INTEGRA LIFESCIENCES HOLDINGS CORP (Form: 8-K, Received: 02/24/2011 06:08:07)  

 


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

     
Date of Report (Date of Earliest Event Reported):   February 24, 2011

Integra LifeSciences Holdings Corporation
__________________________________________
(Exact name of registrant as specified in its charter)

     
Delaware 000-26244 510317849
_____________________
(State or other jurisdiction
_____________
(Commission
______________
(I.R.S. Employer
of incorporation) File Number) Identification No.)
      
311 Enterprise Drive, Plainsboro, New Jersey   08536
_________________________________
(Address of principal executive offices)
  ___________
(Zip Code)
     
Registrant’s telephone number, including area code:   609-275-0500

Not Applicable
______________________________________________
Former name or former address, if changed since last report

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Top of the Form

Item 2.02 Results of Operations and Financial Condition.

On February 24, 2011, Integra LifeSciences Holdings Corporation (the "Company") issued a press release announcing financial results for the quarter and year ended December 31, 2010 (the "Press Release"). A copy of the Press Release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference into this Item. In the financial statements portion of the Press Release, the Company has included a reconciliation of GAAP revenues to adjusted revenues for the quarter and year ended December 31, 2010, and GAAP net income to adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") and adjusted EBITDA excluding stock-based compensation, GAAP net income to adjusted net income, and GAAP earnings per diluted share to adjusted earnings per diluted share used by management for the quarters and years ended December 31, 2010 and 2009, as well as GAAP net income to adjusted net income and GAAP earnings per diluted share to adjusted earnings per diluted share used by management for guidance for the year ending December 31, 2011.

The information contained in Item 2.02 of this Current Report on Form 8-K (including the Press Release and selected historical financial information) is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that Section. The information contained in Item 2.02 of this Current Report on Form 8-K (including the Press Release and selected historical financial information) shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in any such filing.

Discussion of Adjusted Financial Measures

In addition to our GAAP results, we provide adjusted revenues, adjusted EBITDA, adjusted EBITDA excluding stock-based compensation, adjusted net income and adjusted earnings per diluted share. Adjusted revenues consist of growth in total revenues excluding the effects of currency exchange rates on the current period’s revenues. The various measures of adjusted EBITDA consist of GAAP net income, excluding: (i) depreciation and amortization, (ii) other income (expense), net, (iii) interest income and expense, (iv) income taxes, (v) those operating expenses also excluded from adjusted net income and, as appropriate (vi) stock-based compensation expense. The measure of adjusted net income consists of GAAP net income, excluding: (i) acquisition-related charges; (ii) certain employee termination and related costs; (iii) intangible asset impairment charges; (iv) charges associated with discontinued or withdrawn product lines; (v) systems implementation charges; (vi) facility consolidation, manufacturing and distribution transfer charges; (vii) incremental professional and bank fees related to the possibility of obtaining a waiver under our revolving credit facility; (viii) charges related to restructuring our European subsidiaries; (ix) charges related to our Chief Operating Officer’s fully-vested equity and cash signing bonus compensation and other expenses related to his joining the Company; (x) charges or gains related to litigation matters or disputes; (xi) gains and losses related to the early extinguishment of convertible notes; (xii) non-cash amortization of imputed interest as a result of the adoption of the current convertible debt accounting; (xiii) intangible asset amortization expense; (xiv) quarterly adjustments to income tax expense/benefit related to the cumulative impact of changes in estimated tax rates and certain infrequently occurring items; and (xv) the income tax expense/benefit related to these adjustments. The adjusted earnings per diluted share measure is calculated by dividing adjusted net income attributable to diluted shares by diluted weighted average shares outstanding. Reconciliations of GAAP revenues to adjusted revenues for the quarter and year ended December 31, 2010 and GAAP net income to adjusted EBITDA, adjusted EBITDA excluding stock-based compensation and adjusted net income, and GAAP earnings per diluted share to adjusted earnings per diluted share for the quarters and years ended December 31, 2010 and 2009 appear in the financial tables in this release.

The Company believes that the presentation of adjusted revenues and the various adjusted EBITDA, adjusted net income and adjusted earnings per diluted share measures provides important supplemental information to management and investors regarding financial and business trends relating to the Company’s financial condition and results of operations. Management uses non-GAAP financial measures in the form of adjusted revenues, adjusted EBITDA, adjusted EBITDA excluding stock-based compensation, adjusted net income and adjusted earnings per diluted share when evaluating operating performance because we believe that the inclusion or exclusion of the items described below, for which the amounts and/or timing may vary significantly depending upon the Company’s acquisition, integration, and restructuring activities, for which the amounts are non-cash in nature, or for which the amounts are not expected to recur at the same magnitude as we implement certain tax planning strategies, provides a supplemental measure of our operating results that facilitates comparability of our operating performance from period to period, against our business model objectives, and against other companies in our industry. We have chosen to provide this information to investors so they can analyze our operating results in the same way that management does and use this information in their assessment of our core business and the valuation of our Company.

