What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-03 compared with 2023-05-04 · 113 added, 52 removed, 157 unchanged (51% of the section changed)

19 unchanged sentences

On May 3, 2023, the Company and NuVasive each received a request for additional information and documentary materials (the “Second Request”) from the FTC in connection with the FTC’s review of the Merger.

The effect of the Second Request is to extend the waiting period imposed by the HSR Act until 30 days after the Company and NuVasive have substantially complied with the Second Request, unless that period is extended voluntarily by the parties or terminated sooner by the FTC.

Both parties intend to continue to work cooperatively with the FTC in its review.

The effect of the Second Request is to extend the waiting period imposed by the HSR Act, unless that period is extended voluntarily by the parties or terminated sooner by the FTC.

Both parties are continuing to work cooperatively with the FTC in its review.

Completion of the Merger remains subject to the expiration or termination of the waiting period under the HSR Act and the satisfaction or waiver of the other closing conditions specified in the Merger Agreement.

For more information about the Merger, please refer to our Current Reports on Form 8-K filed on February 9, 2023, April 3, 2023, April 17, 2023, April 28, 2023 and May 3, 2023.

COVID-19 Update

We continue to monitor the 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.

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

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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 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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Instead, our goal is to offer a comprehensive product suite that can be used to safely and effectively treat patients based on their specific anatomy and condition, and is customized to the surgeon’s training and surgical preference.

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Musculoskeletal Solutions

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

During the three months ended March 31, 2023, international net sales accounted for approximately 15.4% of our total net sales.

During the six months ended June 30, 2023, international net sales accounted for approximately 15.6% of our total net sales.

We have sold our products in approximately 51 countries other than the United States through a combination of sales representatives employed by us and exclusive international distributors.

1 unchanged sentence

Our business is generally not seasonal in nature.

However, sales of our Musculoskeletal Solutions products may be influenced by summer vacation and winter holiday periods during which we have experienced fewer surgeries

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taking place, as well as more surgeries taking place later in the year when patients have met the deductibles under insurance plans.

However, sales of our Musculoskeletal Solutions products may be influenced by summer vacation and winter holiday periods during which we have experienced fewer surgeries taking place, as well as more surgeries taking place later in the year when patients have met the deductibles under insurance plans.

Sales of our Enabling Technologies products may be influenced by longer capital purchase cycles and the timing of budget approvals for major capital purchases.

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There have been no material changes to the critical accounting policies and estimates as previously disclosed in Part II, Item 7 of our Annual Report on Form 10-K for the year-ended December 31, 2022 .

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Results of Operations

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

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:

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Total net sales

In the United States, the increase in net sales of $37.7 million for the three month period ended March 31, 2023 was due primarily to increased spine product sales, including robotic instruments, resulting from penetration in existing territories and an increase in sales volume of enabling technologies.

International net sales increased by $8.4 million for the three month period ended March 31, 2023 due to increased spine product sales resulting from penetration in existing territories.

In the United States, the increase in net sales of $20.2 million for the three month period ended June 30, 2023 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 $7.8 million for the three month period ended June 30, 2023 due to increased spine product sales resulting from penetration in existing territories.

Cost of Goods Sold

3 unchanged sentences

Percentage of net sales

The $11.7 million increase in cost of goods sold was primarily due to increased volume and product mix .

The $8.0 million increase in cost of goods sold was due primarily to increased volume, product mix, and higher depreciation.

These increases were partially offset by lower write-downs of excess and obsolete inventory and lower production variances .

Research and Development Expenses

3 unchanged sentences

Percentage of net sales

The $3.7 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.

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The $4.0 million increase in research and development expenses was due primarily to an increase in personnel related expenses due to our continued investment in product development.

Selling, General and Administrative Expenses

3 unchanged sentences

Percentage of net sales

The increase in selling, general and administrative expenses was due to an increase in personnel related expenses resulting primarily from higher product sales, and an increase in travel and meeting expenses.

Provision for Litigation

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Provision for Litigation, net

Three Months Ended

(In thousands, except percentages)

Provision for litigation

Provision for litigation, net

Percentage of net sales

The provision for litigation for the three month period ended March 31, 2022 includes an accrual for a potential legal settlement.

