0000917520
2009-01-01
2009-12-31
0000917520
2008-12-31
0000917520
2010-04-01
2010-06-30
0000917520
2009-04-01
2009-06-30
0000917520
2009-01-01
2009-06-30
0000917520
2010-06-30
0000917520
2009-12-31
0000917520
2009-06-30
0000917520
2010-07-26
0000917520
2010-01-01
2010-06-30
iso4217:USD
xbrli:shares
xbrli:shares
iso4217:USD
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left">
</div>
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b>
</div>
<div align="center" style="font-size: 10pt"><b></b></div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>1. BASIS OF PRESENTATION</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>General</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">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.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">In the opinion of management, the June 30, 2010 unaudited condensed consolidated
financial statements contain all adjustments (consisting only of normal recurring
adjustments) necessary for a fair statement of the financial position, 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 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, 2009 included in the Company’s
Annual Report on Form 10-K. The December 31, 2009 condensed consolidated balance sheet
was derived from audited financial statements but does not include all disclosures
required by accounting principles generally accepted in the United States. Operating
results for the six-month period ended June 30, 2010 are not necessarily indicative of
the results to be expected for the entire year.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The preparation of consolidated financial statements in conformity with generally
accepted accounting principles requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities, the disclosure of contingent
liabilities, and the reported amounts of revenues and expenses. Significant estimates
affecting amounts reported or disclosed in the consolidated financial statements include
allowances for doubtful accounts receivable and sales returns and allowances, net
realizable value of inventories, 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, valuation of intangible assets and
in-process research and development, pension assets and liabilities, computation of taxes, valuation
allowances recorded against deferred tax assets, the valuation of stock-based
compensation, 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.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Certain amounts from the prior year’s financial statements have been reclassified in
order to conform to the current year’s presentation.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>2. BUSINESS AND ASSET ACQUISITIONS</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><u>Welch Allyn, Inc.</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">In May 2010, the Company acquired certain assets and liabilities of the surgical
headlight business of Welch Allyn, Inc. (“Welch”) for approximately $2.4 million in cash
and $0.2 million of working capital adjustments. The Company has determined that these
assets and liabilities met the definition of a business under the authoritative
guidance. The Company believes that the assets acquired will further its goal of
expanding its reach into the surgical headlight market. The Company also entered into a
development agreement with Welch that expires on February 15, 2011 unless the product is
commercially available prior to that date.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The final purchase price has been allocated as follows (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="66%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="11%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Accounts receivable
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">518</td>
<td> </td>
<td> </td>
<td align="left" valign="bottom"> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Inventory
</div></td>
<td> </td>
<td> </td>
<td align="right">138</td>
<td> </td>
<td> </td>
<td align="left" valign="bottom"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Property, plant and equipment
</div></td>
<td> </td>
<td> </td>
<td align="right">280</td>
<td> </td>
<td> </td>
<td align="left" valign="bottom"> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Intangible assets
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left" valign="bottom">Wtd. Avg. Life</td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px">Customer relationships
</div></td>
<td> </td>
<td> </td>
<td align="right">490</td>
<td> </td>
<td> </td>
<td align="left" valign="bottom">15 years</td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px">Technology
</div></td>
<td> </td>
<td> </td>
<td align="right">263</td>
<td> </td>
<td> </td>
<td align="left" valign="bottom">6 years</td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px">In-Process research and development
</div></td>
<td> </td>
<td> </td>
<td align="right">312</td>
<td> </td>
<td> </td>
<td align="left" valign="bottom">Indefinite</td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Goodwill
</div></td>
<td> </td>
<td> </td>
<td align="right">601</td>
<td> </td>
<td> </td>
<td align="left" valign="bottom"> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td align="left" valign="bottom"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left" valign="bottom"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Total net assets acquired
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,602</td>
<td> </td>
<td> </td>
<td align="left" valign="bottom"> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td align="left" valign="bottom"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
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</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><u>Athrodax Healthcare International Ltd.</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">In December 2009, the Company acquired certain assets as well as the distribution rights
for its Newdeal<sup style="font-size: 85%; vertical-align: text-top"><sup style="font-size: 85%; vertical-align: text-top">®</sup></sup> product lines in the United Kingdom from Athrodax Healthcare
International Ltd. (“Athrodax”), for approximately $3.3 million (2.0 million British
Pounds) in cash, subject to certain adjustments for working capital items. For the
previous ten years Athrodax had been the Company’s distributor of extremity
