What changed in this filing

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Item 1. Financial Statements

2022-05-10 compared with 2021-11-04 · 123 added, 237 removed, 527 unchanged (41% of the section changed)

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CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

(In thousands, except share and per share values)

Current assets:

Cash, cash equivalents, and restricted cash

Cash and cash equivalents

Short-term marketable securities

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Authorized 500,000,000 shares;

issued and outstanding 79,029,625 and 77,284,007 shares at September 30, 2021 and December 31, 2020, respectively

issued and outstanding 79,297,823 and 79,113,916 shares at March 31, 2022 and December 31, 2021, respectively

Class B common stock;

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Authorized 275,000,000 shares;

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

issued and outstanding 22,430,097 and 22,430,097 shares at March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital

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Three Months Ended

Nine Months Ended

September 30,

(In thousands, except per share amounts)

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Net income/(loss)

Other comprehensive income/(loss):

Unrealized gain/(loss) on marketable securities, net of tax

Other comprehensive income/(loss), net of tax:

Unrealized gain/(loss) on marketable securities

Foreign currency translation gain/(loss)

Total other comprehensive income/(loss)

Total other comprehensive income/(loss), net of tax

Comprehensive income/(loss)

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Balance at March 31, 2022

Stock-based compensation

Grant of restricted stock units

Exercise of stock options

Comprehensive income/(loss)

Balance at June 30, 2021

Stock-based compensation

Grant of restricted stock units

Exercise of stock options

Comprehensive income/(loss)

Balance at September 30, 2021

‎ Common Stock

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Balance at December 31, 2020

Cumulative effects of adoption of accounting standards

Stock-based compensation

Grant of restricted stock units

Exercise of stock options

Comprehensive income/(loss)

Repurchase and retirement of common stock

Balance at March 31, 2021

Stock-based compensation

Exercise of stock options

Comprehensive income/(loss)

Repurchase and retirement of common stock

Balance at June 30, 2020

Stock-based compensation

Exercise of stock options

Comprehensive income/(loss)

Balance at September 30, 2020

See accompanying notes to unaudited condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

Three Months Ended

(In thousands)

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

Acquired in-process research and development

Depreciation and amortization

Amortization of premium (discount) on marketable securities

Write-down of excess and obsolete inventories

Write-down for excess and obsolete inventories, net

Stock-based compensation expense

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Cash flows from financing activities:

Payment of business acquisition related liabilities

Payment of business acquisition liabilities

Proceeds from exercise of stock options

Repurchase of common stock

Net cash provided by/(used in) financing activities

Effect of foreign exchange rates on cash

Net increase in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash at beginning of period

Cash, cash equivalents, and restricted cash at end of period

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosures of cash flow information:

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AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(a) The Company

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We are an engineering-driven company with a history of rapidly developing and commercializing advanced products and procedures to assist surgeons in effectively treating their patients and to address new treatment options.

With over 220 product launches to date, we offer a comprehensive portfolio of innovative and differentiated technologies that address a variety of musculoskeletal pathologies, anatomies, and surgical approaches.

With over 220 products launched, we offer a comprehensive portfolio of innovative and differentiated technologies that address a variety of musculoskeletal pathologies, anatomies, and surgical approaches.

We are headquartered in Audubon, Pennsylvania, and we market and sell our products through our exclusive sales force in the United States, as well as within North, Central & South America, Europe, Asia, Africa and Australia.

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and globally as federal, state and local governments react to the public health crisis, creating significant uncertainties in the economy.

Although the Company cannot reasonably estimate the length or severity of the impact that COVID-19 will have on its financial results, the Company may experience a material adverse impact on its sales, results of operations, and cash flows in 2021 should there be a resurgence impacting hospitals and surgical facilities to which we provide services.

Although the Company cannot reasonably estimate the length or severity of the impact that COVID-19 will have on its financial results, the Company may experience a material adverse impact on its sales, results of operations, and cash flows in 2022 should there be a resurgence impacting hospitals, surgical facilities, our internal operations, or our suppliers.

