RTI Biologics Announces 2008 First Quarter Results
Results Exceed Street Estimates on Revenues, EPS Integration After Merger Progressing Well
Company Will Hold Conference Call at 9:00 a.m. ET
Posted on Tue, May. 06, 2008
ALACHUA, Fla. --
RTI Biologics Inc. (RTI) (NASDAQ: RTIX), a leading processor of
orthopedic and other biologic implants, announced today that the
company's revenues were $29.9 million for the first quarter of 2008,
compared to $22.0 million for the first quarter 2007.
RTI Biologics completed its merger with Tutogen Medical Inc.
(Tutogen) on Feb. 27, 2008. The company's first quarter results
include revenues for Tutogen from Feb. 28 to March 31, 2008, which
were $6.4 million, as well as the impact of purchase accounting
adjustments and restructuring charges associated with the transaction
as described below.
For the first quarter ended March 31, 2008, the company reported
net income of $645,000, compared to net income of $134,000 for the
first quarter of 2007. Earnings per diluted share for the first
quarter 2008 were $0.02, compared to break even per diluted share for
the first quarter of 2007.
Net income for the first quarter ended March 31, 2008 included
purchase accounting adjustments and restructuring charges associated
with the Tutogen merger of $663,000 before income taxes, representing
an after tax expense of $433,000 and a decrease in income per diluted
share of $0.01. The adjustments relate to inventory valuation
adjustments of $235,000 included in the cost of goods sold,
intangibles amortization expense of $60,000 included in marketing,
general and administrative expenses, and $368,000 related to
restructuring charges.
During the first quarter ended March 31, 2008, the company
recorded pre-tax stock-based compensation expense totaling $448,000,
representing an after tax expense of $273,000 and a decrease in net
income per diluted share of $0.01 under the provisions of Statement of
Financial Accounting Standards No. 123R, Share-Based Payment. This
compares to stock-based compensation expense totaling $717,000 before
income taxes for the first quarter ended March 31, 2007, representing
an after tax expense of $437,000 and a decrease in net income per
diluted share of $0.01.
Quarterly Highlights
-- Successful completion of merger with Tutogen to form RTI
Biologics
-- Reported gross margins of 47 percent before purchase
accounting adjustments related to merger with Tutogen - a
year-over-year improvement of 1000 basis points and a
sequential gain of 300 basis points from the fourth quarter
2007
-- Achieved record sports medicine revenues, increasing by 71
percent over the first quarter 2007
-- Delivered initial shipment of Puros(R) allograft bone paste to
Zimmer Inc.
-- Launched fresh-stored osteochondral allograft line at the
American Academy of Orthopaedic Surgeons (AAOS)
"We are very pleased with our performance in the first quarter,"
said Brian K. Hutchison, RTI's chairman and CEO. "Since completing our
transformational merger with Tutogen Medical, integration of the two
companies is progressing extremely well, and we look forward to more
progress in the second quarter, our first full quarter together as RTI
Biologics."
First Quarter 2008 Revenue Analysis
As a result of the Tutogen merger, revenues in 2008 include the
new lines of business for dental and surgical specialties, as well as
additional international distribution originating from the German
facility.
Sports Medicine: Revenues from distribution of sports medicine
implants were $9.2 million for the first quarter compared to $5.4
million for first quarter 2007, representing an increase of 71
percent. Sports medicine revenues included $100,000 from Tutogen for
the combined period of operations.
Unit volumes for the first quarter increased by 42 percent due to
increased levels of tissue available for distribution and new product
introductions during 2007. Sports medicine revenue increases were also
favorably impacted by changes in the mix of implants distributed.
RTI believes the favorable trends seen over the past year in the
sports medicine business will continue. The company's growth in tissue
recoveries, demand for implants launched in 2007 and anticipated new
implant offerings in 2008, such as fresh osteochondral grafts and new
soft tissue offerings, will continue to drive significant growth in
this area.
Spinal: Revenues from distribution of spinal implants were $8.7
million for the first quarter 2008 compared to $9.5 million for the
first quarter 2007, representing a decrease of 8 percent. Spinal
revenues included $400,000 from Tutogen for the combined period of
operations. The revenue decrease primarily reflects a decrease in unit
volumes compared to the prior period.
