Cardinal Health, Inc. · NYSE:CAH
Cardinal Health — Investor Day (June 2009)
124 slides from Cardinal Health's investor day presentation, Jun 2, 2009
Slide 1: Analyst / Investor Day Meetings
Cardinal Health, Inc. Analyst / Investor Day Meetings Exhibit 99.1 Sally J. Curley Senior Vice President, Investor Relations June 2, 2009
Slide 2: Forward-looking information
Forward-looking information The following presentations contain forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. These matters are subject to risks and uncertainties that could cause actual results to di
Slide 3: Welcome
Welcome R. Kerry Clark Chairman and CEO June 2, 2009
Slide 4: Launching two exciting businesses
Launching two exciting businesses Timeline target : Summer 2009
Slide 5: Spinoff rationale
Spinoff rationale • New Cardinal Health and CareFusion are very different businesses - Products - Channels - Geographic footprint • Sharper strategic focus • CareFusion can stand on its own • Should deliver maximum value to our customers and shareholders over time
Slide 6: Conditions and governance
Conditions and governance • Contingent upon – SEC declaring the Form 10 effective – IRS ruling on tax-free nature of transaction – Obtaining investment-grade credit ratings – Completion of necessary financing • Governance – New Boards of Directors in place at spinoff
Slide 7: Financial reporting
Financial reporting • As of July 1, will begin functioning as separate entities in anticipation of spinoff completion • Each entity’s reported results reflecting future company structure down to operating earnings, rolled up for total Cardinal Health picture – New Cardinal Health • Pharmaceutical •
Slide 8: Introductions
George Barrett Current: CEO, HSCS, Cardinal Health, Inc. Post-spinoff: Chairman and CEO, New Cardinal Health Dave Schlotterbeck Current: CEO, CMP, Cardinal Health, Inc. Post-spinoff: Chairman and CEO, CareFusion Corporation Jeff Henderson Chief Financial Officer, Cardinal Health, Inc. Post-spinoff:
Slide 9: Full day agenda
Full day agenda All times are eastern 8:00 a.m. Welcome and agenda Sally Curley, Kerry Clark 8:15 a.m. Spinoff financial details Jeff Henderson 8:30 a.m. New Cardinal Health George Barrett, Jeff Henderson, Mike Kaufmann, Mike Lynch 12:00 p.m. Lunch and healthcare reform update Connie Woodburn 1:15 p
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Slide 12: Spinoff overview
Spinoff overview Jeff Henderson Chief Financial Officer Cardinal Health June 2, 2009
Slide 13: Spinoff
Spinoff • Capital structure • Transaction overview • CareFusion and New Cardinal Health financial crosswalks • Spinoff costs and negative synergies • Go-forward reporting
Slide 14: Capital structure
Cardinal Health Cash: ~$1.7B Debt: ~$3.7B A/R Facility: $850M Credit Revolver: $1.5B Rating: BBB+/Baa2; A2/P2 Capital structure Cash: ~$650M Debt: ~$1.4B Credit Revolver: $500M Expected Rating: Investment grade New Cardinal Health Cash: ~$1B Debt: ~$2.1B A/R Facility: $950M Credit Revolver: $1.5B CF
Slide 15: Transaction overview
Transaction overview 1 Cardinal Health CareFusion Bondholders Cardinal Health Bondholders 1 : CFN borrows $1.4B against bridge loan to pay distribution to CAH 2 : CFN declares and pays $1.4B distribution to CAH 3 : CAH uses proceeds of CFN $1.4B distribution to tender for and retire debt 4 : CFN iss
Slide 16: Crosswalk CareFusion Corporation (CFN)
Crosswalk CareFusion Corporation (CFN) 1 Revenue ($M) 3,410 69 (667) 2,812 Gross margin ($M) 1,507 8 (165) 1,350 SG&A ($M) 871 8 (71) 809 Operating earnings ($M) 460 (0.4) (89) 370 Interest expense and other, net ($M) 83 (15) 39 107 Royalty (income) and other, net received from parent ($M) (194) 194
Slide 17: Crosswalk New Cardinal Health (nCAH)
Crosswalk New Cardinal Health (nCAH) Revenue ($M) 74,385 (2,743) 71,642 Gross margin ($M) 4,183 (1,357) 2,826 SG&A ($M) 2,584 (867) 1,717 Operating earnings ($M) 1,461 (434) 71 11 1,108 2 Diluted EPS from continuing operations $2.44 $(0.83) $0.14 $(0.05) $1.70 2 FY09 YTD As reported Discontinued ope
Slide 18: Estimated one-time spinoff cost details
Estimated one-time spinoff cost details Pre-Tax cash expenses CAH $109 $47 CFN $60 $53 Pre-tax non-cash charges CAH $33 $6 CFN – $1 Tax charges $152 – ($M) Through spin date Post-spin
