GMED 6.30.14 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): August 5, 2014
 
 
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 August 5, 2014 we issued a press release reporting, among other things, our sales and operating results for the three and six month periods ended June 30, 2014. 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 August 5, 2014


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:
August 5, 2014
/s/ RICHARD A. BARON
 
 
 
 
 
Richard A. Baron
 
 
Senior Vice President
 
 
Chief Financial Officer



EXHIBIT LIST
Exhibit No.
Description
 
 
99.1
Press Release dated August 5, 2014



GMED 6.30.14 8K Exhibit 99.1


Exhibit 99.1


Globus Medical Reports 2014 Second Quarter Results

AUDUBON, PA, August 5, 2014: Globus Medical, Inc. (NYSE:GMED), a leading musculoskeletal implant manufacturer, today announced its financial results for the second quarter ended June 30, 2014.

Worldwide sales were $113.6 million, a 6.1% increase over the second quarter 2013
Second quarter net income was $20.6 million, compared to $7.4 million last year
Earnings per diluted share (EPS) were $0.22 in the quarter, compared to $0.08 in 2013
Non-GAAP EPS was $0.23, up from $0.21 in the second quarter of 2013
Quarterly Non-GAAP Adjusted EBITDA was 35.4%, an increase over the 34.0% in 2013
 
David Paul, Chairman and CEO said, "Quarterly sales were up 6.1% over last year, and we continue to execute and produce strong profitability while maintaining our steadfast focus on product innovation. This quarter we launched five new products including CREOTM Threaded, part of our growing new pedicle screw platform, CREO. CREO Threaded offers controlled gradual correction for complex deformity users who prefer threaded locking caps and addresses the largest segment of the spine market. We are confident in our long term growth prospects and our ability to sustain our industry leading profitability by continued execution of our business model."

Second quarter net sales were $113.6 million, as compared to $107.0 million last year, representing a 6.1% increase. Sales in the US and international grew by 3.6% and 34.1%, respectively, over the same quarter in 2013. International sales currently represent 10.5% of total sales.

Non-GAAP Adjusted EBITDA for the quarter was 35.4% of net sales, compared to 34.0% for the second quarter last year. Non-GAAP net income for the quarter, which excludes the provisions for litigation, was $21.5 million, or $0.23 per diluted share, as compared to $20.0 million, or $0.21 per diluted share, for 2013. GAAP net income for the quarter was $20.6 million, or $0.22 per diluted share, as compared to $7.4 million, or $0.08 per diluted share, in the second quarter of 2013.

Cash, cash equivalents and marketable securities ended the quarter at $313.0 million, increasing by $8.1 million during the quarter. The company remains debt free.

Revenue and Non-GAAP Diluted Earnings per Share Guidance
The company today revised its 2014 revenue guidance and now expects full year net sales to be in the range of $460 to $465 million. Full year Non-GAAP diluted earnings per share guidance remained unchanged, and is expected to be in the range of $0.90 to $0.92 per share of common stock.


Conference Call Information
Globus Medical will hold a teleconference to discuss its 2014 first 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 Tuesday, August 19, 2014. 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 2863-3213.
 
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)/expense, net and other non-operating expenses, provision for income taxes, depreciation and amortization, stock-based compensation, changes in the fair value of acquisition-related contingent consideration, provision for litigation and provision for litigation - cost of goods sold, 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, 2014 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, which is 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 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.

Adjusted EBITDA, non-GAAP net income, non-GAAP diluted earnings per share and Free Cash Flow 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 and Free Cash Flow 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,
2014
 
June 30,
2013
 
June 30,
2014
 
June 30,
2013
Sales
$
113,573

 
$
107,009

 
$
227,783

 
$
212,027

Cost of goods sold
26,583

 
23,501

 
51,895

 
46,994

Provision for litigation - cost of goods sold
0

 
1,260

 
0

 
1,260

Gross profit
86,990

 
82,248

 
175,888

 
163,773

 
 
 
 
 
 
 
 
 Operating expenses:
 
 
 
 
 
 
 