Adjusted revenues, adjusted EBITDA, adjusted EBITDA excluding stock-based compensation, adjusted net income and adjusted earnings per diluted share are significant measures used by management for purposes of:

• supplementing the financial results and forecasts reported to the Company’s board of directors;
• evaluating, managing and benchmarking the operating performance of the Company;
• establishing internal operating budgets;
• determining compensation under bonus or other incentive programs;
• enhancing comparability from period to period;
• comparing performance with internal forecasts and targeted business models; and
• evaluating and valuing potential acquisition candidates.

The measure of adjusted revenues that we report reflects the growth in total revenues for the quarter and year ended December 31, 2010 adjusted for the effects of currency exchange rates on current period revenues. We provide this measure because changes in foreign currency exchange rates can distort our revenue growth favorably or unfavorably, depending upon the strength of the U.S. dollar in relation to the various foreign currencies in which we generate revenues. We generate significant revenues outside the United States in multiple foreign currencies including euros, British pounds, Swiss francs and Australian and Canadian dollars. We believe this measure provides useful information to determine the success of our international selling organizations in increasing sales of products in their local currencies without regard to fluctuations in currency exchanges rates, for which we have no control over.

The measure of adjusted net income reflects GAAP net income adjusted for one or more of the following items, as applicable:

• Acquisition-related charges. Acquisition-related charges include up-front fees and milestone payments that are expensed as incurred in connection with acquiring licenses or rights to technology for which no product has been approved for sale by regulatory authorities and such approval is not reasonably assured at the time such up-front fees or milestone payments are made, and in-process research and development charges when accounting rules require them to be expensed, inventory fair value purchase accounting adjustments, impairments to existing intangible assets in connection with a subsequent acquisition, and legal, accounting and other outside consultants expenses directly related to acquisitions. Inventory fair value purchase accounting adjustments consist of the increase to cost of goods sold that occur as a result of expensing the "step up" in the fair value of inventory that we purchased in connection with acquisitions as that inventory is sold during the financial period. Although recurring given the ongoing character of our development and acquisition programs, these acquisition and in-licensing related charges are not factored into the evaluation of our performance by management after completion of development programs or acquisitions because they are of a temporary nature, they are not related to our core operating performance and the frequency and amount of such charges vary significantly based on the timing and magnitude of our development and acquisition transactions as well as the level of inventory on hand at the time of acquisition.

• Certain employee termination and related costs. Certain employee termination and related costs consist of charges related to certain significant reductions in force that are not initiated in connection with facility consolidations or manufacturing transfers and senior management level terminations. Management excludes these items when evaluating the Company’s operating performance because these amounts do not affect our core operations and because of the infrequent and/or large scale nature of these activities.

• Intangible asset impairment charges. This represents impairment charges recorded against various intangible assets, including completed or core technology, customer relationships, and tradenames. Such impairments result primarily from management decisions to discontinue or significantly reduce promoting certain product lines or tradenames, the inability to incorporate existing product technologies into product development programs, and other circumstances. Management excludes this item when evaluating the Company’s operating performance because of the infrequent and non-cash nature of this activity.

• Charges associated with discontinued or withdrawn product lines. These charges represent charges taken and reductions in revenue recorded in connection with product lines that the Company discontinues or withdraws. Management excludes this item when evaluating the Company’s operating performance because of the infrequent nature of this activity or because many such product discontinuations are related to recent acquisitions.

• Systems implementation charges. Systems implementation charges consist of the non-capitalizable portion of internal labor and outside consulting costs related to the implementation of a global enterprise resource planning system. We have inherited many diverse business processes and different information systems through our numerous acquisitions. Accordingly, we are undertaking this initiative in order to standardize business processes globally and to better integrate all of our existing and acquired operations using one information system. Although recurring in nature given the expected timeframe to complete the implementation for our existing operations and our expectation to continue to acquire new businesses and operations, management excludes these charges when evaluating the operating performance of the Company because the frequency and amount of such charges vary significantly based on the timing and magnitude of the Company’s implementation activities and are, in some cases, dependent upon opportunities identified in acquisitions, which also vary in frequency and magnitude.

• Facility consolidation, manufacturing and distribution transfer charges. These charges, which include employee termination and other costs associated with exit or disposal activities, costs related to transferring manufacturing and/or distribution activities to different locations, and costs associated with the worldwide implementation of a single enterprise resource planning system, result from rationalizing and enhancing our existing manufacturing, distribution and administrative infrastructure. Many of these cost-saving and efficiency-driven activities are identified as opportunities in connection with acquisitions that provide the Company with additional capacity or economies of scale. Although recurring in nature given management’s ongoing review of the efficiency of our manufacturing, distribution and administrative facilities and operations, management excludes these items when evaluating the operating performance of the Company because the frequency and amount of such charges vary significantly based on the timing and magnitude of the Company’s rationalization activities and are, in some cases, dependent upon opportunities identified in acquisitions, which also vary in frequency and magnitude.

