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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             
COMMISSION FILE NO. 000-26224
 
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
Delaware 51-0317849
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
 (I.R.S. EMPLOYER
IDENTIFICATION NO.)
1100 Campus Road 08540
Princeton,New Jersey(ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) 
Registrant's Telephone Number, Including Area Code: (609275-0500
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report:
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASSTRADING SYMBOLNAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, Par Value $.01 Per ShareIARTNasdaq Global Select Market
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

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

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





Large accelerated filerAccelerated filer
Non-accelerated filer
  
Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
The number of shares of the registrant’s Common Stock, $0.01 par value, outstanding as of October 24, 2023 was 78,175,803.



Table of Contents
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
INDEX

 
 Page
Number



Table of Contents
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

INTEGRA LIFESCIENCES HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(UNAUDITED)
(Dollars in thousands, except per share amounts)
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Total revenue, net$382,421 $385,191 $1,144,534 $1,159,644 
Costs and expenses:
Cost of goods sold164,076 148,445 486,292 439,418 
Research and development26,596 24,736 79,908 74,410 
Selling, general and administrative161,948 143,820 493,513 464,397 
Intangible asset amortization3,208 3,141 9,342 10,339 
Total costs and expenses355,828 320,142 1,069,055 988,564 
Operating income26,593 65,049 75,479 171,080 
Interest income4,607 3,264 12,653 6,606 
Interest expense(13,062)(12,809)(37,626)(36,700)
Gain (loss) from the sale of business 644  644 
Other income (expense), net471 2,648 1,705 8,056 
Income before income taxes18,609 58,796 52,211 149,686 
Provision (benefit) for income taxes(888)8,881 4,304 22,082 
Net income $19,497 $49,915 $47,907 $127,604 
Net income per share
Basic$0.24 $0.60 $0.59 $1.54 
Diluted$0.24 $0.60 $0.59 $1.53 
Weighted average common shares outstanding (See Note 13):
Basic79,690 83,042 80,842 82,955 
Diluted79,811 83,399 81,112 83,476 
Comprehensive income (See Note 14)
16,412 55,691 39,387 $165,320 
The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.
4

Table of Contents
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands, except per share amounts)
September 30, 2023December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents$273,732 $456,661 
Trade accounts receivable, net of allowances of $5,630 and $4,304
256,270 263,465 
Inventories, net366,251 324,583 
Prepaid expenses and other current assets130,976 116,789 
Total current assets1,027,229 1,161,498 
Property, plant and equipment, net318,718 311,302 
Right of use asset - operating leases156,760 148,284 
Intangible assets, net1,067,023 1,126,609 
Goodwill1,036,146 1,038,881 
Deferred tax assets, net55,587 45,994 
Other assets77,908 57,190 
Total assets$3,739,371 $3,889,758 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of borrowings under senior credit facility$9,687 $38,125 
Current portion of borrowings under securitization facility75,700  
Current portion of lease liability - operating leases14,461 14,624 
Accounts payable, trade93,550 102,100 
Contract liabilities8,139 7,253 
Accrued compensation63,869 78,771 
Accrued expenses and other current liabilities90,306 80,033 
Total current liabilities355,712 320,906 
Long-term borrowings under senior credit facility850,089 733,149 
Long-term borrowings under securitization facility 104,700 
Long-term convertible securities569,527 567,341 
Lease liability - operating leases168,017 157,420 
Deferred tax liabilities74,453 63,338 
Other liabilities142,352 138,501 
Total liabilities2,160,150 2,085,355 
Stockholders’ equity:
Preferred stock; no par value; 15,000 authorized shares; none outstanding
  
