What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-21 compared with 2023-02-21 · 548 added, 310 removed, 679 unchanged (56% of the section changed)

12 unchanged sentences

We have audited the accompanying consolidated balance sheets of Globus Medical, Inc.

and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and the schedule listed in the Index at Item 15(a)(2) (collectively referred to as the "financial statements").

and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and the schedule listed in the Index at Item 15(a)(2) (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 21, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 20, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Inventories Valuation – Refer to Notes 2 and 7 to the financial statements

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• We tested the mathematical accuracy of management’s calculations.

Business Combinations – NuVasive Merger — Refer to Notes 1 and 3 to the financial statements

Critical Audit Matter Description

On September 1, 2023, the Company completed its merger with NuVasive, Inc.

with NuVasive, Inc.

surviving as a wholly owned subsidiary of the Company, for total consideration of approximately $2.604 billion.

Management accounted for the acquisition as a business combination using the acquisition method of accounting.

The most significant items recorded included intangible assets of $899.0 million, inventories of $558.0 million, senior convertible notes of $409.5 million, and resulting goodwill of $1,234 million.

Management utilized third-party valuation specialists to assist in the determination of the fair value of the assets acquired.

The methods used to estimate the fair value involved significant assumption.

The principal considerations for our determination that performing procedures relating to the accounting for this transition is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of the assets acquired;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management's fair value estimates of the assets acquired;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the NuVasive Merger included the following, among others:

• We read the agreement and plan of merger.

• We tested the effectiveness of controls relating to the purchase price allocation, including controls over management’s valuation of the assets acquired and liabilities acquired.

• We evaluated the appropriateness of the valuation methods and completeness and accuracy of significant inputs for fair value measurements used to develop estimates of assets and liabilities acquired.

• We tested the accuracy of the purchase price allocation and goodwill recorded.

• We utilized professionals with specialized skill and knowledge to assist in evaluating the appropriateness of the valuation methods and the reasonableness of the significant inputs for fair value measurements.

/s/ DELOITTE & TOUCHE LLP

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We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated February 20, 2024, expressed an unqualified opinion on those financial statements.

As described in Management’s Annual Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at NuVasive, Inc., which was acquired on September 1, 2023 and whose financial statements constitute 26% of total assets and 26% of revenues of the consolidated financial statement amounts as of and for the year ended December 31, 2023.

Accordingly, our audit did not include the internal control over financial reporting at NuVasive, Inc.

Basis for Opinion

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Property and equipment, net of accumulated depreciation of $ 425,695 and $ 343,036 , respectively

Operating lease right of use assets

Long-term marketable securities

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Accrued expenses

Operating lease liabilities

Income taxes payable

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Deferred revenue

Payable to broker

Total current liabilities

Business acquisition liabilities, net of current portion

Deferred income taxes

Operating lease liabilities

Senior convertible notes

Deferred income taxes and other tax liabilities

Other liabilities

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(In thousands, except per share amounts)

Cost of goods sold

Cost of sales

Operating expenses:

1 unchanged sentence

Selling, general and administrative

Provision for litigation

Provision for litigation, net

Amortization of intangibles

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Stock-based compensation

Grant of restricted stock units

Exercise of stock options

Comprehensive income/(loss)

Balance at March 31, 2022

Stock-based compensation

Grant of restricted stock units

Grant of contingent restricted stock units

Exercise of stock options

Issuance of Class A common stock under employee and director equity option plans, net

Issuance of equity for NuVasive Merger

Comprehensive income/(loss)

Repurchase and retirement of common stock

Balance at June 30, 2022

Stock-based compensation

Grant of restricted stock units

Exercise of stock options

Comprehensive income/(loss)

Balance at September 30, 2022

Stock-based compensation

Grant of restricted stock units

Exercise of stock options

Comprehensive income/(loss)

Balance at December 31, 2023

8 unchanged sentences

Stock-based compensation

Grant of restricted stock units

Exercise of stock options

Comprehensive income/(loss)

Balance at March 31, 2021

Stock-based compensation

Grant of restricted stock units

Exercise of stock options

Comprehensive income/(loss)

Balance at June 30, 2021

Stock-based compensation

Grant of restricted stock units

Exercise of stock options

Comprehensive income/(loss)

Balance at September 30, 2021

Stock-based compensation

Grant of restricted stock units

Grant of contingent restricted stock units

Exercise of stock options

Comprehensive income/(loss)

Repurchase and retirement of common stock

Balance at December 31, 2022

See accompanying notes to consolidated financial statements.

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY (Continued)

‎ Common Stock

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Balance at December 31, 2020

Cumulative effects of adoption of accounting standards

Stock-based compensation

Exercise of stock options

Comprehensive income/(loss)

Repurchase and retirement of common stock

Balance at March 31, 2020

Stock-based compensation

Exercise of stock options

Comprehensive income/(loss)

Repurchase and retirement of common stock

Balance at June 30, 2020

Stock-based compensation

Exercise of stock options

Comprehensive income/(loss)

Balance at September 30, 2020

Stock-based compensation

Grant of restricted stock units

Grant of contingent restricted stock units

Exercise of stock options

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Depreciation and amortization

Amortization of premium (discount) on marketable securities

Write-down for excess and obsolete inventories, net

Amortization of premiums on marketable securities

Provision for excess and obsolete inventory

Amortization of inventory fair value step up

Amortization of 2025 Note fair value step up

Stock-based compensation expense

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Payment of business acquisition related liabilities

Net (gain)/loss from foreign currency adjustment

(Increase) decrease in:

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Cash flows from financing activities:

Payment of business acquisition liabilities

Proceeds from exercise of stock options

Payment of business acquisition-related liabilities

Net proceeds from exercise of stock options

Payments related to tax withholdings for share-based compensation

Repurchase of common stock

5 unchanged sentences

Supplemental disclosures of cash flow information:

Income taxes paid

Purchases of property and equipment included in accounts payable and accrued expenses

Income taxes paid, net

Non-cash investing and financing activities:

Equity issued in conjunction with the NuVasive Merger

Accrued purchases of property and equipment

See accompanying notes to consolidated financial statements.

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(a) The Company

Globus Medical, Inc., together with its subsidiaries, is a medical device company that develops and commercializes healthcare solutions with a mission to improve the quality of life of patients with musculoskeletal disorders.

Globus Medical, Inc., together with its majority-owned or controlled subsidiaries , is a medical device company that develops and commercializes healthcare solutions with a mission to improve the quality of life of patients with musculoskeletal disorders.

We are primarily focused on implants that promote healing in patients with musculoskeletal disorders, including the use of a robotic guidance and navigation system and products to treat patients who have experienced orthopedic traumas.

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

With numerous products launched since the founding of the Company, including 10 products launched in 2023, 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 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, where applicable, our consolidated subsidiaries.

(b) COVID-19 Pandemic Impact

In March 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide.

COVID-19 has significantly impacted the economic conditions in the U.S.

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 2023 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.

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

(b) NuVasive Merger

On September 1, 2023, pursuant to that certain merger agreement (the “Merger Agreement”) with NuVasive, Inc.

(“NuVasive”) and Zebra Merger Sub, Inc.

(“Merger Sub”), Merger Sub, a wholly owned subsidiary of the Company, merged with and into NuVasive, with NuVasive surviving as a wholly owned subsidiary of the Company (the “Merger”).

Under the Merger Agreement, each share of common stock, par value $ 0.001 per share, of NuVasive issued and outstanding immediately prior to the effective time of the Merger (other than certain excluded shares as described in the Merger Agreement) was cancelled and converted into the right to receive 0.75 fully paid and non-assessable shares of Class A common stock of Globus, $ 0.001 par value per share, and the right to receive cash in lieu of fractional shares.

Globus was deemed to be the accounting acquirer of NuVasive for accounting purposes under U.S.

generally accepted accounting principles (“U.S.

Accordingly, prior periods within these consolidated financial statements may not be comparable.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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The accompanying consolidated financial statements have been prepared in conformity with U.S.

generally accepted accounting principles (“U.S.

(b) Principles of Consolidation

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

(b) Prior Period Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

“Operating lease right of use assets” were reclassified out of “Other assets”, and “Operating lease liabilities” were reclassified out of “Accrued expenses” and “Other liabilities”, respectively, depending on the short-term and long-term nature, on our consolidated balance sheets.

The accompanying consolidated financial statements include the accounts of Globus and its majority-owned or controlled subsidiaries .

All intercompany balances and transactions are eliminated in consolidation.

Variable Interest Entities

We provide intraoperative neuromonitoring (“IONM”) services through various majority owned or controlled subsidiaries, which collectively conduct business as NuVasive Clinical Services.

