Friday, March 4, 2016

News: Globus Medical Reports Full Year and Fourth Quarter 2015 Results

AUDUBON, Pa., Feb. 24, 2016 (GLOBE NEWSWIRE) -- Globus Medical, Inc. (NYSE:GMED), a leading musculoskeletal implant manufacturer, today announced its financial results for the fourth quarter and year ended December 31, 2015.
Fourth Quarter:
  • Worldwide sales increased 10.7% as reported to $142.6 million, or 11.5% on a constant currency basis
  • Fourth quarter net income was $37.6 million
  • Earnings per fully diluted share were $0.39
  • Non-GAAP Adjusted EBITDA was 37.7% of sales
Full Year 2015:
  • Worldwide sales increased 14.8% as reported to $544.8 million, or 16.0% on a constant currency basis
  • Net income for the year was $112.8 million
  • Earnings per fully diluted share were $1.17
  • Non-GAAP Adjusted EBITDA was 36.2% of sales

“2015 was a great year for Globus Medical.  Sales grew by 14.8% as reported, reaching $544.8 million, or 16.0% on a constant currency basis.  Full year Adjusted EBITDA was 36.2% of sales.  We launched 14 new products, made steady progress on our robotics project, continued to develop our trauma product line and successfully integrated the Branch Medical acquisition to increase our in-house manufacturing capabilities,” commented David Paul, Chairman and CEO.  “This performance was the result of continued execution of our strategy of robust product innovation, sales force expansion, and disciplined expense control.  I am very proud of the performance of our team in 2015 and remain confident in our ability to increase profitability at or above our sales growth rate over time.”

Anthony Williams, President, added, “Our fourth quarter sales performance capped a strong year of profitable growth.  Fourth quarter worldwide sales were a record $142.6 million and Adjusted EBITDA reached a high point at 37.7% of sales.  We achieved this level of profitability despite continued investments in our trauma and robotics initiatives during the quarter.”

Net income for the year ending December 31, 2015 was $112.8 million, or $1.17 per diluted share, as compared to $92.5 million, or $0.97 per diluted share, for 2014.  For the quarter ending December 31, 2015, net income was $37.6 million, or $0.39 per diluted share, as compared to $27.6 million, or $0.29 per diluted share, for 2014.  As previously announced, we settled outstanding intellectual property litigation with DePuy Synthes, which resulted in a nonrecurring gain of $0.07 in the fourth quarter.  Excluding the provision for litigation, net of taxes, net income for the year ending December 31, 2015 was 105.8 million, or $1.10 per diluted share, and for the quarter ending December 31, 2015, net income was $30.3 million, or $0.32 per diluted share.

Non-GAAP Adjusted EBITDA for the year and quarter ending December 31, 2015 were 36.2% and 37.7% of sales, respectively.  This compares to non-GAAP Adjusted EBITDA of 36.1% and 36.7% of sales for year and quarter ending December 31, 2014, respectively.

Cash, cash equivalents and marketable securities ended the year at $329.8 million.  The company remains debt free.

As previously announced, the company expects 2016 sales to be approximately $583 million and earnings per fully diluted share to be approximately $1.20 per share.

Conference Call Information
Globus Medical will hold a teleconference to discuss its 2015 fourth quarter and full year 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 Wednesday, March 9, 2016.  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 2863-3216.

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 December 31, 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 and net income on a constant currency basis as the current and prior period sales and net income translated at the same predetermined exchange rate.  We believe that sales and net income on a constant currency basis provides insight to the comparative increase or decrease in period sales and net income, 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  and net income 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 and net income 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 Year Ended
 December 31, December 31, December 31,  December 31,
(In thousands, except per share amounts) 2015  2014  2015  2014
Sales$142,587  $128,801  $544,753  $474,371 
Cost of goods sold35,065  31,276  132,803  110,857 
Gross profit107,522  97,525  411,950  363,514 
        
Operating expenses:       
Research and development9,836  8,404  36,982  31,687 
Selling, general and administrative53,390  47,709  214,014  187,798 
Provision for litigation(11,701) 1,768  (11,268) 5,667 
Total operating expenses51,525  57,881  239,728  225,152 
        
Operating income55,997  39,644  172,222  138,362 
Other income/(expense), net236  (166) 583  280 
Income before income taxes56,233  39,478  172,805  138,642 
Income tax provision18,632  11,840  60,021  46,157 
        