Common stock; $0.01 par value; 240,000 authorized shares; 90,935 and 90,477 issued at September 30, 2023 and December 31, 2022, respectively
909 905 
Additional paid-in capital1,262,319 1,276,977 
Treasury stock, at cost; 11,823 shares and 6,823 shares at September 30, 2023 and December 31, 2022, respectively
(612,777)(362,862)
Accumulated other comprehensive income1,745 10,265 
Retained earnings927,025 879,118 
Total stockholders’ equity1,579,221 1,804,403 
Total liabilities and stockholders’ equity$3,739,371 $3,889,758 
The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.
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INTEGRA LIFESCIENCES HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
 Nine Months Ended September 30,
 20232022
OPERATING ACTIVITIES:
Net income$47,907 $127,604 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization92,527 88,803 
Deferred income tax provision2,963 1,439 
Share-based compensation14,350 21,994 
Amortization of debt issuance costs and expenses associated with debt refinancing4,731 5,142 
Non-cash lease expense2,120 3,040 
Loss (gain) on disposal of property and equipment(4)914 
Gain from the sale of business (644)
Change in fair value of contingent consideration and others8,278 (19,481)
Changes in assets and liabilities:
Accounts receivable5,050 (23,870)
Inventories(43,350)(24,443)
Prepaid expenses and other current assets(21,700)1,629 
Other non-current assets(8,774)9,575 
Accounts payable, accrued expenses and other current liabilities(22,141)(803)
Contract liabilities141 2,524 
Other non-current liabilities(893)(14,288)
Net cash provided by operating activities81,205 179,135 
INVESTING ACTIVITIES:
Purchases of property and equipment(42,330)(27,887)
Proceeds from Sale of Business 23,960 
Acquired in-process research and development milestone (4,742)
Net proceeds from swaps designated as net investment hedges5,381 4,909 
Net cash used in investing activities(36,949)(3,760)
FINANCING ACTIVITIES:
Proceeds from borrowings of long-term indebtedness146,900 34,250 
Payments on debt(85,900)(40,750)
Payment of debt issuance costs(7,578) 
Purchases of treasury stock(275,000)(125,000)
Proceeds from exercised stock options4,092 1,592 
Cash taxes paid in net equity settlement(5,549)(24,346)
Net cash used in financing activities(223,035)(154,254)
Effect of exchange rate changes on cash and cash equivalents(4,150)(22,632)
Net decrease in cash and cash equivalents(182,929)(1,511)
Cash and cash equivalents at beginning of period456,661 513,448 
Cash and cash equivalents at end of period$273,732 $511,937 
The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.
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INTEGRA LIFESCIENCES HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
(Dollars in thousands)
Nine Months Ended September 30, 2023
Common StockTreasury StockAdditional Paid-In CapitalAccumulated Other Comprehensive LossRetained EarningsTotal Equity
SharesAmountSharesAmount
Balance, January 1, 202390,476 $905 (6,823)$(362,862)$1,276,977 $10,265 $879,118 $1,804,403 
Net income— — — — — — 24,226 24,226 
Other comprehensive income (loss), net of tax— — — — — (3,198)— (3,198)
Issuance of common stock through employee stock purchase plan21 — — — 1,107 — — 1,107 
Issuance of common stock for vesting of share based awards, net of shares withheld for taxes316 1 16 846 (4,858)— — (4,011)
Share-based compensation— 2 — — 3,609 — — 3,611 
Accelerated shares repurchased— $— (2,111)(119,662)(31,538)$— — (151,200)
Balance, March 31, 202390,813 $908 (8,918)$(481,678)$1,245,297 $7,067 $903,344 $1,674,938 
Net income— — — — — — 4,184 4,184 
Other comprehensive loss, net of tax— — — — — (2,237)— (2,237)
Issuance of common stock for vesting of share based awards, net of shares withheld for taxes68 1 — 21 985 — — 1,007 
Share-based compensation— — — — 5,268 — — 5,268 
Accelerated shares repurchased— $— (609)(32,125)32,125 $— $—  
Balance, June 30, 202390,881 $909 (9,527)$(513,782)$1,283,675 $4,830 $907,528 $1,683,160 
Net income— — — — — — 19,497 19,497 
Other comprehensive income, net of tax— — — — — (3,085)— (3,085)
Treasury shares retirement— — —   — —  
Issuance of common stock for vesting of share based awards, net of shares withheld for taxes54  — 17 424 — — 441 
Share-based compensation— — — — 5,457 — — 5,457 
Accelerated shares repurchased— — (2,296)(99,012)(27,237)— — (126,249)
Balance, September 30, 202390,935 909 (11,823)(612,777)1,262,319 1,745 927,025 1,579,221 
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Nine Months Ended September 30, 2022
Common StockTreasury StockAdditional Paid-In CapitalAccumulated Other Comprehensive LossRetained EarningsTotal Equity
SharesAmountSharesAmount
Balance, January 1, 202289,600 $896 (4,899)$(234,448)$1,264,943 $(45,155)$698,568 $1,684,804 
Net income— — — — — — 32,901 32,901 
Other comprehensive income (loss), net of tax— — — — — 24,130 — 24,130 
Issuance of common stock through employee stock purchase plan17 — — — 1,078 — — 1,078 
Issuance of common stock for vesting of share based awards, net of shares withheld for taxes339 4 14 714 (9,758)— — (9,040)
Share-based compensation— — — — 6,324 — — 6,324 
Accelerated shares repurchased— — (1,938)(129,152)4,152 — — (125,000)
Balance, March 31, 202289,956 $900 (6,823)$(362,886)$1,266,739 $(21,025)$731,469 $1,615,197 
Net income— — — — — — 44,788 44,788 
Other comprehensive loss, net of tax— — — — — 7,810 — 7,810 
Issuance of common stock for vesting of share based awards, net of shares withheld for taxes378 3 — 6 (13,655)— — (13,646)
Share-based compensation— — — — 6,768 — — 6,768 
Balance, June 30, 202290,334 $903 (6,823)$(362,880)$1,259,852 $(13,215)$776,257 $1,660,917 
Net income— — — — — — 49,915 49,915 
Other comprehensive income, net of tax— — — — — 5,776 — 5,776 
Treasury shares retirement— — — — — — —  
Issuance of common stock for vesting of share based awards, net of shares withheld for taxes7 — — 17 (1,160)— — (1,143)
Share-based compensation— — — — 8,949 — — 8,949 
Balance, September 30, 202290,341 903 (6,823)(362,863)1,267,641 (7,439)826,172 1,724,414 
The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.
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INTEGRA LIFESCIENCES HOLDINGS CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PRESENTATION
General
The terms “we,” “our,” “us,” “Company” and “Integra” refer to Integra LifeSciences Holdings Corporation, a Delaware corporation, and its subsidiaries unless the context suggests otherwise.
In the opinion of management, the September 30, 2023 unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the financial position, statement of changes in shareholders' equity, results of operations and cash flows of the Company. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States ("GAAP") have been condensed or omitted in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K. The December 31, 2022 consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. Operating results for the three and nine-month periods ended September 30, 2023 are not necessarily indicative of the results to be expected for the entire year.
The preparation of consolidated financial statements is in conformity with GAAP, which requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent liabilities, and the reported amounts of revenues and expenses. Significant estimates affecting amounts reported or disclosed in the condensed consolidated financial statements include allowances for doubtful accounts receivable and sales returns and allowances, net realizable value of inventories, valuation of intangible assets including amortization periods for acquired intangible assets, discount rates and estimated projected cash flows used to value and test impairments of long-lived assets and goodwill, estimates of projected cash flows and depreciation and amortization periods for long-lived assets, computation of taxes, valuation allowances recorded against deferred tax assets, the valuation of stock-based compensation, valuation of derivative instruments, valuation of contingent liabilities, the fair value of debt instruments and loss contingencies. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the current circumstances. Actual results could differ from these estimates.

