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Musculoskeletal Solutions and Enabling Technologies.
−Removed: COVID-19 Update
−Removed: We continue to monitor the rapidly evolving situation and guidance from domestic and international 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.
+Added: We continue to monitor the evolution and impact of COVID-19 and evaluate the guidance from domestic and international authorities, including federal, state and local public health authorities regarding COVID-19, 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: As such, the Company cannot reasonably estimate the ongoing impacts of COVID-19 on our financial condition, results of operations or cash flows in the future.
+Added: However, if a resurgence occurs and governments mandate restrictions, including restrictions on elective surgeries, we do expect that it may have a material adverse impact on our sales, results of operations, and cash flows, 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.
+Added: We are focused on continuing to navigate the challenges presented by COVID-19 and believe we are in a strong position to continue to sustain and grow our business.
Product Categories
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Enabling Technologies
−Removed: Our Enabling Technologies are comprised of imaging, navigation and robotics (“INR”) solutions for assisted surgery which are advanced computer-assisted intelligent systems designed to enhance a surgeon’s capabilities, and ultimately improve patient care and reduce radiation exposure for all involved, by streamlining surgical procedures to be safer, less invasive, and more accurate.
+Added: Our Enabling Technologies are comprised of INR solutions for assisted surgery which are advanced computer-assisted intelligent systems designed to enhance a surgeon’s capabilities, and ultimately improve patient care and reduce radiation exposure for all involved, by streamlining surgical procedures to be safer, less invasive, and more accurate.
The 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.
21 unchanged sentences
Cost of Goods Sold
−Removed: While we have increased our in-house implant product manufacturing capacity and assemble the ExcelsiusGPS ® system in-house, we also have products manufactured by third-party suppliers.
+Added: While we have increased our in-house implant product manufacturing capacity and assemble our INR systems in-house, we also have products manufactured by third-party suppliers.
Substantially all of our suppliers manufacture our products in the United States.
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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.
−Removed: 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.
+Added: 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 twenty-one 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.
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If quoted market prices are not available, an estimate of fair value is made based on prices of similar assets or other valuation techniques including present value techniques.
−Removed: During the years ended December 31, 2021, 2020, and 2019, we did not record any impairment charges related to long-lived assets.
+Added: During the years ended December 31, 2022, 2021, or 2020 , we did not record any impairment charges related to long-lived assets.
Stock-Based Compensation Expense.
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Total net sales
−Removed: In the United States, the increase in net sales of $155.1 million was due primarily to increased spine product sales resulting from penetration in existing territories and an increase in sales volume of enabling technologies, both of which were partially attributable to the lower net sales for the year ending December 31, 2020 due to the COVID-19 pandemic .
−Removed: International net sales increased by $13.9 million, which was due primarily to increased spine product sales resulting from penetration in existing territories and sales volume of enabling technologies, both of which were partially attributable to the lower net sales for the year ending December 31, 2020 due to the COVID-19 pandemic.
+Added: In the United States, the increase in net sales of $52.4 million was due primarily to increased spine product sales resulting from penetration in existing territories and an increase in sales volume of enabling technologies .
+Added: International net sales increased by $12.4 million, which was due primarily to increased spine product sales resulting from penetration in existing territories and sales volume of enabling technologies, partially offset by lower sales in Japan due to the transition of our sales force composition.
Cost of Goods Sold
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Percentage of net sales
−Removed: The increase in cost of goods sold was primarily due to increased volume, and increased depreciation and royalty costs.
−Removed: These increases were partially offset by favorable production variances driven by manufacturing efficiencies, and lower write-downs of excess and obsolete inventory driven by the impact of the COVID-19 pandemic on operations for the year ending December 31, 2020.
+Added: The increase in cost of goods sold was primarily due to increased volume and product mix and unfavorable freight trends.
+Added: These increases were partially offset by lower write-downs of excess and obsolete inventory and depreciation costs.
Research and Development Expenses
2 unchanged sentences
Percentage of net sales
−Removed: The increase in research and development expenses was due primarily to the $34.3 million of acquired IPR&D for the year ending December 31, 2021, partially offset by the $24.4 million of acquired IPR&D for the year ending December 31, 2020, which were all expensed because we determined that each did not have an alternative future use.
+Added: The decrease in research and development expenses was due primarily to $34.3 million of acquired IPR&D for the year ending December 31, 2021, which was expensed because we determined that it did not have an alternative future use.
The remaining change is driven by an increase in personnel related expenses due to our continued investment in product development.
3 unchanged sentences
Percentage of net sales
−Removed: The increase in selling, general and administrative expenses was primarily due to an increase in commission and bonus expenses resulting from higher product sales, an increase in travel and training expenses, which are comparable to pre-COVID-19 expenses, and an increase in other personnel related costs due to the continued build out of the spine, INR technology and orthopedic trauma sales forces.
