INTEGRA LIFESCIENCES HOLDINGS CORP

Previous wording

We have made statements in this Quarterly Report that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). All statements other than statements of historical fact contained in this Quarterly Report, including, but not limited to, statements regarding our business strategy and plans, growth and growth strategies, developments in the markets for our products and services, financial results, development launches and effectiveness, research and development strategy, regulatory approvals, competitive strengths, the potential or anticipated direct or indirect impact of the Coronavirus pandemic on our business, results of operations, and/or financial condition, objectives of management for future operations and current expectations or forecasts of future results, our expectations regarding the Boston facility; restructuring and cost-saving initiatives, intellectual property rights, litigation and tax matters, governmental proceedings and investigations, mergers and acquisitions, divestitures, market acceptance of our products and services, accounting estimates, financing activities, ongoing contractual obligations, working capital adequacy, value of our investments, our effective tax rate, our expected returns to shareholders, and sales efforts, are forward-looking statements. In some cases, these forward-looking statements may be identified by forward-looking words such as “believe,” “may,” “might,” “could,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “seek,” “plan,” “expect,” “should,” “would” or the negative version of these words or other similar words and expressions in this Quarterly Report.

Current wording

We have made statements in this Quarterly Report that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). All statements other than statements of historical fact contained in this Quarterly Report, including, but not limited to, statements regarding our business strategy and plans, growth and growth strategies, developments in the markets for our products and services, financial results, development launches and effectiveness, research and development strategy, regulatory approvals, competitive strengths, objectives of management for future operations and current expectations or forecasts of future results, our expectations regarding the Boston facility and the Company’s plans to operationalize its Braintree facility, transition the manufacture of SurgiMend® and PriMatrix® to the Braintree facility, and to obtain pre-market approval of SurgiMend® PRS in implant-based breast reconstruction; restructuring and cost-saving initiatives, intellectual property rights, litigation and tax matters, governmental proceedings and investigations, mergers and acquisitions, divestitures, market acceptance of our products and services, accounting estimates, financing activities, ongoing contractual obligations, working capital adequacy, value of our investments, our effective tax rate, our expected returns to shareholders, and sales efforts, are forward-looking statements. In some cases, these forward-looking statements may be identified by forward-looking words such as “believe,” “may,” “might,” “could,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “seek,” “plan,” “expect,” “should,” “would” or the negative version of these words or other similar words and expressions in this Quarterly Report.

Previous wording

These forward-looking statements are subject to a number of risks, uncertainties and assumptions about the Company and other matters that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. We believe these risks include but are not limited to those described under the headings “Risk Factors” and “Special Note Regarding Forward-Looking Statements” in our Annual Report on Form 10-K for the year ended December 31, 2023 and in this Quarterly Report, as such factors may be updated from time to time in our periodic filings with the Securities and Exchange Commission (the “SEC”), which are accessible on the SEC’s website at https://www.sec.gov. Such risks and uncertainties include, but are not limited, to the following: the ongoing and possible future effects of global challenges, including macroeconomic uncertainties, inflation, supply chain disruptions, trade regulation and tariffs, other economic disruptions and U.S. and global recession concerns, on the Company’s customers and on the Company’s business, financial condition, results of operations and cash flows; the Company's ability to execute its operating plan effectively; the Company’s ability to successfully integrate acquired businesses; the Company’s ability to achieve sales growth in a timely fashion; the Company’s ability to manufacture and ship sufficient quantities of its products to meet its customers’ demands; the ability of third-party suppliers to supply us with raw materials and finished products; global macroeconomic and political conditions, including the war in Ukraine and the conflict in Israel and Gaza; the Company’s ability to manage its direct sales channels effectively; the sales performance of third-party distributors on whom the Company relies to generate revenue for certain products and geographic regions; the Company’s ability to access and maintain relationships with customers of acquired entities and businesses; physicians’ willingness to adopt and third-party payors’ willingness to provide or maintain reimbursement for the Company’s recently launched, planned and existing products; initiatives launched by the Company's competitors; downward pricing pressures from customers; the Company's ability to secure regulatory approval for products in development; the Company’s ability to remediate quality systems violations; fluctuations in hospitals’ spending for capital equipment; the Company’s ability to comply with regulations regarding products of human origin and products containing materials derived from animal source; difficulties in controlling expenses, including costs to procure and manufacture our products; the impact of changes in management or staff levels; the impact of goodwill and intangible asset impairment charges if future operating results of acquired businesses are significantly less than the results anticipated at …

