What changed in this filing

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Item 1. Financial Statements

2021-08-04 compared with 2021-05-04 · 105 added, 71 removed, 617 unchanged (22% of the section changed)

32 unchanged sentences

Authorized 500,000,000 shares;

issued and outstanding 77,587,013 and 77,284,007 shares at March 31, 2021 and December 31, 2020, respectively

issued and outstanding 78,303,475 and 77,284,007 shares at June 30, 2021 and December 31, 2020, respectively

Class B common stock;

1 unchanged sentence

Authorized 275,000,000 shares;

issued and outstanding 22,430,097 shares at March 31, 2021 and December 31, 2020

issued and outstanding 22,430,097 shares at June 30, 2021 and December 31, 2020

Additional paid-in capital

7 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands, except per share amounts)

39 unchanged sentences

Balance at March 31, 2021

Stock-based compensation

Grant of restricted stock units

Exercise of stock options

Comprehensive income/(loss)

Balance at June 30, 2021

‎ Common Stock

11 unchanged sentences

Balance at March 31, 2020

Stock-based compensation

Exercise of stock options

Comprehensive income/(loss)

Repurchase and retirement of common stock

Balance at June 30, 2020

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

(In thousands)

1 unchanged sentence

Adjustments to reconcile net income to net cash provided by operating activities:

Acquired in-process research and development

Depreciation and amortization

19 unchanged sentences

Purchases of property and equipment

Acquisition of businesses, net of cash acquired, and purchases of intangible and other assets

Net cash used in investing activities

30 unchanged sentences

In response to these developments, the Company will continue to monitor liquidity and cash flow.

The Company has the ability to borrow from a credit facility signed in August 2020, if needed, although we do not expect to do so due to our cash, cash equivalents and short-term marketable securities balances.

The Company has the ability to borrow from its existing credit facility, if needed, although we do not expect to do so due to our cash, cash equivalents and short-term marketable securities balances.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

5 unchanged sentences

GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2020 which was filed with the SEC on February 17, 2021.

In the opinion of management, these condensed consolidated financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of our financial position as of March 31, 2021, and results of operations for the three months ended March 31, 2021.

In the opinion of management, these condensed consolidated financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of our financial position as of June 30, 2021, and results of operations for the three and six months ended June 30, 2021.

The results of operations for any interim period may not be indicative of results for the full year.

35 unchanged sentences

Maintenance and support services are generally invoiced annually, at the beginning of each contract period, and revenue is recognized ratably over the maintenance period.

For the three months ended March 31, 2021 and 2020, there was an immaterial amount of revenue recognized from previously deferred revenue.

For the three and six months ended June 30, 2021, there was an immaterial amount of revenue recognized from previously deferred revenue.

GLOBUS MEDICAL, INC.

5 unchanged sentences

(f) Marketable Securities

Our marketable securities include municipal bonds, corporate debt securities, commercial paper, asset-backed securities, and securities of government, federal agency, and other sovereign obligations are classified as available-for-sale as of March 31, 2021 and December 31, 2020.

S hort-term and long-term marketable securities are recorded at fair value on our condensed consolidated balance sheets.

43 unchanged sentences

We consider qualitative indicators of the fair value of a reporting unit when it is unlikely that a reporting unit has impaired goodwill.

During the three months ended March 31, 2021 and 2020, we did no t record any impairment charges related to goodwill.

During the six months ended June 30, 2021 and 2020, we did no t record any impairment charges related to goodwill.

Intangible assets consist of purchased in-process research and development (“IPR&D”), developed technology, supplier network, patents, customer relationships, re-acquired rights, and non-compete agreements.

3 unchanged sentences

Fair value is generally determined using a discounted future cash flow analysis.

There were no impairments of finite-lived intangible assets during the three months ended March 31, 2021 or 2020.

There were no impairments of finite-lived intangible assets during the six months ended June 30, 2021 or 2020.

IPR&D has an indefinite life and is not amortized until completion of the project at which time the IPR&D becomes an amortizable asset.

If the related project is not completed in a timely manner, we may have an impairment related to the IPR&D, calculated as the excess of the asset’s carrying value over its fair value.

There were no impairments of IPR&D during the three months ended March 31, 2021 or 2020.

There were no impairments of IPR&D during the six months ended June 30, 2021 or 2020.

