What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-04 compared with 2022-05-10 · 94 added, 27 removed, 160 unchanged (43% of the section changed)

2 unchanged sentences

Globus Medical, Inc.

(together, as applicable, with its consolidated subsidiaries, “Globus,” “we,” “us” or “our”), headquartered in Audubon, Pennsylvania, is a medical device company that develops and commercializes healthcare solutions whose mission is to improve the quality of life of patients with musculoskeletal disorders.

(together, as applicable, with its consolidated subsidiaries, “Globus,” “we,” “us” or “our”), headquartered in Audubon, Pennsylvania, is a medical device company that develops and commercializes healthcare solutions and whose mission is to improve the quality of life of patients with musculoskeletal disorders.

Founded in 2003, Globus is committed to medical device innovation and delivering exceptional service to hospitals, ambulatory surgery centers and physicians to advance patient care and improve efficiency.

6 unchanged sentences

We continue to monitor the rapidly evolving situation and guidance from international and domestic authorities, including federal, state and local public health authorities, regarding the COVID-19 pandemic, and we may need to make changes to our business based on their recommendations.

In these circumstances, there may be developments outside our control requiring us to adjust our operating plan.

Under these circumstances, there may be developments outside our control requiring us to adjust our operating plan.

As such, given the dynamic nature of this situation, the Company cannot reasonably estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future.

However, if a resurgence occurs and governments mandate restrictions, including restrictions on elective surgeries, we do expect that it could have a material adverse impact on our revenue growth, operating profit and cash flow, revised payment terms with certain of our customers, and a change in effective tax rate driven by changes in the mix of earnings across the Company’s jurisdictions.

However, if a resurgence of COVID-19 infections occurs and governments mandate restrictions, including restrictions on elective surgeries, we do expect that it could have a material adverse impact on our revenue growth, operating profit and cash flow, revised payment terms with certain of our customers, and a change in effective tax rate driven by changes in the mix of earnings across the Company’s jurisdictions.

We are focused on navigating these recent challenges presented by COVID-19 and believe we are in a strong position to continue to sustain and grow our business.

15 unchanged sentences

AND SUBSIDIARIES

market for our Enabling Technologies in spine and orthopedic surgery is still in the infancy stage and consists primarily of imaging, navigation and robotic systems.

market for our Enabling Technologies in spine and orthopedic surgery is still in its infancy stage and consists primarily of imaging, navigation and robotic systems.

In spine, a majority of these technologies are limited to surgical planning and assistance in implant placement for increased accuracy and time savings with less intraoperative radiation exposure to the patient and surgical staff.

6 unchanged sentences

sales force and we intend to add additional direct and distributor sales representatives in the future.

During the three months ended March 31, 2022, international net sales accounted for approximately 14.8% of our total net sales.

During the six months ended June 30, 2022, international net sales accounted for approximately 14.7% of our total net sales.

We have sold our products in approximately 50 countries other than the United States through a combination of sales representatives employed by us and exclusive international distributors.

7 unchanged sentences

Results of Operations

Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021

Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021

The following table sets forth, for the periods indicated, our net sales by geography expressed as dollar amounts and the changes in net sales between the specified periods expressed in dollar amounts and as percentages:

4 unchanged sentences

Total net sales

In the United States, the increase in net sales of $3.1 million for the three month period ending March 31, 2022 was due primarily to increased spine product sales, including robotic instruments, resulting from penetration in existing territories, partially offset by current period impacts of the COVID-19 pandemic.

International net sales increased by $0.1 million for the three month period ending March 31, 2022 due to increased spine product sales resulting from penetration in other existing territories, offset by lower sales in Japan due to the transition of our sales force composition.

In the United States, the increase in net sales of $10.2 million for the three month period ended June 30, 2022 was due to an increase in sales volume of enabling technologies and spine product sales, including robotic instruments, resulting from penetration in existing territories.