Recent Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04, Reference Rate Reform (Topic 848), and subsequent amendment to the initial guidance: ASU 2021-01, Reference Rate Reform (Topic 848): Scope (collectively, “Topic 848”). Topic 848 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference London Inter-Bank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. The guidance generally can be applied through December 31, 2024. The Alternative Reference Rates Committee, a group of private-market participants convened by the U.S. Federal Reserve Board and the New York Federal Reserve, has recommended the use of the Secured Overnight Financing Rate ("SOFR") as a more robust reference rate alternative to LIBOR. On March 24, 2023, the Company entered into the seventh amendment and restatement (the "March 2023 Amendment") of its Senior Credit Facility (the “Senior Credit Facility”) with a syndicate of lending banks with Bank of America, N.A., as Administrative Agent. In connection with the March 2023 Amendment, the Company replaced all LIBOR-based contracts with SOFR, which is calculated based on overnight transactions under repurchase agreements backed by Treasury securities. In addition, on April 17, 2023 the Company entered into an amendment (the "April 2023 Amendment") of the Securitization Facility (as defined below) and amended the interest rate from LIBOR to SOFR indexed rate. (See Note 6). In March 2023, the Company entered into a basis swap where the Company receives Term SOFR and pays LIBOR to convert the portfolio of interest rate swaps from LIBOR to SOFR. Integra has elected to adopt the optional expedient under ASC 848, which will allow the interest rate swap hedging relationship to continue, without de-designation, due to the change in the indexed rate from LIBOR to SOFR.
There are no other recently issued accounting pronouncements that are expected to have any significant effect on the Company's financial position, results of operations or cash flows.
9

INTEGRA LIFESCIENCES HOLDINGS CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
2. ACQUISITIONS AND DIVESTITURES
Surgical Innovation Associates, Inc. Acquisition

On December 6, 2022, the Company completed its acquisition of Surgical Innovation Associates, Inc. ("SIA") for an acquisition purchase price of $51.5 million (the "SIA Acquisition") plus contingent consideration of up to $90.0 million.The contingent consideration includes two separate payments, which are dependent on 1) achieving certain revenue-based performance milestones in 2023, 2024, and 2025 (up to $50.0 million in additional payments), as well as 2) the approval by the FDA of the Premarket Approval (“PMA”) Application for DuraSorb for certain uses by certain timing targets (up to $40.0 million in additional payments). SIA's core technology, DuraSorb, is a fully resorbable scaffold of a globally accepted polymer, which is cleared for use in hernia repair, abdominal wall, and other soft tissue reinforcement. DuraSorb sales are reported within Integra’s Tissue Technologies ("TT") segment as part of its Wound Reconstruction and Care franchise.

Assets Acquired and Liabilities Assumed at Fair Value

The SIA Acquisition has been accounted for using the acquisition method of accounting. This method requires that assets acquired, and liabilities assumed in a business combination to be recognized at their fair values as of the acquisition date.

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

Dollars in thousandsFinal ValuationWeighted Average Life
Current assets:
Cash4,438 
Trade accounts receivable, net 1,551 
Inventories, net2,900 
Prepaid expenses and other current assets1,654 
Total current assets$10,543 
Intangible assets75,000 14 years
Goodwill41,380 
Total assets acquired$126,923 
Current liabilities:
Accounts payable and accrued expenses$2,044 
Total current liabilities$2,044 
Deferred Tax Liability11,325 
Contingent consideration57,607 
Total liabilities assumed70,976 
Net assets acquired$55,947 

Developed Technology

The estimated fair value of the developed technology was determined using the multi-period excess earnings method of the income approach, which estimates value based on the present value of future economic benefits. Some of the more significant assumptions inherent in the development of those asset valuations include the estimated net cash flows for each year for each product including net revenues, cost of sales, R&D costs, selling and marketing costs, working capital, and contributory asset charges, the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of the asset’s life cycle, and competitive trends impacting the asset and the cash flow stream.

The Company used a discount rate of 18% to arrive at the present value for the acquired intangible assets to reflect the rate of return a market participant would expect to earn and incremental commercial uncertainty in the cash flow projections. No assurances can be given that the underlying assumptions used to prepare the discounted cash flow analysis will not change. For these and other reasons, actual results may vary significantly from estimated results.





10

INTEGRA LIFESCIENCES HOLDINGS CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
Goodwill

The Company allocated goodwill related to the SIA Acquisition to the TT segment. Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce. A key factor that contributes to the recognition of goodwill, and a driver for the Company’s acquisition of SIA, is the attractive growth opportunities presented by the surgical matrix business in the breast reconstruction market. Goodwill recognized as a result of this acquisition is non-deductible for income tax purposes.

Contingent Consideration

The Company determines the acquisition date fair value of contingent consideration obligations based on a probability-weighted income approach derived from revenue estimates and a probability assessment with respect to the likelihood of achieving contingent obligations. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined using the fair value concepts in ASC 820. The resulting most likely payouts are discounted using an appropriate effective annual interest rate. At each reporting date, the contingent consideration obligation will be revalued to estimated fair value and changes in fair value will be reflected as income or expense in the consolidated statement of operations. Changes in the fair value of the contingent considerations may result from changes in discount periods and rates and changes in the timing and amount of revenue estimates. Changes in assumptions utilized in the contingent consideration fair value estimates could result in an increase in the contingent consideration obligation and a corresponding charge to operating results.

As part of the SIA Acquisition, the Company is required to pay to the former shareholders of SIA up to $90.0 million for two separate payments, which are dependent on 1) achieving certain revenue-based performance milestones in 2023, 2024, and 2025 (up to $50.0 million in additional payments), as well as 2) the approval by the FDA of the PMA for DuraSorb for certain uses by certain timing targets (up to $40.0 million in additional payments). The Company used iterations of the Monte Carlo simulation to calculate the fair value of the contingent consideration for the revenue-based milestone that considered the possible outcomes of scenarios related to each specific milestone for the revenue based performance milestone. The Company used probabilities of achieving the conditions to calculate the fair value of the contingent consideration for the PMA approval milestone. The Company estimated the fair value of the contingent consideration for the revenue based milestone to be $32.6 million at the acquisition date and $25.0 million for the PMA approval milestone at the acquisition date. The company recorded a total of $51.2 million in other liabilities as of September 30, 2023 and $13.0 million in accrued expenses and other current liabilities at September 30, 2023 in the consolidated balance sheet of the Company.