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

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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, 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 September 30, 2021, and results of operations for the three and nine months ended September 30, 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, 2022, and results of operations for the three months ended March 31, 2022.

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

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The accompanying unaudited condensed consolidated financial statements include the accounts of Globus and its wholly-owned subsidiaries.

All intercompany balances and transactions have been eliminated.

All intercompany balances and transactions are eliminated in consolidation.

GLOBUS MEDICAL, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The preparation of the condensed consolidated financial statements in conformity with U.S.

GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

We base our estimates, in part, on historical experience that we believe to be reasonable under the circumstances.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

We base our estimates, in part, on historical experience that management believes to be reasonable under the circumstances.

Actual results could differ from those estimates.

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Our Musculoskeletal Solutions products consist primarily of the implantable devices, disposables, and unique instruments used in an expansive range of spine, orthopedic trauma, hip, knee and extremity procedures.

The majority of contracts with our customers for Musculoskeletal Solutions products have a single performance obligation and revenue is recognized at a point in time.

Our Enabling Technologies products are advanced robotics hardware systems and related technologies that are designed to enhance a surgeon’s capabilities and streamline surgical procedures by making them less invasive, more accurate, and more reproducible to improve patient care.

The majority of contracts with our customers for Enabling Technologies products contain multiple performance obligations, including maintenance and support, and revenue is recognized as we fulfill each performance obligation.

The majority of our Musculoskeletal Solutions contracts have a single performance obligation and revenue is recognized at a point in time.

Our Enabling Technologies products are advanced hardware and software systems, and related technologies that are designed to enhance a surgeon’s capabilities and streamline surgical procedures by making them less invasive, more accurate, and more reproducible to improve patient care.

The majority of our Enabling Technologies product contracts contain multiple performance obligations, including maintenance and support, and revenue is recognized as we fulfill each performance obligation.

When contracts have multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract.

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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 and nine months ended September 30, 2021, there was an immaterial amount of revenue recognized from previously deferred revenue.

For the three months ended March 31, 2022, there was an immaterial amount of revenue recognized from previously deferred revenue.

GLOBUS MEDICAL, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(e) Cash, Cash Equivalents, and Restricted Cash

(e) Cash and Cash Equivalents

The Company considers all short-term, highly liquid investments with original maturities of 90 days or less at acquisition date to be cash equivalents.

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(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 September 30, 2021.

Our marketable securities include municipal bonds, corporate debt securities, commercial paper, asset-backed securities, and securities of government, federal agency, and other sovereign obligations and are classified as available-for-sale as of March 31, 2022 .

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

Any changes in the fair value of our available-for-sale securities, that do not result in recognition or reversal of an allowance for credit loss or write-down, are recorded, net of taxes, as a component of accumulated other comprehensive income or loss on our condensed consolidated balance sheets.

Any change in fair value of our available-for-sale securities, that do not result in recognition or reversal of an allowance for credit loss or write-down, are recorded, net of taxes, as a component of accumulated other comprehensive income or loss on our condensed consolidated balance sheets.

Premiums and discounts are recognized over the life of the related security as an adjustment to yield using the straight-line method.

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Our policy also limits the amount of credit exposure to any one issue, issuer or type of security.

We review our securities for other-than-temporary impairment at each reporting period.

If an unrealized loss for any security is expected, the loss will be recognized on an allowance basis, consistent with ASC 326-30, in our condensed consolidated statement of operations and comprehensive income in the period the determination is made.

We review declines in the fair value of our securities to determine whether they are resulting from expected credit losses or other factors.

If the assessment indicates a credit loss exists, we recognize any measured impairment as an allowance for credit loss in our condensed consolidated statements of operations.

Any other impairments not recorded through allowance for credit losses is recognized in our other comprehensive income.

