Orthofix Medical Inc. · NASDAQ:OFIX
Orthofix Medical — Orthofix International — Proxy Contest (March 2009)
42 slides from Orthofix Medical's proxy contest presentation, Mar 12, 2009
Slide 1: Investor Presentation, March 12, 2009
Investor Presentation March 12, 2009 Orthofix International NV Jim Gero - - Chairman of the Board Maria Sainz - - Independent Director Alan Milinazzo - - President & CEO, Director Bob Vaters - - EVP and CFO Brad Mason - - Group President of North America, Blackstone Michael Finegan - - President, Bi
Slide 2: Safe Harbor Statement
Safe Harbor Statement Except for historical information contained herein, the statements made in this presentation constitute ‘forward looking statements’ that involve certain risks and uncertainties. Certain factors may cause actual results to differ materially from those contained in the forward l
Slide 3: Introductions
Introductions Jim Gero - Chairman of the Board Director since 1995. Chairman since 2005. He currently is a Director of Drew Industries, Intrusion, Inc., and a Board of Governor member of Suntex Capital. Previous Director of REI, American Medical Electronics, DF&R, Spar Aerospace, and numerous privat
Slide 4: Agenda
Agenda Company Overview & Strategy Blackstone Progress & Update Financial Performance & Debt Covenants Corporate Governance Q&A
Slide 5: Positive Momentum
Positive Momentum Current Orthofix Board is driving progress • Blackstone Medical has achieved significant milestones and is poised for success; • Orthofix’s core businesses continue to perform very well; • Orthofix current operating plan provides for ample debt service and covenant compliance; Rami
Slide 6: The Ramius Agenda Raises Serious Questions
The Ramius Agenda Raises Serious Questions • Ramius, a holder for less than six months, owns just over 5% of OFIX common stock but seeks 4 of 10 board seats • Ramius initially proposed removal of our Company’s CEO from the Board, then reversed course , demonstrating poor judgment on corporate govern
Slide 7: Orthofix Sales Growth
($ in millions) Orthofix Sales Growth Breg acquisition Blackstone acquisition
Slide 8: Orthofix Product Profile
25% 49% Orthofix Product Profile 5% • Spine: Market-leading spinal bone growth stimulators, including only FDA-approved cervical spine stimulator; spine implants & biologics • Orthopedics: Internal and external fixation, deformity correction and long bone stimulation • Sports Medicine : Focus on kne
Slide 9: Core Business Segments
Spine Sports Medicine Orthopedics ‘08 revenue = $252 million Gross margin of high-70% ‘08 revenue = $129 million Gross margin of approx. 70% ‘08 revenue = $94 million Gross margin of mid-60% Core Business Segments 2008 Vascular and Other revenue = $44 million
Slide 10: Spine Implant Strategy & Opportunity
Spine Implant Strategy & Opportunity • Increasingly aging population (with more orthopedic disorders) • Sedentary and obese population • Growing acceptance of bone grafts and bone growth substitutes • Increased R&D investments and acceptance of novel technologies Growth Drivers $ 4.7 B 2006 $ 5.1 B
Slide 11: Blackstone Acquisition
Blackstone Acquisition Platform acquisition Rapid revenue growth Broad product portfolio • Strong engineering talent • 14 product introductions preceding the acquisition Distribution scale and upside • Substantial US footprint • Complementary international opportunities • Cross-selling between stim
Slide 12: Key Leadership Changes during 2008
Key Leadership Changes during 2008 Maria Sainz , Independent Director Brad Mason , Group President, North America and President of Orthofix Spine Bob Vaters , Executive Vice President and Chief Financial Officer Jeff Hammel , Orthofix VP of Finance inserted into Blackstone Medical Inc. Denise Pedull
Slide 13: Analysts Agree: We Have Made Progress
