Pss World Medical — Investor Day (May 2008)
81 slides from Pss World Medical's investor day presentation, May 22, 2008
Slide 1: PSS World Medical Annual Investor Day
PSS World Medical Annual Investor Day May 22, 2008 Boston, Ma.
Slide 2: Robert Weiner, Vice President, Investor Relations
Robert Weiner Vice President, Investor Relations
Slide 3: Forward-Looking Statements
Forward-Looking Statements Certain statements in this presentation are "forward-looking statements" made pursuant to the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are identified by the use of words such as "expect," "may," "w
Slide 4: Today's Agenda
Today’s Agenda • David Smith - Chairman and Chief Executive Officer • Brad Hilton - Senior Vice President, Operations • John Sasen - Chief Marketing Officer • Kevin English - Senior Vice President, Supplier Operations • Gary Corless - Chief Operating Officer • David Bronson - Chief Financial Officer
Slide 5: PSS World Medical 25th Anniversary
4 PSS\WorLoMepical” 25th nniversary
Slide 6: PSS World Medical 25th Anniversary
PSS\WorLoMepical” PSS WORLDMEDICAL’ ~ Y BS th ‘Lniversary —
Slide 7: Simple Beginnings, Big Dreams
Simple Beginnings Big Dreams Early Warehouse
Slide 8: Driving Growth and Increasing Strategic Advantages
Driving Growth and Increasing Strategic Advantages
Slide 9: Years of Lessons Learned
25 Years of Lessons Learned • Position us for future success • Continued strategic and competitive advantages
Slide 10: PSS World Medical 25th Anniversary
4 PSS\WorLoMepical” 25th nniversary
Slide 11: Stay Close to the Customer
Stay Close to the Customer • Real time feedback loops • Improved decision-making • Customer needs – Service model – Product portfolio – Marketing programs • Lead innovation, not follow it • Best returns and better leadership
Slide 12: Culture and People Win Battles
Culture and People Win Battles
Slide 13: Culture and People Win Battles
Culture and People Win Battles • Don’t notice in good times but can’t do without in bad times • Balance, not extremes • A lot of work and investment • Ownership and alignment of compensation • Pay-off: Move rapidly as one
Slide 14: Focus and Alignment = Execution
Focus and Alignment = Execution
Slide 15: Focus and Alignment = Execution
Focus and Alignment = Execution • Less dilution of effort and false starts • Better investments and returns • Leverage core competencies and highlight the need for new ones • Strategy, investments, tactics, metrics and compensation • Better acquisitions • More commitment
Slide 16: The DNA of PSS World Medical
The DNA of PSS World Medical Passion Ethics Strategy Innovation Discipline Service Performance Alignment Compensation
Slide 17: Three-Year Strategic Plan: 19% EPS Growth
Three-Year Strategic Plan 19% EPS Growth
Slide 18: Chinese Proverbs
Chinese Proverbs • May you live in interesting times • May your work come to the attention of those in power • May you accomplish your dreams
Slide 19: Economic Environment
Economic Environment Energy costs Global sourcing Housing bubble Health care stability “Mom & Pop” Pressure Technology efficiency Presidential election Drug therapeutics Aging of America Diagnostic development Growth of alternate site Devaluation of the $ Deficit/Reimbursement Credit crunch Uninsure
Slide 20: Physician Market
Physician Market Physician incomes Labor shortage New competition Alternate site shift HIT advancements Drug therapeutics Aging population Diagnostic development Competency Insurance complexity Rising costs Regulation
Slide 21: Elder Care Market
Elder Care Market Energy costs Government necessity Fines and penalties Financing availability Competitive bidding Tort Presidential election Drug therapeutics Aging population Provider incomes Huge growth Labor and nursing shortages Reimbursement Credit crunch Lower cost position
Slide 22: Strategic Priorities
Strategic Priorities • Sourcing • Sales force bandwidth • Operations simplicity • Innovative programs and core growth • H.I.T. • Fold-in acquisitions • Leadership development
