News


RTI Surgical™ Announces 2014 Fourth Quarter, Full Year Results, 2015 Financial Guidance

Robert Jordheim
Chief Financial Officer
rjordheim@rtix.com
386.418.8888

Wendy Crites Wacker, APR
Vice President, Global Communications
wwacker@rtix.com
386.418.8888

– Company achieves record quarterly and annual revenues –
– Company Will Hold Conference Call at 8:30 a.m. ET –

ALACHUA, Fla. (Feb. 12, 2015) – RTI Surgical Inc. (RTI) (Nasdaq: RTIX), a global surgical implant company, reported operating results for the fourth quarter and full year of 2014 as follows:

Quarterly Highlights:

  • Achieved quarterly revenues of $70.9 million, a 17 percent increase over the fourth quarter of 2013, and exceeding revenue guidance of $68 to $69 million.
  • Achieved adjusted net income per fully diluted share of $0.05, exceeding guidance of $0.04.
  • Achieved revenues of $21.8 million in the spine business, an 18 percent increase over the fourth quarter of 2013.
  • Achieved revenues of $12.6 million in the sports medicine business, a 15 percent increase over the fourth quarter of 2013.
  • Achieved revenues of $11.3 million in the orthofixation business, a 44 percent increase over the fourth quarter of 2013.
  • Achieved revenues of $10.3 million in the BGS and general orthopedic business, a 17 percent increase over the fourth quarter of 2013.
  • Announced that Shirley A. Weis, president of Weis Associates, LLC and emerita Vice President and Chief Administrative Officer at Mayo Clinic, joined the company’s board of directors.
  • Announced online publication of a study highlighting nanOss® Advanced Bone Graft Substitutes.

2014 Full Year Highlights:

  • Achieved full year revenues of $262.8 million, exceeding revenue guidance of $260 to $261 million.
  • Achieved above market growth in the spine, sports medicine, BGS and general orthopedic, and orthofixation businesses.
  • Received approval to CE mark Fortiva™ Porcine Dermis and began distribution throughout Europe in March 2014.
  • Announced the first human implantation of the map3® Cellular Allogeneic Bone Graft Strips Allograft in June 2014.
  • Launched more than twenty new products, implants and line extensions.

Fourth Quarter 2014

Worldwide revenues were $70.9 million for the fourth quarter of 2014 compared to revenues of $60.5 million for the fourth quarter of 2013. Domestic revenues were $65.4 million for the fourth quarter of 2014 compared to revenues of $54.4 million for the fourth quarter of 2013. International revenues were $5.4 million for the fourth quarter of 2014 compared to revenues of $6.1 million for the fourth quarter of 2013. On a constant currency basis, international revenues for the fourth quarter of 2013 decreased 4 percent compared to the fourth quarter of 2013.

“Revenues for the quarter exceeded our expectations and we were very pleased to see growth in almost every area of our business,” said Brian K. Hutchison, president and chief executive officer. “Throughout 2014 we indicated that our goals were to see growth in our sports and spine businesses, gain traction in our direct surgical specialties business and expand distribution of our map3 cellular allogeneic bone graft. I’m pleased to report that we achieved each of these goals.”

For the fourth quarter of 2014, the company reported a net loss applicable to common shares of $136 thousand and a net loss per fully diluted common share of $0.00, based on 56.9 million fully diluted shares outstanding, compared to a net loss applicable to common shares of $8.5 million and a net loss per fully diluted common share of $0.15 for the fourth quarter of 2013, based on 56.4 million fully diluted shares outstanding. The fourth quarter of 2014 included a pre-tax severance charge of $4.3 million and a pre-tax litigation settlement charge of $185 thousand. For the fourth quarter of 2014, on a non-GAAP basis, excluding the severance charge and litigation settlement charge, the company reported adjusted net income applicable to common shares of $2.7 million and adjusted net income per fully diluted common share of $0.05.
The company’s fourth quarter of 2014 adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA), as detailed in the reconciliation provided later in this release, was $10.2 million (14 percent of revenues) compared to $5.8 million (10 percent of revenues) for the fourth quarter of 2013.

