Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
RTIX > SEC Filings for RTIX > Form 10-Q on 3-May-2013All Recent SEC Filings

Show all filings for RTI BIOLOGICS, INC. | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for RTI BIOLOGICS, INC.


3-May-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Relating to Forward Looking Statements

Information contained in this filing contains "forward-looking statements" which can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "anticipates" or comparable terminology, or by discussions of strategy. There can be no assurance that the future results covered by these forward-looking statements will be achieved. Some of the matters described in the "Risk Factors" section of our Form 10-K constitute cautionary statements which identify factors regarding these forward-looking statements, including certain risks and uncertainties, that could cause actual results to vary materially from the future results indicated in these forward-looking statements. Other factors could also cause actual results to vary materially from the future results indicated in such forward-looking statements.

Management Overview

RTI Biologics, Inc., together with its subsidiaries, produces orthopedic and other surgical implants that repair and promote the natural healing of human bone and other human tissues. We process donated human musculoskeletal and other tissues, including bone, cartilage, tendon, ligament, fascia lata, pericardium, sclera, and dermal tissues, as well as bovine animal tissues to produce allograft and xenograft implants by utilizing our proprietary BIOCLEANSE®, TUTOPLAST® and CANCELLE™ SP sterilization processes. We process and distribute human and bovine animal tissues for use in the fields of sports medicine, spine, surgical specialties, bone graft substitutes, and general orthopedic and dental. We market our implants through a direct distribution organization, as well as through a network of independent distributors to hospitals and surgeons in the United States and internationally. We were founded in 1997 and are headquartered in Alachua, Florida

Domestic distributions and services accounted for 89% of total revenues in the first three months of 2013. Most of our implants are distributed directly to doctors, hospitals and other healthcare facilities through a direct distribution force and through various strategic relationships.

International distributions and services accounted for 11% of total revenues in the first three months of 2013. Our implants are distributed in over 30 countries through a direct distribution force in Germany and through stocking distributors in the rest of the world outside of Germany and the U.S.

Our business is generally not seasonal in nature; however, the number of orthopedic implant surgeries and elective procedures generally declines during the summer months.

Our principal goals are to honor the gift of donated tissue, donor families, and patients while building our competitive strength in the marketplace to increase revenues, profitability and cash flow as we focus on improved operational efficiency, productivity and asset management. We are making investments in new implant and product development and our U.S. direct distribution network to promote growth in 2013 and beyond.

We continue to maintain our commitment to research and development and the introduction of new strategically targeted allograft and xenograft implants as well as focused clinical efforts to support their acceptance in the marketplace. In addition, we consider strategic acquisitions for new implants and technologies intended to augment our existing implant offerings.


Table of Contents

Three Months Ended March 31, 2013 Compared With Three Months Ended March 31, 2012

                                                    Three Months Ended
                                                         March 31,
                                                     2013          2012
                                                      (In Thousands)
             Revenues from tissue distribution:
             Sports medicine                      $   10,511     $ 13,425
             Spine                                    10,099        8,560
             Surgical specialties                      6,954        7,797
             BGS and general orthopedic                5,351        7,015
             Dental                                    4,173        5,324
             Other revenues                            3,334        1,622

             Total revenues                       $   40,422     $ 43,743

             Domestic revenues                        36,114       37,873
             International revenues                    4,308        5,870

             Total revenues                       $   40,422     $ 43,743

Three Months Ended March 31, 2013 Compared With Three Months Ended March 31, 2012

Revenues. Our total revenues decreased by $3.3 million, or 7.6%, to $40.4 million for the three months ended March 31, 2013 compared to $43.7 million for the three months ended March 31, 2012. Our revenues were negatively impacted in the three months ended March 31, 2013 as a result of continued customer reaction to a U.S. Food and Drug Administration warning letter received in the fourth quarter of 2012.

