Zimmer Biomet Holdings, Inc. · NYSE:ZBH
Zimmer Biomet — Zimmer Holdings — Merger or Acquisition (September 2003)
59 slides from Zimmer Biomet's merger presentation, Sep 4, 2003
Slide 1: European Investor Meetings
+ European Investor Meetings
Slide 2: Disclaimer
Disclaimer This document contains forward-looking statements within safe harbor provisions of the Private Securities Litigation Reform Act of 1995 based on current expectations, estimates, forecasts and projections about the orthopaedics industry, management's beliefs and assumptions made by managem
Slide 3: #1 Pure-Play Orthopaedics Company
# 1 Pure-Play Orthopaedics Company Premier, Innovative, Global Orthopaedics Company Leading Technology MIS Alternate Materials CAS Biologics Disc / Nucleus Leading Scale $2 billion+ sales 100,000+ SKUs 2,000+ sales people 1,000,000+ ft2 mfg 1,000+ patents Leading Positions #1 Reconstructive #1 Hips
Slide 4: Zimmer Overview
Founded 1927 by Justin O. Zimmer in Warsaw, Indiana Successful spin-off from its former parent in 2001 NYSE: ZMH / S&P 500 Company with $9 billion+ market cap A world leader in reconstructive and trauma products 3,600 employees; 1,300 sales people; 8,000 products; 70 countries Zimmer Overview 2002 S
Slide 5: A Trusted Tradition in Orthopaedics
A Trusted Tradition in Orthopaedics More than 75 years in Orthopaedics Rich history of technological advancement Long record of quality, medical education and clinical success
Slide 6: Proven Results From a Focused Team
Proven Results From a Focused Team New Management Team (1) Share of reconstructive implant and fracture management product sales. (2) Unaudited results. Zimmer 1998-2002 Organic Sales CAGR = 12% ($ in Millions) Total Sales Global Share(1) (2) (2)
Slide 7: Zimmer Long-Standing Strategy
Zimmer Long-Standing Strategy New Markets Spine New Geographies Europe New Products "New Patient" Strategies
Slide 8: New Geographies
New Geographies New Markets Spine New Geographies Europe New Products "New Patient" Strategies
Slide 9: Compelling European Opportunity
Favorable demographics and unmet demand Largest hip market in the world Hip to knee ratio at 2.5 to 1 Recon implant sales growing at 10+% Europe represents 12% of Zimmer sales Compelling European Opportunity Zimmer's strategy is aligned with European opportunity.
Slide 10: New Markets
New Markets New Markets Spine New Geographies Europe New Products "New Patient" Strategies
Slide 11: Compelling Opportunities in Spine
Compelling Opportunities in Spine Spine Market CAGR = 25% ($ in Millions) Fastest growing segment at 20-25% CAGR Highest profitability segment at ~80% gross margins International potential (U.S. currently ~80%) Source: Wall Street equity research and Zimmer Management. 2002 Market Share Other 21
Slide 12: New Products
New Products New Markets Spine New Geographies Europe New Products "New Patient" Strategies
Slide 13: Zimmer "New Patient" Philosophy
Zimmer "New Patient" Philosophy New Products "New Patient" Strategies Revision Innovative Materials Hybrid Biologics DTC Lifestyle Designs MIS Younger, active and better informed patients.
