Alphatec Spine Reports Third Quarter 2013 Financial Results

Alphatec Spine Reports Third Quarter 2013 Financial Results

Continuing Strategic Execution and Fiscal Discipline Yield Successful Quarter

CARLSBAD, Calif., Nov. 7, 2013 (GLOBE NEWSWIRE) -- Alphatec Holdings, Inc.
(Nasdaq:ATEC), the parent company of Alphatec Spine, Inc., a medical device
company that provides physician-inspired solutions for patients with spinal
disorders, today announced its financial results for the third quarter of
fiscal year 2013, ended September 30, 2013.

Highlights of Alphatec Spine's Third Quarter and Recent Activities:

  *Third quarter 2013 total revenue was $50.2 million; up 7.2% from the third
    quarter of 2012, or 10.7% on a constant currency basis, representing broad
    growth in all of our markets.
    
  *U.S. revenue was $33.7 million; up 8.8% from the third quarter of 2012;
    excluding the revenue contributions of PureGen realized in Q3 of 2012,
    U.S. revenue was up 15%.U.S. hospital implant revenue was up 23.3%.
    Positive performance in the U.S. was the result of continued solid unit
    volume gains in our core hospital business and increased surgeon uptake
    across our various product lines.
    
  *International revenue was $16.5 million; up 4.0% from the third quarter of
    2012, or approximately 14.4% on a constant currency basis. Strong
    operational performance was again attributable to the Company's robust
    business in Japan, combined with thriving underlying demand in Latin
    America, Asia and Europe.
    
  *Adjusted EBITDA was $6.7 million, or 13.4% of revenues, compared to $6.0
    million, or 12.8% of revenues reported for the third quarter of 2012, and
    $4.9 million, or 9.6% of revenues for the second quarter of 2013.
    
  *The planned restructuring of Scient'x S.A.S's and Surgiview S.A.S's
    operations and the planned discontinuance of commercial activities in
    France is anticipated to improve the gross margins and overall
    profitability of our international businesses and is anticipated to
    increase EBITDA by $6 to $7 million on an annualized basis beginning in
    the second half of 2014.
    
  *After ongoing dialog with the FDA, the Company has made the business
    decision to discontinue PureGen from its product portfolio.Investing in
    the significant clinical trial costs and timelines to support the future
    commercialization of PureGen is not  a prudent use of Alphatec's resources
    at this time.

"When I came onboard as CEO eighteen months ago, I set out a clear strategy
for the company to strengthen the sales and profitability of the
organization," said Les Cross, Chairman and CEO of Alphatec Spine. "This
strategy was supported by key operational initiatives to enhance the
productivity of our global sales organization, generate a continuous flow of
new products, improve overall margin structure and scale our business through
acquisitions of companies and key products.Today, I am pleased to report that
Alphatec's third quarter performance demonstrates the tremendous progress we
have made on each of these initiatives."

"Our third quarter overall revenue performance continues to be strong,"
continued Mr. Cross."We are pleased to see the progress we are making in the
U.S. on unit volume sales to hospitals as well as overall physician uptake of
our products.Additionally, our international business saw growth across all
major geographies in the third quarter.Japan continues to deliver outstanding
results.Excluding the impact of foreign currency, our business in Japan grew
21% in the third quarter of 2013 as compared to third quarter of 2012."

"We are also excited about the positive uptake we are seeing with our newly
launched products. Alphatec Solus, our latest innovative lumbar interbody
fusion device, and NEXoss, the next-generation synthetic bone graft, have both
gained traction with surgeons in the third quarter and we expect this to
continue in 2013 and beyond."

"During the third quarter we also continued to deliver operational savings and
to further improve bottom-line performance.In September we announced plans to
restructure our French operations as well as discontinue commercial operations
in France.This is a significant business decision for our future financial
performance as we expect that it will deliver annualized adjusted EBITDA
improvement of approximately $6 to $7 million beginning in the second half of
2014 once the restructuring is complete.We are grateful for the significant
contributions of those employees who could be impacted by this plan and will
do everything we can to assist all affected employees and their
families.While these decisions are not always easy, we will continue to
identify and implement strategic cost reductions that will drive overall
improvement in gross margins and lower existing cost structures."