(j) Stock -Based Compensation

58 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

4 unchanged sentences

The composition of our short-term and long-term marketable securities was as follows:

March 31, 2021

June 30, 2021

(In thousands)

25 unchanged sentences

Total long-term marketable securities

The short-term marketable securities have effective maturity dates of less than one year and the long-term marketable securities have effective maturity dates ranging from one to three years as of March 31, 2021 and December 31, 2020, respectively.

Purchases of marketable securities include amounts payable to brokers of $ 8.2 million and $ 9.3 million as of March 31, 2021 and December 31, 2020, respectively.

Purchases of marketable securities include amounts payable to brokers of $ 9.7 million and $ 9.3 million as of June 30, 2021 and December 31, 2020, respectively.

FAIR VALUE MEASUREMENTS

21 unchanged sentences

Assets and Liabilities That Are Measured at Fair Value on a Nonrecurring Basis

Fair value of the revenue-based business acquisition liabilities was determined using a discounted cash flow model and an option pricing methodology.

Fair value of the revenue-based business acquisition liabilities was determined using a discounted cash flow model and an option pricing model.

The significant inputs of such models are not observable in the market, such as certain financial metric growth rates, volatility and discount rates, market price risk adjustment, projections associated with the applicable milestone, the interest rate, and the related probabilities and payment structure in the contingent consideration arrangement.

2 unchanged sentences

Weighted Average*

Market risk adjustment

Revenue risk premium

Revenue volatility

Discount rate

Probability of payment

Projected year of payment

* The weighted average rates were calculated based on the relative fair value of each business acquisition liability.

The change in the carrying value of the business acquisition liabilities during the three months ended March 31, 2021 and 2020, respectively included the following:

The change in the carrying value of the business acquisition liabilities during the three and six months ended June 30, 2021 and 2020, respectively included the following:

Three Months Ended

Six Months Ended

(In thousands)

Fair value measurement at January 1, 2021 and 2020, respectively

Fair value measurement at beginning of period

Contingent cash payments

2 unchanged sentences

Contractual payable reclassification

Fair value measurement at March 31, 2021 and 2020, respectively

Fair value measurement at June 30, 2021 and 2020, respectively

Changes in the fair value of business acquisition liabilities are driven by changes in market conditions and the achievement of certain performance conditions.

Inventories included the following:

4 unchanged sentences

Total inventories

During the three months ended March 31, 2021 and 2020, net adjustments to cost of sales related to excess and obsolete inventory were $ 1.6 million and $ 0.7 million, respectively.

The net adjustments for the three months ended March 31, 2021 and 2020 reflect a combination of additional expense for excess and obsolete related provisions ($ 3.8 million and $ 2.4 million, respectively) offset by sales and disposals ($ 2.2 million and $ 1.7 million, respectively) of inventory for which an excess and obsolete provision was provided previously through expense recognized in prior periods.

During the three months ended June 30, 2021 and 2020, net adjustments to cost of sales related to excess and obsolete inventory were $ 3.4 million and $ 6.5 million, respectively.

The net adjustments for the three months ended June 30, 2021 and 2020 reflect a combination of additional expense for excess and obsolete related provisions ($ 7.6 million and $ 8.5 million, respectively) offset by sales and disposals ($ 4.2 million and $ 2.0 million, respectively) of inventory for which an excess and obsolete provision was provided previously through expense recognized in prior periods.

During the six months ended June 30, 2021 and 2020, net adjustments to cost of sales related to excess and obsolete inventory were $ 5.0 million and $ 7.2 million, respectively.

The net adjustments for the six months ended June 30, 2021 and 2020 reflect a combination of additional expense for excess and obsolete related provisions ($ 11.4 million and $ 10.9 million, respectively) offset by sales and disposals ($ 6.4 million and $ 3.7 million, respectively) of inventory for which an excess and obsolete provision was provided previously through expense recognized in prior periods.

GLOBUS MEDICAL, INC.

12 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

GOODWILL AND INTANGIBLE ASSETS

The change in the carrying amount of goodwill during the twelve months ended December 31, 2020 and the three months ended March 31, 2021, respectively included the following:

The change in the carrying amount of goodwill during the twelve months ended December 31, 2020 and the six months ended June 30, 2021, respectively included the following:

(In thousands)

4 unchanged sentences

Foreign exchange

March 31, 2021

June 30, 2021

The composition of intangible assets was as follows:

March 31, 2021

June 30, 2021

(In thousands)

4 unchanged sentences

Total intangible assets

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2020

5 unchanged sentences

Total intangible assets

The following table summarizes amortization of intangible assets for future periods as of March 31, 2021:

The following table summarizes amortization of intangible assets for future periods as of June 30, 2021:

(In thousands)

1 unchanged sentence

Remaining 2021

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

ACCRUED EXPENSES

7 unchanged sentences

In August 2020, we entered into a credit agreement with Citizens Bank, N.A.

