Summary of INTEGRA LIFESCIENCES HOLDINGS CORP

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On November 7, 2008, Integra LifeSciences Holdings Corporation (the "Company") issued a press release announcing financial results for the quarter ended September 30, 2008 (the "Earnings Press Release"). A copy of the Earnings Press Release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference into this Item. In the financial statements portion of the Earnings Press Release, the Company has included a reconciliation of GAAP net (loss)/income to adjusted net income and GAAP (loss)/earnings per diluted share to adjusted earnings per diluted share used by management for the quarters ended September 30, 2008 and 2007.
Beginning with the quarter ended September 30, 2008, the Company will present its revenues in three categories: Integra NeuroSciences, Integra Orthopedics and Integra Medical Instruments. On November 7, 2008, the Company included a breakout of historical revenues in these three categories in the "Events and Presentations" page of the Investor Relations section of our website, a copy of which is attached as Exhibit 99.2 to this Current Report on Form 8-K. These categories have been chosen to better reflect the markets into which our products are sold and replace the previously reported revenue categories. The information contained in Item 2.02 of this Current Report on Form 8-K (including the Earning Press Release and selected historical financial information) is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that Section. The information contained in Item 2.02 of this Current Report on Form 8-K (including the Earnings Press Release and selected historical financial information shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in any such filing. Discussion of Adjusted Financial Measures In addition to our GAAP results, we provide adjusted revenues, adjusted net income and adjusted earnings per diluted share. Adjusted revenues consists of the following two measures: (i) growth in total revenues excluding product lines acquired after the second quarter 2007 and (ii) growth in total revenues excluding eliminated products lines distributed for third parties and recently acquired product lines. Adjusted net income consists of net income, excluding
(i) acquisition-related charges, (ii) facility consolidation, manufacturing and distribution transfer and system integration charges, (iii) certain employee termination and related costs, (iv) charges associated with discontinued or withdrawn product lines, (v) charges related to restructuring European subsidiaries, (vi) intangible asset impairment charges, (vii) incremental professional and bank fees related to the delay in the filing of our 2007 Annual Report on Form 10-K, (viii) charges relating to the grant of restricted stock units in connection with the extension of the term of the CEO's employment agreement and (ix) the income tax expense/benefit related to these adjustments and the cumulative impact of changes in tax rates. Adjusted earnings per diluted share are calculated by dividing adjusted net income for earnings per diluted share by adjusted diluted weighted average shares outstanding. Because the Company reported a GAAP net loss in the third quarter of 2008, the calculation of GAAP diluted weighted average shares outstanding excludes the effects of stock options and unvested restricted stock, as the effect of these equity awards would be anti-dilutive. The Company includes the dilutive effects of these equity awards in the calculation of adjusted diluted weighted average shares outstanding used to calculate adjusted earnings per diluted share because their effects are dilutive in relation to adjusted net income. The Company believes that the presentation of adjusted revenues, adjusted net income and adjusted earnings per diluted share provides important supplemental information to management and investors regarding financial and business trends relating to the Company's financial condition and results of operations. Management uses non-GAAP financial measures in the form of adjusted revenues, adjusted net income and adjusted earnings per diluted share when evaluating operating performance because we believe that the inclusion or exclusion of the items described below, for which the amounts and/or timing may vary significantly depending upon the Company's acquisition, integration, and restructuring activities or for which the amounts are not expected to recur at the same magnitude as we further build out our finance department and implement certain tax planning strategies, provides a supplemental measure of our operating results that facilitates comparability of our operating performance from period to period, against our business model objectives, and against other companies in our industry. We have chosen to provide this information to investors so they can analyze our operating results in the same way that management does and use this information in their assessment of our core business and the valuation of our Company.

Adjusted revenues, adjusted net income and adjusted earnings per diluted share are significant measures used by management for purposes of:
• supplementing the financial results and forecasts reported to the Company's board of directors;

• evaluating, managing and benchmarking the operating performance of the Company;

• establishing internal operating budgets;

• determining compensation under bonus or other incentive programs;

• enhancing comparability from period to period;

• comparing performance with internal forecasts and targeted business models; and

• evaluating and valuing potential acquisition candidates.

The two measures of adjusted revenues that we report reflect total revenues adjusted for the following items:
• Product lines acquired after the second quarter of 2007. We provide a calculation of revenue growth excluding product lines acquired since the end of the quarterly reporting period ended one year prior to the beginning of the current quarterly period. Although our disciplined acquisition program is an important driver of growth and profitability, the revenue growth in our existing product lines (i.e., those not acquired within the last year) is an important factor in management's evaluation of our operating performance. This measure provides useful information to determine the success of our selling organizations in growing the existing business without the benefit of acquisitions and assists management in the allocation of resources.
• Eliminated product lines distributed for third parties. We provide a calculation of revenue growth excluding product lines distributed for third parties that have been eliminated since the end of the quarterly reporting period ended one year prior to the beginning of the current quarterly period. Our core business is focused on developing, manufacturing and marketing products developed internally or acquired. This approach aims to increase the gross margin on our revenues, which is one of our primary operating objectives. Because we do not own the rights to the products distributed for third parties, the gross margins on these products are generally lower than those earned on products that we develop internally or acquire. In addition, our ability to retain distribution rights to the distributed products over the long term is highly dependent upon the third party. For these reasons, we exclude the impact on revenue growth of distributed products that have been eliminated within the past year when evaluating our operating performance because this measure provides useful information to determine the success of our selling organizations in growing the core business. Adjusted net income reflects net income adjusted for the following items:
• Acquisition-related charges. Acquisition-related charges include in-process research and development charges, charges related to discontinued research and development projects for product technologies that were made redundant by an acquisition and inventory fair value purchase accounting adjustments. Inventory fair value purchase accounting adjustments consist of the increase to cost of goods sold that occur as a result of expensing the "step up" in the fair value of inventory that we purchased in connection with acquisitions as that inventory is sold during the financial period. Although recurring given the ongoing character of our acquisition program, these acquisition-related charges are not factored into the evaluation of our performance by management after completion of acquisitions because they are of a temporary nature, they are not related to our core operating performance and the frequency and amount of such charges vary significantly based on the timing and magnitude of our acquisition transactions as well as the level of inventory on hand at the time of acquisition.
• Facility consolidation, manufacturing and distribution transfer and system integration charges. These charges, which include employee termination and other costs associated with exit or disposal activities, costs related to transferring . . .