GMED 9.30.12 8K

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 1, 2012
 
 
GLOBUS MEDICAL, INC.
(Exact name of registrant as specified in charter)
 
 
 
 
 
 
 
 
DELAWARE
 
001-35621
 
04-3744954
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
2560 GENERAL ARMISTEAD AVENUE, AUDUBON, PA 19403
(Address of principal executive offices) (Zip Code)
(610) 930-1800
(Registrant's telephone number, including area code)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 




Item 2.02. Results of Operations and Financial Condition.
On November 1, 2012 we issued a press release reporting, among other things, our sales and operating results for the three and nine month periods ended September 30, 2012. A copy of the press release is attached as Exhibit 99.1 to this report and is incorporated by reference into this Item 2.02 as is fully set forth herein.
In accordance with general instruction B.2 to Form 8-K, the information included in this Item 2.02, and the exhibits attached hereto, shall be deemed to be “furnished” and shall not be deemed to be “filed” with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.


Item 9.01. Financial Statements and Exhibits.
Exhibit No.
Description
 
 
99.1
Press Release dated November 1, 2012


SIGNATURES

 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
GLOBUS MEDICAL, INC.
 
 
(Registrant)
 
 
 
Dated:
November 1, 2012
/s/ RICHARD A. BARON
 
 
 
 
 
Richard A. Baron
 
 
Senior Vice President
 
 
Chief Financial Officer



EXHIBIT LIST
Exhibit No.
Description
 
 
99.1
Press Release dated November 1, 2012



GMED 9.30.12 8K Exhibit 99.1


Exhibit 99.1


Globus Medical Reports 2012 Third Quarter Results

AUDUBON, PA, November 1, 2012: Globus Medical, Inc. (NYSE:GMED), a leading spinal implant manufacturer, today announced its financial results for the quarter ended September 30, 2012.

Worldwide sales were $94.8 million, a 12.5% increase from the third quarter of 2011
Net income was $16.5 million or $0.18 per diluted share
Non-GAAP Adjusted EBITDA was 35.1% of sales

David Paul, Chairman and CEO commented, “During the third quarter, Globus continued to deliver sales growth in excess of the overall spine market, while maintaining our focus on operating the business efficiently. Our top line growth was achieved in a challenging spine market, driven by growth from our Disruptive Technology products. Nearly 100% of our sales growth is attributable to internally-driven, organic projects."

Third quarter net sales were $94.8 million, compared to $84.3 million last year, representing a 12.5% increase. Increased sales were driven by growth from our Disruptive Technology products, including our minimally invasive surgical (MIS) and lateral platform products. International revenue grew by 38.3% over the same quarter in 2011 and currently represents 8.0% of total sales. Globus currently sells in 23 countries, and has the infrastructure and plans in place to continue expanding into new geographies.

Net income for the quarter was $16.5 million or $0.18 per diluted share, as compared to $16.9 million, or $0.19 per diluted share in 2011. Non-GAAP Adjusted EBITDA was 35.1% of net sales, compared to 37.3% last year. The investments in our recently created interventional pain management division, Algea Therapies, negatively impacted the quarterly Adjusted EBITDA by 2.4%.

Mr. Paul continued, "In late September, we received our first PMA approval for our SECURE®-C cervical artificial disc. The 380 patient investigational device exemption (IDE) study demonstrated statistical superiority to anterior cervical discectomy and fusion (ACDF) in terms of overall success, subsequent surgery at the index level, device-related adverse events, and patient satisfaction at 24 months. We are proud of all the hard work and effort by our product development group, our internal clinical and regulatory group, and our participating investigator sites and surgeons. We have since launched SECURE®-C, and will be ramping up our surgeon training program over the coming months.

Financially, we continued to execute efficiently in terms of both gross margin and Adjusted EBITDA, and showed strong positive cash flow while making significant investments in infrastructure and Algea Therapies. Lastly, this has been an exciting quarter for us with the completion of our IPO in August. We are confident that our rapid product development engine and infrastructure foundation will enable us to continue our trend of long term, profitable growth.”

Cash and cash equivalents for the quarter increased by $29.6 million, including a net of $21.0 million raised in the IPO, to end the third quarter of 2012 at $195.2 million. The company remains debt free.

Conference Call Information
Globus Medical will hold a teleconference to discuss its performance with the investment community at 5:30 p.m. Eastern Time today. Globus invites all interested parties to join the call by dialing:
 
1-855-533-7141     United States Participants
1-720-545-0060     International Participants
There is no pass code for the teleconference.






For interested parties who do not wish to ask questions, the teleconference will be webcast live and may be accessed through a link on the Globus Medical website at investors.globusmedical.com.

If you are unable to participate during the live teleconference, the call will be archived until Thursday, November 15, 2012. The audio archive can be accessed by calling 1-855-859-2056 in the U.S. or 1-404-537-3406 from outside the U.S. The pass code for the audio replay is 5047-0117.

