RTI Surgical (RTIX) 10-Q 2009 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to            

Commission file number 0-31271

RTI BIOLOGICS, INC.

Delaware	59-3466543
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

11621 Research Circle

Alachua, Florida 32615

(386) 418-8888

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit and post such files.)    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer	¨	Accelerated Filer	x
Non-Accelerated Filer	¨  (Do not check if a smaller reporting company)	Smaller Reporting Company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes  ¨    No  x

Shares of common stock, $0.001 par value, outstanding on April 23, 2009: 54,251,056

RTI BIOLOGICS, INC.

FORM 10-Q For the Quarter Ended March 31, 2009

Index

		Page #
Part I Financial Information
Item 1	Condensed Consolidated Financial Statements (Unaudited)	1 – 15
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16 – 22
Item 3	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4	Controls and Procedures	23
Part II Other Information
Item 1	Legal Proceedings	24
Item 1A	Risk Factors	24
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3	Defaults Upon Senior Securities	24
Item 4	Submission of Matters to a Vote of Security Holders	24
Item 5	Other Information	24
Item 6	Exhibits	24

RTI BIOLOGICS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except share data)

(Unaudited)

	March 31, 2009			December 31, 2008
Assets
Current Assets:
Cash and cash equivalents	$	13,061		$	20,076
Accounts receivable - less allowances of $1,560 at March 31, 2009 and $1,735 at December 31, 2008		17,885			14,668
Inventories - net		82,666			75,182
Prepaid and other current assets		4,298			4,044
Deferred tax assets - net		16,130			17,740
Total current assets		134,040			131,710
Property, plant and equipment - net		46,802			47,622
Deferred tax assets - net		9,265			7,348
Goodwill		134,707			134,432
Other intangible assets		12,371			12,675
Other assets - net		722			293
Total assets	$	337,907		$	334,080
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	22,038		$	16,915
Accrued expenses		14,632			16,539
Short-term borrowings		2,765			4,166
Current portion of deferred revenue		2,028			2,264
Current portion of long-term obligations		1,721			1,637
Total current liabilities		43,184			41,521
Long-term obligations - less current portion		4,370			3,183
Other long-term liabilities		4,905			4,183
Deferred tax liabilities		120			129
Deferred revenue		3,641			4,014
Total liabilities		56,220			53,030
Stockholders’ equity:
Common stock, $.001 par value: 150,000,000 shares authorized; 54,251,056 and 54,226,706 shares issued and outstanding, respectively		55			55
Additional paid-in capital		404,188			403,746
Accumulated other comprehensive loss		(1,602	)		(765	)
Accumulated deficit		(120,940	)		(121,972	)
Less treasury stock, 133,296 shares, at cost		(14	)		(14	)
Total stockholders’ equity		281,687			281,050
Total liabilities and stockholders’ equity	$	337,907		$	334,080

See notes to condensed consolidated financial statements.

1

RTI BIOLOGICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands, except share and per share data)

(Unaudited)

	Three Months Ended March 31,
	2009			2008
Revenues:
Fees from tissue distribution	$	37,561		$	28,546
Other revenues		1,062			1,364
Total revenues		38,623			29,910
Costs of processing and distribution		20,472			16,110
Gross profit		18,151			13,800
Expenses:
Marketing, general and administrative		14,936			10,467
Research and development		1,825			1,918
Restructuring charges		42			368
Total expenses		16,803			12,753
Operating income		1,348			1,047
Other (expense) income:
Interest expense		(123	)		(175	)
Interest income		111			182
Foreign exchange gain (loss)		105			(18	)
Total other income (expense) - net		93			(11	)
Income before income tax provision		1,441			1,036
Income tax provision		(409	)		(391	)
Net income	$	1,032		$	645
Net income per common share - basic	$	0.02		$	0.02
Net income per common share - diluted	$	0.02		$	0.02
Weighted average shares outstanding - basic		54,230,264			37,809,896
Weighted average shares outstanding - diluted		54,508,207			38,715,807

See notes to condensed consolidated financial statements.

2

RTI BIOLOGICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2009			2008
Cash flows from operating activities:
Net income	$	1,032		$	645
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization expense		1,805			1,579
Amortization of deferred financing costs		17			43
Provision for bad debts and product returns		18			6
Provision for inventory writedowns		453			316
Amortization of deferred revenue		(560	)		(257	)
Deferred income tax (provision) benefit		(299	)		253
Stock-based compensation		423			448
Change in assets and liabilities:
Accounts receivable		(3,350	)		(586	)
Inventories		(8,355	)		(3,211	)
Prepaid and other current assets		(288	)		843
Other long-term assets		(458	)		(443	)
Accounts payable		4,034			2,688
Accrued expenses		(1,786	)		(2,555	)
Other non-current liabilities		736			71
Net cash used in operating activities		(6,578	)		(160	)
Cash flows from investing activities:
Purchases of property, plant and equipment		(308	)		(803	)
Cash acquired in merger, net of transaction costs		—			1,598
Proceeds from sale of property, plant and equipment		—			45
Patent costs		(112	)		—
Net cash (used in) provided by investing activities		(420	)		840
Cash flows from financing activities:
Proceeds from exercise of common stock options		19			281
Net payments on short-term obligations		(1,235	)		—
Proceeds on long-term obligations		1,500			—
Payments on long-term obligations		(301	)		(606	)
Net cash used in financing activities		(17	)		(325	)
Effect of exchange rate changes on cash and cash equivalents		—			23
Net (decrease) increase in cash and cash equivalents		(7,015	)		378
Cash and cash equivalents, beginning of period		20,076			18,560
Cash and cash equivalents, end of period	$	13,061		$	18,938

See notes to condensed consolidated financial statements.