Research and development
7,694

 
7,037

 
15,137

 
13,884

Selling, general and administrative
46,425

 
45,750

 
93,103

 
91,147

Provision for litigation
1,318

 
18,269

 
3,853

 
18,319

Total operating expenses
55,437

 
71,056

 
112,093

 
123,350

 
 
 
 
 
 
 
 
Operating income
31,553

 
11,192

 
63,795

 
40,423

Other income/(expense), net
325

 
(221
)
 
570

 
58

Income before income taxes
31,878

 
10,971

 
64,365

 
40,481

Income tax provision
11,231

 
3,545

 
22,579

 
13,164

 
 
 
 
 
 
 
 
Net income
$
20,647

 
$
7,426

 
$
41,786

 
$
27,317

 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$
0.22

 
$
0.08

 
$
0.44

 
$
0.30

Diluted
$
0.22

 
$
0.08

 
$
0.44

 
$
0.29

Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
94,212

 
92,415

 
93,965

 
92,110

Diluted
95,480

 
93,970

 
95,328

 
93,772








GLOBUS MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
June 30, 2014
 
December 31, 2013
 
(unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
136,500

 
$
89,962

Short-term marketable securities
139,765

 
148,962

Accounts receivable, net of allowances of $1,554 and $1,581, respectively
65,054

 
62,414

Inventories
76,362

 
70,350

Prepaid expenses and other current assets
5,412

 
5,080

Income taxes receivable
4,690

 
2,723

Deferred income taxes
39,317

 
37,317

Total current assets
467,100

 
416,808

Property and equipment, net of accumulated depreciation of $109,342 and $99,910, respectively
65,572

 
64,150

Long-term marketable securities
36,754

 
36,528

Intangible assets, net
29,271

 
29,537

Goodwill
18,372

 
18,372

Other assets
931

 
909

Total assets
$
618,000

 
$
566,304

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
8,814

 
10,073

Accounts payable to related party
4,159

 
2,656

Accrued expenses
51,366

 
51,125

Income taxes payable
212

 
2,358

Business acquisition liabilities, current
1,419

 
1,730

Total current liabilities
65,970

 
67,942

Business acquisition liabilities, net of current portion
15,449

 
15,528

Deferred income taxes
4,147

 
6,385

Other liabilities
4,124

 
4,089

Total liabilities
89,690

 
93,944

Commitments and contingencies
 
 
 
Equity:
 
 
 
Common stock; $0.001 par value. Authorized 785,000 shares; issued and outstanding 94,367 and 93,443 shares at June 30, 2014 and December 31, 2013, respectively
94

 
93

Additional paid-in capital
168,008

 
153,987

Accumulated other comprehensive loss
(867
)
 
(1,009
)
Retained earnings
361,075

 
319,289

Total equity
528,310

 
472,360

Total liabilities and equity
$
618,000

 
$
566,304







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

 
Six Months Ended
(In thousands)
June 30,
2014
 
June 30,
2013
Cash flows from operating activities:
 
 
 
Net income
$
41,786

 
$
27,317

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
10,684

 
9,352

Amortization of premium on marketable securities
1,566

 
755

Provision for excess and obsolete inventories
3,535

 
3,463

Stock-based compensation
3,550

 
2,478

Allowance for doubtful accounts
112

 
89

Change in deferred income taxes
(4,231
)
 
(5,806
)
(Increase)/decrease in:
 
 
 
Accounts receivable
(2,491
)
 
(4,410
)
Inventories
(9,494
)
 
(12,955
)
Prepaid expenses and other assets
(384
)
 
(2,501
)
Increase/(decrease) in:
 
 
 
Accounts payable
(821
)
 
243

Accounts payable to related party
1,503

 
2,645

Accrued expenses and other liabilities
385

 
15,824

Income taxes payable/receivable
(4,118
)
 
(9,238
)
Net cash provided by operating activities
41,582

 
27,256

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of marketable securities
(105,015
)
 
(144,062
)
Maturities of marketable securities
95,292

 
3,900

Sales of marketable securities
17,155

 

Purchases of property and equipment
(12,231
)
 
