RTI Surgical (RTIX) 8-K Rti Biologics Announces 2012 Second Quarter Results

Exhibit 99.1

FOR RELEASE AT 7:00 AM ET	For more information, contact:
July 31, 2012	Robert Jordheim
	Chief Financial Officer
	rjordheim@rtix.com
	Wendy Crites Wacker, APR
	Corporate Communications
	wwacker@rtix.com
	Phone (386) 418-8888

RTI BIOLOGICS ANNOUNCES 2012 SECOND QUARTER RESULTS

– Company Will Hold Conference Call at 8:00 a.m. ET –

ALACHUA, Fla. (July 31, 2012) –RTI Biologics Inc. (RTI) (Nasdaq: RTIX), a leading provider of orthopedic and other biologic implants, reported operating results for the second quarter of 2012 as follows:

Quarterly Highlights:

• Achieved quarterly revenues of $45.2 million, a 4 percent increase over the second quarter of 2011.

• Achieved quarterly net income per fully diluted share of $0.02, a decrease of $0.02 compared to the second quarter of 2011. Excluding a pre-tax litigation settlement charge of $2.35 million in the quarter, or $0.03 per fully diluted share, the company achieved quarterly net income per fully diluted share of $0.05.

• Achieved quarterly revenues of $8.5 million in the surgical specialties business, an 18 percent increase over the second quarter of 2011.

• Achieved quarterly revenues of $7.0 million in the bone graft substitutes and general orthopedic (BGS/GO) business, a 12 percent increase over the second quarter of 2011.

• Achieved quarterly revenues of $13.3 million in the sports medicine business, a 10 percent increase over the second quarter of 2011.

• Achieved international revenues of $6.0 million, a 9 percent increase or a 19 percent increase on a constant currency basis over the second quarter of 2011.

• Achieved quarterly revenues of $14.0 million in the U.S. direct distribution organization, an 8 percent increase over the second quarter of 2011. The U.S. direct distribution organization includes sports medicine and certain BGS/GO implants.

“We are pleased with our second quarter results, which exceeded our expectations and were driven primarily by continued growth in our surgical specialties, direct sports medicine and BGS/GO businesses,” said Brian K. Hutchison, president and chief executive officer of RTI.

Worldwide revenues of $45.2 million for the second quarter of 2012 increased 4 percent compared to the second quarter of 2011. Domestic revenues of $39.2 million for the second quarter of 2012 grew by 3 percent compared to the second quarter of 2011, primarily based on the strength of the surgical specialties, direct sports medicine and dental businesses and were offset by unfavorable comparisons in the spine business. International revenues of $6.0 million increased 9 percent compared to the second quarter of 2011 primarily due to higher export revenue in the sports medicine and BGS/GO businesses. On a constant currency basis, international revenues increased 19 percent as compared to the second quarter of 2011.

In 2005, the company was named as a party, along with a number of other recovery and processor defendants, in lawsuits relating to the tissue recovery practices of Biomedical Tissue Services Ltd. (BTS), an unaffiliated recovery agency. During the second quarter of 2012, the company accrued a pre-tax charge of $2.35 million, or $0.03 per fully diluted share, to settle certain cases related to these proceedings.

For the second quarter of 2012, the company reported net income of $1.3 million and net income per fully diluted share of $0.02, based on 56.0 million fully diluted shares outstanding, compared to net income of $2.0 million or $0.04 per fully diluted share for the second quarter of 2011, based on 55.3 million fully diluted shares outstanding. Excluding the litigation settlement charge of $0.03 per fully diluted share, net income per fully diluted share in the second quarter of 2012 was $0.05.

Fiscal 2012 and Third Quarter Outlook

As a result of first half results that exceeded expectations and better visibility into second half trends, the company is raising its full year revenues guidance for 2012. The company now expects full year revenues for 2012 to be between $177 million to $179 million, as compared to prior guidance of $176 million to $178 million. As a result of the litigation settlement charge of $0.03 per fully diluted share taken in the second quarter, full year net income per fully diluted share is now expected to be in the range of $0.14 to $0.15, based on 56.1 million shares outstanding, as compared to prior guidance of $0.16 to $0.17 per fully diluted share.

For the third quarter of 2012, the company expects revenues to be between $44 million and $45 million and net income per fully diluted share to be approximately $0.04.

Conference Call

RTI will host a conference call and simultaneous audio webcast to discuss the second quarter results at 8:00 a.m. ET today. The conference call can be accessed by dialing (877) 383-7419. The webcast can be accessed through the investor section of RTI’s website atwww.rtix.com. A replay of the conference call will be available on the RTI website following the call.

