RTI Biologics Announces 2012 Fourth Quarter, Full Year Results, 2013 Financial Guidance

Company Will Hold Conference Call at 8:30 a.m. ET

ALACHUA, Fla.--()--RTI Biologics Inc. (RTI) (Nasdaq:RTIX), a leading provider of orthopedic and other biologic implants, reported operating results for the fourth quarter and full year of 2012 as follows:

Quarterly Highlights:

  • Achieved quarterly revenues of $44.6 million, a 4 percent increase over the fourth quarter of 2011.
  • Achieved quarterly net income of $2.3 million, or $0.04 per fully diluted share
  • Achieved quarterly revenues of $5.8 million in the dental business, a 21 percent increase over the fourth quarter of 2011.
  • Achieved quarterly revenues of $10.3 million in the spine business, a 19 percent increase over the fourth quarter of 2011.
  • Achieved quarterly revenues of $7.4 million in the bone graft substitutes and general orthopedic (BGS/GO) business, a 6 percent increase over the fourth quarter of 2011.

2012 Full Year Highlights:

  • Achieved record annual revenues of $178.1 million, a 5 percent increase over 2011.
  • Achieved annual net income of $8.4 million, or $0.15 per fully diluted share. Excluding a pre-tax litigation settlement charge of $2.4 million, or $0.03 per fully diluted share, taken in the second quarter, the company achieved annual net income per fully diluted share of $0.18.
  • Achieved annual revenues of $54.6 million in the U.S. direct distribution organization, a 6 percent increase over 2011.
  • Achieved annual revenue growth in every business with the exception of the spine business.
  • Launched or released for distribution 18 new implants or implant enhancements, which accounted for more than $2 million of revenue for the year.
  • Achieved operating cash flow of $20.8 million.

Fourth Quarter 2012

Worldwide revenues of $44.6 million for the fourth quarter of 2012 increased 4 percent compared to the fourth quarter of 2011. Domestic revenues of $40.1 million for the fourth quarter of 2012 grew by 6 percent compared to the fourth quarter of 2011, primarily based on the strength of the dental, spine and BGS/GO businesses and were offset by weakness in the surgical specialties and sports medicine businesses. International revenues of $4.5 million for the fourth quarter of 2012 decreased 12 percent as compared to the fourth quarter of 2011. On a constant currency basis, international revenues decreased 9 percent as compared to the fourth quarter of 2011.

For the fourth quarter of 2012, the company reported net income of $2.3 million and net income per fully diluted share of $0.04, based on 56.3 million fully diluted shares outstanding, compared to net income of $2.4 million or $0.04 per fully diluted share for the fourth quarter of 2011, based on 55.7 million fully diluted shares outstanding.

“Revenues in the fourth quarter met expectations and were driven primarily by continued growth in our dental, spine and BGS/GO businesses,” said Brian K. Hutchison, president and chief executive officer of RTI. “Overall, we are pleased with our growth for the quarter, despite the unanticipated impact on direct distribution revenue due to customer reaction to the FDA warning letter in the U.S. that was received in October 2012. International revenues were negatively impacted by inaccuracies in European media coverage about the company and the tissue industry. We continue to work through these issues and will bring them to resolution.”

Full Year 2012

Worldwide revenues of $178.1 million for the full year of 2012 were up 5 percent compared to 2011. Domestic revenues of $156.8 million for the full year of 2012 were up 6 percent compared to 2011 primarily based on the strength of the dental, BGS/GO, and sports medicine businesses. International revenues of $21.3 million for the full year of 2012 increased 1 percent compared to 2011 primarily based on the strength of the sports medicine and BGS/GO businesses. On a constant currency basis, international revenues increased 8 percent for the full year of 2012 compared to 2011.

For the full year of 2012, the company reported net income of $8.4 million and net income per fully diluted share of $0.15, based on 56.1 million fully diluted shares outstanding, compared to a net income of $8.4 million and net income per fully diluted share of $0.15, based on 55.4 million fully diluted shares outstanding. Excluding a pre-tax litigation charge of $2.4 million, or $0.03 cents per fully diluted share, taken in the second quarter, net income per fully diluted share for the full year 2012 was $0.18.

Fiscal 2013 and First Quarter Outlook

The company expects full year revenues for 2013 to be between $178 million and $182 million. Full year net income per fully diluted share is expected to be in the range of $0.17 to $0.19, based on 56.7 million fully diluted shares outstanding. In 2013, the company will make investments in distribution, marketing and development activities to support the launch of its direct surgical specialties business and expand its presence in general orthopedics.

For the first quarter of 2013, the company expects revenues to be between $38 million and $39 million, and net income per fully diluted share to be approximately $0.02.

“Due to customer reaction to the FDA warning letter and inaccuracies in media coverage in 2012, we expect a weaker first half of the year. Following the anticipated closure of the warning letter, expansion of our direct distribution business and the launch of several new implants, we expect the second half of the year to be strong,” said Hutchison. “We also expect that the investments we are making in new products and direct distribution, combined with our active business development efforts, will accelerate our future revenue growth.”

