RTI Surgical — Proxy Contest (May 2016)
36 slides from RTI Surgical's proxy contest presentation, May 6, 2016
Slide 1: Creating a Stronger Governance Structure and Building Long-Term Stockholder Value
RTI Surgical May 6, 2016 Creating a Stronger Governance Structure and Building Long-Term Stockholder Value
Slide 2: Forward Looking Statement
Forward Looking Statement The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements. The forward-looking statements contained in this presentation document are subject to certain risks and uncertainties, such as our ability to maintain our e
Slide 3: Creating a Stronger Governance Structure and Building Long-Term Stockholder Value
Creating a Stronger Governance Structure and Building Long-Term Stockholder Value RTI Surgical ("RTI" or the "Company") is committed to the right governance framework to support and increase stockholder value and has conducted a thorough and successful process to strengthen the Board RTI’s Director
Slide 4: RTI Today
Headquarters in Alachua, Fla. Manufacturing and distribution locations: Alachua, Fla; Marquette, Mich.; Greenville, NC; Neunkirchen, Germany; Houten, the Netherlands Approximately 1,100 employees worldwide Diversified market approach through direct organization and commercial distributors Leading bi
Slide 5: Annual Revenues and Key Transactions
Tutogen Merger February 27, 2008 Announced Strategic Alternatives February 17, 2005 Pioneer Acquisition July 16, 2013 Annual Revenues
Slide 6: Changing the Paradigm: Acquisition of Pioneer Surgical Technology
Changing the Paradigm Acquisition of Pioneer Surgical Technology — 2013 Expanded and balanced product portfolio with metals and synthetics Expanded direct channel in U.S. and internationally Added nanOss® advanced bone graft substitute 12+ commercial distributors, solid relationships and favorable c
Slide 7: Direct Business
Direct Business Direct business is the fastest growing segment of our business and is increasing as a percent of overall revenue Direct 49% 2015 revenue Direct Historical Revenue ($000) 29% CAGR
Slide 8: A Strong Strategy to Increase Stockholder Value
A Strong Strategy to Increase Stockholder Value Actionable strategy to grow the Company and increase profitability Extensive investment in higher margin direct sales business Broadening implant portfolio to include metals and synthetics Intense focus on controlling operating cost base Key growth are
Slide 9: Krensavage's Comments on Expenses are Misleading
Krensavage's Comments on Expenses are Misleading as They Ignore Normal Sector Spending Levels Notes: 1Industry comparables consist of Globus Medical, K2M Group Holdings, LDR Holdings, MicroPort Scientific, NuVasive, Orthofix International, SeaSpine Holdings and Xtant Medical Holdings 2Analysis exclu
Slide 10: Improved Profitability Resulting from Streamlined Execution
Improved Profitability Resulting from Streamlined Execution Adjusted Operating Income ($mm) % of Revenue (15.5%) (10.9%) 9.0% 10.9% (11.5%) (18.0%) 1.7% 4.4% 5.6% 4.4% 7.0% 8.2% 0.4% 6.2% 9.6% Adjusted Cumulative Results '01-'05 '06-'10 '11-'15 '01-'15 CAGR Revenue $ 380 $ 646 $ 1,091 10.8% Operatin
Slide 11: Significant Progress Executing Value Creation Strategy
Significant Progress Executing Value Creation Strategy Track Record of Growth Successfully increased operating income margin from 2.1% in 2014 to 8.7% in 2015 Direct sales growth from 40% of revenues in 2011 to 50% of revenues in 2015 Expectation of direct sales increasing to 60% of revenues in the
Slide 12: RTI Conducted a Thorough Evaluation to Identify its Director Nominees
RTI Conducted a Thorough Evaluation to Identify its Director Nominees Over the past several months, our nominating and governance committee conducted a thorough evaluation of over 20 potential Director candidates, including those proposed by Krensavage The evaluation was consistent with the committe
Slide 13: Pre-determined Selection Criteria to Ensure Best Candidates
RTI's Board identified the following skill sets that it believes should be represented on the Board: Current or prior experience as a CEO of an orthopedic/medical device publicly traded company; Current or prior experience as a CFO of a publicly traded company or as a partner at a nationally-recogni
Slide 14: RTI Has Refreshed its Board
Note: 1Water Street is the largest shareholder of RTI and has preferred voting shares RTI Has Refreshed its Board in an Attempt to Ensure Strong Governance and Directors Who Will Help the Company Respond to a Changing Industry and Regulatory Landscape If this slate is elected, 7 of 9 directors will
Slide 15: Strong Governance Structure
Strong Governance Structure Eight independent Directors out of a total of nine Directors on the Board Significant stockholder representation: Two Directors associated with our largest investor Separate CEO and Chairman roles All members of the Nominating, Audit and Compensation Committees are outsid
Slide 16: RTI Has Proposed a Highly-Qualified Slate of Director Nominees
RTI Has Proposed a Highly–Qualified Slate of Director Nominees Current and past CEO experience Public company Board experience Current and past CFO experience Experienced, skilled perspectives and deep insights regarding strategic and operational challenges Certified public accounting experience at
Slide 17: RTI's Director Nominees are the Better Leadership Team
RTI considered more than 20 candidates and upon thorough review recommended three new nominees. RTI's slate of nominees has significant and relevant industry experience along with meaningful public Board experience. Note: Curtis Selquist and Christopher Sweeney are preferred Directors appointed by W
Slide 18: Krensavage's Nominees are Less Qualified than RTI's Nominees
Krensavage's Nominees are Less Qualified than RTI's Nominees None of the Krensavage nominees have experiences leading orthopedic device companies The Krensavage nominees have less medical device related operating, finance and sales experience than the average of the RTI's recommended nominees Mark S
Slide 19: RTI Welcomes the Views of its Investors and has Engaged with Krensavage
RTI Welcomes the Views of its Investors and has Engaged with Krensavage on Multiple Occasions RTI has a robust stockholder engagement program and regularly meets with investors and analysts We are generally open to constructive input from our stockholders and we respect the right of stockholders to
Slide 20: Krensavage Has Incorrectly Characterized RTI's Interactions with John Watts
Krensavage Has Incorrectly Characterized RTI's Interactions with its Nominee, John Watts Krensavage says that: RTI declined to interview Mr. Watts Mr. Watts withdrew from Krensavage’s slate because of his relationship with Water Street In fact: Mr. Watts had a telephonic interview as part of the nom
Slide 21: Krensavage is Misleading on Inside Ownership
Krensavage is Misleading on Inside Ownership Even though Krensavage calls Water Street RTI's largest shareholder, it excludes the ownership interest represented by its preferred shares in Krensavage's ownership graph RTI's total insider ownership stake is greater than the mean ownership stake of 22.
