Exhibit 99.1
For more information, contact:
Thomas F. Rose
Chief Financial Officer
Wendy Crites Wacker, APR
Corporate Communications
Phone (386) 418-8888
Susan A. Noonan
The SAN Group, LLC
Phone (212) 966-3650
REGENERATION TECHNOLOGIES ANNOUNCES 2006 THIRD QUARTER RESULTS
Company Will Hold Conference Call at 9:00 a.m. ET
ALACHUA, Fla. (November 8, 2006) – Regeneration Technologies, Inc. (RTI) (Nasdaq: RTIX), a leading processor of orthopedic, cardiovascular and other biologic implants, announced today that the company’s revenues were $18.1 million for the third quarter 2006 and $54.9 million for the nine months ended September 30, 2006, compared to $22.5 million for the third quarter 2005 and $55.1 million for the nine months ended September 30, 2005.
For the third quarter ended September 30, 2006, the company reported net loss of $1.5 million and net loss per diluted share of $0.05, compared to net loss of $1.6 million and net loss per diluted share of $0.06 for the third quarter 2005. For the nine months ended September 30, 2006 the company reported net loss of $4.4 million and net loss per diluted share of $0.15, compared to net loss of $3.8 million and net loss per diluted share of $0.14 for the nine months ended September 30, 2005.
During the third quarter and first nine months of 2006, the company recorded stock-based compensation expense totaling approximately $800,000 and $2.3 million, respectively, before income taxes, or $0.02 and $0.06, respectively, on net loss per diluted share, under the provisions of Statement of Financial Accounting Standards No. 123R. Prior to 2006, the company accounted for stock-based compensation under Accounting Principles Board Opinion No. 25.
“There are four key initiatives that we have been making progress on, which should positively impact 2007 results,” said Brian K. Hutchison, RTI’s chairman, president and CEO. “First, we are developing new strategic relationships to gain additional donated human tissue, enabling us to better meet surgeon demand for our implants. Second, we are expanding our clinical and marketing efforts for our Sterling® xenograft line, which we initially launched in 2006. Third, as a result of our newly crafted agreement with our largest distributor, Medtronic Sofamor Danek, we will be finalizing new agreements for distribution of bone graft substitutes and spine implants, which will be crucial to our growth in the coming year. And fourth, new product introductions for bone graft substitutes, xenograft and assembled bone-tendon-bone implants should drive growth in the coming year.”
The company has also been involved in consideration and discussion of various strategic alternatives during the third quarter, including strategic partnerships, sales or exchanges of assets and business combinations, including the acquisition of other companies and the acquisition of the company. Some of these discussions and considerations have continued during the fourth quarter. Other than a strategic tissue sourcing agreement reached in Nov. 2006 with Tutogen Medical, the company has not yet reached any definitive agreements with respect to these strategic alternatives, and even if it does, there is no assurance that the agreements will be consummated.
Third Quarter and Nine Month 2006 Analysis
Spinal Constructs:Revenues from distribution of spinal implants were $9.1 million for the third quarter, compared to $10.4 million in the prior year period, representing a decrease of 12.2 percent. Revenues for the nine months ended September 30, 2006 were $27.0 million, compared to $25.5 million in the prior year period, representing an increase of 5.7 percent. The revenue volumes were impacted in the third quarter of 2006 by reduced tissue available for processing spinal implants to meet our customer demand.
Bone Graft Substitutes: Revenues from distribution of bone graft substitutes were $2.6 million for the third quarter, compared to $5.8 million for the prior year period, representing a decrease of 55.0 percent. Revenues for the nine months ended September 30, 2006 were $10.1 million, compared to $13.0 million for the prior year period, representing a decrease of 22.5 percent. Bone graft substitutes consist of all moldable and flowable bone pastes, as well as all chips and cubes. The revenues in the third quarter were impacted by reduced orders from our two largest distributors due to timing of the stocking orders.
Sports Medicine:Revenues from distribution of sports medicine implants were $3.6 million for the third quarter, compared to $3.4 million for the prior year period, representing an increase of 7.3 percent. Revenues for the nine months ended September 30, 2006 were $10.3 million, compared to $7.6 million for the prior year period, representing an increase of 36.3 percent. The increase in revenues for the nine-month period was principally due to higher fees recognized through our direct distribution network compared to an independent distribution partner in 2005.
Cardiovascular: Revenues from distribution of cardiovascular implants were $1.4 million for the third quarter, compared to $2.1 million for the prior year period, representing a decrease of 31.7 percent. Revenues for the nine months ended September 30, 2006 were $4.3 million, compared to $6.0 million for the prior year period, representing a decrease of 27.7 percent. The primary reason for the decreased revenue was lower cardiovascular recoveries during the quarter and nine months. Demand for these life-saving implants remains high.
General Orthopedic: Revenues from general orthopedic implants were $223,000 for the third quarter, compared to $309,000 for the third quarter of the prior year period, representing a decrease of 27.8 percent. Revenues for the nine months ended September 30, 2006 were $726,000, compared to $787,000 for the nine months of the prior year period, representing a decrease of 7.8 percent. General orthopedic revenue consists of bone blocks, strips, wedges and shafts. Revenues in the current year periods are down primarily due to lower levels of tissue available for distribution.