Slide 19: Estimated negative synergies
Estimated negative synergies Driven by: • Functional duplication • De-leveraging shared services • Additional depreciation CFN 30 31 32 nCAH – 17 29 Incremental cost to FY09 pro forma Operating expense ($M) FY10 FY11 FY12
Slide 20: Go-forward reporting (FY10 pre-spin)
Go-forward reporting (FY10 pre-spin) Consolidated Sector Segment (Operating earnings) (P&L, balance sheet, and cash flow) (Segment profit) nCAH Pharma Medical CAH CFN Critical Care Medical Technologies
Slide 21: Summary
Summary • Spin transaction is on track • Target completion: Summer 2009 • We expect to be ready to go once transaction conditions are met • On July 1, will begin to function as separate companies in anticipation of spinoff completion
Slide 22: Strategic foundations for the New Cardinal Health
Strategic foundations for the New Cardinal Health George Barrett Post-spinoff: Chairman and CEO June 2, 2009
Slide 23: New Cardinal Health agenda
8:30 a.m. New Cardinal Health George Barrett, Post-spinoff: Chairman and CEO 9:05 a.m. Financial overview Jeff Henderson, Chief Financial Officer 9:30 a.m. Break 9:45 a.m. Pharmaceutical Segment Mike Kaufmann, Chief Executive Officer, Pharmaceutical Segment 10:25 a.m. Medical Segment Mike Lynch, Chi
Slide 24: Strategic foundations
Strategic foundations • Critical role in healthcare • Three pillar strategy for the future • What to expect going forward • New Cardinal Health
Slide 25: Why new Cardinal Health?
Why new Cardinal Health? Well positioned to deliver healthcare solutions in most cost-effective manner while maintaining product integrity Balanced business model focused on delivering healthcare products and services Experienced team with diverse healthcare backgrounds leading one of largest health
Slide 26: Profile of a leader
Profile of a leader Revenue * Employees Countries with direct operations Customers >$94B ~30K 11 >50K Operating earnings * ~$1.5B *Pro forma Cardinal Health non-GAAP revenue and operating earnings, trailing 12 months ended March 31, 2009. See Cardinal Health appendix for more information regarding C
Slide 27: What's new about Cardinal Health?
What’s new about Cardinal Health? • Experienced management team with renewed focus on the core • Reinvigorated culture • Capital deployment strategy • Streamlined portfolio management
Slide 28: New Cardinal Health – Who we are
New Cardinal Health – Who we are George Barrett Chairman and CEO Jeff Henderson Chief Financial Officer Mike Kaufmann CEO, Pharmaceutical Segment Mike Lynch CEO, Medical Segment Shelley Bird EVP, Public Affairs Craig Morford Chief Legal and Compliance Officer Mark Rosenbaum Chief Customer Officer Ca
Slide 29: Our mission
Our mission We make healthcare more cost-effective so our customers can focus on their patients Our Customers Patients • Customers are facing enormous pressures to reduce costs and improve performance • We reduce the costs of care through our sourcing, supply chain efficiencies, reduction of errors
Slide 30: Strategic foundations
Strategic foundations • New Cardinal Health • Three pillar strategy for the future • What to expect going forward • Critical role in healthcare
Slide 31: Healthcare costs are rising at an alarming rate
• Up to 66 million Americans could be uninsured by 2019 unless healthcare reform is enacted¹ • Businesses could see their healthcare costs double within 10 years¹ • 64.4 million, or 1 in 4 non-elderly Americans, are in families that will spend >10 percent of pre-tax income on healthcare this year² •
Slide 32: Positioned on the right side of healthcare evolution
Positioned on the right side of healthcare evolution • Slow growth rate of costs • Comparative effectiveness research Quality issues Fragmented system Rising costs Increasing number of uninsured and underinsured Role of New Cardinal Health • Efficient, low cost partner • Solutions for increased cust
Slide 33: At the intersection of the evolving healthcare system
At the intersection of the evolving healthcare system Ambulatory Care • Clinic • Physician office • Home care provider • Long-term care • Surgery center Retail • Pharmacy • Mail service • In-store clinic Acute Care • Hospital • Laboratory