Sports Medicine-Revenues from sports medicine allografts decreased $2.9 million, or 21.7%, to $10.5 million for the three months ended March 31, 2013 compared to $13.4 million for the three months ended March 31, 2012. Sports medicine revenues decreased primarily as a result of lower unit volumes of 21.7%.

Spine-Revenues from spinal allografts increased $1.5 million, or 18.0%, to $10.1 million for the three months ended March 31, 2013 compared to $8.6 million for the three months ended March 31, 2012. Spine revenues increased primarily as a result of higher unit volumes of 22.6% partially offset by lower average revenue per unit of 3.8%, primarily due to changes in distribution mix.

Surgical Specialties-Revenues from surgical specialty allografts decreased $843,000, or 10.8%, to $7.0 million for the three months ended March 31, 2013 compared to $7.8 million for the three months ended March 31, 2012. Surgical specialties revenues decreased as a result of lower unit volumes of 20.2% partially offset by higher average revenue per unit of 11.1%.

Bone Graft Substitutes (BGS) and General Orthopedic-Revenues from BGS and general orthopedic allografts decreased $1.7 million, or 23.7%, to $5.4 million for the three months ended March 31, 2013 compared to $7.0 million for the three months ended March 31, 2012. BGS and general orthopedic revenues decreased primarily as a result of lower unit volumes of 21.6% and lower average revenue per unit of 3.2%.

Dental-Revenues from dental allografts decreased $1.2 million, or 21.6%, to $4.2 million for the three months ended March 31, 2013 compared to $5.3 million for the three months ended March 31, 2012. Dental revenues decreased primarily as a result of lower unit volumes of 21.5%.

Other Revenues-Revenues from other sources consisting of tissue recovery fees, biomedical laboratory fees, recognition of previously deferred revenues, shipping fees, distribution of reproductions of our allografts to


Table of Contents

distributors for demonstration purposes and restocking fees increased by $1.7 million to $3.3 million for the three months ended March 31, 2013 compared to $1.6 million for the three months ended March 31, 2012. The increase was primarily due to the acceleration of deferred revenue recognition relating to Davol relinquishing their exclusive distribution rights in the hernia market in the three months ended March 31, 2013.

International revenues-International revenues include distributions from our foreign affiliates as well as domestic export revenues. International revenues decreased $1.6 million, or 26.6%, to $4.3 million for the three months ended March 31, 2013 compared to $5.9 million for the three months ended March 31, 2012. On a constant currency basis, international revenues decreased 27.1%.

Costs of Processing and Distribution. Costs of processing and distribution decreased $2.4 million, or 10.2%, to $21.2 million for the three months ended March 31, 2013 compared to $23.6 million for the three months ended March 31, 2012.

Costs of processing and distribution decreased as a percentage of revenues from 54.0% for the three months ended March 31, 2012 to 52.5% for the three months ended March 31, 2013. The decrease was primarily due to the recognition of $1.7 million of additional deferred revenue in the other revenues category due to the acceleration of deferred revenue recognition with no associated costs of processing and distribution relating to Davol relinquishing their exclusive distribution rights in the hernia market in the three months ended March 31, 2013.

Marketing, General and Administrative Expenses. Marketing, general and administrative expenses increased $649,000, or 4.5%, to $15.0 million for the three months ended March 31, 2013 from $14.4 million for the three months ended March 31, 2012. Marketing, general and administrative expenses increased as a percentage of revenues from 32.9% for the three months ended March 31, 2012 to 37.2% for the three months ended March 31, 2013. The increase in expenses was primarily due to increases in marketing related expenses of $490,000 due to the build-out of the surgical specialties direct distribution force.

Research and Development Expenses. Research and development expenses increased by $284,000, or 10.0%, to $3.1 million for the three months ended March 31, 2013 from $2.8 million for the three months ended March 31, 2012. As a percentage of revenues, research and development expenses increased from 6.5% for the three months ended March 31, 2012 to 7.7% for the three months ended March 31, 2013. The increase was primarily due to higher research study related expenses of $277,000.

