In 2009, we saw our business diversify and our customer relationships grow as we guided the company effectively through a year in which many companies were not so fortunate.  We turned challenges into opportunities.  We reduced our debt and focused our acquisition strategy.  We invested in infrastructure to prime our business for growth when the economy strengthens.   Because of our strategic efforts, we have been able to enter more markets worldwide, introduce new products that fulfilled important needs, and increase our bottom-line successfully.  With 2009 as a base, the coming year represents even more opportunity as we continue to learn about the customers we serve, what they want and what drives them, as well as what additional possibilities exist in the market.

Stuart Essig President and CEO

Here are some of the adaptations we made in 2009 that helped us to succeed and will fuel success in the years to come:

• Cost Control: We ran lean by devoting attention to reducing expenses.  We are contributing resources to new systems and making our processes less time-consuming. 
• Cash Management:  We reduced our total debt by more than $180 million, and generated over $140 million in operating cash flow.  We reduced days of accounts receivable and better managed our inventory.  Looking to 2010, we plan to continue to reduce our debt.
• Transactions:  We focused our acquisition strategy on smaller targets, both as a result of the available strategic opportunities and in an effort to conserve our cash.  We acquired a minimally invasive surgery technology for our spine group, and our distributor of extremities products in the United Kingdom.  In 2010, we remain focused on orthopedics, neurosurgery and medical instruments and plan to seek out additional business opportunities to extend our reach in those markets.
• Retain Talent:  Because we run lean we did not have to reduce the size of our workforce.  In fact, we grew headcount in 2009.  We were able to retain talent and acquire it from other medical device companies. 

Business Accomplishments

In 2009, we met several important strategic goals and achieved a number of milestones, including:

• Nearly doubling operating cash flows;
• Increasing EBITDA, on an adjusted basis, by 9%;
• Increasing earnings per share, on an adjusted basis, by 5%;
• Opening our new EMEA headquarters facility in Lyon, France; and
• Launching over 20 new products throughout our sales organizations.

 Business Unit Highlights

• Orthopedics:  

• Extremity Reconstruction:  In 2009, we successfully launched five new products and achieved record revenue.  We invested in our team by adding and training sales professionals, growing it into one of the largest direct extremities sales forces in the United States.  
• Spine & Orthobiologics:  We completed our first full year in the spinal hardware market, and we acquired a new minimally invasive surgery technology, the Paramount® System. In 2009, we focused on further expanding our distribution network and leveraging the combined portfolio of implants and orthobiologics.  In parallel with distribution activities, we focused internal resources on the development and acquisition of innovative technologies.  We launched a total of ten new internally developed implants.
• NeuroSciences:  We continued to gain share as the market leader in neurosurgery, with the largest direct sales force in the United States.  We successfully launched four new products through this sales channel, including the CUSA NXT™ next-generation ultrasonic tissue ablation system.  While the economy affected the capital equipment lines in this group, we were pleased with the growth of our implants and disposables.
• Medical Instruments:  This sales organization faced a number of challenges in 2009, including unprecedented hospital budget cuts and customer inventory reductions.  However, the economics of this category remain strong, contributing to our record cash flow in 2009.  We continue to renew our GPO contracts and provide the highest quality instruments to our customers.

Investments in Future Growth
While we have carefully managed cash and realized cost savings in several areas during 2009, we have not withheld investments in much-needed support functions, including research and development and sales and marketing.  In 2010, we will continue to invest in these areas and in capital infrastructure. 

First, we are investing in a new version of our Enterprise Management Software System across our organization.  This roughly $30 million capital expenditure commitment over the next three years will help us to streamline business processes throughout the company and enable our employees to do their jobs more efficiently.   

We are also initiating the next phase of our capacity expansion program for our collagen manufacturing facilities in New Jersey and Puerto Rico.  We expect to spend approximately $20 million on this expansion over the next three years.

These upgrades to our existing systems and facilities will help Integra support our revenue growth objective of $1 billion and more.

2010 and Beyond
Integra is still a relatively young company, and we are continuing to learn more about our customers, both quantitatively and qualitatively.  As I envision our evolution and growth in the years to come, our mission is foremost in my mind – to produce products and provide support that are essential to those who work on the front lines: The surgeons who treat patients and dramatically improve their patients’ quality of life.  It is through the talents and dedication of our nearly 3,000 employees that we are able to fulfill such an important mission.  Our team united strongly to meet and address the challenges that the economy presented us.  In doing so, we emerged as a stronger, more confident company that is determined to seize the opportunities before us and thrive in this new environment.

Thank you, our stockholders, for your continued support.

Sincerely,
Stuart Essig
President and Chief Executive Officer