(g) Fair Value Measurements

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We utilize Level 3 inputs in the determination of the initial fair value.

GLOBUS MEDICAL, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contingent consideration represents contingent milestone, performance and revenue-sharing payment obligations related to business acquisitions and is measured at fair value, based on significant inputs that are not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

Contingent consideration represents contingent milestone, performance and revenue-sharing payment obligations related to acquisitions and is measured at fair value, based on significant inputs that are not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

The valuation of contingent consideration uses assumptions we believe would be made by a market participant.

We assess these assumptions on an ongoing basis as additional data impacting the assumptions is obtained.

The fair value of contingent consideration recorded in business acquisition liabilities on our condensed consolidated balance sheets, and changes in the fair value of contingent consideration are recognized within acquisition related costs in the condensed consolidated statements of operations and comprehensive income.

The fair value of contingent consideration recorded in business acquisition liabilities on our condensed consolidated balance sheets, and changes in the fair value of contingent consideration are recognized in acquisition related costs in the condensed consolidated statements of operations and comprehensive income.

The fair value of contingent restricted stock unit (“RSU”) grants are recorded as additional paid-in capital in the consolidated balance sheet on the day of the grant due to the remote likelihood of forfeiture.

GLOBUS MEDICAL, INC.

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(h) Inventories

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Goodwill is tested for impairment at least annually or whenever events or circumstances indicate that a carrying amount may not be recoverable.

Goodwill is tested for impairment at the reporting unit level by comparing the reporting unit’s carrying amount to the fair value of the reporting unit.

Goodwill is tested for impairment at the reporting unit level by comparing the reporting unit’s carrying amount to the estimated fair value of the reporting unit.

Fair values are estimated using an income and discounted cash flow approach.

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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 nine months ended September 30, 2021 and 2020, we did no t record any impairment charges related to goodwill.

During the three months ended March 31, 2022 and 2021, 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.

Intangible assets with finite useful lives are amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from one to sixteen years.

Intangible assets are tested for impairment annually or whenever events or circumstances indicate that a carrying amount of an asset (asset group) may not be recoverable.

Intangible assets with finite useful lives are tested whenever events or circumstances indicate that a carrying amount of an asset (asset group) may not be recoverable.

If an impairment is indicated, we measure the amount of the impairment loss as the amount by which the carrying amount exceeds the fair value of the asset.

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

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

There were no impairments of finite-lived intangible assets during the three months ended March 31, 2022 or 2021.

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 nine months ended September 30, 2021 or 2020.

Intangible assets with indefinite useful lives are tested for impairment annually or whenever events or circumstances indicate that a carrying amount of an asset (asset group) may not be recoverable 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, 2022 or 2021.

(j) Stock -Based Compensation

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The dividend yield assumption is based on the history and expectation of no dividend payouts.

The fair value of restricted stock units is estimated using the closing price of the Company’s common stock on the date of grant.

GLOBUS MEDICAL, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The fair value of restricted stock units is estimated on the date of the grant using the closing price of the Company’s common stock.

(k) Recently Issued Accounting Pronouncements

None applicable.

(l) Recently Adopted Accounting Pronouncements

On March 12, 2020, the FASB issued ASU No.

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related to reference rate reform.

We will continue to evaluate the impact this guidance could have on our condensed consolidated financial statements and related disclosures.

(l) Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”) , which is intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted.

We adopted ASU 2019-12 on January 1, 2021.

This standard did not have a material impact on our financial position, results of operations and disclosures.

GLOBUS MEDICAL, INC.

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will continue to evaluate the impact this guidance could have on our condensed consolidated financial statements and related disclosures.

ASSET ACQUISITIONS AND BUSINESS COMBINATIONS

Asset Acquisitions

During the fourth quarter of 2021, the Company acquired substantially all the assets of Capstone Surgical Technologies, LLC (“Capstone”), which engages in the business of advanced drill and robotic surgery platforms.