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Current wording

These forward-looking statements are subject to a number of risks, uncertainties and assumptions about the Company and other matters that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. We believe these risks include but are not limited to those described under the headings “Risk Factors” and “Special Note Regarding Forward-Looking Statements” in our Annual Report on Form 10-K for the year ended December 31, 2023 and in this Quarterly Report, as such factors may be updated from time to time in our periodic filings with the Securities and Exchange Commission (the “SEC”), which are accessible on the SEC’s website at https://www.sec.gov. Such risks and uncertainties include, but are not limited, to the following: the ongoing and possible future effects of global challenges, including macroeconomic uncertainties, inflation, supply chain disruptions, trade regulation and tariffs, other economic disruptions and U.S. and global recession concerns, on the Company’s customers and on the Company’s business, financial condition, results of operations and cash flows; the Company's ability to execute its operating plan effectively; the Company’s ability to successfully integrate acquired businesses; the Company’s ability to achieve sales growth in a timely fashion; the Company’s ability to manufacture and ship sufficient quantities of its products to meet its customers’ demands; the ability of third-party suppliers to supply us with raw materials and finished products; global macroeconomic and political conditions, including the war in Ukraine and the conflict in Israel and Gaza; the Company’s ability to manage its direct sales channels effectively; the sales performance of third-party distributors on whom the Company relies to generate revenue for certain products and geographic regions; the Company’s ability to access and maintain relationships with customers of acquired entities and businesses; physicians’ willingness to adopt and third-party payors’ willingness to provide or maintain reimbursement for the Company’s recently launched, planned and existing products; initiatives launched by the Company's competitors; downward pricing pressures from customers; the Company's ability to secure regulatory approval for products in development; the Company’s ability to remediate quality systems violations; difficulties or delays in obtaining and maintaining required regulatory approvals related to the transition of the manufacturing to the Braintree facility and obtain pre-market approval of SurgiMend® PRS in implant-based breast reconstruction; the possibility that costs or difficulties related to building and the operationalization of the Braintree facility or the transition of manufacturing activities from the Company’s Boston facility to the Braintree facility will be greater than expected; fluctuations in hospital…

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Previous wording

Innovating for Outcomes. An important part of Integra’s growth strategy is introducing new products to strengthen and expand our portfolio, including via acquisitions. For example, On April 1, 2024, the Company successfully completed the acquisition of Acclarent from Ethicon, Inc., a subsidiary of Johnson & Johnson. Acclarent is an innovator and market leader in ear, nose and throat (“ENT”) procedures and we believe that the acquisition of Acclarent will provide Integra with the opportunity to become a leading provider of ENT products and technologies. Furthermore, we believe that, owing to the ENT segment being an anatomical adjacency to neurosurgery, the acquisition will allow Integra to deliver future innovation both within the ENT segment and across our other CSS technology platforms. Additionally, we seek clinical evidence to support regulatory approval and strong reimbursement of our product portfolio around the world, including new indications for existing technologies. For example, in 2021, we filed a pre-market approval (“PMA”) application for a specific indication for Surgimend® in the use of post-mastectomy breast reconstruction. In 2022, we acquired SIA, which is also pursuing a PMA for DuraSorb for use in implant-based breast reconstruction (“IBBR”), and in June 2023 we completed enrollment in the DuraSorb U.S. investigational device exemption clinical study for two-stage breast reconstruction; the primary follow-up period is one year after device implantation. We hope to have approval for DuraSorb in 2025. For SurgiMend, we are not currently able to predict an approval date because of the delays in remediating our Boston manufacturing site. We also continued to advance the development of pioneering neurosurgical technologies with the expansion of our product offerings. In 2023 we launched the CUSA® Clarity Tips for use in surgical procedures requiring the controlled fragmentation, emulsification and aspiration of bone as well as in laparoscopic liver surgery.

Current wording

Innovating for Outcomes. An important part of Integra’s growth strategy is introducing new products to strengthen and expand our portfolio through clinical evidence to support regulatory approval and strong reimbursement of our product portfolio around the world, including new indications for existing technologies. For example, in 2021, we filed a pre-market approval (“PMA”) application for a specific indication for Surgimend® in the use of post-mastectomy breast reconstruction. We cannot predict an approval date because of the timeline of restarting manufacturing at the Braintree facility, where Surgimend® will be manufactured. In the late 2022, we acquired SIA, which is also pursuing a PMA for DuraSorb for use in implant-based breast reconstruction (“IBBR”). We completed enrollment for the DuraSorb U.S. investigational device exemption clinical study for two-stage breast reconstruction in June 2023 and are conducting the primary follow-up one year after device implantation. We hope to secure approval for DuraSorb in 2025. In addition, in March 2024, we expanded our urinary bladder matrix platform with the U.S. launch of MicroMatrix® Flex, a dual-syringe system enabling the convenient mixing and precise delivery of MicroMatrix® paste to provide convenient access to hard-to-reach spaces and to help prepare an even wound surface in challenging wound areas.