Bone Graft Substitutes: Bone graft substitutes consist of all
moldable and flowable bone pastes, as well as all cancellous chips and
cubes. Revenues from distribution of bone graft substitutes were $4.8
million for the first quarter 2008 compared to $4.5 million for the
first quarter 2007.
The company launched its new, ready-to-use paste in the first
quarter of 2008 and expects to launch a moldable paste in the second
half of 2008, both with Zimmer Inc. In addition, revenue expansion is
planned for both domestic and international distribution of the
current portfolio of bone graft substitutes through existing and new
distribution channels.
Dental: Revenues from distribution of dental implants for the
period of combined operations were $3.5 million. This compares to
Tutogen's previous run rate of approximately $2.4 million for the same
period last year. The increase in dental revenues reflects a higher
unit volume, a 5 percent fee increase during the first quarter of
2008, as well as additional new customers.
Surgical Specialties: The surgical specialties revenue category
consists of implants for hernia repair, breast reconstruction,
ophthalmology and urology. Revenues from distribution of implants for
surgical specialties for the period of combined operations were $1.6
million. This compares to Tutogen's previous run rate of approximately
$600,000 for the same period last year. The increase in revenues is
attributable to increased tissue availability to meet the strong
demand for membrane tissues.
In particular, unit volume for hernia repair and breast
reconstruction implants during the period of combined operations
increased approximately 300 percent over the same period of the prior
year. The company expects these two markets to achieve the highest
growth rates for the company in 2008.
General Orthopedic: General orthopedic revenues consist of bone
blocks, strips and shafts. Revenues from distribution of general
orthopedic implants were $602,000 for the first quarter 2008, compared
to $213,000 in first quarter 2007. General orthopedic revenues include
$400,000 from Tutogen for the combined period of operations.
Cardiovascular: In the first quarter 2007, $938,000 of revenues
was recognized on distribution of cardiovascular tissue with no
comparable revenues in 2008. The company completed its exit of the
cardiovascular business at the end of 2007.
Other Revenues: Other revenues consist of tissue recovery fees,
biomedical laboratory fees, revenue from exclusivity rights, grant
revenue, shipping fees, distribution of reproductions of allografts to
distributors for demonstration purposes and restocking fees. Other
revenues were $1.5 million for the first quarter 2008, compared to
similar levels in the first quarter 2007. During the first two months
of 2008, the company recognized $500,000 in revenues on distribution
of tissues to Tutogen prior to the merger, compared to $1.1 million in
the first three months of 2007.
Merger with Tutogen Medical Inc.
RTI and Tutogen completed their merger on Feb. 27, 2008. In the
first month of combined operations, we have hit the following
milestones in integrating the two companies:
-- Increased the previously estimated pre-tax annualized expense
synergies related to the merger by $1 million to a range of
$6.5 to $7.0 million
-- Integration of all U.S. administrative services of the two
companies
-- Integration of U.S. sourcing activities
-- Integration of global distribution, marketing and product
development
-- Integration of research activities
-- Integration of U.S. quality assurance and regulatory
activities
Weighted average shares for the first quarter of 2008 only include
shares of Tutogen for 33 days of the quarter. Weighted average shares
for the second quarter are estimated to be approximately 56 million.
Conference Call
RTI will hold a live conference call and simultaneous audio web
cast on Tuesday, May 6, 2008 at 9:00 a.m. ET to discuss first quarter
results. The conference call can be accessed by dialing 877-591-4959,
passcode 2107364. The web cast can be accessed through the investor
section of RTI's web site at www.rtix.com. A telephone replay of the
call will be available through May 26, 2008 and can be accessed by
calling 888-203-1112; the replay will also be available at
www.rtix.com.
About RTI Biologics Inc.
