Form 8-K RTI SURGICAL, INC. For: Apr 23

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) April 23, 2015

 

 

RTI SURGICAL, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Delaware		0-31271		59-3466543
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)
11621 Research Circle, Alachua, Florida				32615
(Address of Principal Executive Offices)				(Zip Code)

Registrant’s telephone number, including area code: (386) 418-8888

not applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02.

Results of Operations and Financial Condition.

On April 23, 2015, RTI Surgical, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended March 31, 2015. A copy of this press release is furnished herewith as Exhibit 99.1.

The information furnished herewith pursuant to Item 2.02 of this Current Report, including Exhibit 99.1, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. The information in this Current Report shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this Current Report, regardless of any general incorporation language in the filing.

 

Item 9.01.

Financial Statements and Exhibits.

(d) Exhibits.

 

99.1		Press Release issued by the Company dated April 23, 2015.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

				RTI SURGICAL, INC.
Date: April 23, 2015				By:		/s/ Robert P. Jordheim
				Name:		Robert P. Jordheim
				Title:		Executive Vice President and Chief Financial Officer

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EXHIBIT INDEX

RTI Surgical, Inc.

Form 8-K Current Report

 

Exhibit Number		Description of Document
99.1		Press Release issued by the Company dated April 23, 2015.

Exhibit 99.1

 

FOR DISTRIBUTION ON		For more information, contact:
APRIL 23, 2015 AT 08:00 A.M.		Robert Jordheim
		Chief Financial Officer
		[email protected]
		Wendy Crites Wacker, APR
		Vice President, Global Communications
		[email protected]
		Phone (386) 418-8888

RTI SURGICAL™ ANNOUNCES 2015 FIRST QUARTER RESULTS

– Raises revenue guidance for full year 2015 –

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

ALACHUA, Fla. (April 23, 2015) – RTI Surgical Inc. (RTI) (Nasdaq: RTIX), a global surgical implant company, reported operating results for the first quarter of 2015 as follows:

First Quarter Highlights:

 

•

Achieved first quarter revenues of $68 million, a 12 percent increase over the first quarter of 2014.

 

•

Achieved net income per fully diluted share of $0.05.

 

•

Benefited from accelerated deferred revenue recognition of $1.5 million and associated net income per fully diluted share of $0.02.

 

•

Achieved revenues of $19.4 million in the spine business, a 2 percent increase over the first quarter of 2014 with a 20 percent increase in the direct spine business.

 

•

Achieved revenues of $12.1 million in the sports medicine business, a 7 percent increase over the first quarter of 2014.

 

•

Achieved revenues of $10.9 million in the BGS and general orthopedic business, a 34 percent increase over first quarter of 2014.

 

•

Achieved revenues of $10.6 million in the orthofixation business, a 42 percent increase over the first quarter of 2014.

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Worldwide revenues were $68 million for the first quarter of 2015 compared to revenues of $60.7 million for the first quarter of 2014. Domestic revenues were $62.7 million for the first quarter of 2015 compared to revenues of $54.8 million for the first quarter of 2014. International revenues were $5.3 million for the first quarter of 2015 compared to revenues of $5.9 million for the first quarter of 2014. On a constant currency basis, international revenues for the first quarter of 2015 increased 1 percent compared to the first quarter of 2014. For the first quarter of 2015, the company benefited from $1.5 million in accelerated deferred revenue recognition due to loss of exclusivity by its commercial partner in the breast reconstruction market.

“We saw solid growth in the first quarter, exceeding our expectations and keeping us on track for the year,” said Brian K. Hutchison, president and chief executive officer. “Our growth was in line with the plan we laid out for our three major areas of focus, mentioned on our fourth quarter and year-end earnings call. Our base biologics business, which includes allograft and xenograft implants was comparable to prior year. Our hardware business, which includes metals and synthetic-based implants, grew 30 percent and our focused products, which includes nanOss^® advanced bone graft substitute, Fortiva™ porcine dermis and map3^® cellular allogeneic bone graft, grew more than 100 percent.”