"Overall, I am very proud of Alphatec's performance this year and the third
quarter results demonstrate our clarity of focus on our strategy and
delivering sustainable, positive results.The foundation we have built over
the last eighteen months is clearly generating positive momentum and provides
us with an extraordinary opportunity to maximize future shareholder value.We
are committed to continue to identify ways in which we can strategically drive
top-line results while continuing our ongoing fiscal discipline to improve
future profitability."

Third Quarter Financial Results

The Financial results of the Company were impacted by two non-recurring items
that were charged in the third quarter.Charges incurred as a result of the
planned French restructuring and discontinuance of  PureGen are identified in
an additional table attached hereto to aid reconciliations to our operating
results.The Company expensed a total of $8.5 million associated with the
planned French restructuring. $4.5 million of this included non-cash charges
that were expensed to cost of goods sold to reflect a provision to write off
inventory and surgical instruments associated with the discontinuation of
commercial operations in France.The remainder, $4.0 million, was charged as a
non-recurring future cash restructuring expense and reflects the French Social
Plan costs for the impacted employees and other costs associated with the
planned restructuring.

The Company also charged $3.5 million to cost of goods sold in the quarter to
reflect non-cash expenses associated with the Company's decision to cease
further commercial activities with respect to PureGen.

Both of these items have been excluded from our non-GAAP Adjusted EBITDA
metric as we believe that the non-recurring nature of these charges does not
represent the underlying performance of the Company.

Consolidated net revenues for the third quarter of 2013 ended September 30,
2013 were $50.2 million, representing growth of 7.2% compared to $46.8 million
reported for the third quarter of 2012. Excluding the effect of foreign
currency conversion, net revenues increased 10.7% during the quarter.

U.S. net revenues for the third quarter of 2013 were $33.7 million, an
increase of 8.8%, compared to $31.0 million reported for U.S. net revenues in
the third quarter of 2012.

International net revenues for the third quarter of 2013 were $16.5 million,
representing growth of 4.0% compared to $15.9 million reported for the third
quarter of 2012. Excluding the effect of foreign currency conversion,
international net revenues increased 14.4% during the quarter.

Gross profit and gross margin for the third quarter of 2013 were $24.2 million
and 48.3%, respectively, compared to $29.6 million and 63.3%, respectively,
for the third quarter of 2012.When gross profit and gross margin in the third
quarter of 2013 are adjusted for the two non-recurring items ($4.5 million for
French inventory and $3.5 million for PureGen), gross profit and gross margin
would be $32.3 million and 64.3%, respectively, reflecting continued
performance at managing costs in a challenging environment for both pricing
and product mix.

Total operating expenses for the third quarter of 2013 were $37.4 million, or
74.5% of revenues, reflecting an increase of approximately $5.8 million
compared to the third quarter of 2012.The variance is driven by the $4.0
million restructuring charge, legal expenses associated with current
litigation matters and the medical device excise tax.

GAAP net loss for the third quarter of 2013 was $14.5 million or ($0.15) per
share (basic and diluted), compared to a net loss of $2.5 million, or ($0.03)
per share (basic and diluted) for the third quarter of 2012. Non-GAAP EPS when
adjusted for the two non-recurring items and the amortization of intangible
assets is $0.01 per share (basic and diluted), compared to $0.01 per share
(basic and diluted) for the third quarter of 2012.

Adjusted EBITDA in the third quarter of 2013 was $6.7 million, or 13.4% of
revenues, compared to $6.0 million, or 12.8% of revenues reported for the
third quarter of 2012. Adjusted EBITDA represents net income or loss excluding
the effects of interest, taxes, depreciation, amortization, stock-based
compensation, and other non-recurring items, such as restructuring expenses,
IPR&D and transaction-related expenses.

