RTI Biologics Announces 2011 Third Quarter Results

10/27/2011

• Robert Jordheim
• Chief Financial Officer
• rjordheim@rtix.com

• Wendy Crites Wacker, APR
• Corporate Communications
• wwacker@rtix.com
• 386-418-8888

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

ALACHUA, Fla. (Oct. 27, 2011) – RTI Biologics Inc. (RTI) (Nasdaq: RTIX), a leading provider of orthopedic and other biologic implants, reported operating results for the third quarter of 2011 as follows:

Quarterly Highlights:

• Achieved quarterly revenues of $42.3 million.
• Achieved quarterly net income of $2.7 million, or $0.05 per fully diluted share.
• Achieved quarterly revenues of $12.1 million in the U.S. direct distribution organization, a 7 percent increase over the third quarter of 2010. The U.S. direct distribution organization includes sports medicine and some bone graft substitute/general orthopedic (BGS/GO) implants.
• Achieved quarterly revenues of $7.5 million in the surgical specialties business, an 11 percent increase over third quarter 2010.
• Achieved quarterly revenues of $7.0 million in the BGS/GO business, a 24 percent increase over third quarter 2010.
• Achieved international revenues of $5.0 million, an 18 percent increase over the third quarter of 2010.
• Released one new spinal construct, one BGS/GO implant and one surgical specialties implant for distribution with three different commercial distributors.
• “We are pleased with our third quarter results, which exceeded our expectations and were driven primarily by growth in surgical specialties and BGS/GO,” said Brian K. Hutchison, chief executive officer of RTI. “The decrease in reported dental revenues is the result of the change in the terms of our distributor agreement, which was announced in the third quarter of 2010. If the new terms with our distributor had been effective for the entire third quarter of 2010, dental revenues would have increased by 17 percent compared to the third quarter of 2010.”

Worldwide revenues of $42.3 million for the third quarter of 2011 were up 1 percent compared to the third quarter of 2010. Domestic revenues of $37.3 million for the third quarter of 2011 were comparable to the third quarter of 2010. If the new terms with the company’s dental distributor had been effective for the entire third quarter of 2010, domestic revenues would have increased by 9 percent compared to the third quarter of 2010, primarily based on the strength of the dental, surgical specialties and BGS/GO businesses. International revenues of $5.0 million increased 18 percent due to growth in all businesses from the company’s international operations in Germany, offset by declines in revenues from exports to other countries. On a constant currency basis, international revenues increased 9 percent compared to the third quarter of 2010.

For the third quarter of 2011, the company reported net income of $2.7 million and net income per fully diluted share of $0.05, based on 55.4 million fully diluted shares outstanding, compared to a net loss of $133.1 million and a net loss per fully diluted share of $2.43 based on 54.8 million fully diluted shares outstanding. Third quarter 2011 earnings per share were favorably impacted by approximately $0.01 due to the de-recognition of an uncertain tax liability as a result of Internal Revenue Service guidance provided during the third quarter of 2011 and applicable to the deductibility of transaction fees incurred as part of the Tutogen merger in 2008. Third quarter 2010 results included a decrease in net income of $134.7 million, or $2.46 per fully diluted share, due to a goodwill impairment charge.

Fiscal 2011 and Fourth Quarter Outlook

As a result of better than expected results through the first nine months of the year, the company is raising its full year revenue guidance for 2011. The company now expects full year revenues for 2011 to be between $166 million and $167 million, as compared to prior guidance of between $164 million and $166 million. Full year net income is expected to be approximately $0.14 per fully diluted share, based on 55.4 million shares outstanding, at the top end of our prior guidance of between $0.12 and $0.14 per fully diluted share.

For the fourth quarter of 2011, the company expects revenues to be between $40 million and $41 million, and net income per fully diluted share to be approximately $0.03.

“Despite the challenging economic environment, we are pleased with our progress in the first three quarters of 2011.” Hutchison said. “We are raising on our annual revenue guidance based on stronger than expected results through the first three quarters of 2011 and visibility into fourth quarter orders.”

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 webcast 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 bovine 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. Two such processes – the BioCleanse® Tissue Sterilization Process and the Tutoplast® Tissue Sterilization Process – have a combined record of millions of implants distributed with zero incidence of allograft-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 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.

To view the XBRL filing, please click here.

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 three and nine month periods ended September 30, 2010 as well as the reasons for excluding the individual item:

Impairment charges – These adjustments represent one-time charges and relate to evaluating the goodwill that has been created through purchase transactions. Management removes the impact of the goodwill impairment 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 impairment charges. 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.