Slide 14: Revision
Revision New Products Strategy Revision procedures growing 50% faster than primaries Revision procedures growing 50% faster than primaries Revision procedures growing 50% faster than primaries Revision procedures growing 50% faster than primaries Revision procedures growing 50% faster than primaries
Slide 15: Innovative Materials-Trabecular Metal
Innovative Materials-Trabecular Metal(tm) Our global porous platform-"the best thing next to bone" "New Patient" Strategies Innovative Materials Revision DTC Hybrid Bio- technology Lifestyle Designs MIS
Slide 16: Biologicals - Early Partnership Research
Biologicals - Early Partnership Research Potential single surgery, arthroscopic osteochondral grafts Graft Native Tissue "New Patient" Strategies Revision Innovative Materials DTC Hybrid Bio- technology Lifestyle Designs MIS
Slide 17: Direct-To-Consumer (DTC)
Direct-To-Consumer (DTC) "New Patient" Strategies Revision Innovative Materials Hybrid Bio- technology DTC Lifestyle Designs MIS Followed by In some countries, millions of patients by mass media
Slide 18: Life at 155° Hi-Flex Knee
Life at 155° Hi-Flex Knee for "Lifestyle" and "Culture" Patient potential for safe and effective increased flexion "New Patient" Strategies Revision Innovative Materials DTC Hybrid Bio- technology Lifestyle Designs MIS
Slide 19: Minimally Invasive Solutions (MIS)
Minimally Invasive Solutions(tm) (MIS) For the patient and for Zimmer, it's not about small incisions, it's about living life big! "New Patient" Strategies Revision Innovative Materials DTC Hybrid Bio- technology MIS Lifestyle Designs
Slide 20: "Living Life Big" with MIS
"Living Life Big" with MIS . . . . . less invasion, less pain and less systemic cost same day mobility, ambulation and discharge patient-defined "normal life" in a few weeks post-op WE BELIEVE PATIENT QUALITY OF LIFE WILL BE THE KEY MEASURE A younger, informed more active patient will rule
Slide 21: A Visible Improvement . . . HIPS
A Visible Improvement . . . . . HIPS
Slide 22: Any "Mini" Versus the Zimmer 2-Incision
Any "Mini" Versus the Zimmer "2-Incision" "MINI" HIPS Less blood loss Less rehab Less hospital time Less scar ZIMMER "2-INCISION" HIPS Min. blood donation or loss 50% -60% less rehab Min. tissue disruption and scar Home the same day "outpatient" IGS supported Mini's are progress-but the 2-Incision c
Slide 23: Bilateral MIS 2-Incision
Bilateral MIS 2-Incision in Less than 20 Days
Slide 24: A Visible Improvement . . . KNEES
A Visible Improvement . . . . . KNEES
Slide 25: MIS Total Knee Clinical Observations
MIS Total Knee Clinical Observations Length 10-14cm Small VMO snip Avoid patella tension Immobilization or PROM ? PT. Flex to 90? - day 3 3-4 days Less Blood loss Earlier ambulation Length 8-12cm No VMO violation No patella eversion Early mobilization. Flex to 90? on day of surgery. 1 - 1.5 days Min
Slide 26: MIS Knee Patient
_ MIS Knee Patient
Slide 27: Zimmer / Medtronic Image Guidance Co-Development
Zimmer / Medtronic Image Guidance Co-Development MIS Applications 2-Incision Hip MIS-TKA Mini Knee Mini Hip MG Uni Advanced Uni Patello-Femoral Electromagnetic Applications 2-Incision Hip Single Incision Hip MIS-TKA (Quad-Sparing) Open Surgical Applications Instrumentation Disposable Long Term Exclu
Slide 28: Grand Opening March 31, 2003
Grand Opening March 31, 2003 . . . . .
Slide 29: The Zimmer Institute Tour
The Zimmer Institute Tour pst
Slide 30: Zimmer and Centerpulse = Leadership
Zimmer and Centerpulse = Leadership Product Sales and Market Share Disease "Continuum of Care" Geographic Sales and Market Share Future Technology Investments ?