Slide 23: PSS World Medical 25th Anniversary
4 PSS\WorLoMepical” 25th nniversary
Slide 24: Brad Hilton, Senior Vice President, Operations
Brad Hilton Senior Vice President, Operations
Slide 25: Operating Margin Expansion
Operating Margin Expansion Drive customer loyalty Enhance sales and marketing strategies Profitability through simplification Achieve goal of $20 - $25 million in cost savings 8.0% 7.0% 6.0% 5.0% 4.0% FY08 FY09 FY10 Q4 FY11 Base Business Simplification Sourcing Revenue Growth Leverage
Slide 26: Past Investments That Drove Results
Past Investments That Drove Results Infrastructure • Branch Consolidations • Facility standardization Processes • Best practices • Targeted centralization Team • Leadership development • Alignment of all team compensation Systems • JDE integration • Performance metrics
Slide 27: Profitability Through Simplification
FY09 - FY11 Profitability Through Simplification
Slide 28: Future Investments For Profitable Growth
Future Investments For Profitable Growth Infrastructure • World Med network optimization Processes • Lean process reengineering • Empowered customer Team • Alignment with pay for performance programs • Leadership development Systems • Advanced warehouse management system • Transportation and logisti
Slide 29: Operating Margin Contribution
8.0% 7.0% 6.0% 5.0% 4.0% Q4 FY08E Q4 FY09 Q4 FY10 Q4 FY11 Base Business Simplification Sourcing Revenue Growth Leverage Operating Margin Contribution • Systems • Team • Processes • Infrastructure $25 million/yr. in margin improvement
Slide 30: Our Goal
Our Goal Intelligent Investments To Drive Customer Loyalty and Shareholder Returns
Slide 31: PSS World Medical 25th Anniversary
4 PSS\WorLoMepical” 25th nniversary
Slide 32: John Sasen, Chief Marketing Officer
John Sasen Executive Vice President & Chief Marketing Officer
Slide 33: Brand Strategy
Brand Strategy Develop a broad array of competitive products from commodity to innovative that strengthens customer loyalty Our Brands represent our core values with emphasis on quality and value
Slide 34: Positioning Our Brand
Positioning Our Brand Multi Brand Strategy Select Specialty Brands • Commodity Categories • Consumable Products • Value Priced • Innovative • Complex • Strategic
Slide 35: Product Positioning for Quality and Customer Value
Product Positioning for Quality and Customer Value Select™ Brand Select ™ Brand EVOKE™ Brand REPARA ® Brand
Slide 36: Branded Supplier Strategy
Branded Supplier Strategy Mitigating Channel Conflict • Access to several consumer promotions • Positioning cost and price • Need for market share • Communications and networking
Slide 37: Select Mix
Select™ Mix # of Reps Rep Penetration % 0% - 15% 15% - 20% 20% - 25% 25% - 30% 30% - 35% 35% - 40% 40% +
Slide 38: Branding Next Steps
Branding Next Steps • Continue to develop both commodity and specialty products • Deeper penetration of customer base • Continue to build infrastructure • Leverage our investments through new markets and channels
Slide 39: PSS World Medical 25th Anniversary
4 PSS\WorLoMepical” 25th nniversary
Slide 40: Kevin English, Supplier Operations
Kevin English Senior Vice President, Supplier Operations
Slide 41: Margin Expansion
Margin Expansion Return on Investment Goals $20 - $25 million P&L improvement $15 - $20 million balance sheet improvement 20 - 30% Improvement in Sales Rep productivity 8.0% 7.0% 6.0% 5.0% 4.0% FY08 FY09 FY10 FY11 Base Business Simplification Sourcing Revenue Growth Leverage
Slide 42: Past Investments that Drove Results
Past Investments that Drove Results • Global sourcing capability • Centralized supplier management • Redistribution network • Centralized procurement • Performance metrics
Slide 43: Future Investments Drive Profitable Growth
Future Investments Drive Profitable Growth • Supplier profitability • Global sourcing expansion • Systems and technology investments • Sales Rep bandwidth improvements
Slide 44: New Approach and Investments for Supplier Profitability
New Approach and Investments for Supplier Profitability Transaction GP Buy-side Profit Marketing Income Supply Chain Excess Rebate Costs