Analysts Agree: We Have Made Progress “Orthofix is in a position where it must execute its current strategy through 2009 to achieve its guidance. Ramius, an investment management firm with a stake in OFIX, has made an aggressive push to hold a special shareholders meeting to call into questions the
Slide 14: Orthofix Working Capital
Orthofix Working Capital $ 200 M $ 210 M $ 220 M Apr $ 240 M $ 270 M Dec May Jun Jul Aug Sep $ 230 M Nov 08* Mar $ 0 M $ 260 M $ 250 M Feb Jan Dec Oct
Slide 15: Blackstone Recovery
Blackstone Recovery Jul Aug Sep Oct Nov Dec USA $ 0.0 M $ 6.5 M $ 7.0 M $ 7.5 M $ 8.0 M $ 8.5 M $ 9.0 M Jan Feb Mar Apr May Jun Monthly US Revenue, Blackstone BM promotion MTF announced
Slide 16: Acquisition Strategy and DD efforts
Acquisition Strategy and DD efforts Brad Mason
Slide 17: North America Strategy
North America Strategy Secure core businesses § Spine Stimulation § Orthopedics § Sports Medicine Assess Blackstone business § Entrepreneurial § Public Company Acquisition § OIG Investigation
Slide 18: Blackstone Priorities
Blackstone Priorities Secure, Stabilize and Improve § Distributors § Surgeons § Management Focus on Fundamentals § Leadership and Culture § Customers § Financial Discipline § Business Processes § New Product Pipeline
Slide 19: Internal Development
Internal Development + Firebird Pedicle Screw System + Pillar™SA Interbody Device + Ascent LE Posterior Cervical System + Advent™ Cervical Disc + ProView™ Minimal Access Portal System + TDX Dynamic Stabilization Rod In-licensing and acquisitions + New stem cell-based matrix collaboration with MTF +
Slide 20: Path To Profitability at Blackstone
Path To Profitability at Blackstone Margins § Trinity Evolution § Vendor management § Centralized price management § New higher margin products Reduce Sales & Marketing Expenses § Discount sharing § Reduced commissions § Leverage (Sales Mgt, Trade Shows, MarCom, etc.) Consolidation § Projected savin
Slide 21: Blackstone Recovery
Blackstone Recovery Jan 2008 Feb 2008 Mar 2008 Apr 2008 May 2008 Jun 2008 Jul 2008 Aug 2008 Sep 2008 Oct 2008 Nov 2008 Dec 2008 USA $ 0.0 M $ 6.5 M $ 7.0 M $ 7.5 M $ 8.0 M $ 8.5 M $ 9.0 M Monthly US Revenue, Blackstone BM promotion MTF announced
Slide 22: Acquisition Strategy and DD efforts
Acquisition Strategy and DD efforts Michael Finegan
Slide 23: MTF Collaboration
MTF Collaboration “Orthofix International N.V. (NASDAQ: OFIX) announced today that the Musculoskeletal Transplant Foundation (MTF) has completed the major milestone in the development of a next-generation stem cell allograft...The full commercialization of this tissue form, called Trinity Evolution™
Slide 24: Acquisition Strategy and DD efforts
Acquisition Strategy and DD efforts Bob Vaters
Slide 25: Q4 2008 Financial Performance
Q4 2008 Financial Performance Orthofix revenues increased 7% sequentially Blackstone revenues increased 9% sequentially Working Capital Management improvements Sequential improvement in EBITDA* Resulted in: • $10M Q4 08 voluntary debt pre-payment • $7M Q1 09 additional debt pre-payment • Improved le
Slide 26: Current projections show financial stability as Blackstone Performance has improved
Current projections show financial stability as Blackstone Performance has improved Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec USA $ 0 M $ 7 M $ 8 M $ 9 M Mar Jul Jun Sep May Apr $ 0 M Dec Nov Feb Jan Dec Oct $ 200 M $ 250 M $ 300 M Aug Monthly US Revenue 2008 Orthofix Working Capital
Slide 27: 2009 Leverage Ratio
2009 Leverage Ratio 10-15% EBITDA* growth Consolidated EBITDA* of $93-$98 million • Q4 2008 EBITDA* of $23.1M Q3 09 improvement in LTM EBITDA* * As defined by our amended credit facility
Slide 28: Acquisition Strategy and DD efforts
Acquisition Strategy and DD efforts Jim Gero
Slide 29: Orthofix's Directors Maintain Best-in-Class Corporate Governance Practices
Orthofix’s Directors Maintain Best-in-Class Corporate Governance Practices Best-In-Class Governance: • No staggered or classified Board of Directors; all directors stand for election annually • The roles of Chairman and CEO are held by separate individuals • The Audit, Compensation, and Nominating &