Slide 31: Creates the Pure-Play Leader in Global Orthopaedics
Creates the Pure-Play Leader in the Served Global Orthopaedics Market ($ in Millions) Note: For 2002. Includes hips, knees, shoulders, elbows, spine, trauma and dental markets. Source: Company annual filings, Wall Street equity research and Zimmer Management. +
Slide 32: Combined Sales by Product Segment
Combined Sales by Product Segment Recon OSP Trauma ($ in Millions) Dental Spinal OSP Spinal (1) Represents sales from continuing operations. Dental Trauma Recon Recon Trauma Zimmer 2002 Sales: $1,372 Centerpulse 2002 Sales (1): $796 Zimmer + Centerpulse 2002 Sales: $2,168
Slide 33: Zimmer and Centerpulse = Leadership
Zimmer and Centerpulse = Leadership Product Sales and Market Share Disease "Continuum of Care" Geographic Sales and Market Share Future Technology Investments ? ?
Slide 34: Completes Reconstructive Continuum of Care: Hips
Completes Reconstructive Continuum of Care: Hips Zimmer Centerpulse End Stage Treatment Mid Stage Treatment Early Stage Treatment
Slide 35: Completes Reconstructive Continuum of Care: Knees
Completes Reconstructive Continuum of Care: Knees Zimmer Centerpulse Early Stage Treatment Mid Stage Treatment End Stage Treatment
Slide 36: Spine Business Strategy
New products (e.g. Dynesys) Leverage MIS programs Increase salesforce Merge disc / nucleus discovery Invest in biologics Spine Business Strategy Full Range of Spinal Products Interbody Fusion Cages Instruments - rods, screws, plates, hooks Allograft and Bone Materials Artificial Disc and Nucleus 200
Slide 37: Zimmer and Centerpulse = Leadership
Zimmer and Centerpulse = Leadership Product Sales and Market Share Disease "Continuum of Care" Geographic Sales and Market Share Future Technology Investments ? ? ?
Slide 38: Combined Sales by Geographic Area
Combined Sales by Geographic Area ($ in Millions) Americas Europe Asia- Pacific North America Europe ROW Americas Europe ROW (1) Represents sales from continuing operations. Note: Combined Americas includes Americas sales for Zimmer and North America revenue for Centerpulse. Combined ROW includes As
Slide 39: Provides Leadership in Each Major Geographic Market
Provides Leadership in Each Major Geographic Market #2 in Asia-Pacific / ROW #1 in Japan #1 in Europe #1 in North America / #1 in U.S. ($ in Millions) Note: Zimmer defines reconstructive as hips, knees, shoulders, elbows and dental markets. Source: Company annual filings, Wall Street equity research
Slide 40: Zimmer and Centerpulse = Leadership
Zimmer and Centerpulse = Leadership Product Sales and Market Share Disease "Continuum of Care" Geographic Sales and Market Share Future Technology Investments ? ? ? ?
Slide 41: Combined R&D Commitment to Future Technologies
Combined R&D Commitment to Future Technologies Transformational implants and techniques Co-develop imaging and guidance tools Metrology and Tribology Orthopaedic biologics Zimmer + Centerpulse R&D ($ in Millions) 2002 R&D as % of Sales (1) Centerpulse data for continuing operations. (1)
Slide 42: Combined Portfolio of Future Technologies
Combined Portfolio of Future Technologies Zimmer Centerpulse
Slide 43: Zimmer Financials
Zimmer Financials Sam Leno Senior Vice President & CFO
Slide 44: Zimmer Statement of Earnings - 2nd Quarter 2003
Zimmer Statement of Earnings* - 2nd Quarter 2003 ($ in Millions, except EPS) Record leveraged earnings through profitable sales growth * 2003 excludes cumulative adjustment and 2002 adjusted for the accounting principle change for instruments
Slide 45: Zimmer - 2nd Quarter 2003 Growth at a Glance
Zimmer - 2nd Quarter 2003 Growth* At a Glance "Waterfall effect" sales to earnings performance 16% * 2003 excludes cumulative adjustment and 2002 adjusted for the accounting principle change for instruments 16% 15%
