EX-99.1 2 d54587dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

FOR DISTRIBUTION ON    For more information, contact:  
THURSDAY, OCT 29, 08:00 AM EDT    Robert Jordheim  
   Executive Vice President,  
   Chief Financial Officer  
   rjordheim@rtix.com  
   Wendy Crites Wacker, APR  
   Vice President, Global Communications  
   wwacker@rtix.com  
   Phone (386) 418-8888  

RTI SURGICAL® ANNOUNCES 2015 THIRD QUARTER RESULTS

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

ALACHUA, Fla. (October 29, 2015) – RTI Surgical Inc. (RTI) (Nasdaq: RTIX), a global surgical implant company, reported operating results for the third quarter of 2015 as follows:

Quarterly Highlights:

 

    Achieved worldwide revenues of $66.5 million, a 3 percent increase on a constant currency basis over the third quarter of 2014.

 

    Achieved net income per fully diluted share of $0.05, meeting guidance.

 

    Achieved revenues of $13.7 million in the orthofixation business, a 44 percent increase over the third quarter of 2014.

 

    Achieved revenues of $9.8 million in the BGS and general orthopedic business, a 6 percent increase over the third quarter of 2014.

 

    Achieved revenues of $6 million in the dental business, a 20 percent increase over the third quarter of 2014.

 

    Achieved revenues of $5.5 million in the international business, a 13 percent increase on a constant currency basis over the third quarter of 2014.

Worldwide revenues were $66.5 million for the third quarter of 2015 compared to revenues of $65.2 million for the third quarter of 2014. Domestic revenues were $61 million for the third quarter of 2015 compared to revenues of $59.7 million for the third quarter of 2014. International revenues were $5.5 million for the third quarter of 2015, which were comparable to the third quarter of 2014. On a constant currency basis, international revenues for the third quarter of 2015 increased 13 percent compared to the third quarter of 2014.


“Our results for the third quarter were mixed with revenues coming in below our guidance and earnings meeting our guidance,” said Brian K. Hutchison, president and chief executive officer. “While the third quarter is traditionally impacted by seasonal trends in surgery, the impact this year was greater than we anticipated. Our revenue shortfall was largely due to lower than expected growth in our direct distribution business as well as declines in certain segments of the commercial business, offset by increased traction in our international business. Due to slower than anticipated growth, we have made changes to some of our sales leadership and we expect that we will see improvement by the end of the year.”

For the third quarter of 2015, the company reported net income applicable to common shares of $2.7 million and net income per fully diluted common share of $0.05, based on 58.9 million fully diluted shares outstanding, compared to net income applicable to common shares of $1.2 million and net income per fully diluted common share of $0.02 for the third quarter of 2014, based on 57.5 million fully diluted shares outstanding.

Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA), as detailed in the reconciliation provided later in this release, was $10.7 million for the third quarter of 2015 (16 percent of third quarter 2015 revenues) compared to $8.2 million for the third quarter of 2014 (13 percent of third quarter 2014 revenues).

Fiscal 2015 and Fourth Quarter Outlook

Based on results from the first three quarters of the year, the company is lowering its full year revenue guidance for 2015. The company now expects full year revenues for 2015 to be between $274 million and $275 million, as compared to prior guidance of between $282 million and $286 million. The company now expects full year net income per fully diluted common share to be approximately $0.19 based on 58.8 million fully diluted common shares outstanding, as compared to prior guidance of $0.20 to $0.23.

For the fourth quarter of 2015, the company expects revenues to be between $68 million and $69 million and net income per fully diluted common share to be approximately $0.05, based on 59 million fully diluted shares outstanding.


“Despite a challenging third quarter, we are committed to our long term plan,” Hutchison said. “We will continue to focus on our base biologics business, our hardware business and our focused products. While the recent changes in sales leadership will take some time to gain traction, we believe we have put the pieces in place to achieve our goals.”

Conference Call

RTI will host a conference call and simultaneous audio webcast to discuss the third quarter 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 Surgical Inc.

