GMED 6.30.15 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): July 30, 2015
 
 
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:
 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o
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 July 30, 2015 we issued a press release reporting, among other things, our sales and operating results for the three and six month periods ended June 30, 2015. 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 July 30, 2015
 
 

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:
July 30, 2015
/s/ DANIEL T. SCAVILLA
 
 
 
 
 
Daniel T. Scavilla
 
 
Senior Vice President,
 
 
Chief Financial Officer


EXHIBIT LIST
Exhibit No.
Description
 
 
99.1
Press Release dated July 30, 2015




GMED 6.30.15 8K Exhibit 99.1


Exhibit 99.1


Globus Medical Reports Second Quarter 2015 Results
Reports Record Quarterly Sales and Increases Guidance


AUDUBON, PA, July 30, 2015: Globus Medical, Inc. (NYSE:GMED), a leading musculoskeletal implant manufacturer, today announced its financial results for the second quarter ended June 30, 2015.

Worldwide sales increased 17.6% to $133.6 million, or 19.1% on a constant currency basis
Second quarter net income increased 16.5% to $24.1 million
Fully diluted earnings per share (EPS) were $0.25
Non-GAAP Adjusted EBITDA was 35.0% of sales
Company increases 2015 guidance for sales to $524 million and EPS to $1.04

David Paul, Chairman and CEO said, “We are pleased to report second quarter sales of $133.6 million, a year-over-year increase of 17.6% as reported and 19.1% on a constant currency basis. Once again the Globus team achieved strong sales growth and market share gains while maintaining strong profitability, with quarterly net income of $24.1 million, or 16.5% higher than the same quarter last year. During the second quarter, we also launched 5 new products and made further progress on integrating our two most recent acquisitions. We remain confident in our long term growth prospects and our ability to sustain our industry leading profitability by the continued execution of our strategy of introducing innovative products, expanding our U.S. and international sales footprint, and controlling our expenses.”

Second quarter sales in the U.S. grew by 19.5% over the second quarter of 2014. International sales increased by 1.2% over the second quarter of 2014 on an as reported basis and 15.4% on a constant currency basis.

Second quarter net income was $24.1 million, an increase of 16.5% over $20.6 million in the second quarter 2014. Fully diluted EPS for the second quarter was $0.25, as compared to $0.22 for the second quarter 2014.

Cash, cash equivalents and marketable securities ended the quarter at $281.2 million. The company remains debt free.

2015 Annual Guidance
The company today increased guidance on sales by $10 million to $524 million and earnings per share by $0.02 to $1.04.


Conference Call Information
Globus Medical will hold a teleconference to discuss its 2015 second quarter results 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, August 13, 2015. 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 passcode for the audio replay is 8132-2678.


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


Non-GAAP Financial Measures
To supplement our financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), management uses certain non-GAAP financial measures. For example, Adjusted EBITDA, which represents net income before interest income, 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 other acquisition related costs, and provisions for litigation, is useful as an additional measure of operating performance, and particularly as a measure of comparative operating performance from period to period, 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, asset base, 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. In addition, for the periods ended June 30, 2015 and for other comparative periods, we are presenting non-GAAP net income and non-GAAP diluted earnings per share, which represent net income and diluted earnings per share, respectively, before provisions for litigation, net of the tax effects of such provisions. We believe these non-GAAP measures are also useful indicators of our operating performance, and particularly as additional measures of comparative operative performance from period to period as they remove the effects of litigation, which we believe are not reflective of underlying business trends. We also define the non-GAAP measure of Free Cash Flow as the net cash provided by operating activities, adjusted for the impact of restricted cash, less the cash impact of purchases of property and equipment. We believe that this financial measure provides meaningful information for evaluating our overall financial performance for comparative periods as it facilitates an assessment of funds available to satisfy current and future obligations and fund acquisitions. Furthermore, we define the non-GAAP measure of sales on a constant currency basis as the current and prior period sales translated at the same predetermined exchange rate. We believe that this sales on a constant currency basis provides insight to the comparative increase or decrease in period sales, in dollar and percentage terms, excluding the effects of fluctuations in foreign currency exchange rates.