Net income$37,601  $27,638  $112,784  $92,485 
        
Earnings per share:       
Basic$0.39  $0.29  $1.19  $0.98 
Diluted$0.39  $0.29  $1.17  $0.97 
Weighted average shares outstanding:       
Basic95,273  94,573  95,046  94,227 
Diluted96,214  95,670  96,073  95,457 

GLOBUS MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
 December 31, December 31,
(In thousands, except par value) 2015 2014
 (unaudited)  
ASSETS   
Current assets:   
Cash and cash equivalents$60,152  $82,265 
Restricted cash26,119  23,370 
Short-term marketable securities220,877  146,439 
Accounts receivable, net of allowances of $2,513 and $1,647, respectively77,681  75,430 
Inventories105,260  90,945 
Prepaid expenses and other current assets7,351  5,742 
Income taxes receivable8,672  5,772 
Deferred income taxes38,687  40,062 
Total current assets544,799  470,025 
Property and equipment, net of accumulated depreciation of $139,114 and $118,544, respectively114,743  69,475 
Long-term marketable securities48,762  75,347 
Intangible assets, net33,242  34,529 
Goodwill91,964  53,196 
Other assets590  975 
Total assets$834,100  $703,547 
    
LIABILITIES AND EQUITY   
Current liabilities:   
Accounts payable$15,971  $15,904 
Accounts payable to related-party  5,359 
Accrued expenses53,769  61,499 
Income taxes payable763  569 
Business acquisition liabilities, current12,188  6,081 
Total current liabilities82,691  89,412 
Business acquisition liabilities, net of current portion21,126  20,195 
Deferred income taxes13,260  5,166 
Other liabilities1,699  3,320 
Total liabilities118,776  118,093 
Commitments and contingencies   
Equity:   
Common stock; $0.001 par value.  Authorized 785,000 shares; issued and outstanding 95,320 and 94,706 shares at December 31, 2015 and 2014, respectively95  95 
Additional paid-in capital192,629  175,242 
Accumulated other comprehensive loss(1,958) (1,657)
Retained earnings524,558  411,774 
Total equity715,324  585,454 
Total liabilities and equity$834,100  $703,547 

GLOBUS MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
 Year Ended
 December 31, December 31,
(In thousands) 2015  2014
Cash flows from operating activities:   
Net income$112,784  $92,485 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization24,084  21,754 
Amortization of premium on marketable securities3,354  2,680 
Write-down for excess and obsolete inventories9,924  6,962 
Stock-based compensation expense9,639  7,111 
Excess tax benefit related to nonqualified stock options(2,050) (4,408)
Allowance for doubtful accounts1,465  318 
Change in deferred income taxes6,235  (4,379)
Increase in:   
Restricted cash(2,749) (23,370)
Accounts receivable(4,193) (12,667)
Inventories(19,327) (18,001)
Prepaid expenses and other assets(1,203) (249)
Increase/(decrease) in:   
Accounts payable(3,825) 4,628 
Accounts payable to related-party(5,359) 2,703 
Accrued expenses and other liabilities(6,165) 4,018 
Income taxes payable/receivable(657) (413)
Net cash provided by operating activities121,957  79,172 
    
Cash flows from investing activities:   
Purchases of marketable securities(297,707) (251,422)
Maturities of marketable securities188,702  184,567 
Sales of marketable securities57,728  27,737 
Purchases of property and equipment(50,760) (24,754)
Acquisition of businesses, net of cash acquired(48,513) (36,128)
Net cash used in investing activities(150,550) (100,000)
    
Cash flows from financing activities:   
Payment of business acquisition liabilities(1,200) (1,200)
Proceeds from exercise of stock options5,477  9,738 
Excess tax benefit related to nonqualified stock options2,050  4,408 
Net cash provided by financing activities6,327  12,946 
    
Effect of foreign exchange rate on cash153  185 
    
Net decrease in cash and cash equivalents(22,113) (7,697)
Cash and cash equivalents, beginning of period82,265  89,962 
Cash and cash equivalents, end of period$60,152  $82,265 
    
Supplemental disclosures of cash flow information:   
Interest paid9  32 
Income taxes paid$57,100  $51,096 

Supplemental Financial Information
Sales by Geographic Area:
 
(Unaudited)Three Months Ended Year Ended
(In thousands)December 31,
 2015
 December 31,
 2014
 December 31,
 2015
 December 31,
 2014
United States$131,051  $117,154  $498,191  $427,091 
International11,536  11,647  46,562  47,280 
Total sales$142,587  $128,801  $544,753  $474,371 