3

RTI BIOLOGICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Shareholders' Equity

For the Three Months Ended March 31, 2009

(In thousands)

(Unaudited)

	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss			Accumulated Deficit			Treasury Stock			Total
BALANCE, DECEMBER 31, 2008	$	55	$	403,746	$	(765	)	$	(121,972	)	$	(14	)	$	281,050
Net income		—		—		—			1,032			—			1,032
Foreign currency translation adjustment		—		—		(837	)		—			—			(837	)
Comprehensive income for the three months ended March 31, 2009		—		—		(837	)		1,032			—			195
Exercise of common stock options		—		19		—			—			—			19
Stock-based compensation		—		423		—			—			—			423
BALANCE, MARCH 31, 2009	$	55	$	404,188	$	(1,602	)	$	(120,940	)	$	(14	)	$	281,687

See notes to condensed consolidated financial statements.

4

RTI BIOLOGICS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2009 and 2008

(Unaudited)

(In thousands, except share and per share data)

1. Operations and Organization

We are a leader in the use of natural tissues and innovative technologies to produce orthopedic and other surgical implants that repair and promote the natural healing of human bone and other human tissues and improve surgical outcomes. We process human musculoskeletal and other tissue, including bone, cartilage, tendon, ligament, fascia lata, pericardium, sclera and dermal tissue, and bovine animal tissue in producing allografts, utilizing proprietary BIOCLEANSE® and TUTOPLAST® sterilization processes, for distribution to hospitals and surgeons. We process at two facilities in Alachua, Florida and one facility in Germany and distribute our products and services in all 50 states and in over 31 countries worldwide.

2. Basis of Presentation and Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals, which the Company considers necessary for a fair presentation of the results of operations for the periods shown. The condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary for a fair presentation of consolidated financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

The condensed consolidated financial statements include the accounts of RTI and its wholly owned subsidiaries, Tutogen Medical, Inc. (“TMI”), RTI Biologics, Inc. – Cardiovascular (inactive), Biological Recovery Group (inactive), and RTI Services, Inc. The condensed consolidated financial statements also include the accounts of RTI Donor Services, Inc. (“RTIDS”), which is a controlled entity. The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. All intercompany balances and transactions have been eliminated in consolidation.

Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 142 (“SFAS 142”),Goodwill and Other Intangible Assets, requires companies to test goodwill for impairment on an annual basis at the reporting unit level (or an interim basis if an event occurs that might reduce the fair value of a reporting unit below its carrying value). The Company has one reporting unit and the annual impairment test is performed at each year-end unless indicators of impairment are present and require more frequent testing. SFAS 142 also requires that the carrying value of an identifiable intangible asset that has an indefinite life be determined by using a fair value based approach.

Intangible assets generally consist of patents, trademarks, procurement contracts, customer lists, non-compete agreements, distribution agreements and acquired exclusivity rights. Patents and trademarks are amortized on the straight-line method over the shorter of the remaining protection period or estimated useful lives of between 8 and 16 years. Procurement contracts, customer lists, non-compete agreements and distribution agreements are amortized over estimated useful lives of between 5 to 25 years. The acquired exclusivity rights are being amortized over eight years, the remaining term of the amended distribution agreement.

The valuation of goodwill and intangible assets with indefinite useful lives requires management to use significant judgments and estimates including, but not limited to, projected future revenue and cash flows. Changes in assumptions or market conditions could result in a change in estimated future cash flows and the likelihood of materially different report results. The valuation of the goodwill associated with the merger of TMI will be evaluated on an annual basis in accordance with the provisions of SFAS 142 and is subject to risk based on the performance of the Company following the acquisition.

5

In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective for financial assets and liabilities in fiscal years beginning after November 15, 2007, and for non-financial assets and liabilities in fiscal years beginning after November 15, 2008. The Company adopted SFAS 157 for financial assets and liabilities in the first quarter of 2008 with no material impact to its condensed consolidated financial statements. The Company's financial assets and liabilities consist of cash and cash equivalents, accounts receivable, accounts payable, debt, and certain current liabilities. Fair value for these instruments is based on readily available market prices. The Company adopted SFAS 157 fair value measurements for non-financial assets and non-financial liabilities in the first quarter of 2009 with no impact to its condensed consolidated financial statements as the Company did not elect fair value accounting for any non-financial assets or non-financial liabilities during the period.

In 2007 the FASB issued Statement No. 160,Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (“SFAS 160”). This Statement significantly changes the financial accounting and reporting of noncontrolling (or minority) interests of a subsidiary in consolidated financial statements. The Company adopted SFAS 160 in the first quarter of 2009 with no impact to its condensed consolidated financial statements as no noncontrolling interests in entities were acquired.

In December 2007, the FASB issued SFAS No. 141(R),Business Combinations (“SFAS 141(R)”), which is intended to improve the relevance, representational faithfulness and comparability of information provided in financial reports about business combinations. SFAS 141(R) retains the fundamental requirements set forth by SFAS No. 141,Business Combinations(“SFAS 141”) specifically that the acquisition method of accounting be used for all business combinations and that an acquirer be identified. However, SFAS 141(R) is broader in scope than its predecessor in that the acquisition method of accounting will now be applied not only to business combinations in which control was obtained by transferring consideration, but to all transactions and other events in which one entity obtains control over one or more businesses. SFAS 141(R) requires the acquirer to recognize assets acquired, liabilities assumed and any noncontrolling interest in the acquire at fair value as of the date of acquisition, effectively eliminating the practice of allocating costs to assets acquired and liabilities assumed based on their estimated fair values as stipulated by SFAS 141. Costs incurred to effect the acquisition, previously considered in the aforementioned cost-allocation process, are to be recognized as a component of earnings. SFAS 141(R) is effective for acquisitions consummated on or after January 1, 2009. The Company adopted SFAS 141(R) in the first quarter of 2009 with no impact to its condensed consolidated financial statements as no businesses were acquired during the period.