Deferred Tax Liabilities

Deferred tax liabilities result from identifiable intangible assets’ fair value adjustments. These adjustments create excess book basis over tax basis which is tax-effected by the statutory tax rates of applicable jurisdictions.

Sale of non-core traditional wound care business
On August 31, 2022, the Company completed its sale of its non-core traditional wound care ("TWC") business to Gentell, LLC ("Gentell") for $28.8 million, which consists of $27.8 million in cash plus $1.0 million in contingent consideration which may be received upon achieving certain revenue-based performance milestones two years after the closing date. The transaction included the sale of the Company's TWC products, such as sponges, gauze and conforming bandages, and certain advanced wound care dressings, such as supportive, calcium alginate, hydrogel, and foam dressings.
The divestiture did not represent a strategic shift that had a major effect on the Company's operations and financial statements. Goodwill was allocated to the assets and liabilities divested using the relative fair value method of the TWC business to the Company's TT reportable business segment. In connection with the sale, the Company recognized $0.6 million as a gain from the sale of the business in the condensed consolidated statement of operations for the year ended December 31, 2022. The transaction is subject to final working capital adjustments.
In addition to the purchase and sale agreement, the Company also entered into a contract manufacturing agreement with Gentell. Under the terms of the agreement, Gentell received inventory, equipment, and tooling to manufacture certain MediHoney® and TCC-EZ® products on behalf of the Company. On the close date of this transaction, the Company transferred manufacturing inventory associated with these products to Gentell and recognized an asset of $11.1 million, as a form of a deposit for the inventory transferred, which based on the expected timing of inventory purchases, was primarily included within prepaid expenses and other current assets in the consolidated balance sheet. This deposit will be utilized by the Company on future orders placed to Gentell for such products. As of September 30, 2023, the Company had a deposit remaining of $6.0 million which is included in prepaid assets. In addition, there are outstanding balances related to the Company's ongoing purchase of MediHoney® and TCC-EZ® products subsequent to the close of the TWC divestiture.
11

INTEGRA LIFESCIENCES HOLDINGS CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
3. REVENUES FROM CONTRACTS WITH CUSTOMERS
Summary of Accounting Policies on Revenue Recognition
Revenue is recognized upon the transfer of control of promised products or services to the customers in an amount that reflects the consideration the Company expects to receive in exchange for those products and services.
Performance Obligations
The Company's performance obligations consist mainly of transferring control of goods and services identified in the contracts, purchase orders, or invoices. The Company has no significant multi-element contracts with customers.
Significant Estimates
Usage-based royalties and licenses are estimated based on the provisions of contracts with customers and recognized in the same period that the royalty-based products are sold by the Company's strategic partners. The Company estimates and recognizes royalty revenue based upon communication with licensees, historical information, and expected sales trends. Differences between actual reported licensee sales and those that were estimated are adjusted in the period in which they become known, which is typically the following quarter. Historically, such adjustments have not been significant.
The Company estimates returns, price concessions, and discount allowances using the expected value method based on historical trends and other known factors. Rebate allowances are estimated using the most likely method based on each customer contract.
The Company's return policy, as set forth in its product catalogs and sales invoices, requires review and authorization in advance prior to the return of product. Upon the authorization, a credit will be issued for the goods returned within a set amount of days from the shipment, which is generally 90 days.
Due to the voluntary recall of all products manufactured at the Boston facility, including Primatrix®, Surgimend®, Revize™, and TissueMend™ ("The Boston recall") the Company recorded a total of $6.8 million and $19.7 million provision for product returns, as a reduction of net revenue during the three and nine months ended September 30, 2023, respectively. Additionally, the Company has credited $8.3 million and $9.0 million to customers during the three and nine months ended September 30, 2023, respectively. As of September 30, 2023, the return reserve was $10.7 million.
The Company disregards the effects of a financing component if the Company expects, at contract inception, that the period between the transfer and customer payment for the goods or services will be one year or less. The Company has no significant revenues recognized on payments expected to be received more than one year after the transfer of control of products or services to customers.
Contract Asset and Liability
Revenues recognized from the Company's private label business that are not invoiced to the customers as a result of recognizing revenue over time are recorded as a contract asset included in the prepaid expenses and other current assets account in the consolidated balance sheets.
Other operating revenues may include fees received under service agreements. Non-refundable fees received under multiple-period service agreements are recognized as revenue as the Company satisfies the performance obligations to the other party. A portion of the transaction price allocated to the performance obligations to be satisfied in the future periods is recognized as contract liability.
12

INTEGRA LIFESCIENCES HOLDINGS CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
The following table summarizes the changes in the contract asset and liability balances for the nine months ended September 30, 2023:
Dollars in thousandsTotal
Contract Asset
Contract asset, January 1, 2023
$10,122 
Transferred to trade receivable from contract asset included in beginning of the year contract asset(7,743)
Written off from beginning of the year contract asset due to Boston recall(2,379)
Contract asset, net of transferred to trade receivables on contracts during the period10,392 
Contract asset, September 30, 2023
$10,392 
Contract Liability
Contract liability, January 1, 2023
$16,127 
Recognition of revenue included in beginning of year contract liability$(6,159)
Contract liability, net of revenue recognized on contracts during the period6,282 
Foreign currency translation(51)
Contract liability, September 30, 2023
$16,199 
At September 30, 2023, the short-term portion of the contract liability of $8.1 million and the long-term portion of $8.1 million are included in current liabilities and other liabilities, respectively, in the consolidated balance sheets.
As of September 30, 2023, the Company is expected to recognize revenue of approximately 50% of unsatisfied (or partially unsatisfied) performance obligations as revenue within 12 months, with the remaining balance to be recognized thereafter.
Shipping and Handling Fees
The Company elected to account for shipping and handling activities as a fulfillment cost rather than a separate performance obligation. Amounts billed to customers for shipping and handling are included as part of the transaction price and recognized as revenue when control of underlying products is transferred to the customer. The related shipping and freight charges incurred by the Company are included in the cost of goods sold.
Product Warranties
Certain of the Company's medical devices, including monitoring systems and neurosurgical systems, are designed to operate over long periods of time. These products are sold with warranties which may extend for up to two years from the date of purchase. The warranties are not considered a separate performance obligation. The Company estimates its product warranties using the expected value method based on historical trends and other known factors. The Company includes them in accrued expenses and other current liabilities in the consolidated balance sheet.
Taxes Collected from Customers
The Company elected to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer.
13

