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

Business Wire

ALACHUA, Fla. -- February 7, 2013

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           $ 42,837         $ 41,342         $ 171,703        $ 162,855
distribution
Other revenues    1,770          1,589          6,410          6,461      
Total revenues     44,607           42,931           178,113          169,316
Costs of
processing and    22,859         23,096         92,896         92,102     
distribution
Gross profit      21,748         19,835         85,217         77,214     
                                                                    
Expenses:
Marketing,
general and        15,209           13,817           58,376           55,576
administrative
Research and       2,952            2,399            12,231           9,806
development
Litigation         -                -                2,350            -
settlement
Asset             2              3              20             61         
abandonments
Total expenses    18,163         16,219         72,977         65,443     
Operating         3,585          3,616          12,240         11,771     
income
Total other
income            66             1              204            (167       )
(expense) -
net
Income before
income tax         3,651            3,617            12,444           11,604
provision
Income tax        (1,380     )    (1,247     )    (4,042     )    (3,226     )
provision
Net income       $ 2,271         $ 2,370         $ 8,402         $ 8,378      
                                                                    
Net income per
common share -   $ 0.04          $ 0.04          $ 0.15          $ 0.15       
basic
Net income per
common share -   $ 0.04          $ 0.04          $ 0.15          $ 0.15       
diluted
Weighted
average shares    55,968,910     55,388,262     55,861,957     55,150,886 
outstanding -
basic
Weighted
average shares    56,268,839     55,708,396     56,068,795     55,354,675 
outstanding -
diluted


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       $  2,350
charge
Tax effect on litigation      (906   )
settlement charge
Litigation settlement
charge, net of tax          $  1,444  
effect


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           7,361      6,917      29,308      26,291
general orthopedic
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                   25,397         24,028
liabilities
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              2,079        2,024        7,993         8,026
amortization expense
Stock-based                   504          479          2,078         1,973
compensation
Amortization of               (1,165 )     (1,166 )     (4,656  )     (4,353 )
deferred revenue
Other items to
reconcile to net cash
provided by operating        (185   )    1,646      6,986       13,743 
activities
Net cash provided by         3,504      5,353      20,803      27,767 
operating activities
Cash flows from
investing activities:
Purchases of property,        (4,245 )     (3,862 )     (11,089 )     (6,345 )
plant and equipment
Patent and acquired           (5,381 )     (1,010 )     (6,772  )     (2,139 )
intangible asset costs
Other investing              -          -          49          -      
activities
Net cash used in             (9,626 )    (4,872 )    (17,812 )    (8,484 )
investing activities
Cash flows from
financing activities:
Proceeds from exercise        124          876          514           1,122
of common stock options
Payments on long-term         (82    )     (127   )     (471    )     (2,600 )
obligations
Other financing              494        282        474         282    
activities
Net cash provided by
(used in) financing          536        1,031      517         (1,196 )
activities
Effect of exchange rate
changes on cash and          40         (34    )    10          (121   )
cash equivalents
Net (decrease) increase
in cash and cash              (5,546 )     1,478        3,518         17,966
equivalents
Cash and cash
equivalents, beginning       55,242     44,700     46,178      28,212 
of period
Cash and cash
equivalents, end of         $ 49,696    $ 46,178    $ 49,696     $ 46,178 
period


Contact:

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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