Adjusted EBITDA, non-GAAP net income, non-GAAP diluted earnings per share, Free Cash Flow and sales on a constant currency basis are not calculated in conformity with U.S. GAAP. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for financial measures prepared in accordance with U.S. GAAP. These measures do not include certain expenses that may be necessary to evaluate our liquidity or operating results. Our definitions of Adjusted EBITDA, non-GAAP net income, non-GAAP diluted earnings per share, Free Cash Flow, and sales on a constant currency basis may differ from that of other companies and therefore may not be comparable.

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 words such as “believe,” “may,” “might,” “could,” “will,” “aim,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “plan” and other similar terms. These forward-looking statements are based on our current assumptions, expectations and estimates of future events and trends. Forward-looking statements are only predictions and are subject to many risks, uncertainties and other factors that may affect our businesses and operations and could cause actual results to differ materially





from those predicted. These risks and uncertainties include, but are not limited to, factors affecting our quarterly results, our ability to manage our growth, our ability to sustain our profitability, demand for our products, our ability to compete successfully (including without limitation our ability to convince surgeons to use our products and our ability to attract and retain sales and other personnel), our ability to rapidly develop and introduce new products, our ability to develop and execute on successful business strategies, our ability to comply with laws and regulations that are or may become applicable to our businesses, our ability to safeguard our intellectual property, our success in defending legal proceedings brought against us, trends in the medical device industry, general economic conditions, and other risks. For a discussion of these and other risks, uncertainties and other factors that could affect our results, you should refer to the disclosure contained in our most recent annual report on Form 10-K filed with the Securities and Exchange Commission, including the sections labeled “Risk Factors” and “Cautionary Note Concerning Forward-Looking Statements,” and in our Forms 10-Q, Forms 8-K and other filings with the Securities and Exchange Commission. These documents are available at www.sec.gov. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for us to predict all risk factors and uncertainties, 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. Given these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements contained in this press release speak only as of the date of this press release. We undertake no obligation to update any forward-looking statements as a result of new information, events or circumstances or other factors arising or coming to our attention after the date hereof.






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

 
Three Months Ended
 
Six Months Ended
(In thousands, except per share amounts)
June 30,
2015
 
June 30,
2014
 
June 30,
2015
 
June 30,
2014
Sales
$
133,570

 
$
113,573

 
$
265,174

 
$
227,783

Cost of goods sold
32,579

 
26,583

 
64,686

 
51,895

Gross profit
100,991

 
86,990

 
200,488

 
175,888

 
 
 
 
 
 
 
 
 Operating expenses:
 
 
 
 
 
 
 
Research and development
9,081

 
7,694

 
17,737

 
15,137

Selling, general and administrative
54,506

 
46,425

 
106,795

 
93,103

Provision for litigation
374

 
1,318

 
406

 
3,853

Total operating expenses
63,961

 
55,437

 
124,938

 
112,093

 
 
 
 
 
 
 
 
Operating income
37,030

 
31,553

 
75,550

 
63,795

Other income, net
441

 
325

 
94

 
570

Income before income taxes
37,471

 
31,878

 
75,644

 
64,365

Income tax provision
13,417

 
11,231

 
26,942

 
22,579

 
 
 
 
 
 
 
 
Net income
$
24,054

 
$
20,647

 
$
48,702

 
$
41,786

 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$
0.25

 
$
0.22

 
$
0.51

 
$
0.44

Diluted
$
0.25

 
$
0.22

 
$
0.51

 
$
0.44

Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
94,979

 
94,212

 
94,884

 
93,965

Diluted
96,049

 
95,480

 
95,977

 
95,328






GLOBUS MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)
June 30,
2015
 
December 31, 2014
 
(unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
41,559

 
$
82,265

Restricted cash
24,682

 
23,370

Short-term marketable securities
158,247

 
146,439

Accounts receivable, net of allowances of $2,211 and $1,647, respectively
73,045

 
75,430

Inventories
101,046

 
90,945

Prepaid expenses and other current assets
6,811

 
5,742

Income taxes receivable
6,921

 
5,772

Deferred income taxes
42,445

 
40,062

Total current assets
454,756

 
470,025

Property and equipment, net of accumulated depreciation of $129,105 and $118,544, respectively
99,913

