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RTI Biologics, Inc. (RTIX)
Q3 2010 Earnings Call
November 4, 2010 09:00 am ET
Wendy Crites Wacker - Director of Corporate Communications
Brian Hutchison - Chairman & CEO
Rob Jordheim - EVP & CFO
Matt Dolan - Roth Capital Partners
Shawn Bevec - Susquehanna Investment Group
Jayson Bedford - Raymond James
Raymond Myers - The Benchmark Company
Chris Cooley - Stephens
Previous Statements by RTIX
» RTI Biologics Inc. Q2 2010 Earnings Call Transcript
» RTI Biologics, Inc. Q1 2010 Earnings Call Transcript
» RTI Biologics, Inc. Q4 2009 Earnings Call Transcript
» RTI Biologics, Inc., Q3 2009 Earnings Call Transcript
I would now like to turn the conference over to your host for today, Ms. Wendy Crites Wacker, Director of Corporate Communications. Ma’am you may begin.
Wendy Crites Wacker
Good morning and thank you for joining RTI Biologics for our third quarter 2010 conference call. Today we will hear from Brian Hutchison, Chairman and CEO, and Rob Jordheim, Executive Vice President and Chief Financial officer.
Also joining us this morning for Q&A are Tom Rose, Executive Vice President and Chief Operations Officer, and Roger Rose, Executive Vice President and Chief Commercial Officer.
Before we start, let me make the following disclosure about forward-looking statements. The earnings and other matters we will be discussing on this conference call will involve statements that are forward-looking. These statements are based on our management’s current expectations, but they are subject to various risks and uncertainties associated with our lines of business and with the economic environment in general.
Our actual results may vary from any statements concerning our expectations about future events that are made during the course of this meeting, and we make no guarantees as to the accuracy of these statements. Accordingly, we urge you to consider all information about the company, and not to place undue reliance on these forward-looking statements.
I’ll now turn the call over to Brian Hutchison.
Good morning, everyone, and thank for joining us. On our call today, I’d like to begin by discussing our operating highlights and then Rob will review our financial results.
As detailed in the press release issued this morning, we reported revenues of $41.8 million for the third quarter in line with expectation. Sports medicine was again our fastest growing area in the third quarter. The growth in sports medicine and our general business offset revenue declines in spine, surgical specialties, and international revenues.
Due to a non-cash impairment charge to our goodwill, we reported a net loss for the quarter of $133.1 million or $2.43 per fully diluted share based on 54.8 million fully diluted shares outstanding.
As a result of recent external economic conditions and recent decline of RTI stock price, we performed a goodwill impairment test as of September 30th, 2010. This test resulted in a non-cash charge in the third quarter of $134.7 million.
When excluding this impartment charge, adjusted net income was $1.6 million or $0.03 per fully diluted share, which were in line with expectations.
Turning to a review of our business lines, our sports medicine business achieved quarterly revenues of $10.9 million, an increase of 15% over last year. Domestically, sports medicine grew by 20%, which is higher than the overall industry growth rate.
Our distribution force continued to demonstrate strength during the third quarter, which is historically soft as a result of seasonal slowdowns for surgeries in the summer months.
We believe we’re gaining market share due to our superior product quality, well-trained distribution group and excellent customer service as well as demand for our non-irradiated BioCleanse sterilized implants.
In August, we held meetings with two surgeon advisory groups focusing on ligament reconstruction and articular solutions. These meetings were very productive and we’re very excited to be working with a group of top-notch sports medicine surgeons. Their input will be used to help prioritize new product development projects. We expect that our sports medicine business will continue to deliver above industry growth rates through the remainder of this year.
Third quarter spine revenues were $9.7 million, a decline of 10%, as many of our distributors in this line of business are experiencing declines in procedure volumes and pricing pressure.
We are still committed to working with all of our distributors to support their needs and have launched a cervical graft for their largest distributor during the quarter. As anticipated, we showed modest, sequential growth from Q2 to Q3 as orders are normalizing from the inventory management initiatives of the first half.
We anticipate we will see a slight uptick in revenues again in Q4, but total spine revenues for the year will be down. As we said last quarter, we’ve been working to strategically expand our portfolio of spine distributors to positively impact the remainder of this year and 2011.
This quarter, we added SeaSpine to our distributors group and launched a new cervical graft for them. There are possible opportunities for additional grafts in 2011.
Dental revenues showed an increase of 11% over the previous year to $7.7 million. This increase is primarily the result of the amended exclusivity agreement with Zimmer Dental, which included a $1 million inventory stocking order in the quarter. We are very pleased to complete this, our exclusive 10-year distribution agreement with Zimmer Dental this quarter, which was effective September 30.
Under the new agreement, we will supply sterilized allograft and xenograft implants for agreed upon transfer fees, as opposed to the marketing fee structure of our previous agreement. Zimmer will be responsible for worldwide marketing and distribution of biologic implants for use in dental applications.