About Globus Medical, Inc.
Globus Medical, Inc. is a leading spinal implant manufacturer and is based in Audubon, Pennsylvania. The company was founded in 2003 by an experienced team of spine professionals with a shared vision to create products that enable spine surgeons to promote healing in patients with spinal disorders.

Non-GAAP Financial Measures

Adjusted EBITDA represents net income before interest (income)/expense, net and other non-operating expenses, provision for income taxes, depreciation and amortization, stock-based compensation, changes in the fair value of contingent consideration in connection with business acquisitions and provision for litigation settlements. This financial measure is not calculated in conformity with accounting principles generally accepted in the United States of America (GAAP). We present Adjusted EBITDA because we believe it is a useful indicator of our operating performance. Our management uses Adjusted EBITDA principally as a measure of our operating performance and believes that Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies in industries similar to ours. We also believe Adjusted EBITDA is useful to our management and investors as a measure of comparative operating performance from period to period and among companies as it is reflective of changes in pricing decisions, cost controls and other factors that affect operating performance, and it removes the effect of our capital structure (primarily interest expense), asset base (primarily depreciation and amortization) and items outside the control of our management (primarily income taxes and interest income and expense). Our management also uses Adjusted EBITDA for planning purposes, including the preparation of our annual operating budget and financial projections.

Adjusted EBITDA should not be considered in isolation or as a substitute for a measure of our liquidity or operating performance prepared in accordance with GAAP, and is not indicative of net income (loss) from operations as determined under GAAP. Adjusted EBITDA and other non-GAAP financial measures have limitations that should be considered before using these measures to evaluate our liquidity or financial performance. Adjusted EBITDA does not include certain expenses that may be necessary to review our operating results and liquidity requirements. Our definition and calculation of Adjusted EBITDA may differ from that of other companies.


Safe Harbor Statements

All statements included in this press release other than statements of historical fact are forward-looking statements and may be identified by their use of terms such as anticipate, believe, could, estimate, expect, intend, may, plan, predict, project, will, and other similar terms. These forward-looking statements are based on our current assumptions, knowledge, beliefs, estimates, expectations and views. These forward-looking statements are only predictions and are subject to many risks, uncertainties and other factors that are difficult to predict and may affect our businesses and operations. As a result, our actual results may differ materially and adversely from those expressed or implied by our forward-looking statements. As a result, you should not place undue reliance on any of these forward-looking statements. For a discussion of some of the risks, uncertainties and other factors that could affect our results, you should refer to the disclosure contained in our prospectus filed with the Securities and Exchange Commission on August 3, 2012, as amended, including the sections labeled “Risk Factors,” “Cautionary Note Concerning Forward-Looking Statements,” and “Management's Discussion





and Analysis of Financial Condition and Results of Operations,” and in our periodic reports on file with the Securities and Exchange Commission. These documents are available at www.sec.gov. We undertake no obligation to update any forward-looking statements as a result of new information or future events or circumstances arising after the date on which it was made. Moreover, we operate in an evolving environment. Additional risks, uncertainties and other factors emerge from time to time and it is not possible for us to predict all risks, uncertainties and other factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.






GLOBUS MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)

 
Three Months Ended
 
Nine Months Ended
(In thousands, except per share amounts)
September 30,
2012
 
September 30,
2011
 
September 30,
2012
 
September 30,
2011
Sales
$
94,764

 
$
84,270

 
$
285,458

 
$
243,485

Cost of goods sold
18,872

 
17,141

 
55,642

 
49,309

Gross profit
75,892

 
67,129

 
229,816

 
194,176

 
 
 
 
 
 
 
 
 Operating expenses:
 
 
 
 
 
 
 
Research and development
7,022

 
5,916

 
20,698

 
17,691

Selling, general and administrative
41,780

 
34,762

 
124,236

 
102,529

Provision for litigation settlements
30

 
(78
)
 
(801
)
 
306

Total operating expenses
48,832

 
40,600

 
144,133

 
120,526

 
 
 
 
 
 
 
 
Operating income
27,060

 
26,529

 
85,683

 
73,650

Other expense, net
(45
)
 
(172
)
 
(124
)
 
(193
)
Income before income taxes
27,015

 
26,357

 
85,559

 
73,457

Income tax provision
10,528

 
9,494

 
32,495

 
26,243

 
 
 
 
 
 
 
 