• Incremental professional and bank fees related to the possibility of obtaining a waiver under our revolving credit facility. These charges include fees paid to various banks in connection with the possibility of obtaining a waiver related to certain non-financial debt covenants. Management excludes these items when evaluating the Company’s operating performance because such incremental amounts are not expected to be incurred again.

• Charges related to restructuring our European subsidiaries. These amounts represent charges recorded in operating or non-operating expenses such as levies and fees paid to government authorities, legal, tax, accounting and consulting fees, and foreign currency gains and losses related to intercompany loan agreements incurred directly as a result of reorganizing our European subsidiaries and transfers of business assets between these legal entities. Management excludes this item when evaluating the Company’s operating performance because of the infrequent nature of this activity.

• Charges related to our Chief Operating Officer’s fully vested equity and cash signing bonus compensation and other expenses related to his joining the Company. These charges related to a fully-vested equity grant, a cash signing bonus and other expenses incurred in connection with the hiring of our Chief Operating Officer. Management excludes this item when evaluating the Company’s operating performance because of the infrequent nature of this activity.

• Charges or gains related to litigation matters or disputes. These charges or gains include estimated losses, gains or actual settlements and judgment against or in favor of the Company related to litigation, disputes or similar matters. Management excludes this item when evaluating the Company’s operating performance because of the infrequent nature of this activity.

• Gains or losses related to the early extinguishment of convertible notes. This amount represents the gain/loss recorded by the Company from repurchasing its convertible debt securities for more/less than their face value. Management excludes this item when evaluating the Company’s operating performance because of the infrequent nature of this activity.

• Non-cash amortization of imputed interest as a result of the adoption of the current convertible debt accounting. The adoption of current convertible debt accounting requires separate accounting for the liability and equity components of the Company’s convertible debt instruments, which may be settled in cash upon conversion, in a manner that reflects an applicable nonconvertible debt borrowing rate at the time that we issued such convertible debt instruments. Management excludes this item when evaluating the Company’s operating performance because of the non-cash nature of this activity and because it resulted from a change in accounting principles that were not applicable at the time such convertible notes were issued.

• Intangible asset amortization expense. Management excludes this item when evaluating the Company’s operating performance because it is a non-cash expense.

• Quarterly adjustments to income tax expense/benefit related to the cumulative impact of changes in estimated tax rates and certain infrequently occurring items. Income tax expense in the current quarter is adjusted by the cumulative impacts in that quarter of changes in income tax rates (statutory and estimated effective tax rates) and certain other infrequently occurring items (such as penalties, interest, and settlements with government tax authorities) that relate to prior periods. Management excludes this item when evaluating the Company’s current quarter operating performance because the cumulative impact in the current quarter of these items applies to prior periods and thus distorts the Company’s adjusted income tax rate in the current quarter. The year-to-date adjusted net income and adjusted diluted earnings per share measures are not adjusted by this item, as the cumulative impacts are properly reflected in the year-to-date adjusted results.

• Income tax expense (benefit) related to the above adjustments. Income tax expense is adjusted by the amount of additional tax expense or benefit that the Company estimates that it would record if it used non-GAAP results instead of GAAP results in the calculation of its tax provision, based on the statutory rate applicable to jurisdictions in which the above non-GAAP adjustments relate.

Adjusted revenues, adjusted EBITDA, adjusted EBITDA excluding stock-based compensation, adjusted net income and adjusted earnings per diluted share are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP financial measures have limitations in that they do not reflect all of the revenues, costs or benefits associated with the operations of the Company’s business as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. The Company expects to continue to acquire businesses and product lines and to incur expenses of a nature similar to many of the non-GAAP adjustments described above, and exclusion of these items from its adjusted financial measures should not be construed as an inference that all of these revenue adjustments or costs are unusual, infrequent or non-recurring. Some of the limitations in relying on the adjusted financial measures are:

• The Company periodically acquires other companies or businesses, and we expect to continue to incur acquisition-related expenses and charges in the future. These costs can directly impact the amount of the Company’s available funds or could include costs for aborted deals which may be significant and reduce GAAP net income.

• The Company has initiated a long term effort to implement a global enterprise resource planning system, and we expect to continue to incur significant systems implementation charges until that effort is completed. These costs can directly impact the amount of the Company’s available funds and reduce GAAP net income.

• All of the adjustments to GAAP net income have been tax affected at the Company’s actual tax rates. Depending on the nature of the adjustments and the tax treatment of the underlying items, the effective tax rate related to adjusted net income could differ significantly from the effective tax rate related to GAAP net income.

In the financial tables portion of the Press Release, the Company has included a reconciliation of GAAP reported revenues to adjusted revenues for the quarter and year ended December 31, 2010 and GAAP net income to adjusted EBITDA and adjusted EBITDA excluding stock-based compensation, GAAP net income to adjusted net income, and GAAP earnings per diluted share to adjusted earnings per diluted share used by management for the quarters and years ended December 31, 2010 and 2009. Also included are reconciliations for future periods.