Conference Call

RTI will host a conference call and simultaneous audio webcast to discuss the fourth quarter and full year results at 8:30 a.m. ET today. The conference call can be accessed by dialing (877) 383-7419. The webcast can be accessed through the investor section of RTI’s website at www.rtix.com. A replay of the conference call will be available on the RTI website following the call.

About RTI Biologics Inc.

RTI Biologics Inc. is a leading provider of sterile biologic implants for surgeries around the world with a commitment to advancing science, safety and innovation. RTI prepares human donated tissue and animal tissue for transplantation through extensive testing and screening and using proprietary processes. These allograft and xenograft implants are used in orthopedic, dental and other specialty surgeries.

RTI’s innovations continuously raise the bar of science and safety for biologics – from being the first company to offer precision-tooled bone implants and assembled technology to maximize each gift of donation, to inventing validated sterilization processes that include viral inactivation steps. The BioCleanse® Tissue Sterilization Process, the Tutoplast® Tissue Sterilization Process and the Cancelle™ SP Demineralization Process have a combined record of more than four million implants distributed with zero incidence of implant-associated infection. These processes have been validated by tissue type to inactivate or remove viruses, bacteria, fungi and spores from the tissue while maintaining biocompatibility and functionality.

RTI’s worldwide corporate headquarters are located in Alachua, Fla., with international locations in Germany and France. The company is accredited by the American Association of Tissue Banks in the United States and is a member of AdvaMed.

Forward-Looking Statement

This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s current expectations, estimates and projections about our industry, our management's beliefs and certain assumptions made by our management. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, except for historical information, any statements made in this communication about anticipated financial results, growth rates, new product introductions, future operational improvements and results or regulatory actions or approvals or changes to agreements with distributors also are forward-looking statements. These statements are not guarantees of future performance and are subject to risks and uncertainties, including the risks described in public filings with the U.S. Securities and Exchange Commission (SEC). Our actual results may differ materially from the anticipated results reflected in these forward-looking statements. Copies of the company's SEC filings may be obtained by contacting the company or the SEC or by visiting RTI's website at www.rtix.com or the SEC's website at www.sec.gov.

RTI BIOLOGICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except share and per share data)
(Unaudited)
 
  Three Months Ended   Twelve Months Ended
December 31, December 31,
  2012       2011     2012       2011  
Revenues:
Tissue distribution $ 42,837 $ 41,342 $ 171,703 $ 162,855
Other revenues   1,770     1,589     6,410     6,461  
Total revenues 44,607 42,931 178,113 169,316
Costs of processing and distribution   22,859     23,096     92,896     92,102  
Gross profit   21,748     19,835     85,217     77,214  
 
Expenses:
Marketing, general and administrative 15,209 13,817 58,376 55,576
Research and development 2,952 2,399 12,231 9,806
Litigation settlement - - 2,350 -
Asset abandonments   2     3     20     61  
Total expenses   18,163     16,219     72,977     65,443  
Operating income   3,585     3,616     12,240     11,771  
Total other income (expense) - net   66     1     204     (167 )
Income before income tax provision 3,651 3,617 12,444 11,604
Income tax provision   (1,380 )   (1,247 )   (4,042 )   (3,226 )
Net income $ 2,271   $ 2,370   $ 8,402   $ 8,378  
 
Net income per common share - basic $ 0.04   $ 0.04   $ 0.15   $ 0.15  
Net income per common share - diluted $ 0.04   $ 0.04   $ 0.15   $ 0.15  
Weighted average shares outstanding - basic   55,968,910     55,388,262     55,861,957     55,150,886  
Weighted average shares outstanding - diluted   56,268,839     55,708,396     56,068,795     55,354,675  
 
RTI BIOLOGICS, INC. AND SUBSIDIARIES
Reconciliation of Net Income and Net Income Per Diluted Share to
Adjusted Net Income and Adjusted Net Income Per Diluted Share
(In thousands except per share data)
(Unaudited)
 
 
  Twelve Months Ended
December 31, 2012   December 31, 2011
  Amount   Amount
Net per Diluted Net per Diluted
Income Share Income Share
 
As reported $ 8,402 $ 0.15 $ 8,378 $ 0.15
Litigation settlement charge,
net of tax effect (1)   1,444     0.03   -   -
Adjusted $ 9,846   $ 0.18 $ 8,378 $ 0.15
 
 
 
 
 
(1) Litigation settlement charge, net of tax effect, as follows:
 
Litigation settlement charge $ 2,350
Tax effect on litigation settlement charge   (906 )
Litigation settlement charge, net of tax effect $ 1,444  
 

Use of Non-GAAP Financial Measures

To supplement RTI Biologic’s condensed consolidated financial statements presented on a GAAP basis, the company discloses certain non-GAAP financial measures that exclude certain amounts, including non-GAAP net income and non-GAAP net income per fully diluted share. These non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States. Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP measures are included in the reconciliation above.

The following is an explanation of the adjustment that management excluded as part of the non-GAAP measures for the year ended December 31, 2012 as well as the reasons for excluding the individual item:

Litigation settlement – This adjustment represents a charge and relates to a litigation settlement of certain BTS related lawsuits. Management removes the amount of the litigation settlement charge from the Company’s operating results to assist in assessing its operating performance in the current period and to supplement a comparison to the Company’s past operating performance.