The purchase price consisted of $ 24.5 million of cash paid at closing, subject to net working capital and other post-closing adjustments, if applicable.

The transaction also provides for additional consideration contingent upon the developed products obtaining approval from the U.S.

Food and Drug Administration (the “FDA”) of up to $ 15.0 million, and additional consideration of up to $ 10.0 million contingent upon the achievement of certain performance milestones.

Contingent consideration is not recorded in an asset acquisition until the milestone is met.

Also during the fourth quarter of 2021, the Company acquired substantially all the assets of a company that engages in the development of technology for use in robotic surgery platforms which was not considered material to the consolidated financial statements during the periods presented.

The purchase price consisted of $ 10.0 million of cash paid at closing and also provides for additional consideration of $ 5.0 million contingent upon the achievement of certain performance milestones.

Contingent consideration is not recorded in an asset acquisition until the milestone is met.

During the second quarter of 2020, the Company acquired Synoste Oy (“Synoste”), a Finnish engineering company that specializes in the research and development of a limb lengthening system.

The fair value of the net assets acquired was $ 25.3 million, and the consideration consisted of approximately $ 22.8 million of cash paid at closing plus $ 2.5 million of a contractual holdback obligation payable eighteen months from the closing date of the transaction, subject to net working capital and other post-closing adjustments, if applicable.

The contractual holdback obligation is included in accrued expenses in the condensed consolidated balance sheet.

The Company accounted for the transaction as an asset acquisition as substantially all of the fair value of the assets acquired was concentrated in a single identified asset, IPR&D of the limb lengthening system, thus satisfying the requirements of the screen test in ASU 2017-1.

At the date of acquisition, the Company determined that the development of the projects underway at Synoste had not yet reached technological feasibility and that the research in process had no alternative future use.

Accordingly, the acquired IPR&D of $ 24.4 million was charged to research and development expense in the condensed consolidated statements of operations and comprehensive income at the date of acquisition.

The transaction also provides for additional consideration contingent upon the developed product obtaining approval from the U.S.

Food and Drug Administration (the “FDA”) of $ 8.0 million within the third anniversary, or $ 4.0 million within the fourth anniversary of the acquisition closing date, respectively.

During the fourth quarter of 2021, the contractual holdback and net working capital and other post-closing adjustments were settled for $ 2.7 million.

The transaction also provides for additional consideration of $ 8.0 million contingent upon the developed product obtaining approval from the U.S.

Food and Drug Administration (the “FDA”) within the third anniversary, or $ 4.0 million if within the fourth anniversary of the acquisition closing date, respectively.

Contingent consideration is not recorded in an asset acquisition until the milestone is met.

The Company accounted for each of these transactions as asset acquisitions because substantially all of the fair value of the assets acquired in each transaction was concentrated in a single identified asset, in-process research and development (“IPR&D”) of the acquired technology, thus satisfying the requirements of the screen test in ASU 2017-1.

At the date of the acquisitions, the Company determined that the development of the projects underway had not yet reached technological feasibility and that the research in process had no alternative future use.

Accordingly, the acquired IPR&D of $ 34.3 million and $ 24.4 million was charged to research and development expense in the condensed consolidated statements of operations and comprehensive income for years ended 2021 and 2020, respectively.

Business Combinations

During the third quarter of 2021, the Company completed two acquisitions that were not considered material, individually or collectively, to the condensed consolidated financial statements during the periods presented.

During 2021, the Company completed three acquisitions that were not considered material, individually or collectively, to the condensed consolidated financial statements during the periods presented.

Two acquisitions were completed in the third quarter, while the third acquisition was completed in the fourth quarter.

These acquisitions have been included in the condensed consolidated financial statements from the date of acquisition.

The combined purchase price consisted of approximately $ 12.6 million of contingent consideration payments.

The contingent payments are based upon achieving various performance obligations over a period of 10 years, and are payable in a combination of cash and RSUs.