Item 7.01 Regulation FD Disclosure.

Attached as Exhibit 99.1, and incorporated into this Item 7.01 by reference, is the Press Release issued on February 24, 2011 by the Company.





Item 9.01 Financial Statements and Exhibits.

Press release with attachments, dated February 24, 2011, issued by Integra LifeSciences Holdings Corporation






Top of the Form

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 hereunto duly authorized.

         
    Integra LifeSciences Holdings Corporation
          
February 24, 2011   By:   John B. Henneman, III
       
        Name: John B. Henneman, III
        Title: Executive Vice President, Finance & Administration, and Chief Financial Officer


Top of the Form

Exhibit Index


     
Exhibit No.   Description

 
99.1
  Press release with attachments dated February 24, 2011, issued by Integra LifeSciences Holdings Corporation

News Release

Contacts:

Integra LifeSciences Holdings Corporation

     
John B. Henneman, III
  Investor Relations:
Executive Vice President,
Finance and Administration,
and Chief Financial Officer
(609) 275-0500
jack.henneman@integralife.com
  Angela Steinway


(609) 936-2268
angela.steinway@integralife.com
 
   

Integra LifeSciences Reports Fourth Quarter and Full Year 2010 Financial Results

Revenues for the fourth quarter and full year increased to $194 million and $732 million

Plainsboro, New Jersey, February 24, 2011 – Integra LifeSciences Holdings Corporation (NASDAQ: IART) today reported its financial results for the fourth quarter and full year ending December 31, 2010. Total revenues for the fourth quarter were $194.1 million, reflecting an increase of $10.6 million, or 6%, over the fourth quarter of 2009. Total revenues in the full year of 2010 were $732.1 million, reflecting an increase of $49.6 million, or 7%, over the full year of 2009. Excluding the impact of currency exchange rates, revenues increased 7% over the fourth quarter of 2009 and 7% over the full year 2009. We present revenues by product category in a table at the end of this press release.

“We successfully navigated the continued challenges presented by the economy in 2010. Our financial results highlight the strength of our diverse revenue base,” said Integra’s Chief Executive Officer, Stuart Essig. “We believe the investments we made throughout 2010 position our company well for long-term growth.”

The Company reported GAAP net income of $18.8 million, or $0.63 per diluted share, for the fourth quarter of 2010, compared to GAAP net income of $15.7 million, or $0.53 per diluted share, for the fourth quarter of 2009. The Company reported GAAP net income of $65.7 million, or $2.17 per diluted share, for the full year 2010, compared to GAAP net income of $51.0 million, or $1.74 per diluted share in 2009.

Adjusted net income for the fourth quarter of 2010, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $24.0 million, or $0.80 per diluted share, compared to $21.0 million, or $0.71 per diluted share, in the fourth quarter of 2009. Adjusted net income for the full year 2010, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $89.9 million, or $2.97 per diluted share, compared to $76.5 million, or $2.61 per diluted share in 2009.

Integra generated $28.4 million in cash flows from operations and used $18.2 million of cash on capital expenditures in the fourth quarter of 2010. For the full year ended December 31, 2010, Integra’s cash flows from operations totaled $105.6 million. The Company used $37.1 million of cash on capital expenditures during the year.

Adjusted EBITDA for the fourth quarter of 2010, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $41.5 million, flat compared to the same period last year. Adjusted EBITDA for the full year 2010, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $151.0 million, an increase of 4% compared to the full year 2009.

Adjusted EBITDA excluding stock-based compensation for the fourth quarter of 2010, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $45.8 million, an increase of 1% compared to the same period last year. Adjusted EBITDA excluding stock-based compensation for the full year 2010, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $166.7 million, an increase of 4% compared to the same period last year.

Outlook for 2011

The Company is providing revenues and earnings per share guidance for the full year 2011. The Company anticipates revenues between $765 million and $780 million, at current exchange rates. As has been the case in the past, we expect revenues in the first quarter of 2011 to be 7% to 8% lower than the fourth quarter of 2010, and earnings to be disproportionately lower, and that the fourth quarter of 2011 will be the strongest quarter of the year. The Company is guiding to GAAP earnings per diluted share of between $1.97 and $2.12 and to adjusted earnings per diluted share of between $2.87 and $3.02. In accordance with our usual practice, expectations for financial performance do not include the impact of acquisitions or other strategic corporate transactions that have not yet closed.

In the future, the Company may record, or expects to record, certain additional revenues, gains, expenses or charges as described in the Discussion of Adjusted Financial measures below that it will exclude in the calculation of adjusted EBITDA and adjusted earnings per share for historical periods and in providing adjusted earnings per share guidance.

Conference Call

Integra has scheduled a conference call for 8:30 AM ET on Thursday, February 24, 2011 to discuss financial results for the fourth quarter and full year 2010 and forward-looking financial guidance. The conference call will be hosted by Integra’s senior management team and will be open to all listeners. Additional forward-looking information may be discussed in a question and answer session following the call.

