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Bacterin Announces Second Quarter 2013 Results

Highlights:

  • Revenue increased to $8.3 million from $8.2 million reported during the second quarter of 2012
  • Revenues for the period, excluding distributor stocking orders, increased 13% over the first quarter of 2013
  • Revenues for the six month period ended June 30, 2013 increased 6% year over year to approximately $16.9 million
  • The Company closed an equity financing in June 2013 which resulted in net proceeds of approximately $4.5 million to the Company.

BELGRADE, Mt.--(BUSINESS WIRE)--Aug. 6, 2013-- Bacterin International Holdings, Inc. (NYSE MKT: BONE), a leader in the development of revolutionary bone graft material and coatings for medical applications, today reported its financial results for the second quarter ended June 30, 2013. The Company reported revenues of approximately $8.3 million and a net loss for the second quarter of approximately $2.5 million, or ($0.05) per common share, compared to a net income of approximately $730,000, or $0.02 per common share, reported during the same period in 2012.

The Company also reported revenues of approximately $16.9 million and a net loss of approximately $4.2 million, or ($0.09) per common share, over the first six months of 2013. This compares to revenues of approximately $16.0 million and a net loss of approximately $316,000, or ($0.01) per common share, over the same period in 2012.

Revenue

Revenue for the second quarter was approximately $8.3 million, compared to approximately $8.2 million for the same period during 2012. The increase was primarily attributed to higher volume sales, which were partially offset by lower sales prices resulting from discounting associated with higher volume distributors and preferred vendors. For the first six months of 2013, revenues were approximately $16.9 million compared to approximately $16.0 million for the same period of 2012.

“Despite the challenges we incurred during the second quarter of 2013 associated with the resignation of our prior CEO, this was a satisfying quarter,” said John Gandolfo, co-interim CEO and Chief Financial Officer of Bacterin International Holdings. “We were able to keep our senior management team intact, which has resulted in winning back previous accounts and stabilizing our core hospital business. As a result of our efforts, we realized a sequential increase in our core hospital business during the period over the first quarter of 2013. We are currently assessing sales strategies which will enhance the sustained growth of our core business during the second half of the year. There is a continuing opportunity to leverage new sales channels and we are well positioned to increase our market presence.

Gross Profit

For the second quarter of 2013, gross profit was approximately $4.7 million, a decrease of 20% from $5.9 million in the second quarter of 2012. Gross margin for the period was 57%, which compares to a gross margin of 72% reported for the same period last year. During the quarter, the Company took a charge of approximately $500,000 associated with the write off of expired products primarily related to an improvement being made to our hMatrix manufacturing process which we expect to result in an improved product in the future. Excluding this charge, gross margins in the quarter would have been 63%.The first six months of 2013 saw gross profit of $10.2 million, compared to $11.8 million for the same period of 2012. Gross margins for the first six months were 60% in 2013 compared to 74% in 2012.

Sales and Marketing Expenses

Sales and marketing expenses for the second quarter increased to $4.2 million as compared to $3.8 million for the same period during 2012. As a percentage of revenues, selling and marketing expenses increased to 51%, which compares to 47% reported for the second quarter of 2012. The increase was primarily the result of higher personnel costs incurred prior to the recent reduction of headcount and increased administrative fees for GPO Contracts initiated during the third quarter of 2012. In addition, we incurred $103,000 of severance costs associated with headcount reductions announced during the second quarter of 2013.

The first six months of 2013, sales and marketing expenses remained flat at $8.0 million compared to the prior year.

General and Administrative Expenses

In the second quarter, general and administrative expenses (G&A) remained unchanged at $2.3 million for the period as compared to the same period last year. The second quarter 2013 figure included $164,000 of severance costs associated with the previously announced headcount reduction program as well as $124,000 of non-recurring expenses associated with a legal settlement. As a percentage of revenues, general and administrative expenses were 27% in 2013 as compared to 28% for the second of quarter 2012.

The first six months experienced a slight increase of general and administrative expenses to $5.1 million, which compares with $4.9 million reported during the second quarter of 2012. As a percentage of revenues, G&A was 30% in the first half of 2013 compared to 31% in 2012.

EBITDA

The Company defines earnings before interest, taxes, depreciation and amortization (“EBITDA”) as net income/loss from operations before depreciation, amortization and non-cash stock-based compensation. EBITDA for the second quarter of 2013 was a loss of $1.4 million, compared to breakeven EBITDA for the second quarter of 2012. Excluding the write-off of expired inventory of approximately $500,000 and severance expenses associated with the headcount reduction of $267,000, the second quarter 2013 EBITDA loss was $637,000. See "GAAP to non-GAAP Reconciliation" below for further information on this non-GAAP measure.

Financial Liquidity

Cash and cash equivalents were $5.1 million and net accounts receivable were $6.2 million on June 30, 2013, compared to cash and cash equivalents of $4.9 million and net accounts receivable of $7.2 million on December 31, 2012.