Slide 34: Critical role in a complex system
Critical role in a complex system • Distribution • Inventory management • Logistics support • Product selection • Financial transactions • Risk management • Patient safety • Pharmacy management • Quality and integrity Ambulatory Care Retail Acute Care
Slide 35: Delivering value to major stakeholders
Delivering value to major stakeholders Role of New Cardinal Health • Improve efficiency, eliminate waste, enable scale and manage risk • Most efficient link to end- users, manage risk, smooth volatility, drive share • Drive usage of cost effective solutions, ensure safety / integrity • Improved econ
Slide 36: Two strong segments
Two strong segments • Pharmaceutical distribution • Manufacturer and specialty services • Nuclear and pharmacy services Key Activities • Medical product distribution • Lab product distribution • Infection prevention products Segment Balanced portfolio of products and services playing a critical role
Slide 37: Strategic foundations
Strategic foundations • New Cardinal Health • Critical role in healthcare • What to expect going forward • Three pillar strategy for the future
Slide 38: Strategic direction for New Cardinal Health
Strategic direction for New Cardinal Health • Deliver exceptional customer service • Strengthen our competitive advantage in supply chain and sourcing • Focus our business portfolio and build scale Explore: • Related healthcare segments • Strategic M&A and partnerships • Opportunities outside U.S. a
Slide 39: Strengthen the core: progress in the past year
Strengthen the core Progress in the past year • Delivering FY09 HSCS financial goals • Refocus on customer retention and loyalty • Stabilize pharmaceutical segment – Solidify management team – Controlled drug licenses restored – Strengthen relationship with retail independents • Elevate focus on and
Slide 40: Strengthen the core: continued emphasis
Strengthen the core Continued emphasis on the core • Significant progress ongoing – Simplify how we do business – Invest in productivity (IT and OpEx) – Medical transformation • Major initiatives underway – Inventory management / new stocking strategies – Further enhance Medical sourcing model – Fur
Slide 41: Strengthen the core: portfolio management
Strengthen the core Portfolio management • Reposition Medicine Shoppe International • Divest Martindale (UK business) • Divest SpecialtyScripts pharmacy, but committed to specialty distribution
Slide 42: Expand into adjacencies
Expand into adjacencies Maximize our core competencies • Accelerate private label growth in Medical • Innovations in operating room • Expand Positron Emission Tomography (PET) • Scale specialty distribution • Expansion outside of acute care setting
Slide 43: Build new growth platforms
Build new growth platforms Future growth opportunities Explore: • Clinically-oriented products and services • Information-enabled strategies • Targeted international expansion
Slide 44: Strategic foundations
Strategic foundations • New Cardinal Health • Critical role in healthcare • Three pillar strategy for the future • What to expect going forward
Slide 45: Near-term considerations
Near-term considerations • Completing the transition in FY10 • Short-term market factors create headwinds – Generic launch cycles – Impact of economy on procedure-based channels • Important contract renewal • DSA timing • Continued investment to further strengthen the core – Medical transformation –
Slide 46: Three-year outlook
Three-year outlook Regaining momentum in FY11 • Pharmaceutical will regain positive growth trajectory • Medical will grow faster, creating an even more balanced business model • Non-GAAP EPS past FY10, growing at high single digit rate Close expense control with a focus on margins and balance sheet
Slide 47: Positive momentum
Positive momentum • Attractive industry: sustained demand growth • Focused on critical issue for the industry: cost-effectiveness • Stabilized organization and investing in its future • Increasingly balanced business model • Attractive capital deployment Solid cash-generating businesses with trends
Slide 48: Why new Cardinal Health?