Material Limitations Associated with the Use of Non-GAAP Financial Measures

Non-GAAP net income and non-GAAP net income per fully diluted share should not be considered in isolation, or as a replacement for GAAP measures.

Usefulness of Non-GAAP Financial Measures to Investors

The Company believes that presenting non-GAAP net income and non-GAAP net income per fully diluted share in addition to the related GAAP measures provide investors greater transparency to the information used by management in its financial decision-making which excludes the litigation settlement charge. The Company further believes that providing this information better enables RTI Biologic’s investors to understand the Company’s overall core performance and to evaluate the methodology used by management to assess and measure such performance.

RTI BIOLOGICS, INC. AND SUBSIDIARIES
Condensed Consolidated Revenues
(In thousands)
(Unaudited)
 
  Three Months Ended   Twelve Months Ended
December 31, December 31,
  2012     2011   2012     2011
 
Revenues from tissue distribution:
Sports medicine $ 12,624 $ 13,241 $ 51,197 $ 48,122
Spine 10,334 8,662 38,866 39,722
Surgical specialties 6,761 7,745 30,897 30,328
Bone graft substitutes and general orthopedic 7,361 6,917 29,308 26,291
Dental 5,757 4,777 21,435 18,392
Other revenues   1,770   1,589   6,410   6,461
Total revenues $ 44,607 $ 42,931 $ 178,113 $ 169,316
Domestic revenues 40,096 37,808 156,803 148,315
International revenues   4,511   5,123   21,310   21,001
Total revenues $ 44,607 $ 42,931 $ 178,113 $ 169,316
 
RTI BIOLOGICS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
    December 31,   December 31,
  2012     2011  
Assets
Cash and cash equivalents $ 49,696 $ 46,178
Accounts receivable - net 21,694 20,674
Inventories - net 76,509 76,598
Prepaid and other assets   18,673     16,231  
Total current assets 166,572 159,681
 
Property, plant and equipment - net 49,644 44,532
Goodwill 2,062 -
Other assets - net   23,131     25,814  
Total assets $ 241,409   $ 230,027  
 
Liabilities and Stockholders' Equity
Accounts payable $ 11,949 $ 11,141
Accrued expenses and other current liabilities 25,397 24,028
Current portion of long-term obligations   116     448  
Total current liabilities 37,462 35,617
 
Deferred revenue 18,780 20,589
Long-term liabilities   1,175     1,402  
Total liabilities 57,417 57,608
Stockholders' equity:
Common stock and additional paid-in capital 414,504 411,741
Accumulated other comprehensive loss (1,776 ) (2,184 )
Accumulated deficit   (228,736 )   (237,138 )
Total stockholders' equity   183,992     172,419  
Total liabilities and stockholders' equity $ 241,409   $ 230,027  
 
RTI BIOLOGICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
    Three Months   Twelve Months
Ended December 31, Ended December 31,
  2012       2011     2012       2011  
Cash flows from operating activities:
Net income $ 2,271 $ 2,370 $ 8,402 $ 8,378
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization expense 2,079 2,024 7,993 8,026
Stock-based compensation 504 479 2,078 1,973
Amortization of deferred revenue (1,165 ) (1,166 ) (4,656 ) (4,353 )
Other items to reconcile to net cash
provided by operating activities   (185 )   1,646     6,986     13,743  
Net cash provided by operating activities   3,504     5,353     20,803     27,767  
Cash flows from investing activities:
Purchases of property, plant and equipment (4,245 ) (3,862 ) (11,089 ) (6,345 )
Patent and acquired intangible asset costs (5,381 ) (1,010 ) (6,772 ) (2,139 )
Other investing activities   -     -     49     -  
Net cash used in investing activities   (9,626 )   (4,872 )   (17,812 )   (8,484 )
Cash flows from financing activities:
Proceeds from exercise of common stock options 124 876 514 1,122
Payments on long-term obligations (82 ) (127 ) (471 ) (2,600 )
Other financing activities   494     282     474     282  
Net cash provided by (used in) financing activities   536     1,031     517     (1,196 )
Effect of exchange rate changes on cash and cash equivalents   40     (34 )   10     (121 )
Net (decrease) increase in cash and cash equivalents (5,546 ) 1,478 3,518 17,966
Cash and cash equivalents, beginning of period   55,242     44,700     46,178     28,212  
Cash and cash equivalents, end of period $ 49,696   $ 46,178   $ 49,696   $ 46,178  
 

Contacts

RTI Biologics Inc.
Robert Jordheim
Chief Financial Officer
rjordheim@rtix.com
or
Jenny Highlander, APR, 386-418-8888
Corporate Communications
jhighlander@rtix.com

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Contacts

RTI Biologics Inc.
Robert Jordheim
Chief Financial Officer
rjordheim@rtix.com
or
Jenny Highlander, APR, 386-418-8888
Corporate Communications
jhighlander@rtix.com