In providing IONM services to surgeons and healthcare facilities across the U.S., the Company maintains contractual relationships with several physician practices (“PCs”).

In accordance with authoritative guidance, the Company has determined that the PCs are variable interest entities and therefore, the accompanying consolidated financial statements include the accounts of the PCs from the date of acquisition.

During the periods presented, the results of the PCs were immaterial to the Company’s

GLOBUS MEDICAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

financial statements.

The creditors of the PCs have claims only to the assets of the PCs, which are not material, and the assets of the PCs are not available to the Company.

(d) Use of Estimates

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

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Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.

Significant areas that require estimates include revenue recognition, intangible assets, business acquisition liabilities, allowance for doubtful accounts, stock-based compensation, reserves for excess and obsolete inventory, useful lives of assets, the outcome of litigation,

GLOBUS MEDICAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

recoverability of intangible assets and income taxes.

We are subject to risks and uncertainties due to changes in the healthcare environment, regulatory oversight, competition, and legislation that may cause actual results to differ from estimated results.

(d) Revenue Recognition

(e) Revenue Recognition

In accordance with Accounting Standards Codification 606 Revenue from Contracts with Customers, (“ASC 606”), the Company recognizes revenue upon the transfer of goods or services to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services.

The principles in ASC 606 are applied using the following five steps:

(i) identify the contract with a customer;

(ii) identify the performance obligation(s) in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligation(s) in the contract;

and (v) recognize revenue when (or as) the Company satisfies its performance obligation(s).

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.

1 unchanged sentence

For purposes of disclosure, we disaggregate our revenue into two categories, Musculoskeletal Solutions and Enabling Technologies.

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.

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

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

For our IONM services, revenue is recognized in the period the service is performed, which can be either point in time or over time, depending how the performance obligation is defined for the amount of consideration expected to be received.

Our policy is to classify shipping and handling costs billed to customers as sales and the related expenses as cost of sales.

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 .

Our policy is to classify shipping and handling costs billed to customers as sales and the related expenses as cost of goods sold.

Nature of Products and Services

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Revenue from the sale of consigned musculoskeletal products is recognized when we transfer control, which occurs at the time the product is used or implanted.

For all other Musculoskeletal Solutions product transactions, we recognize revenue when we transfer title to the goods, provided there are no remaining performance obligations that can affect the customer’s final acceptance of the sale.

Revenue from the sale of Enabling Technologies products is generally recognized when control transfers to the customer which occurs at the time the product is shipped or delivered.

Any revenue related to the provision of maintenance and support is recognized as we satisfy the performance obligation.

We use an observable price to determine the stand-alone selling price for each separate performance obligation.

For all other Musculoskeletal Solutions product transactions, we recognize revenue when we transfer control, which is generally when we transfer the title to the goods, provided there are no remaining performance obligations that can affect the customer’s final acceptance of the sale.

For Musculoskeletal Solutions service transactions, we recognize revenue in the period the service is performed for the amount of consideration expected to be received.

In certain cases, we offer the ability for customers to lease surgical instrumentation primarily on a non-sales type basis.

The majority of 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 an observable price to determine the standalone selling price of each distinct good or service in the contract.

Revenue for the performance obligations recognized at a point of time is recognized when we transfer control to the customer, which is generally at the point of shipment, but can also be at either delivery or installation, depending on the terms of the arrangement .

GLOBUS MEDICAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contract Balances

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For the years ended December 31, 2023, 2022, and 2021, there was an immaterial amount of revenue recognized from previously deferred revenue.

(e) Concentrations of Credit Risk

(f) Concentrations of Credit Risk

Financial instruments, which potentially subject us to concentrations of credit risk, are primarily marketable securities and accounts receivable.

2 unchanged sentences

There was no customer that accounted for 10% or more of sales for the years ended December 31, 2023, 2022, and 2021 , respectively.

(f) Cash, Cash Equivalents, and Restricted Cash

(g) 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.

Cash equivalents, which consist of money market accounts, commercial paper and corporate debt securities are stated at fair value.

(g) Marketable Securities

(h) 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, and are classified as available-for-sale as of December 31, 2023 and 2022.

GLOBUS MEDICAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

(h) Fair Value Measurements

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

(i) Fair Value Measurements

Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or the liability in an orderly transaction between market participants on the measurement date.

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Level 3—unobservable inputs in which there is little or no market data available, which require the reporting entity to use significant unobservable inputs or valuation techniques.

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

The purchase price of business acquisitions is primarily allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date, with the excess recorded as goodwill.

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

GLOBUS MEDICAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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The fair value of contingent consideration is recorded in business acquisition liabilities on our consolidated balance sheets, and changes in the fair value of contingent consideration is recognized in acquisition-related costs in the 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.

(i) Inventories

The fair value of contingent restricted stock unit grants (“RSUs”) 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.

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

(j) Inventories

Inventories are stated at the lower of cost or net realizable value.

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Once inventory has been written down, it creates a new cost basis for inventory that is not subsequently written up.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(j) Property and Equipment

(k) Property and Equipment

Property and equipment is recorded at cost less accumulated depreciation.

2 unchanged sentences

When assets are sold or otherwise disposed of, the related property, equipment, and accumulated depreciation amounts are relieved from the accounts, and any gain or loss is recorded in the consolidated statements of operations and comprehensive income.

(k) Goodwill and Intangible Assets

(l) Goodwill and Intangible Assets

Goodwill represents the excess of purchase price over the fair values of the identifiable assets acquired less the liabilities assumed in the acquisition of a business.

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.

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

Goodwill is tested for impairment at least annually or whenever events or circumstances indicate that a carrying amount may be impaired.

We perform our goodwill impairment analysis at the reporting unit level.

We perform our annual impairment analysis by either comparing a reporting unit’s estimated fair value to its carrying amount or doing a qualitative assessment of a reporting unit’s fair value from the last quantitative assessment to determine if there is potential impairment.

We may do a qualitative assessment when the results of the previous quantitative test indicated the reporting unit’s estimated fair value was significantly in excess of the carrying value of its net assets and we do not believe there have been significant changes in the reporting unit’s operations that would significantly decrease its estimated fair value or significantly increase its net assets.

If a quantitative assessment is performed, the evaluation includes management estimates of discounted cash flow projections based on internal future projections and/or use of a market approach by looking at market values of comparable companies.

We perform our annual impairment test of goodwill in the fourth quarter of each year.

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 years ended December 31, 2022, 2021, and 2020 , we did no t record any impairment charges related to goodwill.

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

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 with finite useful lives are tested 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) more likely than not is not 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 years ended December 31, 2022, 2021, and 2020 .

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

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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 years ended December 31, 2022, 2021, and 2020 .

(l) Impairment of Long-Lived Assets

During the twelve months ended December 31, 2023, there were no impairments in goodwill, finite-lived intangible assets, or IPR&D.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(m) Impairment of Long-Lived Assets

We periodically evaluate the recoverability of the carrying amount of long-lived assets, which include property and equipment, as well as whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be fully recoverable.

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During the years ended December 31, 2023, 2022, and 2021 , we did no t record any impairment charges related to long-lived assets.

(m) Cost of Goods Sold

Cost of goods sold consists primarily of costs from our manufacturing operations, costs of products purchased from third-party suppliers, reserves for excess and obsolete inventory, depreciation of surgical instruments and cases, royalties, shipping, inspection and related costs incurred in making our products available for sale or use.

(n) Research and Development

(n) Cost of Sales

Cost of sales consists primarily of costs from our manufacturing operations, costs of products purchased from third-party suppliers, reserves for excess and obsolete inventory, depreciation of surgical instruments and cases, royalties, shipping, inspection and related costs incurred in making our products available for sale or use.

(o) Research and Development

Research and development costs are expensed as incurred.

1 unchanged sentence

Costs incurred in obtaining technology licenses and patents are charged immediately to research and development expense if the technology licensed has not reached technological feasibility and has no alternative future use.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(o) Stock -Based Compensation

(p) Stock -Based Compensation

The cost of employee and non-employee director awards is measured at the grant date fair value of the award and is recognized as expense over the requisite service period, which is generally the vesting period of the equity award.

Expense for performance-based restricted stock units is recognized when the performance condition is deemed to be probable.

Compensation expense for awards includes the impact of forfeiture in the period when they occur.

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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 on the day of grant based on the closing price of the Company’s common stock.

(p) Provision for Litigation

The respective fair values of restricted stock units and performance restricted stock units are estimated on the day of grant based on the closing price of the Company’s common stock.

We assumed equity-classified awards for certain NuVasive RSUs, and performance restricted stock units (“PRSUs”), as part of the Merger.

These RSUs and PRSUs are measured at the grant date based on the estimated fair value of the award.