RTI Surgical is a leading global surgical implant company providing surgeons with safe biologic, metal and synthetic implants. Committed to delivering a higher standard, RTI’s implants are used in sports medicine, general surgery, spine, orthopedic, trauma and cardiothoracic procedures and are distributed in nearly 50 countries. RTI is headquartered in Alachua, Fla., and has four manufacturing facilities throughout the U.S. and Europe. RTI is accredited in the U.S. by the American Association of Tissue Banks and is a member of AdvaMed. For more information, please visit www.rtix.com.

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 SURGICAL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except share and per share data)

 

     For the Three Months Ended
September 30,
    For the Nine Months Ended
September 30,
 
     2015     2014     2015     2014  

Revenues

   $ 66,529      $ 65,163      $ 206,172      $ 191,937   

Costs of processing and distribution

     31,296        30,470        96,737        95,992   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     35,233        34,693        109,435        95,945   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

        

Marketing, general and administrative

     25,464        26,863        80,088        80,019   

Research and development

     3,793        4,224        11,492        11,398   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     29,257        31,087        91,580        91,417   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     5,976        3,606        17,855        4,528   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense - net

     (405     (296     (986     (1,136
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax provision

     5,571        3,310        16,869        3,392   

Income tax provision

     (2,069     (1,324     (6,120     (1,355
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     3,502        1,986        10,749        2,037   
  

 

 

   

 

 

   

 

 

   

 

 

 

Convertible preferred dividend

     (832     (784     (2,460     (2,318
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) applicable to common shares

   $ 2,670      $ 1,202      $ 8,289      $ (281
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per common share - basic

   $ 0.05      $ 0.02      $ 0.14      $ (0.00
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per common share - diluted

   $ 0.05      $ 0.02      $ 0.14      $ (0.00
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding - basic

     57,701,810        56,864,161        57,492,606        56,677,773   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding - diluted

     58,922,423        57,480,592        58,591,303        56,677,773   
  

 

 

   

 

 

   

 

 

   

 

 

 


RTI SURGICAL, INC. AND SUBSIDIARIES

Reconciliation of Net Income (Loss) Applicable to Commons Shares to Adjusted EBITDA

(Unaudited, in thousands)

 

     For the Three Months
Ended September 30,
    For the Nine Months
Ended September 30,
 
     2015     2014     2015     2014  

Net income (loss)

   $ 2,670      $ 1,202      $ 8,289      $ (281

Interest expense, net

     336        277        978        1,047   

Provision for income taxes

     2,069        1,324        6,120        1,355   

Depreciation

     3,011        2,830        9,212        8,104   

Amortization of intangible assets

     1,100        1,056        3,245        3,309   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     9,186        6,689        27,844        13,534   

Reconciling items for Adjusted EBITDA

        

Preferred dividend

     832        784        2,460        2,318   

Non-cash stock based compensation

     662        672        1,915        1,695   

FX (gain) loss

     69        19        8        89   

Other reconciling items

        

Inventory purchase accounting adjustment (1)

     —          —          —          5,708   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 10,749      $ 8,164      $ 32,227      $ 23,344   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA as a percent of revenues

     16     13     16     12
  

 

 

   

 

 

   

 

 

   

 

 

 

Use of Non-GAAP Financial Measures

To supplement the Company’s condensed consolidated financial statements presented on a GAAP basis, the Company discloses adjusted EBITDA, a non-GAAP financial measure that excludes certain amounts. This non-GAAP financial measure is not in accordance with, or an alternative for, generally accepted accounting principles in the United States. A reconciliation of the non-GAAP financial measure to the corresponding GAAP measure is included in the table above.

The following is an explanation of the adjustment that management excluded as part of adjusted measures for the nine month period ended September 30, 2014 as well as the reason for excluding the individual item:

(1) 2014 Inventory purchase accounting adjustment – This adjustment represents the purchase price effects on the sale of inventory acquired in the Pioneer Surgical Technologies, Inc. acquisition in 2013, which have been included in costs of processing and distribution. Management removes the amount of these nonrecurring costs from the Company’s operating results to assist in assessing its operating performance in the periods affected and to supplement a comparison to the Company’s past operating performance.