6

3. Goodwill and Other Intangible Assets

Goodwill and other intangible assets are as follows:

	March 31, 2009				December 31, 2008
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Goodwill	$	134,707	$	—	$	134,432	$	—
Patents		4,336		745		4,256		698
Acquired exclusivity rights		2,941		1,021		2,941		928
Acquired licensing rights		4,900		233		4,900		58
Procurement contracts		1,755		280		1,755		262
Selling and marketing relationships		500		117		500		100
Customer lists		374		279		399		278
Non-compete agreement		275		62		275		55
Trademarks		58		31		58		30
Total	$	149,846	$	2,768	$	149,516	$	2,409

Goodwill includes the excess of the TMI purchase price over the sum of the amounts assigned to assets acquired less liabilities assumed as of the merger date of February 27, 2008.

Patents and trademarks are amortized on the straight-line method over the shorter of the remaining protection period or estimated useful life of between 8 and 16 years. The acquired exclusivity rights are being amortized over eight years, the remaining term of the amended distribution agreement. Procurement contracts, customer lists, non-compete agreements and distribution agreements are amortized over estimated useful lives of between 5 to 25 years. Amortization expense for the three months ended March 31, 2009 and 2008 was $375 and $303, respectively. Management estimates amortization expense of $1,400 per year for the next five years.

On November 24, 2008, the Company entered into a License Agreement with LifeNet Health, Inc. (“LifeNet”) to license from LifeNet certain intellectual property rights to be used in the Company’s tissue processing efforts. The term of the License Agreement is for seven years or the remaining life of any patent covered by the License Agreement, whichever is longer. Total monetary consideration for the License Agreement is $4,900, to be paid in five annual installments of $980 from November 2008 to 2012. The licensing rights are being amortized over seven years, the term of the License Agreement.

4. Stock-Based Compensation

The Company has four stock-based compensation plans under which employees, consultants and outside directors receive stock options and other equity-based awards. At March 31, 2009, awards relating to 6,957,116 shares were outstanding, and 550,285 shares remained available for the grant of awards under our plans. For the three months ended March 31, 2009, employees and outside directors of the Company were granted 860,000 stock options under the plans. Stock options are granted with an exercise price equal to 100% of the market value of a share of common stock on the date of the grant, generally have ten-year contractual terms, and vest over a one to five year period from the date of grant.

2004 Equity Incentive Plan—In 2004, the Company adopted an equity incentive plan (the “2004 Plan”) which provides for the grant of incentive and nonqualified stock options and restricted stock to key employees, including officers and directors of the Company, and consultants and advisors. The option or grant of restricted stock price per share may not be less than 100% of the fair market value of such shares on the date granted. The 2004 Plan allows for up to 2,000,000 shares of common stock to be issued with respect to awards granted. Awards or shares which are forfeited, surrendered or otherwise terminated are available for further awards; provided, however, that any such shares that are surrendered in connection with any award or that are otherwise forfeited after issuance shall not be available for purchase pursuant to incentive stock options intended to qualify under Code Section 422.

7

1998 Stock Option Plan—In July 1998, the Company adopted a stock option plan (the “1998 Plan”) which provides for the grant of incentive and nonqualified stock options to key employees, including officers and directors of the Company, and consultants and advisors. The option price per share may not be less than 100% of the fair market value of such shares on the date such option is granted. The 1998 Plan allows for up to 4,406,400 shares of common stock to be issued with respect to awards granted. Awards or shares which are forfeited, surrendered or otherwise terminated are available for further awards; provided, however, that any such shares that are surrendered in connection with any award or that are otherwise forfeited after issuance shall not be available for purchase pursuant to incentive stock options intended to qualify under Code Section 422.

TMI 1996 Stock Option Plan and TMI 2006 Incentive and Non-Statutory Stock Option Plan—In connection with the merger with TMI, the Company assumed the TMI 1996 Stock Option Plan and the TMI 2006 Incentive and Non-Statutory Stock Option Plan (“TMI Plans”). The TMI Plans allow for 4,880,000 and 1,830,000 shares of common stock, respectively, to be issued with respect to stock options granted.

Stock options outstanding, exercisable and available for grant at March 31, 2009 are summarized as follows:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding at January 1, 2009	6,140,494		$	6.55
Granted	860,000			2.98
Exercised	(9,150	)		2.02
Forfeited or expired	(34,228	)		8.88
Outstanding at March 31, 2009	6,957,116		$	6.10	5.52	$	846
Vested or expected to vest at March 31, 2009	6,531,057		$	6.14	5.33	$	846
Exercisable at March 31, 2009	5,209,522		$	6.41	4.48	$	846
Available for grant at March 31, 2009	550,285

The weighted-average fair value of options granted as determined under the Black-Scholes method during the three months ended March 31, 2009 was $1.79 per share. The total intrinsic value of options exercised during the three months ended March 31, 2009 was $5. The intrinsic value of a stock option at March 31, 2009 is the difference between the Company’s closing stock price on the last trading day of March 2009 and the exercise price, multiplied by the number of in-the-money options that would have been received by the option holders had all option holders exercised their options on March 31, 2009. This amount changes based on the fair market value of the Company’s stock.

As of March 31, 2009, there was $4,200 of total unrecognized stock-based compensation cost related to nonvested stock options. That cost is expected to be recognized over a weighted-average period of 3.2 years.

For the three months ended March 31, 2009 and 2008, the Company recognized stock-based compensation as follows:

	Three Months Ended March 31,
	2009		2008
Stock-based compensation:
Costs of processing and distribution	$	72	$	102
Marketing, general and administrative		326		329
Research and development		25		17
Total	$	423	$	448

8

5. Earnings Per Share

A reconciliation of the weighted-average number of shares of common stock used in the calculation of basic and diluted earnings per share is presented below:

	Three Months Ended March 31,
	2009	2008
Basic shares	54,230,264	37,809,896
Effect of dilutive securities:
Stock options	277,943	905,911
Diluted shares	54,508,207	38,715,807

For the three months ended March 31, 2009 and 2008, approximately 5,615,000, and 3,092,000, respectively, of issued stock options were not included in the computation of diluted earnings per share because they were anti-dilutive since their exercise price exceeded their market price.