Previous wording

Growing Internationally: Over the years, we have been significantly expanding our global footprint through investments in our commercial and manufacturing organizations, the expansion and development of international markets and new product introductions. As part of our In-China-For-China strategy, we continue the build out of our assembly capabilities in our new facility in Suzhou, China. Several new products were introduced in select international markets in 2023, including MicroMatrix® and Certas Plus® Programmable Valve which were launched in Europe, and CUSA Clarity Laparoscopic tip which was launched in Australia, New Zealand, Japan, Canada, South Africa and Israel. In addition, DuraGen Secure, received approval in Japan, while DuraGen Plus, an absorbable and sutureless collagen onlay indicated as a dura substitute for the repair of dura mater, was approved in China.

Current wording

Growing Internationally: Over the years, we have been significantly expanding our global footprint through investments in our commercial and manufacturing organizations, the expansion and development of international markets and new product introductions. As part of our In-China-For-China strategy, we continue the build out of our assembly capabilities in our new facility in Suzhou, China. Several new products were introduced in select international markets in 2023 and 2024, including MicroMatrix® and Certas Plus® Programmable Valve, which were launched in Europe, and CUSA Clarity laparoscopic tip, which was launched in Australia, New Zealand, Japan, Canada, South Africa and Israel. In addition, DuraGen® Secure, received approval in Japan, while DuraGen Plus, an absorbable and sutureless collagen onlay indicated as a dura substitute for the repair of dura mater, was approved in China. CereLink, DuraSeal® and MediHoney® also continued their market uptake in international markets.

Previous wording

Broadening Impact on Care Pathways. We seek ways to develop products and technologies that impact the lives of patients, starting with the journey that a patient takes from diagnosis and treatment planning to surgery and postoperative care. We are well-established in acute care in the hospital setting and continue to leverage that strong position to grow in this segment and shape treatment pathways into preoperative care and additional sites of care.

Current wording

Broadening Impact on Care Pathways. We seek ways to develop and acquire products and technologies that impact the lives of patients, starting with the journey that a patient takes from diagnosis and treatment planning to surgery and postoperative care. We are well-established in acute care in the hospital setting and continue to leverage that strong position to grow in this segment and shape treatment pathways into preoperative care and additional sites of care. On April 1, 2024, the Company successfully completed the acquisition of Acclarent from Ethicon, Inc., a subsidiary of Johnson & Johnson. Acclarent is an innovator and market leader in ear, nose and throat (“ENT”) procedures and the acquisition of Acclarent has positioned Integra as one of the leading providers of ENT products and technologies. Furthermore, we believe that, owing to the ENT business being an anatomical adjacency to neurosurgery, the acquisition will allow Integra to deliver future innovation both within the ENT business and across our other CSS technology platforms.

Previous wording

Driving Operations and Customer Excellence. We have been making investments to build more responsive and scalable processes, enhance the reliability of our supply chain, and drive productivity initiatives to further supply and lower costs. Additionally, we continue to invest in technologies, systems and processes to enhance the customer experience. We continue to invest in our capacity expansion. This includes ongoing projects of transferring our Boston manufacturing to a new location in Braintree, Massachusetts, validating manufacturing processes in our manufacturing facility in Plainsboro, New Jersey and increasing cleanroom capacity in our Memphis, Tennessee location.

Current wording

Driving Operations and Customer Excellence. We have been making investments to build more responsive and scalable processes, enhance the reliability of our supply chain, and drive productivity initiatives to further supply and lower costs. Additionally, we continue to invest in technologies, systems and processes to enhance the customer experience. We continue to invest in our capacity expansion. This includes ongoing projects of transferring our Boston manufacturing to a new location in Braintree, Massachusetts, validating manufacturing processes in our manufacturing facility in Plainsboro, New Jersey and increasing capacity in our Memphis, Tennessee location.