The fair value of equity instruments that are expected to vest is recognized and amortized over the requisite service period.

The Company has granted awards with up to five year graded or cliff vesting terms (in each case, with service through the date of vesting being required).

No exercise price or other monetary payment is required for receipt of the shares issued in settlement of the respective award;

instead, consideration is furnished in the form of the participant’s service to the Company.

The fair value of RSUs including PRSUs with pre-defined performance criteria is based on the stock price on the date of grant whereas the expense for PRSUs with pre-defined performance criteria is adjusted with the probability of achievement of such performance criteria at each period end.

(q) Derivative Financial Instruments

The Company recognizes all derivative instruments as assets or liabilities in its Consolidated Balance Sheets and measures these instruments at fair value by revaluing these assets and liabilities at the end of each reporting period.

Gains and losses are recorded as a component of other expense, net in the consolidated statements of operations and comprehensive income.

The effects of these derivative instruments are immaterial to the Company’s financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(r) Other Comprehensive Income (Loss)

Other comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources.

Other comprehensive income (loss) includes net of tax, unrealized gains or losses on the Company’s marketable debt securities and foreign currency translation adjustments.

(s) Provision for Litigation

We are involved in a number of proceedings, legal actions, and claims.

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We expense legal costs related to loss contingencies as incurred.

(q) Acquisition Related Costs

Acquisition related costs represents the change in fair value of business acquisition related contingent consideration;

costs related to integrating recently acquired businesses including but not limited to costs to exit or convert contractual obligations, severance, and information system conversion;

and specific costs related to the consummation of the acquisition process such as banker fees, legal fees, and other acquisition related professional fees.

(r ) Foreign Currency Translation

(t) Acquisition-Related Costs

Acquisition-related costs represents the change in fair value of business acquisition-related contingent consideration and specific costs related to the consummation of the acquisition process such as banker fees, legal fees and other acquisition-related professional fees.

(u ) Foreign Currency Translation

The functional currency of our foreign subsidiaries is generally their local currency.

Assets and liabilities of the foreign subsidiaries are translated at the period end currency exchange rate and revenues and expenses are translated at an average currency exchange rate for the period.

Assets and liabilities of the foreign subsidiaries, and intercompany receivables and payables of a long-term investment nature, are translated at the period end currency exchange rate and revenues and expenses are translated at an average currency exchange rate for the period.

The resulting foreign currency translation gains and losses are included as a component of accumulated other comprehensive income.

Gains and losses arising from intercompany foreign transactions are included in other income, net on the consolidated statements of operations and comprehensive income.

(s) Income Taxes

(v) Accounts Receivable and Related Valuation Accounts

Accounts receivable in the accompanying consolidated balance sheets are presented net of allowances for expected credit losses.

We maintain an allowance for expected credit losses resulting from the inability of its customers, including hospitals, ambulatory surgery centers, and distributors, to make required payments.

The allowance for credit losses is calculated quarterly and is estimated on a region-by-region basis considering a number of factors including age of account balances, collection history, historical account write-offs, third-party credit reports, identified trends, current economic conditions, and supportable forecasted economic expectations.

The allowance is adjusted on a specific identification basis for certain accounts as well as pooling of accounts with similar characteristics.

An increase in the provision for credit losses may be required when the financial condition of our customers or their collection experience deteriorates.

Our exposure to credit losses may also increase if its customers are adversely affected by changes in healthcare laws, coverage and reimbursement, macroeconomic pressures or uncertainty associated with local or global economic recessions, disruption associated with pandemics, or other customer-specific factors.

(w) Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(t) Recently Issued Accounting Pronouncements

None applicable.

(u) Recently Adopted Accounting Pronouncements

(x) Recently Issued Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (the “FASB”), issued Accounting Standards Update (“ASU”) No.

2023-09 , Income Taxes (Topic 740), Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures.

The enhancement will provide information to better assess how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows.

Investors currently rely on the rate reconciliation table and other disclosures, including total income taxes paid, to evaluate income tax risks and opportunities.

This update is effective for fiscal years beginning after December 15, 2024 and early adoption is permitted.

The amendments should be applied prospectively with retrospective applications also permitted.

The Company is currently evaluating the impact the standard will have on its consolidated financial statements and related disclosures.

In November 2023, the FASB, issued ASU No.

2023-07 , Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures , to improve reportable segment disclosure requirements.

The amendment introduced new requirementd to disclose significant segment expenses regularly provided to the chief operating decision maker (“CODM”), extend certain annual disclosures to interim periods, clarify single reportable segment entities must apply ASC 280 in its entirety, permit more than one measure of segment profit or loss to be reported under certain conditions, and require disclosure of the title and position of the CODM.

This update is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years after December 15, 2024, early adoption is permitted.

The amendments should be applied retrospectively.

The Company is currently evaluating the impact the standard will have on its consolidated financial statements and related disclosures.

In June 2022, the FASB issued ASU No.

2022-03 , Fair Value Measurement (Topic 820), Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions , which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value.

The ASU introduces new disclosure requirements to provide investors with information about contractual restrictions, including the nature and remaining duration of such restrictions.

This update is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted.

The amendments should be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption.

The Company is currently evaluating the impact the standard will have on its consolidated financial statements .

(y) Recently Adopted Accounting Pronouncements

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires an entity (acquirer) to recognize and measure contract assets and liabilities acquired in a business combination in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”).

This update is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted.

The amendments should be applied prospectively to business combinations occurring on or after the effective date of the amendments.

The Company adopted ASU No.

2021-08 as of January 1, 2023.

The adoption did not have a material impact on the Company’s consolidated financial statements.

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

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

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.

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

ASU 2016-13 replaces the incurred loss impairment methodology for measuring and recognizing credit losses with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

This amendment is effective for fiscal years beginning after December 15, 2019.

We adopted the updated guidance on January 1, 2020 on a prospective basis recording $ 0.5 million as a cumulative effect adjustment to retained earnings and as a result, prior period amounts were not adjusted.

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

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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

The Company determined the transaction was an asset acquisition, by an analysis of the screen test in accordance with ASU No.

2017-01 in which substantially all of the value was concentrated in a single identifiable asset or a group of similar identifiable assets.

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 contingent upon the achievement of certain performance obligations of up to $ 10.0 million.

The transaction also provides for additional consideration contingent upon the developed products obtaining approval from the FDA of up to $ 15.0 million, and additional consideration contingent upon the achievement of certain performance obligations of up to $ 10.0 million.

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 Company determined the transaction was an asset acquisition, by an analysis of the screen test in accordance with ASU No.

2017-01 in which substantially all of the value was concentrated in a single identifiable asset or a group of similar identifiable assets.

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

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

During the second quarter of 2020, the Company acquired 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.

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 FDA within the third anniversary, or $ 4.0 million 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 all of these transactions as asset acquisitions as 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.

GLOBUS MEDICAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Business Combinations

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The Company recorded identifiable net assets, based on their estimated fair values, for inventory of $ 3.0 million, goodwill of $ 14.2 million, customer relationships and other intangibles of $ 10.5 million with a weighted average useful life of 20 years, and developed technology of $ 2.4 million with a weighted average useful life of 8 years.

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

The Company has finalized the purchase price allocation of the assets and liabilities acquired.

During the second quarter of 2022, the Company completed one acquisition that was not considered material to the consolidated financial statements during the periods presented.

This acquisition has been included in the condensed consolidated financial statements from the date of acquisition.

This acquisition has been included in the consolidated financial statements from the date of acquisition.

The purchase price consisted of approximately $ 0.2 million of cash paid at closing and $ 4.4 million of contingent consideration payments, resulting in goodwill of $ 4.6 million based on the estimated fair values.

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The contingent payments for all three acquisitions are based upon achieving various performance obligations 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 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 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.

NuVasive Merger

On September 1, 2023, pursuant to that certain Merger Agreement with NuVasive and Merger Sub, Merger Sub, a wholly owned subsidiary of the Company, merged with and into NuVasive, with NuVasive surviving as a wholly owned subsidiary of the Company.

NuVasive has a comprehensive procedural portfolio including surgical access instruments, spinal implants, fixation systems, biologics, software for surgical planning, navigation and imaging solutions, magnetically adjustable implant systems for spine and orthopedics, and IONM technology and service offerings.

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As part of the Merger, the Company assumed equity awards for certain NuVasive RSUs and NuVasive PRSUs in accordance with the terms of the Merger Agreement.

Certain awards included a change in control provision (single trigger) which accelerated the vesting of the awards on the closing date of the Merger.

These awards were considered as part of the total purchase price.

The unvested awards will continue to vest in accordance with the terms of the original award agreement, except for certain PRSUs that were converted into RSUs.

Once vested, the holders will receive shares of the Company’s Class A common stock.