About RTI Biologics Inc.

RTI Biologics Inc. is a leading provider of sterilebiologic implants for surgeries around the world with a commitment to advancing science, safety and innovation. RTI prepares human donated tissue and bovine tissue for transplantation through extensivetesting and screening and using proprietary processes. These allograft and xenograft implants are used in orthopedic, dental and other specialty surgeries.

RTI’s innovations continuously raise the bar of science and safety for biologics – from being the first company to offer precision-tooled bone implants and assembled technology to maximize each gift of donation, to inventing validated sterilization processes that include viral inactivation steps. Two such processes – theBioCleanse® Tissue Sterilization Process and theTutoplast® Tissue Sterilization Process – have a combined record of more than two million implants distributed with zero incidence of allograft-associated infection. These processes have been validated by tissue type to inactivate or remove viruses, bacteria, fungi and spores from the tissue while maintaining biocompatibility and functionality.

RTI’s worldwide corporate headquarters are located in Alachua, Fla., with international locations in Germany and France. The company is accredited by the American Association of Tissue Banks in the United States and is a member of AdvaMed.

Forward Looking Statement

This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s current expectations, estimates and projections about our industry, our management’s beliefs and certain assumptions made by our management. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, except for historical information, any statements made in this communication about anticipated financial results, growth rates, new product introductions, future operational improvements and results or regulatory approvals or changes to agreements with distributors also are forward-looking statements. These statements are not guarantees of future performance and are subject to risks and uncertainties, including the risks described in public filings with the U.S. Securities and Exchange Commission (SEC). Our actual results may differ materially from the anticipated results reflected in these forward-looking statements. Copies of the company’s SEC filings may be obtained by contacting the company or the SEC or by visiting RTI’s website atwww.rtix.com or the SEC’s website atwww.sec.gov.

RTI BIOLOGICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands, except share and per share data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Revenues:
Tissue distribution	$	43,711		$	41,504		$	85,832		$	81,023
Other revenues		1,486			1,978			3,108			3,105
Total revenues		45,197			43,482			88,940			84,128
Costs of processing and distribution		23,526			23,763			47,163			46,072
Gross profit		21,671			19,719			41,777			38,056
Expenses:
Marketing, general and administrative		14,294			14,186			28,668			28,095
Research and development		3,343			2,479			6,170			4,897
Asset abandonments		2			—			18			57
Litigation settlement		2,350			—			2,350			—
Total operating expenses		19,989			16,665			37,206			33,049
Operating income		1,682			3,054			4,571			5,007
Total other income (expense) - net		51			(55	)		106			(139	)
Income before income tax provision		1,733			2,999			4,677			4,868
Income tax provision		(412	)		(981	)		(1,354	)		(1,602	)
Net income	$	1,321		$	2,018		$	3,323		$	3,266
Net income per common share - basic	$	0.02		$	0.04		$	0.06		$	0.06
Net income per common share - diluted	$	0.02		$	0.04		$	0.06		$	0.06
Weighted average shares outstanding - basic		55,857,858			55,158,345			55,785,171			55,024,052
Weighted average shares outstanding - diluted		56,027,272			55,268,897			55,973,094			55,127,497

RTI BIOLOGICS, INC. AND SUBSIDIARIES

Reconciliation of Net Income and Net Income Per Diluted Share to

Adjusted Net Income and Adjusted Net Income Per Diluted Share

(In thousands except per share data)

(Unaudited)

	Three Months Ended
	June 30, 2012					June 30, 2011
				Impact				Impact
	Net			per Diluted		Net		per Diluted
	Income			Share		Income		Share
As reported	$	1,321		$	0.02	$	2,018	$	0.04
Litigation settlement charge, net of tax effect (1)		1,444			0.03		—		—
Adjusted	$	2,765		$	0.05	$	2,018	$	0.04
	Six Months Ended
	June 30, 2012					June 30, 2011
	Net Income			Impact per Diluted Share		Net Income		Impact per Diluted Share
As reported	$	3,323		$	0.06	$	3,266	$	0.06
Litigation settlement charge, net of tax effect (1)		1,444			0.03		—		—
Adjusted	$	4,767		$	0.09	$	3,266	$	0.06
(1)    Litigation settlement charge, net of tax effect, as follows:
Litigation settlement charge	$	2,350
Tax effect on litigation settlement charge		(906	)
Litigation settlement charge, net of tax effect	$	1,444

Use of Non-GAAP Financial Measures

To supplement RTI Biologic’s condensed consolidated financial statements presented on a GAAP basis, the company discloses certain non-GAAP financial measures that exclude certain amounts, including non-GAAP net income and non-GAAP net income per fully diluted share. These non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States. Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP measures are included in the reconciliation above.