INTEGRA LIFESCIENCES HOLDINGS CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
Disaggregated Revenue
The following table presents revenues disaggregated by the major sources of revenues for the three and nine months ended September 30, 2023 and 2022 (dollar amounts in thousands):
Three Months Ended September 30, 2023Three Months Ended September 30, 2022Nine Months Ended September 30, 2023Nine Months Ended September 30, 2022
Neurosurgery$209,229 $193,848 $607,902 $588,818 
Instruments58,976 55,948 179,469 166,149 
Total Codman Specialty Surgical268,205 249,796 787,371 754,967 
Wound Reconstruction and Care88,071 104,625 280,129 304,149 
Private Label26,145 30,770 77,034 100,528 
Total Tissue Technologies114,216 135,395 357,163 404,677 
Total revenue$382,421 $385,191 $1,144,534 $1,159,644 
See Note 15, Segment and Geographical Information, for details of revenues based on the location of the customer.
4. INVENTORIES
Inventories, net consisted of the following:
Dollars in thousandsSeptember 30, 2023December 31, 2022
Finished goods$182,066 $172,088 
Work in process76,072 70,598 
Raw materials108,113 81,897 
Total inventories, net$366,251 $324,583 
Boston Recall
In the nine months ended September 30, 2023, due to the Boston recall, the Company recorded a $24.6 million write off of inventory to cost of goods sold that was no longer able to be sold.
Inventory Write-off
There was a tornado that struck the LeLocle, Switzerland area on July 24, 2023. After review of the damage to the product caused by the tornado, it was determined that the inventory write-off was $0.8 million.

5. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
Changes in the carrying amount of goodwill for the nine-month period ended September 30, 2023 were as follows:
Dollars in thousandsCodman Specialty
Surgical
Tissue TechnologiesTotal
Goodwill at December 31, 2022$656,219 $382,662 $1,038,881 
SIA Acquisition Working Capital Adjustment (382)(382)
Foreign currency translation(1,486)(867)(2,353)
Goodwill at September 30, 2023
$654,733 $381,413 $1,036,146 
The Company tests goodwill and intangible assets with indefinite lives for impairment annually in the third quarter in accordance with ASC Topic 350. Additionally, the Company may perform interim tests if an event occurs or circumstances change that could potentially reduce the fair value of a reporting unit or indefinite lived intangible asset below its carrying amount. The carrying value of each reporting unit is determined by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units.
14

INTEGRA LIFESCIENCES HOLDINGS CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
The Company tests for impairment by either performing a qualitative evaluation or a quantitative test. The qualitative evaluation is an assessment of factors, including reporting unit specific operating results as well as industry, market and general economic conditions, to determine whether it is more likely than not that the fair values of a reporting unit is less than its carrying amount, including goodwill. The Company may elect to bypass this qualitative evaluation for some or all of its reporting units and perform a quantitative test. The quantitative test estimates the fair value of the reporting unit using a discounted cash flow model, which incorporates significant estimates and assumptions made by management which, by their nature, are characterized by uncertainty
In the second quarter of 2023, due to the Boston recall, as well as the associated drop in the Company's stock price in that quarter, the Company elected to perform a quantitative analysis for its TT reporting unit. The quantitative test utilized a long-term growth rate of 2% and a discount rate of 10%. The Company determined, after performing the quantitative analysis, that the fair value of the goodwill of the reporting unit was not less than the carrying amount, with more than 20% headroom.
In the third quarter of 2023, the Company performed the annual qualitative analysis for its three reporting units and intangible assets with indefinite lives. The Company determined, after performing the qualitative analysis, that there was no evidence that it is more likely than not that the fair value was less than the carrying amounts, therefore, it was not necessary to perform a quantitative impairment test.

Other Intangible Assets
The components of the Company’s identifiable intangible assets were as follows:
 September 30, 2023
Dollars in thousandsWeighted
Average
Life
CostAccumulated
Amortization
Net
Completed technology18 years$1,206,522 $(424,244)$782,278 
Customer relationships12 years$192,566 $(149,243)$43,323 
Trademarks/brand names28 years$97,228 $(37,363)$59,865 
Codman tradenameIndefinite$167,520 $— $167,520 
Supplier relationships30 years$30,211 $(17,904)$12,307 
All other11 years$5,932 $(4,202)$1,730 
$1,699,979 $(632,956)$1,067,023 
 December 31, 2022
Dollars in thousandsWeighted
Average
Life
CostAccumulated
Amortization
Net
Completed technology18 years$1,204,325 $(370,968)$833,357 
Customer relationships12 years193,081 (144,040)49,041 
Trademarks/brand names28 years97,265 (34,674)62,591 
Codman tradenameIndefinite166,693 — 166,693 
Supplier relationships30 years30,211 (17,170)13,041 
All other11 years5,957 (4,071)1,886 
$1,697,532 $(570,923)$1,126,609 
Total amortization of intangible assets for the three and nine months ended September 30, 2023 was $20.9 million and $62.1 million, respectively. Of these amounts, $17.7 million and $52.8 million, respectively was related to amortization of technology based intangibles and included in cost of goods sold, with the remainder included in intangible amortization in the statement of operations.
Total amortization of intangible assets for the three and nine months ended September 30, 2022 was $19.2 million and $58.7 million, respectively. Of these amounts, $16.1 million and $48.3 million, respectively was related to amortization of technology based intangibles and included in cost of goods sold, with the remainder included in intangible amortization in the statement of operations.
15