The Company recorded other intangible assets of $ 1.6 million, with a weighted average useful life of 3.8 years, and goodwill of $ 11.0 million based on their preliminary estimated fair values.

The Company will finalize the purchase price allocation of the assets and liabilities acquired within one year from the date of acquisition.

While the Company does not expect material changes from the initial outcome of the valuation, certain assumptions and findings made at the date of acquisition could result in changes in the purchase price allocation.

During the fourth quarter of 2020, the Company completed two acquisitions that were not considered material, individually or collectively, to the condensed consolidated financial statements during the periods presented.

The purchase price of the acquisition in the fourth quarter consisted of approximately $ 0.3 million of cash paid at closing and $ 13.0 million of contingent consideration payments, resulting in goodwill of $ 13.3 million based on the estimated fair values.

The combined purchase price of the two acquisitions in the third quarter consisted of approximately $ 12.6 million of contingent consideration payments.

The Company recorded other intangible assets of $ 1.6 million, with a weighted average useful life of 3.8 years, and goodwill of $ 11.0 million based on their estimated fair values.

The contingent payments for all three acquisitions are based upon achieving various performance milestones over a period of 10 years and are payable in a combination of cash and RSUs.

During the fourth quarter of 2020, the Company completed two acquisitions that were not considered material, individually or collectively, to the overall consolidated financial statements during the periods presented.

These acquisitions have been included in the condensed consolidated financial statements from the date of acquisition.

The combined purchase price consisted of approximately $ 1.5 million of cash paid at closing, plus $ 0.3 million of other liabilities and $ 33.2 million of contingent consideration payments.

The contingent payments are based upon achieving various performance obligations over a period of 10 years, and are payable in a

The contingent payments are based upon achieving various performance milestones over a period of 10 years and are payable in a combination of cash and RSUs.

The Company recorded other intangible assets of $ 8.8 million, with a weighted average useful life of 4.2 years, and goodwill of $ 26.2 million based on their fair values.

GLOBUS MEDICAL, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

combination of cash and RSUs.

The Company recorded other intangible assets of $ 8.8 million, with a weighted average useful life of 4.2 years, and goodwill of $ 26.2 million based on their fair values.

During the second quarter of 2019, the Company acquired substantially all of the assets of StelKast, Inc.

(the “StelKast Acquisition”), a privately held company that designs, manufactures and distributes orthopedic implants for knee and hip replacement surgeries.

The Company has included the financial results from the StelKast Acquisition in our condensed consolidated financial statements from the acquisition date.

At the acquisition date, the fair value of the net assets acquired was $ 28.1 million.

The purchase price consisted of approximately $ 23.8 million of cash paid at closing, plus $ 4.3 million of contingent consideration payable based upon the achievement of product sales milestones.

The Company recorded identifiable net assets, based on their estimated fair values, for inventory of $ 15.3 million, fixed assets of $ 4.2 million and customer relationships of $ 3.9 million and goodwill of $ 4.7 million.

The contingent consideration payable related to the StelKast Acquisition of $ 5.0 million was paid during the third quarter of 2020.

The following table represents net sales by product category:

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

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

September 30, 2021

March 31, 2022

(In thousands)

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Asset-backed securities

Government, federal agency, and other sovereign obligations

Total long-term marketable securities

GLOBUS MEDICAL, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2021

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Asset-backed securities

Government, federal agency, and other sovereign obligations

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 September 30, 2021 and December 31, 2020, respectively.

GLOBUS MEDICAL, INC.

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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, 2022 and December 31, 2021, respectively.

Purchases of marketable securities include amounts payable to brokers of $ 2.2 million as of December 31, 2021.

Purchases of marketable securities included no amounts payable to brokers as of March 31, 2022.