 
69,475

Long-term marketable securities
81,380

 
75,347

Intangible assets, net
33,951

 
34,529

Goodwill
93,561

 
53,196

Other assets
1,102

 
975

Total assets
$
764,663

 
$
703,547

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
18,326

 
$
15,904

Accounts payable to related-party

 
5,359

Accrued expenses
60,507

 
61,499

Income taxes payable
601

 
569

Business acquisition liabilities, current
12,299

 
6,081

Total current liabilities
91,733

 
89,412

Business acquisition liabilities, net of current portion
20,625

 
20,195

Deferred income taxes
5,787

 
5,166

Other liabilities
3,393

 
3,320

Total liabilities
121,538

 
118,093

Commitments and contingencies
 
 
 
Equity:
 
 
 
Common stock; $0.001 par value. Authorized 785,000 shares; issued and outstanding 95,067 and 94,706 shares at June 30, 2015 and December 31, 2014, respectively
95

 
95

Additional paid-in capital
184,243

 
175,242

Accumulated other comprehensive loss
(1,689
)
 
(1,657
)
Retained earnings
460,476

 
411,774

Total equity
643,125

 
585,454

Total liabilities and equity
$
764,663

 
$
703,547






GLOBUS MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
Six Months Ended
(In thousands)
June 30,
2015
 
June 30,
2014
Cash flows from operating activities:
 
 
 
Net income
$
48,702

 
$
41,786

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
11,579

 
10,684

Amortization of premium on marketable securities
1,370

 
1,566

Write-down for excess and obsolete inventories
4,730

 
3,535

Stock-based compensation
4,669

 
3,550

Excess tax benefit related to nonqualified stock options
(1,317
)
 
(3,841
)
Allowance for doubtful accounts
717

 
112

Change in deferred income taxes
(5,047
)
 
(4,231
)
(Increase)/decrease in:
 
 
 
Restricted cash
(1,312
)
 

Accounts receivable
1,591

 
(2,491
)
Inventories
(11,651
)
 
(9,494
)
Prepaid expenses and other assets
(897
)
 
(384
)
Increase/(decrease) in:
 
 
 
Accounts payable
(66
)
 
(821
)
Accounts payable to related-party
(5,359
)
 
1,503

Accrued expenses and other liabilities
(65
)
 
385

Income taxes payable/receivable
187

 
(277
)
Net cash provided by operating activities
47,831

 
41,582

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of marketable securities
(143,691
)
 
(105,015
)
Maturities of marketable securities
85,444

 
95,292

Sales of marketable securities
39,085

 
17,155

Purchases of property and equipment
(25,126
)
 
(12,231
)
Acquisition of businesses, net of cash acquired
(48,016
)
 

Net cash used in investing activities
(92,304
)
 
(4,799
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Payment of business acquisition liabilities
(600
)
 
(600
)
Proceeds from exercise of stock options
3,015

 
6,631

Excess tax benefit related to nonqualified stock options
1,317

 
3,841

Net cash provided by financing activities
3,732

 
9,872

 
 
 
 
Effect of foreign exchange rate on cash
35

 
(117
)
 
 
 
 
Net increase/(decrease) in cash and cash equivalents
(40,706
)
 
46,538

Cash and cash equivalents, beginning of period
82,265

 
89,962

Cash and cash equivalents, end of period
$
41,559

 
$
136,500

 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
Interest paid
9

 
25

Income taxes paid
$
31,880

 
$
27,122







Supplemental Financial Information

Sales by Geographic Area:
(Unaudited)
Three Months Ended
 
Six Months Ended
(In thousands)
June 30,
2015
 
June 30,
2014
 
June 30,
2015
 
June 30,
2014
United States
$
121,487

 
$
101,631

 
$
241,470

 
$
203,336

International
12,083

 
11,942

 
23,704

 
24,447

Total sales
$
133,570

 
$
113,573

 
$
265,174

 
$
227,783

 
Sales by Product Category:
(Unaudited)
Three Months Ended
 
Six Months Ended
(In thousands)
June 30,
2015
 
June 30,
2014
 
June 30,
2015
 
June 30,
2014
Innovative Fusion
$
71,571

 
$
65,860

 
$
141,941

 
$
132,630

Disruptive Technology
61,999

 
47,713

 
123,233

 
95,153

Total sales
$
133,570

 
$
113,573

 
$
265,174

 
$
227,783

Liquidity and Capital Resources:
(Unaudited)
June 30,
2015
 
December 31,
2014
(In thousands)
 
 
 