Access to the live call is available by dialing 719-457-2693 and using the passcode 2097741. The call can also be accessed through a webcast via a link provided on the Investor Relations homepage of Integra’s website at www.integralife.com. Access to the replay is available through March 10, 2011 by dialing 719-457-0820 and using the passcode 2097741. The webcast will also be archived on the website.

***

Integra LifeSciences, a world leader in medical devices, is dedicated to limiting uncertainty for surgeons, so they can concentrate on providing the best patient care. Integra offers innovative solutions in orthopedics, neurosurgery, spine, reconstructive and general surgery. For more information, please visit www.integralife.com.

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks, uncertainties and reflect the Company’s judgment as of the date of this release. Forward-looking statements include, but are not limited to, statements concerning future financial performance, including projections for revenues, GAAP and adjusted net income, GAAP and adjusted earnings per diluted share, stock-based compensation, non-GAAP adjustments such as system implementations charges, acquisition-related charges, non-cash amortization of imputed interest as a result of the adoption of the current convertible debt accounting, intangible asset amortization, and income tax expense (benefit) related to non-GAAP adjustments. Such forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from predicted or expected results. Such risks and uncertainties include, but are not limited to: the Company’s ability to maintain relationships with customers of acquired entities; physicians’ willingness to adopt and third-party payors’ willingness to provide reimbursement for the Company’s recently launched and planned products; the Company’s ability to manufacture sufficient quantities of its products to meet its customers’ demand; initiatives launched by the Company’s competitors; the Company’s ability to secure regulatory approval for products in development; fluctuations in hospital spending for capital equipment; the Company’s ability to comply with and obtain approvals for products of human origin and comply with recently enacted regulations regarding products containing materials derived from animal sources; difficulties in controlling expenses, including costs to procure and manufacture our products; the impact of changes in management or staff levels; the Company’s ability to integrate acquired businesses; the Company’s ability to leverage its existing selling organizations and administrative infrastructure; the Company’s ability to increase product sales and gross margins, and control non-product costs; the amount and timing of acquisition and integration related costs; the geographic distribution of where the Company generates its taxable income; the effect of legislation effecting healthcare reform in the United States; the timing and amount of share-based awards granted to employees; fluctuations in foreign currency exchange rates; the amount of our convertible notes and bank borrowings outstanding, and the economic, competitive, governmental, technological and other risk factors and uncertainties identified under the heading “Risk Factors” included in Item 1A of Integra’s Annual Report on Form 10-K for the year ended December 31, 2010 and information contained in subsequent filings with the Securities and Exchange Commission. These forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

Discussion of Adjusted Financial Measures

In addition to our GAAP results, we provide adjusted revenues, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA excluding stock-based compensation, adjusted net income and adjusted earnings per diluted share. Adjusted revenues consist of growth in total revenues excluding the effects of currency exchange rates on the current period’s revenues. The various measures of adjusted EBITDA consist of GAAP net income, excluding: (i) depreciation and amortization, (ii) other income (expense), net, (iii) interest income and expense, (iv) income taxes, (v) those operating expenses also excluded from adjusted net income and, as appropriate (vi) stock-based compensation expense. The measure of adjusted net income consists of GAAP net income, excluding: (i) acquisition-related charges; (ii) certain employee termination and related costs; (iii) intangible asset impairment charges; (iv) charges associated with discontinued or withdrawn product lines; (v) systems implementation charges; (vi) facility consolidation, manufacturing and distribution transfer charges; (vii) incremental professional and bank fees related to the possibility of obtaining a waiver under our revolving credit facility; (viii) charges related to restructuring our European subsidiaries; (ix) charges related to our Chief Operating Officer’s fully-vested equity and cash signing bonus compensation and other expenses related to his joining the Company; (x) charges or gains related to litigation matters or disputes; (xi) gains and losses related to the early extinguishment of convertible notes; (xii) non-cash amortization of imputed interest as a result of the adoption of the current convertible debt accounting; (xiii) intangible asset amortization expense; (xiv) quarterly adjustments to income tax expense/benefit related to the cumulative impact of changes in estimated tax rates and certain infrequently occurring items; and (xv) the income tax expense/benefit related to these adjustments. The adjusted earnings per diluted share measure is calculated by dividing adjusted net income attributable to diluted shares by diluted weighted average shares outstanding. Reconciliations of GAAP revenues to adjusted revenues for the quarter and year ended December 31, 2010 and GAAP net income to adjusted EBITDA, adjusted EBITDA excluding stock-based compensation and adjusted net income, and GAAP earnings per diluted share to adjusted earnings per diluted share for the quarters and years ended December 31, 2010 and 2009 appear in the financial tables in this release.