Of the total consideration for the assumed equity awards, $ 28.6 million was allocated to the purchase price and $ 42.3 million was deemed compensatory as it was attributable to post acquisition vesting.

Of the $ 42.3 million of total compensation related to the assumed awards, $ 12.9 million was expensed on the acquisition date due to accelerated vesting of the awards, recognized as Merger-related costs, and $ 29.4 million relates to future services and will be expensed over the remaining service periods of the unvested awards on a straight-line basis.

Of the $ 29.4 million related to future services, $ 4.9 million of expense was recognized for the year ended December 31, 2023.

Concurrently with the Merger, the Company repaid the outstanding $ 420.8 million under NuVasive’s revolving senior credit facility in addition to assuming the 0.375 % Senior Convertible Notes due 2025 (“2025 Notes”), the privately negotiated call options (“2025 Hedge”) and the privately negotiated warrants (“2025 Warrants”).

The aggregate consideration in connection with the closing of the Merger was as follows:

(In thousands)

NuVasive shares outstanding as of September 1, 2023

NuVasive accelerated equity awards

Globus exchange ratio

Globus Class A Common Stock issued in exchange for NuVasive shares

Globus closing share price

Total Value Class A Common Stock

2025 Warrants

Repayment of revolving credit facility

Fair value of assumed equity awards

Total purchase price

We accounted for the Merger using the acquisition method of accounting, which requires the NuVasive assets and liabilities to be recorded on our balance sheet at fair value as of the acquisition date.

We will complete a final determination of the fair value of certain assets and liabilities within the one-year measurement period from the date of the acquisition as required by FASB ASC Topic 805, “Business Combinations”.

The preliminary fair value estimates for the assets acquired and liabilities assumed were based upon preliminary calculations, valuations, and assumptions that are subject to change as the Company obtains additional information during the measurement period.

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands)

Preliminary Purchase Price Allocation as of September 30, 2023

Measurement Period and Other Adjustments

Purchase Price Allocation as of December 31, 2023 (as adjusted)

Current assets (excluding accounts receivable and inventories)

Accounts receivable

Property, plant, and equipment

Operating lease ROU asset

Intangible assets

Other long-term assets

Deferred income taxes

Current Liabilities

Operating lease liabilities, including current portion

Business acquisition liabilities, including current portion

Senior convertible notes

Deferred income taxes and other tax liabilities

Other liabilities

Total liabilities

Fair value of acquired identifiable assets and liabilities

Purchase price

Fair value of acquired identifiable assets and liabilities

( 1,679,681 )

( 1,369,362 )

The excess of the purchase price over the net tangible and intangible assets is recorded to Goodwill and primarily reflects the assembled workforce and expected synergies.

The majority of goodwill is non-deductible for tax purposes.

During the year ended December 31, 2023, total transaction costs incurred in connection with the Merger were $ 49.8 million.

These transaction costs were recognized as acquisition-related costs in the consolidated statements of operations and comprehensive income.

Details of our valuation methodology and significant inputs for fair value measurements are included below.

The fair value measurements for property, plant and equipment and intangible assets are based on significant inputs that are not observable in the market and, therefore, represent Level 3 measurements.

The preliminary fair value of work-in-process and finished goods inventory utilizes a sales comparison approach which estimates the selling price of the inventory in completed condition less costs of disposal and a reasonable profit allowance for the selling effort.

The preliminary fair value of property and equipment utilizes a combination of the cost approach, income approach, and sales comparison approach less amounts for capitalized research and development costs existing on NuVasive’s closing balance sheet.

The preliminary fair value of the identifiable intangible assets was determined using variations of the income approach, namely the multi-period excess earnings and relief from royalty methodologies.

The most significant assumptions applied in the development of the intangible asset fair values include:

the amount and timing of future cash flows, the selection of discount and royalty rates, and the assessment of the asset’s economic life.

The preliminary fair value of the operating lease ROU asset utilizes a market approach in determination of the measured asset.

The preliminary fair value of the operating lease liability utilizes a discounted cost approach in determination of the measured liability.

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The identifiable intangible assets acquired are amortized on a straight-line basis over their estimated useful lives.

The following table summarizes the estimated fair value of NuVasive’s identifiable intangible assets acquired and their remaining amortization period (in years):

Fair Value as of

(In thousands)

December 31, 2023

Developed Technology

Customer Relationships

Preliminary fair value of the 2025 Notes was determined using the publicly traded price.

NuVasive’s results have been included in the Company’s financial statements for the period subsequent to the date of the acquisition on September 1, 2023.

NuVasive contributed revenues of $ 414.9 million, for the period from September 1, 2023 to December 31, 2023.

Due to the continuing integration of NuVasive’s operations into the Company, it is impractical to determine NuVasive’s net income/loss during the period, which is included in the Company’s Net Income.

Supplemental Unaudited Pro Forma Information

The following are the supplemental consolidated financial results of Globus and NuVasive on an unaudited pro forma basis, as if the acquisitions had been consummated as of the beginning of fiscal year 2022.

(In thousands)

Pro forma net sales

Pro forma net income

The unaudited pro forma net income for the year ended December 31, 2023 was adjusted to exclude $ 111.4 million of acquisition-related costs incurred in 2023.

The unaudited pro forma net income for the year ended December 31, 2022, was adjusted to include the aforementioned charges.

The following table represents net sales by product category:

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Corporate debt securities

Commercial paper

Asset-backed securities

Government, federal agency, and other sovereign obligations

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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 December 31, 2023 and 2022, 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 December 31, 2022.

FAIR VALUE MEASUREMENTS

The following table represents the fair value of assets and liabilities, as of December 31, 2023 and 2022, respectively included the following:

GLOBUS MEDICAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FAIR VALUE MEASUREMENTS

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 and 2021, respectively included the following:

(In thousands)

‎ December 31,

Cash equivalents

1 unchanged sentence

Corporate debt securities

Commercial paper

Asset-backed securities

Government, federal agency, and other sovereign obligations

Senior Convertible Notes due 2025

Bifurcated Conversion Option of the Senior Convertible Notes due 2025

Business acquisition liabilities

(In thousands)

‎ December 31,

Cash equivalents

6 unchanged sentences

Our marketable securities are classified as Level 2 within the fair value hierarchy, as we measure their fair value using quoted market prices for similar instruments and inputs such as actual trade data, benchmark yields, broker/dealer quotes and other similar data obtained from quoted market prices or independent pricing vendors .

The bifurcated conversion option and 2025 Hedge are classified as Level 2 within the fair value hierarchy, based on implied equity volatility.

The estimated fair value of the 2025 Notes, inclusive of the embedded conversion option, at December 31, 2023 was $ 418.0 million.

The fair value was determined based on the quoted price of the 2025 Notes in an active market on the last trading day of the reporting period and has been classified as Level 1 within the fair value hierarchy.

GLOBUS MEDICAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

17 unchanged sentences

Ending balance

We translate the financial statements of our foreign subsidiaries with functional currencies other than the U.S.

dollar into the U.S.

dollar for consolidation using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations.

Some of our reporting entities conduct a portion of their business in currencies other than the entity’s functional currency.

These transactions give rise to receivables and payables that are denominated in currencies other than the entity’s functional currency.

The value of these receivables and payables is subject to changes in currency exchange rates from the point at which the transactions are originated until the settlement in cash.

Both realized and unrealized gains and losses in the value of these receivables and payables are included in the determination of net income or loss.

Net currency exchange gains/(losses), which include gains and losses from derivative instruments, were $ 14.1 million and ($ 1.0 ) million for the year ended December 31, 2023 and December 31, 2022, respectively, and are included in other expense, net in the Consolidated Statements of Operations and Comprehensive Income.

To manage foreign currency exposure risks, we may use derivatives for activities in entities that have short-term intercompany receivables and payables denominated in a currency other than the entity’s functional currency.

The fair value is based on a quoted market price (Level 1).

As of December 31, 2023, a notional principal amount of $ 10.0 million was outstanding to hedge currency risk relative to our foreign currency-denominated receivables and payables.

Derivative instrument net losses on our forward exchange contracts were $ 0.1 million as of December 31, 2023 and are included in other expense, net in the Consolidated Statements of Operations and Comprehensive Income.

The fair value of the forward exchange contract derivative instrument asset (liability) was di minimis as of December 31, 2023.

The derivative instruments are recorded in other current assets or other current liabilities in the Consolidated Balance Sheets commensurate with the nature of the instrument at period end.

Inventories as of December 31, 2023 and 2022, respectively included the following:

4 unchanged sentences

Total inventories

During years ended December 31, 2022, 2021, and 2020, net adjustments to cost of sales related to excess and obsolete inventory were $ 6.4 million, $ 6.1 million, and $ 17.7 million, respectively.