The following is an explanation of the adjustment that management excluded as part of the non-GAAP measures for the three and six month periods ended June 30, 2012 as well as the reasons for excluding the individual item:

Litigation settlement – This adjustment represents a charge and relates to a litigation settlement of certain BTS related lawsuits. Management removes the impact of the litigation settlement charge from the Company’s operating results to assist in assessing its operating performance in the current period and to supplement a comparison to the Company’s past operating performance.

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

Non-GAAP net income and non-GAAP net income per fully diluted share should not be considered in isolation, or as a replacement for GAAP measures.

Usefulness of Non-GAAP Financial Measures to Investors

The Company believes that presenting non-GAAP net income and non-GAAP net income per fully diluted share in addition to the related GAAP measures provide investors greater transparency to the information used by management in its financial decision-making which excludes the litigation settlement charge. The Company further believes that providing this information better enables RTI Biologic’s investors to understand the Company’s overall core performance and to evaluate the methodology used by management to assess and measure such performance.

RTI BIOLOGICS, INC. AND SUBSIDIARIES

Condensed Consolidated Revenues

(In thousands)

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Revenues from tissue distribution:
Sports medicine	$	13,337	$	12,120	$	26,762	$	23,809
Spine		9,785		11,028		18,345		20,738
Surgical specialties		8,459		7,153		16,256		15,064
Bone graft substitutes and general orthopedic		7,016		6,241		14,031		12,348
Dental		5,114		4,962		10,438		9,064
Other revenues		1,486		1,978		3,108		3,105
Total revenues	$	45,197	$	43,482	$	88,940	$	84,128
Domestic revenues		39,191		37,980		77,064		73,225
International revenues		6,006		5,502		11,876		10,903
Total revenues	$	45,197	$	43,482	$	88,940	$	84,128

RTI BIOLOGICS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

	June 30,			December 31,
	2012			2011
Assets
Cash and cash equivalents	$	50,231		$	46,178
Accounts receivable - net		22,603			20,674
Inventories - net		73,214			76,598
Prepaid and other current assets		16,288			16,231
Total current assets		162,336			159,681
Property, plant and equipment - net		45,603			44,532
Other assets - net		25,567			25,814
Total assets	$	233,506		$	230,027
Liabilities and Stockholders’ Equity
Accounts payable	$	9,869		$	11,141
Accrued expenses and other current liabilities		24,887			24,028
Current portion of long-term obligations		270			448
Total current liabilities		35,026			35,617
Deferred revenue		21,210			20,589
Long-term liabilities		1,106			1,402
Total liabilities		57,342			57,608
Stockholders’ equity:
Common stock and additional paid-in capital		412,772			411,741
Accumulated other comprehensive loss		(2,793	)		(2,184	)
Accumulated deficit		(233,815	)		(237,138	)
Total stockholders’ equity		176,164			172,419
Total liabilities and stockholders’ equity	$	233,506		$	230,027

RTI BIOLOGICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2012			2011			2012			2011
Cash flows from operating activities:
Net income	$	1,321		$	2,018		$	3,323		$	3,266
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		1,970			2,042			3,879			3,967
Stock-based compensation		525			494			1,050			993
Amortization of deferred revenue		(1,164	)		(1,016	)		(2,328	)		(2,022	)
Litigation settlement		2,350			—			2,350			—
Other items to reconcile to net cash provided by operating activities		(187	)		5,075			906			8,889
Net cash provided by operating activities		4,815			8,613			9,180			15,093
Cash flows from investing activities:
Purchases of property, plant and equipment		(1,806	)		(816	)		(4,609	)		(1,310	)
Patent and acquired intangible asset costs		(311	)		(52	)		(376	)		(1,073	)
Net cash used in investing activities		(2,117	)		(868	)		(4,985	)		(2,383	)
Cash flows from financing activities:
Proceeds from exercise of common stock options		114			—			214			185
Payments on long-term obligations		(95	)		(1,975	)		(294	)		(2,251	)
Other		—			—			(20	)		—
Net cash provided by (used in) financing activities		19			(1,975	)		(100	)		(2,066	)
Effect of exchange rate changes on cash and cash equivalents		(74	)		133			(42	)		193
Net increase in cash and cash equivalents		2,643			5,903			4,053			10,837
Cash and cash equivalents, beginning of period		47,588			33,146			46,178			28,212
Cash and cash equivalents, end of period	$	50,231		$	39,049		$	50,231		$	39,049