6. Inventories

Inventories by stage of completion are as follows:

	March 31, 2009		December 31, 2008
Unprocessed donor tissue	$	23,555	$	20,075
Tissue in process		42,337		39,413
Implantable donor tissue		14,976		14,094
Supplies		1,798		1,600
	$	82,666	$	75,182

For the three months ended March 31, 2009 and 2008, the Company had inventory write-downs of $453 and $316, respectively, relating primarily to product obsolescence.

9

7. Property, Plant and Equipment

Property, plant and equipment are as follows:

	March 31, 2009			December 31, 2008
Land	$	1,795		$	1,874
Buildings and improvements		42,861			43,226
Processing equipment		26,100			25,672
Office equipment, furniture and fixtures		1,418			1,401
Computer equipment and software		3,725			3,706
Construction in process		1,554			1,316
Processing equipment under capital leases		285			20
		77,738			77,215
Less accumulated depreciation and amortization		(30,936	)		(29,593	)
	$	46,802		$	47,622

Depreciation and amortization expense of property, plant and equipment including amortization of assets held under capital leases, was $1,430 and $1,276 for the three months ended March 31, 2009 and 2008, respectively.

8. Accrued Expenses

Accrued expenses are as follows:

	March 31, 2009		December 31, 2008
Accrued compensation	$	2,814	$	2,580
Accrued donor recovery fees		3,787		6,052
Accrued distributor fees and marketing commissions		1,135		1,145
Accrued severance		1,082		1,009
Accrued licensing fees		980		980
Accrued taxes		1,008		653
Accrued professional service fees		925		765
Other		2,901		3,355
	$	14,632	$	16,539

The Company accrues for the estimated recovery fees due to third party recovery agencies as tissue is received.

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9. Short-Term Borrowings and Long-Term Obligations

Short-term borrowings and long-term obligations are as follows:

	Current Interest Rate			Maturity Date	March 31, 2009					December 31, 2008
					(Euro)		(US Dollar)			(Euro)		(US Dollar)
					(In Thousands)
Short-Term Borrowings
United States
Revolving
Credit Facility			(1)				$	—				$	1,500
Germany
Revolving
Credit Facilities:
Line of Credit - 1	6.50	%	(2)	None	€	869		1,148		€	1,023		1,442
Line of Credit - 2	9.63	%	(3)	None		430		568			—		—
Interim Line of Credit	6.00	%	(3)	(6)		794		1,049			868		1,224
						2,093		2,765			1,891		4,166
Long-Term Obligations
United States
Revolving
Credit Facility	3.01	%	(4)	2/2011				1,500					—
Term Loan	3.51	%	(5)	2/2011				1,625					1,750
Germany
Term Loans:
Senior Debt	5.00	%	(3)	6/2011		220		291			244		344
Construction I	5.15	%	(3)	3/2012		750		991			812		1,145
Construction II	5.60	%	(3)	12/2016		880		1,162			880		1,241
Construction III	5.75	%	(3)	9/2012		182		240			195		275
					€	2,032		2,684		€	2,131		3,005
Capital Leases	5.00%-8.46	%		5/2010 - 2/2011				282					65
								6,091					4,820
Less current portion								(1,721	)				(1,637	)
Long-term portion								4,370					3,183
Total Debt							$	8,856				$	8,986

(1) Refinanced with long-term revolving credit facility

(2) Fixed interest rate is negotiated annually in March

(3) Fixed interest rates

(4) LIBOR plus 2.5% to 3.5%

(5) LIBOR plus 3.0%

(6) Interim line of credit matures upon conversion to term loan upon completion of construction

11

The revolving credit facility with the U.S. bank contains various restrictive covenants which limit, among other things, indebtedness, liens and minimum cash balances. Under the agreement, the credit facility and term loan are secured by the Company’s domestic accounts receivable and inventory. The Company is required to maintain an average cash on hand balance of $5,000 with the financial institution.

Under the terms of the revolving credit facilities with two German banks, the Company may borrow up to 1,500 Euros (1,000 Euros and 500 Euros, respectively), or approximately $2,000 for working capital needs. The 1,000 Euro revolving credit facility is secured by a mortgage on the Company’s German facility and a 4,000 Euro guarantee by TMI. The 500 Euro revolving credit facility is secured by accounts receivable of TMI’s German subsidiary.

In 2008, the Company entered into a financing agreement with a German bank to finance the expansion of its processing facility in Germany. The agreement calls for an interim line of credit of up to 900 Euros or approximately $1,190 while the expansion is completed, which is expected to occur in May 2009, upon which the line of credit will convert to a term loan.

At March 31, 2009, the Company had an outstanding interest rate swap agreement relating to the German term loan of 750 Euro, or $991, maturing March 31, 2012. Under this agreement, the Company pays a fixed interest rate of 5.15%. Payments or receipts on the agreement are recorded as adjustments to interest expense. Such adjustments have not been significant.

10. Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Deferred income taxes are recorded to reflect the tax consequences in future years for differences between the tax basis of assets and liabilities and their financial reporting amounts at each period-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to amounts which are more likely than not to be realized.

As of March 31, 2009, the Company has federal net operating loss carryforwards of $28,915 that will expire in the years 2010 to 2012, 2018 and 2021 to 2028, as well as state net operating loss carryforwards of $34,774 that will expire in the years 2021, 2022, and 2024 to 2027.

As of March 31, 2009, the Company has research and experimentation tax credit carryforwards of $3,555 that will expire in years 2018 through 2028, as well as alternative minimum tax credit carryforwards of $332 that are carried forward indefinitely.