The net adjustments for the years ended December 31, 2022, 2021, and 2020 reflect a combination of additional expense for excess and obsolete related provisions ($ 18.5 million, $ 20.2 million, and $ 27.4 million, respectively) offset by sales and disposals ($ 12.1 million, $ 14.1 million, and $ 9.7 million, respectively) of inventory for which an excess and obsolete provision was previously recorded.

GLOBUS MEDICAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As part of the NuVasive Merger, a step-up in the value of inventory of $ 202.6 million was recorded, which was composed of $ 3.0 million for work in process and $ 199.6 million for finished goods.

The amortization of the inventory step-up recorded in product cost of sales was $ 71.7 million for the year ended December 31, 2023, respectively.

As of December 31, 2023, the total remaining balance of inventory step-up was $ 131.1 million.

During years ended December 31, 2023, 2022, and 2021, net adjustments to cost of sales related to excess and obsolete inventory were $ 10.9 million, $ 6.4 million, and $ 6.1 million, respectively.

The net adjustments for the years ended December 31, 2023, 2022, and 2021 reflect a combination of additional expense for excess and obsolete related provisions ($ 18.1 million, $ 18.5 million, and $ 20.2 million, respectively) offset by sales and disposals ($ 7.2 million, $ 12.1 million, and $ 14.1 million, respectively) of inventory for which an excess and obsolete provision was previously recorded.

PROPERTY AND EQUIPMENT

2 unchanged sentences

Buildings and improvements

Modules and cases

Instruments, modules, and cases

Other property and equipment

accumulated depreciation

accumulated depreciation and amortization

Instruments are hand-held devices used by surgeons to install implants during surgery.

12 unchanged sentences

December 31, 2023

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Intangible assets as of December 31, 2023 included the following:

6 unchanged sentences

Total intangible assets

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Intangible assets as of December 31, 2022 included the following:

16 unchanged sentences

Total accrued expenses

The carrying values of the Company’s 2025 Notes, acquired in the Merger, as of December 31, 2023, were as follows:

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands)

0.375% Senior Convertible Notes due 2025:

Unamortized fair value adjustment for acquisition accounting

0.375% Senior Convertible Notes due 2025

Embedded Conversion Option

Debt, net of unamortized fair value adjustments for acquisition accounting

Interest expense:

Contractual coupon interest

Amortization of fair value adjustments for acquisition accounting

Total interest expense recognized on Senior Convertible Notes due 2025

Effective interest rates:

Senior Convertible Notes due 2025

Line of Credit

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 (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.

Revolving loans under the Credit Agreement will bear interest, at the Company’s option, at either a base rate or the Daily Bloomberg Short-Term Bank Yield (“BSBY”) (as defined in the Credit Agreement), plus, in each case, an applicable margin, as determined in accordance with the provisions of the Credit Agreement.

The base rate will be the highest of:

the rate of interest announced publicly by Citizens Bank, N.A.

from time to time as its “prime rate”;

the federal funds effective rate plus 1/2 of 1 %;

and the Daily BSBY Rate plus 1 %.

The applicable margin is subject to adjustment as provided in the Credit Agreement.

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

As of December 31, 2022, we have no t borrowed under the Revolving Credit Facility.

In September 2023, we entered into an unsecured credit agreement with U.S.

Bank National Association, as administrative agent, Citizens Bank, N.A., as syndication agent, Royal Bank of Canada, as documentation agent, U.S.

Bank National Association and Citizens Bank, N.A., as joint lead arrangers and joint book runners, and the other lenders referred to therein (the “September 2023 Credit Agreement”), that provides a revolving credit facility permitting borrowings up to $ 400.0 million and has a termination date of September 27, 2028 .

We may request an increase in the revolving commitments in an aggregate amount not to exceed (i) $ 200 million or (ii) so long as the Leverage Ratio (as defined in the September 2023 Credit Agreement) is at least 0.25 to 1.00 less than the applicable Leverage Ratio then required under the September 2023 Credit Agreement, an unlimited amount.

Revolving Loans under the September 2023 Credit Agreement bear interest at either a base rate or the Term SOFR Rate (as defined in the Revolving Credit Facility) plus, in each case, an applicable margin, as determined in accordance with the provisions of the September 2023 Credit Agreement.

The Applicable Margin ranges from 0.125 % to 0.625 % for the Base Rate and 1.125 % to 1.625 % for the Term SOFR Rate.

We may also request Swingline Loans (as defined in the September 2023 Credit Agreement) at either the Base Rate or the Daily Term SOFR Rate.

The September 2023 Credit Agreement is guaranteed by certain direct or indirect wholly owned subsidiaries of the Company.

The September 2023 Credit Agreement contains financial and other customary covenants, including a funded net indebtedness to adjusted EBITDA ratio.

As of December 31, 2023, we have no t borrowed under the September 2023 Credit Agreement and we are compliance with all covenants.

0.375% Senior Convertible Notes due 2025

On September 1, 2023, in connection with the closing of the Merger, the Company, NuVasive and Wilmington Trust National Association, as trustee (the “Trustee”) entered into a supplemental agreement (the “First Supplemental Indenture”) to the Indenture, dated March 2, 2020 (the “Base Indenture”), by and between NuVasive and the Trustee, relating to NuVasive’s $ 450.0 million in aggregate principal amount of 0.375 % Convertible Senior Notes due 2025.

As of the closing date of the Merger, $ 450 million of aggregate principal amount of the 2025 Notes were outstanding.

Pursuant to the First Supplemental Indenture, the 2025 Notes are convertible into the Company’s Class A common stock at a conversion rate of 8.0399 shares per $ 1,000 principal amount of 2025 Notes, which is equivalent to a conversion price of approximately $ 124.38 per share, subject to adjustments.

The 2025 Notes may be settled in cash, stock, or a combination thereof, solely at the Company’s discretion.

Pursuant to the terms of the First Supplemental Indenture, Globus agreed to guarantee NuVasive’s obligations under the Indenture.

The 2025 Notes bear interest at a rate of 0.375 % per annum, payable semi-annually in arrears on March 15 and September 15 of each year.

The 2025 Notes mature on March 15, 2025 , unless earlier converted, redeemed, or repurchased in accordance with their terms.

The Merger constituted a Merger Event as defined in the Base Indenture.

In the event of a Merger Event, the Company is required to execute a supplemental indenture providing for (i) each holder of 2025 Notes with the right to convert each $ 1,000 principal amount of 2025 Notes into the same type of consideration that holders would have been entitled to receive if such holders had held a number of shares of NuVasive Common Stock equal to the applicable conversion rate in effect immediately prior to such Merger Event, and (ii) subsequent adjustments to the conversion rate set forth in the Base Indenture.

GLOBUS MEDICAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Prior to September 15, 2024, holders may convert their 2025 Notes only under the following conditions:

(a) during any calendar quarter commencing after the calendar quarter ending on June 30, 2020 (and only during such calendar

quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

(b) during the five business day period after any five consecutive trading day period, or the measurement period, in which the

trading price of the 2025 Notes per $ 1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the conversion rate on such trading day;

(c) if the Company calls any or all of the 2025 Notes for redemption, at any time prior to the close of business on the second

scheduled trading day preceding the redemption date;

(d) upon the occurrence of specified corporate events, as defined in the 2025 Notes.

On or after September 15, 2024, until the close of business on the second scheduled trading day immediately preceding March 15, 2025, holders may convert their 2025 Notes at any time, regardless of the foregoing conditions.

In addition, following certain corporate events that occur prior to the maturity date or if the Company issues a notice of redemption, the Company will increase the conversion rate for a holder who elects to convert its 2025 Notes in connection with such a corporate event or in connection with such redemption in certain circumstances.

The Company may redeem the 2025 Notes, at its option, in whole or in part, until the close of business on the business day immediately preceding September 15, 2024, if the last reported sale price of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company delivers written notice of a redemption.

The redemption price will be equal to 100 % of the principal amount of such 2025 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date.

No principal payments are due on the 2025 Notes prior to maturity.

Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the 2025 Notes do not contain any financial covenants and do not restrict the Company from conducting significant restructurings, paying dividends or issuing or repurchasing any of its other securities.

Upon the initial recognition of the 2025 Notes pursuant to the purchase accounting for the Merger, the embedded conversion feature does not meet the equity scope exception described in ASC 815-40, Contracts in Entity’s Own Equity.

The embedded conversion feature is bifurcated and presented as a liability on the consolidated balance sheet with subsequent measurement at fair value with changes in fair value recognized as other income/(expense).

The Company recognized, at Merger closing, the embedded conversion feature at fair value of $ 1.7 million and allocated the residual $ 407.8 million of the 2025 Notes fair value to the host debt instrument.