Sales by Product Category:
 
(Unaudited)Three Months Ended Year Ended
(In thousands)December 31,
 2015
 December 31,
 2014
 December 31,
 2015
 December 31,
 2014
Innovative Fusion$73,631  $70,496  $288,062  $270,852 
Disruptive Technology68,956  58,305  256,691  203,519 
Total sales$142,587  $128,801  $544,753  $474,371 

Liquidity and Capital Resources:
 
(Unaudited)December 31,
 2015
 December 31,
 2014
(In thousands)   
Cash and cash equivalents$60,152  $82,265 
Short-term marketable securities220,877  146,439 
Long-term marketable securities48,762  75,347 
Total cash, cash equivalents and marketable securities$329,791  $304,051 
    
Available borrowing capacity under revolving credit facility50,000  50,000 
Working capital$462,108  $380,613 

The following tables reconcile GAAP to Non-GAAP financial measures.
Non-GAAP Adjusted EBITDA Reconciliation Table:
    
(Unaudited)Three Months Ended Year Ended
(In thousands, except percentages)December 31,
 2015
 December 31,
 2014
 December 31,
 2015
 December 31,
 2014
Net income$37,601  $27,638  $112,784  $92,485 
Interest income, net(406) (228) (1,304) (805)
Provision for income taxes18,632  11,840  60,021  46,157 
Depreciation and amortization6,415  5,697  24,084  21,754 
EBITDA62,242  44,947  195,585  159,591 
Stock-based compensation expense2,704  1,900  9,639  7,111 
Provision for litigation(11,701) 1,768  (11,268) 5,667 
Change in fair value of contingent consideration and other acquisition related costs488  (1,353) 3,352  (937)
Adjusted EBITDA$53,733  $47,262  $197,308  $171,432 
Adjusted EBITDA as a percentage of sales37.7% 36.7% 36.2% 36.1%

Non-GAAP Net Income Reconciliation Table:
 
(Unaudited)Three Months Ended Year Ended
(In thousands)December 31,
 2015
 December 31,
 2014
 December 31,
 2015
 December 31,
 2014
Net income$37,601  $27,638  $112,784  $92,485 
Provision for litigation, net of taxes(7,270) 1,138  (6,991) 3,665 
Non-GAAP net income$30,331  $28,776  $105,793  $96,150 

Non-GAAP Diluted Earnings Per Share Reconciliation Table:
 
(Unaudited)Three Months Ended Year Ended
(Per share amounts)December 31,
 2015
 December 31,
 2014
 December 31,
 2015
 December 31,
 2014
Diluted earnings per share, as reported$0.39  $0.29  $1.17  $0.97 
Provision for litigation, net of taxes(0.07) 0.01  (0.07) 0.04 
Non-GAAP diluted earnings per share$0.32  $0.30  $1.10  $1.01 

Non-GAAP Free Cash Flow Reconciliation Table:
    
(Unaudited)Three Months Ended Year Ended
(In thousands)December 31,
 2015
 December 31,
 2014
 December 31,
 2015
 December 31,
 2014
Net cash provided by operating activities$44,080  $1,945  $121,957  $79,172 
Adjustment for impact of restricted cash734  23,370  2,749  23,370 
Purchases of property and equipment(14,154) (9,095) (50,760) (24,754)
Non-GAAP free cash flow$30,660  $16,220  $73,946  $77,788 

Non-GAAP Sales and Net Income on a Constant Currency Basis Comparative Table:
    
(Unaudited)Three Months Ended Percent Change
(In thousands, except percentages)December 31,
 2015
 December 31,
 2014
 Reported Constant
Currency
United States$131,051  $117,154  11.9% 11.9%
International11,536  11,647  (1.0%) 7.9%
Total sales$142,587  $128,801  10.7% 11.5%
          
Net Income$37,601  $27,638  36.0% 35.9%

(Unaudited)Year Ended Percent Change
(In thousands, except percentages)December 31,
 2015
 December 31,
 2014
 Reported Constant
Currency
United States$498,191  $427,091  16.6% 16.6%
International46,562  47,280  (1.5%) 10.2%
Total sales$544,753  $474,371  14.8% 16.0%
          
Net Income$112,784  $92,485  21.9% 23.7%

Contact:
Daniel Scavilla
Senior Vice President, Chief Financial Officer
Phone: (610) 930-1800

Published at Nasdaq GlobeNewswire

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