The Company expects the deferred tax assets of approximately $29,097, net of the valuation allowance at March 31, 2009 of $1,160, to be realized through the generation of future taxable income and the reversal of existing taxable temporary differences. Valuation allowances have been recorded for certain state tax loss carryforwards as the Company does not believe that it will have future income in the state to utilize the loss carryforwards. The Company has considered the impact of prior year financial reporting losses as it relates to the realization of the remaining net deferred tax assets. Based on the weight of evidence, including various strategic initiatives such as new distribution and recovery agreements entered into, new product introductions during 2006 through 2008, taxable income in 2007 and 2008, and forecasted taxable income in future years, management has determined that it is more likely than not that such net deferred tax assets will be realized.

11. Restructuring Charges

At the time of the merger with TMI, the Company instituted a restructuring plan primarily related to severance of certain of its employees as a result of the integration activities following the merger. The total estimated restructuring charges were approximately $493 and were fully recognized as of March 31, 2009. The severance payments are made over periods ranging from one month to twelve months and will not have a material impact on cash flows of the Company in any quarterly period. An analysis of the restructuring charges was as follows:

Accrued restructuring charges at January 1, 2009	$	64
Employee separation benefits accrued		42
Cash payments		(106	)
Accrued restructuring charges at March 31, 2009	$	—

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12. Supplemental Disclosures of Cash Flow and Noncash Investing and Financing Activities

Selected cash payments, receipts and noncash activities are as follows:

	Three Months Ended March 31,
	2009		2008
Cash paid for interest	$	74	$	171
Income taxes paid		118		225
Purchases of property, plant and equipment financed through capital leases		264		—
Accrual for purchases of property, plant and equipment		781		285
Accrual for merger-related fees		—		574
Common stock issued and stock options assumed for acquisition of TMI		—		265,914

13. Segment Data

The Company processes human and bovine animal tissue and distributes the tissue through various distribution channels. The Company’s lines of business are comprised primarily of six product categories: spine, sports medicine, dental, surgical specialties, bone graft substitutes and general orthopedic. The following table presents revenues from tissue distribution, and other revenues:

	Three Months Ended March 31,
	2009		2008 (1)
	(In thousands)
Fees from tissue distribution:
Spine	$	9,779	$	8,738
Sports medicine		9,375		9,215
Dental		7,293		3,486
Surgical specialties		4,827		1,562
Bone graft substitutes		3,862		4,773
General orthopedic		2,425		772
Other revenues		1,062		1,364
Total revenues	$	38,623	$	29,910
Domestic revenues		32,309		26,064
International revenues		6,314		3,846
Total revenues	$	38,623	$	29,910

(1) Includes revenues of the former Tutogen Medical, Inc. (“TMI”) from February 28, 2008 to March 31, 2008; revenues for the period totaled $6,353.

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For the three months ended March 31, 2009 and 2008, the Company derived approximately 24% and 29%, respectively, of its total revenues from Medtronic (“MDT”).

For the three months ended March 31, 2009 and 2008, the Company derived approximately 23% and 14%, respectively, of its total revenues from Zimmer, Inc. (“Zimmer”).

For the three months ended March 31, 2009 and 2008, the Company derived approximately 16% and 13%, respectively, of its total revenues from foreign distribution.

As of March 31, 2009, the Company had $35,384 of property, plant and equipment located domestically, and $11,418 of property, plant and equipment located at its processing facility in Germany.

14. Commitments and Contingencies

In 2008, the Company was audited by the German VAT authorities and received an assessment for 600 Euros, or $792, for the year ended December 31, 2008. The Company believes the assessment is without merit and is vigorously challenging the assessment. The Company does not believe that it is probable that it will ultimately be required to pay the assessment to the German VAT authorities and therefore has not accrued a liability for this contingency.

The Company leases certain facilities, items of office equipment and vehicles under non-cancelable operating lease arrangements expiring on various dates through 2013. The facility leases generally contain renewal options and are subject to annual inflationary adjustments. The Company anticipates that most of these leases will be renewed or replaced upon expiration. Future minimum lease commitments under non-cancelable operating leases as of March 31, 2009 are as follows:

	Operating Leases
2009	$	1,228
2010		1,148
2011		961
2012		328
2013 and beyond		191
	$	3,856

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The Company is, from time to time, involved in litigation relating to claims arising out of its operations in the ordinary course of business. The Company believes that none of these claims that were outstanding as of March 31, 2009 will have a material adverse impact on its financial position or results of operations.

Biomedical Tissue Service, Ltd.—The Company has been named as a party, along with a number of other defendants, in tort based lawsuits relating to the recall of tissue recovered by Biomedical Tissue Service, Ltd., an unaffiliated recovery agency (“BTS”). As of December 31, 2008, there are 569 lawsuits pending against RTI related to the recall. An additional 351 have been dismissed, of which 322 are being appealed by the plaintiffs. As of December 31, 2008, the Company’s subsidiary TMI had a total of 74 suits pending related to BTS, with 42 suits dismissed, of which 22 are being appealed. These lawsuits generally allege that the Company was negligent in not discovering deficiencies in recovery practices at BTS and include related claims for matters such as misrepresentation and negligence. Where specific damages have been identified, the actions seek compensatory damages in ranges of $15,000 to $5 million and punitive damages in ranges of $75,000 to $10 million.

The Company believes that it has meritorious defenses to these claims, and will defend them vigorously. In addition, the Company believes its existing insurance should cover all litigation expenses and damage awards, if any. Product and professional liability insurance of approximately $10 million is currently available for legal fees or potential settlements relating to the BTS recall. However, if existing insurance coverage is not adequate, the legal fees and settlements for such lawsuits could have a material adverse effect on quarterly results of the Company’s operations and financial position.

Osteotech, Inc.—On September 11, 2006, Osteotech, Inc. filed a lawsuit in the United States District Court for the District of New Jersey claiming infringement of one of their patents by the Company’s BioCleanse^® process. Osteotech’s complaint was subsequently amended to add another patent. The lawsuit requests 1) that the Company be enjoined permanently from infringing the patents, 2) damages, along with treble damages as a result of alleged willful infringement, and 3) reimbursement of costs and expenses and reasonable attorney fees. In addition to affirmative defenses asserted by the Company in the course of litigation, the Company filed a Motion for Partial Summary Judgment to limit potential damages alleged by Osteotech. On September 25, 2008, the Court granted the Company’s Motion, thereby precluding Osteotech from seeking pre-suit damages. Both parties have filed motions for summary judgment that are being briefed before the court. The Company believes the suit is without merit and will vigorously defend its position. However, a finding of infringement could have a material adverse effect on the Company.

