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BASIS OF PRESENTATION | 9 Months Ended
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Sep. 30, 2014
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
BASIS OF PRESENTATION | BASIS OF PRESENTATION General The terms “we,” “our,” “us,” “Company” and “Integra” refer to Integra LifeSciences Holdings Corporation, a Delaware corporation, and its subsidiaries unless the context suggests otherwise. In the opinion of management, the September 30, 2014 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, 2013 included in the Company’s Current Report on Form 8-K dated June 16, 2014, which was filed with the Securities and Exchange Commission on June 20, 2014. The December 31, 2013 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 three- and nine-month periods ended September 30, 2014 are not necessarily indicative of the results to be expected for the entire year. 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, valuation of intangible assets including in-process research and development, amortization periods for acquired intangible assets, discount rates and estimated projected cash flows used to value and test impairments of long-lived assets and goodwill, estimates of projected cash flows and depreciation and amortization periods for long-lived assets, computation of taxes, valuation allowances recorded against deferred tax assets, the valuation of stock-based compensation, valuation of pension assets and liabilities, valuation of derivative instruments, valuation of the equity component of convertible debt instruments, valuation of contingent liabilities, the fair value of debt instruments and loss contingencies. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the current circumstances. Actual results could differ from these estimates. Certain amounts from the prior year’s financial statements have been reclassified in order to conform to the current year’s presentation. Change in Accounting Principle In the first quarter of 2014, the Company changed its method of accounting for the medical device excise tax (“MDET”). Prior to the change the Company recorded the MDET in inventory at the time of the first sale in the United States and then recognized the MDET in cost of goods sold when the medical device was sold to the ultimate customer. Under the new method, the MDET will be recorded in selling, general and administrative expenses in the period the first sale occurs in the United States, which could be an intercompany sale. The Company believes that this change in accounting principle is preferable as the new method provides a better comparison with the Company's peers, the majority of which expense the MDET at the time of the first sale in the United States. The medical device excise tax applies to sales beginning January 1, 2013; therefore, this change affected only 2013 financial results. The cumulative effect of the change in the prior year is included in retained earnings as of December 31, 2013. We have revised the comparative results for the three- and nine-month periods ended September 30, 2013 to reflect the retrospective application of the change in accounting principle had the new method been in effect for all periods, as follows: Condensed Consolidated Statements of Operations and Comprehensive Income:
| Three Months Ended September 30, 2013 |  | Nine Months Ended September 30, 2013
| Originally |  |  |  | As |  | Originally |  |  |  | As
| Reported |  | Adjustments |  | Adjusted |  | Reported |  | Adjustments |  | Adjusted
| (In thousands, except per share amounts)
Cost of goods sold | $ | 84,101 |  |  | $ | (2,334 | ) |  | $ | 81,767 |  |  | $ | 247,437 |  |  | $ | (4,229 | ) |  | $ | 243,208 |
Selling, general and administrative | 95,933 |  |  | 3,861 |  |  | 99,794 |  |  | 295,713 |  |  | 10,324 |  |  | 306,037 |
Income tax expense (benefit) | (6,605 | ) |  | 253 |  |  | (6,352 | ) |  | (8,755 | ) |  | (417 | ) |  | (9,172 | )
Net income (loss) | (28,550 | ) |  | (1,780 | ) |  | (30,330 | ) |  | (29,160 | ) |  | (5,678 | ) |  | (34,838 | )
Basic net income (loss) per common share | $ | (1.02 | ) |  |  |  |  | $ | (1.09 | ) |  | $ | (1.05 | ) |  |  |  |  | $ | (1.25 | )
Diluted net income (loss) per common share | (1.02 | ) |  |  |  |  | (1.09 | ) |  | (1.05 | ) |  |  |  |  | (1.25 | )
Comprehensive income (loss) | $ | (19,860 | ) |  | $ | (1,780 | ) |  | $ | (21,640 | ) |  | $ | (25,076 | ) |  | $ | (5,678 | ) |  | $ | (30,754 | )
Condensed Consolidated Balance Sheets:
| December 31, 2013
| Originally |  |  |  | As
| Reported |  | Adjustments |  | Adjusted
| (In thousands)
Inventories | $ | 213,431 |  |  | $ | (6,512 | ) |  | $ | 206,919 |
Deferred tax assets - current | 46,300 |  |  | 2,316 |  |  | 48,616 |
Prepaid expenses and other current assets | 26,752 |  |  | 106 |  |  | 26,858 |
Retained earnings | 285,046 |  |  | (4,090 | ) |  | 280,956 |
Condensed Consolidated Statements of Cash Flows:
| Nine Months Ended September 30, 2013
| Originally |  |  |  | As
| Reported |  | Adjustments |  | Adjusted
| (In thousands)
Net income (loss) | $ | (29,160 | ) |  | $ | (5,678 | ) |  | $ | (34,838 | )
Inventories | (34,855 | ) |  | 6,090 |  |  | (28,765 | )
Prepaid and other current assets | (282 | ) |  | (412 | ) |  | (694 | )
Realignment of Segment Revenues In the first quarter of 2014 the Company realigned certain products between operating segments. The Company did not change its management structure and has determined that the Company still has the same five reportable segments. The impact of this immaterial change on all periods presented is that (i) the revenues and segment profit of the U.S. Extremities segment is lower, and U.S. Instruments and U.S. Spine and Other segments are higher, and (ii) the global revenues of the Orthopedics product category is lower and the Instruments product category is higher. These changes have been reflected in all periods presented. There has been no change in the Company's net revenues reported. Recently Issued Accounting Standards In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This updated guidance requires an unrecognized tax benefit to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, similar tax loss, or a tax credit carryforward. To the extent the tax benefit is not available at the reporting date under the governing tax law or if the entity does not intend to use the deferred tax asset for such purpose, the unrecognized tax benefit should be presented as a liability and not combined with deferred tax assets. This ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2013 for public entities and early adoption is permitted. The amendments are to be applied to all unrecognized tax benefits that exist as of the effective date and may be applied retrospectively to each prior reporting period presented. The standard adoption did not have a material impact on the Company's financial statements. In April 2014, the FASB issued amendments to guidance for reporting discontinued operations and disposals of components of an entity. The amended guidance requires that a disposal representing a strategic shift that has (or will have) a major effect on an entity’s financial results or a business activity classified as held for sale should be reported as discontinued operations. The amendments also expand the disclosure requirements for discontinued operations and add new disclosures for individually significant dispositions that do not qualify as discontinued operations. The amendments are effective prospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2014 (early adoption is permitted only for disposals that have not been previously reported). The implementation of the amended guidance is not expected to have a material impact on our consolidated financial position or results of operations. In May 2014, the FASB issued Update No. 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should: 1) identify the contract(s) with a customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue when (or as) the entity satisfies a performance obligation. This update is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and early adoption is not permitted. The Company is in the process of evaluating the impact of this standard on its financial statements. In June 2014, the FASB issued Update No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (Topic 718). The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This update is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period, and early adoption is permitted. The implementation of the amended guidance is not expected to have a material impact on our consolidated financial position or results of operations. There are no other recently issued accounting pronouncements that are expected to have a material effect on our financial position, results of operations or cash flows.

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