Integra believes that the presentation of adjusted revenues and the various adjusted EBITDA, adjusted net income, and adjusted earnings per diluted share measures provides important supplemental information to management and investors regarding financial and business trends relating to the Company’s financial condition and results of operations. For further information regarding why Integra believes that these non-GAAP financial measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the Company’s Current Report on Form 8-K regarding this earnings press release filed today with the Securities and Exchange Commission. This Current Report on Form 8-K is available on the SEC’s website at www.sec.gov or on our website at www.integralife.com .

1

INTEGRA LIFESCIENCES HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

(In thousands, except per share amounts)

                                 
    Three Months Ended   Twelve Months Ended
    December 31,   December 31,
    2010   2009   2010   2009
Total revenues
  $ 194,134     $ 183,526     $ 732,068     $ 682,487  
Costs and expenses:
                               
Cost of product revenues
    71,306       63,944       268,188       244,918  
Research and development
    13,331       11,810       48,114       44,280  
Selling, general and administrative
    82,590       76,484       305,055       281,102  
Intangible asset amortization
    2,744       3,441       12,017       14,363  
 
                               
Total costs and expenses
    169,971       155,679       633,374       584,663  
Operating income
    24,163       27,847       98,694       97,824  
Interest income
    53       53       225       631  
Interest expense
    (5,125 )     (4,876 )     (18,356 )     (23,227 )
Other income (expense), net
    349       (347 )     1,551       (2,076 )
 
                               
Income before income taxes
    19,440       22,677       82,114       73,152  
Income tax expense (benefit)
    633       6,946       16,445       22,197  
 
                               
Net income
    18,807       15,731       65,669       50,955  
Diluted net income per share*
  $ 0.63     $ 0.53     $ 2.17     $ 1.74  
Weighted average common shares
                               
outstanding for diluted net
                               
income per share
    29,935       29,540       30,149       29,292  

*In accordance with the authoritative guidance related to determining whether instruments issued in share-based payment transactions are participating securities, certain of the Company’s unvested restricted share units contain rights to receive non-forfeitable dividends, and thus, are participating securities requiring the two-class method of computing earnings per share. The calculation of earnings per share for common stock shown above excludes the income attributable to the unvested restricted share units with dividend rights from the numerator and excludes the dilutive impact of those units from the denominator. This had an insignificant impact (impacts the rounding by $0.01 or less per share) on diluted net income per share for all periods shown above.

2

Listed below are the items included in GAAP revenues and GAAP net income that management excludes in computing the adjusted financial measures referred to in the text of this press release and further described under Discussion of Adjusted Financial Measures.

Growth in total revenues excluding the effects of currency exchange rates
(In thousands)

                                                 
    Three Months Ended   Twelve Months Ended
    December 31,   December 31,
    2010   2009   Change   2010   2009   Change
Orthopedics
  $ 74,074     $ 68,505       8 %   $ 290,050     $ 262,170       11 %
Neurosurgery
  $ 74,150     $ 68,137       9 %   $ 275,046     $ 256,544       7 %
Instruments
  $ 45,910     $ 46,884       -2 %   $ 166,972     $ 163,773       2 %
 
                                               
Total revenues
  $ 194,134     $ 183,526       6 %   $ 732,068     $ 682,487       7 %
Impact of changes in
                                               
currency exchange rates
    ($1,350 )                   ($715 )              
 
                                               
Growth in total revenues
                                               
excluding the effects of
                                               
currency exchange rates
  $ 195,484     $ 183,526       7 %   $ 732,783     $ 682,487       7 %

3

Items included in GAAP net income
(In thousands)

                                 
    Three Months Ended   Twelve Months Ended
    December 31,   December 31,
    2010   2009   2010   2009
Acquisition-related charges (a)
  $ 425     $ 632     $ 2,509     $ 5,598  
Certain employee termination and related
                               
charges (b)
    339       28       1,498       674  
Intangible asset impairment charges (c)
                856       1,519  
Charges associated with discontinued
                               
or withdrawn product lines (d)
    432             506       246  
Systems implementation charges (e)
    1,673             3,462        
Facility consolidation, manufacturing
                               
and distribution transfer charges (f)
    872       280       1,676       768  
Incremental professional and bank fees related to
                               
the possibility of obtaining a waiver under our
                               
revolving credit facility (g)
                      350  
Charges related to restructuring
                               
European entities (h)
    934             1,329       1,876  
Charges related to our Chief Operating Officer’s
                               
fully-vested equity and cash signing bonus
                               
compensation and other expenses related to
                               
his joining the Company (i)
    2,188             2,188        
Litigation settlement (gain) and
                               
related charges (j)
                      (253 )
Loss (gain) related to early extinguishment
                               
of convertible notes (k)
          448             (469 )
Non-cash amortization of imputed interest as a
                               
result of the adoption of the current convertible
                               
debt accounting (l)
    1,606       2,038       7,125       9,900  
Intangible asset amortization expense**
    4,200       4,854       17,019       19,404  
Income tax expense related to above
                               
adjustments, quarterly adjustments
                               
to income tax expense related to the
                               
cumulative impact of changes in
                               
estimated tax rates and certain
                               
infrequently occurring items that
                               
affected the reported tax rate
    (7,483 )     (2,986 )     (13,957 )     (14,052 )
Stock-based compensation expense*
    4,256       4,058       15,709       15,580  
Depreciation expense
    6,304       7,720       21,298       18,766  