The Company’s accounting policy is to accrue for legal costs as they are incurred.

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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. We cannot assure you 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

Given the country’s macroeconomic climate, we are seeing elective, non-critical surgeries in some of our markets, such as dental being postponed.

Our goals for 2009 are to develop potential revenue synergies resulting from the merger with TMI, and build on the Company’s competitive strengths as we focus on our future. We continue to focus on several long-term strategies in order to meet our goals. The key strategies are to continue to:

• maintain sufficient tissue available for processing from tissue recovery agencies;

• grow distributions in key markets;

• focus on marketing, distribution and regulatory support of our line of xenograft implants;

• develop new allograft and xenograft implants to enhance our current lines of implants;

• maintain our commitment to research and development and focus clinical efforts to support the market acceptance of our allograft and xenograft implants;

• control and, where possible, reduce costs; and

• manage inventory levels consistent with market demand.

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Three Months Ended March 31, 2009 Compared With Three Months Ended March 31, 2008

	Three Months Ended March 31,
	2009		2008 (1)
	(In thousands)
Fees from tissue distribution:
Spine	$	9,779	$	8,738
Sports medicine		9,375		9,215
Dental		7,293		3,486
Surgical specialties		4,827		1,562
Bone graft substitutes		3,862		4,773
General orthopedic		2,425		772
Other revenues		1,062		1,364
Total revenues	$	38,623	$	29,910
Domestic revenues		32,309		26,064
International revenues		6,314		3,846
Total revenues	$	38,623	$	29,910

(1) Includes revenues of the former Tutogen Medical, Inc. (“TMI”) from February 28, 2008 to March 31, 2008; revenues for the period totaled $6,353.

Revenues.Our total revenues increased $8.7 million, or 29.1%, to $38.6 million for the three months ended March 31, 2009 compared to $29.9 million for the three months ended March 31, 2008.

Spine—Revenues from spinal allografts increased $1.1 million, or 11.9%, to $9.8 million for the three months ended March 31, 2009 compared to $8.7 million for the three months ended March 31, 2008. Spine revenues increased primarily due to revenues associated with TMI for the three months ended March 31, 2009 and new products to new distributors. Unit volumes were up 15.1% as a result of higher distributions of cervical grafts to both current and new distributors. Average revenue per unit decreased 2.8% due to changes in product mix.

Sports Medicine—Revenues from sports medicine allografts increased $160,000, or 1.7%, to $9.4 million for the three months ended March 31, 2009 compared to $9.2 million for the three months ended March 31, 2008. Sports medicine revenues increased primarily as a result of favorable impact of distribution mix and increases in average revenue per unit of 13.2%, offset by a decrease in unit volumes of 10.1%.

Dental—Revenues from dental allografts increased $3.8 million, or 109.2%, to $7.3 million for the three months ended March 31, 2009 compared to $3.5 million for the three months ended March 31, 2008. We did not offer dental allografts prior to our merger with TMI, which closed on February 27, 2008.

Surgical Specialties—Revenues from surgical specialty allografts increased $3.2 million, or 209.0%, to $4.8 million for the three months ended March 31, 2009 compared to $1.6 million for the three months ended March 31, 2008. We did not offer surgical specialty allografts (hernia repair, breast reconstruction, ear, nose and throat, (“ENT”), urology, and ophthalmology) prior to our merger with TMI, which closed on February 27, 2008.

Bone Graft Substitutes—Revenues from bone graft substitutes decreased $911,000, or 19.1%, to $3.9 million for the three months ended March 31, 2009 compared to $4.8 million for the three months ended March 31, 2008. Bone graft substitutes revenues decreased primarily due to delays in launching new products and an unfavorable impact of distribution mix. Average revenue per unit decreased 35.0% due to changes in product mix. This resulted from higher unit volumes with Zimmer Dental which has lower average revenues per unit.

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General Orthopedic—Revenues from general orthopedic allografts increased $1.6 million or 214.1%, to $2.4 million for the three months ended March 31, 2009 compared to $772,000 for the three months ended March 31, 2008. The increase is primarily attributable to $1.5 million of revenues associated with TMI for the three months ended March 31, 2009 versus one month in 2008.

Other Revenues—Revenues from other sources, consisting of tissue recovery fees, biomedical laboratory fees, deferred revenues, shipping fees, distribution of reproductions of our allografts to distributors for demonstration purposes, decreased by $302,000, or 22.1%, to $1.1 million for the three months ended March 31, 2009 compared to $1.4 million for the three months ended March 31, 2008 primarily due to lower tissue recovery fees. Prior to the merger with TMI we were recovering tissue for TMI.

Costs of Processing and Distribution. Costs of processing and distribution increased by $4.4 million, or 27.1%, to $20.5 million for the three months ended March 31, 2009. As a percentage of revenues, costs of processing and distribution decreased from 53.9% for the three months ended March 31, 2008 to 53.0% for the three months ended March 31, 2009.

The increase in cost of processing and distribution was primarily due to higher levels of tissue distributed during the quarter. The decrease in cost of processing as a percentage of revenues is due primarily to the acquired TMI product lines which overall had higher average gross margins than those previously recognized by Regeneration Technologies. Gross margin increased from 46.1% for the three months ended March 31, 2008 to 47.0% for the three months ended March 31, 2009.