INTEGRA LIFESCIENCES HOLDINGS CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
Based on quarter-end exchange rates, amortization expense (including amounts reported in cost of goods sold) is expected to be approximately $20.7 million for the remainder of 2023, $82.2 million in 2024, $82.1 million in 2025, $82.0 million in 2026, $80.0 million in 2027, $78.5 million in 2028 and $477.1 million thereafter.
The Company periodically performs testing for impairment on certain long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
In the second quarter of 2023, due to the Boston recall, the Company elected to perform impairment testing on certain definite lived intangibles. The intangible components associated with the recalled products include completed technology and customer relationships with a net book value of $29.9 million and $8.1 million, respectively, as of September 30, 2023. The company used an undiscounted cash flow methodology and obtained revenue projections through the useful life of the intangibles. After performing the analysis, no impairment was noted. The Company will continue to monitor these intangibles as we return to the market and evaluate any changes that would impact our sales of these products.

6. DEBT
Amendment to the Seventh Amended and Restated Senior Credit Agreement
On March 24, 2023, the Company entered into the seventh amendment and restatement (the "March 2023 Amendment") of the Senior Credit Facility (the "Senior Credit Facility") with a syndicate of lending banks with Bank of America, N.A., as Administrative Agent. The March 2023 Amendment extended the maturity date to March 24, 2028, amended the contractual repayments of the term loan component, and amended the interest rate from LIBOR to SOFR-indexed interest. The Company continues to have the aggregate principal amount of up to approximately $2.1 billion available to it through the following facilities: (i) a $775.0 million term loan facility, and (ii) a $1.3 billion revolving credit facility, which includes a $60 million sublimit for the issuance of standby letters of credit and a $60 million sublimit for swingline loans.
The Company’s maximum consolidated total leverage ratio in the financial covenants (as defined in the Senior Credit Facility) was modified to the following:
Fiscal QuarterMaximum Consolidated Total Leverage Ratio
March 31, 2023 through December 31, 2024
4.50 to 1.00
March 31, 2025 through June 30, 2026
4.25 to 1.00
September 30, 2026 and the last day of each fiscal quarter thereafter
4.00 to 1.00
Borrowings under the Senior Credit Facility bear interest, at the Company’s option, at a rate equal to the following:
i.Term SOFR in effect from time to time plus 0.10% plus the applicable rate (ranging from 1.00% to 1.75%), or
ii.the highest of:
1.the weighted average overnight Federal funds rate, as published by the Federal Reserve Bank of New York, plus 0.50%
2.the prime lending rate of Bank of America, N.A. or
3.the one-month Term SOFR plus 1.00%
The applicable rates are based on the Company’s consolidated total leverage ratio (defined as the ratio of (a) consolidated funded indebtedness as of such date less cash that is not subject to any restriction on the use or investment thereof to (b) consolidated EBITDA (as defined by the amended Seventh Amended and Restated Credit Agreement (the "Credit Agreement")), for the period of four consecutive fiscal quarters ending on such date).
The Company will pay an annual commitment fee (ranging from 0.15% to 0.30%), based on the Company's consolidated total leverage ratio, on the amount available for borrowing under the revolving credit facility.
The Senior Credit Facility is collateralized by substantially all of the assets of the Company’s U.S. subsidiaries, excluding intangible assets. The Senior Credit Facility is subject to various financial and negative covenants and at September 30, 2023, the Company was in compliance with all such covenants. The Company capitalized $7.6 million in deferred financing costs in connection with the modification of the Senior Credit Facility and wrote off $0.2 million of previously capitalized financing costs during the first quarter of 2023.
16