FAIR VALUE MEASUREMENTS

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(In thousands)

September 30,

Cash equivalents

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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* 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 and nine months ended September 30, 2021 and 2020, respectively included the following:

The change in the carrying value of the business acquisition liabilities during the three months ended March 31, 2022 and 2021, respectively included the following:

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Fair value measurement at beginning of period

Purchase price contingent consideration

Beginning balance

Contingent cash payments

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Contractual payable reclassification

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

Ending balance

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:

September 30,

(In thousands)

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Total inventories

During the three months ended September 30, 2021 and 2020, net adjustments to cost of sales related to excess and obsolete inventory were $ 0.6 million and $ 5.2 million, respectively.

The net adjustments for the three months ended September 30, 2021 and 2020 reflect a combination of additional expense for excess and obsolete related provisions ($ 3.8 million and $ 7.9 million, respectively) offset by sales and disposals ($ 3.2 million and $ 2.7 million, respectively) of inventory for which an excess and obsolete provision was provided previously through expense recognized in prior periods.

During the nine months ended September 30, 2021 and 2020, net adjustments to cost of sales related to excess and obsolete inventory were $ 5.6 million and $ 12.4 million, respectively.

The net adjustments for the nine months ended September 30, 2021 and 2020 reflect a combination of additional expense for excess and obsolete related provisions ($ 15.2 million and $ 18.9 million, respectively) offset by sales and disposals ($ 9.6 million and $ 6.5 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 March 31, 2022 and 2021, net adjustments to cost of sales related to excess and obsolete inventory were $ 1.8 million and $ 1.6 million, respectively.

The net adjustments for the three months ended March 31, 2022 and 2021 reflect a combination of additional expense for excess and obsolete related provisions ($ 3.4 million and $ 3.8 million, respectively) offset by sales and disposals ($ 1.6 million and $ 2.2 million, respectively) of inventory for which an excess and obsolete provision was provided previously through expense recognized in prior periods.

GLOBUS MEDICAL, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

PROPERTY AND EQUIPMENT

Property and equipment included the following:

September 30,

(In thousands)

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Three Months Ended

Nine Months Ended

September 30,

(In thousands)

GOODWILL AND INTANGIBLE ASSETS

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

The change in the carrying amount of goodwill during the twelve months ended December 31, 2021 and the three months ended March 31, 2022, respectively included the following:

(In thousands)

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Foreign exchange

Additions and adjustments

September 30, 2021

March 31, 2022

The composition of intangible assets was as follows:

September 30, 2021

March 31, 2022

(In thousands)

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AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2021

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Total intangible assets

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

The following table summarizes amortization of intangible assets for future periods as of March 31, 2022:

(In thousands)

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Accrued expense included the following:

September 30,

(In thousands)

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Accrued non-income taxes

Rebates & Fees

Total accrued expenses

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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”).

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

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

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

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

As of March 31, 2022, we have no t borrowed under the Credit Agreement.

GLOBUS MEDICAL, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Repurchases

Under the current stock repurchase plan, announced in March 2020, the Company is authorized to repurchase up to $ 200 million of the Company’s Class A common stock.

In March 2020, the Company announced a stock repurchase plan, pursuant to which the Company was authorized to repurchase up to $ 200 million of the Company’s Class A common stock.

In March 2022, the Company announced the expansion of the stock repurchase plan, pursuant to which the Company is authorized to repurchase an additional $ 200 million of the Company’s Class A common stock.

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

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

As of March 31, 2022, $ 295.3 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.