reconstruction products in the United Kingdom. The acquisition provides the Company with
the opportunity to distribute orthopedic products directly to its United Kingdom
customers, and included an experienced sales team in the foot and ankle surgery market
which had successfully developed its brand in the United Kingdom.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><u>Innovative Spinal Technologies, Inc.</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">In
August 2009, the Company acquired certain assets and liabilities of Innovative Spinal
Technologies, Inc. (“IST”) for approximately $9.3 million in cash and $0.2 million in
acquisition expenses. IST’s focus was on spinal implant products related to minimally
invasive surgery and motion preservation techniques. We acquired three product lines,
various product development assets for posterior dynamic stabilization, various patents
and trademarks and inventory, and we also assumed certain of IST’s patent license
agreements and related obligations. The assets and liabilities acquired did not meet the
definition of a business under the authoritative guidance for business combinations.
Accordingly, the assets and liabilities have been recognized at fair value with no
related goodwill.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><u>Theken</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">In August 2008 the Company acquired Theken Spine, LLC, Theken Disc, LLC and Therics, LLC
(collectively, “Integra Spine”) for $75.0 million in cash, acquisition expenses of $2.4
million, working capital adjustments of $3.9 million, and up to an additional $125.0
million in future payments based on the revenue performance of the business in each of
the two years after closing. We paid approximately $52.0 million of the potential
revenue performance obligation in November 2009. Integra Spine, based in Akron, Ohio,
designs, develops and manufactures spinal fixation products.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>3. INVENTORIES</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Inventories, net consisted of the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="66%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>(in thousands)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Finished goods
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">109,898</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">109,077</td>
<td> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Work-in process
</div></td>
<td> </td>
<td> </td>
<td align="right">30,174</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">28,757</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Raw materials
</div></td>
<td> </td>
<td> </td>
<td align="right">32,379</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">30,131</td>
<td> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Less: reserves
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(29,198</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(27,725</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">143,253</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">140,240</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>4. GOODWILL AND OTHER INTANGIBLE ASSETS</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Changes in the carrying amount of goodwill for the six months ended June 30, 2010 were
as follows (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="77%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Goodwill
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">261,941</td>
<td> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Accumulated impairment losses
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr>
<td align="left" valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Goodwill at December 31, 2009
</div></td>
<td> </td>
<td> </td>
<td align="right">261,941</td>
<td> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign currency translation
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(10,399</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Welch Allyn acquisition
</div></td>
<td> </td>
<td> </td>
<td align="right">601</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr>
<td align="left" valign="top"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Goodwill at June 30, 2010
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">252,143</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The Company’s assessment of the recoverability of goodwill is based upon a comparison of
the carrying value of goodwill with its estimated fair value, determined using a
discounted cash flow methodology. The Company performs this assessment annually during
the second quarter and no impairment resulted after completing this assessment during
the second quarter of 2010.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">During the second quarter of 2010, the Company recorded a $0.8 million impairment charge
related to several brand names. The impairment charge relates to management’s decision
with respect to the Company’s re-branding strategy for several legacy brand names. The
Company has recorded the charge as a component of amortization expense.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The components of the Company’s identifiable intangible assets were as follows (in
thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="23%"> </td>
<td width="3%"> </td>
<td width="8%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Weighted</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>June 30, 2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>December 31, 2009</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Average</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Accumulated</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Accumulated</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Life</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Cost</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Amortization</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Net</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Cost</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Amortization</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Net</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="center" valign="bottom"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Completed technology
</div></td>
<td> </td>
<td align="center" valign="bottom">12 years</td>
<td> </td>
<td align="left">$</td>