Marketing, General and Administrative Expenses. Marketing, general and administrative expenses increased by $4.4 million, or 42.7%, to $14.9 million for the three months ended March 31, 2009 from $10.5 million for the three months ended March 31, 2008. Marketing, general and administrative expenses increased as a percentage of revenues from 35.0% for the three months ended March 31, 2008 to 38.7% for the three months ended March 31, 2009. The increase is primarily attributable to including three months of TMI expenses in 2009 versus one month in the prior year. Domestic increases included distributor commissions of $743,000, as a result of higher commissions on the acquired dental product line of implants; an increase in domestic payroll and benefits expense of $647,000, an increase in legal expenses of $611,000 due primarily to on-going patent litigation; an increase in travel of $300,000; an increase in marketing programs of $165,000; an increase in accounting, bank fees, bad debt expense and executive meeting fees of $379,000; and an increase in utilities, rent and insurance of $253,000. In addition, a $1.4 million increase in marketing, general and administrative costs was associated with the TMI German and French business operations.

Research and Development Expenses. Research and development expenses decreased by $93,000, or 4.8%, to $1.8 million for the three months ended March 31, 2009 from $1.9 million for the three months ended March 31, 2008. As a percentage of revenues, research and development expenses decreased from 6.4% for the three months ended March 31, 2008 to 4.7% for the three months ended March 31, 2009. The decrease was primarily due to lower studies and research expenses of $275,000, lower legal and consulting expenses of $141,000 offset by an increase in domestic payroll and benefits expense of $170,000, and the addition of $156,000 in research and development expenses associated with the TMI German operations.

Restructuring Charges. As a result of the merger with TMI we implemented a formal restructuring plan which resulted in $42,000 of expenses for the three months ended March 31, 2009. These expenses represent severance benefits.

Net Other Income (Expense). Net other income was $93,000 for the three months ended March 31, 2009 compared to net other expense of $11,000 for the three months ended March 31, 2008. Interest expense decreased by $52,000 for the three months ended March 31, 2009 to $123,000 from $175,000 for the three months ended March 31, 2008 due to additional interest paid on long-term obligations. Interest income decreased by $71,000 for the three months

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ended March 31, 2009 to $111,000 from $182,000 for the three months ended March 31, 2008 due to the lower interest earned on the investment of excess cash in interest bearing cash equivalents than the comparable prior year period. Foreign exchange gain was $105,000 for the three months ended March 31, 2009 compared to foreign exchange loss of $18,000 for the three months ended March 31, 2008 due to the strengthening of the dollar versus the Euro and lower inter-company balances at March 31, 2009.

Income Tax Provision. Income tax provision for the three months ended March 31, 2009 was $409,000 compared to $391,000 for the three months ended March 31, 2008. Our effective tax rate for the three months ended March 31, 2009 and 2008 was 28.4% and 37.7%, respectively. Our effective tax rate for the three months ended March 31, 2009 compared to the three months ended March 31, 2008 decreased primarily as a result of increased profitability with the TMI processing facility in Germany with lower associated tax rates.

Liquidity and Capital Resources

Cash Flows - Three Months Ended March 31, 2009 Compared With Three Months Ended March 31, 2008.

Our cash used in operating activities were $6.6 million for the three month period ended March 31, 2009, compared to $160,000 for the three month period ended March 31, 2008. The increase in cash used in operating activities was primarily due to increases in accounts receivable and inventories, partially offset by an increase in accounts payable.

At March 31, 2009, we had 42 days of sales outstanding in trade accounts receivable, an increase of 4 days compared to March 31, 2008. At March 31, 2009, we had 316 days of inventory on hand, an increase of 67 days compared to March 31, 2008. Days sales in inventory at March 31, 2009 is higher than the prior year period primarily due to significant success of our donor sourcing organization to obtain higher levels of inventory to support recent and anticipated 2009 product launches and future quarterly distributions.

Our cash used in investing activities was $420,000 for the three month period ended March 31, 2009, compared to cash provided by investing activities of $840,000 for the three month period ended March 31, 2008. Our investing activities for the three month period ended March 31, 2009 consisted primarily of purchases of property, plant and equipment of $308,000. Our investing activities for the three months ended March 31, 2008 consisted primarily of purchases of property, plant and equipment of $803,000, offset by cash acquired with the merger with TMI, net of transaction costs, of $1.6 million.

Our net cash used in financing activities was $17,000 for the three months ended March 31, 2009 compared to $325,000 for the three month period ended March 31, 2008. Net cash used in financing activities for the three months ended March 31, 2009 consisted of net payments on short-term obligations of $1.2 million, proceeds on long-term obligations of $1.5 million, proceeds from exercises of stock options of $19,000, and payments on long-term obligations of $301,000. Net cash used in financing activities for the three months ended March 31, 2008 consisted of payments on long-term obligations of $606,000 and proceeds from exercise of stock options of $281,000.

Liquidity.

As of March 31, 2009, we had $13.1 million of cash and cash equivalents. We believe that our working capital as of March 31, 2009, together with our borrowing ability under our revolving line of credits, will be adequate to fund our on-going operations for the next twelve months.

Certain Commitments.

On November 24, 2008, we entered into a License Agreement with LifeNet Health, Inc. (“LifeNet”) to license from LifeNet certain intellectual property rights that may be used in or useful to our tissue processing efforts. The term of the License Agreement is for seven years or the remaining life of any patent covered by the License Agreement, whichever is longer. Total monetary consideration for the License Agreement is $4.9 million, to be paid in five annual installments of $1.0 million in each of November 2008 through 2012.

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On May 14, 2007, we entered into an exclusive distribution agreement with Zimmer with an initial term of 10 years, relating to certain new bone graft substitutes products. As part of the agreement, Zimmer has agreed to make three payments to us totaling $5.0 million for the aforementioned exclusive distribution rights, and maintain certain minimum order volumes commencing in 2010. The first payment of $1.0 million was made at the time of entering the agreement. The second payment of $2.0 million was made in the first quarter of 2008. As a result of a product launch delay, the final payment of $2.0 million is expected to be paid in the second quarter of 2009. The $5.0 million exclusivity payment has been deferred and is being recognized as other revenue on a straight-line basis over the initial term of the contract. The contract provides for repayment, on a pro rata basis, of the exclusivity payments during the initial contract term for specific events of non-performance, as defined in the agreement. The agreement also includes automatic two-year renewal terms, as well as buy-out provisions by both parties upon proper notice of cancellation.