Kent Swanson, Chairman of Bacterin International Holdings added, “The sequential growth of our recurring revenues is a clear indication of the success we are having with our base hospital business. Now with our recent clearance from the FDA to market the OsteoSelect DBM Putty for spinal fusion procedures, we are well positioned to leverage our products and execute on our sales strategies to further penetrate the marketplace and grow this business.”

Conference Call Details

Management will hold a conference call to discuss its financial results at 10:00 a.m. ET, on Wednesday, August 7, 2013. Please refer to the information below for conference call dial-in information and webcast registration.

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact the Cockrell Group at 1-877-889-1972.

Conference Dial-in:

  877‐269‐7756

International Dial-in:

201‐689‐7817

Conference Name:

Bacterin’s Second Quarter and Six Month 2013 Results Call

Webcast Registration:

Click Here

Following the live call, a replay will be available on the Company's website, www.bacterin.com, under “Investor Info".

About the Presentation of EBITDA

EBITDA is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income, operating income or any other financial measures so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of liquidity. The company defines EBITDA as net income/(loss) from operations before depreciation, amortization and non-cash stock-based compensation. Other companies (including competitors) may define EBITDA differently. The company presents EBITDA because management believes it to be an important supplemental measure of performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Management also uses this information internally for forecasting and budgeting. It may not be indicative of the historical operating results of Bacterin nor is it intended to be predictive of potential future results. Investors should not consider EBITDA in isolation or as a substitute for analysis of the company's results as reported under GAAP. See "GAAP to non-GAAP Reconciliation" below for further information on this non-GAAP measure.

About Bacterin International Holdings

Bacterin International Holdings, Inc. (NYSE MKT: BONE) develops, manufactures and markets biologics products to domestic and international markets. Bacterin's proprietary methods optimize the growth factors in human allografts to promote bone growth, subchondral repair and dermal growth. These products are used in a variety of applications including enhancing fusion in spine surgery, relief of back pain, promotion of bone growth in foot and ankle surgery, promotion of cranial healing following neurosurgery and subchondral repair in knee and other joint surgeries.

Bacterin's Medical Device division develops and licenses coatings for various medical device applications. For further information, please visit www.bacterin.com.

Important Cautions Regarding Forward-looking Statements

This news release contains certain disclosures that may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to significant risks and uncertainties. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "continue," "efforts," "expects," "anticipates," "intends," "plans," "believes," "estimates," "projects," "forecasts," "strategy," "will," "goal," "target," "prospects," "potential," "optimistic," "confident," "likely," "probable" or similar expressions or the negative thereof. Statements of historical fact also may be deemed to be forward-looking statements. We caution that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including, among others: the Company's ability to meet its existing and anticipated contractual obligations, including financial covenant and other obligations contained in the Company’s secured lending facility; the Company’s ability to manage cash flow and achieve profitability; the Company's ability to develop, market, sell and distribute desirable applications, products and services and to protect its intellectual property; the ability of the Company's sales force to achieve expected results; the ability of the Company's customers to pay and the timeliness of such payments; the Company's ability to obtain financing as and when needed; changes in consumer demands and preferences; the Company's ability to attract and retain management and employees with appropriate skills and expertise; the Company’s ability to attract and retain a well qualified Chief Executive Officer; the Company’s ability to successfully conclude government investigations; the impact of changes in market, legal and regulatory conditions and in the applicable business environment, including actions of competitors; and other factors. Additional risk factors are listed in the Company's Annual Report on Form 10-K and Quarterly Report on Form 10-Q under the heading "Risk Factors." The Company undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.

BACTERIN INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
         
As of
June 30, As of
2013 December 31,

 

(Unaudited)

2012
 
ASSETS
Current Assets:
Cash and cash equivalents $ 5,135,974 $ 4,926,066
Trade accounts receivable, net of allowance for doubtful accounts of $518,419 and $1,576,955, respectively 6,226,619 7,154,065
Inventories, net 13,803,063 13,141,421
Prepaid and other current assets 667,871 353,271
Total current assets 25,833,527 25,574,823
 
Non-current inventories 1,238,225 1,238,225
Property and equipment, net 5,458,272 5,234,867
Intangible assets, net 564,693 592,378
Goodwill 728,618 728,618
Other assets 1,295,718 1,126,643
 
Total Assets $ 35,119,053 $ 34,495,554
 
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 4,245,745 $ 3,997,789
Accounts payable - related party 478,762 418,922
Accrued liabilities 2,391,313 2,400,090
Warrant derivative liability 1,374,044 984,356
Current portion of capital lease obligations 160,267 149,729
Current portion of royalty liability 804,250 698,408
Current portion of long-term debt 46,320 45,135
Total current liabilities 9,500,701 8,694,429
Long-term Liabilities:
Capital lease obligation, less current portion 162,880 245,703
Long term royalty liability, less current portion 6,677,474 6,839,935
Long-term debt, less current portion 15,342,246 14,483,102
Total Liabilities 31,683,301 30,263,169
 
Commitments and Contingencies
Stockholders' Equity
Preferred stock, $.000001 par value; 5,000,000 shares authorized; no shares issued and
outstanding - -

