      10,112              6,719              24,604             15,410
EU medical device regulation ("EU MDR")              13,208              7,077              32,970             16,240
Total                                            $    9,478          $  16,433          $   38,022          $  18,062

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

The items presented above are reflected in the condensed consolidated statements of earnings as follows:

                                          Three Months Ended September 30,               Nine Months Ended September 30,
Dollars in thousands                          2022                   2021                   2022                   2021
Cost of goods sold                     $          4,198          $    5,854          $         13,859          $   26,757
Research and development                          5,723               5,517                    15,528              13,140
Selling, general and administrative                 877               6,386                    12,440              24,443
Gain from the sale of businesses(1)                (644)                230                      (644)            (41,967)
Other income                                       (676)             (1,554)                   (3,161)         $   (4,311)
 Total                                 $          9,478          $   16,433          $         38,022          $   18,062

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

We typically define special charges as items for which the amounts and/or timing
of such expenses may vary significantly from period to period, depending upon
our acquisition, divestiture, integration and restructuring activities, and for
which the amounts are non-cash in nature, or for which the amounts are not
expected to recur at the same magnitude. We believe that given our ongoing
strategy of acquisitions and divestitures and efforts to optimize our
manufacturing, distribution, commercial and administration infrastructure, 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.

Revenues and gross margin

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

                                                Three Months Ended September 30,                   Nine Months Ended September 30,
Dollars in thousands                               2022                     2021                     2022                     2021
Segment Net Sales
Codman Specialty Surgical                  $            249,796       $        256,497       $            754,967       $        754,575
Tissue Technologies                                     135,395                130,364                    404,677                382,349
Total revenues                             $            385,191       $        386,861       $          1,159,644              1,136,924
Cost of goods sold                                      148,445                144,468                    439,418                441,558
Gross margin on total revenues             $            236,746       $        242,393       $            720,226       $        695,366
Gross margin as a percentage of total
revenues                                                61.5  %              62.7    %                    62.1  %              61.2    %


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Three months completed September 30, 2022 compared to the three months ended
September 30, 2021

Revenue

For the three months ended September 30, 2022, total revenues decreased by $1.7
million to $385.2 million from $386.9 million for the same period in 2021,
inclusive of a unfavorable foreign currency impact of $11.8 million on revenues.
Domestic revenues increased by $6.2 million, or 2.3%, to $282.0 million and were
73.2% of total revenues for the three months ended September 30, 2022 compared
to $275.8 million during the same period in the prior year. International
revenues decreased by $7.9 million or 7.1% to $103.2 million for the three
months ended September 30, 2022 compared to $111.1 million during the same
period in the prior year, which is inclusive of a unfavorable foreign currency
impact of $11.8 million.

In the CSS segment, revenues were $249.8 million which was a decrease of $6.7
million, or 2.6% as compared to the prior-year period, inclusive of $10.5
million unfavorable foreign currency impact on revenue. Excluding the impact of
foreign currency, the CSS segment revenues in the third quarter increased $3.8
million as compared to the prior year period. The increase was driven primarily
by low single digits growth in our Neurosurgery portfolio, partially offset by
low single digits declines in our our Instruments business. This increase in our
Neurosurgery portfolio was primarily driven by the growth in advanced energy,
CSF management, and dural access and repair, partially offset by declines in
neuro monitoring which was impacted by the voluntary recall of the CereLink ICP
monitoring system.

In the TT segment, revenues were $135.4 million which was an increase of $5.0
million, or 3.9% from the prior-year period, inclusive of a $1.2 million
unfavorable foreign currency impact on revenue. Excluding the impact of foreign
currency of $1.2 million and the divestiture impact of TWC of $2.9 million, the
TT segment revenues in the third quarter increased by $9.1 million. This
increase was driven by high single digits increases in our Wound Reconstruction
business, led by Integra® Dermal Matrices, amniotic tissue products and ACell
MicroMatrix, and low single digit increases in our Private Label business as
compared to the same period in the prior year.

Gross margin

Gross margin was $236.7 million for the three months ended September 30, 2022, a
decrease of $5.6 million from $242.4 million for the same period in 2021. Gross
margin as a percentage of revenues was 61.5% for the three months ended
September 30, 2022 and 62.7% or the same period in 2021. This decrease in gross
margin was driven by CereLink recall impacts, unfavorable regional mix, and
higher material and labor costs, partially offset by favorable price and other
procurement and margin improvement initiatives.

Functionnary costs

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

                                            Three Months Ended September 30,
                                                    2022                     2021
Research and development                                         6.4  %      6.7  %
Selling, general and administrative                             37.3  %     40.3  %
Intangible asset amortization                                    0.8  %      1.1  %
Total operating expenses                                        44.5  %     48.1  %


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

The Company continues to prioritize its operating costs to increase organic investments that will drive long-term growth, including support for new product development and launch, clinical studies, geographic expansion and WE sales channel expansion.