Cash and cash equivalents
$
41,559

 
$
82,265

Short-term marketable securities
158,247

 
146,439

Long-term marketable securities
81,380

 
75,347

Total cash, cash equivalents and marketable securities
$
281,186

 
$
304,051

 
 
 
 
Available borrowing capacity under revolving credit facility
50,000

 
50,000

Working capital
$
363,023

 
$
380,613

The following tables reconcile GAAP to Non-GAAP financial measures.
Non-GAAP Adjusted EBITDA Reconciliation Table:
(Unaudited)
Three Months Ended
 
Six Months Ended
(In thousands, except percentages)
June 30,
2015
 
June 30,
2014
 
June 30,
2015
 
June 30,
2014
Net income
$
24,054

 
$
20,647

 
$
48,702

 
$
41,786

Interest income, net
(278
)
 
(195
)
 
(556
)
 
(396
)
Provision for income taxes
13,417

 
11,231

 
26,942

 
22,579

Depreciation and amortization
5,905

 
5,387

 
11,579

 
10,684

EBITDA
43,098

 
37,070

 
86,667

 
74,653

Stock-based compensation
2,538

 
1,623

 
4,669

 
3,550

Provision for litigation
374

 
1,318

 
406

 
3,853

Change in fair value of contingent consideration and other acquisition related costs
730

 
143

 
1,314

 
153

Adjusted EBITDA
$
46,740

 
$
40,154

 
$
93,056

 
$
82,209

Adjusted EBITDA as a percentage of sales
35.0
%
 
35.4
%
 
35.1
%
 
36.1
%





Non-GAAP Net Income Reconciliation Table:
(Unaudited)
Three Months Ended
 
Six Months Ended
(In thousands)
June 30,
2015
 
June 30,
2014
 
June 30,
2015
 
June 30,
2014
Net income
$
24,054

 
$
20,647

 
$
48,702

 
$
41,786

Provision for litigation, net of taxes
240

 
854

 
261

 
2,497

Non-GAAP net income
$
24,294

 
$
21,501

 
$
48,963

 
$
44,283

Non-GAAP Diluted Earnings Per Share Reconciliation Table:
(Unaudited)
Three Months Ended
 
Six Months Ended
(Per share amounts)
June 30,
2015
 
June 30,
2014
 
June 30,
2015
 
June 30,
2014
Diluted earnings per share, as reported
$
0.25

 
$
0.22

 
$
0.51

 
$
0.44

Provision for litigation, net of taxes

 
0.01

 

 
0.02

Non-GAAP diluted earnings per share
$
0.25

 
$
0.23

 
$
0.51

 
$
0.46

Non-GAAP Free Cash Flow Reconciliation Table:
(Unaudited)
Three Months Ended
 
Six Months Ended
(In thousands)
June 30,
2015
 
June 30,
2014
 
June 30,
2015
 
June 30,
2014
Net cash provided by operating activities
$
13,161

 
$
12,350

 
$
47,831

 
$
41,582

Adjustment for impact of restricted cash
1,312

 

 
1,312

 

Purchases of property and equipment
(17,898
)
 
(6,067
)
 
(25,126
)
 
(12,231
)
Non-GAAP free cash flow
$
(3,425
)
 
$
6,283

 
$
24,017

 
$
29,351

Non-GAAP Sales on a Constant Currency Basis Reconciliation Table:
(Unaudited)
Three Months Ended
 
Percent Change
(In thousands, except percentages)
June 30,
2015
 
June 30,
2014
 
Reported
 
Constant Currency
United States
$
121,487

 
$
101,631

 
19.5
%
 
19.5
%
International
12,083

 
11,942

 
1.2
%
 
15.4
%
Total sales
$
133,570

 
$
113,573

 
17.6
%
 
19.1
%
(Unaudited)
Six Months Ended
 
Percent Change
(In thousands, except percentages)
June 30,
2015
 
June 30,
2014
 
Reported
 
Constant Currency
United States
$
241,470

 
$
203,336

 
18.8
 %
 
18.8
%
International
23,704

 
24,447

 
(3.0
%)
 
9.3
%
Total sales
$
265,174

 
$
227,783

 
16.4
 %
 
17.8
%


Contact:
Daniel Scavilla
Senior Vice President, Chief Financial Officer





Phone: (610) 930-1800
Email:     investors@globusmedical.com
www.globusmedical.com