As of the December 31, 2023, the fair value of the embedded conversion feature was $ 0.7 million.

As a result of the Merger and recognizing the fair value of the 2025 Notes, along with the embedded conversion feature, as of the acquisition date, the Company recorded $ 42.2 million debt discount to be accreted as interest expense over the life of the notes.

On September 1, 2023, in connection with the closing of the Merger, the Company, NuVasive, and certain dealers entered into amendment and guarantee agreements with respect to 2025 Hedge pursuant to which NuVasive purchased options from such dealers exercisable into its own common stock in connection with the sale of the 2025 Notes.

Pursuant to such amendment and guarantee agreements, the 2025 Hedge is exercisable into Globus Class A common stock in certain circumstances and the Company guaranteed NuVasive’s obligations under the 2025 Hedge.

Subject to the amended 2025 Hedge, the Company is entitled to purchase up to 3,617,955 shares of the Company’s Class A common stock at a strike price of $ 124.38 .

The 2025 Hedge will expire on the second scheduled trading day immediately preceding March 15, 2025 and is expected to reduce the potential equity dilution upon conversion of the 2025 Notes if the daily volume-weighted average price per share of the Company’s common stock exceeds the strike price of the 2025 Hedge.

In accordance with ASC 805, the Company recognized the 2025 Hedge at an acquisition date fair value of $ 1.7 million.

The 2025 Hedge does not meet the equity scope exception described in ASC 815-40, Contract in Entity’s Own Equity, and will be presented as asset on the consolidated balance sheet with subsequent measurement at fair value with changes in fair value recognized as other income/(expense).

As of December 31, 2023, the fair value of the 2025 Hedge is $ 0.7 million recorded within the Other Assets with the consolidated balance sheet.

An assumed exercise of the 2025 Hedge by NuVasive is considered anti-dilutive since the effect of the inclusion would always be anti-dilutive with respect to the calculation of diluted earnings per share.

GLOBUS MEDICAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2025 Warrants

On September 1, 2023, in connection with the closing of the Merger, the Company, NuVasive, and certain dealers entered into amendment and guarantee agreements with respect to the 2025 Warrants, pursuant to which NuVasive sold warrants to such dealers for its own common stock in connection with the initial sale of the 2025 Notes.

Pursuant to such amendment and guarantee agreements, the warrants are exercisable into Globus Class A common stock in certain circumstances and the Company guaranteed NuVasive’s obligations under the 2025 Warrants.

Subject to the amended 2025 Warrants, the holders of the 2025 Warrants are entitled to purchase up to 3,617,955 shares of the Company’s common stock at a strike price of $ 170.45 .

The 2025 Warrants will expire on various dates from June 2025 through October 2025 and may be settled in net shares or cash, at the Company’s election.

In accordance with ASC 805, the Company recognized the 2025 Warrants at an acquisition date fair value of $ 0.6 million within additional paid-in capital.

The 2025 Warrants could have a dilutive effect on the Company’s earnings per share to the extent that the price of the Company’s common stock during a given measurement period exceeds the strike price of the 2025 Warrants, which is $ 170.45 per share.

The Company uses the treasury share method for assumed exercise of its 2025 Warrants to compute the weighted average common shares outstanding for diluted earnings per share.

Stock Repurchases

On March 11, 2020, the Company announced a share repurchase program, which authorized the Company to repurchase up to $ 200 million of the Company’s Class A common stock.

On March 4, 2022, the share repurchase program was expanded by authorizing the Company to repurchase an additional $ 200 million of the Company’s Class A common stock.

On March 11, 2020, the Company announced a share repurchase program, which authorized the Company to repurchase up to $ 200.0 million of the Company’s Class A common stock (“Class A Common”).

On March 4, 2022, the share repurchase program was expanded by authorizing the Company to repurchase an additional $ 200.0 million of the Company’s Class A Common.

On September 27, 2023, the share repurchase program was expanded by authorizing the Company to repurchase an additional $ 350.0 million of the Company’s Class A Common.

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

As of December 31, 2022, the Company has remaining authorization to repurchase a total of $ 150.8 million of Class A common stock.

During the year ended December 31, 2023, the Company repurchased a total of 4.3 million shares under this program at an average price of $ 52.11 , for a dollar amount of $ 225.6 million.

As of December 31, 2023, the Company has approximately $ 275.2 million remaining under the share repurchase program authorized of Class A Common.

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

The following table summarizes the activity related to share repurchases:

(In thousands except for per share prices)

Total number of shares repurchased

Average price paid per share

Dollar amount of shares repurchased (1)

Approximate dollar value of shares that may yet be purchased under the plan

January 1, 2020 - March 31, 2020

April 1, 2020 - June 30, 2020

July 1, 2020 - September 30,2020

October 1, 2020 - December 31, 2020

January 1, 2021 - March 31, 2021

April 1, 2021 - June 30, 2021

July 1, 2021 - September 30, 2021

October 1, 2021 - December 31, 2021

January 1, 2022 - March 31, 2022

April 1, 2022 - June 30, 2022

July 1, 2022 - September 30, 2022

October 1, 2022 - December 31, 2022

January 1, 2020 - December 31, 2022

(1) Inclusive of an immaterial amount of commission fees

Our amended and restated Certificate of Incorporation provides for a total of 775,000,000 authorized shares of common stock.

Of the authorized number of shares of common stock, 500,000,000 shares are designated as Class A common stock (“Class A Common”) and 275,000,000 shares are designated as Class B common stock (“Class B Common”).

Of the authorized number of shares of common stock, 500,000,000 shares are designated as Class A Common and 275,000,000 shares are designated as Class B common stock (“Class B Common”).

The holders of Class A Common are entitled to one vote for each share of Class A Common held.

Each share of our Class B common stock is convertible at any time at the option of the holder into one share of our Class A common stock.

Each share of our Class B common stock is convertible at any time at the option of the holder into one share of our Class A Common.

In addition, each share of our Class B common stock will convert automatically into one share of our Class A common stock upon any transfer, whether or not for value, except for permitted transfers.

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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 consolidated statements of operations and comprehensive income.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Earnings Per Common Share

The Company computes basic net income per share using the weighted-average number of common shares outstanding during the period.

Diluted net income per share assumes the conversion, exercise or issuance of all potential common stock equivalents, unless the effect of inclusion would be anti-dilutive.

For purposes of this calculation, common stock equivalents include the Company’s stock options and unvested RSUs.

The contingently issuable shares are included in basic net income per share as of the date that all necessary conditions have been satisfied and are included in the denominator for dilutive calculation for the entire period if such shares would be issuable as of the end of the reporting period assuming the end of the reporting period was the end of the contingency period.

The Company computes basic earnings per share using the weighted-average number of common shares outstanding during the period.

Diluted earnings per share assumes the conversion, exercise or issuance of all potential common stock equivalents, unless the effect of inclusion would be anti-dilutive.

For purposes of this calculation, common stock equivalents include the Company’s stock options, unvested RSUs, and PRSUs.

These are included in basic net income per share as of the date that all necessary conditions have been satisfied and are included in the denominator for dilutive calculation for the entire period if such shares would be issuable as of the end of the reporting period assuming the end of the reporting period was the end of the contingency period.

The following table sets forth the computation of basic and diluted earnings per share:

(In thousands, except per share amounts)

Net income/(loss)

Net income/(loss) for basic:

Dilutive potential net income (loss):

Adjusted net income (loss) for diluted

Denominator for basic and diluted net income per share:

Weighted average shares outstanding for basic

Dilutive stock options and RSUs

Dilutive stock options, RSUs, and PRSUs

Weighted average shares outstanding for diluted

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Anti-dilutive stock options and RSUs excluded from the calculation

Anti-dilutive warrants excluded from the calculation

Anti-dilutive Senior Convertible Notes due 2025 excluded from the calculation

In accordance with ASU No.

2020-06, Debt with Conversion and Other Options (Subtopic 470-20), the Company applies the if-converted method in computing the effect of the Company's 2025 Notes on diluted net income per share.

For periods in which the Company reports net income, the numerator of the diluted per share computation is adjusted for interest expense and amortization of debt issuance costs, net of tax, and the denominator is adjusted for the weighted average number of shares into which each of the Company’s 2025 Notes could be converted.

The effect is only included in the calculation of diluted net income per share for those 2025 Notes which reduce net income per share.

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”), together with the 2012 Plan, the “Plans”.

The 2021 Plan is the only active stock plan.

We have four stock plans:

our 2012 Equity Incentive Plan (the “2012 Plan”) and our 2021 Equity Incentive Plan (the “2021 Plan”), the NuVasive 2014 Equity Incentive Plan (the “NuVasive 2014 Plan”), and the Ellipse Technologies 2015 Incentive Award Plan (the “Ellipse 2015 Plan”).