RTI Biologics, Inc. is the leading provider of sterile biological
implants for surgeries around the world with a commitment to advancing
science, safety and innovation. RTI prepares human donated tissue and
bovine tissue for transplantation through extensive testing and
screening, precision shaping and proprietary, validated sterilization
processes. These allograft and xenograft implants are used in
orthopedic, dental, hernia 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 fully validated sterilization processes that
include viral inactivation steps. Two such processes, the
BioCleanse(R) Tissue Sterilization Process and the Tutoplast(R)
process, sterilize tissue, are clinically successful and are
scientifically proven to eliminate donor-to-recipient disease
transmission risk while preserving tissue strength and
biocompatibility. These processes have a proven record of more than
two million implants distributed with zero incidence of infection. In
addition, RTI pastes are sterilized through the demineralization
process, a validated viral inactivation step.
The company is leading the evolution of biologics once again by
offering a bovine based biological matrix, providing surgeons an
expanded supply of safe, sterile tissue for their patients.
RTI's worldwide corporate headquarters are located in Alachua,
Fla., with international facilities in Neunkirchen, Germany, and
Aix-en-Provence, France. The company is accredited by the American
Association of Tissue Banks.
Forward Looking Statement
This communication contains "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995.
Such statements include but are not limited to statements about the
expected benefits of the business combination involving RTI and
Tutogen, including potential synergies and cost savings, future
financial and operating results, and the combined company's plans and
objectives. 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, regulatory approvals or changes to
agreements with distributors also are forward-looking statements.
Forward-looking statements are subject to risks and uncertainties,
including the ability of RTI to integrate its business successfully
and to realize the expected synergies and cost savings from the merger
and the risks described in public filings on file with the Securities
and Exchange Commission (SEC). Actual results may differ materially
from 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 Web site at
www.rtix.com or the SEC's Web site 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
March 31,
-------------------------
2008 (1) 2007 (2)
------------ ------------
Revenues:
Fees from tissue distribution $ 28,376 $ 20,497
Other revenues 1,534 1,518
------------ ------------
Total revenues 29,910 22,015
Costs of processing and distribution 16,110 13,913
------------ ------------
Gross profit 13,800 8,102
------------ ------------
Expenses:
Marketing, general and administrative 10,467 6,637
Research and development 1,918 1,227
Gain on business exchange - (197)
Restructuring charge 368 -
------------ ------------
Total expenses 12,753 7,667
------------ ------------
Operating income 1,047 435
------------ ------------
Other (expense) income:
Interest expense (175) (201)
Interest income 164 179
------------ ------------
Total other (expense) income - net (11) (22)
------------ ------------
Income before income tax expense 1,036 413
Income tax provision (391) (279)
------------ ------------
Net income $ 645 $ 134
============ ============
Net income per common share - basic $ 0.02 $ 0.00
============ ============
Net income per common share - diluted $ 0.02 $ 0.00
============ ============
Weighted average shares outstanding - basic 37,809,896 29,775,382
============ ============
Weighted average shares outstanding -
diluted 38,715,807 30,119,803
============ ============
(1) Includes results of operation for the former Tutogen Medical, Inc.
from February 28, 2008 to March 31, 2008; revenues for the period
totaled $6,353.
(2) Regeneration Technologies, Inc. only results
RTI BIOLOGICS, INC. AND SUBSIDIARIES
Condensed Consolidated Revenues
(In thousands)
(Unaudited) Three months ended
March 31,
---------------------
2008 (1) 2007 (2)
---------- ----------
Fees from tissue distribution:
Sports medicine $ 9,215 $ 5,395
Spinal constructs 8,738 9,498
Bone graft substitutes 4,773 4,453
Dental 3,486 -
Surgical specialties 1,562 -
General orthopedic 602 213
Cardiovascular - 938
Other revenues 1,534 1,518
---------- ----------
Total revenues $ 29,910 $ 22,015
========== ==========
Domestic revenues $ 26,064 $ 20,430
International revenues 3,846 1,585
---------- ----------
Total revenues $ 29,910 $ 22,015
========== ==========
(1) Includes results of operation for the former Tutogen Medical, Inc.
from February 28, 2008 to March 31, 2008; revenues for the period
totaled $6,353.