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The Company’s short-term borrowings and long-term obligations are as follows:

	Current Interest Rate			Maturity Date	March 31, 2009					December 31, 2008
					(Euro)		(US Dollar)			(Euro)		(US Dollar)
					(In Thousands)
Short-Term Borrowings
United States
Revolving
Credit Facility			(1)				$	—				$	1,500
Germany
Revolving
Credit Facilities:
Line of Credit - 1	6.50	%	(2)	None	€	869		1,148		€	1,023		1,442
Line of Credit - 2	9.63	%	(3)	None		430		568			—		—
Interim Line of Credit	6.00	%	(3)	(6)		794		1,049			868		1,224
						2,093		2,765			1,891		4,166
Long-Term Obligations
United States
Revolving
Credit Facility	3.01	%	(4)	2/2011				1,500					—
Term Loan	3.51	%	(5)	2/2011				1,625					1,750
Germany
Term Loans:
Senior Debt	5.00	%	(3)	6/2011		220		291			244		344
Construction I	5.15	%	(3)	3/2012		750		991			812		1,145
Construction II	5.60	%	(3)	12/2016		880		1,162			880		1,241
Construction III	5.75	%	(3)	9/2012		182		240			195		275
					€	2,032		2,684		€	2,131		3,005
Capital Leases	5.00%-8.46	%		5/2010 - 2/2011				282					65
								6,091					4,820
Less current portion								(1,721	)				(1,637	)
Long-term portion								4,370					3,183
Total Debt							$	8,856				$	8,986

(1) Refinanced with long-term revolving credit facility

(2) Fixed interest rate is negotiated annually in March

(3) Fixed interest rates

(4) LIBOR plus 2.5% to 3.5%

(5) LIBOR plus 3.0%

(6) Interim line of credit matures upon conversion to term loan upon completion of construction

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The revolving credit facility with the U.S. bank contains various restrictive covenants which limit, among other things, indebtedness, liens and minimum cash balances. Under the agreement, the credit facility and term loan are secured by the Company’s domestic accounts receivable and inventory. The Company is required to maintain an average cash on hand balance of $5.0 million with the financial institution.

Under the terms of the revolving credit facilities with two German banks, the Company may borrow up to 1.5 million Euros (1.0 million Euros and 500,000 Euros, respectively), or approximately $2.0 million for working capital needs. The 1.0 million Euro revolving credit facility is secured by a mortgage on the Company’s German facility and a 4.0 million Euro guarantee by TMI. The 500,000 Euro revolving credit facility is secured by accounts receivable of TMI’s German subsidiary.

In 2008, the Company entered into a financing agreement with a German bank to finance the expansion of its processing facility in Germany. The agreement calls for an interim line of credit of up to 900,000 Euros or approximately $1.2 million while the expansion is completed, which is expected to occur in May 2009, upon which the line of credit will convert to a term loan.

At March 31, 2009, the Company had an outstanding interest rate swap agreement relating to the German term loan of 750,000 Euros, or $991,000 maturing March 31, 2012. Under this agreement, the Company pays a fixed interest rate of 5.15%. Payments or receipts on the agreement are recorded as adjustments to interest expense. Such adjustments have not been significant.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to market risk from exposure to changes in interest rates based upon our financing, investing and cash management activities. We do not expect changes in interest rates to have a material adverse effect on our income or our cash flows in 2009. However, we cannot assure that interest rates will not significantly change in the future.

In the United States and Germany, the Company is exposed to interest rate risk. Changes in interest rates affect interest income earned on cash and cash equivalents and interest expense on revolving credit arrangements. Except for an interest rate swap associated with 750,000 Euros (or $1.0 million) of long term debt over six years that was started March 31, 2006, the Company does not enter into derivative transactions related to cash and cash equivalents or debt. Accordingly, the Company is subject to changes in interest rates. Based on March 31, 2009 outstanding intercompany balances, a 1% change in interest rates would have had a de-minimis impact on our results of operations.

The value of the U.S. dollar compared to the Euro affects our financial results. Changes in exchange rates may positively or negatively affect revenues, gross margins, operating expenses and net income. The international operation currently transacts business primarily in the Euro. Assets and liabilities of foreign subsidiaries are translated at the period end exchange rate while revenues and expenses are translated at the average exchange rate for the period. Intercompany transactions are translated from the Euro to the U.S. dollar. Based on March 31, 2009 outstanding intercompany balances, a 1% change in currency rates would have had a de-minimis impact on our results of operations.

Item 4. Controls and Procedures

As of the end of the period covered by this report, an evaluation was performed on the effectiveness of the design and operation of our disclosure controls and procedures under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Disclosure controls and procedures include controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures were effective as of the end of the period covered by this report.

There have been no changes in the Company’s internal control over financial reporting during the Company’s last fiscal quarter that materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We refer you to Part I, Item 1, note 14 entitled “Commitments and Contingencies.”

Item 1A. Risk Factors

There have been no material changes from the information provided in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

31.1	Certification of the Chief Executive Officer Under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Executive Vice President and Chief Financial Officer Under Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Periodic Financial Report by Chief Executive Officer Under Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Periodic Financial Report by Executive Vice President and Chief Financial Officer Under Section 906 of the Sarbanes-Oxley Act of 2002.

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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 thereunto duly authorized.

RTI BIOLOGICS, INC. (Registrant)
By:	/s/ Brian K. Hutchison
	Brian K. Hutchison
	Chairman and Chief Executive Officer
By:	/s/ Thomas F. Rose
	Thomas F. Rose
	Executive Vice President, Chief Financial Officer and Secretary

Date: May 1, 2009

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