Common stock, $.000001 par value; 95,000,000 shares authorized; 51,528,544 shares issued and outstanding as of June 30, 2013 and 42,877,770 shares issued and outstanding as of December 31, 2012

52 43
Additional paid-in capital 55,253,597 51,897,890
Accumulated deficit (51,817,897) (47,665,548)
Total Stockholders’ Equity 3,435,752 4,232,385
 
Total Liabilities & Stockholders’ Equity $ 35,119,053 $ 34,495,554
 
 
BACTERIN INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
               
 
 
Three months ended June 30, Six months ended June 30,
2013 2012 2013 2012
Revenue
Tissue sales $ 8,196,554 $ 8,113,605 $ 16,719,902 $ 15,784,554
Royalties and other 70,294 94,667 165,753 193,719
Total Revenue 8,266,848 8,208,272 16,885,655 15,978,273
 
Cost of tissue and medical devices sales 3,572,674 2,329,432 6,693,360 4,188,154
 
Gross Profit 4,694,174 5,878,840 10,192,295 11,790,119
 
Operating Expenses
General and administrative 2,256,287 2,319,851 5,113,369 4,910,623
Sales and marketing 4,205,333 3,835,209 8,003,710 7,981,552
Depreciation and amortization 100,470 95,206 206,848 214,280
Non-cash consulting expense (932) (24,069) (31,229) 304,184
Total Operating Expenses 6,561,158 6,226,197 13,292,698 13,410,639
 
Loss from Operations (1,866,984) (347,357) (3,100,403) (1,620,520)
 
Other Income (Expense)
Interest expense (1,174,648) (266,200) (2,238,636) (409,052)
Change in warrant derivative liability 460,270 1,301,576 1,095,625 1,519,127
Other income 98,271 42,498 91,065 194,167
 
Total Other Income (Expense) (616,107) 1,077,874 (1,051,946) 1,304,242
 
Net Loss Before (Provision) Benefit for Income Taxes (2,483,091) 730,517 (4,152,349) (316,278)
 
(Provision) Benefit for Income Taxes
Current - - - -
Deferred - - - -
 
Net (Loss) Income $ (2,483,091) 730,517 $ (4,152,349) (316,278)
 
Net (loss) income per share:
Basic $ (0.05) 0.02 $ (0.09) (0.01)
Dilutive $ (0.05) 0.02 $ (0.09) (0.01)
 
Shares used in the computation:
Basic 45,250,699 42,695,350 44,095,052 42,121,718
Dilutive 45,250,699 44,683,663 44,095,052 42,121,718
 

 

 
 
BACTERIN INTERNATIONAL HOLDINGS, INC.

RECONCILIATION OF EBITDA

 

Three Months

Three Months

Six months

Six months

2013 2012   2013     2012
 
EBITDA
Net Loss from ops (1,866,984) (347,357) (3,100,403) (1,620,520)
Depreciation 100,470 95,206 206,848 214,280
Allocated depreciation 94,000 94,486 188,000 188,972
Stock based compensation 269,483 190,055 268,109 385,587
Non-cash consulting expense (932) (24,069) (31,229) 304,184
(1,403,963) 8,321 (2,468,675) (527,497)
 
 
BACTERIN INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
     
 

 

Six Months Ended June 30,

 

2013

 

2012

Operating activities:
Net income (loss) $ (4,152,349) $ (316,278)
Noncash adjustments:
Depreciation and amortization 394,849 403,252
Amortization of debt discount 583,181 53,707
Non-cash consulting expense/stock option expense 236,880 1,038,780
Provision for losses on accounts receivable and inventory 258,367 (23,733)
(Gain) loss on disposal of assets (500) 7,902
Change in derivative warrant liability (1,095,625) (1,519,127)
Reduction of contingent liability (91,740) (358,426)
Changes in operating assets and liabilities:
Accounts receivable 156,335 524,232
Inventories (148,898) (3,944,422)
Prepaid and other assets (183,675) (740,338)
Accounts payable 307,796 1,006,175
Accrued liabilities 180,491 (993,897)
Net cash used in operating activities (3,554,888) (4,862,173)
 
Investing activities:
Purchases of property and equipment (579,920) (870,569)
Intangible asset additions (10,149) -
Net cash used in investing activities (590,069) (870,569)
 
Financing activities:
Proceeds from the issuance of long-term debt - 2,741,720
Payments on long-term debt (22,852) (445,534)
Payments on capital leases (72,285) (21,085)
Net proceeds from issuance of stock 4,450,002 3,899,996
Proceeds from exercise of options - 20,099
Net cash provided by financing activities 4,354,865 6,195,196
 
Net change in cash and cash equivalents 209,908 462,454
 
Cash and cash equivalents at beginning of period 4,926,066 751,111
Cash and cash equivalents at end of period $ 5,135,974 $ 1,213,565

Source: Bacterin International Holdings, Inc.

Investor Contact:
COCKRELL GROUP
Rich Cockrell
877-889-1972
investorrelations@thecockrellgroup.com
cockrellgroup.com