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| 8-K - 8-K - RTI SURGICAL, INC. | d156551d8k.htm |
Exhibit 99.1
| FOR DISTRIBUTION ON | For more information, contact: | |||
| THURSDAY, JULY 30, 2015 AT 8:00 AM | Robert Jordheim | |||
| Executive Vice President, | ||||
| Chief Financial Officer rjordheim@rtix.com | ||||
|
Wendy Crites Wacker, APR | ||||
| Vice President, Global Communications wwacker@rtix.com | ||||
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Phone (386) 418-8888 |
RTI SURGICAL™ ANNOUNCES 2015 SECOND QUARTER RESULTS
– Company Achieves Record Quarterly Revenues –
– Company Will Hold Conference Call at 8:30 a.m. ET –
ALACHUA, Fla. (July 30, 2015) – RTI Surgical Inc. (RTI) (Nasdaq: RTIX), a global surgical implant company, reported operating results for the second quarter of 2015 as follows:
Quarterly Highlights:
| • | Achieved revenues of $71.6 million, a 10 percent increase on a constant currency basis over the second quarter of 2014, and exceeding guidance of $70 to $71 million. |
| • | Achieved net income per fully diluted share of $0.05, exceeding guidance of $0.04. |
| • | Achieved revenues of $13.1 million in the orthofixation business, a 48 percent increase over the second quarter of 2014. |
| • | Achieved revenues of $10.5 million in the BGS and general orthopedic business, a 15 percent increase over the second quarter of 2014. |
| • | Achieved revenues of $6.2 million in the dental business, a 21 percent increase over the second quarter of 2014. |
Worldwide revenues were $71.6 million for the second quarter of 2015 compared to revenues of $66 million for the second quarter of 2014. Domestic revenues were $66 million for the second quarter of 2015 compared to revenues of $59 million for the second quarter of 2014. International revenues were $5.6 million for the second quarter of 2015 compared to revenues of $7 million for the second quarter of 2014. On a constant currency basis, international revenues for the second quarter of 2015 decreased 7 percent compared to the second quarter of 2014.
“Our results for the second quarter were strong with revenues and earnings exceeding our expectations,” said Brian K. Hutchison, president and chief executive officer. “In base biologics, which includes allograft and xenograft implants, we saw slight growth over the prior year. In hardware, which includes metals and synthetic-based implants, we saw growth of 14 percent. For focused products, which includes map3® cellular allogeneic bone graft, Fortiva® porcine dermis and nanOss advanced bone graft substitute, we grew 80 percent.”
For the second quarter of 2015, the company reported a net income applicable to common shares of $2.7 million and net income per fully diluted common share of $0.05, based on 58.8 million fully diluted shares outstanding, compared to net income applicable to common shares of $1.6 million and net income per fully diluted common share of $0.03 for the second quarter of 2014, based on 57.1 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 $10.8 million for the second quarter of 2015 (15 percent of second quarter 2015 revenues) compared to $8.8 million for the second quarter of 2014 (13 percent of second quarter 2014 revenues).
Fiscal 2015 and Third Quarter Outlook
Based on results from the first half of the year, the company is narrowing its full year revenue guidance for 2015. The company now expects full year revenues for 2015 to be between $282 million and $286 million, as compared to prior guidance of between $281 million and $286 million. The company now expects full year net income per fully diluted common share to be in the range of $0.20 to $0.23 based on 58.7 million fully diluted common shares outstanding, as compared to prior guidance of $0.19 to $0.23.
For the third quarter of 2015, the company expects revenues to be between $69 million and $70 million and net income per fully diluted common share to be approximately $0.05, based on 58.8 million fully diluted shares outstanding.
“The third quarter has traditionally been impacted by seasonal trends in surgeries,” Hutchison said, “however, based on our results from the first half, I am optimistic that we can capitalize on our momentum and meet our growth goals for the year.”