Research and development

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

Selling, general and administrative expenses

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

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Amortization of intangible assets

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

Non-operating income and expenses

Here is a summary of non-operating income and expenses:

                                                  Three Months Ended September 30,
Dollars in thousands                                     2022                      2021
Interest income                           $          3,264                      $  1,786
Interest expense                                   (12,809)                      (12,192)
Other income, net                                    2,648                         4,985
Gain (loss) from the sale of businesses                644                  

(230)

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


Interest Income

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

Interest charges

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

Gain from the sale of businesses

On August 31, 2022, the Company completed its previously announced sale of its
TWC business to Gentell and recognized $0.6 million as a gain from the sale of
the business for the three months ended September 30, 2022. On January 4, 2021,
the Company completed its sale of its Extremity Orthopedics business and
recorded a decrease to the gain from the sale of the business of $0.2 million
for the three months ended September 30, 2021 as a result of working capital
adjustment.

Other Income, net

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

Income Taxes

                                       Three Months Ended September 30,
Dollars in thousands                  2022                             2021
Income before income taxes     $        58,796                      $ 50,788
Income tax (benefit) expense             8,881                         7,559
Effective tax rate                        15.1   %                      14.9  %


The Company's effective income tax rates for the three months ended
September 30, 2022 and 2021 were 15.1% and 14.9%, respectively. For the three
months ended September 30, 2022, the primary driver of the higher tax rate is a
decrease of income in lower-taxed jurisdictions, offset by a $1.2 million
benefit related to prior year amended tax returns.

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

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Nine month period ended September 30, 2022 compared to the nine-month periods ended September 30, 2021

Revenues and Gross Margin

For the nine months ended September 30, 2022, total revenues increased by $22.7
million to $1,159.6 million from $1,136.9 million for the same period in 2021,
inclusive of an unfavorable foreign currency impact of $26.7 million on
revenues. Domestic revenues increased by $31.0 million, or 3.9%, to $832.7
million and were 71.8% of total revenues for the nine months ended September 30,
2022. International revenues decreased by $8.2 million, or 2.5% to $326.9
million for the nine months ended September 30, 2022 compared to $335.2 million
during the same period in the prior year, which is inclusive of a unfavorable
foreign currency impact of $26.7 million.

In the CSS segment, revenues were $755.0 million, which was an increase of $0.4
million, or 0.1% from the prior-year period, inclusive of a $23.9 million
unfavorable foreign currency impact on revenue. Excluding the impact of foreign
currency, the CSS segment revenues increased $24.3 million as compared to the
prior year period. This increase was primarily driven by low single digits
growth in both our Neurosurgery and Instruments portfolios as compared to the
same period in the prior year. The increase in our Neurosurgery portfolio was
primarily driven by growth in advanced energy and CSF management, partially
offset by the voluntary recall of the CereLink ICP monitoring system.

In the TT segment, revenues were $404.7 million, which was an increase of $22.3
million, or 5.8% from the prior-year period, inclusive of a $2.7 million
unfavorable foreign currency impact on revenue. Excluding the impact of foreign
currency of $2.7 million and the divestiture impact of TWC of $2.9 million, the
TT segment revenues in the third quarter increased by $27.9 million. This
increase was driven by mid-single digit increases in our Wound Reconstruction
business, led by Integra® Dermal Matrices, SurgiMend® and ACell MicroMatrix and
low double digit increased in our Private Label business driven by higher
customer demand and favorable order timing.

Gross margin

Gross margin was $720.2 million for the nine months ended September 30, 2022, an
increase of $24.9 million from $695.4 million for the same period last year.
Gross margin as a percentage of total revenue increased to 62.1% for the nine
months ended September 30, 2022 from 61.2% in the same period last year. The
increase in gross margin percentage was due to higher revenues and a reduction
of inventory step-up amortization in connection with the acquisition of ACell in
the prior year.

Operating Expenses

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

                                            Nine Months Ended September 30,
                                                    2022                    2021
Research and development                                        6.4  %      6.0  %
Selling, general and administrative                            40.0  %     41.8  %
Intangible asset amortization                                   0.9  %      1.1  %
Total operating expenses                                       47.4  %     48.9  %


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

The Company continues to prioritize its operating costs to increase organic investments that will drive long-term growth, including support for new product development and launch, clinical studies, geographic expansion and WE sales channel expansion.

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Research and development

Research and development expenses for the nine months ended September 30, 2022
increased by $6.1 million as compared to the same period in the prior year. This
increase in spending resulted from additional spending on new product
development, clinical studies and additional spending due to the EU MDR
compliance.

Selling, general and administrative expenses

Selling, general and administrative costs decreased by $10.8 million as compared
to the same period in the prior year driven primarily by reduced employee
related costs and stock-based compensation, partially offset by increased
selling costs on commissions and investment in sales force expansion.
Additionally, the decrease in the nine months ended September 30, 2022 as
compared to the same period in the prior year was also due to the reduction of
$16.8 million in the change in fair value of contingent consideration for ACell,
partially offset by increased spending in acquisition related costs for
acquiring ACell as well as the sale of its Extremity Orthopedics business to
Smith & Nephew.

