UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 9, 2020 (June 3, 2020)
RTI SURGICAL HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 001-38832 | 83-2540607 | ||
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(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
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| 520 Lake Cook Road, Suite 315, Deerfield, Illinois | 60015 | |||
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Registrant’s telephone number, including area code: (877) 343-6832
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading
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Name of exchange
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| common stock, $0.001 par value | RTIX | Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.06 (Material Impairments).
On June 3, 2020, the Audit Committee of the Board of Directors of RTI Surgical Holdings, Inc. (the “Company”) concluded that, in connection with the preparation of the Company’s annual financial statements, impairment charges related primarily to goodwill and other intangible assets were required under U.S. generally accepted accounting principles.
In December 2019, the Company changed its reporting structure, as it adopted new segment reporting, which the Company concluded resulted in two reporting units, Global Spine (“Spine”) and Global OEM (“OEM”). Prior to such change in reporting units, Paradigm Spine, LLC (“Paradigm”), which the Company acquired on March 8, 2019 for a purchase price of approximately $232.9 million and recorded goodwill of approximately $135.6 million, was included in the Company’s single reporting unit. With the change in reporting units, the Company performed a relative fair value valuation calculation to allocate the Company’s historical goodwill (existing prior to the Paradigm acquisition) between the two reporting units. The goodwill arising from the Paradigm acquisition was specifically allocated to the Spine reporting unit. The Company concluded specific allocation was most appropriate because Paradigm was recently acquired and the benefits of the acquired goodwill were never realized by the rest of the reporting unit as Paradigm was not integrated. Based on this change in reporting units, the Company conducted an impairment test before and after the change, and it was concluded that the fair value of its reporting unit exceeded the carrying value under the previous reporting unit structure. On the impairment test performed immediately subsequent to the change in reporting units, on the OEM reporting unit test, it was concluded the fair value of goodwill is substantially in excess of its carrying value; on the Spine reporting unit test, it was concluded the carrying value was in excess of the fair value of goodwill. Based on several factors, the Company weighted the income approach at 75% and the market approach at 25% in determining the fair value of the OEM reporting unit and utilized the cost approach for the Spine reporting unit for the purpose of the impairment test. The test resulted in the fair value of the OEM reporting unit exceeding the carrying value by approximately 54%, and the fair value of the Spine reporting unit could not support the allocated goodwill. As a result, for the year ended December 31, 2019, the Company recorded an impairment charge of all the goodwill in the Spine reporting unit totaling $140.0 million.
Additionally, the Company recorded asset impairment and abandonments of $97.3 million for the year ended December 31, 2019, related to the impairment of long-lived and other intangible assets in the Spine segment. In December 2019, the Company concluded that factors existed indicating that long-lived assets in the Spine asset group were impaired. As a result, for the year ended December 31, 2019, the Company completed a fair value assessment of the Spine asset group and recorded impairment charges to finite-lived intangible assets totaling $85.1 million, to property, plant and equipment, totaling $11.7 million, and to right-of-use assets totaling $0.2 million. In addition, for the year ended December 31, 2019, an abandonment charge of $0.3 million was recognized related to intangible assets that were abandoned.
No portion of the impairment charges relates to future cash expenditures and no future cash expenditures are expected related to this subject.
Item 8.01 (Other Events).
On June 8, 2020, the Company issued a press release announcing the filing of its Form 10-K for the fiscal year ended December 31, 2019 and completion of its previously announced financial statement restatement. A copy of this press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| 99.1 |
Press Release of RTI Surgical Holdings, Inc., issued on June 8, 2020. |
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 hereunto duly authorized.
| RTI SURGICAL HOLDINGS, INC. | ||||||
| Date: June 9, 2020 |
By: Name: Title: |
/s/ Joshua H. DeRienzis Joshua H. DeRienzis Vice President, General Counsel and Corporate Secretary |
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Exhibit 99.1
RTI Surgical Holdings, Inc.® Announces Filing of 2019 10-K and Completion of Financial Statement Restatement
Deerfield, Ill., June 8, 2020 – RTI Surgical Holdings, Inc. (Nasdaq: RTIX), a global surgical implant company, today announced that it has completed the filing of its 2019 Form 10-K and has completed its previously announced financial statement restatement.
The Company has also completed its previously announced internal investigation of certain accounting matters, including the Company’s revenue recognition practices for certain contractual arrangements, primarily with OEM customers involving the accounting treatment, financial reporting and internal controls related to such arrangements. The Company revised its financial statements to correct for errors, and has filed restated audited consolidated financial statements for the fiscal years ended December 31, 2016, 2017 and 2018, selected financial data for the years ended December 31, 2014 and 2015, and related disclosures for the quarterly periods for such years, each on Form 10-K/A, and restated condensed consolidated unaudited financial statements for the quarters ended March 31, 2019, June 30, 2019, and September 30, 2019, reflected in its 2019 Form 10-K. The previously announced investigation by the SEC remains ongoing, and the Company is cooperating with the SEC in its investigation.