(a)   Q4 2010 — $364 recorded in cost of product revenues, $61 recorded in selling general and administrative;

FY 2010 — $1,760 recorded in cost of product revenues, $673 recorded in selling general and administrative, $76 included in research and development.
Q4 2009 — $215 recorded in cost of product revenues, $134 recorded in research and development, $283 recorded in selling general and administrative;

FY 2009 — $4,787 recorded in cost of product revenues, $410 recorded in research and development, $401 recorded in selling general and administrative.

(b)   Q4 2010 — $205 recorded in cost of product revenues; $134 recorded in selling general and administrative;

FY 2010 — $555 recorded in cost of product revenues; $943 recorded in selling general and administrative.
Q4 2009 – all recorded in cost of product revenues;
FY 2009 — $117 recorded in cost of product revenues, $160 recorded in research and development, $397 recorded in selling general and administrative.

(c)   FY 2010 – all recorded in intangible asset amortization.
     
FY 2009 - all recorded in cost of product revenues.
(d)  
Q4 2010 — $317 recorded in cost of product revenues, $115 recorded in selling general and administrative;

FY 2010 — $391 recorded in cost of product revenues, $115 recorded in selling general and administrative.
FY 2009 — all recorded in cost of product revenues.

(e)   All recorded in selling general and administrative.

(f)   Q4 2010 — $202 recorded in cost of product revenues, $670 recorded in selling general and administrative;

FY 2010 — $936 recorded in cost of product revenues; $714 recorded in selling general and administrative; $26 recorded in research and development.
Q4 2009 – all recorded in cost of product revenues;

FY 2009 — $531 recorded in cost of product revenues, $237 recorded in selling general and administrative.

(g) FY 2009 – $200 recorded in selling general and administrative, $150 recorded in interest expense.
(h) FY 2010 – all recorded in selling general and administrative.

     
FY 2009 – all recorded in other expense (income).
(i)
(j)
(k)
(l)
 
All recorded in selling general and administrative.
FY 2009 — All recorded in other expense (income).
All recorded in other expense (income).
All recorded in interest expense.

*   Q4 2010 and FY 2010 – This amount excludes $1,500 of stock-based compensation expense included in item (i) above.

**   FY 2010 – This amount excludes $856 of intangible asset amortization expense included in item (c) above;

FY 2009 – This amount excludes $1,519 of intangible asset amortization expense included in item (c) above.

4

INTEGRA LIFESCIENCES HOLDINGS CORPORATION
RECONCILIATION OF NON-GAAP ADJUSTMENTS – GAAP NET INCOME TO ADJUSTED EBITDA AND ADJUSTED EBITDA
EXCLUDING STOCK BASED COMPENSATION
(UNAUDITED)

(In thousands)

                                 
    Three Months Ended   Twelve Months Ended
    December 31,   December 31,
    2010   2009   2010   2009
GAAP net income
  $ 18,807     $ 15,731     $ 65,669     $ 50,955  
Non-GAAP adjustments:
                               
Depreciation and intangible asset
                               
amortization expense
    10,504       12,574       38,317       38,170  
Other (income) expense, net
    (349 )     347       (1,551 )     2,076  
Interest (income) expense, net
    5,072       4,823       18,131       22,596  
Income tax expense
    633       6,946       16,445       22,197  
Acquisition-related charges
    425       632       2,509       5,598  
Certain employee termination and related
                               
Charges
    339       28       1,498       674  
Intangible asset impairment charges
                856       1,519  
Charges associated with discontinued
                               
or withdrawn product lines
    432             506       246  
Systems implementation charges
    1,673             3,462        
Facility consolidation, manufacturing
                               
and distribution transfer charges
    872       280       1,676       768  
Incremental professional and bank fees
                               
related to the possibility of obtaining a
                               
waiver under our revolving credit facility
                      200  
Charges related to restructuring
                               
European entities
    934             1,329        
Charges related to our Chief Operating
                               
Officer’s fully-vested equity and cash signing
                               
bonus compensation and other expenses
                               
related to his joining the Company
    2,188             2,188        
Total of non-GAAP adjustments
    22,723       25,630       85,366       94,044  
 
                               
Adjusted EBITDA
  $ 41,530     $ 41,361     $ 151,035     $ 144,999  
Stock-based compensation expense
    4,256       4,058       15,709       15,580  
 
                               
Adjusted EBITDA excluding stock-based
                               
compensation
  $ 45,786     $ 45,419     $ 166,744     $ 160,579  

5

INTEGRA LIFESCIENCES HOLDINGS CORPORATION
RECONCILIATION OF NON-GAAP ADJUSTMENTS – GAAP NET INCOME TO MEASURES OF ADJUSTED NET INCOME AND
ADJUSTED EARNINGS PER SHARE
(UNAUDITED)