<td align="right">68,771</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(24,799</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">43,972</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">69,632</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(22,526</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">47,106</td>
<td> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Customer relationships
</div></td>
<td> </td>
<td align="center" valign="bottom">12 years</td>
<td> </td>
<td> </td>
<td align="right">97,025</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(40,573</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">56,452</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">97,922</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(36,724</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">61,198</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Trademarks/brand names
</div></td>
<td> </td>
<td align="center" valign="bottom">35 years</td>
<td> </td>
<td> </td>
<td align="right">33,023</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(7,781</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">25,242</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">35,741</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(8,692</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">27,049</td>
<td> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Trademarks/brand names
</div></td>
<td> </td>
<td align="center" valign="bottom">Indefinite</td>
<td> </td>
<td> </td>
<td align="right">49,384</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">49,384</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">49,384</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">49,384</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Supplier relationships
</div></td>
<td> </td>
<td align="center" valign="bottom">30 years</td>
<td> </td>
<td> </td>
<td align="right">29,300</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(4,037</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">25,263</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29,300</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,647</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">25,653</td>
<td> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">All other*
</div></td>
<td> </td>
<td align="center" valign="bottom">15 years*</td>
<td> </td>
<td> </td>
<td align="right">8,364</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(7,503</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">861</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,197</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(7,470</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">727</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="center" valign="bottom"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="center" valign="bottom"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="center" valign="bottom"> </td>
<td> </td>
<td align="left">$</td>
<td align="right">285,867</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(84,693</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">201,174</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">290,176</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(79,059</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">211,117</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="center" valign="bottom"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">*</td>
<td> </td>
<td>
<div style="text-align: justify">All other includes $0.3 million of in-process research and development which is
indefinite lived.
</div></td>
</tr>
</table>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Annual amortization expense is expected to approximate $17.7 million in 2010, $16.6
million in 2011, $16.4 million in 2012, $13.7 million in 2013 and $12.7 million in 2014.
Identifiable intangible assets are initially recorded at fair market value at the time
of acquisition using an income or cost approach.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>5. DEBT</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>2010 and 2012 Senior Convertible Notes</i>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">On June 11, 2007, the Company issued $165.0 million aggregate principal amount of its
2010 Notes and $165.0 million aggregate principal amount of its 2012 Notes (the 2010
Notes and the 2012 Notes, collectively the “Notes”). The 2010 Notes and the 2012 Notes
bear interest at a rate of 2.75% per annum and 2.375% per annum, respectively, in each
case payable semi-annually in arrears on December 1 and June 1 of each year.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">In 2009, the Company repurchased a total principal amount of $87.1 million of the 2010
Notes and recognized a gain of $0.5 million. Total cash paid for these repurchases was
$83.3 million of which $78.0 million related to repayment of the liability component of
the Notes. For all of these transactions, the bond hedge contracts were terminated on a
pro-rata basis and the number of options was adjusted to reflect the number of
convertible securities outstanding that together have a total principal amount of $77.9
million. Also, in connection with the repurchases, in separate transactions, we amended
the warrant transactions to reduce the number of warrants outstanding to reflect such
number of convertible securities outstanding. The Company repaid the remaining $77.9
million principal amount in June 2010 in accordance with the agreement, of which $71.4
million was related to the liability component and $6.6 million was for accreted
interest.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The principal amount outstanding under the 2012 Notes at June 30, 2010 was $165.0
million. The fair value of the 2012 Notes at June 30, 2010 was approximately $161.6
million. The 2012 Notes are senior, unsecured obligations of the Company, and are
convertible into cash and, if applicable, shares of its common stock based on an initial
conversion rate, subject to adjustment, of 15.3935 shares per $1,000 principal amount of
notes (which represents an initial conversion price of approximately $64.96 per share).
The Company will satisfy any conversion of the 2012 Notes with cash up to the principal
amount pursuant to the net share settlement mechanism set forth in the indenture and,
with respect to any excess conversion value, with shares of the Company’s common stock.