“RTI is a company guided by strong values and business standards,” stated RTI’s President and Chief Executive Officer Camille Farhat. “These values are reflected in our ongoing efforts to remediate the various accounting issues that have delayed our financial filings and led to the extensive investigation and subsequent corrections in our historical financial information. We are now focused on working toward filing our first quarter 2020 financial statements, completing our pending sale of the OEM business, and preparing our spine business to be a stand-alone entity.”
About RTI Surgical Holdings, Inc.
RTI Surgical Holdings is a leading global surgical implant company providing surgeons with safe biologic, metal and synthetic implants. Committed to delivering a higher standard, RTI’s implants are used in sports medicine, plastic surgery, spine, orthopedic and trauma procedures and are distributed in over 50 countries. RTI has four manufacturing facilities throughout the U.S. and Europe. RTI is accredited in the U.S. by the American Association of Tissue Banks and is a member of AdvaMed. For more information, please visit www.rtix.com. Connect with us on LinkedIn and Twitter.
Forward-Looking Statements
This press release 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. The forward-looking statements are not guarantees of future performance and are based on certain assumptions including general economic conditions, as well as those within the Company’s industry, and numerous other factors and risks identified in the Company’s Form 10-K for the fiscal year ended December 31, 2019 and other filings with the SEC. Our actual results may differ materially from the anticipated results reflected in these forward-looking statements. Important factors that could
cause actual results to differ materially from the anticipated results reflected in these forward-looking statements include risks and uncertainties relating to the following: (i) the risk of potential litigation or regulatory action arising from the internal investigation and its findings or from the failure to timely file the Form 10-K; (ii) the identification of control deficiencies, including material weaknesses in internal control over financial reporting and the impact of the same; (iii) potential reputational damage that the Company may suffer as a result of the ultimate findings of the investigation; (iv) the Company’s ability to develop a plan to regain compliance with the continued listing criteria of the Nasdaq Stock Market, Nasdaq’s acceptance of such plan, and the Company’s ability to execute such plan and to continue to comply with the applicable listing standards within the available cure period; (v) the risk that the filing of the Form 10-Q for the first quarter of 2020 will take longer than currently anticipated; (vi) general worldwide economic conditions and related uncertainties; (vii) the anticipated impact of the COVID-19 novel coronavirus pandemic and the Company’s attempts at mitigation; (viii) the failure by the Company to identify, develop and successfully implement immediate action plans and longer-term strategic initiatives; (ix) our ability to continue production; (x) the reliability of our supply chain; (xi) our ability to meet obligations under our debt or material agreements; (xii) the duration of decreased demand for our products; (xiii) our ability to recall employees; (xiv) whether or when the demand for procedures will increase; (xv) the Company’s access to adequate operating cash flow, trade credit, borrowed funds and capital to fund its operations and pay its obligations as they become due, including the impact of adverse trends or disruption in the global credit and equity markets; (xvi) our financial position and results, total revenue, product revenue, gross margin, and operations; (xvii) the risk that the Company may be unable to obtain shareholder approval for the proposed transaction or that the Company or the Buyer may be unable to obtain regulatory approvals required for the proposed transaction, or required regulatory approvals may delay the proposed transaction; (xviii) the risk that a condition to the closing of the proposed transaction may not be satisfied; (xix) the risk that the occurrence of an event that could give rise to termination of the definitive agreement; (xx) the risk that shareholder litigation in connection with the proposed transaction may affect the timing or occurrence of the proposed transaction or result in significant costs of defense, indemnification and liability; (xxi) the timing to consummate the proposed transaction; (xxii) the effect of the announcement or disruption from the proposed transaction making it more difficult to retain and hire key personnel and maintain relationships with customers, suppliers and other third parties; (xxiii) the diversion of management time and attention on the proposed transaction; (xxiv) the effect and timing of changes in laws or in governmental regulations; and (xxv) other risks described in our public filings with the SEC. These factors should be considered carefully and undue reliance should not be placed on the forward-looking statements. Each forward-looking statement in this communication speaks only as of the date of the particular statement. Copies of the Company’s SEC filings may be obtained by contacting the Company or the SEC or by visiting RTI’s website at www.rtix.com or the SEC’s website at www.sec.gov. We undertake no obligation to update these forward-looking statements except as may be required by law.
Jonathon Singer
Investor and Media Contact
jsinger@rtix.com
+1 877-343-6832