Net income
$
16,487

 
$
16,863

 
$
53,064

 
$
47,214

 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$
0.18

 
$
0.19

 
$
0.60

 
$
0.54

Diluted
$
0.18

 
$
0.19

 
$
0.58

 
$
0.52

Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
90,111

 
88,063

 
88,900

 
88,119

Diluted
92,697

 
90,398

 
91,563

 
90,709








GLOBUS MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
September 30, 2012
 
December 31, 2011
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
195,156

 
$
142,668

Accounts receivable, net of allowances of $931 and $602, respectively
51,863

 
46,727

Inventories
57,038

 
47,369

Prepaid expenses and other current assets
3,180

 
2,515

Income taxes receivable
6,346

 
3,336

Deferred income taxes
19,849

 
16,160

Total current assets
333,432

 
258,775

Property and equipment, net
56,892

 
52,394

Intangible assets, net
9,746

 
7,433

Goodwill
15,342

 
9,808

Other assets
630

 
980

Total assets
$
416,042

 
$
329,390

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
5,963

 
$
5,323

Accounts payable to related party
4,837

 
1,178

Accrued expenses
20,510

 
21,268

Income taxes payable
1,389

 
302

Business acquisition liabilities, current
1,375

 
1,200

Total current liabilities
34,074

 
29,271

Business acquisition liabilities, net of current portion
10,126

 
9,089

Deferred income taxes
4,395

 
5,755

Other liabilities
3,185

 
2,799

Total liabilities
51,780

 
46,914

Commitments and contingencies
 
 
 
Equity:
 
 
 
Convertible preferred stock; $0.001 par value. Authorized 50,961 shares; issued and outstanding 0 and 50,961 shares at September 30, 2012 and December 31, 2011

 
51

Common stock; $0.001 par value. Authorized 785,000 and 679,178 shares; issued and outstanding 91,127 and 72,529 shares at September 30, 2012 and December 31, 2011
91

 
73

Additional paid-in capital
135,076

 
106,708

Accumulated other comprehensive loss
(815
)
 
(1,202
)
Retained earnings
229,910

 
176,846

Total equity
364,262

 
282,476

Total liabilities and equity
$
416,042

 
$
329,390








GLOBUS MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
Nine Months Ended
(In thousands)
September 30,
2012
 
September 30,
2011
Cash flows from operating activities:
 
 
 
Net income
$
53,064

 
$
47,214

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
Depreciation and amortization
13,500

 
12,202

Provision for excess and obsolete inventories
5,386

 
6,793

Stock-based compensation
3,682

 
2,151

Allowance for doubtful accounts
336

 
93

Change in fair value of interest rate swap

 
113

Change in fair value of contingent consideration
23

 
182

Deferred income taxes
(5,057
)
 
190

(Increase) decrease in:
 
 
 
Accounts receivable
(5,277
)
 
(868
)
Inventories
(14,587
)
 
(11,044
)
Prepaid expenses and other assets
(326
)
 
(1,117
)
Increase (decrease) in:
 
 
 
Accounts payable
34

 
(4,187
)
Accounts payable to related party
3,659

 
1,115

Accrued expenses and other liabilities
(730
)
 
(1,618
)
Income taxes payable/receivable
3,362

 
2,539

Net cash provided by operating activities
57,069

 
53,758

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(17,032
)
 
(15,694
)
Acquisition of businesses
(6,031
)
 
(7,500
)
Net cash used in investing activities
(23,063
)
 
(23,194
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Repayments of long-term debt

 
(5,253
)
Payment of business acquisition liabilities
(800
)
 

Net proceeds from initial public offering
20,963

 

Net proceeds from issuance of common stock
1,046

 
545

Purchase of common stock

 
(10,000
)
Excess tax benefit related to nonqualified stock options
(2,644
)
 
54

Net cash provided by/(used in) financing activities
18,565

 
(14,654
)
 
 
 
 
Effect of foreign exchange rate on cash
(83
)
 
(282
)
 
 
 
 
Net increase/(decrease) in cash and cash equivalents
52,488

 
15,628

Cash and cash equivalents, beginning of period
142,668

 
111,701

Cash and cash equivalents, end of period
$
195,156

 
$
127,329

 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
Interest paid
39

 
275

Income taxes paid
$
36,317

 
$
25,688







The following is a reconciliation of Adjusted EBITDA (unaudited) to net income for the periods presented:
 
Three Months Ended
 
Nine Months Ended
(In thousands, except percentages)
September 30, 2012
 
September 30, 2011
 
September 30, 2012
 
September 30, 2011
Net Income
$
16,487

 
$
16,863

 
$
53,064

 
$
47,214

Interest (income)/expense, net
(13
)
 
(5
)
 
(75
)
 
52

Provision for income taxes
10,528

 
9,494

 
32,495

 
26,243

Depreciation and amortization
4,612

 
4,326

 
13,500

 
12,202

EBITDA
31,614

 
30,678

 
98,984

 
85,711

Stock-based compensation
1,545

 
765

 
3,682

 
2,151

Provision for legal settlements
30

 
(78
)
 
(801
)
 
306

Change in fair value of contingent consideration
63

 
30

 
23

 
182

Adjusted EBITDA
$
33,252

 
$
31,395

 
$
101,888

 
$
88,350

Adjusted EBITDA as a percentage of sales
35.1
%
 
37.3
%
 
35.7
%
 
36.3
%


Contact:
Ed Joyce
Director, Investor Relations
Phone: (610) 930-1800
Email:     investors@globusmedical.com
www.globusmedical.com