Slide 45: Global Sourcing
Global Sourcing Focus o Experienced sourcing partners o Multiple factories o Use of growth for negotiating o Dedicated and experienced quality control/quality assurance o Leverage existing model o Dedicated new product development o Establish local operations o Preferred supplier programs Strategies
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Slide 48: Margin Expansion
Margin Expansion Significant Sourcing Contribution • Profitable supplier relationships • Meaningful investment in systems and technology • Expanded global sourcing capabilities • Improvements in Sales Rep productivity 8.0% 7.0% 6.0% 5.0% 4.0% FY08 FY09 FY10 Q4 FY11 Base Business Simplification Sourc
Slide 49: PSS World Medical 25th Anniversary
4 PSS\WorLoMepical” 25th nniversary
Slide 50: Gary Corless, Chief Operating Officer
Gary Corless Chief Operating Officer
Slide 51: Business Planning
Business Planning All Things Considered... • Environment • Market • Regulatory • Competition • Suppliers • Products • Technology • Leadership • Sales Force • Customers
Slide 52: Why and How We Will Win
Why and How We Will Win • Largest, best-trained sales force • Most comprehensive solutions-based offering • High customer loyalty with increasing needs for business partners • Robust product and program pipeline • Competent and seasoned management team
Slide 53: Physician Business Revenue Mix
Physician Business Revenue Mix – FY 2008 By Product Segment Branded Consumables 34.4% H.I.T. .1% Rx 22.1% Lab Diagnostics 21.2% Equipment 11.1% Select TM 11.2%
Slide 54: Physician Business: Select Strategies
Physician Business Select ™ Strategies Goal: 20% growth in FY 2009 Branded Consumables 34.4% H.I.T. .1% Rx 22.1% Lab Diagnostics 21.2% Equipment 11.1% 11.2% Select • Drive penetration of existing customer base • Investments in proprietary promotions • New product launches • Investment in field suppo
Slide 55: Physician Business: Rx Strategies
Physician Business Rx Strategies • Focus on adult vaccine products • Leverage preferred supplier contracts • Continued penetration of customer base • Field training and education Goal: 15% - 20% growth in FY 2009 Branded Consumables 34.4% H.I.T. .1% Rx 22.1% Lab Diagnostics 21.2% Equipment 11.1% Sel
Slide 56: Physician Business: Equipment and Lab Diagnostics Strategies
Physician Business Equipment and Lab Diagnostics Strategies • Leverage sales force competencies and customer relationships • Focus on revenue generating products • Targeted ancillary services campaigns • Introduction of specialty brand diagnostic products Goal: 2% - 3% growth in FY 2009 Branded Cons
Slide 57: Physician Business: HIT Strategies
Physician Business Health Care Information Technology (HIT) Strategies • Revenue cycle management, EMR, Practice management and eCommerce • Investment in HIT specialists • Increased H.I.T. training • Investment in eCommerce infrastructure Goal: • 800 – 1,000 physicians by end of FY 2009 • 35% of Phy
Slide 58: Elder Care Business Revenue Mix
Elder Care Business Revenue Mix – FY 2008 Billing Services 2.4% Home Care 35.5% Nursing Home & Assisted Living 62.1%
Slide 59: Elder Care: Skilled Nursing & Assisted Living Strategies
Elder Care Business Skilled Nursing & Assisted Living Strategies • Launch of innovative program • Continued Select™ penetration • Focused market blitzes (SNF & Proclaim) • Increased Training & Development Goal: 6% - 8% growth in FY 2009 Nursing Home & Assisted Living 62.1%
Slide 60: PSS World Medical 25th Anniversary
4 PSS\WorLoMepical” 25. Laniversany
Slide 61: Elder Care: Home Care Strategies
Elder Care Business Home Care Strategies • Focused blitzes • Enhanced sales toolbox • Investment in sales representatives • Develop specialized hospice program • Invest in home care IT customers Goal: 8% - 11% growth in FY 2009 Home Care 35.5%
Slide 62: Elder Care: Billing Services Strategies
