INTEGRA LIFESCIENCES HOLDINGS CORPIART
INTEGRA LIFESCIENCES HOLDINGS CORP Stock Compensation Disclosure
STOCK-BASED COMPENSATION
Stock-based compensation expense - all related to employees and members of the Board of Directors - recognized under the authoritative guidance was as follows:
| Years Ended December 31, | |||||||||||||||||
| Dollars in thousands | 2025 | 2024 | 2023 | ||||||||||||||
| Cost of goods sold | $ | 806 | $ | 649 | $ | 588 | |||||||||||
| Research and development | 2,250 | 2,697 | 2,071 | ||||||||||||||
| Selling, general and administrative | 15,527 | 21,031 | 17,483 | ||||||||||||||
| Total stock-based compensation expense | $ | 18,583 | $ | 24,377 | $ | 20,142 | |||||||||||
| Total estimated tax benefit related to stock-based compensation expense | 2,826 | 4,677 | 5,223 | ||||||||||||||
| Net effect on net income | $ | 15,757 | $ | 19,700 | $ | 14,919 | |||||||||||
EQUITY AWARD PLANS
As of December 31, 2025, the Company had stock options, restricted stock awards, performance stock awards, contract stock awards and restricted stock unit awards outstanding under the Integra LifeSciences Holdings Corporation Fifth Amended and Restated 2003 Equity Incentive Plan (the “2003 Plan”).
In May 2010 and May 2017, the stockholders of the Company approved amendments to the 2003 Plan to increase by 3.5 million and 1.7 million, respectively, the number of shares of common stock that may be issued under the 2003 Plan. The Company has reserved 14.7 million shares under the 2003 Plan. The 2003 Plan permits the Company to grant incentive and non-qualified stock options, stock appreciation rights, restricted stock, contract stock, performance stock, or dividend equivalent rights to designated directors, officers, employees and associates of the Company.
Stock options issued under the 2003 Plan become exercisable over specified periods, generally within four years from the date of grant for officers and employees, and within one year from the date of the grant for members of the Board of Directors. The awards generally expire eight years from the grant date for employees and from to ten years for directors and certain executive officers, except in certain instances that result in accelerated vesting due to death, disability, retirement age or change in control provisions within their grant agreements. Restricted stock issued under the 2003 Plan vests ratably over specified periods, generally three years after the date of grant. The vesting of performance stock issued under the 2003 Plan is subject to service and performance conditions.
Stock Options
The Company values stock option grants using the binomial distribution model. Management believes that the binomial distribution model is preferable to the Black-Scholes model because it is a more flexible model that gives consideration to the impact of non-transferability and vesting provisions in valuing employee stock options.
In determining the value of stock options granted, the Company considered that it has never paid cash dividends and does not currently intend to pay cash dividends, and thus has assumed a 0.0% dividend yield. Expected volatilities are based on the historical volatility of the Company’s stock price. The expected life of stock options is estimated based on historical data on exercise of stock options, post-vesting forfeitures and other factors to estimate the expected term of the stock options granted. The risk-free interest rates are derived from the U.S. Treasury yield curve in effect on the date of grant for instruments with a remaining term similar to the expected life of the options. The Company accounts for forfeitures as they occur.
The Company granted stock options at two separate dates during the year ended December 31, 2025 and applied a range of assumptions for the volatility and risk free interest rate employed in the weighted average methodology in the calculation of option fair value. For the years ended December 31, 2024 and December 31, 2023, all assumptions employed a weighted average methodology in the calculation of option fair value. The following table outlines these assumptions:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Dividend yield | 0% | 0% | 0% | ||||||||||||||
| Expected volatility | 37.02% - 37.60% | 33% | 30% | ||||||||||||||
| Risk free interest rate | 4.16% - 4.52% | 4.09% | 3.86% | ||||||||||||||
| Expected life of option from grant date | 7 years | 7 years | 7 years | ||||||||||||||
Weighted average grant date fair value of options granted | $10.77 | $15.68 | $21.58 | ||||||||||||||
The following table summarizes the Company’s stock option activity:
| Shares | Weighted Average Exercise Price | Weighted Average Contractual Term in Years | Aggregate Intrinsic Value | ||||||||||||||||||||
| Stock Options | (In thousands) | (In thousands) | |||||||||||||||||||||
Outstanding at January 1, 2025 | 1,204 | $ | 50.06 | 4.01 | $ | — | |||||||||||||||||
| Granted | 395 | 22.71 | — | — | |||||||||||||||||||
| Exercised | — | — | — | — | |||||||||||||||||||
| Forfeited or Expired | (245) | 46.44 | — | — | |||||||||||||||||||
Outstanding at December 31, 2025 | 1,354 | $ | 42.73 | 4.39 | $ | — | |||||||||||||||||
Exercisable at December 31, 2025 | 739 | $ | 53.17 | 2.54 | $ | — | |||||||||||||||||
The Company recognized $1.7 million, $2.2 million, and $1.4 million in expense related to stock options during the years ended December 31, 2025, 2024, and 2023, respectively. There were no options exercised for the year ended December 31, 2025. The intrinsic value of options exercised for the years ended December 31, 2024, and 2023 were $0.7 million, and $1.8 million, respectively. Cash received from option exercises and employee stock purchase plan was $1.0 million, $6.4 million, and $4.3 million, for the years ended December 31, 2025, 2024, and 2023, respectively. For the years ended December 31, 2025 and 2024, the realized tax expense related to the exercise of stock options was $0.8 million and $0.5 million, respectively. A realized tax benefit $0.1 million was recognized for the year ended December 31, 2023.