Asset Abandonments. There were no asset abandonments for the three months ended March 31, 2013 compared to $16,000 for the three months ended March 31, 2012.

Net Other Income. There was zero net other income for the three months ended March 31, 2013 compared to $55,000 for the three months ended March 31, 2012. The decrease in net other income is primarily attributable to lower interest income and unfavorable foreign currency exchange changes due to fluctuations in the value of the U.S. dollar versus the Euro and the timing of payments on foreign currency liabilities.

Income Tax Benefit (Provision). Income tax benefit for the three months ended March 31, 2013 was $400,000 compared to an income tax provision of $942,000 for the three months ended March 31, 2012. Our effective tax rate for the three months ended March 31, 2013 and 2012 was a benefit of (37.7%) and a provision of 32.0% respectively. During the three months ended March 31, 2013, we recognized the entire 2012 research tax credit plus a portion of the 2013 research tax credit with no comparable credit in the prior period. On January 2, 2013 the American Taxpayer Relief Act of 2012 ("ATRA") was signed into law. The ATRA retroactively extended the research tax credit to the beginning of 2012 through 2013. Under ASC 740, Income Taxes, the effects of the tax legislation are recognized upon enactment. Therefore, we recognized the tax benefit during the three months ended March 31, 2013.


Table of Contents

Liquidity and Capital Resources

Our working capital at March 31, 2013 increased $653,000 to $129.8 million from $129.1 million at December 31, 2012. The increase in working capital was primarily due to a decrease in accrued expenses partially offset by increases in inventories and prepaid and other current assets during the current period. At March 31, 2013, we had 45 days of revenues outstanding in trade accounts receivable, an increase of 1 day compared to December 31, 2012. The increase was due to lower cash receipts from customers than shipments and corresponding billings to customers during the first three months of 2013. At March 31, 2013 we had 320 days of inventory on hand, an increase of 18 days compared to December 31, 2012. The increase was primarily as a result of higher tissue procurements and lower product distributions. We believe that our inventory levels will be adequate to support our on-going operations for the next twelve months. We had $38.8 million of cash and cash equivalents at March 31, 2013. The decrease in cash was primarily due to strong tissue procurements, lower implant distributions, the investment in our direct surgical specialties distribution force and the timing of tax payments in the three months ended March 31, 2013.

Our long term obligations at March 31, 2013 decreased $82,000 to $38,000 from $120,000 at December 31, 2012. The decrease in long term obligations was primarily due to paying down our capital leases. At March 31, 2013, we have $16.4 million of borrowing capacity available under our revolving credit facilities.

As of March 31, 2013, we believe that our working capital, together with our borrowing ability under our revolving credit facilities, will be adequate to fund our on-going operations for the next twelve months.

Certain Commitments.

The Company's short-term and long-term debt obligations and availability of
credit as of March 31, 2013 are as follows:



                                          Outstanding       Available
                                            Balance          Credit
                                                (In thousands)
               Short-term obligations:
               Credit facilities         $          -      $    16,379
               Capital leases                       38              -

The following table provides a summary of our debt obligations, operating lease obligations, and other significant obligations as of March 31, 2013.

                                                           Contractual Obligations Due by Period
                                              Total       2013       2014      2015      2016       After 2016
                                                                       (In thousands)

Debt obligations                             $    38     $    30     $   8     $  -      $  -      $         -
Operating leases                               1,899         728       507       366       168              130
Other significant obligations (1)              4,768       4,768        -         -         -                -
Unrecognized tax benefits                      1,129         808        -         -        321               -

Total                                        $ 7,834     $ 6,334     $ 515     $ 366     $ 489     $        130

(1) These amounts consist of contractual obligations for tissue recovery development grants and licensing fees.

The Company was in compliance with all covenants related to its revolving credit facilities as of March 31, 2013.


Table of Contents

  Add RTIX to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for RTIX - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial      Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.