The 2012 Notes are convertible only in the following circumstances: (1) if the closing
sale price of the Company’s common stock exceeds 130% of the conversion price during a
period as defined in the indenture; (2) if the average trading price per $1,000
principal amount of the Notes is less than or equal to 97% of the average conversion
value of the Notes during a period as defined in the indenture; (3) at any time on or
after December 15, 2011; or (4) if specified corporate transactions occur. However, none
of these conditions existed at June 30, 2010 and, as a result, the 2012 Notes are
classified as long term. The issue
price of the 2012 Notes was equal to their face amount, which is also the amount holders
are entitled to receive at maturity if the 2012 Notes are not converted.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Holders of the 2012 Notes, who convert their notes in connection with a qualifying
fundamental change, as defined in the indenture, may be entitled to a make-whole premium
in the form of an increase in the conversion rate. Additionally, following the
occurrence of a fundamental change, holders may require that the Company repurchase some
or all of the 2012 Notes for cash at a repurchase price equal to 100% of the principal
amount of the notes being repurchased, plus accrued and unpaid interest, if any.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The 2012 Notes, under the terms of the private placement agreement, are guaranteed fully
by Integra LifeSciences Corporation, a subsidiary of the Company. The 2012 Notes will be
the Company’s direct senior unsecured obligations and will rank equal in right of
payment to all of the Company’s existing and future unsecured and unsubordinated
indebtedness.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">In connection with the original issuance of the Notes, the Company entered into call
transactions and warrant transactions, primarily with affiliates of the initial
purchasers of the Notes (the “hedge participants”), in connection with each series of
Notes. The cost of the call transactions to the Company was approximately $46.8 million.
The Company received approximately $21.7 million of proceeds from the warrant
transactions. The call transactions involve the Company’s purchasing call options from
the hedge participants, and the warrant transactions involve the Company’s selling call
options to the hedge participants with a higher strike price than the purchased call
options. The calls related to the 2010 Notes expired with the maturity of those notes
and the warrants related to the 2010 Notes expire at various times through January 2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The initial strike price of the remaining call transactions is approximately $64.96 for
the 2012 Notes, subject to anti-dilution adjustments substantially similar to those in
the 2012 Notes. The initial strike price of the warrant transactions is (x) for the 2010
Notes, approximately $77.96 per share of Common Stock and (y) for the 2012 Notes,
approximately $90.95, in each case subject to customary anti-dilution adjustments.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Senior Secured Revolving Credit Facility</i>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">As of June 30, 2010, the Company had $220.0 million of outstanding borrowings under this
credit facility at a weighted average interest rate of 1.13%. The fair value of the
outstanding borrowings on this credit facility at June 30, 2010 was approximately $211.9
million. During the six months ended June 30, 2010, the Company borrowed $75.0 million
in connection with the maturity of its 2010 Notes and also repaid $15.0 million of its
outstanding borrowings. The Company considers all such outstanding amounts to be
long-term in nature based on its current intent and ability to repay the borrowing
outside of the next twelve-month period. This credit facility expires in December 2011.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>6. DERIVATIVE INSTRUMENTS</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The Company utilizes a foreign currency forward exchange contract to hedge an
anticipated intercompany transaction in euros and designates this derivative instrument
as a cash-flow hedge. Our forward exchange contract has a notional amount of 8.2 million
euros ($10.0 million at June 30, 2010), and is short term in nature with a term of less
than twelve months. This forward exchange contract matches the currency, timing and
notional amount of underlying forecasted transactions. Therefore, no ineffectiveness
resulted or was recorded through the condensed consolidated statement of operations. As
of June 30, 2010, this forward exchange contract has an aggregate U.S. dollar equivalent
fair value amounting to net losses of $2.2 million included in other current
liabilities. The net gains or losses from this cash flow hedge reported in accumulated
other comprehensive income is reclassified to earnings and recorded in other income in
our consolidated statement of operations as the foreign currency rates fluctuate over
the term of the instrument. At June 30, 2010, the amount of net unrealized gains in
other comprehensive income which will be recognized as an increase to other income in
the remainder of 2010 was not significant. The Company considers the credit risk related
to the forward exchange contract to be low because the instrument was entered into with
a financial institution with a high credit rating.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>7. STOCK-BASED COMPENSATION</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">As of June 30, 2010, the Company had stock options, restricted stock awards, performance
stock awards, contract stock awards and restricted stock unit awards outstanding under
six plans, the 1996 Incentive Stock Option and Non-Qualified Stock Option Plan (the
“1996 Plan”), the 1998 Stock Option Plan (the “1998 Plan”), the 1999 Stock Option Plan
(the “1999 Plan”), the 2000 Equity Incentive Plan (the “2000 Plan”), the 2001 Equity
Incentive Plan (the “2001 Plan”), and the 2003 Equity Incentive Plan (the “2003 Plan,”
and collectively, the “Plans”). No new awards may be granted under the 1996 Plan, the
1998 Plan, the 1999 Plan and the 2000 Plan.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Stock options issued under the Plans become exercisable over specified periods,
generally within four years from the date of grant for officers, directors and
employees, and generally expire six years from the grant date for employees and from six
to ten years for directors and certain executive officers. The transfer and
non-forfeiture provisions of restricted stock issued under the Plans lapse over
specified periods, generally three years after the date of grant.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><u>Stock Options</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The Company granted approximately 59,000 and 62,500 stock options during the six months
ended June 30, 2010 and June 30, 2009, respectively. As of June 30, 2010, there were
approximately $3.8 million of total unrecognized compensation costs related to unvested
stock options. These costs are expected to be recognized over a weighted-average period
of approximately 1.9 years. The Company received net proceeds of $4.6 million and $0.6