Other: Revenues from other implants were $1.1 million for the third quarter almost doubled, compared to $555,000 for the third quarter of the prior year period. Revenues for the nine months ended September 30, 2006 were $2.4 million, compared to $2.2 million for the nine months of the prior year period, representing an increase of 11.2 percent. Other revenues consist of tissue recovery fees, biomedical laboratory fees, manufacturing royalties, shipping fees, distribution of reproductions of our allografts to distributors for demonstration purposes and restocking fees. The increase in the third quarter was primarily a result of higher revenues from transfer of dermis tissues to another processor.
Conference Call
RTI will hold a live conference call and simultaneous audio web cast on Wednesday, November 8, 2006 at 9:00 a.m. ET to discuss third quarter results. The conference call can be accessed by dialing 888-390-0675, passcode RTIXQ THREE. The web cast can be accessed through the investor section of RTI’s web site at www.rtix.com. A telephone replay of the call will be available through December 7, 2006 and can be accessed by calling 800-871-1323; the replay will also be available at www.rtix.com.
About Regeneration Technologies, Inc.
RTI processes allograft and xenograft tissue into shaped implants for use in orthopedic, cardiovascular and other surgeries with a commitment to science, safety and innovation.
RTI also holds the patents on BioCleanse®, the only proven tissue sterilization process validated to eliminate viruses, bacteria, fungi and spores from tissue without impacting the structural or biomechanical integrity of the tissue. The company has distributed more than half a million allograft implants sterilized with the BioCleanse process with zero incidence of infection. RTI is accredited by the American Association of Tissue Banks and was named a 2004 Technology Pioneer by the World Economic Forum.
Except for historical information, any statements made in this press release about the company’s anticipated financial results, growth rates, new product introductions, future operational improvements and results, regulatory approvals or changes to the company’s agreements with its distributors are forward-looking statements subject to risks and uncertainties, such as those described in the company’s public filings on file with the Securities and Exchange Commission. Actual results may differ materially from 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 web site atwww.rtix.com or the SEC’s web site atwww.sec.gov.
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REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except share and per share data)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
Revenues: | | | | | | | | | | | | | | | | |
Fees from tissue distribution | | $ | 17,010 | | | $ | 21,994 | | | $ | 52,438 | | | $ | 52,877 | |
Other revenues | | | 1,101 | | | | 555 | | | | 2,441 | | | | 2,196 | |
| | | | | | | | | | | | | | | | |
Total net revenues | | | 18,111 | | | | 22,549 | | | | 54,879 | | | | 55,073 | |
Costs of processing and distribution | | | 12,410 | | | | 17,955 | | | | 37,692 | | | | 40,887 | |
| | | | | | | | | | | | | | | | |
Gross profit | | | 5,701 | | | | 4,594 | | | | 17,187 | | | | 14,186 | |
| | | | |
Operating Expenses | | | 7,851 | | | | 7,207 | | | | 23,707 | | | | 20,351 | |
| | | | | | | | | | | | | | | | |
Operating loss | | | (2,150 | ) | | | (2,613 | ) | | | (6,520 | ) | | | (6,165 | ) |
Net other income (expense) | | | 17 | | | | (136 | ) | | | 30 | | | | (492 | ) |
| | | | | | | | | | | | | | | | |
Loss before income tax benefit | | | (2,133 | ) | | | (2,749 | ) | | | (6,490 | ) | | | (6,657 | ) |
Income tax benefit | | | 606 | | | | 1,152 | | | | 2,054 | | | | 2,813 | |
| | | | | | | | | | | | | | | | |
Net loss | | $ | (1,527 | ) | | $ | (1,597 | ) | | $ | (4,436 | ) | | $ | (3,844 | ) |
| | | | | | | | | | | | | | | | |
Net loss per common share - basic | | $ | (0.05 | ) | | $ | (0.06 | ) | | $ | (0.15 | ) | | $ | (0.14 | ) |
| | | | | | | | | | | | | | | | |
Net loss per common share - diluted | | $ | (0.05 | ) | | $ | (0.06 | ) | | $ | (0.15 | ) | | $ | (0.14 | ) |
| | | | | | | | | | | | | | | | |
Weighted average shares outstanding - basic | | | 29,768,916 | | | | 27,834,975 | | | | 29,753,084 | | | | 27,132,660 | |
| | | | | | | | | | | | | | | | |
