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RTI Biologics Inc. Q2 2010 Earnings Call Transcript

RTI Biologics Inc. Q2 2010 Earnings Call Transcript

RTI Biologics Inc. (RTIX)

Q2 2010 Earnings Call

August 04, 2010 9:00 a.m. ET


Wendy Crites Wacker- Director of Corporate Communications

Brian Hutchison - Chairman & CEO

Tom Rose, Executive Vice President & Chief Operations Officer

Roger Rose, Executive Vice President & Chief Commercial Officer


Bill Plovanic - Canaccord Genuity

Shawn Bevac - Susquehanna Financial Group

Matt Dolan - Roth Capital Partners

Jayson Bedford - Raymond James & Associates

Ray Myers - The Benchmark Company



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Good day ladies and gentlemen and welcome to the RTI Biologics Second Quarter 2010 Earnings Conference Call. At this time all participant lines are in a listen-only mode. Let we'll conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Ms. Wendy Crites Wacker. Please go ahead.

Wendy Crites Wacker

Good morning and thank you for joining RTI Biologics for our second quarter 2010 conference call. Today, we will hear from Brian Hutchison, Chairman and CEO, who will discuss operational highlights and future activities for the company, as well as Tom Rose, Executive Vice President and Chief Operations Officer, who will provide an overview of our financial results. Also joining us this morning for Q&A are Rob Jordheim, Executive Vice President and Chief Financial Officer, Carrie Hartill, Executive Vice President and Chief Scientific Officer and Roger Rose, Executive Vice President and Chief Commercial Officer

Before we start, let me make the following disclosure about forward-looking statements. The earnings and other matters we will be discussing on this conference call will involve statements that are forward-looking. These statements are based on our management’s current expectations, but they are subject to various risks and uncertainties associated with our lines of business and with the economic environment in general.

Our actual results may vary from any statements concerning our expectations about future events that are made during the course of this meeting and we make no guarantees as to the accuracy of these statements. Accordingly, we urge you to consider all information about the company and not to place undue reliance on these forward-looking statements.

I'll turn the call over to Brian Hutchison.

Brian Hutchison

Thanks Webdy, good morning everyone. As many of you saw in our press release this morning, we reported quarterly revenues of $41.2 million with net income of $948,000 or $0.02 per share. Sport medicine we again our fastest growing area for the second quarter along with growth in BGS general orthopedics and domestic dental offsetting declines in spine, surgical specialties and international revenues.

Our direct sport medicine business achieve record quarterly revenues of $11.5 million representing about 28% of our overall revenue this quarter. Domestic sports medicine grew by 22% which is much higher than the industry growth rate. We believe we are gaining market share due to our superior quality -- product quality, well trained director solution group and excellent customer service, as well as our demand for non-irradiated power plant sterilized implant.

This past quarter our sports medicine group launched it's first surgeon education program. This events marks the Company's entrance into providing high quality education for surgeons with content focused on fresh osteochondral allografts and meniscus allograf transplant. We will be holding additional educational events in the future to train surgeon on safe and effective use of our implant to ensure the best patient outcome. We anticipate sports medicine will continue to see bulk industry growth rates in the next six months and end 2010 as our largest business.

Our BGS general orthopedics revenue were up 41% for the second quarter. The growth is driven by increased distributor orders, of principally of implants introduced in 2009 to Stryker as well as increased market penetration through our direct distribution forces in both U.S. and Germany. The growth in BGS general orthopedics revenue illustrates the continued success of our direct distribution team and our ability serve as a total tissue provider to hospitals.

Domestic dental revenues showed an increase of 6% over the previous year indicating further stabilization in the market. After reviewing numerous alternatives in the past year we are currently in the process of finalizing a new agreement with Zimmer Dental. Based on the foundation of this long standing relationship and the past success in the dental markets we're confident that continuing to work with Zimmer is our best opportunity to create long-term value in the dental space. We'll have more details as soon as the agreement is finalized.

Our Spine revenues in the second quarter decreased 25% from Q2 2009 as a result of an inventory adjustment of about $2 million by our largest spine distributor. This is a continuation of the adjustment we saw in the first quarter and the process ended at the end of April. We’re working to strategically expand our portfolio spine distributors which will positively impact the second half of the year.

Surgical specialties revenues declined 7% globally compared to second quarter 2009 due primarily to a decline in domestic hernia revenues in the quarter as the result of inventory adjustments by our distributor. The decline in Hernia offset revenue growth in all of the other areas of surgical specialties. We're working closely with our distributor to evaluate the market needs and ensure to have the appropriate mix of implants to gain additional market share.

International revenues which includes exports and distribution from our German and French facilities were down 9% over Q2 2009. These decreases were directly related to lower export orders from several European countries, many of which are still suffering from poor economic condition. In addition, the strengthening dollar has negatively impacted export revenue.

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