million from stock option exercises for the six months ended June 30, 2010 and 2009,
respectively.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><u>Awards of Restricted Stock, Performance Stock and Contract Stock</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Performance stock awards have performance features associated with them. Performance
stock, restricted stock and contract stock awards generally have requisite service
periods of three years. The fair value of these awards is being expensed on a
straight-line basis over the vesting period or requisite service period, whichever is
shorter. As of June 30, 2010, there was approximately $13.4 million of total
unrecognized compensation costs related to unvested awards. These costs are expected to
be recognized over a weighted-average period of approximately 1.8 years.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The Company has no formal policy related to the repurchase of shares for the purpose of
satisfying stock-based compensation obligations.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The Company also maintains an Employee Stock Purchase Plan (the “ESPP”), which provides
eligible employees of the Company with the opportunity to acquire shares of common stock
at periodic intervals by means of accumulated payroll deductions. The ESPP is a
non-compensatory plan based on its terms.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 8 - us-gaap:PensionAndOtherPostretirementBenefitsDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>8. RETIREMENT BENEFIT PLANS</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The Company maintains defined benefit pension plans that cover employees in its
manufacturing plants located in Andover, United Kingdom (the “UK Plan”) and Tuttlingen,
Germany (the “Germany Plan”). The Company closed the Tuttlingen, Germany plant, to which
the Germany Plan pertained, in December 2005. However, the Company did not terminate the
Germany Plan and the Company remains obligated for the accrued pension benefits related
to this plan. The plans cover certain current and former employees. Net periodic benefit
costs for the Company’s defined benefit pension plans included the following amounts (in
thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Three Months Ended June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Six Months Ended June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Service cost
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">26</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">30</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">53</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">57</td>
<td> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest cost
</div></td>
<td> </td>
<td> </td>
<td align="right">155</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">151</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">313</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">285</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected return on plan assets
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(119</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(103</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(244</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(199</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Recognized net actuarial loss
</div></td>
<td> </td>
<td> </td>
<td align="right">36</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">115</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">74</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">222</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Net period benefit cost
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">98</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">193</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">196</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">365</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The Company made $0.5 million and $0.4 million of contributions to its defined benefit
pension plans during the six months ended June 30, 2010 and 2009, respectively.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 9 - us-gaap:ComprehensiveIncomeNoteTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>9. COMPREHENSIVE (LOSS) INCOME</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Comprehensive (loss) income was as follows (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Three Months Ended June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Six Months Ended June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net Income
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">15,157</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">11,225</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">30,379</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">20,792</td>
<td> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign currency translation adjustment
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(16,704</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">13,691</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(27,933</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">5,726</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Change in unrealized gain on derivatives, net of tax
</div></td>
<td> </td>
<td> </td>
<td align="right">(5</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">(11</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Comprehensive (loss) income
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1,552</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">24,916</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,435</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">26,518</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 10 - us-gaap:EarningsPerShareTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>10. NET INCOME PER SHARE</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">In January 2009 the Company adopted 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 nonforfeitable dividends, and thus, are participating securities requiring the
two-class method of computing earnings per share. Because these securities had an
insignificant impact on the calculation of earnings per share (impacts the rounding by
$0.01 or less per share) the Company does not present the full calculation below.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Basic and diluted net income per share was as follows (in thousands, except per share
amounts):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Three Months Ended June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Six Months Ended June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Basic net income per share:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">15,157</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">11,225</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">30,379</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">20,792</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average common shares
outstanding
</div></td>
<td> </td>
<td> </td>
<td align="right">29,855</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29,004</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29,672</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">28,974</td>