(the “Credit Agreement”) that provides a revolving credit facility permitting borrowings up to $ 125.0 million (the “Revolving Credit Facility”), and has a termination date of August 5, 2021 .

(the “Credit Agreement”) that provides a revolving credit facility permitting borrowings up to $ 125.0 million (the “Revolving Credit Facility”).

As amended, the Credit Agreement has a termination date of August 3, 2022 .

The Revolving Credit Facility includes up to a $ 25.0 million sub limit for letters of credit.

7 unchanged sentences

The Credit Agreement contains financial and other customary covenants, including a maximum leverage ratio.

As of March 31, 2021, we have no t borrowed under the Credit Agreement with Citizens Bank, N.A.

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of June 30, 2021, we have no t borrowed under the Credit Agreement with Citizens Bank, N.A.

Stock Repurchases

1 unchanged sentence

The repurchase program has no time limit and may be suspended for periods or discontinued at any time.

As of March 31, 2021, $ 95.3 million of this authorization is remaining.

As of June 30, 2021, $ 95.3 million of this authorization is remaining.

The timing and actual number of shares repurchased will depend on various factors including price, corporate and regulatory requirements, debt covenant requirements, alternative investment opportunities and other market conditions.

2 unchanged sentences

The Company made an accounting policy election to charge the excess of repurchase price over par value entirely to retained earnings.

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the activity related to share repurchases:

9 unchanged sentences

January 1, 2021 - March 31, 2021

January 1, 2020 - March 31, 2021

April 1, 2021 - June 30, 2021

January 1, 2020 - June 30, 2021

(1) Inclusive of an immaterial amount of commission fees

7 unchanged sentences

For more details relating to the conversion of our Class B common stock please see “Exhibit 4.2, Description of Securities of the Registrant” filed with our Annual Report on Form 10-K on February 17, 2021.

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accumulated Other Comprehensive Income (Loss)

The tables below present the changes in each component of accumulated other comprehensive income/(loss), including current period other comprehensive income/(loss) and reclassifications out of accumulated other comprehensive income/(loss) for the three months ended March 31, 2021 and 2020, respectively:

The tables below present the changes in each component of accumulated other comprehensive income/(loss), including current period other comprehensive income/(loss) and reclassifications out of accumulated other comprehensive income/(loss) for the six months ended June 30, 2021 and 2020, respectively:

(In thousands)

8 unchanged sentences

Other comprehensive (loss)/income, net of tax

Accumulated other comprehensive loss, net of tax, at March 31, 2021

Accumulated other comprehensive loss, net of tax, at June 30, 2021

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands)

8 unchanged sentences

Other comprehensive (loss)/income, net of tax

Accumulated other comprehensive loss, net of tax, at March 31, 2020

Accumulated other comprehensive loss, net of tax, at June 30, 2020

Amounts reclassified from accumulated other comprehensive loss, net of tax, related to unrealized gains/losses on marketable securities were released to other income, net in our condensed consolidated statements of operations and comprehensive income.

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Earnings Per Common Share

5 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands, except per share amounts)

2 unchanged sentences

Weighted average shares outstanding for basic

Dilutive stock options

Dilutive stock options and RSUs

Weighted average shares outstanding for diluted

2 unchanged sentences

STOCK-BASED COMPENSATION

We have two stock plans:

our 2008 Stock Plan and our 2012 Equity Incentive Plan (the “2012 Plan”).

We have three stock plans:

our 2008 Stock Plan, our 2012 Equity Incentive Plan (the “2012 Plan”), and our 2021 Equity Incentive Plan (the “2021 Plan”).

The 2021 Plan is the only active stock plan.

The purpose of the 2008 Stock Plan was, and of the 2012 Plan is, to provide incentive to employees, directors, and consultants of Globus.

The purpose of the 2008 and 2012 Stock Plans was, and of the 2021 Plan is, to provide incentive to employees, directors, and consultants of Globus.

The Plans are administered by the Board of Directors of Globus (the “Board”) or its delegates.

