DIVESTITURE OF SURGICAL & INFECTION PREVENTION AND …

[Pages:20]DIVESTITURE OF SURGICAL & INFECTION PREVENTION AND THIRD QUARTER 2017 EARNINGS CALL

NOVEMBER 1, 2017

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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).

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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

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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

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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%

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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

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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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