The 2021 Plan, the NuVasive 2014 Plan and the Ellipse 2015 Plan are the only active stock plans.

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.

The number, type of option, exercise price, and vesting terms are determined by the Board or its delegates in accordance with the terms of the Plans.

The options granted expire on a date specified by the Board, which is generally not more than ten years from the grant date.

Options granted to employees generally vest in varying installments over a four-year period.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The 2012 Plan, 2021 Plan, NuVasive 2014 Plan, and Ellipse 2015 Plan are administered by the Board of Directors of Globus (the “Board”) or its delegates.

The number, type of option, exercise price, and vesting terms are determined by the Board or its delegates in accordance with the terms of the 2012 Plan and 2021 Plan.

The options granted expire on a date specified by the Board, which is ten years from the grant date.

Options granted to employees vest in varying installments over a four -year period.

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

The 2012 Plan terminated as to new awards pursuant to its terms in 2022.

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

Following effectiveness of the 2021 Plan, we have no t issued any additional awards under the 2012 Plan;

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

GLOBUS MEDICAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

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

As of December 31, 2022, pursuant to the 2021 Plan, there were 5,687,725 shares of Class A Common stock reserved and 2,634,899 shares of Class A Common stock available for future grants.

In connection with the Merger, the Company assumed outstanding awards for the RSUs and PRSUs under the NuVasive 2014 Plan and the Ellipse 2015 Plan in accordance with the terms in the Merger Agreement.

The PRSUs ultimate issuance amount is determined by the Company’s Compensation Committee.

Share payout levels range from 0 % to 100 % depending on the respective terms of an award.

As of December 31, 2023, pursuant to the 2021 Plan, the NuVasive 2014 Plan, and the Ellipse 2015 Plan, there were 9,799,141 shares 2,271,633 shares, and 423,886 shares of Class A Common stock reserved, respectively and 5,152,998 shares, 1,625,088 shares, and 241,048 shares of Class A Common stock available, respectively, for future grants.

Stock Options

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Outstanding at December 31, 2023

Performance-Based Restricted Stock Units

Performance-based restricted stock unit activity during the year ended December 31, 2023 is summarized as follows:

Performance-Based Restricted Stock

‎ Units (thousands)

‎ grant date fair value

‎ contractual

‎ life (years)

Outstanding at December 31, 2022

Outstanding at December 31, 2023

Stock-Based Compensation

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Stock-based compensation expense

Stock-based compensation expense classified in Acquisition-Related Costs

Net stock-based compensation capitalized into inventory

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(In thousands)

The components of the provision for income taxes are as follows:

(In thousands)

GLOBUS MEDICAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The components of the provision for income taxes are as follows:

(In thousands)

A reconciliation of the statutory U.S.

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Domestic production activities deduction

Stock-based compensation windfall

Compensation expense

Nondeductible expenses

Foreign inclusions

Acquisition related charges

Effective tax rate

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Significant components of our deferred income taxes are as follows:

GLOBUS MEDICAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands)

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Net operating loss carryforwards

General business and other credit carryforwards

Lease Liability

Total deferred tax assets

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Depreciation and amortization

Right of Use Asset

Total deferred tax liabilities

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The Company has established valuation allowances of $ 190.8 million and $ 5.5 million at December 31, 2023 and 2022, respectively, primarily related to the uncertainty of the utilization of certain deferred tax assets comprised of tax loss carryforwards in various jurisdictions.

The decrease in the valuation allowance during fiscal year 2022 is primarily driven by foreign deferred tax assets that are expected to be realized.

The increase in the valuation allowance during 2023 is primarily driven by acquired foreign deferred tax assets from the Merger that are not expected to be realized.

The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

As of December 31, 2022 and 2021, we have NOL carryforwards of $ 20.2 million and $ 19.9 million, respectively, which, if unused, will expire in years 2023 through 2039.

GLOBUS MEDICAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

At December 31, 2023, the Company had $ 1.3 million, $ 51.7 million and $ 376.8 million of federal, state and foreign net operating loss carryforwards, respectively.

Federal net operating loss carryforwards begin to expire in 2026, state net operating loss carryforwards begin to expire in 2023, and foreign net operating losses carry forward indefinitely.

The Company has California research and development income tax credit carryforwards of $ 41.9 million.

The California credits can be carried forward indefinitely.

The Company has foreign tax credit carryforwards of $ 2.8 million which expire beginning in 2027 .

Due to the “change of ownership” provision of the Tax Reform Act of 1986, utilization of the Company’s net operating loss and credit carryforwards may be subject to an annual limitation against taxable income in future periods.

As a result of any future ownership changes, the annual limitation of loss and credit carryforwards may cause them to expire before ultimately becoming available to reduce future income tax liabilities.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

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Unrecognized tax benefits at the beginning of the year

Additions related to current year tax positions

Additions related to prior year tax positions

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Unrecognized tax benefits at the end of the year

The additions related to current year tax positions for the year ended December 31, 2023 of $ 0.9 million are primarily related to additional current year reserves.

The additions related to the prior year tax positions for the year ended December 31, 2023 of $ 32.0 million

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

are related to the historical positions from the Merger, and recorded using the acquisition method of accounting.

The reduction s related to prior year tax positions for the year ended December 31, 2023 of $ 0.1 million are primarily related to the resolution of certain foreign tax positions.

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Portion of total unrecognized tax benefits that, if recognized, would affect the effective income tax rate

The Company intends to indefinitely reinvest its foreign earnings abroad to ensure sufficient working capital for further expansion of its existing operations outside the United States, therefore the Company has not recorded income taxes on the undistributed earnings of its foreign subsidiaries.

The undistributed earnings of our foreign subsidiaries as of December 31, 2023 are immaterial.

In the event we are required to repatriate funds from outside of the United States, such repatriation may be subject to local laws, customs, and tax consequences.

Due to recent tax reform in the U.S.

and favorable treaties between the U.S.

and countries in which the Company’s controlled foreign corporations operate, the Company has the ability to repatriate earnings without incurring additional tax liabilities.

Accordingly, the Company has not recorded a liability for taxes associated with any future distributions of these undistributed earnings.

Interest and penalties are recorded in the statement of income as provision for income taxes.

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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 December 31, 2022.

On December 14, 2023, a jury returned a defense verdict in favor of Globus.

As such, we have no t recorded a liability, outside of counsel fees, related to this litigation as of December 31, 2023.

The Company leases certain equipment, vehicles, office and storage facilities via various operating and financing lease agreements.

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

Certain lease agreements require the Company to pay taxes, insurance, and maintenance, and provide for 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 has security deposits recorded and maintained in Other Assets totaling $ 1.5 million as of December 31, 2023.

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

Operating lease expense is recognized on a

GLOBUS MEDICAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

straight-line basis over the term of the lease as a component of operating income on the consolidated statement of operations and comprehensive income.

Finance leases amortize the right-of-use assets and amortize the interest on the lease liability over the term of the lease.

Amounts reported in the consolidated balance sheet were as follows:

(In thousands)

Operating lease right-of-use asset

Finance lease right-of-use asset

Total leased assets

Operating lease liability

Finance lease liability

Operating lease liability

Finance lease liability

Total lease liabilities

The table below summarizes the Company’s lease costs arising from the operating and financing lease obligations:

Twelve Months Ended

(In thousands)

Lease expense:

Operating lease expense

Finance lease expense:

Depreciation of right-of-use asset

Interest expense on lease liabilities

Total lease expense

Future minimum lease payments under non-cancellable leases as of December 31, 2023 are as follows:

(In thousands)

Total minimum lease payments

amount representing interest

Present value of obligations under leases

current portion

Long-term lease obligations

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The table below summarizes the Company’s supplemental cash flow information and assumptions used:

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

Other supplemental cash flow information:

Cash paid for amounts included in measurement of lease liabilities

Operating cash flows from operating leases

Operating cash flows for finance leases

Financing cash flows for finance leases

Total cash paid for amounts included in the measurement of lease liabilities

Right-of-use assets obtained in exchange for lease obligations

Operating leases

Financing leases

Weighted-average remaining lease term

Operating leases

Financing leases

Weighted-average discount rate

Operating leases

Financing leases

RETIREMENT BENEFIT PLANS

We sponsor a 401(k) Plan covering all eligible U.S.

Under the 401(k) Plan, we make nondiscretionary matching contributions at the rate of 100 % of employee’s contributions up to a maximum annual contribution of $ 6,000 per eligible employee, limited to 3 % of the employee’s compensation for the period.