Slide 30: Orthofix's Directors Maintain Best-in-Class Corporate Governance Practices
Orthofix’s Directors Maintain Best-in-Class Corporate Governance Practices Other Important Governance Practices: • Board regularly meets without CEO at least 2X per quarter • Directors receive routine briefings from General Counsel and Senior VP Compliance on governance topics as regular feature of
Slide 31: Ramius is Seeking to Remove Four Highly Qualified Orthofix Directors
Ramius is Seeking to Remove Four Highly Qualified Orthofix Directors James Gero is currently Chairman of Orthofix International N.V. (OFIX) and has served on the board of Orthofix International N.V. since 1995. He currently is a director of Drew Industries (NYSE), Intrusion, Inc. (Nasdaq), and a Boa
Slide 32: Ramius is Seeking to Remove Four Highly Qualified Orthofix Directors (cont.)
Ramius is Seeking to Remove Four Highly Qualified Orthofix Directors (cont.) Mr. Kester became a non-executive Director of Orthofix International N.V. in August 2004. Mr. Kester retired after 28 years, 18 as an audit partner, from KPMG LLP in 2002. While at KPMG, he served as the lead partner for la
Slide 33: Board Evolution
Board Evolution
Slide 34: Ramius Nominees
Source: www.sec.gov Ramius Nominees Peter Feld has no apparent healthcare or operating experience • Was a director of Sharper Image for only 5 months just prior to its bankruptcy. • Joined the board of CPI Corp., a portrait studio company, in 2008. In November 2008, CPI Corp was in danger of being d
Slide 35: Ramius Nominees
Ramius Nominees Steven Lee is the former CEO of Polymedica • In 1998, the federal government began investigating two Polymedica subsidiaries. • In 2001, two “whistleblower” lawsuits were filed in federal courts claiming false claims were submitted to Medicare resulting in over billing to federal hea
Slide 36: Ramius Nominees
Ramius Nominees J. Michael Egan • President and Chief Executive Officer, Steadman Hawkins Research Foundation • Director, Venture Lending & Leasing IV Inc. • Director, Western Technology Investment • Chairman of the Board of Directors, iBalance Medical • The Deeming Board for the University of Color
Slide 37: Conclusion
Conclusion Current Orthofix Board is driving progress and is focused on creating long- term shareholder value • Blackstone Medical has achieved significant milestones and is poised for success; • Orthofix’s core businesses continue to perform very well; • Orthofix current operating plan provides for
Slide 38: Notification of Proxy Statement Filing
Notification of Proxy Statement Filing Important Additional Information Orthofix International N.V. (“Orthofix”) has filed a definitive proxy statement, dated February 26, 2009, with the SEC in connection with a special general meeting of shareholders of Orthofix to be held on April 2, 2009 at which
Slide 39: Definitions
Definitions • For a further explanation of how Orthofix calculates EBITDA and why we believe it is a useful measure of our performance, please see the Company's earnings release issued on February 12, 2009, which was filed with the SEC on Form 8-K and is available free of charge on the SEC's website
Slide 40: Background Information
Background Information
Slide 41: Trinity and Trinity Evolution
Trinity ® and Trinity ® Evolution™ Trinity Evolution • Long term Development and Commercialization collaboration with MTF, leading tissue processor and supplier in the world, all fields of use • Adult MSCs derived from allogeneic tissue with all three key bone growth pathways • Commercialization to
Slide 42: Experienced Audit Committee
Experienced Audit Committee All are independent under applicable NASDAQ rules. Jerry C. Benjamin Director and Chairman of the Audit Committee Mr. Benjamin became a non-executive Director of Orthofix International N.V. in March 1992. He has been a General Partner of Advent Venture Partners, a venture