INTEGRA LIFESCIENCES HOLDINGS CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
At September 30, 2023 there was $90.0 million outstanding under the revolving portion of the Senior Credit Facility. At December 31, 2022 there was no outstanding balance under the revolving portion of the Senior Credit Facility. At September 30, 2023 and December 31, 2022, there was $775.0 million outstanding under the term loan component of the Senior Credit Facility at a weighted average interest rate of 6.8% and 5.6%, respectively. The liability related to the Senior Credit Facility shown on the balance sheet at September 30, 2023 and December 31, 2022 is reflected net of $5.2 million and $3.7 million, respectively, in deferred financing costs. As of September 30, 2023 and December 31, 2022 there was $9.7 million and $38.1 million of the term loan component of the Senior Credit Facility classified as current on the condensed consolidated balance sheet, respectively.
The fair value of outstanding borrowings of the Senior Credit Facility's term loan component at September 30, 2023 was $752.3 million. This fair value was determined by using a discounted cash flow model based on current market interest rates available to the Company. These inputs are corroborated by observable market data for similar liabilities and therefore classified within Level 2 of the fair value hierarchy. Level 2 inputs represent inputs that are observable for the asset or liability, either directly or indirectly, and are other than active market observable inputs that reflect unadjusted quoted prices for identical assets or liabilities.
Letters of credit outstanding as of September 30, 2023 and December 31, 2022 totaled $1.7 million and $1.6 million, respectively. There were no amounts drawn as of September 30, 2023.
Contractual repayments of the term loan component of the Senior Credit Facility are due as follows:
As of September 30, 2023
Principal Repayment
Dollars in thousands
Remainder of 2023
$ 
2024
$14,531 
2025
$33,906 
2026
$38,750 
Thereafter687,813 
$775,000 
Future interest payments on the term loan component of the Senior Credit Facility based on current interest rates are expected to approximate $13.5 million for remainder of 2023, $53.4 million in 2024, $51.6 million in 2025, $48.9 million in 2026, and $55.9 million thereafter. Interest is calculated on the term loan portion of the Senior Credit Facility based on SOFR plus the certain amounts set forth in the Credit Agreement. As the revolving credit facility and Securitization Facility (defined below) can be repaid at any time, no interest has been included in the calculation.
Any outstanding borrowings on the revolving credit component of the Senior Credit Facility is due on March 24, 2028.
Convertible Senior Notes
On February 4, 2020, the Company issued $575.0 million aggregate principal amount of its 0.5% Convertible Senior Notes due 2025 (the "2025 Notes"). The 2025 Notes will mature on August 15, 2025 and bear interest at a rate of 0.5% per annum payable semi-annually in arrears, unless earlier converted, repurchased or redeemed in accordance with the terms of the 2025 Notes. In connection with this offering, the Company capitalized $13.2 million of financing fees.
The 2025 Notes are senior, unsecured obligations of the Company, and are convertible into cash and shares of its common stock based on an initial conversion rate, subject to adjustment of 13.5739 shares per $1,000 principal amounts of the 2025 Notes (which represents an initial conversion price of $73.67 per share). The 2025 Notes convert only in the following circumstances: (1) if the closing price of the Company's common stock has been at least 130% of the conversion price during the period; (2) if the average trading price per $1,000 principal amount of the 2025 Notes is less than or equal to 98% of the average conversion value of the 2025 Notes during a period as defined in the indenture; (3) if the Company calls the notes for optional redemption as defined in the indenture; or (4) if specified corporate transactions occur. As of September 30, 2023, none of these conditions existed and the 2025 Notes are classified as long term obligations.
17

INTEGRA LIFESCIENCES HOLDINGS CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
On December 9, 2020, the Company entered into the First Supplemental Indenture to the original indenture dated as of February 4, 2020 (The "Indenture") between the Company and Citibank, N.A., as trustee, governing the Company’s outstanding 2025 Notes. The Company irrevocably elected (1) to eliminate the Company’s option to choose physical settlement on any conversion of the 2025 Notes that occurs on or after the date of the First Supplemental Indenture and (2) with respect to any Combination Settlement (as defined in the indenture) for a conversion of the 2025 Notes, the Specified Dollar Amount (as defined in the indenture) that will be settled in cash per $1,000 principal amount of the 2025 Notes shall be no lower than $1,000.
Holders of the 2025 Notes will have the right to require the Company to repurchase for cash all or a portion of their 2025 Notes at 100% of their principal amount, plus any accrued and unpaid interest, upon the occurrence of a fundamental change (as defined in the indenture relating to the 2025 Notes). The Company will also be required to increase the conversion rate for holders who convert their 2025 Notes in connection with certain fundamental changes occurring prior to the maturity date or following delivery by the Company of a notice of redemption.
In connection with the issuance of the 2025 Notes, the Company entered into call transactions and warrant transactions, primarily with affiliates of the initial purchasers of the 2025 Notes (the “hedge participants”). The cost of the call transactions was $104.2 million for the 2025 Notes. The Company received $44.5 million of proceeds from the warrant transactions for the 2025 Notes. The call transactions involved purchasing call options from the hedge participants, and the warrant transactions involved selling call options to the hedge participants with a higher strike price than the purchased call options. The initial strike price of the call transactions was $73.67, subject to anti-dilution adjustments substantially similar to those in the 2025 Notes. The initial strike price of the warrant transactions was $113.34 for the 2025 Notes, subject to customary anti-dilution adjustments.
At September 30, 2023, the carrying amount of the liability was $575.0 million. The fair value of the 2025 Notes at September 30, 2023 was $524.7 million. Factors that the Company considered when estimating the fair value of the 2025 Notes included recent quoted market prices or dealer quotes. The level of the 2025 Notes is considered as Level 1.
Securitization Facility
In 2018, the Company entered into an accounts receivable securitization facility (the "Securitization Facility") under which accounts receivable of certain domestic subsidiaries are sold on a non-recourse basis to a special purpose entity (“SPE”), which is a bankruptcy-remote, consolidated subsidiary of the Company. Accordingly, the assets of the SPE are not available to satisfy the obligations of the Company or any of its subsidiaries. From time to time, the SPE may finance such accounts receivable with a revolving loan facility secured by a pledge of such accounts receivable. The amount of outstanding borrowings on the Securitization Facility at any one time is limited to $150.0 million. The Securitization Facility Agreement ("Securitization Agreement") governing the Securitization Facility contains certain covenants and termination events. An occurrence of an event of default or a termination event under this Securitization Agreement may give rise to the right of its counterparty to terminate this facility. As of September 30, 2023, the Company was in compliance with the covenants and none of the termination events had occurred.
On May 28, 2021, the Company entered into an amendment (the "May 2021 Amendment") of the Securitization Facility which extended the maturity date from December 21, 2021 to May 28, 2024. In addition, on April 17, 2023 the company entered into an amendment (the "April 2023 Amendment") of the Securitization Facility and amended the interest rate from LIBOR to SOFR indexed rate. The April 2023 Amendment and the May 2021 Amendment do not increase the Company’s total indebtedness.
The Securitization Facility is currently indexed to SOFR. At September 30, 2023 and December 31, 2022, the Company had $75.7 million and $104.7 million, respectively, of outstanding borrowings under its Securitization Facility at a weighted average interest rate of 6.6% and 5.0%, respectively. At September 30, 2023, the total amount outstanding under the Securitization Facility is classified as current on the consolidated balance sheet as the total amount is due on May 28, 2024.
The fair value of the outstanding borrowing of the Securitization Facility at September 30, 2023 was $74.8 million. These fair values were determined by using a discounted cash flow model based on current market interest rates available to the Company. These inputs are corroborated by observable market data for similar liabilities and therefore classified within Level 2 of the fair value hierarchy. Level 2 inputs represent inputs that are observable for the asset or liability, either directly or indirectly, and are other than active market observable inputs that reflect unadjusted quoted prices for identical assets or liabilities.
18