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

Adjusted EBITDA 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 adjusted EBITDA 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 inventory purchase accounting adjustment. The Company further believes that providing this information better enables the Company’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 SURGICAL, INC. AND SUBSIDIARIES

Condensed Consolidated Revenues

(Unaudited, in thousands)

 

     For the Three Months Ended
September 30,
     For the Nine Months Ended
September 30,
 
     2015      2014      2015      2014  

Revenues:

           

Spine

   $ 18,104       $ 20,486       $ 57,551       $ 60,895   

Ortho fixation

     13,659         9,476         37,385         25,837   

Sports medicine

     10,816         11,357         34,684         34,176   

BGS and general orthopedic

     9,752         9,237         31,151         26,472   

Dental

     6,038         5,021         16,991         14,807   

Surgical specialties

     5,057         6,747         17,673         21,207   

Other revenues

     3,103         2,839         10,737         8,543   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

   $ 66,529       $ 65,163       $ 206,172       $ 191,937   
  

 

 

    

 

 

    

 

 

    

 

 

 

Domestic revenues

     61,046         59,677         189,751         173,498   

International revenues

     5,483         5,486         16,421         18,439   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

   $ 66,529       $ 65,163       $ 206,172       $ 191,937   
  

 

 

    

 

 

    

 

 

    

 

 

 


RTI SURGICAL, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited, in thousands)

 

     September 30,
2015
    December 31,
2014
 
Assets     

Cash and cash equivalents

   $ 10,308      $ 15,703   

Accounts receivable - net

     44,011        38,833   

Inventories - net

     118,592        113,464   

Prepaid and other current assets

     28,644        29,496   
  

 

 

   

 

 

 

Total current assets

     201,555        197,496   

Property, plant and equipment - net

     82,914        77,028   

Goodwill

     54,887        54,887   

Other assets - net

     41,860        48,724   
  

 

 

   

 

 

 

Total assets

   $ 381,216      $ 378,135   
  

 

 

   

 

 

 
Liabilities and Stockholders’ Equity     

Accounts payable

   $ 22,747      $ 26,834   

Accrued expenses and other current liabilities

     23,694        30,673   

Current portion of long-term obligations

     6,141        6,479   
  

 

 

   

 

 

 

Total current liabilities

     52,582        63,986   

Deferred revenue

     10,571        12,460   

Long-term liabilities

     84,336        81,020   
  

 

 

   

 

 

 

Total liabilities

     147,489        157,466   

Preferred stock, including accrued dividends

     55,433        52,834   

Stockholders’ equity:

    

Common stock and additional paid-in capital

     417,492        415,570   

Accumulated other comprehensive loss

     (6,093     (3,881

Accumulated deficit

     (233,105     (243,854
  

 

 

   

 

 

 

Total stockholders’ equity

     178,294        167,835   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 381,216      $ 378,135   
  

 

 

   

 

 

 


RTI SURGICAL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

 

     For the Three Months
Ended September 30,
    For the Nine Months
Ended September 30,
 
     2015     2014     2015     2014  

Cash flows from operating activities:

        

Net income

   $ 3,502      $ 1,986      $ 10,749      $ 2,037   

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

        

Depreciation and amortization expense

     4,111        3,886        12,457        11,413   

Stock-based compensation

     662        672        1,915        1,695   

Amortization of deferred revenue

     (1,160     (1,207     (5,065     (4,213

Other items to reconcile to net cash (used in) provided by operating activities

     (11,409     (3,188     (17,633     (9,468
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by operating activities

     (4,294     2,149        2,423        1,464   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

        

Purchases of property, plant and equipment

     (4,392     (2,800     (12,969     (11,272

Patent and acquired intangible asset costs

     (133     (130     (249     (406
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (4,525     (2,930     (13,218     (11,678
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

        

Proceeds from long-term obligations

     6,750        —          6,750        5,000   

Net proceeds (payments) from short-term obligations

     160        (157     508        1,151   

Payments on long-term obligations

     (1,135     (638     (4,161     (670

Other financing activities

     612        267        2,308        684   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     6,387        (528     5,405        6,165   
  

 

 

   

 

 

   

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     41        (563     (5     (742
  

 

 

   

 

 

   

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (2,391     (1,872     (5,395     (4,791

Cash and cash equivalents, beginning of period

     12,699        15,802        15,703        18,721   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 10,308      $ 13,930      $ 10,308      $ 13,930