Slide 22: We Urge You to Vote the WHITE Proxy Card
RTI’s independent nominating and governance committee conducted a thorough evaluation to identify director nominees with the desired skills, qualifications and experience to help grow value for all stockholders We believe RTI's director nominees are the better leadership team to direct the business
Slide 23: Appendix
Appendix surgical A HIGHER STANDARD*
Slide 24: RTI Consistently Engages with Shareholders
Regular dialogue with multiple major shareholders Over the last twelve months only, the Company has held more than 100 in-person meetings and phone calls with investors, in addition to participating in 7 investor conferences RTI prioritizes interaction with investors through its attendance at some o
Slide 25: RTI Has Been Prompt, Engaging and Proactive with Krensavage
RTI has been prompt, engaging and proactive in its interactions with Krensavage. Krensavage has asked for changes but has not provided its specific plans to enhance RTI’s strategy and performance RTI has proactively refreshed its Board of Directors and openly considered and assessed Krensavages four
Slide 26: Details of Interactions With Krensavage
Date Event Action by RTI 11/9/15 Krensavage filed a Schedule 13D, noting purchase of RTI shares based on its belief that the shares, when purchased, were undervalued. Krensavage expressed its concern with the Issuer’s perennial underperformance, missed guidance and destruction of shareholder wealth.
Slide 27: Details of Interactions With Krensavage (Cont'd)
Details of Interactions With Krensavage (Cont'd) Date Event Action by RTI 02/19/16 Krensavage submitted a formal nomination letter notifying RTI of its intent to nominate Messrs. Goldberg, Stolper, Watts and Williams as nominees to be elected to RTI's Board of Directors at the Annual Meeting. 02/23/
Slide 28: Details of Interactions With Krensavage (Cont'd)
Details of Interactions With Krensavage (Cont'd) Date Event Action by RTI 03/02/16– 03/24/16 The Nominating and Governance Committee conducted a thorough evaluation of a number of potential Director candidates to identify individuals who possess the right qualities and expertise to strengthen RTI's
Slide 29: Director Nominee Biographies
Name Biography Peter F. Gearen, MD Deep medical experience and healthcare knowledge; knowledgeable about our products and the orthopedic products market Present Positions Joined RTI's Board of Directors in 1998 and was appointed Vice Chairman of the Board of Directors in February 2016 Selected Previ
Slide 30: Director Nominee Biographies
Name Biography Jonathon M. Singer Strong financial background (sitting CFO of a publicly-traded company and as a certified public accountant with experience at a big four accounting firm) and life sciences experience Present Positions Chief Financial Officer of Sagent Pharmaceuticals (NASDAQ:SGNT) s
Slide 31: Director Nominee Biographies
Name Biography Nicholas J. Valeriani Experience in the global medical device industry; leadership in the areas of strategy, growth and human resources Present Positions Currently serves on the Board of Directors of Edwards Lifesciences Corp. (NYSE:EW), Roka Bioscience, Inc. (NASDAQ:ROKA) and Sense4B
Slide 32: Reconciliation of Net Income (Loss) to Adjusted EBITDA
Reconciliation of Net Income (Loss) Applicable to Common Shares to Adjusted EBITDA Twelve Months Ended December 31, ($000s) 2015 2014 Net Income (Loss) $11,610 ($417) Interest Expense, Net 1,489 1,348 Provision for Income Taxes 8,299 1,493 Depreciation 12,240 11,010 Amortization of Intangible Assets
Slide 33: Reconciliation of Reported Operating Income to Adjusted Operating Income
Reconciliation of Reporting Operating Income to Adjusted Operating Income Twelve Months Ended December 31, ($000s) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Reported Operating Income ($10.5) ($14.0) $6.6 $10.0 ($8.9) ($17.5) ($2.6) ($98.4) $9.0 ($127.4) $11.8 $12.2 (
Slide 34: Reconciliation of Net Income (Loss) to Adjusted Net Income
Reconciliation of Net Income (Loss) to Adjusted Net Income Twelve Months Ended, December 31, 2015 December 31, 2014 ($000s, except per share data) Net Income Applicable to Common Shares Amount per Diluted Share Net Loss Applicable Common Shares Amount per Diluted Share Net Income (Loss) as Reported
Slide 35: Non-GAAP Financial Measures
Presentations in this slide deck include adjusted EBITDA, adjusted net income per share and adjusted operating income, non-GAAP financial measures that exclude certain amounts. These non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principl
Slide 36: RTI Surgical www.rtix.com
RTI Surgical Nasdaq: RTIX www.rtix.com