Cash and cash equivalents were $18.7 million at September 30, 2013, compared
to $22.2 million reported at December 31, 2012.

2013 Financial Guidance

The Company expects full-year revenues for 2013 to be approximately $204
million on an as-reported basis, which represents an increase of 3.9% from
2012 or approximately 6.5% on a constant currency basis from 2012.The Company
anticipates Non GAAP Adjusted EBITDA to be in the range of $24 million to $25
million, or approximately 21% to 26% over 2012, and representing approximately
12% of revenue.

Conference Call

Alphatec Spine will webcast its Quarterly Update Call today at 5:00 p.m. EST /
2:00 p.m. PST.Les Cross, Alphatec's Chairman and CEO will lead the
call.During the call the Company plans to provide further details underlying
its third quarter 2013 financial results.

To access the webcast, please log on to www.alphatecspine.com approximately
fifteen minutes prior to the call to register, download and install any
necessary audio software.For those without access to the internet, the live
call may be accessed by phone by calling toll-free (877) 556-5251 (U.S. /
Canada) or (720) 545-0036 (international), participant passcode number
90531878.A replay of the call will also be available on the investor
relations section of Alphatec Spine's website for at least 30 days.

Non-GAAP Information

Alphatec Spine reports certain non-GAAP financial measures such as non-GAAP
earnings and earnings per share, adjusted for effects of amortization and
other non-recurring or expense items, such as loss on extinguishment of debt,
restructuring expenses and transaction-related expenses.Adjusted EBITDA
included in this press release is a non-GAAP financial measure that represents
net income (loss) excluding the effects of interest, taxes, depreciation,
amortization, stock-based compensation expenses, and other non-recurring
income or expense items, such as severance expense and transaction-related
expenses. The Company believes that non-GAAP adjusted EBITDA provides
investors with an additional tool for evaluating the Company's core
performance, which management uses in its own evaluation of continuing
operating performance, and a base-line for assessing the future earnings
potential of the Company.For completeness, Management uses non-GAAP adjusted
EBITDA in conjunction with GAAP earnings and earnings per common share
measures.These non-GAAP financial measures should be considered in addition
to, and not as a substitute for, or superior to, financial measures calculated
in accordance with GAAP.Included below are reconciliations of the non-GAAP
financial measures to the comparable GAAP financial measure.

About Alphatec Spine

Alphatec Spine, Inc., a wholly owned subsidiary of Alphatec Holdings, Inc., is
a medical device company that designs, develops, manufactures and markets
physician-inspired products and solutions for the treatment of spinal
disorders associated with trauma, congenital deformities, disease and
degeneration. The Company's mission is to combine innovative surgical
solutions with world-class customer service to improve outcomes and patient
quality of life. The Company and its affiliates market products in the U.S.
and in over 50 countries internationally via a direct sales force and
independent distributors.

Additional information can be found at www.alphatecspine.com.