Slide 46: Zimmer Delivers Strong Free Cash Flow
Zimmer Delivers Strong Free Cash Flow Debt Balance Trends - Since Spin-off ($ in Millions)
Slide 47: DSO Year End 2002 - Industry Best
DSO Year End 2002 - Industry Best ddso 31 52 80 U.S. Global 31 52 80 Best in class DSO Days
Slide 48: DOH Year End 2002 - Industry Best
DOH Year End 2002 - Industry Best ddso 247 286 247 287 Best in class inventory management Days
Slide 49: Zimmer Stock Price Performance vs. Indices
Zimmer Stock Price Performance vs. Indices Zimmer's relative growth exceeds peers by 3.5x. (BMET, SNN, SYK)
Slide 50: Combined Financial Highlights
Combined Financial Highlights $2.2 billion 2002 sales and EBITDA margin of 30+% Accretive to 2004 First Call EPS ($1.91 on May 18) Without synergies and one time charges Projected to be debt free by end of 2006 $70 to $90 million of annual pre-tax synergies by year three Synergies execution and othe
Slide 51: Projected Timetable
Projected Timetable May 20: Pre-announcement of offers for Centerpulse and InCentive Capital June 19: Formal launch of offers August 27: Offer period expired August 28: Announced minimum shares required achieved Mid September: Additional acceptance period October 1 (approx.): Close
Slide 52: Synergies
Synergies ($ in millions) Estimate (full year) As % of ZMH & CEP Actions COGS $25 - 30 4 - 5% Increased capacity utilization Insource forgings and castings High speed axis mills and robotic polishing Selling 5 1 Sales administration Sales training Marketing /Distribution 10 - 15 4 - 6 Meeting and co
Slide 53: Synergies - $'s and Timing
Synergies - $'s and Timing 2004 2005 2006 2007 2008 Sales Dis-Synergies $ (50) $ (25) - - - Op Profit from Sales Dis-Synergies (20) (10) - - - Expense synergies: COGS 2 8 30 30 30 R&D 6 15 15 15 15 Selling 2 5 5 5 5 Marketing and Distribution 3 15 15 15 15 G & A 8 23 25 25 25 Total Expense Synergies
Slide 54: Transaction Fees and Integration Costs
Transaction Fees and Integration Costs Transaction fees $120 Debt financing costs Advisory and professional fees Break-up fees Change of control Integration costs $160 Retention payments Employee termination Lease termination IT integration Sales training and integration mtgs Re-branding Purchase ac
Slide 55: Perceived Risk - Stability of Sales Base
Perceived Risk 1 - Stability of Sales Base Focus on Distributors Retain distributors Individual meetings "Best Athlete" approach Phase out period for non-competing lines Focus on Sales Reps Zimmer's goal is 100% retention Centerpulse rep are analogous to Zimmer reps Broader product portfolio Retenti
Slide 56: Perceived Risk - Employee Retention
Perceived Risk 2 - Employee Retention Minimize voluntary turnover Retention pay "All employee" meetings and communication strategy "Best Athlete" selection process at all levels Participation in developing and executing integration plan Speedy implementation Monitor integration plan, execution and t
Slide 57: Perceived Risk - Zimmer Acquisition and Integration Experience
Perceived Risk 3 - Zimmer Acquisition and Integration Experience 5 acquisitions in excess of $500 mm market value 7 acquisitions between $100 and $500 million market value Over 200 total acquisitions, divestitures and J.V's, many of which in healthcare 20 cross-border acquisitions in Germany, France
Slide 58: Strong Combined Credit Profile
Strong Combined Credit Profile Projected statistics consistent with investment grade credit Estimated at Closing (9/30/03) Debt / Book Capitalization 36.0% Debt / EBITDA 1.9x Net Debt / EBITDA 1.7x EBITDA / Interest 13.1x FFO / Debt 37.7% Ratings: S&P = BBB Moodys = Baa3
Slide 59: Thank You
Thank You Thank You
Zimmer Holdings — Merger or Acquisition (September 2003) on 6ix