(2) Regeneration Technologies, Inc. only results
RTI BIOLOGICS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited) March 31, December
31,
-------------------
Assets 2008 (1) 2007 (2)
--------- ---------
Current Assets:
Cash and cash equivalents $ 18,938 $ 18,560
Short-term investments 5,428 -
Accounts receivable - net 16,113 9,754
Inventories - net 59,509 39,847
Prepaid and other current assets 5,368 5,555
Deferred tax assets - current 19,651 14,726
--------- ---------
Total current assets 125,007 88,442
Property, plant and equipment - net 49,551 35,549
Deferred tax assets 3,705 1,782
Goodwill 232,974 151
Other intangible assets 13,527 8,461
Other assets - net 697 1,581
--------- ---------
Total assets $425,461 $135,966
========= =========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 14,169 $ 7,631
Accrued expenses 14,121 8,190
Short-term borrowings 1,192 -
Current portion of deferred revenue 2,382 500
Current portion of long-term obligations 3,840 1,500
--------- ---------
Total current liabilities 35,704 17,821
Long-term obligations - less current portion 3,261 1,875
Other long-term liabilities 625 460
Deferred tax liabilities 394 -
Deferred revenue 5,775 4,167
--------- ---------
Total liabilities 45,759 24,323
--------- ---------
Stockholders' equity:
Common stock, $.001 par value: 150,000,000
shares authorized; 53,641,097 and 29,880,296
shares issued and outstanding, respectively 54 30
Additional paid-in capital 400,209 133,621
Additional other comprehensive income 802 -
Accumulated deficit (21,349) (21,994)
Less treasury stock, 133,296 shares, at cost (14) (14)
--------- ---------
Total stockholders' equity 379,702 111,643
========= ---------
Total liabilities and
stockholders' equity $425,461 $135,966
========= =========
(1) Balances at March 31, 2008 are those of the combined RTI
Biologics, Inc.
(2) Balances at December 31, 2007 are for Regeneration Technologies,
Inc. only.
RTI BIOLOGICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited) Three Months
Ended March 31,
-------------------
2008 (1) 2007 (2)
--------- ---------
Cash flows from operating activities:
Net income $ 645 $ 134
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization expense 1,579 1,426
Amortization of deferred financing costs 43 43
Provision for bad debts and product returns 6 63
Provision for inventory writedowns 316 161
Amortization of deferred revenue (257) -
Deferred income tax provision (benefit) 253 (464)
Stock-based compensation expense 448 717
Gain on business exchange - (197)
Change in assets and liabilities:
Accounts receivable (586) 1,995
Inventories (3,211) (56)
Prepaid and other current assets 843 (384)
Other intangible assets (368) -
Other assets (75) (194)
Accounts payable 2,688 (608)
Accrued expenses (2,555) (1,480)
Other long-term liabilities 71 743
--------- ---------
Net cash (used in) provided by
operating activities (160) 1,899
--------- ---------
Cash flows from investing activities:
Purchases of property, plant and equipment (803) (204)
Cash acquired in merger, net of transaction
costs 1,598 -
Proceeds from sale of property, plant and
equipment 45 8
--------- ---------
Net cash provided by (used in)
investing activities 840 (196)
--------- ---------
Cash flows from financing activities:
Proceeds from exercise of stock options 281 7
Payments on long-term obligations (606) (652)
--------- ---------
Net cash used in financing activities (325) (645)
--------- ---------
Effect of exchange rate changes on cash and cash
equivalents 23 -
--------- ---------
Net increase in cash and cash equivalents 378 1,058
Cash and cash equivalents, beginning of period 18,560 15,509
--------- ---------
Cash and cash equivalents, end of period $ 18,938 $ 16,567
========= =========
(1) Includes results of operation for the former Tutogen Medical, Inc.
from February 28, 2008 to March 31, 2008; revenues for the period
totaled $6,353.
(2) Regeneration Technologies, Inc. only results
RTI Biologics Inc.
Thomas F. Rose
Chief Financial Officer
or
Wendy Crites Wacker, APR, 386-418-8888
Corporate Communications
or
The SAN Group, LLC
Susan A. Noonan, 212-966-3650
or
The Sharadin Group, LLC
Kate Sharadin, 425-869-9778
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