Forward Looking Statements

This press release may contain "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 that involve risks and
uncertainty. Such statements are based on management's current expectations
and are subject to a number of risks and uncertainties that could cause actual
results to differ materially from those described in the forward looking
statements. Alphatec Spine cautions investors that there can be no assurance
that actual results or business conditions will not differ materially from
those projected or suggested in such forward-looking statements as a result of
various factors. Forward looking statements include references to Alphatec
Spine's 2013 revenue (including without limitation, the approximated revenues
for Q4 2013 that are set forth in this press release) and adjusted EBITDA
projections; the success of the Company to achieve the gross margin,
profitability and adjusted EBITDA improvements of the French restructuring in
the anticipated timeframes; the ability of the Company to minimize the revenue
loss associated with the French restructuring; the success of the Company's
initiatives to drive global sales growth, increase margins and increase
operating efficiencies. The important factors that could cause actual
operating results to differ significantly from those expressed or implied by
such forward-looking statements include, but are not limited to: the
uncertainty of success in developing new products or products currently in
Alphatec Spine's pipeline; the uncertainties regarding the ability to
successfully license or acquire new products, and the commercial success of
such products; failure to achieve acceptance of Alphatec Spine's products by
the surgeon community, including the Alphatec Solus, and NeXoss products
discussed in this press release; failure to successfully implement
streamlining activities to create anticipated savings; failure to successfully
begin in-house manufacturing of certain products; failure to obtain FDA
clearance or approval or international regulatory approvals for new products,
including the products discussed in this press release, or unexpected or
prolonged delays in the process; Alphatec Spine's ability to develop and
expand its U.S. and/or global revenues; continuation of favorable third party
payor reimbursement for procedures performed using Alphatec Spine's products;
unanticipated expenses or liabilities or other adverse events affecting cash
flow or Alphatec Spine's ability to successfully control its costs or achieve
profitability; uncertainty of additional funding; Alphatec Spine's ability to
compete with other competing products and with emerging new technologies;
product liability exposure; failure to meet all financial obligations in the
Cross Medical settlement or its credit agreement; an unsuccessful outcome in
any material litigation in which the Company is a defendant; patent
infringement claims and claims related to Alphatec Spine's intellectual
property. The words "believe," "will," "should," "expect," "intend,"
"estimate" and "anticipate," variations of such words and similar expressions
identify forward-looking statements, but their absence does not mean that a
statement is not a forward-looking statement. Please refer to the risks
detailed from time to time in Alphatec Spine's SEC reports, including its
Annual Report Form 10-K for the year ended December 31, 2012, filed on March
4, 2013 with the Securities and Exchange Commission, as well as other filings
on Form 10-Q and periodic filings on Form 8-K. Alphatec Spine disclaims any
intention or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events, or otherwise, unless
required by law.

ALPHATEC HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts - unaudited)

                               Three Months Ended     Nine Months Ended
                               September 30,          September 30,
                               2013        2012       2013        2012
                                                               
Revenues                        $50,196   $46,839  $151,659  $143,535
Cost of revenues                25,532     16,844    61,303     50,773
Amortization of acquired        432        362       1,289      1,114
intangible assets
Total cost of revenues          25,964      17,206     62,592      51,887
Gross profit                    24,232      29,633     89,067      91,648
                                                               
Operating expenses:                                             
Research and development        3,028      3,216     10,376     11,003
Sales and marketing             18,149     17,778    55,804     55,843
General and administrative      11,443      9,758      34,018     28,714
Amortization of acquired        741         491        2,255      1,574
intangible assets
Transaction related costs       --        364        --        364
Restructuring expenses          4,045      --       4,045      --
Total operating expenses        37,406      31,607     106,498     97,498
Operating loss                  (13,174)    (1,974)    (17,431)    (5,850)
Interest and other income       (836)       (533)      (3,506)     (5,013)
(expense), net
Loss from continuing operations (14,010)    (2,507)    (20,937)    (10,863)
before taxes
Income tax provision (benefit)  500        (38)      883        (759)
Net loss                        $(14,510) $(2,469) $(21,820) $(10,104)
                                                               
Net loss per common share:                                      
Basic and diluted net loss per  $(0.15)   $(0.03)  $(0.23)   $(0.11)
share
                                                               
Weighted-average shares - basic 96,381      89,503     96,046      89,222
and diluted



ALPHATEC HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands - unaudited)
                                                       
                                          September 30, December 31,
                                          2013          2012
ASSETS                                                  
Current assets:                                         
Cash and cash equivalents                 $18,654     $22,241
Accounts receivable, net                  41,738        41,012
Inventories, net                          43,139        49,855
Prepaid expenses and other current assets 6,069         5,953
Deferred income tax assets                2,874        2,991
Total current assets                       112,474       122,052
                                                       
Property and equipment, net                29,515        30,403
Goodwill                                   181,390       180,838
Intangibles, net                           40,744        46,856
Other assets                               2,012         1,978
Total assets                               $366,135    $382,127
                                                       