International net sales increased by $2.5 million for the three month period ended June 30, 2022 due to an increase in sales volume of enabling technologies and spine product sales, including robotic instruments, resulting from penetration in existing territories, partially offset by lower sales in Japan due to the transition of our sales force composition.

GLOBUS MEDICAL, INC.

5 unchanged sentences

Percentage of net sales

The $4.1 million increase in cost of goods sold was primarily due to increased volume, un favorable production variances, higher inventory reserves and write-offs, and unfavorable freight trends.

The $4.6 million increase in cost of goods sold was primarily due to increased volume, unfavorable freight trends, and unfavorable production variances, partially offset by lower depreciation and inventory reserves and write-offs .

Research and Development Expenses

9 unchanged sentences

Percentage of net sales

The increase in selling, general and administrative expenses was primarily due to an increase in travel and meeting expenses, which are comparable to pre-COVID-19 spending.

The balances for selling, general and administrative expenses are consistent for the three month period ended June 30, 2022 compared to the three month period ended June 30, 2021.

Provision for Litigation

3 unchanged sentences

Percentage of net sales

The provision for litigation for the three month period ending March 31, 2022 includes an accrual for a potential legal settlement and for the period ending March 31, 2021 includes a receipt of a settlement.

The provision for litigation was immaterial for the three month periods ended June 30, 2022 and 2021.

Amortization of Intangibles

17 unchanged sentences

Percentage of net sales

The balances are consistent for the three month period ended March 31, 2022 compared to the three month period ended March 31, 2021.

The decrease in other income/(expense) is due to an unfavorable change in foreign exchange rates partially offset by a reimbursement for damaged inventory and instrumentation.

Income Tax Provision

3 unchanged sentences

Effective income tax rate

The increase in the effective income tax rate was primarily due to the lower impact of stock option exercises compared to the prior period.

A discussion of our Results of Operations for the three months ended March 31, 2021 can be found in “ Part I, Item 2.

The increase in the effective income tax rate was primarily due to the lower impact of stock option exercises.

A discussion of our Results of Operations for the three months ended June 30, 2021 can be found in “ Part I, Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations:

Results of Operations;

Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020.

” on our Form 10-Q filed on May 4, 2021 .

Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020.

” on our Form 10-Q filed on August 4, 2021 .

Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021

Six Months Ended

(In thousands, except percentages)

United States

International

Total net sales

In the United States, the increase in net sales of $13.2 million was due primarily to increased spine product sales, including robotic spine instruments, resulting from penetration in existing territories and an increase in sales volume of enabling technologies.

International net sales increased by $2.6 million, which was due primarily to increased spine product sales, including robotic spine instruments, resulting from penetration in existing territories and an increase in sales volume of enabling technologies, partially offset by lower sales in Japan due to the transition of our sales force composition.

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

Cost of Goods Sold

Six Months Ended

(In thousands, except percentages)

Cost of goods sold

Percentage of net sales

The $8.8 million increase in cost of goods sold was primarily due to increased volume, unfavorable production variances, and unfavorable freight trends, partially offset by lower depreciation .

Research and Development Expenses

Six Months Ended

(In thousands, except percentages)

Research and development

Percentage of net sales

The $4.3 million increase in research and development expenses was primarily due to an increase in personnel related expenses due to our continued investment in product development.

Selling, General and Administrative Expenses

Six Months Ended

(In thousands, except percentages)

Selling, general and administrative

Percentage of net sales

The increase in selling, general and administrative expenses was primarily due to an increase in travel and meeting expenses, partially offset by a decrease in employee benefit costs.

Provision for Litigation

Six Months Ended

(In thousands, except percentages)

Provision for litigation

Percentage of net sales

The provision for litigation for the six month period ended June 30, 2022 includes a legal settlement and for the period ended June 30, 2021 includes a receipt of a settlement.