Why new Cardinal Health? Well positioned to deliver healthcare solutions in most cost-effective manner while maintaining product integrity Balanced business model focused on delivering healthcare products and services Experienced team with diverse healthcare backgrounds leading one of largest health
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Slide 51: New Cardinal Health: Disciplined financial management
New Cardinal Health: Disciplined financial management Jeff Henderson Chief Financial Officer Cardinal Health June 2, 2009
Slide 52: Agenda
Agenda • Three-year financial outlook • Focus on shareholder return • Driving financial discipline
Slide 53: Success requires exceptional financial discipline
Success at Cardinal Health requires exceptional financial discipline Key focus area Simplifying the portfolio • Ongoing, disciplined portfolio reviews • Resource focus • Account profitability management • Active compliance monitoring • Selective capital investment to drive differentiation • Focus on
Slide 54: Reshaping and simplifying portfolio
Reshaping and simplifying portfolio Pre-Spin (2005-2009) • Pharma Distribution • Medical Supply • UK Pharma Dist. • Pharmacy Services • Nuclear Pharmacy • Medicine Shoppe • Martindale • Kitting (Presource™) • Contract Sales and Marketing • Pharmacy Staffing • Specialty Pharmacy • Gloves/Convertors/
Slide 55: Simplified reporting
Simplified reporting Pharmaceutical Segment Medical Segment FY10(E) Pro Forma Segment Profit Contribution 2 FY05 Segment Profit Contribution as Originally Reported 1 PDPS MPS CTS PTS CTS – Clinical Technologies and Services; MPS – Medical Products and Services; PTS – Pharmaceutical Technologies and
Slide 56: Strengthen the core: key financial metrics
Strengthen the core Key financial metrics Total shareholder return Segment profit margin Net working capital days Return on tangible capital Operating cash flow
Slide 57: Driving efficient capital management
FY09E FY10E FY11E FY12E Strengthen the core Driving efficient capital management 15 0 Net Working Capital Days 1 Net working capital days reflects the estimated impact of CareFusion as Discontinued Operations in the period presented. See Cardinal Health Appendix for further explanation of the pro fo
Slide 58: Strong operating cash flow generation
FY09E FY10E FY11E FY12E Strengthen the core Strong operating cash flow generation $1.3B 0 Operating Cash Flow 1 Operating cash flow from continuing operations reflects the estimated impact of CareFusion as Discontinued Operations in the period presented. See Cardinal Health Appendix for further expl
Slide 59: Agenda
Agenda • Driving financial discipline • Focus on shareholder return • Three-year financial outlook
Slide 60: Entering FY10 with strong balance sheet
Entering FY10 with strong balance sheet • Total debt (after post-spin debt retirement): ~$2.1B • Cash position: ~$1.0B • Accounts receivable facility: $950M • Bank credit revolver: $1.5B (thru Jan FY12) • <20% CFN equity stake • Committed to maintaining investment grade ratings
Slide 61: FY10 headwinds expected to subside in FY11
FY10 headwinds expected to subside in FY11 Generic launches Pricing/customer renewals Medical cost of goods DSA transition timing Portfolio repositioning Sourcing models Medical Supply Chain Ambulatory care Customer ordering systems Est. FY11 and FY12 Market factors Strategic positioning decisions T
Slide 62: Organic investment for the future
Organic investment for the future $300M 0 Capital Expenditures 1 FY09E FY10E FY11E FY12E Estimated capital expenditures for Cardinal Health excluding CareFusion. I/T Other
Slide 63: FY10 outlook
FY10 outlook • A year of transition and investment • Continued strong cash flow generation • Investing in capex and increasing dividend • Growth in M segment despite increased investment • Dealing with headwinds in P while preparing for the future
Slide 64: Earnings per share growth returns in FY11
FY09E FY10E FY11E FY12E Earnings per share 1 growth returns in FY11 Pro forma non-GAAP diluted earnings per share from continuing operations reflects the estimated impact of CareFusion as Discontinued Operations in the period presented. See Cardinal Health Appendix for further explanation of the pro
Slide 65: Agenda
Agenda • Driving financial discipline • Three-year financial outlook • Focus on shareholder return
Slide 66: Focus on shareholder return
Margin expansion Focus on shareholder return Return capital to shareholders Working capital management Strong OCF and investment grade credit
Slide 67: Strong track record of disciplined capital deployment
60% 4% 25% 11% Capital expenditures Acqusitions Dividends Share repurchases OCF Divestitures Increased Leverage Strong track record of disciplined capital deployment Source of cash Deployment $11.5B total FY05-FY08 $11.6B total
Slide 68: History of increasing dividend returns
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 FY04 FY05 FY06 FY07 FY08 0 50 100 150 200 250 History of increasing dividend returns, supplemented by share repurchases Dividends Share repurchases* *Share repurchase program suspended in FY09 due to spinoff $M $M
Slide 69: Capital deployment will differentiate New Cardinal Health
Capital deployment will differentiate New Cardinal Health • 25-30% of OCF for organic growth and strengthening the core through high-impact capital investments • Tuck-in M&A activity • Opportunistic share buybacks, primarily focused on offsetting equity program issuances in near-term Meaningful and
Slide 70: Significantly increasing dividend payout
FY04 FY05 FY06 FY07 FY08 FY09 YTD FY09 pro forma Significantly increasing dividend payout 1 31% 4% 5% 10% 7% 13% 17% Historical 20% target Pro forma payout ratio reflects the anticipated dividend per share post spinoff of $0.175 cents per share per quarter divided by the mid-point of the FY09 pro fo
Slide 71: In summary
In summary We have a clear financial focus • Superior execution against stated goals and delivering on key metrics • Relentless focus on cost and capital efficiency • Strengthening our core capabilities and building stronger foundation for future growth • Strong external focus on maximizing sharehol
Slide 72: Pharmaceutical Segment
Pharmaceutical Segment Mike Kaufmann Chief Executive Officer Pharmaceutical Segment June 2, 2009
Slide 73: Agenda
Agenda • Business today and profit drivers – Nuclear and Pharmacy Services – Manufacturer and Specialty Services – Pharmaceutical Distribution • Outlook and summary • Overall segment view
Slide 74: Pharmaceutical Segment today
Pharmaceutical Segment today >$85B Revenue 1 Segment profit 1 SKUs Distribution centers Nuclear pharmacies >$1B >50k 25 ~160 Pro forma revenue and segment profit, trailing 12 months ended March 31, 2009. See Cardinal Health appendix for more information regarding Cardinal Health pro forma financial
Slide 75: At the intersection of the evolving healthcare system
At the intersection of the evolving healthcare system Ambulatory Care • Pharmaceutical Distribution • Nuclear and Pharmacy Services • Manufacturer and Specialty Services Retail • Pharmaceutical Distribution Acute Care • Pharmaceutical Distribution • Nuclear and Pharmacy Services • Manufacturer and S
Slide 76: Pharmaceutical Segment
Pharmaceutical Segment Nuclear and Pharmacy Services Manufacturer and Specialty Services Pharmaceutical Distribution
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Slide 78: Nuclear Pharmacy Services – Industry leader
Nuclear and Pharmacy Services Nuclear Pharmacy Services – Industry leader • Successfully release lower-cost generic this summer • Optimize customer operations with new management software • Capture increased use of diagnostic imaging studies Profit drivers: • Leader in industry and growing : can rea
Slide 79: Positron Emission Tomography (PET) – Growing
Nuclear and Pharmacy Services Positron Emission Tomography (PET) – Growing • Acquire tuck-in to build national footprint • Deepen collaboration with key universities • Become integral part of clinical trial design for biopharma Profit drivers: • A leading U.S. player in number of cyclotrons and dose
Slide 80: Pharmacy Solutions – Re-positioning
Nuclear and Pharmacy Services Pharmacy Solutions – Re-positioning • Re-energize and re-position the business • Expand service footprint • Implement formulary management in pharmacies Profit drivers: • Leader in pharmacy management, outsourcing services and formulary management • Fast growing R x e-s
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Slide 82: Manufacturer and Specialty Services – Bringing focus
Manufacturer and Specialty Services – Bringing focus • Create a differentiated model • Drive synergy among the businesses • Build-out capabilities Profit drivers: • Key player in third - party logistics , representing over 60 supplier partners • Significant presence in plasma/specialty distribution
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Slide 84: Pharmaceutical distribution – Our position
Pharmaceutical Distribution Pharmaceutical distribution – Our position Leading Distributor to national retail chains Distributor to acute-care facilities Footprint in Puerto Rico Generic telesales Logistics network Leading Leading Increasing Differentiated
Slide 85: Customers
Customers Pharmaceutical Distribution Critical role in the healthcare system Supply Partners Alternate Care Hospital Retail Pharmacy Mail Service Generic Pharma Private Label Brand Pharma HBA/ OTC
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Slide 87: Value delivered to Retail
• Reduced generic acquisition costs – Demand aggregation – Simple program with aligned incentives • Reduced inventories – Best-in-class software and process (Cardinal Inventory Manager) – Daily delivery with high service levels • Reduced back-office costs / administration – Best-in-class third party
Slide 88: Partner with key Retail customers
Pharmaceutical Distribution Partner with key Retail customers
Slide 89: Two Retail Independent brands – Deliver value
Pharmaceutical Distribution Two Retail Independent brands – Deliver value • Streamline operations for improved performance Value: ~$27K profit/average store 1 • Improve payor management for better financial performance Value: ~$95K profit/average store 1 • Create alternative revenue streams for bett
Slide 90: Value delivered to health systems
Pharmaceutical Distribution Value delivered to health systems • Reduced generic acquisition costs – Carve-out portfolios – Back-up portfolios • Reduced acquisition costs – Contract compliance reporting – Sentry 340B software • Reduced labor costs – Packaging options – Delivery to the floor - Cardina
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Slide 92: Value delivered to supplier partners
Pharmaceutical Distribution Value delivered to supplier partners • Transparency – Provide sales and inventory data • Integrity – Buy only from manufacturer • High fill rates – Scripts not delayed or unfilled • Volume – Generic formularies drive volume • Financial stability – Insulation from credit e
Slide 93: A strong business model
Pharmaceutical Distribution A strong business model Breadth Differentiation Integration Execution Experience Knowledge Important player in all classes of trade Equal or superior offers Borschow, ParMed, Dohmen done well Positive in all areas >100 years combined industry experience Strong customer an
Slide 94: Industry dynamics play to our strengths
• Growth – Wholesaler growth has surpassed industry projections – Aligned with key customers – Healthcare reform, demographics and consumerism should drive continued volume and generic utilization • Customer consolidation – Aligned with acquirers • Manufacturer consolidation – Little to no impact on
Slide 95: Key profit drivers
Pharmaceutical Distribution Key profit drivers Improve the customer experience Grow generics Increase sales force effectiveness 1 2 3
Slide 96: 1. Improve the customer experience
Pharmaceutical Distribution 1. Improve the customer experience • Deliver a consistent experience • Develop technology that simplifies their lives • Create value-added programs • Know what each customer values, and deliver it Q3FY08 Q4FY08 Q1FY09 Q2FY09 Q3FY09 Q4FY09 Result: Higher customer retention
Slide 97: 2. Grow generics: Goals for FY10
Goals for FY10 • Increase generic margin rates by >200 basis points • Increase retail independent generic penetration by >10% Result: Expanded margins and increased profitability • Improve our sourcing model and costing • Offer clear value proposition • Deliver best-in-class service levels • Require
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Slide 99: Agenda
Agenda • Overall segment view • Business today and profit drivers – Nuclear and Pharmacy Services – Manufacturer and Specialty Services – Pharmaceutical Distribution • Outlook and summary
Slide 100: Pharmaceutical Segment key metrics
Pharmaceutical Segment key metrics Customer loyalty scores Unadjusted service levels Penetration (% generics) Non-bulk revenue growth Segment profit margin Inventory days
Slide 101: In summary
In summary We have value, focus and a plan to grow • Cost-effective and efficient: Wholesalers are the most cost- effective and efficient way for suppliers and customers to interact. • Focused on the customer: Offers are customized to each customer’s unique needs. Programs and services are best-in-c
Slide 102: Medical Segment
Medical Segment Michael A. Lynch CEO, Medical Segment June 2, 2009
Slide 103: Agenda
Agenda • Industry dynamics • Profit drivers • Outlook and summary • Business today
Slide 104: Medical Segment today
Medical Segment today > $8B Revenue¹ Segment profit¹ SKUs Distribution centers Manufacturing sites >$400M ~300k 49 13 Pro forma revenue and segment profit, trailing 12 months ended March 31, 2009. See Cardinal Health appendix for more information regarding Cardinal Health pro forma financial informa
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Slide 106: Key strengths
1. Scale in each of our channels: hospital, lab, ambulatory, kitting 2. Depth and breadth of capabilities: distribution, sourcing, manufacturing 3. Differentiated portfolio of self-manufactured products 4. Dedicated sales capabilities for different hospital callpoints: C-suite, materials management,
Slide 107: Unmatched channel breadth
Surg. Ctr. 1. Unmatched channel breadth Hospital (U.S.) Clinical Lab Ambulatory Kitting Canada Phys. Office
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Slide 109: Differentiated product portfolio
Esteem ® #1 polyisoprene surgical glove Medi-Vac Guardian canister #1 OR suction canister Tiburon ® Industry-leading surgical drape 3. Differentiated product portfolio
Slide 110: Dedicated sales capabilities
4. Dedicated sales capabilities • Multiple customers/ departments within each hospital • Served by one dedicated account team • With specialist support tailored to each customer/department C-Suite Operating Room Nursing Pharmacy Radiology Lab Central Sterile Materials Management Hospital Customers S
Slide 111: Leadership positions we have today
Leadership positions we have today present great opportunities for the future • Leading distributor of medical products in North America • Leading distributor of supplies to clinical laboratories and surgery centers • Leader in medical procedure kits and surgical packs • Leading positions with self-
Slide 112: Agenda
Agenda • Business today • Profit drivers • Outlook and summary • Industry dynamics
Slide 113: Industry environment plays to our strengths
Industry environment plays to our strengths • Volume will increase as coverage expands • Cost to serve must decrease as current growth rate is not sustainable • Procedures are shifting to ambulatory care settings • Growing importance of diagnostics as a critical aspect of providing quality, cost-eff
Slide 114: Well positioned to meet customer needs
Well positioned to meet customer needs • Scale across channels that supports the development of a low-cost product portfolio • Expertise that helps our customers make their supply chain more efficient and effective • Shared, flexible operating platform that allows us to serve our customers cost effe
Slide 115: Agenda
Agenda • Business today • Industry dynamics • Outlook and summary • Profit drivers
Slide 116: Five key profit drivers
1. Invest in a business transformation that will deliver a best-in-class customer and supplier experience 2. Improve sourcing capabilities to utilize our scale 3. Grow in laboratory/ambulatory care channels 4. Execute new kitting business model 5. Expand our product portfolio – Innovation in OR prod
Slide 117: 1. Customer and supplier experience
1. Customer and supplier experience Q3FY08 Q4FY08 Q1FY09 Q2FY09 Q3FY09 Q4FY09 Medical Segment Customer Loyalty
Slide 118: 2. Sourcing capabilities
2. Sourcing capabilities • Beginning to source across channels – Improved economics – Standardized terms and conditions • Drive more purchasing volume through sourcing capabilities in Asia • We will more aggressively manage product categories across segment – Reducing complexity and cost for our cus
Slide 119: 3. Growth in Ambulatory and Lab
Lab Clinical 6-7% Continue to serve well Life Science 4-6% Future opportunity Ambulatory Surgery Center 6-8% Continue to serve well Home Care 6-7% Future opportunity Long Term Care 1-3% Future opportunity 3. Growth in Ambulatory and Lab Industry Growth Focus Independent 6-8% Priority for expansion P
Slide 120: 4. Execute new kitting business model
4. Execute new kitting business model • Lean transformation to improve speed in meeting changes in customer needs • Driving lower component costs through enhancement of segment’s sourcing capabilities • New business models that better differentiate between customer desire for low-cost, standardized
Slide 121: 5. Expanding our product portfolio
5. Expanding our product portfolio ORwell Differentiated fluid collection and disposal solution Private Label Using our sourcing expertise to offer customers a compelling alternative to current offerings
Slide 122: Agenda
Agenda • Business today • Industry dynamics • Profit drivers • Outlook and summary
Slide 123: Medical Segment key metrics
Customer loyalty scores Private label growth Service levels Return on tangible capital Segment profit margin Medical Segment key metrics
Slide 124: Why we will win
Why we will win • Unmatched channel breadth • Unmatched product depth • Deep capabilities in sourcing and operational excellence • Unrivaled, integrated sales capabilities