+Added: The increase in selling, general and administrative expenses was primarily due to an increase in commission expenses resulting from higher product sales and an increase in travel and meeting expenses.
Provision for Litigation
2 unchanged sentences
Percentage of net sales
−Removed: The provision for litigation for the year ending December 31, 2021 includes accruals for potential legal settlements.
+Added: The provision for litigation includes accruals for potential legal settlements for the year ending December 31, 2022 and 2021.
Amortization of Intangibles
2 unchanged sentences
Percentage of net sales
−Removed: The increase in the amortization of intangibles is primarily due to the developed technology intangible asset acquired in connection with the Nemaris acquisition and the intangible assets acquired in the fourth quarter of fiscal 2020 .
+Added: The decrease in the amortization of intangibles is primarily due to individual intangible assets reaching their full amortization .
Acquisition Related Costs
2 unchanged sentences
Percentage of net sales
−Removed: Acquisition related costs increased due to changes in fair value of business acquisition liabilities, driven by changes in market conditions and the achievement of certain performance conditions .
+Added: Acquisition related costs decreased due to lower unfavorable changes in fair value of business acquisition liabilities, driven by changes in market conditions and the achievement of certain performance conditions .
Other Income/(expense), Net
(In thousands, except percentages)
−Removed: Other income/(expense), net
+Added: Other income, net
Percentage of net sales
−Removed: The decrease in other income, net was due primarily to lower interest income from lower yields on marketable securities during the year ended December 31, 2021.
+Added: The increase in other income, net was due primarily to higher interest income from higher yields on marketable securities from external market factors and a non-recurring recovery related to damaged product during the year ended December 31, 2022.
Income Tax Provision
2 unchanged sentences
Effective income tax rate
−Removed: The decrease in the effective income tax rate was primarily the result of the non-deductible expense of acquired IPR&D in the prior year, partially offset by the lower effect of stock option exercises on higher pretax income in the current year.
+Added: The increase in the effective income tax rate was primarily the result of the lower effect of windfall tax benefits from stock-based compensation compared to the prior year.
A discussion of our Results of Operations for the year ended December 31, 2021 can be found in “ Part II, Item 7.
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In August 2020, we entered into a credit agreement with Citizens Bank, N.A.
−Removed: (the “Credit Agreement”) that provides a revolving credit facility permitting borrowings up to $125.0 million (the “Revolving Credit Facility”).
−Removed: As amended, the Credit Agreement has a termination date of August 3, 2022.
+Added: (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 2, 2023.
The Revolving Credit Facility includes up to a $25.0 million sub limit for letters of credit.
−Removed: As of December 31, 2021, we have not borrowed under the Credit Agreement.
+Added: As of December 31, 2022, we have not borrowed under the Revolving Credit Facility.
The following table summarizes our outstanding contractual obligations as of December 31, 2022.
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Effect of foreign exchange rate changes on cash
−Removed: Increase (decrease) in cash, cash equivalents, and restricted cash
+Added: Increase (decrease) in cash and cash equivalents
Cash Provided by Operating Activities
−Removed: The increase in net cash provided by operating activities for the year ended December 31, 2021 was primarily due to the increase of cash flow from net income and reduced outflows for inventories and liabilities.
−Removed: These were partially offset by an unfavorable change in accounts receivable as a result of increased sales.
+Added: The net cash provided by operating activities for the year ended December 31, 2022 was primarily cash flow from net income, partially offset by outflows for inventories and unfavorable changes in accounts receivable.
Cash Used in Investing Activities
−Removed: The increase in net cash used in investing activities for the year ended December 31, 2021 was due primarily to the net outflows of purchases, maturities and sales of marketable securities, which was partially offset by a decrease in purchases of property and equipment.
+Added: The cash used in investing activities for the year ended December 31, 2022 was primarily from purchases of property and equipment and the acquisition of businesses, net of cash acquired and purchases of intangible and other assets.
Cash Provided by Financing Activities
−Removed: The increase in net cash provided by financing activities for year ended December 31, 2021 was primarily the result of the cash used for the repurchase of common stock in the year ended December 31, 2020, partially offset by a decrease in proceeds from option exercises.
+Added: The net cash used in financing activities for the year ended December 31, 2022 was primarily the result of the repurchase of Class A common stock, partially offset by inflows from proceeds from exercise of stock options.
A discussion of our Cash Flows for the year ended December 31, 2021 can be found in “ Part II, Item 7.
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” on our Form 10-K filed on February 17, 2022 .
−Removed: Related-Party Transactions
−Removed: We do not have any related-party transactions.
Recently Issued Accounting Pronouncements
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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.