Full Year 2014

Worldwide revenues were $262.8 million for the full year of 2014 compared to revenues of $198 million for the full year 2013. Domestic revenues were $238.9 million for the full year of 2014 compared to revenues of $177.2 million for the full year 2013. International revenues were $23.9 million for the full year of 2014 compared to $20.8 million for the full year 2013. On a constant currency basis, international revenues for the full year 2014 increased 15 percent compared to the full year 2013. Our prior year worldwide revenues for the full year 2013 include $36 million from the Pioneer acquisition for the period of July 16, 2013 to December 31, 2013, whereas our current year period includes a full year of Pioneer-related revenues. If the acquisition were effective January 1 for both 2013 and 2014, worldwide revenues would have increased by 8 percent.

For the full year 2014, the company reported a net loss applicable to common shares of $417 thousand and net loss per fully diluted common share of $0.01, based on 56.7 million fully diluted shares outstanding, compared to a net loss applicable to common shares of $19.2 million and net loss per fully diluted common share of $0.34, based on 56.3 million fully diluted shares outstanding for the full year 2013. For the full year of 2014, on a non-GAAP basis, excluding severance charges, the litigation settlement charge, and the inventory purchase accounting adjustment taken in the first quarter, the company reported adjusted net income applicable to common shares of $6.2 million and adjusted net income per fully diluted common share of $0.11.

The company’s full year 2014 adjusted EBITDA, as detailed in the reconciliation provided later in this release, was $34.0 million (13 percent of revenues) compared to $15.1 million (8 percent of revenues) for the full year 2013.

Fiscal 2015 and First Quarter Outlook

The company expects full year revenues for 2015 to be between $279 million and $285 million. Full year net income per fully diluted common share is expected to be in the range of $0.17 to $0.22, based on 58 million fully diluted common shares outstanding.

For the first quarter of 2015, the company expects revenues to be between $66 million and $67 million, and net income per fully diluted common share to be approximately $0.03, based on 57.5 million fully diluted shares outstanding.

“Due to timing of orders in the commercial businesses we anticipate that first quarter revenue will be slightly down sequentially, but will then increase sequentially on a quarterly basis throughout the year,” said Hutchison. “In 2015, we will target several key initiatives including driving growth in our focused products of nanOss 3D Advanced Bone Graft Substitute, Fortiva Porcine Dermis and map3 Cellular Allogeneic Bone Graft, capturing market share in spine hardware, growing international revenue and controlling spending to continue to improve margins.”

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 Surgical Inc.

RTI Surgical is a leading global surgical implant company providing surgeons with safe biologic, metal and synthetic implants. Committed to advancing science, safety and innovation, 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.












Use of Non-GAAP Financial Measures
To supplement RTI Surgical’s condensed consolidated financial statements presented on a GAAP basis, the Company discloses certain non-GAAP financial measures that exclude certain amounts, including adjusted net income (loss) applicable to common shares, adjusted net income (loss) per fully diluted share and adjusted EBITDA. 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 are explanations of the adjustments that management excluded as part of adjusted measures for the three and twelve month period ended December 31, 2014 and 2013 as well as the reasons for excluding the individual item:

2014 and 2013 Inventory purchase accounting adjustment – This adjustment represents the purchase price effects on the sale of acquired Pioneer inventory, 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.

2014 Severance Charges – This adjustment represents a charge and relates to certain expenses associated with the severance costs associated with former employees. Management removes the amount of these severance 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.

2013 Restructuring charges – This adjustment represents a charge and relates to the severance of certain employees and an office closure as a result of the integration activities following the acquisition of Pioneer. Management removes the amount of these one-time fees 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.

2013 Acquisition expenses – This adjustment represents a charge and relates to certain fees associated with the acquisition of Pioneer. Management removes the amount of these one-time fees 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.

2013 Integration expenses – This adjustment represents a charge and relates to certain expenses associated with the integration of Pioneer. Management removes the amount of these one-time fees 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.

2014 and 2013 Litigation settlement charge – This adjustment represents a charge and relates to a litigation settlement of an international distributor dispute in 2014 and certain BTS related lawsuits in 2013. Management removes the amount of the litigation settlement charge from the Company’s operating results to assist in assessing its operating performance in the period 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 net income (loss) applicable to common shares, adjusted net income (loss) per fully diluted share, and 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 net income (loss) applicable to common shares, adjusted net income (loss) per fully diluted share, and 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, acquisition expenses, integration expenses, severance costs, and, the litigation settlement charge. The Company further believes that providing this information better enables RTI Surgical’s investors to understand the Company’s overall core performance and to evaluate the methodology used by management to assess and measure such performance.








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