3 unchanged sentences

The 2012 Plan was approved by our Board in March 2012, and by our stockholders in June 2012.

Under the 2012 Plan, the aggregate number of shares of Class A Common stock that may be issued subject to options and other awards is equal to the sum of (i) 3,076,923 shares, (ii) any shares available for issuance under the 2008 Plan as of March 13, 2012, (iii) any shares underlying awards outstanding under the 2008 Plan as of March 13, 2012 that, on or after that date, are forfeited, terminated, expired or lapse for any reason, or are settled for cash without delivery of shares and (iv) starting January 1, 2013, an annual increase in the number of shares available under the 2012 Plan equal to up to 3 % of the number of shares of our common and preferred stock outstanding at the end of the previous year, as determined by our Board.

The number of shares that may be issued or transferred pursuant to incentive stock options under the 2012 Plan is limited to 10,769,230 shares.

The shares of Class A Common stock covered by the 2012 Plan include authorized but unissued shares, treasury shares or shares of common stock purchased on the open market.

As of March 31, 2021, pursuant to the 2012 Plan, there were 17,901,177 shares of Class A Common stock reserved and 806,579 shares of Class A Common stock available for future grants.

Under the 2012 Plan, the aggregate number of shares of Class A Common stock that were able to be issued subject to options and other awards is equal to the sum of (i) 3,076,923 shares, (ii) any shares available for issuance under the 2008 Plan as of March 13, 2012, (iii) any shares underlying awards outstanding under the 2008 Plan as of March 13, 2012 that, on or after that date, are forfeited, terminated, expired or lapse for

GLOBUS MEDICAL, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

any reason, or are settled for cash without delivery of shares and (iv) starting January 1, 2013, an annual increase in the number of shares available under the 2012 Plan equal to up to 3 % of the number of shares of our common and preferred stock outstanding at the end of the previous year, as determined by our Board.

The number of shares that were able to be issued or transferred pursuant to incentive stock options under the 2012 Plan was limited to 10,769,230 shares.

The shares of Class A Common stock covered by the 2012 Plan included authorized but unissued shares, treasury shares or shares of common stock purchased on the open market.

The 2021 Plan was approved by our Board in March 2021, and by our stockholders in June 2021.

Under the 2021 Plan, the aggregate number of shares of Class A Common stock that were able to be issued subject to options and other awards is equal to the sum of (i) 2,000,000 shares, (ii) any shares available for issuance under the 2012 Plan as of June 3, 2021 and (iii) any shares underlying awards outstanding under the 2012 Plan or 2021 Plan as of June 3, 2021 that, on or after that date, are forfeited, terminated, expired or lapse for any reason, or are settled for cash without delivery of shares.

The number of shares that may be issued or transferred pursuant to incentive stock options under the 2021 Plan is limited to 2,000,000 shares.

The shares of Class A Common stock covered by the 2021 Plan include authorized but unissued shares, treasury shares or shares of common stock purchased on the open market.

As of June 30, 2021, pursuant to the 2021 Plan, there were 2,845,575 shares of Class A Common stock reserved and 2,791,397 shares of Class A Common stock available for future grants.

Stock Options

Stock option activity during the three months ended March 31, 2021 is summarized as follows:

Stock option activity during the six months ended June 30, 2021 is summarized as follows:

‎ Shares (thousands)

3 unchanged sentences

Outstanding at December 31, 2020

Outstanding at March 31, 2021

Exercisable at March 31, 2021

Expected to vest at March 31, 2021

The total intrinsic value of stock options exercised was $ 10.1 million and $ 3.5 million during the three months ended March 31, 2021, and 2020, respectively.

Outstanding at June 30, 2021

Exercisable at June 30, 2021

Expected to vest at June 30, 2021

The total intrinsic value of stock options exercised was $ 25.0 million and $ 12.7 million during the three months ended June 30, 2021, and 2020, respectively.

The total intrinsic value of stock options exercised was $ 35.1 million and $ 16.2 million during the six months ended June 30, 2021, and 2020, respectively.

The fair value of the options was estimated on the date of the grant using a Black-Scholes option pricing model with the following assumptions:

Three Months Ended

Six Months Ended

Risk-free interest rate

2 unchanged sentences

Expected dividend yield

The weighted average grant date fair value of stock options granted during the three months ended March 31, 2021, and 2020 was $ 19.26 and $ 14.43 per share, respectively.