Previous wording

In the third quarter of 2021, we filed a PMA application for a specific indication for Surgimend® in the use of post-mastectomy breast reconstruction. In 2022, we acquired SIA, which has also submitted a PMA application for DuraSorb with IBBR, and in June 2023 we completed enrollment in the DuraSorb U.S. IDE clinical study for two-stage breast reconstruction; the primary follow-up period is one year after device implantation. By offering two distinct product solutions, we believe we have the opportunity to build a leading position in the IBBR market. We hope to have approval for DuraSorb in 2025. For SurgiMend, we are not currently able to predict an approval date because of the delays in remediating our Boston manufacturing site.

Current wording

In the third quarter of 2021, we filed a PMA application for a specific indication for Surgimend® in the use of post-mastectomy breast reconstruction. In 2022, we acquired SIA, which has also submitted a PMA application for DuraSorb with IBBR, and in June 2023 we completed enrollment in the DuraSorb U.S. investigational device exemption clinical study for two-stage breast reconstruction; the primary follow-up period is one year after device implantation. By offering two distinct product solutions, we believe we have the opportunity to build a leading position in the IBBR market. We hope to secure approval for DuraSorb in 2025. For SurgiMend®, we cannot predict an approval date because of the timeline of restarting manufacturing at the Braintree facility.

Previous wording

On March 7, 2019, TEI Biosciences, Inc. (“TEI”), one of our wholly-owned subsidiaries, received a Warning Letter (the “2019 Warning Letter”), dated March 6, 2019, from the FDA. The 2019 Warning Letter related to quality systems issues at TEI’s manufacturing facility located in Boston, Massachusetts. The Boston facility manufactures extracellular bovine matrix products in our TT segment that are sold both in wound reconstruction and care and in private label channels. The letter resulted from an inspection held at that facility in October and November 2018 and did not identify any new observations that were not already provided in the Form 483 that followed the inspection. We submitted our initial response to the 2019 Warning Letter on March 28, 2019 and provide regular progress reports to the FDA as to its corrective actions. On October 28, 2021, the FDA initiated an inspection of the facility and at the conclusion of the inspection, issued an FDA Form 483 on November 12, 2021 (the “2021 Form 483”). We provided an initial response to the inspection observations. On March 1, 2023, the FDA commenced an inspection of the Boston facility, and issued an FDA Form 483 at the conclusion of this inspection (the “2023 Form 483”). In May 2023, after consultation with the FDA, the Company initiated a voluntary recall of products manufactured in the Boston facility distributed between March 1, 2018 and May 22, 2023, and extended the temporary halt of manufacturing at the facility to implement additional detection and quality controls. On July 19, 2023, TEI received a Warning Letter, dated July 17, 2023, from the FDA related to quality system issues at the Boston facility (the “2023 Warning Letter”). The 2023 Warning Letter did not identify any new observations that had not already been provided in the 2023 Form 483. The Company has submitted periodic responses to the FDA for both the 2023 Form 483 and the 2023 Warning Letter. We are committed to resolving the matters identified in the Warning Letters and Form 483s and are continuing our significant efforts to remediate the observations.

Current wording

On March 7, 2019, TEI Biosciences, Inc. (“TEI”), one of our wholly-owned subsidiaries, received a Warning Letter (the “2019 Warning Letter”), dated March 6, 2019, from the FDA. The 2019 Warning Letter related to quality systems issues at TEI’s manufacturing facility located in Boston, Massachusetts (the “Boston facility”). The Boston facility manufactures extracellular bovine matrix products in our TT segment that are sold both in wound reconstruction and care and in private label channels. The letter resulted from an inspection held at that facility in October and November 2018 and did not identify any new observations that were not already provided in the Form 483 that followed the inspection. We submitted our initial response to the 2019 Warning Letter on March 28, 2019 and provide regular progress reports to the FDA as to its corrective actions. On October 28, 2021, the FDA initiated an inspection of the facility and at the conclusion of the inspection, issued an FDA Form 483 on November 12, 2021 (the “2021 Form 483”). We provided an initial response to the inspection observations. On March 1, 2023, the FDA commenced an inspection of the Boston facility and issued an FDA Form 483 at the conclusion of this inspection (the “2023 Form 483”). In May 2023, after consultation with the FDA, The Company initiated a voluntary global recall of all products manufactured at the Boston facility, including PriMatrix®, SurgiMend®, Revize™, and TissueMend™, distributed between March 1, 2018 and May 22, 2023. On July 19, 2023, TEI received a Warning Letter, dated July 17, 2023, from the FDA related to quality system issues at the Boston facility (the “2023 Warning Letter”). The 2023 Warning Letter did not identify any new observations that had not already been provided in the 2023 Form 483. The Company has submitted periodic responses to the FDA for both the 2023 Form 483 and the 2023 Warning Letter. We are committed to resolving the matters identified in the Warning Letters and Form 483s and are continuing our significant efforts to remediate the observations.

Previous wording

As required by the 2023 Warning Letter, we retained an outside expert consultant to perform an audit of the Boston facility in March 2024. While we anticipated this audit would yield findings and there would be remaining work to be completed, the audit yielded more findings than we anticipated. We are still determining the full scope of the work required to address these additional findings and resume commercial distribution. Based on a preliminary assessment of the work to be done, we no longer expect to resume commercial distribution in 2024. As a result, the Company elected to perform impairment testing on certain definite-lived intangibles and goodwill. For further detail on the impairment testing, see Note 5. Goodwill and Other Intangible Assets.

Current wording

The Company elected to perform impairment testing on certain definite-lived intangibles and goodwill in the first quarter of 2024, which resulted in an intangible impairment of $7.1 million. For further detail on the impairment testing, see Note 5. Goodwill and Other Intangible Assets.

Previous wording

Net loss for thethree months ended March 31, 2024 was $3.3 million, or $0.04 per diluted share, as compared to net income of $24.2 million or $0.29 per diluted share for thethree months ended March 31, 2023. The decrease in net income for the three months ended March 31, 2024, was driven by higher manufacturing costs and impairment charges of$7.1 million, primarily related to our Boston facility.

Current wording

Net loss for thethree and sixmonths ended June 30, 2024 was $(12.4) million and $(15.7) million, or $(0.16) and $(0.20) per diluted share, as compared to net income of $4.2 million and $28.4 million or $0.05 and $0.35 per diluted share for thethree and six months ended June 30, 2023. The decrease in net income for the three and six months ended June 30, 2024, was driven by costs related to the Acclarent acquisition, as well as higher manufacturing costs.

Previous wording

In the CSS segment, revenues were $256.4 million which was an increase of $8.3 million, or 3.3% as compared to the prior-year period, inclusive of a $2.4 million unfavorable foreign currency impact on revenue. Excluding the impact of foreign exchange, the Neurosurgery portfolio grew mid-single digits primarily due to increased sales in Neuro Monitoring and CSF Management.

Current wording

In the CSS segment, revenues were $301.8 million which was an increase of $30.7 million, or 11.3% as compared to the prior-year period. This is inclusive of $31.3 million related to the Acclarent acquisition and $2.9 million unfavorable foreign currency impact on revenue. Excluding the impact of foreign exchange and the Acclarent acquisition, the Neurosurgery portfolio grew low-single digits primarily due to increased sales in Dural Access & Repair and MicroFrance®.

Previous wording

Gross margin was $206.8 million for the three months ended March 31, 2024, a decrease of $26.0 million from $232.9 million for the same period in 2023. Gross margin as a percentage of revenues was 56.1%for the three months ended March 31, 2024 and 61.1% for the same period in 2023. The decrease in gross margin percentage was primarily associated with higher costs related to idle capacity at our Boston facility, as well as additional manufacturing expenses across our manufacturing sites.

Current wording

Gross margin was $225.9 million for the three months ended June 30, 2024, an increase of $18.9 million from $207.0 million for the same period in 2023. Gross margin as a percentage of revenues was 54.0% for the three months ended June 30, 2024 and 54.3% for the same period in 2023. For the three months ended June 30, 2024, gross margins were impacted by Boston impairment charges, Acclarent inventory step up, and higher manufacturing costs. For the three months ended June 30, 2023, gross margins were impacted by expenses associated with the Boston recall.

Previous wording

Total operating expenses, which consist of research and development, selling, general and administrative, and amortization expenses, increased by $6.4 million, or 3.3% to $202.9 million in the three months ended March 31, 2024, compared to $196.5 millionin the same period in 2023, mainly driven by intangible amortization.

Current wording

Total operating expenses, which consist of research and development, selling, general and administrative, and amortization expenses, increased by $34.4 million, or 17.7%, to $228.9 million in the three months ended June 30, 2024, compared to $194.5 million in the same period in 2023.

Previous wording

Research and development expenses for the three months ended March 31, 2024 increased by $0.2 million as compared to the same period in the prior year.

Current wording

Research and development expenses for the three months ended June 30, 2024 increased by $3.2 million as compared to the same period in the prior year primarily due to the Acclarent acquisition.

Previous wording

Selling, general and administrative costs for the three months ended March 31, 2024 decreased by $0.9 million as compared to the same period in the prior year.

Current wording

Selling, general and administrative costs for the three months ended June 30, 2024 increased by $30.6 million as compared to the same period in the prior year due to the professional fees and costs associated with the Acclarent acquisition and higher spending in commercial selling activities for both legacy and Acclarent products.

Previous wording

Interest income for the three months ended March 31, 2024 increased by $0.9 million ascompared to the same period in the prior year primarilydue to higher interest rates.

Current wording

Interest income for the three months ended June 30, 2024 increased by $1.1 million ascompared to the same period in the prior year primarilydue to higher interest rates.

Previous wording

Interest expense for the three months ended March 31, 2024 increased by $1.5 million ascompared to the same period in the prior year primarilydue incremental borrowing and higher interest rates.

Current wording

Interest expense for the three months ended June 30, 2024 increased by $6.2 million ascompared to the same period in the prior year primarilydue to incremental borrowing to fund Acclarent acquisition and higher interest rates.

Previous wording

Our effective income tax rates for the three months ended March 31, 2024 and 2023 were 37.3% and 18.6%, respectively.

Current wording

Our effective income tax rates for the three months ended June 30, 2024 and 2023 were 18.3% and (9.4)%, respectively.

Previous wording

Amortization expense (excluding amounts reported in cost of product revenues for technology-based intangible assets) for the three months ended March 31, 2024 was $10.1 million compared to $3.1 million for the same period in the prior year. The increase is driven by the impairment of customer relationship intangible related to our Boston facility.

Current wording

Amortization expense (excluding amounts reported in cost of product revenues for technology-based intangible assets) for the six months ended June 30, 2024 was $13.8 million compared to $6.1 million for the same period in the prior year. The increase is driven by the impairment of customer relationship intangible related to our Boston facility of $7.1 million.

Previous wording

Other income, net for the three months ended March 31, 2024 decreased by $2.0 million compared to the same period in the prior year. The decrease is primarily driven by lower Transition Service Agreement (“TSA”) income from our divestitures.

Current wording

Other income, net for the six months ended June 30, 2024, decreased by $0.4 million as compared to the same period in the prior year.

Previous wording

Domestic revenues decreased by $14.8 million for the three months ended March 31, 2024 compared to the same period last year. European sales increased by $0.5 million for the three months ended March 31, 2024 compared to the same period last year. Sales to customers in Asia Pacific decreased by $0.9 million for the three months ended March 31, 2024. Sales to customers in the the Rest of World for the three months ended March 31, 2024 increased by $3.2 million compared to the same period last year. The international revenues were impacted by $2.4 million of unfavorable foreign exchange impact, with the larger impact in Asia. The decrease in global revenues is primarily the result of the Boston recall which affected both domestic and international markets.

Current wording

Domestic revenues increased by $33.4 million for the three months ended June 30, 2024 compared to the same period in the prior year. European sales increased by $3.2 million for the three months ended June 30, 2024 compared to the same period in the prior year. Sales to customers in Asia Pacific decreased by$1.8 million for the three months ended June 30, 2024. Sales to customers in the the Rest of World for the three months ended June 30, 2024 increased by$2.0 million compared to the same period in the prior year. The international revenues were impacted by $3.0 million of unfavorable foreign exchange impact. The increase in domestic revenues is primarily the result of the Acclarent acquisition.

Previous wording

The Company’s working capital as of March 31, 2024 and December 31, 2023 was $1,113.3 million and $751.1 million, respectively. Working capital consists of total current assets less total current liabilities as presented in the consolidated balance sheets.

Current wording

The Company’s working capital as of June 30, 2024 and December 31, 2023 was $784.0 million and $751.1 million, respectively. Working capital consists of total current assets less total current liabilities as presented in the consolidated balance sheets.

Previous wording

The Company had cash and cash equivalents totaling approximately $591.9 million and $276.4 million at March 31, 2024 and December 31, 2023 respectively, which are valued based on Level 1 measurements in the fair value hierarchy. At March 31, 2024, our non-U.S. subsidiaries held approximately $210.6 million of cash and cash equivalents that are available for use outside the U.S. The Company asserts that it has the ability and intends to indefinitely reinvest the undistributed earnings from its foreign operations unless there is no material tax cost to remit the earnings into the U.S.