INTEGRA LIFESCIENCES HOLDINGS CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
7. DERIVATIVE INSTRUMENTS
Interest Rate Hedging
The Company’s interest rate risk relates to U.S. dollar denominated variable interest rate borrowings. The Company uses interest rate swap derivative instruments to manage earnings and cash flow exposure resulting from changes in interest rates. These interest rate swaps apply a fixed interest rate on a portion of the Company's expected SOFR-indexed borrowings. In connection with the March 2023 Amendment to the Senior Credit Facility, the Company amended its interest rate from LIBOR to SOFR-indexed interest. In March 2023, the Company entered into a basis swap where the Company receives Term SOFR and pays LIBOR to convert the portfolio of swaps from LIBOR to SOFR.
The Company held the following interest rate swaps as of September 30, 2023 and December 31, 2022 (dollar amounts in thousands):
September 30, 2023September 30, 2023
Hedged ItemNotional AmountDesignation DateEffective DateTermination DateFixed Interest RateEstimated Fair Value
Asset (Liability)
1-month Term SOFR Loan150,000 December 13, 2017July 1, 2019June 30, 20242.423 %3,395 
1-month Term SOFR Loan200,000 December 13, 2017January 1, 2018December 31, 20242.313 %7,440 
1-month Term SOFR Loan75,000 October 10, 2018July 1, 2020June 30, 20253.220 %2,381 
1-month Term SOFR Loan75,000 October 10, 2018July 1, 2020June 30, 20253.199 %2,486 
1-month Term SOFR Loan75,000 October 10, 2018July 1, 2020June 30, 20253.209 %2,339 
1-month Term SOFR Loan100,000 December 18, 2018December 30, 2022December 31, 20272.885 %6,052 
1-month Term SOFR Loan100,000 December 18, 2018December 30, 2022December 31, 20272.867 %6,187 
1-month Term SOFR Loan575,000 December 15, 2020July 31, 2025December 31, 20271.415 %31,528 
1-month Term SOFR Loan125,000 December 15, 2020July 1, 2025December 31, 20271.404 %7,369 
Basis Swap (1)
March 31, 2023March 24, 2023December 31, 2027N/A(1,923)
$1,475,000 $67,254 
(1) The notional of the basis swap amortizes to match the total notional of the interest rate swap portfolio over time

19

INTEGRA LIFESCIENCES HOLDINGS CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
December 31, 2022December 31, 2022
Hedged ItemNotional AmountDesignation DateEffective DateTermination DateFixed Interest RateEstimated Fair Value
Asset (Liability)
1-month USD LIBOR Loan150,000 December 13, 2017July 1, 2019June 30, 20242.423 %5,012 
1-month USD LIBOR Loan200,000 December 13, 2017January 1, 2018December 31, 20242.313 %8,380 
1-month USD LIBOR Loan75,000 October 10, 2018July 1, 2020June 30, 20253.220 %1,831 
1-month USD LIBOR Loan75,000 October 10, 2018July 1, 2020June 30, 20253.199 %1,905 
1-month USD LIBOR Loan75,000 October 10, 2018July 1, 2020June 30, 20253.209 %1,970 
1-month USD LIBOR Loan100,000 December 18, 2018December 30, 2022December 31, 20272.885 %4,252 
1-month USD LIBOR Loan100,000 December 18, 2018December 30, 2022December 31, 20272.867 %4,153 
1-month USD LIBOR Loan575,000 December 15, 2020July 31, 2025December 31, 20271.415 %23,742 
1-month USD LIBOR Loan125,000 December 15, 2020July 1, 2025December 31, 20271.404 %5,467 
$1,475,000 $56,712 
The Company has designated these derivative instruments as cash flow hedges. The Company assesses the effectiveness of these derivative instruments and has recorded the changes in the fair value of the derivative instrument designated as a cash flow hedge as unrealized gains or losses in accumulated other comprehensive income (“AOCI”), net of tax, until the hedged item affected earnings, at which point any gain or loss was reclassified to earnings. If the hedged cash flow does not occur, or if it becomes probable that it will not occur, the Company will reclassify the remaining amount of any gain or loss on the related cash flow hedge recorded in AOCI to interest expense at that time.
Foreign Currency Hedging
From time to time, the Company enters into foreign currency hedge contracts intended to protect the U.S. dollar value of certain forecasted foreign currency denominated transactions. The Company assesses the effectiveness of the contracts that are designated as hedging instruments. The changes in fair value of foreign currency cash flow hedges are recorded in AOCI, net of tax. Those amounts are subsequently reclassified to earnings from AOCI as impacted by the hedged item when the hedged item affects earnings. If the hedged forecasted transaction does not occur or if it becomes probable that it will not occur, the Company will reclassify the amount of any gain or loss on the related cash flow hedge to earnings at that time. For contracts not designated as hedging instruments, the changes in fair value of the contracts are recognized in other income, net in the consolidated statements of operation, along with the offsetting foreign currency gain or loss on the underlying assets or liabilities.
The success of the Company’s hedging anticipated currency exchange gains or losses to the extent that there are differences between forecasted and actual activities during periods of currency volatility. In addition, changes in currency exchange rates related to any unhedged transactions may affect earnings and cash flows.
Cross-Currency Rate Swaps
On September 22, 2023, the Company amended the Swiss Franc ("CHF")-denominated intercompany loan to partially settle CHF 20.0 million and extend the termination date to September 2024 and as a result, the Company terminated the cross-currency swap designated as cash flow hedge of an intercompany loan with aggregate notional amount of $48.5