RTIX

RTI Surgical, Inc. (RTIX)

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RTI Biologics Inc. (RTIX)

Acquisition Announcement Conference Call

June 12, 2013 08:30 am ET

Executives

Wendy T. Crites WackerDirector of Corporate Communications

Brian K. Hutchison – President and Chief Executive Officer

Robert P. Jordheim – Executive Vice President and Chief Financial Officer

Roger W. Rose – Executive Vice President and Chief Commercial Officer

Caroline A. Hartill - Executive Vice President and Chief Scientific Officer

Analysts

David Turkaly – JMP Securities

Matthew Hewitt – Craig-Hallum Capital Group

Matt V. Dolan – ROTH Capital Partners LLC

Chris Cooley – Stephens Inc.

Jayson T. Bedford – Raymond James & Associates, Inc.

Bill J. Plovanic – Canaccord Genuity, Inc.

Neil Joseph Gagnon – Gagnon Securities LLC

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the RTI Biologics acquisition announcement. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, today's conference is being recorded.

I’d now like to turn the conference over to your host, Ms. Wendy Crites Wacker. Please go ahead.

Wendy T. Crites Wacker

Good morning and thank you for joining RTI Biologics for our conference call to discuss our acquisition of Pioneer Surgical Technology. RTI President and Chief Executive Officer, Brian Hutchison will discuss the transaction, strategic rationale and financial implication. Rob Jordheim, Executive Vice President and Chief Financial Officer will also be available to address the questions during Q&A at the end of the call.

Before we begin, let me make the following disclosure about forward-looking statements. This communication 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 anticipate, expect, intent, plans, beliefs, seeks, estimates, variations of such words and similar expressions are indented to identify such forward-looking statements.

In addition, except for historical information, any statements made in this communication about growth rates, new product introductions, future operational improvements and results, or regulatory actions or approval or changes to agreements to distributors also are forward-looking statements. These statements are not guarantees of future performance and are subject to risks and uncertainties, including the risk described in public filings with the U.S. Securities and Exchange Commission.

In addition, these statements are subject to risks associated with Pioneer’s financial condition, business and operations and the integration of Pioneer’s business with ours. Our actual results may differ materially from the anticipated results [profected] in these forward-looking statements. Copies of the company’s SEC’s filings may be obtained by contacting the company or the SEC or by visiting RTI’s website or the SEC’s website.

This presentation shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or jurisdiction.

Now, I’ll turn the call over the Brian Hutchison to get us started.

Brian K. Hutchison

Good morning everyone. This morning we announced that RTI Biologics is acquiring Pioneer Surgical Technology for $130 million in a cash transaction. We are really excited about the combination of our two businesses that I will detail in this presentation. We believe that this transaction significantly advances our strategic goals while being financially attractive. We expect this acquisition will be accretive to cash earnings per share and free cash flow in 2014, excluding one-time related items. The transaction will be funded through a combination of cash on hand, a new credit facility and a concurrent private placement of convertible, preferred equity from Water Street Healthcare Partners.

The merger agreement has been approved by both companies Board of Directors. The merger is subject to customary closing conditions and regulatory approvals and we expect to close in the third quarter of 2013. After the closing, I will continue to serve as President and CEO of the combined company, and Rob will continue to serve as the Executive Vice President and CFO. The remainder of the executive team will be made up of current RTI management team and some members of the current Pioneer senior leadership team. Our headquarters will remain in Alachua, Florida.

Let me give you a little more color on the financing of the transaction. RTI has received the commitment from TD Bank and Regions Bank for a five-year $80 million senior secured facility which includes a $60 million term loan and a $20 million revolving credit facility. Additionally, RTI has agreed to a $50 million private placement of convertible, preferred equity with Water Street, a leading healthcare focused strategic private equity firm.

The convertible preferred equity and preferred stock initially will be convertible into RTI common stock at $4.39 per share giving Water Street, 16.8% ownership in the combined company. We are very pleased to have Water Street involved in this transaction. As a healthcare focused firm, strategic private equity firm, they have a strong track record of leading transformational acquisitions that have created market-leading healthcare companies of greater long-term value.

Through this agreement, we will be able to leverage their extensive operating experience, industry knowledge and network of relationships in the medical product sector. We have agreed to appoint two directors designated by Water Street to the Company’s Board of Directors, effective at the closing of this transaction. The addition of the Water Street appointees brings RTI’s total number of Directors to 10 members.

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