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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _______________

Commission File No. 001-35621

GLOBUS MEDICAL, INC.

(Exact name of registrant as specified in its charter)

DELAWARE

04-3744954

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

2560 General Armistead Avenue, Audubon, PA 19403

 

(610) 930-1800

(Address of principal executive offices) (Zip Code)

 

(Registrant’s telephone number, including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbols

Name of exchange on which registered

Class A Common Stock, par value $.001 per share

GMED

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes   No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files):

Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller Reporting Company

Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes   No 

The number of shares outstanding of the issuer’s common stock (par value $0.001 per share) as of August 3, 2020 was 97,781,223 shares.

1


GLOBUS MEDICAL, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

 

Condensed Consolidated Balance Sheets (Unaudited)

 

 

June 30, 2020 and December 31, 2019

3

 

Condensed Consolidated Statements of Income (Unaudited)

 

 

Three and six months ended June 30, 2020 and June 30, 2019

4

 

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

 

 

Three and six months ended June 30, 2020 and June 30, 2019

5

Condensed Consolidated Statements of Equity (Unaudited)

 

Three and six months ended June 30, 2020 and June 30, 2019

6

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

 

Six months ended June 30, 2020 and June 30, 2019

7

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

8

Item 2.

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

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

Controls and Procedures

33

PART II.

OTHER INFORMATION

34

Item 1.

Legal Proceedings

34

Item 1A.

Risk Factors

34

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

34

Item 3.

Defaults Upon Senior Securities

35

Item 4.

Mine Safety Disclosures

35

Item 5.

Other Information

35

Item 6.

Exhibits

35

 

SIGNATURES

37

 

2


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

GLOBUS MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

June 30,

December 31,

(In thousands, except par value)

2020

2019

ASSETS

Current assets:

Cash, cash equivalents, and restricted cash

$

165,554

$

195,724

Short-term marketable securities

151,181

115,763

Accounts receivable, net of allowances of $8,117 and $5,599, respectively

132,092

154,326

Inventories

224,457

196,314

Prepaid expenses and other current assets

19,625

17,243

Income taxes receivable

3,982

8,098

Total current assets

696,891

687,468

Property and equipment, net of accumulated depreciation of $257,885 and $243,732, respectively

211,902

199,841

Long-term marketable securities

319,483

409,514

Intangible assets, net

85,226

78,812

Goodwill

129,184

128,775

Other assets

21,070

21,741

Deferred income taxes

2,046

5,926

Total assets

$

1,465,802

$

1,532,077

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

27,715

$

24,614

Accrued expenses

69,243

63,283

Income taxes payable

1,990

1,057

Business acquisition liabilities

665

6,727

Deferred revenue

6,513

5,402

Payable to broker

-

10,320

Total current liabilities

106,126

111,403

Business acquisition liabilities, net of current portion

3,551

2,822

Deferred income taxes

5,046

6,023

Other liabilities

14,164

9,377

Total liabilities

128,887

129,625

Commitments and contingencies (Note 12)

 

 

Equity:

Class A common stock; $0.001 par value. Authorized 500,000 shares; issued and outstanding 75,327 and 77,395 shares at June 30, 2020 and December 31, 2019, respectively

75

77

Class B common stock; $0.001 par value. Authorized 275,000 shares; issued and outstanding 22,430 and 22,430 shares at June 30, 2020 and December 31, 2019, respectively

22

22

Additional paid-in capital

387,611

357,320

Accumulated other comprehensive income (loss)

1,298

(2,898)

Retained earnings

947,909

1,047,931

Total equity

1,336,915

1,402,452

Total liabilities and equity

$

1,465,802

$

1,532,077

See accompanying notes to unaudited condensed consolidated financial statements.


3


GLOBUS MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

(In thousands, except per share amounts)

2020

2019

2020

2019

Sales

$

148,922

$

194,539

$

339,499

$

377,486

Cost of goods sold

50,643

43,990

99,507

85,828

Gross profit

98,279

150,549

239,992

291,658

Operating expenses:

Research and development

39,455

15,746

54,857

30,069

Selling, general and administrative

80,019

88,379

173,558

174,163

Provision for litigation

197

197

Amortization of intangibles

4,115

3,449

7,891

6,792

Acquisition related costs

56

106

604

685

Total operating expenses

123,842

107,680

237,107

211,709

Operating income/(loss)

(25,563)

42,869

2,885

79,949

Other income, net

Interest income/(expense), net

3,590

4,417

7,914

8,576

Foreign currency transaction gain/(loss)

(168)

(210)

(636)

(22)

Other income/(expense)

199

17

393

241

Total other income/(expense), net

3,621

4,224

7,671

8,795

Income/(loss) before income taxes

(21,942)

47,093

10,556

88,744

Income tax provision

(1,105)

8,930

5,444

17,370

Net income/(loss)

$

(20,837)

$

38,163

$

5,112

$

71,374

Earnings per share:

Basic

$

(0.21)

$

0.39

$

0.05

$

0.72

Diluted

$

(0.21)

$

0.38

$

0.05

$

0.70

Weighted average shares outstanding:

Basic

97,509

99,023

98,572

98,875

Dilutive stock options

2,559

2,420

2,600

Diluted

97,509

101,582

100,992

101,475

Anti-dilutive stock options excluded from weighted average calculation

11,680

5,021

6,645

4,854

See accompanying notes to unaudited condensed consolidated financial statements.

 

4


GLOBUS MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

(In thousands)

2020

2019

2020

2019

Net income/(loss)

$

(20,837)

$

38,163

$

5,112

$

71,374

Other comprehensive income/(loss):

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

6,897

1,984

3,055

3,783

Foreign currency translation gain/(loss)

667

1,768

1,141

1,661

Total other comprehensive income/(loss)

7,564

3,752

4,196

5,444

Comprehensive income/(loss)

$

(13,273)

$

41,915

$

9,308

$

76,818

See accompanying notes to unaudited condensed consolidated financial statements.

 

5


GLOBUS MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

Class A
Common Stock

Class B
Common Stock

Additional paid-in

Accumulated other comprehensive

Retained

(In thousands)

Shares

$

Shares

$

capital

income/(loss)

earnings

Total

Balance at December 31, 2019

77,394

$

77

22,431

$

22

$

357,320

$

(2,898)

$

1,047,931

$

1,402,452

Cumulative effects of adoption of accounting standards

(468)

(468)

Stock-based compensation

6,902

6,902

Exercise of stock options

190

1

5,762

5,763

Comprehensive income/(loss)

(3,368)

25,949

22,581

Repurchase and retirement of common stock

(1,920)

(2)

(73,862)

(73,864)

Balance at March 31, 2020

75,664

$

76

22,431

$

22

$

369,984

$

(6,266)

$

999,550

$

1,363,366

Stock-based compensation

7,426

7,426

Exercise of stock options

434

(1)