The provision for litigation, net for the three month period ended June 30, 2023 includes a receipt of a legal settlement.

Amortization of Intangibles

3 unchanged sentences

Percentage of net sales

Amortization of intangibles remained consistent for the three month period ended March 31, 2023 compared to the three month period ended March 31, 2022.

Amortization of intangibles remained consistent for the three month period ended June 30, 2023 compared to the three month period ended June 30, 2022.

Acquisition Related Costs

3 unchanged sentences

Percentage of net sales

The increase in acquisition related costs is due to costs incurred related to the Merger Agreement with NuVasive, including payments for regulatory filings and share registration costs, which were partially offset by favorable changes in fair value of business acquisition liabilities, driven by changes in market conditions and the achievement of certain performance conditions.

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The increase in acquisition related costs is due to costs incurred related to unfavorable changes in fair value of business acquisition liabilities, driven by changes in market conditions and the achievement of certain performance conditions.

The current period also includes costs incurred related to the Merger Agreement with NuVasive.

Other Income/(expense), Net

3 unchanged sentences

Percentage of net sales

The increase in other income, net was due primarily to higher interest income from higher yields on marketable securities from external market factors.

The increase in other income, net is due primarily to higher interest income from higher yields on marketable securities from external market factors.

Income Tax Provision

3 unchanged sentences

Effective income tax rate

The effective income tax rate remained consistent for the three months ended March 31, 2023 compared to the three month period ended March 31, 2022.

A discussion of our Results of Operations for the three months ended March 31, 2022 can be found in “ Part I, Item 2.

The effective income tax rate remained consistent for the three months ended June 30, 2023 compared to the three month period ended June 30, 2022.

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A discussion of our Results of Operations for the three months ended June 30, 2022 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, 2022 Compared to the Three Months Ended March 31, 2021.

” on our Form 10-Q filed on May 10, 2022 .

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

” on our Form 10-Q filed on August 4, 2022 .

Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

Six Months Ended

(In thousands, except percentages)

United States

International

Total net sales

In the United States, the increase in net sales of $57.9 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 $16.2 million, which was due primarily to increased spine product sales, including robotic spine instruments, resulting from penetration in existing territories.

Cost of Goods Sold

Six Months Ended

(In thousands, except percentages)

Cost of goods sold

Percentage of net sales

The $19.7 million increase in cost of goods sold was due primarily to increased volume and product mix, as well as higher depreciation and field service costs.

These increases were partially offset by lower write-downs of excess and obsolete inventory and lower production variances .

Research and Development Expenses

Six Months Ended

(In thousands, except percentages)

Research and development

Percentage of net sales

The $7.6 million increase in research and development expenses was due primarily to an increase in personnel related expenses due to our continued investment in product development.

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Selling, General and Administrative Expenses

Six Months Ended

(In thousands, except percentages)

Selling, general and administrative

Percentage of net sales

Provision for Litigation, net

Six Months Ended

(In thousands, except percentages)

Provision for litigation, net

Percentage of net sales

The provision for litigation, net for the six month period ended June 30, 2023 includes a receipt of a settlement.

For the period ended June 30, 2022, the provision includes an accrual for a legal settlement.

Amortization of Intangibles

Six Months Ended

(In thousands, except percentages)

Amortization of intangibles

Percentage of net sales

Amortization of intangibles remained consistent for the six month period ended June 30, 2023 compared to the six month period ended June 30, 2022.

Acquisition Related Costs

Six Months Ended

(In thousands, except percentages)

Acquisition related costs

Percentage of net sales

The current period also includes costs incurred related to the Merger Agreement with NuVasive.

Other Income/(expense), Net

Six Months Ended

(In thousands, except percentages)

Other income, net

Percentage of net sales

The increase in other income, net is due primarily to higher interest income from higher yields on marketable securities from external market factors.

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Income Tax Provision

Six Months Ended

(In thousands, except percentages)

Income tax provision

Effective income tax rate

The effective income tax rate remained consistent for the six months ended June 30, 2023 compared to the six month period ended June 30, 2022.

