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

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.--(BUSINESS WIRE)-- RTI Biologics Inc. (RTI) (NAS: 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 Processhave 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