For the first quarter of 2015, the company reported net income applicable to common shares of $2.9 million and net income per fully diluted common share of $0.05, based on 57.9 million fully diluted shares outstanding, compared to net loss applicable to common shares of $3.1 million and net loss per fully diluted common share of $0.05 for the first quarter of 2014, based on 56.5 million fully diluted shares outstanding. For the first quarter 2015, the company benefited from $0.9 million in net income applicable to common shares, or $0.02 in net income per fully diluted common share, related to the previously mentioned accelerated deferred revenue recognition.

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 first quarter of 2015 (16 percent of first quarter 2015 revenues) compared to $6.4 million for the first quarter of 2014 (10 percent of first quarter 2014 revenues).

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Fiscal 2015 and Second Quarter Outlook

Based on results from the first quarter, the company is raising full year guidance for 2015. The company now expects full year revenues for 2015 to be between $281 million and $286 million, as compared to prior guidance of between $279 million and $285 million. Full year net income per fully diluted common share is expected to be in the range of $0.19 to $0.23 based on 58.2 million fully diluted common shares outstanding, as compared to prior guidance of $0.17 to $0.22.

For the second quarter of 2015, the company expects revenues to be between $70 million and $71 million, and net income per fully diluted common share to be approximately $0.04, based on 58.2 million fully diluted shares outstanding.

“During the first quarter we saw strong growth in our direct distribution business,” said Hutchison. “Based on results from the first quarter, I am confident in our ability to meet our goals for the year. We will continue to target our key initiatives including driving growth in our focused products, capturing market share in spine hardware, growing international revenue and controlling spending to improve margins.”

Conference Call

RTI will host a conference call and simultaneous audio webcast to discuss the first 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

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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.

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RTI SURGICAL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

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

 

		For the Three Months Ended
		March 31,
		2015				2014
Revenues		$	68,034			$	60,745
Costs of processing and distribution			31,035				34,547
Gross profit			36,999				26,198
Expenses:
Marketing, general and administrative			27,255				25,854
Research and development			3,580				3,832
Total operating expenses			30,835				29,686
Operating income (loss)			6,164				(3,488	)
Total other expense—net			(294	)			(355	)
Income (loss) before income tax (provision) benefit			5,870				(3,843	)
Income tax (provision) benefit			(2,128	)			1,533
Net income (loss)			3,742				(2,310	)
Convertible preferred dividend			(808	)			(750	)
Net income (loss) applicable to common shares		$	2,934			$	(3,060	)
Net income (loss) per common share—basic		$	0.05			$	(0.05	)
Net income (loss) per common share—diluted		$	0.05			$	(0.05	)
Weighted average shares outstanding—basic			57,087,497				56,451,646
Weighted average shares outstanding—diluted			57,949,224				56,451,646

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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
		Ended March 31,
		2015				2014
Net income (loss)		$	2,934			$	(3,060	)
Interest expense, net			316				333
Provision (benefit) for income taxes			2,128				(1,533	)
Depreciation			2,944				2,536
Amortization of intangible assets			1,022				1,128
EBITDA			9,344				(596	)
Reconciling items for Adjusted EBITDA
Preferred dividend			808				750
Non-cash stock based compensation			573				490
FX (gain) loss			(22	)			22
Other reconciling items (1)
Inventory purchase accounting adjustment			—				5,708
Adjusted EBITDA		$	10,703			$	6,374
Adjusted EBITDA as a percent of revenues			16	%			10	%

 

(1)	See explanations in Use of Non-GAAP Financial Measures section later in this release

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RTI SURGICAL, INC. AND SUBSIDIARIES

Reconciliation of Net Income (Loss) Applicable to Common Shares and Net Income (Loss) Per Diluted Share to

Adjusted Net Income Applicable to Common Shares and Adjusted Net Income Per Diluted Share

(Unaudited, in thousands, except per share data)

 

		For the Three Months Ended
		March 31, 2015								March 31, 2014
		Net								Net
		Income				Amount				Loss				Amount
		Applicable to				per Diluted				Applicable to				per Diluted
		Common Shares				Share				Common Shares				Share
As reported		$	2,934			$	0.05			$	(3,060	)		$	(0.05	)
Inventory purchase price adjustment, net of tax effect (1)			—				—				3,467				0.06
Adjusted		$	2,934			$	0.05			$	407			$	0.01