LIABILITIES AND STOCKHOLDERS' EQUITY                    
Current liabilities:                                    
Accounts payable                          $14,171     $15,237
Accrued expenses                          35,952        38,490
Deferred revenue                          1,264         1,361
Current portion of long-term debt         4,984         1,700
Total current liabilities                  56,371        56,788
                                                       
Total long term liabilities               57,191       55,920
Redeemable preferred stock                23,603       23,603
Stockholders' equity                      228,970      245,816
Total liabilities and stockholders' equity $366,135    $382,127



ALPHATEC HOLDINGS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands, except per share amounts - unaudited)
                                                               
                               Three Months Ended     Nine Months Ended
                               September 30,          September 30,
                               2013        2012       2013        2012
                                                               
Operating loss, as reported     $(13,174) $(1,974) $(17,431) $(5,850)
Add back:                                                       
Depreciation                    3,677      3,542     10,852     10,536
Amortization of intangible      2,525      1,405     5,568      4,199
assets
Amortization of acquired        1,173      853       3,544      2,688
intangible assets
Total EBITDA                    (5,799)     3,826      2,533       11,573
                                                               
Add back significant items:                                     
Stock-based compensation        853        1,000     2,832      2,210
In-process research and         --         --        --         --
development
Transaction related expenses    --         364       --         364
Restructuring and other charges 11,666     793       12,321     793
                                                               
EBITDA, as adjusted for         $6,720    $5,983   $17,686   $14,940
significant items
                                                               
                                                               
Net loss, as reported           $(14,510) $(2,469) $(21,820) $(10,104)
Add back:                                                       
In-process research and         --        --        --        --
development
Amortization of acquired        1,173      853       3,544      2,688
intangible assets
Amortization of intangible      2,525      1,405     5,568      4,199
assets
Loss on extinguishment of debt  --        --       --        2,910
Transaction related expenses    --        364       --        364
Restructuring and other charges 11,666     793       12,321     793
                                                               
Net loss, as adjusted for       $854      $946     $(387)    $850
significant items
                                                               
                                                               
Net loss per common share -     $(0.15)   $(0.03)  $(0.23)   $(0.11)
basic and diluted
Add back:                                                       
Amortization of acquired        0.01       0.01      0.04       0.03
intangible assets
Amortization of intangible      0.03       0.02      0.06       0.05
assets
Loss on extinguishment of debt  --        --       --        0.03
Transaction related expense     --        0.00      --        0.00
Restructuring and other charges 0.12       0.01      0.13       0.01
                                                               
Net loss per common share -
basic anddiluted, as adjusted  $0.01     $0.01    $(0.00)   $0.01
for significant items
                                                               
Weighted-average shares - basic 96,381      89,503     96,046      89,222
and diluted



ALPHATEC HOLDINGS, INC.
RECONCILIATION OF GEOGRAPHIC SEGMENT REVENUES AND GROSS PROFIT
(in thousands, except percentages - unaudited)
                                                                
                   Three Months Ended                             % Change
                   September 30,             % Change   % Change    Foreign
                   2013         2012         As         Operations  Currency
                                              Reported
                                                                
Revenues by                                                      
geographic segment
U.S.                $33,696    $30,980    8.8%       8.8%        0.0%
International       16,500       15,859       4.0%       14.4%       -10.4%
Total revenues      $50,196    $46,839    7.2%       10.7%       -3.5%
                                                                
Gross profit by                                                  
geographic segment
U.S.                $19,754    $21,360                         
International       4,478        8,273                             
Total gross profit  $24,232    $29,633                         
                                                                
Gross profit margin
by geographic                                                    
segment
U.S.                58.6%        68.9%                             
International       27.1%        52.2%                             
Total gross profit  48.3%        63.3%                             
margin
                                                                
                   Nine Months Ended                              % Change
                   September 30,            % Change   % Change    Foreign
                   2013         2012         As         Operations  Currency
                                              Reported
                                                                