(In thousands, except per share amounts)

                                 
    Three Months Ended   Twelve Months Ended
    December 31,   December 31,
    2010   2009   2010   2009
GAAP net income
  $ 18,807     $ 15,731     $ 65,669     $ 50,955  
Non-GAAP adjustments:
                               
Acquisition-related charges
    425       632       2,509       5,598  
Certain employee termination and related
                               
charges
    339       28       1,498       674  
Intangible asset impairment charges
                856       1,519  
Charges associated with discontinued
                               
or withdrawn product lines
    432             506       246  
Systems implementation charges
    1,673             3,462        
Facility consolidation, manufacturing
                               
and distribution transfer charges
    872       280       1,676       768  
Incremental professional and bank fees related to
                               
the possibility of obtaining a waiver under our
                               
revolving credit facility
                      350  
Charges related to restructuring
                               
European entities
    934             1,329       1,876  
Charges related to our Chief Operating Officer’s
                               
fully-vested equity and cash signing bonus
                               
compensation and other expenses related to
                               
his joining the Company
    2,188             2,188        
Litigation settlement (gain) and
                               
related charges
                      (253 )
Loss (gain) related to early extinguishment
                               
of convertible notes
          448             (469 )
Non-cash amortization of imputed interest as a
                               
result of the adoption of the current convertible
                               
debt accounting
    1,606       2,038       7,125       9,900  
Intangible asset amortization expense
    4,200       4,854       17,019       19,404  
Income tax expense related to above
                               
adjustments, quarterly adjustments
                               
to income tax expense related to the
                               
cumulative impact of changes in
                               
estimated tax rates and certain
                               
infrequently occurring items that
                               
affected the reported tax rate
    (7,483 )     (2,986 )     (13,957 )     (14,052 )
Total of non-GAAP adjustments
    5,186       5,294       24,211       25,561  
Adjusted net income
  $ 23,993     $ 21,025     $ 89,880     $ 76,516  
Adjusted diluted net income per share *
  $ 0.80     $ 0.71     $ 2.97     $ 2.61  
 
                               
Weighted average common shares outstanding
                               
for diluted net income per share
    29,935       29,540       30,149       29,292  

*   In accordance with the authoritative guidance related to determining whether instruments issued in share-based payment transactions are participating securities, certain of the Company’s unvested restricted share units contain rights to receive non-forfeitable dividends, and thus, are participating securities requiring the two-class method of computing earnings per share. The calculation of earnings per share for common stock shown above excludes the income attributable to the unvested restricted share units with dividend rights from the numerator and excludes the dilutive impact of those units from the denominator. This had an insignificant impact (impacts the rounding by $0.01 or less per share) on diluted net income per share for all periods shown above.

6

INTEGRA LIFESCIENCES HOLDINGS CORPORATION
CONDENSED BALANCE SHEET DATA
(UNAUDITED)

(In thousands)

                 
    December 31,   December 31,
    2010   2009
Cash and cash equivalents
  $ 128,763     $ 71,891  
Accounts receivable, net
    106,005       103,228  
Inventory, net
    146,928       140,240  
Term loan
    148,126        
Bank line of credit
    100,000       160,000  
Convertible securities
    155,154       225,514  
Stockholders’ equity
    499,963       444,885  

7

INTEGRA LIFESCIENCES HOLDINGS CORPORATION
RECONCILIATION OF NON-GAAP ADJUSTMENTS – GUIDANCE

(In thousands, except per share amounts)

                 
    Projected Year Ended
    December 31, 2011
     
 
  Low   High
 
               
GAAP net income
  $ 59,700     $ 64,200  
Non-GAAP adjustments:
               
Acquisition-related charges
    3,290       3,290  
Systems implementation charges
    14,000       14,000  
Facility consolidation, manufacturing
               
and distribution transfer charges
    2,230       2,230  
Expenses related to our Chief Operating
               
Officer’s joining the Company
    300       300  
Non-cash amortization of imputed interest as a result of the
               
adoption of the current convertible debt accounting
    6,710       6,710  
Intangible asset amortization expense
    16,960       16,960  
Income tax expense related
               
to above adjustments and certain
               
infrequently occurring items
    (16,190 )     (16,190 )
 
               
Total of non-GAAP adjustments
    27,300       27,300  
 
               
Adjusted net income
  $ 87,000     $ 91,500  
GAAP diluted net income per share
  $ 1.97     $ 2.12  
Non-GAAP adjustments detailed above
               
(per share)
  $ 0.90     $ 0.90  
Adjusted diluted net income per share
  $ 2.87     $ 3.02  
 
               
Weighted average common shares
               
outstanding for diluted net
               
income per share
    30,300       30,300  

IART-F
Source: Integra LifeSciences Holdings Corporation

8