DIVESTITURE OF SURGICAL & INFECTION PREVENTION AND …
[Pages:20]DIVESTITURE OF SURGICAL & INFECTION PREVENTION AND THIRD QUARTER 2017 EARNINGS CALL
NOVEMBER 1, 2017
0
Agenda and speakers
Joe Woody
Chief Executive Officer
Transaction Rationale Halyard Outlook and Go-Forward Strategy
Q&A
Steve Voskuil
Chief Financial Officer
Financial Overview & Transformation Third Quarter Performance
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Forward looking statements
FORWARD-LOOKING INFORMATION
Certain matters in this presentation and conference call, including our 2017 outlook, expectations and planning assumptions, and any estimates, projections, and statements relating to our business plans, objectives, or the divestiture of our Surgical & Infection Prevention business, constitute forward-looking statements and are based upon management's expectations and beliefs concerning future events impacting the Company. These statements are subject to risks and uncertainties, including currency exchange risks, cost savings and reductions, raw material, energy, and other input costs, competition, market demand, economic condition, and legislative and regulatory actions. There can be no assurance that these future events will occur as anticipated or that the Company's results will be as estimated. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to publicly update them. For a more complete listing and description of other factors that could cause the Company's future results to differ materially from those expressed in any forward-looking statements, see the Company's most recent Form 10-K and Quarterly Reports on Form 10-Q.
NON-GAAP FINANCIAL MEASURES
Management believes that non-GAAP financial measures enhance investors' understanding and analysis of the company's performance. As such, results and outlook have been adjusted to exclude certain items for relevant time periods as indicated in the non-GAAP reconciliations to the comparable GAAP financial measures included in this presentation and in today's earnings release posted on our website (investors).
2
Divestiture of S&IP unlocks shareholder value
? Represents a significant milestone in company's strategy since spin-off ? Transforms the company into a focused Medical Devices business ? Creates a growth-oriented pure-play Medical Devices business with industry-leading Pain
Management and Chronic Care portfolios
Pure-Play Medical Devices
Company
Attractive End-Markets
Enhanced Growth Profile
Divestiture of S&IP accelerates value for shareholders immediately and over time
3
Transaction sets the stage for future growth
Terms & Structure
? Definitive agreement to sell Surgical & Infection Prevention business for $710 million to Owens & Minor
? Sale includes the Halyard brand name and current IT platform. The IT platform will be transferred in approximately one year
? Halyard will continue to provide IT services to S&IP for at least one year after closing as the company manages the transition to new ownership
? Halyard is finalizing multi-year plan to address dis-synergies and corporate costs
Use of Proceeds
? Estimated net after-tax proceeds of approximately $550 million, a portion of which will be allocated to the corporate rebrand and the new IT platform
? Management will evaluate options for use of proceeds, with the objective of maximizing balance sheet flexibility for future growth
? Halyard will provide more detail on capital deployment in the coming months
Closing
? Transaction is subject to regulatory approval and other customary closing conditions
? Transaction is expected to close in the first quarter of 2018
4
Strong momentum enables acceleration of transformation
Operating Profit Shift*
Halyard at Spin-off 4Q '14
Halyard Today 3Q '17
S&IP Medical Devices
Medial Devices Sales and Operating Profit Margin
($ in millions) $650 $600 $550 $500 $450
20.8% $502 2014A
21.2% $510 2015A
Medical Devices Net Sales
*Excludes impact from Corporate and Other
S&IP Medical Devices
21.8% $567 2016A Operating Profit Margin
24.9% $600 LTM 9/30/17A
25.0% 23.0% 21.0% 19.0%
5
Transformation to focused business with attractive financial profile
Management Focus:
Commodity Volatility:
Strategic Value
Halyard Today Split
Significant
Post-Transaction Focused, pure-play
Minimal
Organic Top-line Growth:
Gross Margin:
Operating Margin Growth:
Financial Value
Halyard Today Flat
Mid-30s Flat
Post-Transaction Mid-single digit
Low-60s Growing
6
Positioned to win in core areas with attractive opportunities
Strong Position in Large Addressable Market
Addressable Market
Medical Devices Sales
Q3 2017
Chronic Care
Pain Management
$6.0bn
Pain Management Chronic Care
Pain Management Outlook
? Includes Surgical Pain and Interventional Pain ? Fastest-growing part of our business, driven by
COOLIEF and ON-Q success ? Growth strategy:
- Introduce new products and therapeutic solutions to doctors and patients
- Leverage products into adjacent markets - Pursue new, complementary opportunities - Support adoption of non-opioid solutions
* Based on the midpoint of guidance
(%)
Historical Organic Sales Growth and Outlook (%)
5 4 3 2 1 0 -1 -2
2014
2015
2016
2017E*
Pain Management
Chronic Care
Chronic Care Outlook
? Includes Digestive Health and Respiratory Health ? More mature market, with leading positions further
enhanced by success of CORPAK acquisition ? Growth strategy:
- Develop innovative technologies to manage the health issues we address today
- Leverage existing products to enter new and related markets
- Strengthen portfolio through acquisitions
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