Weighted average shares outstanding - diluted | | | 29,768,916 | | | | 27,834,975 | | | | 29,753,084 | | | | 27,132,660 | |
| | | | | | | | | | | | | | | | |
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARIES
Revenues
(Unaudited)
(In thousands)
| | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | | 2006 | | 2005 | | 2006 | | 2005 |
Fees from tissue distribution: | | | | | | | | | | | | |
Spinal constructs | | $ | 9,139 | | $ | 10,408 | | $ | 26,950 | | $ | 25,491 |
Bone graft substitutes | | | 2,626 | | | 5,838 | | | 10,088 | | | 13,024 |
Sports medicine | | | 3,597 | | | 3,352 | | | 10,348 | | | 7,591 |
Cardiovascular | | | 1,425 | | | 2,087 | | | 4,326 | | | 5,984 |
General orthopedic | | | 223 | | | 309 | | | 726 | | | 787 |
Other revenues | | | 1,101 | | | 555 | | | 2,441 | | | 2,196 |
| | | | | | | | | | | | |
Total | | $ | 18,111 | | $ | 22,549 | | $ | 54,879 | | $ | 55,073 |
| | | | | | | | | | | | |
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
| | | | | | |
| | | September 30,
2006 | | December 31,
2005 |
| Assets | | | | | | |
Current Assets: | | | | | | |
Cash and cash equivalents | | $ | 16,472 | | $ | 25,559 |
Accounts receivable - net | | | 8,043 | | | 9,021 |
Inventories | | | 40,538 | | | 38,534 |
Other current assets | | | 8,680 | | | 12,181 |
| | | | | | |
Total current assets | | | 73,733 | | | 85,295 |
Property, plant and equipment - net | | | 42,060 | | | 44,527 |
Other assets | | | 18,410 | | | 12,440 |
| | | | | | |
Total assets | | $ | 134,203 | | $ | 142,262 |
| | | | | | |
| Liabilities and Stockholders’ Equity | | | | | | |
Current Liabilities: | | | | | | |
Accounts payable | | $ | 7,006 | | $ | 7,123 |
Other current liabilities | | | 7,533 | | | 8,575 |
| | | | | | |
Total current liabilities | | | 14,539 | | | 15,698 |
Other liabilities | | | 3,851 | | | 8,751 |
| | | | | | |
Total liabilities | | | 18,390 | | | 24,449 |
Total stockholders’ equity | | | 115,813 | | | 117,813 |
| | | | | | |
Total liabilities and stockholders’ equity | | $ | 134,203 | | $ | 142,262 |
| | | | | | |
REGENERATION TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
Cash flows from operating activities: | | | | | | | | | | | | | | | | |
Net loss | | $ | (1,527 | ) | | $ | (1,597 | ) | | $ | (4,436 | ) | | $ | (3,844 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | | | | | | | | | |
Depreciation and amortization expense | | | 1,302 | | | | 1,121 | | | | 3,848 | | | | 3,345 | |
Amortization of deferred financing costs | | | 43 | | | | 43 | | | | 127 | | | | 131 | |
Change in working capital | | | 251 | | | | 1,471 | | | | (2,825 | ) | | | (1,402 | ) |
Other | | | (3,145 | ) | | | (1,381 | ) | | | (3,253 | ) | | | (3,340 | ) |
| | | | | | | | | | | | | | | | |
Net cash used in operating activities | | | (3,076 | ) | | | (343 | ) | | | (6,539 | ) | | | (5,110 | ) |
| | | | | | | | | | | | | | | | |
Cash flows from investing activities: | | | | | | | | | | | | | | | | |
Purchases of property, plant and equipment | | | (370 | ) | | | (638 | ) | | | (1,075 | ) | | | (3,359 | ) |
Purchase of intellectual property | | | — | | | | — | | | | — | | | | (1,600 | ) |
Proceeds from sale of property, plant and equipment | | | — | | | | — | | | | 200 | | | | — | |
| | | | | | | | | | | | | | | | |
Net cash used in investing activities | | | (370 | ) | | | (638 | ) | | | (875 | ) | | | (4,959 | ) |
| | | | | | | | | | | | | | | | |
Cash flows from financing activities: | | | | | | | | | | | | | | | | |
Payments on capital lease and note obligations | | | (575 | ) | | | (564 | ) | | | (1,719 | ) | | | (1,747 | ) |
Proceeds from revolving line of credit | | | — | | | | — | | | | — | | | | 3,000 | |
Payment on revolving line of credit | | | — | | | | (3,000 | ) | | | — | | | | (3,000 | ) |
Proceeds from exercise of stock options | | | 38 | | | | 686 | | | | 46 | | | | 1,155 | |
| | | | | | | | | | | | | | | | |
Net cash (used in) provided by financing activities | | | (537 | ) | | | 19,497 | | | | (1,673 | ) | | | 21,783 | |
| | | | | | | | | | | | | | | | |
Net (decrease) increase in cash and cash equivalents | | | (3,983 | ) | | | 18,516 | | | | (9,087 | ) | | | 11,714 | |
Cash and cash equivalents, beginning of period | | | 20,455 | | | | 4,682 | | | | 25,559 | | | | 11,484 | |
| | | | | | | | | | | | | | | | |
Cash and cash equivalents, end of period | | $ | 16,472 | | | $ | 23,198 | | | $ | 16,472 | | | $ | 23,198 | |
| | | | | | | | | | | | | | | | |