Revenues by                                                      
geographic segment
U.S.                $99,249    $96,430    2.9%       2.9%        0.0%
International       52,410       47,105       11.3%      20.6%       -9.3%
Total revenues      $151,659   $143,535   5.7%       8.7%        -3.0%
                                                                
Gross profit by                                                  
geographic segment
U.S.                $64,778    $66,785                         
International       24,289       24,863                            
Total gross profit  $89,067    $91,648                         
                                                                
Gross profit margin
by geographic                                                    
segment
U.S.                65.3%        69.3%                             
International       46.3%        52.8%                             
Total gross profit  58.7%        63.9%                             
margin
                                                                
Footnotes:                                                       
1)The impact from foreign currency represents the percentage change in 2013
revenues due to the change in foreign exchange rates for the periods
presented.
                                                                


ALPHATEC HOLDINGS, INC.
NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts - unaudited)
                                                               
                          Three Months Ended September 30, 2013
                                        Non-GAAP                
                          GAAP           Adjustments             Non-GAAP
                                                               
Revenues                   $50,196      $--                  $50,196
Cost of revenues           25,532        (8,045)       (a) (b)   17,487
Amortization of acquired   432                                  432
intangible assets
Total cost of revenues     25,964         (8,045)                17,919
Gross profit               24,232         8,045                  32,277
                          48.3%                                 64.3%
Operating expenses:                                             
Research and development   3,028         --                     3,028
Sales and marketing        18,149                               18,149
General and administrative 11,443         (469)          (c)      10,974
Amortization of acquired   741                                   741
intangible assets
Transaction related costs  --                                  --
Restructuring expenses     4,045         (4,045)       (d)      --
Total operating expenses   37,406         (4,514)                32,892
Operating loss             (13,174)       12,559                 (615)
Interest and other income  (836)                                 (836)
(expense), net
Loss from continuing       (14,010)       12,559                 (1,451)
operations before taxes
Income tax provision       500                                  500
(benefit)
Net loss                   $(14,510)    $12,559               $(1,951)
                                                               
                                                               
                          Nine Months Ended September 30, 2013
                                        Non-GAAP                
                          GAAP           Adjustments             Non-GAAP
                                                               
Revenues                   $151,659     $--                  $151,659
Cost of revenues           61,303        (8,045)       (a) (b)   53,258
Amortization of acquired   1,289                                1,289
intangible assets
Total cost of revenues     62,592         (8,045)                54,547
Gross profit               89,067         8,045                  97,112
                          58.7%                                 64.0%
Operating expenses:                                             
Research and development   10,376        (162)         (e)      10,214
Sales and marketing        55,804                               55,804
General and administrative 34,018        (962)          (c)      33,056
Amortization of acquired   2,255                                2,255
intangible assets
Transaction related costs  --                                  --
Restructuring expenses     4,045         (4,045)       (d)      --
Total operating expenses   106,498        (5,169)                101,329
Operating loss             (17,431)       13,214                 (4,217)
Interest and other income  (3,506)                               (3,506)
(expense), net
Loss from continuing       (20,937)       13,214                 (7,723)
operations before taxes
Income tax provision       883                                  883
(benefit)
Net loss                   $(21,820)    $13,214               $(8,606)
                                                               
Notes:                                                          
(a) Write-off of inventory and intangibles of $3.5 million related to the
Company's Puregen product.
(b) Record inventory and instrument net book value adjustment of $4.5 million
related to the restructuring of the Company's French operations.
(c) Amount primarily relates to Phygen related severance benefits.
(d) Facility closing costs accrued for the restructuring of the Company's
French operations.
(e)Expense of in-process research and development.

CONTACT: Investor/Media Contact:
        
         Christine Zedelmayer
         Investor Relations
         Alphatec Spine, Inc.
         (760) 494-6610
         czedelmayer@alphatecspine.com

Alphatec Spine
 
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