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July 1, 2021 - September 30, 2021

January 1, 2020 - September 30, 2021

October 1, 2021 - December 31, 2021

January 1, 2022 - March 31, 2022

January 1, 2020 - March 31, 2022

(1) Inclusive of an immaterial amount of commission fees

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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 nine months ended September 30, 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 three months ended March 31, 2022 and 2021, respectively:

(In thousands)

‎ gain/(loss) on

‎ securities,

‎ translation

‎ adjustments

comprehensive income/(loss)

Unrealized loss on marketable securities, net of tax

Foreign currency translation adjustments

Accumulated other comprehensive loss

Accumulated other comprehensive income/(loss), net of tax, at December 31, 2021

2 unchanged sentences

Other comprehensive income/(loss), net of tax

Accumulated other comprehensive income/(loss), net of tax, at September 30, 2021

Accumulated other comprehensive income/(loss), net of tax, at March 31, 2022

(In thousands)

‎ gain/(loss) on

‎ securities,

‎ translation

‎ adjustments

‎ comprehensive income/(loss)

Unrealized loss on marketable securities, net of tax

Foreign currency translation adjustments

Accumulated other comprehensive loss

Accumulated other comprehensive income/(loss), net of tax, at December 31, 2020

2 unchanged sentences

Other comprehensive income/(loss), net of tax

Accumulated other comprehensive income/(loss), net of tax, at September 30, 2020

Accumulated other comprehensive income/(loss), net of tax, at March 31, 2021

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.

6 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except per share amounts)

8 unchanged sentences

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

STOCK-BASED COMPENSATION

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”).

STOCK-BASED AWARDS

We have two stock plans:

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

The purpose of the 2012 Plan 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.

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

The 2012 Plan terminated pursuant to its terms in 2022.

Following the effectiveness of our 2021 Equity Incentive Plan, we have not issued any additional awards under the 2012 Plan;

however, awards previously granted under the 2012 Plan remain outstanding and are administered by our Board of Directors under the terms and conditions of the 2012 Plan.

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 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.

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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 September 30, 2021, pursuant to the 2021 Plan, there were 2,845,575 shares of Class A Common stock reserved and 2,684,008 shares of Class A Common stock available for future grants.

As of March 31, 2022, pursuant to the 2021 Plan, there were 3,247,276 shares of Class A Common stock reserved and 1,333,253 shares of Class A Common stock available for future grants.

Stock Options

Stock option activity during the nine months ended September 30, 2021 is summarized as follows:

Stock option activity during the three months ended March 31, 2022 is summarized as follows:

‎ Shares (thousands)

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Outstanding at December 31, 2021

Outstanding at September 30, 2021

Exercisable at September 30, 2021

Expected to vest at September 30, 2021

The total intrinsic value of stock options exercised was $ 33.8 million and $ 23.3 million during the three months ended September 30, 2021, and 2020, respectively.

The total intrinsic value of stock options exercised was $ 68.9 million and $ 39.4 million during the nine months ended September 30, 2021, and 2020, respectively.

Outstanding at March 31, 2022

Exercisable at March 31, 2022

Expected to vest at March 31, 2022

The total intrinsic value of stock options exercised was $ 4.7 million and $ 10.1 million during the three months ended March 31, 2022, and 2021, respectively.

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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:

Nine Months Ended

September 30,

Three 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 September 30, 2021, and 2020 was $ 24.11 and $ 16.98 per share, respectively.

The weighted average grant date fair value of stock options granted during the nine months ended September 30, 2021, and 2020 was $ 20.19 and $ 14.54 per share, respectively.

The weighted average grant date fair value of stock options granted during the three months ended March 31, 2022, and 2021 was $ 20.48 and $ 19.26 per share, respectively.

Restricted Stock Units

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

Restricted stock unit activity during the three months ended March 31, 2022 is summarized as follows:

Restricted Stock

4 unchanged sentences

Outstanding at December 31, 2021

Outstanding at September 30, 2021

Outstanding at March 31, 2022

Stock-Based Compensation

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

2 unchanged sentences

Total stock-based compensation cost

As of September 30, 2021, there was $ 66.1 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 March 31, 2022, there was $ 78.8 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 and nine months ended September 30, 2021 and 2020, respectively:

The following table provides a summary of our effective tax rate for the three months ended March 31, 2022 and 2021, respectively:

Three Months Ended

Nine Months Ended

September 30,

Effective income tax rate

1 unchanged sentence

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

COMMITMENTS AND CONTINGENCIES

10 unchanged sentences

District Court for the Western District of Texas for patent infringement.