(12,956
)
Net cash used in investing activities
(4,799
)
 
(153,118
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Payment of business acquisition liabilities
(600
)
 
(700
)
Proceeds from issuance of common stock
6,631

 
4,254

Excess tax benefit related to nonqualified stock options
3,841

 
2,187

Net cash provided by financing activities
9,872

 
5,741

 
 
 
 
Effect of foreign exchange rate on cash
(117
)
 
35

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

 
(120,086
)
Cash and cash equivalents, beginning of period
89,962

 
212,400

Cash and cash equivalents, end of period
$
136,500

 
$
92,314

 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
Interest paid
25

 
30

Income taxes paid
$
27,122

 
$
25,891







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,
2014
 
June 30,
2013
 
June 30,
2014
 
June 30,
2013
Net income
$
20,647

 
$
7,426

 
$
41,786

 
$
27,317

Interest income, net
(195
)
 
(144
)
 
(396
)
 
(190
)
Provision for income taxes
11,231

 
3,545

 
22,579

 
13,164

Depreciation and amortization
5,387

 
4,742

 
10,684

 
9,352

EBITDA
37,070

 
15,569

 
74,653

 
49,643

Stock-based compensation
1,623

 
1,166

 
3,550

 
2,478

Provision for litigation
1,318

 
18,269

 
3,853

 
18,319

Provision for litigation - cost of goods sold

 
1,260

 

 
1,260

Change in fair value of acquisition-related contingent consideration
143

 
74

 
153

 
144

Adjusted EBITDA
$
40,154

 
$
36,338

 
$
82,209

 
$
71,844

Adjusted EBITDA as a percentage of sales
35.4
%
 
34.0
%
 
36.1
%
 
33.9
%
Non-GAAP Net Income Reconciliation Table:
(Unaudited)
Three Months Ended
 
Six Months Ended
(In thousands)
June 30,
2014
 
June 30,
2013
 
June 30,
2014
 
June 30,
2013
Net income
$
20,647

 
$
7,426

 
$
41,786

 
$
27,317

Provision for litigation, net of taxes
854

 
11,802

 
2,497

 
11,834

Provision for litigation - cost of goods sold, net of taxes

 
814

 

 
814

Non-GAAP Net Income
$
21,501


$
20,042

 
$
44,283

 
$
39,965

Non-GAAP Diluted Earnings Per Share Reconciliation Table:
(Unaudited)
Three Months Ended
 
Six Months Ended
(Per share amounts)
June 30,
2014
 
June 30,
2013
 
June 30,
2014
 
June 30,
2013
Diluted earnings per share, as reported
$
0.22

 
$
0.08

 
$
0.44

 
$
0.29

Provision for litigation, net of taxes
0.01

 
0.12

 
0.02

 
0.13

Provision for litigation - cost of goods sold, net of taxes

 
0.01

 

 
0.01

Non-GAAP diluted earnings per share
$
0.23

 
$
0.21

 
$
0.46

 
$
0.43







Non-GAAP Free Cash Flow Reconciliation Table:
(Unaudited)
Three Months Ended
 
Six Months Ended
(In thousands)
June 30,
2014
 
June 30,
2013
 
June 30,
2014
 
June 30,
2013
Net cash provided by operating activities
$
12,350

 
$
8,980

 
$
41,582

 
$
27,256

Purchases of property and equipment
(6,067
)
 
(6,184
)
 
(12,231
)
 
(12,956
)
Non-GAAP free cash flow
$
6,283

 
$
2,796

 
$
29,351

 
$
14,300

The following table highlights certain information related to our liquidity and capital resources:
(In thousands)
June 30,
2014
 
December 31,
2013
 
(unaudited)
 
Cash and cash equivalents
$
136,500

 
$
89,962

Short-term marketable securities
139,765

 
148,962

Long-term marketable securities
36,754

 
36,528

Total cash, cash equivalents and marketable securities
$
313,019

 
$
275,452

 
 
 
 
Available borrowing capacity under revolving credit facility
50,000

 
50,000

Working capital
$
401,130

 
$
348,866


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