Amortization of intangible assets

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

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

Non-operating income and expenses

Here is a summary of non-operating income and expenses:

                                                 Nine Months Ended September 30,
Dollars in thousands                                   2022                      2021
Interest income                          $           6,606                    $  5,298
Interest expense                                   (36,700)                    (38,270)
Gain from the sale of businesses                       644                  

41,967

Other income, net                                    8,056                  

14,888

Total non-operating income and expense   $         (21,394)                   $ 23,883


Interest Income

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

Interest Expense

Interest expense for the nine months ended September 30, 2022 decreased by $1.6 million compared to the same period last year, mainly due to less borrowing on the senior secured credit facility.

Gain from the sale of businesses

On August 31, 2022, the Company completed its previously announced sale of its
TWC business to Gentell and recognized $0.6 million as a gain from the sale of
the business for the nine months ended September 30, 2022. On January 4, 2021,
the Company completed its sale of its Extremity Orthopedics business and
recognized a gain of $42.0 million for the nine months ended September 30, 2021.

Other income, net

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

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Income Taxes

                                      Nine Months Ended September 30,
Dollars in thousands                  2022                           2021
Income before income taxes     $       149,686                   $ 162,890
Income tax (benefit) expense            22,082                      39,199
Effective tax rate                        14.8   %                    24.1  %


The Company's effective income tax rates for the nine months ended September 30,
2022 and 2021 were 14.8% and 24.1%, respectively. For the nine months ended
September 30, 2022, the primary driver of the lower tax rate is a $5.5 million
benefit related to excess tax benefits from stock compensation, offset by the
prior year tax impact of the gain on the sale of the Extremity Orthopedics
business, which was completed during the first quarter of 2021.

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

Additionally, changes to income tax laws and regulations, in any of the tax
jurisdictions in which the Company operates, could impact the effective tax
rate. Various governments, both U.S. and non-U.S., are increasingly focused on
tax reform and revenue-raising legislation. Further, legislation in foreign
jurisdictions may be enacted, in response to the BEPS project begun by the OECD.
The OECD recently finalized major reform of the international tax system with
respect to a 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 tax reserves are presented in the balance sheet within other
liabilities, except for amounts relating to items we expect to pay in the coming
year, which would be classified as current income taxes payable.

PRODUCT GEOGRAPHIC REVENUES AND OPERATIONS

The Company allocates revenue to geographic areas based on customer location. Total revenue by main geographic area breaks down as follows:

                                             Three Months Ended September 30,             Nine Months Ended September 30,
Dollars in thousands                             2022                2021                    2022                    2021
United States                               $   282,016          $  275,775          $         832,714          $   801,754
Europe                                           38,301              46,458                    128,907              140,714
Asia Pacific                                     42,774              45,015                    133,856              136,616
Rest of World                                    22,100              19,613                     64,167               57,840
Total Revenues                              $   385,191          $  386,861          $       1,159,644          $ 1,136,924


The Company generates 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 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.

Domestic revenues increased by $6.2 million for the three months ended
September 30, 2022 compared to the same period last year. European sales
decreased by $8.2 million for the three months ended September 30, 2022 compared
to the same period last year. Sales to customers in Asia Pacific decreased by
$2.2 million for the three months ended September 30, 2022 compared to the same
period last year. The Rest of World for the three months ended September 30,
2022 increased by $2.5 million compared to the same period last year. The
international revenues were impacted by a $11.7 million unfavorable foreign
exchange impact. Sales in China, Japan and Canada were the primary drivers of
international growth.

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Domestic revenues increased by $31.0 million for the nine months ended
September 30, 2022 compared to the same period last year. European sales
decreased by $11.8 million for the nine months ended September 30, 2022 compared
to the same period last year. Sales to customers in Asia Pacific decreased by
$2.8 million for the nine months ended September 30, 2022 compared to the same
period last year. The Rest of World for the nine months ended September 30, 2022
increased by $6.3 million compared to the same period last year. The
international revenues were impacted by a $26.6 million unfavorable foreign
exchange impact. Sales in Japan, China, and Canada were the primary drivers of
international growth.

CASH AND CAPITAL RESOURCES

Working capital

The Company's working capital as of September 30, 2022 and December 31, 2021 was
$892.0 million and $813.7 million, respectively. Working capital consists of
total current assets less total current liabilities as presented in the
consolidated balance sheets.

Cash and negotiable securities

The Company had cash and cash equivalents totaling approximately $511.9 million
and $513.4 million at September 30, 2022 and December 31, 2021 respectively,
which are valued based on Level 1 measurements in the fair value hierarchy. At
September 30, 2022, our non-U.S. subsidiaries held approximately $317.7 million
of cash and cash equivalents that are available for use outside the U.S. On
October 3, 2022, the Company settled cross-currency swaps designated as cash
flow hedges of intercompany loans and approximately $100 million of cash was
repatriated to the U.S. Refer to See Note 7, Derivative Instruments of the Notes
to Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for
additional details The Company asserts that it has the ability and intends to
indefinitely reinvest the undistributed earnings from its foreign operations
unless there is no material tax cost to remit the earnings into the U.S.

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