Current wording

The Company had cash and cash equivalents totaling approximately $215.2 million and $276.4 million at June 30, 2024 and December 31, 2023 respectively, which are valued based on Level 1 measurements in the fair value hierarchy. Level 1 inputs represent quoted prices in active markets for identical assets or liabilities. At June 30, 2024, our non-U.S. subsidiaries held approximately $191.9 million of cash and cash equivalents that are available for use outside the U.S. The Company asserts that it has the ability and intends to indefinitely reinvest the undistributed earnings from its foreign operations unless there is no material tax cost to remit the earnings into the U.S.

Previous wording

The Company had short term investments, primarily consisting of time deposits, totaling approximately $71.2 million at March 31, 2024 compared to $32.7 million at December 31, 2023.

Current wording

The Company had short term investments, primarily consisting of time deposits, which are valued based on Level 1 measurements in the fair value hierarchy, totaling approximately $81.7 million at June 30, 2024 compared to $32.7 million at December 31, 2023.

Previous wording

Operating cash flows for the three months ended March 31, 2024 decreased by $10.4 million compared to the same period in 2023. Within operating cash flows, net income less non-cash adjustments decreased for the three months ended March 31, 2024 by approximately $29.7 million as compared to the same period in 2023 primarily due to lower revenues attributable to the Boston recall, as well as additional manufacturing expenses across our manufacturing sites.

Current wording

Operating cash flows for the six months ended June 30, 2024 increased by $1.7 million compared to the same period in 2023. Within operating cash flows, net income less non-cash adjustments decreased for the six months ended June 30, 2024 by approximately $33.5 million as compared to the same period in 2023 primarily driven by costs related to the Acclarent acquisition, as well as higher manufacturing costs.

Previous wording

The changes in assets and liabilities for the three months ended March 31, 2023, net of business acquisitions, decreased cash flows by$42.6 million, primarily due to increases in inventory.

Current wording

The changes in assets and liabilities for the six months ended June 30, 2024, net of business acquisitions, decreased cash flows by $22.4 million, mainly attributable to increases in prepaid and other current assets, and inventory, and decreases in other non current liabilities.

Previous wording

The changes in assets and liabilities for the three months ended March 31, 2024, net of business acquisitions, decreased cash flows by $23.4 million, mainly attributable to increases in inventory, and decreases in other current liabilities and accounts receivable.

Current wording

The changes in assets and liabilities for the six months ended June 30, 2023, net of business acquisitions, decreased cash flows by $57.6 million, mainly attributable to increases in inventory and other current assets, and decreases in accounts payable, accrued expenses and other current liabilities.

Previous wording

Uses of cash from investing activities for the three months ended March 31, 2024 related to $38.5 million related to short term investments, and $15.5 million paid for capital expenditures to support operations improvement initiatives at a number of our manufacturing facilities and other information technology investments.

Current wording

Uses of cash from investing activities for the six months ended June 30, 2024 were $282.0 million related to the Acclarent acquisition, $49.0 million related to short term investments, and $45.2 million paid for capital expenditures to support operations improvement initiatives at a number of our manufacturing facilities and other information technology investments.

Previous wording

There were no sources of cash from investing activities during the three months ended March 31, 2023.

Current wording

There were no sources of cash from investing activities during the six months ended June 30, 2024.

Previous wording

Uses of cash from investing activities during the three months ended March 31, 2023 related to $13.7 million paid for capital expenditures to support operations improvement initiatives at a number of our manufacturing facilities and other information technology investments.

Current wording

Uses of cash from investing activities during the six months ended June 30, 2023 related to $29.3 million paid for capital expenditures to support operations improvement initiatives at a number of our manufacturing facilities and other information technology investments.

Previous wording

There were no sources of cash from investing activities during thethree months ended March 31, 2024.

Current wording

There were no sources of cash from investing activities during the six months ended June 30, 2023.

Previous wording

Uses of cash from financing activities in the three months ended March 31, 2024 related to the repayments of $15.1 million under our Senior Credit Facility and Securitization Facility. In addition, the Company had $3.1 million in cash taxes paid for net equity settlements.

Current wording

Uses of cash from financing activities in the six months ended June 30, 2024 related to the repayments of $105.6 million under our Senior Credit Facility and Securitization Facility, $50.0 million related to the repurchase of treasury stock of under the share repurchase agreements, and $11.9 million related to payment of SIA contingent consideration. In addition, the Company had $3.2 million in cash taxes paid for net equity settlements.