The weighted average grant date fair value of stock options granted during the three months ended June 30, 2021, and 2020 was $ 21.30 and $ 12.42 per share, respectively.

The weighted average grant date fair value of stock options granted during the six months ended June 30, 2021, and 2020 was $ 19.58 and $ 14.29 per share, respectively.

GLOBUS MEDICAL, INC.

2 unchanged sentences

Restricted Stock Units

Restricted stock unit activity during the three months ended March 31, 2021 is summarized as follows:

Restricted stock unit activity during the six months ended June 30, 2021 is summarized as follows:

Restricted Stock

4 unchanged sentences

Outstanding at December 31, 2020

Outstanding at March 31, 2021

Outstanding at June 30, 2021

Stock-Based Compensation

1 unchanged sentence

Three Months Ended

Six Months Ended

(In thousands)

2 unchanged sentences

Total stock-based compensation cost

As of March 31, 2021, there was $ 75.9 million of unrecognized compensation expense related to unvested employee stock options that are expected to vest over a weighted average period of approximately three years .

As of June 30, 2021, there was $ 70.0 million of unrecognized compensation expense related to unvested employee stock options that are expected to vest over a weighted average period of approximately three years .

In computing our income tax provision, we make certain estimates and judgments, such as estimated annual taxable income or loss, annual effective tax rate, the nature and timing of permanent and temporary differences between taxable income for financial reporting and tax reporting, and the recoverability of deferred tax assets.

1 unchanged sentence

Should facts and circumstances change during a quarter causing a material change to the estimated effective income tax rate, a cumulative adjustment is recorded.

The following table provides a summary of our effective tax rate for the three months ended March 31, 2021 and 2020, respectively:

The following table provides a summary of our effective tax rate for the three and six months ended June 30, 2021 and 2020, respectively:

Three Months Ended

Six Months Ended

Effective income tax rate

The change in effective income tax rate for the three month periods ending March 31, 2021 and 2020 is primarily driven by the increase in pretax income partially offset by an increase in tax benefits related to stock option exercises and the reduction to non-tax deductible expenses in the current year.

The change in the effective income tax rates for the three and six month periods ending June 30, 2021 and 2020 is primarily driven by the increase in pretax income and impact of the non-tax-deductible expense of acquired IPR&D of $ 24.4 million for the three and six month periods ending June 30, 2020, which were partially offset by tax benefits due to an increase in stock option exercises in the current year.

COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

In some actions, the claimants seek damages, as well as other relief, including injunctions prohibiting us from engaging in certain activities, which, if granted, could require significant expenditures and/or result in lost revenues.

We record a liability in the condensed consolidated financial statements for these actions when a loss is considered probable and the amount can be reasonably estimated.

If the reasonable estimate of a probable loss is a range, and no amount in the range is a better estimate than any other, the minimum amount of the range is accrued.

If a loss is reasonably possible, but not probable, and the amount can be reasonably estimated, the estimated loss or range of loss is disclosed.

In most cases, significant judgment is required to estimate the amount and timing of a

We record a liability in the

GLOBUS MEDICAL, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

condensed consolidated financial statements for these actions when a loss is considered probable and the amount can be reasonably estimated.

If the reasonable estimate of a probable loss is a range, and no amount in the range is a better estimate than any other, the minimum amount of the range is accrued.

If a loss is reasonably possible, but not probable, and the amount can be reasonably estimated, the estimated loss or range of loss is disclosed.

In most cases, significant judgment is required to estimate the amount and timing of a loss.

While it is not possible to predict the outcome for most of the matters discussed, we believe it is possible that costs associated with them could have a material adverse impact on our consolidated earnings, financial position or cash flows.

7 unchanged sentences

District Court for the Eastern District of Pennsylvania.

The outcome of this litigation cannot be determined, nor can we estimate a range of potential loss, therefore, we have not recorded a liability related to this litigation as of March 31, 2021.

The outcome of this litigation cannot be determined, nor can we estimate a range of potential loss, therefore, we have no t recorded a liability related to this litigation as of June 30, 2021.

The Company leases certain equipment, vehicles, and facilities under the terms of operating lease agreements.

17 unchanged sentences

Three months ended

Six months ended

(In thousands)

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Future minimum lease payments under non-cancellable leases as of March 31, 2021 are as follows:

Future minimum lease payments under non-cancellable leases as of June 30, 2021 are as follows:

(In thousands)

9 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements