Avanos Medical, Inc. · NYSE:AVNS
Avanos Medical — Halyard Health — Investor Presentation (October 2014)
34 slides from Avanos Medical's investor presentation, Oct 21, 2014
Slide 1: Halyard Health Investor Presentation
Exhibit 99.1 Halyard Health Investor Presentation
Slide 2: Legal Disclaimer
Legal Disclaimer PRELIMINARY FINANCIAL RESULTS This presentation contains Halyard Health’s preliminary financial results for the quarter ended September 30, 2014. This financial information is preliminary and subject to completion of quarter-end financial reporting processes and review. FORWARD-LOOK
Slide 3: Legal Disclaimer (Continued)
Legal Disclaimer (Continued) BASIS OF PRESENTATION The information included in this presentation about Halyard Health assumes the completion of the transfer by Kimberly-Clark of its health care business to the Company and the spin-off of Halyard Health. Halyard Health’s historical financial data pre
Slide 4: Transaction Overview
Transaction Overview Spin-off Overview and Timing Considerations Company Halyard Health, Inc. Ticker (When-Issued) HYH-WI Ticker (Regular Way) HYH st When-Issued Trading Begins Tuesday, October 21 rd Record Date Thursday, October 23 st Spin Effective / Distribution Date Friday, October 31 Distributi
Slide 5: Today's Presenters and Halyard Representatives
Today’s Presenters and Halyard Representatives Robert Abernathy Christopher Lowery Steven Voskuil David Crawford Chairman & SVP & Chief Operating Officer SVP & Chief Financial Officer VP Treasurer, FP&A and Chief Executive Officer Investor Relations 20+ years in 20+ years of healthcare 20+ years of
Slide 6: Compelling Investment Opportunity
Compelling Investment Opportunity 1 Diverse Business with Leading Positions 2 Global Manufacturing and Sales Organization 3 Strategic Focus Shifts to Medical Devices 4 Significant Cash Flow Generation to Fund Opportunistic Acquisitions and to Drive Total Shareholder Return 5 Proven and Experienced M
Slide 7: Over 30 Years of Innovation in Medical Products
Over 30 Years of Innovation in Medical Products Founded health care business in the late 1970s with a focus on products 1970 leveraging Kimberly-Clark’s patented, innovative nonwovens technology providing protection from liquids, while remaining breathable 1976 Introduced Kimguard Sterilization Wrap
Slide 8: Spin-off Benefits and Rationale
Spin-off Benefits and Rationale Spin-off Creates a Diversified, Global Med Tech Company with a Growing Medical Device Platform Enables Halyard to pursue its own distinct strategies and operating priorities, Strategic which have diverged over time from those of Kimberly-Clark Health Care Focus Allows
Slide 9: Halyard's Strategic Vision
Halyard’s Strategic Vision Traditional S&IP Focus Has ...Which We Expect to Enable Created a Stable and Reliable Halyard to Grow Medical Devices Platform with Significant and Transform the Portfolio Cash Flow... Over Time 9
Slide 10: Halyard Health Overview – Diverse Business with Leading Positions
1 Halyard Health Overview – Diverse Business with Leading Positions Halyard is a global, market-leading company that addresses some of today’s most important health and healthcare needs, offering products and solutions to prevent infection, eliminate pain and speed recovery across the healthcare con
Slide 11: Surgical & Infection Prevention Overview
1 Surgical & Infection Prevention Overview Overview Key Highlights and Strategy The S&IP segment offers products to help prevent health 30-year track record — market leadership positions care-acquired infections (HAIs) and provide protection for both healthcare workers and patients across product po
Slide 12: Diversified S&IP Product Portfolio with Leading Brands
1 Diversified S&IP Product Portfolio with Leading Brands KIMGUARD Sterilization Wraps QUICK CHECK SMART-FOLD AERO BLUE Surgical Drapes & Gowns MICROCOOL TECNOL Facial Protection FLUIDSHIELD CONTROL Protective Apparel SPUNCARE SAFESKIN LAVENDER Medical Exam Gloves STERLING PURPLE NITRILE 12
Slide 13: Medical Device Overview
1 Medical Device Overview Overview Key Highlights and Strategy Medical Device segment focused on four therapeutic areas: Leading market positions in pain, respiratory and digestive Surgical Pain Management health Interventional Pain Management Respiratory Health Invest for growth – both organic and
Slide 14: Portfolio of Innovative Medical Devices
1 Portfolio of Innovative Medical Devices ON-Q Surgical Pain HOMEPUMP Management ECHOBRIGHT COOLIEF Interventional Pain TRANSDISCAL Management SINERGY BALLARD Respiratory Health MICROCUFF TRACH CARE MIC-KEY Digestive Health MIC MIC-KEY SF 14
Slide 15: Global Commercial Infrastructure with Efficient Footprint and Direct Sales Force
Global Commercial Infrastructure with Efficient Footprint 2 and Effective Direct Sales Force Global commercial infrastructure drives cost efficiencies, enables innovation and strategically positions Halyard for growth in new markets Products sold in 100+ countries Well-recognized sales force of appr
Slide 16: Strategic Focus – Shift Towards Medical Devices Portfolio
3 Strategic Focus –Shift Towards Medical Devices Portfolio Focused Execution to Accelerate Portfolio Growth of Medical Devices Position For Successful spin execution and retirement of spin-related costs Success Focus on efficiency / effectiveness of stand-alone operations, including commercial (spin
Slide 17: Increased R&D Investment
3 Increased R&D Investment Doubling R&D Investment over Time to Drive Profitable Growth and Margins Incremental S&IP R&D to maintain current leadership Accelerated spending on R&D within our Medical Devices segment, particularly pain management Increased spending on new adjacent medical device produ
Slide 18: Disciplined Approach to Complementary Medical Devices M&A
Disciplined Approach to Complementary Medical 3 Devices M&A Focus on complementary acquisitions within adjacent therapeutic areas to our existing Medical Devices segment Viewed through disciplined lens with delineated growth, margin and return on invested capital targets As part of Kimberly-Clark, e
Slide 19: Significant Cash Flow Generation to Fund Acquisitions and Drive TSR
Significant Cash Flow Generation to Fund Opportunistic 4 Acquisitions and Drive Total Shareholder Return Strong cash flow expected following retirement of spin-related costs and as Halyard efficiencies increase Capital spending post-spin expected to be less than 3% of net sales Cash available to fun
Slide 20: Proven and Experienced Management Team
5 Proven and Experienced Management Team Proven ability to drive value through growing global businesses, expanding into ancillary markets and integrating complementary platform acquisitions Years of leadership and operational experience from prior roles at Kimberly-Clark Supported by years of diver
Slide 21: Compelling Investment Opportunity
Compelling Investment Opportunity 1 Diverse Business with Leading Positions 2 Global Manufacturing and Sales Organization 3 Strategic Focus Shifts to Medical Devices 4 Significant Cash Flow Generation to Fund Opportunistic Acquisitions and to Drive Total Shareholder Return 5 Proven and Experienced M
Slide 22: Financial Review
FINANCIAL REVIE @ HALYARD
Slide 23: Financial Overview
Financial Overview Strong, Diversified Cash Flow Well-capitalized with Financial Flexibility Limited Need for Capital Expenditures Disciplined Approach to Cash Deployment with a Focus on Total Shareholder Return Near-term Focus on Elimination of TSAs and Other Transactional Costs Leverage Heritage o