A discussion of our Results of Operations for the six months ended June 30, 2022 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, 2022 Compared to the Six Months Ended June 30, 2021 .

” on our Form 10-Q filed on August 4, 2022 .

Liquidity and Capital Resources

7 unchanged sentences

There is no assurance that we will be able to secure such additional funding on terms acceptable to us, or at all.

In August 2020, we entered into the Credit Agreement with Citizens Bank, N.A.

which provides a Revolving Credit Facility permitting borrowings up to $125.0 million.

As amended, the Credit Agreement 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.

As of March 31, 2023, we have not borrowed under the Credit Agreement.

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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 month period ended March 31, 2023 was primarily cash flow from net income and favorable changes in income tax and accounts payable, partially offset by outflows for inventories and unfavorable changes in accounts receivable and accrued expenses and other liabilities.

The net cash provided by operating activities for the six month period ended June 30, 2023 was primarily cash flow from net income and favorable changes in accrued expenses and other liabilities and income taxes payable.

These changes were partially offset by unfavorable changes in accounts payable and outflows for inventories.

Cash Used in Investing Activities

The cash provided by investing activities for the three month period ended March 31, 2023 was primarily from net inflows of purchases, maturities and sales of marketable securities, partially offset by purchases of property and equipment and the acquisition of businesses, net of cash acquired and purchases of intangible and other assets.

The cash provided by investing activities for the six month period ended June 30, 2023 was primarily from net inflows of purchases, maturities and sales of marketable securities and lower purchases of property and equipment.

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Cash Used in Financing Activities

The net cash provided by financing activities for the three month period ended March 31, 2023 was primarily the result of the proceeds from exercise of stock options, partially offset by payment of business acquisition liabilities.

A discussion of our Cash Flows for the three months ended March 31, 2022 can be found in “ Part I, Item 2.

The net cash provided by financing activities for the six month period ended June 30, 2023 was primarily the result of no repurchases of common stock in the six months ended June 30, 2023 as compared to the six month period ended June 30, 2022, partially offset by lower proceeds from exercise of stock options.

A discussion of our Cash Flows for the three and six months ended June 30, 2022 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 10, 2022 .

” on our Form 10-Q filed on August 4, 2022 .

Contractual Obligations and Commitments

There have been no material changes to our contractual obligations during the three months ended March 31, 2023.

There have been no material changes to our contractual obligations during the three and six months ended June 30, 2023.

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

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(k) Recently Issued Accounting Pronouncements” above.

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Cautionary Note Concerning Forward-Looking Statements

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the effect of the announcement of the transaction on the ability of Globus or NuVasive to retain and hire key personnel and maintain relationships with customers, suppliers and others with whom Globus or NuVasive does business, or on Globus’ or NuVasive’s operating results and business generally;

health epidemics, pandemics and similar outbreaks, including the COVID-19 pandemic, factors affecting our quarterly results, our ability to manage our growth, our ability to sustain our profitability, demand for our products, our ability to compete successfully (including without limitation our ability to convince surgeons to use our products and our ability to attract and retain sales and other personnel), our ability to rapidly develop and introduce new products, our ability to develop and execute on successful business strategies, our ability to comply with changes and applicable laws and regulations that are applicable to our businesses, our ability to safeguard our intellectual property, our success in defending legal proceedings brought against us, trends in the medical device industry, and general economic conditions, and other risks set forth in this Quarterly Report on Form 10-Q and throughout our Annual Report on Form 10-K for the year ended December 31, 2022 , particularly those set forth under “Item 1.

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ability to comply with changes and applicable laws and regulations that are applicable to our businesses, our ability to safeguard our intellectual property, our success in defending legal proceedings brought against us, trends in the medical device industry, and general economic conditions, and other risks set forth in this Quarterly Report on Form 10-Q and throughout our Annual Report on Form 10-K for the year ended December 31, 2022 , particularly those set forth under “Item 1.

Business,” “Item 1A.

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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.

What changed 10-Q

Item 2. Management’s Discussion and Analysis