As of December 31, 2025, there was approximately $4.5 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 three years.
Awards of Restricted Stock, Performance Stock and Contract Stock
The following table summarizes the Company’s awards of restricted stock, performance stock and contract stock for the year ended December 31, 2025:
| Restricted Stock Awards | Performance Stock and Contract Stock Awards | ||||||||||||||||||||||
| Shares | Weighted Average Grant Date Fair Value Per Share | Shares | Weighted Average Grant Date Fair Value Per Share | ||||||||||||||||||||
| (In thousands) | (In thousands) | ||||||||||||||||||||||
Unvested, January 1, 2025 | 871 | $ | 39.33 | 420 | $ | 41.83 | |||||||||||||||||
| Granted | 890 | 20.40 | 640 | 22.28 | |||||||||||||||||||
| Adjustments for performance achievement related to award target | — | — | (232) | 35.81 | |||||||||||||||||||
| Cancellations | (163) | 33.55 | (66) | 34.65 | |||||||||||||||||||
| Vested | (380) | 41.13 | (99) | 19.66 | |||||||||||||||||||
Unvested, December 31, 2025 | 1,218 | $ | 25.72 | 663 | $ | 26.42 | |||||||||||||||||
The Company recognized $16.9 million, $22.1 million and $18.7 million in expense related to such awards during the years ended December 31, 2025, 2024, and 2023, respectively. The total fair market value of shares vested and released in 2025, 2024, and 2023 was $9.8 million, $11.3 million and $18.2 million, respectively. Vested awards include shares that have been fully earned but had not been delivered as of December 31, 2025.
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. As of December 31, 2025, there were no performance stock units (“PSUs”) subject to vest and be released based on 2025 performance achievement.
As of December 31, 2025, there was approximately $27.7 million of total unrecognized compensation costs related to unvested restricted stock, performance stock and contract stock awards. These costs are expected to be recognized over a weighted-average period of approximately two years.
At December 31, 2025, there were approximately 4.6 million shares available for grant under the 2003 Plan.
The Company capitalized share based compensation costs of $0.8 million, $0.7 million, and $0.6 million for the years ended December 31, 2025, 2024, and 2023, into inventory, respectively. Such share-based compensation was recognized as cost of goods sold when related inventory was sold.
CEO Separation
On February 27, 2024, the Company announced that Mr. De Witte would retire from his position as President and Chief Executive Officer and director of the Company following the completion of a succession process and entered into a letter agreement with Mr. De Witte to modify his current employment agreement and put forth the form of a post-employment consulting agreement. The Company applied modification accounting to the outstanding equity-based awards granted to Mr. De Witte as of that date, which revalued and accelerated stock-based compensation associated with equity-based awards granted to him over his expected service period to the Company. Pursuant to this letter agreement, Mr. De Witte’s unvested equity-based awards will continue to vest during his continued service period to the Company and vested stock options were modified such that they will remain exercisable until the earlier of (a) the stated term of the stock options and (b) six months following his cessation of continued service to the Company. As a result of the modifications, the Company recorded a total of $1.9 million in accelerated stock-based compensation expenses for the year ended December 31, 2024.
EMPLOYEE STOCK PURCHASE PLAN
The purpose of the Employee Stock Purchase Plan (the “ESPP”) is to provide 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. Under the ESPP, a total of 3.0 million shares of common stock are reserved for issuance. These shares will be made available either from the Company’s authorized but unissued shares of common stock or from shares of common stock reacquired by the Company as treasury stock. At December 31, 2025, 1.8 million shares remain available for purchase
under the ESPP. During the years ended December 31, 2025, 2024, and 2023, the Company issued 64,435 shares, 44,426 shares and 23,337 shares under the ESPP for $0.8 million, $1.0 million, and $1.0 million, respectively.About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.