Elder Care Business Billing Services Strategies • Expanding sales force • Training and education • Market blitzes • New program launch Goal: 20% growth in FY 2009 Billing Services 2.4% Home Care 35.5% Nursing Home & Assisted Living 62.1%
Slide 63: PSS World Medical 25th Anniversary
4 PSS\WorLoMepical” 25th nniversary
Slide 64: David Bronson, Chief Financial Officer
David Bronson Executive Vice President & Chief Financial Officer
Slide 65: Revenue Growth
Revenue Growth $1,619 ($ in millions) $1,742 $1,856 $2,020 FY09 Goal 8.5% - 9.5% in FY 2009
Slide 66: Revenue Growth: FY2009 Goals By Business Segment
Revenue Growth FY2009 Goals By Business Segment ($ in millions) Elder Care Business Physician Business $1,309 $1,420 - $1,425* $547 $585 - $590* *Mid point of FY 2009 Goals
Slide 67: Revenue Growth Drivers
Revenue Growth Drivers Physician • Expansion and growth of Select™ • Leverage Rx program • Continued program growth & market blitzes – Consumables – Equipment • Investments in health care information technology Elder Care • Expansion and growth of Select™ • Home Healthcare revenue growth • Continued
Slide 68: Operating Margin Expansion
21 Goal: 6% - 6.5% Operating Margin Expansion FY 06 FY 07 FY 08 Total Costs As % of Revenue Total Revenue ($ in Billions) $1.5 $2.0 Total Revenue Total Costs as % of Revenue 4.5% FY06 4.7% FY07
Slide 69: Operating Margin Contribution
Operating Margin Contribution 8.0% 7.0% 6.0% 5.0% 4.0% FY08 FY09 FY10 Q4 FY11 Base Business Simplification Sourcing Revenue Growth Leverage
Slide 70: Revenue Growth Leverage
Revenue Growth Leverage • Distribution infrastructure • Technology platform • Shared services and back office functions Goal: 7.5% – 9% Operating margin drop-through
Slide 71: Margin Expansion Investments and Return
FY 09 – FY 11 Margin Expansion Investments and Return o Operations simplicity o Branding strategy & Sourcing o Revenue leverage o $20 - $25 million in cost to serve Investments Return o $10 - $15 million savings in G & A savings ( G&A reduction, as % of sales ) o $20 - $25 million in sourcing and pr
Slide 72: EPS Growth
EPS Growth FY 2006 – FY 2011 $0.66 Earning Per Diluted Share $0.73 $0.86 $0.94 - $0.96 $1.13 - $1.17 $1.35 - $1.39 Actual Goal
Slide 73: Historical Earnings Progression By Quarter
Fiscal Year 2005 - 2008: Historical Earnings Progression By Quarter FY 2006 FY 2005 FY2005 excludes tax benefit of $5.6 million or $0.09 per diluted share FY 2007 FY 2008
Slide 74: Efficient Capital Structure
Efficient Capital Structure ($ in millions) Q4 FY 2008 Cash $ 21.1 Total Debt: Convertible senior notes & other $221.7 Net debt $200.6 Shareholders’ equity $335.0 Weighted shares outstanding 63.2 (fully diluted)
Slide 75: Operating Cash Flow Growth
$54.9 $59.8 $69.8 Operating Cash Flow Growth $68.0 ($ in millions) $69.8 $63.5 $73 - $77 (Goal)
Slide 76: Fold-in Acquisition Strategy
Fold-in Acquisition Strategy • Pressures on small distributors – Rebates and contracts complexity – Access to private label, globally-sourced products – Access to HIT and other new technologies – Access to capital markets
Slide 77: Fold-in Acquisition Strategy
Fold-in Acquisition Strategy • Acquire to: – Leverage infrastructure and capabilities – Gain experienced sales representatives • Targets: – $10mm - $50mm of revenue – Company with similar market approaches
Slide 78: Share Repurchase Activity
Share Repurchase Activity • April 2, 2008: - Board of Directors approved repurchase of 5% • Total availability 3.5 MM shares FY06 FY07 FY08 TOTAL Total Shares - 2.1 6.4 8.5 Total Investment - $42.9 $112.5 $155.4 Total Cost Per Share - $20.17 $17.68 $18.31
Slide 79: Capital Expenditures
Capital Expenditures • Maintenance Capital $4 - $5 Million • Customer interface process improvements $11 - 12 Million • Strategic systems development $12 – Million • Infrastructure & rollover $1 Million $28 - $30 Million
Slide 80: FY 2009: Financial Goals
FY 2009: Financial Goals • Consolidated revenue growth 8.5% - 9.5% • Operating cash flow (in millions) $73.0 - $77.0 • Earnings per diluted share $0.94 - $0.96
Slide 81: PSS World Medical 25th Anniversary
4 PSS\WorLoMepical” 25th nniversary