Slide 24: Halyard Capitalization
Halyard Capitalization Capital Structure Assures Flexibility to Fund Growth Halyard expects $640MM of aggregate principal amount of debt at spin-off $390MM senior secured term loan facility due 2021 (L+325 floating rate, 0.75% LIBOR floor) $250MM senior unsecured notes due 2022 (6.250% coupon) close
Slide 25: Halyard Stand-Alone and Transitional Costs
Halyard Stand-Alone and Transitional Costs Excludes $100-$125MM of pre-spin costs • Information Technology • Transition Service • Finance Agreements • Human Resources • Branding • Decreased Purchasing • Royalties • Incremental D&A Scale Expense • Start Up 40 • Stranded Facility Costs • Reduced Relat
Slide 26: Historical Segment Performance
Historical Segment Performance (1) Net Sales FYE 12/31 ($MM) 2,000 1,640 1,663 1,652 1,639 1,500 452 478 499 506 1,000 500 1,188 1,185 1,153 1,133 0 2011A 2012A 2013A LTM 9/30/14A Surgical & Infection Prevention Medical Devices Adj. EBITDA FYE 12/31 ($MM) 340 (2) 313 286 (2) 295 (2) 290 262 240 190
Slide 27: September 30, 2014 YTD Pro Forma Financial Performance
September 30, 2014 YTD Pro Forma Financial Performance September 30, 2014 YTD Pro Forma Financial Performance and Commentary Pro Forma (1) Pro Forma Adjusted EBITDA up 13% driven by: Nine Months Ended ($MM) 9/30/2013 9/30/2014 Reduced SG&A (on a normalized basis): S&IP 860.1 840.2 Patent infringemen
Slide 28: Q3 2014 Pro Forma Financial Performance
Q3 2014 Pro Forma Financial Performance Q3 2014 Pro Forma Financial Performance and Commentary Pro Forma (1) Difficult comparison to prior year; second highest Three Months Ended ($MM) quarter ever 9/30/2013 9/30/2014 S&IP 287.0 279.2 Q3 2013 Pro Forma Adjusted EBITDA was Medical Devices 126.2 122.5
Slide 29: Halyard's Long-Term Financial Objectives
Halyard’s Long-Term Financial Objectives Today (1) Longer Term Goals (2) Portfolio optimized for higher growth Organic Revenue <1% Improving growth rate especially in higher margin Growth categories Organic Adjusted Earnings growth driven by margin expansion <3% Earnings Growth Growth in higher marg
Slide 30: Focus on Total Shareholder Return
Focus on Total Shareholder Return Focus on Key Long-Term Drivers of Total Shareholder Return Maintain balance sheet flexibility and focus on working capital efficiency Disciplined growth funding Capital spending Research and development Mergers and acquisitions Infrastructure efficiency Continued fo
Slide 31: Appendix
APPENDIX
Slide 32: Net Income to Pro Forma Adjusted EBITDA Reconciliation
Halyard Health Net Income to Pro Forma Adjusted EBITDA Reconciliation Unaudited Three Months Ended Nine Months Ended ($MM) 9/30/2013 9/30/2014 9/30/2013 9/30/2014 Net Sales 419.5 408.5 1,246.2 1,232.7 Related Party Sales (1) (6.3) (6.8) (19.3) (19.0) Pro Forma Net Sales 413.2 401.7 1,226.9 1,213.7 O
Slide 33: Net Income to Pro Forma Adjusted EBITDA Reconciliation (Continued)
Halyard Health Net Income to Pro Forma Adjusted EBITDA Reconciliation (Continued) Unaudited Combined Pro Forma Less 9 Add 9 LTM LTM ($MM) FY 2011 FY 2012 FY 2013 Months Months Sept. 30, Sept. 30, (2013) (2014) 2014 2014 (11) Net Income 142.4 152.6 154.6 114.8 29.5 69.3 78.3 Provision for Income Taxe
Slide 34: Reconciliation (Supporting Footnotes)
Halyard Health Net Income to Pro Forma Adjusted EBITDA Reconciliation (Supporting Footnotes) 1. Reflects an adjustment to eliminate related party sales associated with certain feminine care products manufactured by Halyard for Kimberly-Clark that will not continue after the distribution. This adjust
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