Conference Call
RTI will host a conference call and simultaneous audio webcast to discuss the second 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 | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Revenues |
$ | 71,609 | $ | 66,029 | $ | 139,643 | $ | 126,774 | ||||||||
| Costs of processing and distribution |
34,406 | 30,975 | 65,441 | 65,522 | ||||||||||||
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| Gross profit |
37,203 | 35,054 | 74,202 | 61,252 | ||||||||||||
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| Expenses: |
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| Marketing, general and administrative |
27,369 | 27,302 | 54,624 | 53,156 | ||||||||||||
| Research and development |
4,119 | 3,342 | 7,699 | 7,174 | ||||||||||||
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| Total operating expenses |
31,488 | 30,644 | 62,323 | 60,330 | ||||||||||||
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| Operating income |
5,715 | 4,410 | 11,879 | 922 | ||||||||||||
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| Total other expense - net |
(287 | ) | (485 | ) | (581 | ) | (840 | ) | ||||||||
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| Income before income tax provision |
5,428 | 3,925 | 11,298 | 82 | ||||||||||||
| Income tax provision |
(1,923 | ) | (1,564 | ) | (4,051 | ) | (31 | ) | ||||||||
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| Net income |
3,505 | 2,361 | 7,247 | 51 | ||||||||||||
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| Convertible preferred dividend |
(820 | ) | (784 | ) | (1,628 | ) | (1,534 | ) | ||||||||
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| Net income (loss) applicable to common shares |
$ | 2,685 | $ | 1,577 | $ | 5,619 | $ | (1,483 | ) | |||||||
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| Net income (loss) per common share - basic |
$ | 0.05 | $ | 0.03 | $ | 0.10 | $ | (0.03 | ) | |||||||
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| Net income (loss) per common share - diluted |
$ | 0.05 | $ | 0.03 | $ | 0.10 | $ | (0.03 | ) | |||||||
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| Weighted average shares outstanding - basic |
57,523,447 | 56,714,512 | 57,301,204 | 56,584,579 | ||||||||||||
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| Weighted average shares outstanding - diluted |
58,755,954 | 57,077,552 | 58,342,045 | 56,584,579 | ||||||||||||
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RTI SURGICAL, INC. AND SUBSIDIARIES
Reconciliation of Net Income (Loss) Applicable to Commons Shares to Adjusted EBITDA
(Unaudited, in thousands)
| For the Three Months | For the Six Months | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Net income (loss) |
$ | 2,685 | $ | 1,577 | $ | 5,619 | $ | (1,483 | ) | |||||||
| Interest expense, net |
326 | 437 | 642 | 770 | ||||||||||||
| Provision for income taxes |
1,923 | 1,564 | 4,051 | 31 | ||||||||||||
| Depreciation |
3,257 | 2,738 | 6,201 | 5,274 | ||||||||||||
| Amortization of intangible assets |
1,123 | 1,125 | 2,145 | 2,253 | ||||||||||||
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| EBITDA |
9,314 | 7,441 | 18,658 | 6,845 | ||||||||||||
| Reconciling items for Adjusted EBITDA |
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| Preferred dividend |
820 | 784 | 1,628 | 1,534 | ||||||||||||
| Non-cash stock based compensation |
680 | 533 | 1,253 | 1,023 | ||||||||||||
| FX (gain) loss |
(39 | ) | 48 | (61 | ) | 70 | ||||||||||
| Other reconciling items |
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| Inventory purchase accounting adjustment (1) |
— | — | — | 5,708 | ||||||||||||
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| Adjusted EBITDA |
$ | 10,775 | $ | 8,806 | $ | 21,478 | $ | 15,180 | ||||||||
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| Adjusted EBITDA as a percent of revenues |
15 | % | 13 | % | 15 | % | 12 | % | ||||||||
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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 six month period ended June 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 | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Revenues: |
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| Spine |
$ | 20,068 | $ | 21,346 | $ | 39,447 | $ | 40,409 | ||||||||
| Ortho fixation |
13,089 | 8,866 | 23,726 | 16,361 | ||||||||||||
| Sports medicine |
11,761 | 11,459 | 23,868 | 22,819 | ||||||||||||
| BGS and general orthopedic |
10,470 | 9,088 | 21,399 | 17,235 | ||||||||||||
| Surgical specialties |
6,606 | 7,182 | 12,616 | 14,460 | ||||||||||||
| Dental |
6,198 | 5,140 | 10,953 | 9,786 | ||||||||||||
| Other revenues |
3,417 | 2,948 | 7,634 | 5,704 | ||||||||||||
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| Total revenues |
$ | 71,609 | $ | 66,029 | $ | 139,643 | $ | 126,774 | ||||||||
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| Domestic revenues |
66,017 | 59,006 | 128,705 | 113,821 | ||||||||||||