 

Footnotes:		2014
(1) Inventory purchase price adjustment, net of tax effect, as follows:
Inventory purchase price adjustment		$	5,708
Tax effect on inventory purchase price adjustment			(2,241	)
Inventory purchase price adjustment, net of tax effect		$	3,467

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 is an explanation of the adjustment that management excluded as part of adjusted measures for the three month period ended March 31, 2014 as well as the reason for excluding the individual item:

2014 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.

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

Adjusted net income applicable to common shares, adjusted net income per fully diluted share, and adjusted EBITDA should not be considered in isolation, or as a replacement for GAAP measures.

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Usefulness of Non-GAAP Financial Measures to Investors

The Company believes that presenting adjusted net income applicable to common shares, adjusted net income 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. 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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RTI SURGICAL, INC. AND SUBSIDIARIES

Condensed Consolidated Revenues

(Unaudited, in thousands)

 

		For the Three Months Ended
		March 31,
		2015				2014
Revenues:
Spine		$	19,379			$	19,063
Sports medicine			12,107				11,360
Bone graft substitutes and general orthopedic			10,929				8,147
Ortho fixation			10,637				7,495
Surgical specialties			6,010				7,278
Dental			4,755				4,646
Other revenues			4,217				2,756
Total revenues		$	68,034			$	60,745
Domestic revenues			62,688				54,815
International revenues			5,346				5,930
Total revenues		$	68,034			$	60,745

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RTI SURGICAL, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited, in thousands)

 

		March 31,				December 31,
		2015				2014
Assets
Cash and cash equivalents		$	11,904			$	15,703
Accounts receivable—net			39,666				38,833
Inventories—net			114,908				113,464
Prepaid and other current assets			28,906				29,496
Total current assets			195,384				197,496
Property, plant and equipment—net			77,290				77,028
Goodwill			54,887				54,887
Other assets—net			46,644				48,724
Total assets		$	374,205			$	378,135
Liabilities and Stockholders’ Equity
Accounts payable		$	27,016			$	26,834
Accrued expenses and other current liabilities			25,623				30,673
Current portion of long-term obligations			6,467				6,479
Total current liabilities			59,106				63,986
Deferred revenue			13,003				12,460
Long-term liabilities			79,813				81,020
Total liabilities			151,922				157,466
Preferred stock			53,688				52,834
Stockholders’ equity:
Common stock and additional paid-in capital			416,063				415,570
Accumulated other comprehensive loss			(7,356	)			(3,881	)
Accumulated deficit			(240,112	)			(243,854	)
Total stockholders’ equity			168,595				167,835
Total liabilities and stockholders’ equity		$	374,205			$	378,135

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RTI SURGICAL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

 

		For the Three Months
		Ended March 31,
		2015				2014
Cash flows from operating activities:
Net income (loss)		$	3,742			$	(2,310	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense			3,966				3,664
Stock-based compensation			573				490
Amortization of deferred revenue			(2,746	)			(1,799	)
Other items to reconcile to net cash provided by (used in) operating activities			(4,529	)			(3,352	)
Net cash provided by (used in) operating activities			1,006				(3,307	)
Cash flows from investing activities:
Purchases of property, plant and equipment			(4,265	)			(4,936	)
Patent and acquired intangible asset costs			(22	)			(217	)
Net cash used in investing activities			(4,287	)			(5,153	)
Cash flows from financing activities:
Proceeds from long-term obligations			—				4,000
Net proceeds from short-term obligations			510				1,233
Payments on long-term obligations			(1,513	)			(20	)
Other financing activities			554				170
Net cash (used in) provided by financing activities			(449	)			5,383
Effect of exchange rate changes on cash and cash equivalents			(69	)			(179	)
Net decrease in cash and cash equivalents			(3,799	)			(3,256	)
Cash and cash equivalents, beginning of period			15,703				18,721
Cash and cash equivalents, end of period		$	11,904			$	15,465

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