Previous wording

Sources of cash from financing activities for the three months ended March 31, 2024 were $370.5 million proceeds from borrowings of long-term indebtedness and $6.4 million proceeds from the exercise of stock options.

Current wording

Sources of cash from financing activities for the six months ended June 30, 2024 were $429.3 million proceeds from borrowings of long-term indebtedness and $6.4 million proceeds from the exercise of stock options.

Previous wording

Uses of cash from financing activities in the three months ended March 31, 2023 related to the repurchase of treasury stock of $150.0 million under the share repurchase agreements, repayments of $12.4 million under our Senior Credit Facility and Securitization Facility. In addition, we had $7.6 million attributable to debt issuance costs, as well as $5.2 million in cash taxes paid for net equity settlements.

Current wording

Uses of cash from financing activities in the six months ended June 30, 2023 related to the repurchase of treasury stock of $150.0 million under the share repurchase agreements, repayments of $29.1 million under our Senior Credit Facility and Securitization Facility. In addition, we had $7.6 million attributable to debt issuance costs, as well as $5.3 million in cash taxes paid for net equity settlements.

Previous wording

Sources of cash from financing activities for the three months ended March 31, 2023 were $10.2 million borrowing under our Senior Credit Facility and Securitization Facility and $2.3 million proceeds from the exercise of stock options.

Current wording

Sources of cash from financing activities for the six months ended June 30, 2023 were $15.2 million borrowing under our Senior Credit Facility and Securitization Facility and $3.4 million proceeds from the exercise of stock options.

Previous wording

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

Current wording

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

Previous wording

See Note 6. Debt, to the Notes to Unaudited Condensed Consolidated Financial Statements (Part I, Item 1 of this Quarterly Report) for a discussion of our Amended and Restated Senior Credit Agreement, the 2025 Notes and Securitization Facility and Note 7, Derivative Instruments, to the Notes to Unaudited Condensed Consolidated Financial Statements (Part I, Item 1 of this Quarterly Report) for discussion of our hedging activities.

Current wording

See Note 6. Debt, to the Notes to Unaudited Condensed Consolidated Financial Statements (Part I, Item 1 of this Quarterly Report) for a discussion of our Credit Agreement, the 2025 Notes and Securitization Facility and Note 7. Derivative Instruments, to the Notes to Unaudited Condensed Consolidated Financial Statements (Part I, Item 1 of this Quarterly Report) for discussion of our hedging activities.

Previous wording

We do not have any off–balance sheet financing arrangements during the three months ended March 31, 2024 that have or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our interests.

Current wording

We do not have any off-balance sheet financing arrangements during the six months ended June 30, 2024 that have or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our interests.

Previous wording

Our primary obligations include principal and interest payments on the revolving portion and term loan component of the Senior Credit Facility, Securitization Facility and 2025 Notes. See Note 6. Debt, to the Notes to Unaudited Condensed Consolidated Financial Statements (Part I, Item 1 of this Quarterly Report) for details. We also lease some of our manufacturing facilities and office buildings which have future minimum lease payments. See Note 10. Leases and Related Party Leases, to the Notes to Unaudited Condensed Consolidated Financial Statements (Part I, Item 1 of this Quarterly Report)for a schedule of our future minimum lease payments. Amounts related to our other obligations, including employment agreements and purchase obligations were not material.

Current wording

Our primary obligations include principal and interest payments on the revolving credit facility and term loan component of the Senior Credit Facility, Securitization Facility and 2025 Notes. See Note 6. Debt, to the Notes to Unaudited Condensed Consolidated Financial Statements (Part I, Item 1 of this Quarterly Report) for details. We also lease some of our manufacturing facilities and office buildings which have future minimum lease payments. See Note 10. Leases and Related Party Leases, to the Notes to Unaudited Condensed Consolidated Financial Statements (Part I, Item 1 of this Quarterly Report)for a schedule of our future minimum lease payments. Amounts related to our other obligations, including employment agreements and purchase obligations were not material.

Previous wording

We based the discussion and analysis of our financial condition and results of operations upon our consolidated financial statements, which have been prepared in conformity with GAAP. The preparation of these financial statements requires us 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. The critical accounting estimates discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 did not materially change in the three months ended March 31, 2024.

Current wording

We based the discussion and analysis of our financial condition and results of operations upon our consolidated financial statements, which have been prepared in conformity with GAAP. The preparation of these financial statements requires us 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. The critical accounting estimates discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 did not materially change in the six months ended June 30, 2024.