| International revenues |
5,592 | 7,023 | 10,938 | 12,953 | ||||||||||||
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| Total revenues |
$ | 71,609 | $ | 66,029 | $ | 139,643 | $ | 126,774 | ||||||||
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RTI SURGICAL, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
| June 30, | December 31, | |||||||
| 2015 | 2014 | |||||||
| Assets | ||||||||
| Cash and cash equivalents |
$ | 12,699 | $ | 15,703 | ||||
| Accounts receivable - net |
40,212 | 38,833 | ||||||
| Inventories - net |
117,199 | 113,464 | ||||||
| Prepaid and other current assets |
27,639 | 29,496 | ||||||
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| Total current assets |
197,749 | 197,496 | ||||||
| Property, plant and equipment - net |
79,563 | 77,028 | ||||||
| Goodwill |
54,887 | 54,887 | ||||||
| Other assets - net |
45,228 | 48,724 | ||||||
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| Total assets |
$ | 377,427 | $ | 378,135 | ||||
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| Liabilities and Stockholders’ Equity | ||||||||
| Accounts payable |
$ | 28,723 | $ | 26,834 | ||||
| Accrued expenses and other current liabilities |
23,829 | 30,673 | ||||||
| Current portion of long-term obligations |
5,962 | 6,479 | ||||||
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| Total current liabilities |
58,514 | 63,986 | ||||||
| Deferred revenue |
11,787 | 12,460 | ||||||
| Long-term liabilities |
78,570 | 81,020 | ||||||
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| Total liabilities |
148,871 | 157,466 | ||||||
| Preferred stock, including accrued dividends |
54,554 | 52,834 | ||||||
| Stockholders’ equity: |
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| Common stock and additional paid-in capital |
417,042 | 415,570 | ||||||
| Accumulated other comprehensive loss |
(6,433 | ) | (3,881 | ) | ||||
| Accumulated deficit |
(236,607 | ) | (243,854 | ) | ||||
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| Total stockholders’ equity |
174,002 | 167,835 | ||||||
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| Total liabilities and stockholders’ equity |
$ | 377,427 | $ | 378,135 | ||||
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RTI SURGICAL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
| For the Three Months | For the Six Months | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Cash flows from operating activities: |
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| Net income |
$ | 3,505 | $ | 2,361 | $ | 7,247 | $ | 51 | ||||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
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| Depreciation and amortization expense |
4,380 | 3,863 | 8,346 | 7,527 | ||||||||||||
| Stock-based compensation |
680 | 533 | 1,253 | 1,023 | ||||||||||||
| Amortization of deferred revenue |
(1,159 | ) | (1,207 | ) | (3,905 | ) | (3,006 | ) | ||||||||
| Other items to reconcile to net cash provided by (used in) operating activities |
(1,695 | ) | (2,928 | ) | (6,224 | ) | (6,280 | ) | ||||||||
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| Net cash provided by (used in) operating activities |
5,711 | 2,622 | 6,717 | (685 | ) | |||||||||||
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| Cash flows from investing activities: |
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| Purchases of property, plant and equipment |
(4,312 | ) | (3,536 | ) | (8,577 | ) | (8,472 | ) | ||||||||
| Patent and acquired intangible asset costs |
(94 | ) | (59 | ) | (116 | ) | (276 | ) | ||||||||
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| Net cash used in investing activities |
(4,406 | ) | (3,595 | ) | (8,693 | ) | (8,748 | ) | ||||||||
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| Cash flows from financing activities: |
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| Proceeds from long-term obligations |
— | 1,000 | — | 5,000 | ||||||||||||
| Net (payments) proceeds from short-term obligations |
(162 | ) | 75 | 348 | 1,308 | |||||||||||
| Payments on long-term obligations |
(1,513 | ) | (12 | ) | (3,026 | ) | (32 | ) | ||||||||
| Other financing activities |
1,142 | 247 | 1,696 | 417 | ||||||||||||
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| Net cash (used in) provided by financing activities |
(533 | ) | 1,310 | (982 | ) | 6,693 | ||||||||||
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| Effect of exchange rate changes on cash and cash equivalents |
23 | — | (46 | ) | (179 | ) | ||||||||||
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| Net increase (decrease) in cash and cash equivalents |
795 | 337 | (3,004 | ) | (2,919 | ) | ||||||||||
| Cash and cash equivalents, beginning of period |
11,904 | 15,465 | 15,703 | 18,721 | ||||||||||||
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| Cash and cash equivalents, end of period |
$ | 12,699 | $ | 15,802 | $ | 12,699 | $ | 15,802 | ||||||||
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