We sponsor 401(k) Plans covering all eligible U.S.

employees, and a retirement plan for all eligible Puerto Rico employees.

Under the 401(k) Plans, we make matching contributions ranging from 3 % to 4 % of the employee’s compensation for the period.

Additionally, we contribute to various foreign retirement benefit plans required by local law or coordinated with government sponsored plans which cover many of our international employees.

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SEGMENT AND GEOGRAPHIC INFORMATION

Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance.

We manage our business globally within one operating segment.

Segment information is consistent with how management reviews the business, makes investing and resource allocation decisions and assesses operating performance.

The following table represents total net sales by geographic area, based on the location of the customer for the years ended December 31, 2022, 2021 and 2020, respectively:

(In thousands)

United States

International

Total net sales

SUBSEQUENT EVENT

On February 8, 2023, the Company and its wholly-owned subsidiary, Zebra Merger Sub, Inc.

(“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with NuVasive, Inc., a Delaware corporation (“NuVasive”).

The Merger Agreement provides, among other things, that subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into NuVasive (the “Merger”), with NuVasive surviving the Merger as a wholly owned subsidiary of the Company.

The transaction brings together these two technology companies in the musculoskeletal industry, which have a shared vision focused on innovation in a relentless pursuit of unmet clinical needs to improve patient care.

Under the Merger Agreement, at the effective time of the Merger, each share of common stock, par value $ 0.001 per share, of NuVasive (“NuVasive Common Stock”) issued and outstanding immediately prior to the effective time (other than certain excluded shares as described in the Merger Agreement) will be cancelled and converted into the right to receive 0.75 fully paid and non-assessable shares of Class A common stock of Globus Medical, $ 0.001 par value per share (the “Globus Medical Class A Common Stock”), and the right to receive cash in lieu of fractional shares.

Following the close of the transaction, NuVasive shareholders will own approximately 28 % of the combined company, and Globus Medical shareholders will own approximately 72 %, on a fully diluted basis.

Either NuVasive or Globus Medical may terminate the Merger Agreement under certain circumstances described in the Merger Agreement, resulting in a termination fee payable to the other equal to $ 120 million or $ 75 million, depending on such circumstances.

NuVasive will also be required to make a payment to Globus Medical equal to $ 60 million if the Merger Agreement is terminated because NuVasive’s stockholders fail to adopt the Merger Agreement and at the time of such failure, NuVasive’s board of directors has not changed its recommendation to its stockholders in favor of the Merger.

GLOBUS MEDICAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The transaction is expected to close in the middle of 2023, subject to approval by both companies’ shareholders, regulatory approval, and other customary closing conditions.

For additional information about the Merger Agreement, please refer to our Form 8-K filed on February 9, 2023 .

No Offer or Solicitation

This filing is not intended to and does not constitute an offer to subscribe for, buy or sell, or the solicitation of an offer to subscribe for, buy or sell, or a solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in which such offer, sale or solicitation would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, and otherwise in accordance with applicable law.

Important Information About the Transaction and Where To Find It

In connection with the proposed transaction, Globus Medical will file with the U.S.

Securities and Exchange Commission (“SEC”) a registration statement on Form S-4 that will include a joint proxy statement of Globus Medical and NuVasive and that will also constitute a prospectus of Globus Medical for shares of its class A common stock to be offered in the proposed transaction.

Globus Medical and NuVasive may also file other documents with the SEC regarding the proposed transaction.

This document is not a substitute for the joint proxy statement statement/prospectus or registration statement or any other document which Globus Medical or NuVasive may file with the SEC.

INVESTORS AND SECURITY HOLDERS OF GLOBUS MEDICAL AND NUVASIVE ARE URGED TO READ THE REGISTRATION STATEMENT, WHICH WILL INCLUDE THE JOINT PROXY STATEMENT/PROSPECTUS, AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND RELATED MATTERS.

The registration statement, definitive joint proxy statement/ prospectus and other documents filed by Globus Medical and NuVasive with the SEC will be available free of charge at the SEC’s website (www.sec.gov) and from Globus Medical and NuVasive.

Requests for copies of the joint proxy statement/ prospectus and other documents filed by Globus Medical with the SEC may be made by contacting Keith Pfeil, Chief Financial Officer by phone at (610) 930-1800 or by email at kpfeil@globusmedical.com, and request for copies of the joint proxy statement/prospectus and other documents filed by NuVasive may be made by contacting Matt Harbaugh, Chief Financial Officer, by phone at (858) 210-2129 or by email at investorrelations@nuvasive.com.

Participants in the Solicitation

Globus Medical, NuVasive, their respective directors and certain of their executive officers and other employees may be deemed to be participants in the solicitation of proxies from Globus Medical’s and NuVasive’s shareholders in connection with the proposed transaction.

Information about the directors and executive officers of Globus Medical and their ownership of Globus Medical stock is set forth in Globus Medical’s annual report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the SEC on February 17, 2022 and its proxy statement for its 2022 annual meeting of stockholders, which was filed with the SEC on April 21, 2022.

Information regarding NuVasive’s directors and executive officers is contained in NuVasive’s annual report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the SEC on February 23, 2022, and its proxy statement for its 2022 annual meeting of stockholders, which was filed with the SEC on March 30, 2022.

Certain directors and executive officers of Globus Medical and NuVasive may have a direct or indirect interest in the transaction due to securities holdings, vesting of equity awards and rights to severance payments.

Additional information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of Globus Medical’s and NuVasive’s shareholders in connection with the proposed transaction will be included in the joint proxy statement/prospectus.

These documents can be obtained free of charge from the sources indicated above.

Cautionary Notes on Forward-Looking Statements

This Form 10-K contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “may,” “target,” and similar expressions and variations or negatives of these words.

Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the consummation of the proposed transaction and the anticipated benefits thereof.

These and other forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements, including the failure to consummate the proposed transaction or to make any filing or take other action required to consummate such transaction in a timely matter or at all.

Important risk factors that may cause such a difference include, but are not limited to:

(i) the proposed transaction may not be completed on anticipated terms and timing, (ii) a condition to closing of the transaction may not be satisfied, including obtaining shareholder and regulatory approvals, (iii) the anticipated tax treatment of the transaction may not be

Operating segments are defined as components of an organization for which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance.

We have identified two operating segments, Musculoskeletal Solutions and Enabling Technologies, based on how management reviews the business, makes investing and resource allocation decisions and assesses operating performance.

We aggregate these operating segments into one reportable segment, based on conclusions reached after considering the factors including economic similarity, customer base, regulatory environment, production processes, nature of services and products provided, and our comprehensive approach to product development and offerings targeting patient needs through procedural-based solutions.

GLOBUS MEDICAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

obtained, (iv) the potential impact of unforeseen liabilities, future capital expenditures, revenues, costs, expenses, earnings, synergies, economic performance, indebtedness, financial condition and losses on the future prospects, business and management strategies for the management, expansion and growth of the combined business after the consummation of the transactions, (v) potential litigation relating to the proposed transaction that could be instituted against Globus Medical, NuVasive or their respective directors, (vi) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the transactions, (vii) any negative effects of the announcement, pendency or consummation of the transactions on the market price of Globus Medical’s or NuVasive’s common stock and on Globus Medical’s or NuVasive’s businesses or operating results, (viii) risks associated with third party contracts containing consent and/or other provisions that may be triggered by the proposed transaction, (ix) the risks and costs associated with the integration of, and the ability of Globus Medical and NuVasive to integrate, their businesses successfully and to achieve anticipated synergies, (x) the risk that disruptions from the proposed transaction will harm Globus Medical’s or NuVasive’s business, including current plans and operations, (xi) the ability of Globus Medical or NuVasive to retain and hire key personnel and uncertainties arising from leadership changes, (xii) legislative, regulatory and economic developments, and (xiii) the other risks described in Globus Medical’s and NuVasive’s most recent annual reports on Form 10-K and quarterly reports on Form 10-Q.

These risks, as well as other risks associated with the proposed transaction, will be more fully discussed in the joint proxy statement/prospectus that will be included in the registration statement on Form S-4 that will be filed with the SEC in connection with the proposed transaction.

While the list of factors presented here is, and the list of factors to be presented in the registration statement on Form S-4 are, considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties.

Unlisted factors may present significant additional obstacles to the realization of forward-looking statements.

Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on Globus Medical’s or NuVasive’s consolidated financial condition, results of operations, credit rating or liquidity.

Neither Globus Medical nor NuVasive assumes any obligation to publicly provide revisions or updates to any forward looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.

The following table represents total net sales and property and equipment, net by geographic area, based on the location of the customer for the years ended December 31, 2023, 2022 and 2021, respectively:

Property and Equipment, Net

(In thousands)

United States

International

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data