Amortization of Intangibles

Six Months Ended

(In thousands, except percentages)

Amortization of intangibles

Percentage of net sales

The decrease in the amortization of intangibles is primarily due to individual intangible assets reaching their full amortization.

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

Acquisition Related Costs

Six Months Ended

(In thousands, except percentages)

Acquisition related costs

Percentage of net sales

Acquisition related costs increased due to changes in fair value of business acquisition liabilities.

Other Income/(expense), Net

Six Months Ended

(In thousands, except percentages)

Other income, net

Percentage of net sales

The decrease in other income/(expense) is due to change in foreign exchange rates partially offset by a reimbursement for damaged inventory and instrumentation.

Income Tax Provision

Six Months Ended

(In thousands, except percentages)

Income tax provision

Effective income tax rate

The increase in the effective income tax rate was primarily due to the lower impact of stock option exercises.

A discussion of our Results of Operations for the six months ended June 30, 2021 can be found in “ Part I, Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations:

Results of Operations;

Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020.

” on our Form 10-Q filed on August 4, 2021 .

Liquidity and Capital Resources

11 unchanged sentences

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

As of March 31, 2022, we have not borrowed under the Credit Agreement.

As of June 30, 2022, we have not borrowed under the Credit Agreement.

GLOBUS MEDICAL, INC.

1 unchanged sentence

The following table summarizes, for the periods indicated, cash flows from operating, investing and financing activities:

Three Months Ended

Six Months Ended

(In thousands)

5 unchanged sentences

Cash Provided by Operating Activities

The net cash provided by operating activities for the three months ended March 31, 2022 was primarily cash flow from net income and favorable changes in accounts payable and income tax payables, partially offset by outflows for inventories.

The net cash provided by operating activities for the six months ended June 30, 2022 was primarily cash flow from net income and favorable changes in accounts payable, partially offset by unfavorable changes in accounts receivables and outflows for inventories and accrued expenses and other liabilities.

Cash Used in Investing Activities

The cash used in investing activities for the three months ended March 31, 2022 was primarily from the purchases of property and equipment partially offset by net outflows of purchases, maturities and sales of marketable securities.

The cash provided by investing activities for the six months ended June 30, 2022 was primarily from the net inflows of purchases, maturities and sales of marketable securities, partially offset by purchases of property and equipment.

Cash Used in Financing Activities

The net cash provided by financing activities for the three months ended March 31, 2022 was primarily the result of the receipt of proceeds from option exercises, partially offset by payments of business acquisition liabilities.

A discussion of our Cash Flows for the three months ended March 31, 2021 can be found in “ Part I, Item 2.

The net cash used in financing activities for the six months ended June 30, 2022 was primarily the result of the repurchased Class A common stock.

A discussion of our Cash Flows for the six months ended June 30, 2021 can be found in “ Part I, Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations:

Results of Operations;

” on our Form 10-Q filed on May 4, 2021 .

” on our Form 10-Q filed on August 4, 2021 .

Contractual Obligations and Commitments

There have been no material changes to our contractual obligations during the three months ended March 31, 2022.

There have been no material changes to our contractual obligations during the six months ended June 30, 2022.

We work closely with our suppliers to ensure that our inventory needs are met while maintaining high quality and reliability.

6 unchanged sentences

Safety stock levels are determined based on a number of factors, including demand, manufacturing lead times, and quantities required to maintain service levels.

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

Recently Issued Accounting Pronouncements

4 unchanged sentences

(k) Recently Issued Accounting Pronouncements” above.

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

Cautionary Note Concerning Forward-Looking Statements

8 unchanged sentences

Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Item 7A.

Quantitative and Qualitative Disclosure About Market Risk” , and those discussed in other documents we file with the Securities and Exchange Commission (the “SEC”).

Quantitative and Qualitative Disclosure About Market Risk” , and those discussed in other documents we file with the U.S.

Securities and Exchange Commission (the “SEC”).

Moreover, we operate in an evolving environment.

6 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 2. Management’s Discussion and Analysis