Moskowitz, a non-practicing entity, alleges that Globus willfully infringes one or more claims of eight patents by making, using, offering for sale or selling the COALITION ® , COALITION MIS ® , COALITION AGX ® , CORBEL TM , MONUMENT ® , MAGNIFY ® -S, HEDRON IA TM , HEDRON IC TM , INDEPENDENCE ® , INDEPENDENCE MIS ® , INDEPENDENCE MIS AGX ® , FORTIFY ® and XPAND ® families, SABLE TM , RISE ® , RISE ® INTRALIF, RISE ® -L, ELSA ® , ELSA ® ATP, RASS, ALTERA ® , ARIEL ® , LATIS ® , CALIBER ® and CALIBER ® -L products.

Moskowitz seeks an unspecified amount in damages and injunctive relief.

Moskowitz, a non-practicing entity, alleges that Globus willfully infringes one or more claims of six patents by making, using, offering for sale or selling the COALITION ® , COALITION MIS ® , COALITION AGX ® , CORBEL ® , MONUMENT ® , MAGNIFY ® -S, HEDRON IA TM , HEDRON IC ® , INDEPENDENCE ® , INDEPENDENCE MIS ® , INDEPENDENCE MIS AGX ® , FORTIFY ® and XPAND ® families, SABLE ® , RISE ® , RISE ® INTRALIF, RISE ® -L, ELSA ® , ELSA ® ATP, ALTERA ® , ARIEL ® , CALIBER ® and CALIBER ® -L products.

Moskowitz seeks monetary damages and injunctive relief.

On July 2, 2020, this suit was transferred from the U.S.

1 unchanged sentence

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 no t recorded a liability related to this litigation as of September 30, 2021.

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

Our leases have initial lease terms ranging from one year to fourteen years .

Certain leases contain options to extend the term beyond the initial lease termination date.

We use judgment to determine whether it is reasonably possible that we will extend the lease beyond the initial term and the length of the possible extension.

Leases that have terms of less than 12 months are treated as short-term and we do not recognize right of use assets or lease liabilities for such leases.

We generally estimate discount rates using our incremental borrowing rate, and based on other information available, at commencement date of a lease when determining the present value of future payments as most of our leases do not provide an implicit rate.

The Company includes right-of-use assets in other assets, short-term lease liabilities in accrued expenses, and long-term lease liabilities in other liabilities on the condensed consolidated balance sheet.

Lease expense is recognized, on a straight-line basis over the term of the lease, as a component of operating income on the condensed consolidated statement of operations and comprehensive income.

Amounts reported in the condensed consolidated balance sheet were as follows:

September 30,

(In thousands, except weighted average lease term and discount rate)

Operating lease right of use asset

Lease liability - current

Lease liability - long-term

Total operating lease liability

Supplemental non-cash information:

Weighted-average remaining lease term (years) - operating leases

Weighted-average discount rate - operating leases

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Operating lease expense recognized in the condensed consolidated statement of operations and comprehensive income was as follows:

Three months ended

Nine months ended

September 30,

(In thousands)

Operating lease expense

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

(In thousands)

Operating Leases

Remaining 2021

Total undiscounted operating lease payments

imputed interest

Total operating lease liability

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 March 31, 2022.

SEGMENT AND GEOGRAPHIC INFORMATION

3 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

2 unchanged sentences

Total net sales

SUBSEQUENT EVENT

On November 4, 2021, the Company acquired substantially all of the assets of Capstone Surgical Technologies, LLC, which engages in the business of creating advanced drill and robotic surgery platforms.

The purchase price is a combination of an initial cash payment of $ 25.0 million, subject to post-closing adjustments, if applicable, and contingent consideration of up to $ 25.0 million.

GLOBUS MEDICAL, INC.

1 unchanged sentence

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