<td> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Basic net income per common share
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">0.51</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.38</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1.02</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.71</td>
<td> </td>
</tr>
<tr>
<td align="left" valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Diluted net income per share:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">15,157</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">11,225</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">30,379</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">20,792</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average common shares
outstanding — Basic
</div></td>
<td> </td>
<td> </td>
<td align="right">29,855</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29,004</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29,672</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">28,974</td>
<td> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Effect of dilutive securities:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Stock options and restricted stock
</div></td>
<td> </td>
<td> </td>
<td align="right">544</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">198</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">610</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">254</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average common shares
for diluted earnings per share
</div></td>
<td> </td>
<td> </td>
<td align="right">30,399</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29,202</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">30,282</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29,228</td>
<td> </td>
</tr>
<tr>
<td align="left" valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Diluted net income per share
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">0.50</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.38</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1.00</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.71</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">At June 30, 2010 and 2009 the Company had 1.9 million and 2.6 million of outstanding
stock options, respectively. The Company also has warrants outstanding relating to its
2010 Notes and 2012 Notes. Stock options, restricted stock and warrants are included in
the diluted earnings per share calculation using the treasury stock method, unless the
effect of including the stock options would be anti-dilutive. For the three months ended
June 30, 2010 and 2009, 0.7 million and 2.3 million anti-dilutive stock options,
respectively, were excluded from the diluted earnings per share calculation. As the
strike price of the warrants exceeded the Company’s average stock price for the period,
the warrants are anti-dilutive and the entire number of warrants were also excluded from
the diluted earnings per share calculation.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>11. SEGMENT AND GEOGRAPHIC INFORMATION</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The Company’s management, including the chief operating decision maker, reviews financial results and manages the business on an
aggregate basis. Therefore, financial results are reported in a single operating
segment, the development, manufacture and marketing of medical devices for use in
cranial and spinal procedures, peripheral nerve repair, small bone and joint injuries,
and the repair and reconstruction of soft tissue.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Revenue consisted of the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Three Months Ended June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Six Months Ended June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Integra Orthopedics
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">72,819</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">65,164</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">143,006</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">129,530</td>
<td> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Integra NeuroSciences
</div></td>
<td> </td>
<td> </td>
<td align="right">66,306</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">61,448</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">131,080</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">121,179</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Integra Medical Instruments
</div></td>
<td> </td>
<td> </td>
<td align="right">39,470</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">39,113</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">77,207</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">75,966</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Total revenues
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">178,595</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">165,725</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">351,293</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">326,675</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Total revenues by major geographic area are summarized below (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Three Months Ended June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Six Months Ended June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">United States
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">138,760</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">127,086</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">268,123</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">249,671</td>
<td> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Europe
</div></td>
<td> </td>
<td> </td>
<td align="right">20,076</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,035</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44,228</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">46,429</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Asia Pacific
</div></td>
<td> </td>
<td> </td>
<td align="right">9,174</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,935</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,411</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,129</td>
<td> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Other Foreign
</div></td>
<td> </td>
<td> </td>
<td align="right">10,585</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,669</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">20,531</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,446</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Total revenues
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">178,595</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">165,725</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">351,293</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">326,675</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>12. COMMITMENTS AND CONTINGENCIES</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">In consideration for certain technology, manufacturing, distribution and selling rights
and licenses granted to the Company, the Company has agreed to pay royalties on the
sales of products that are commercialized relative to the granted rights and licenses.
Royalty payments made by the Company under these agreements were not significant for any
of the periods presented.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Various lawsuits, claims and proceedings are pending or have been settled by the
Company. The only significant item is described below.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">In January 2010, the Company received a notice from the seller’s representative of the
former Theken companies of a disagreement in the calculation of “trade sales” used in
calculating a revenue performance payment that the Company made in November 2009. The
notice alleges that the Company owes an additional $6.7 million. We are currently
discussing this matter with the seller’s representative in an attempt to resolve the
dispute in accordance with the provisions contained in the asset purchase agreement
governing the transaction.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">In addition to this matter, the Company is subject to various claims, lawsuits and
proceedings in the ordinary course of its business, including claims by current or
former employees, distributors and competitors and with respect to its products. In the
opinion of management, such claims are either adequately covered by insurance or
otherwise indemnified, or are not expected, individually or in the aggregate, to result
in a material adverse effect on the Company’s financial condition. However, it is
possible that its results of operations, financial position and cash flows in a
particular period could be materially affected by these contingencies.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The Company accrues for loss contingencies when it is deemed probable that a loss has
been incurred and that loss is estimable. The amounts accrued are based on the full
amount of the estimated loss before considering insurance proceeds, and do not include
an estimate for legal fees expected to be incurred in connection with the loss
contingency. The Company consistently accrues legal fees expected to be incurred in
connection with loss contingencies as those fees are incurred by outside counsel as a
period cost.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
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<!-- Begin Block Tagged Note 13 - us-gaap:IncomeTaxDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>13. Income Taxes</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The following table provides a summary of our effective tax rate:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="58%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Percentage Point</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">Three Months Ended June 30,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Increase</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">(Decrease)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Reported tax rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">28.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">35.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(7.3</td>
<td nowrap="nowrap">%)</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="58%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Percentage Point</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">Six Months Ended June 30,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Increase</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">(Decrease)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff; padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Reported tax rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">24.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">35.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(10.9</td>
<td nowrap="nowrap">%)</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The decrease in the Company’s effective tax rates for the second quarter and first half of 2010, as
compared the same periods in 2009, relates primarily to an increase in the expected proportion of
the Company’s taxable income for the full year that will come from foreign jurisdictions with lower tax rates. Additionally, during
the first quarter of 2010 the Company reversed $2.3 million of reserves for uncertain tax positions
due to matters that are considered effectively settled and the expiration of the statute of
limitations for certain matters.
</div>
</div>
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<!-- Begin Block Tagged Note 14 - us-gaap:LeasesOfLesseeDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>14. LEASES</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">On March 1, 2010, the Company exercised an option to extend a lease agreement for
production equipment dated June 2000 with Medicus Corporation. Under the option, the
term of the original lease agreement was extended through March 31, 2012. The initial
June 2000 agreement was subsequently amended on June 29, 2010 to extend the term of the
lease to March 31, 2022, with an option to renew through March 31, 2032. The sole
stockholder of Medicus Corporation is Provco Ventures I, LP, of which the Company’s
chairman serves as partner and president.
</div>
</div>
false
--12-31
Q2
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10-Q
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