Pss World Medical — Investor Day (May 2012)
66 slides from Pss World Medical's investor day presentation, May 24, 2012
Slide 1: PSS World Medical Investor Day 2012
PSS WORLD MEDICAL INVESTOR DAY 2012 May 24, 2012 InterContinental Hotel - Times Square New York, NY EXHIBIT 99.1
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS 2 During this meeting and its replay, we may make a number of forward-looking statements regarding revenue, gross margin, operating expenses, operating margins, earnings per share and other matters that are not historical facts. Additionally, we may include statements rega
Slide 3: Agenda
AGENDA 3 INDUSTRY OVERVIEW AND STRATEGIC TRANSFORMATION FINANCIAL TRANSFORMATION GO TO MARKET STRATEGIES OPERATIONS OVERVIEW SUMMARY QUESTIONS AND ANSWERS Gary Corless, President & CEO David Bronson, EVP & CFO Eddie Dienes, President, PSS Brad Hilton, Chief Service Officer Gary Corless, President &
Slide 4: Industry Overview and Strategic Transformation
INDUSTRY OVERVIEW AND STRATEGIC TRANSFORMATION 4 Gary Corless, President & CEO
Slide 5: The Healthcare Industry Must Change
5 THE HEALTHCARE INDUSTRY MUST CHANGE Healthcare Costs as % of U.S. GDP Source: Centers for Medicare & Medicaid Services 16% 17% 18% 20% 2005 2010 2015 2020
Slide 6: Rapid Change Requires Bold Action
RAPID CHANGE REQUIRES BOLD ACTION 6 Time Reimbursement Pressures Healthcare Reform Consolidation Economic Environment Unemployment Lower Utilization
Slide 7: Our Vision for Moving Forward
OUR VISION FOR MOVING FORWARD 7 Common Distribution Infrastructure World-Class Shared Services Team Information Technology Platform
Slide 8: Rationale for Four Verticals
RATIONALE FOR FOUR VERTICALS 8 Payer & Patient Preferred Higher Growth Demonstrated Core Competency Higher Profitability
Slide 9: Focused on Growth and Margin
FOCUSED ON GROWTH AND MARGIN 9 $8 $8 $5 $1.5 Market Growth Rate (%) $ in Billions - $8 Physician Laboratory In-Office Dispensing Skilled Nursing Facilities Home Care & Hospice Specialty Dental
Slide 10: Focused Structure for Growth
FOCUSED STRUCTURE FOR GROWTH 10 Skilled Nursing Physician Business Extended Care POST-TRANSFORMATION Specialty Dental PRE-TRANSFORMATION
Slide 11: Physician Target Market Opportunity
TARGET MARKET OPPORTUNITY 11 STRATEGIC OBJECTIVE COMPETITIVE ADVANTAGES PHYSICIAN • Size: $7-9 Billion • Historic growth rate: 2-4% • Number of sites: >200,000 • Current market share: 15% Accelerate revenue growth through innovative and differentiated solutions that strengthen primary care and front
Slide 12: Laboratory Target Market Opportunity
TARGET MARKET OPPORTUNITY 12 STRATEGIC OBJECTIVE COMPETITIVE ADVANTAGES LABORATORY • Size: $6-9 Billion • Historic growth rate: 5-6% • Number of sites: 100,000 physician office laboratories • Current market share: 6-8% Market-leading distributor of laboratory products and services to physician offic
Slide 13: Dispensing Target Market Opportunity
TARGET MARKET OPPORTUNITY 13 STRATEGIC OBJECTIVE COMPETITIVE ADVANTAGES DISPENSING • Size: $1-2 Billion • Historic growth rate: 10-15% • Number of sites: 40,000 • Current market share: 6-8% Market leader for in-office dispensing solutions for physician offices, urgent care, work-site clinics and com
Slide 14: Home Care & Hospice Target Market Opportunity
TARGET MARKET OPPORTUNITY 14 STRATEGIC OBJECTIVE COMPETITIVE ADVANTAGES HOME CARE & HOSPICE • Size: $1-5 Billion • Historic growth rate: 7-8% • Number of sites: 12,000 agencies and 3,500 hospice sites • Current market share: 10% Market leader for innovative products and services for home care agenci
Slide 15: 5 Year Vision
5 YEAR VISION 15 2X Revenues 10% Operating Margin
Slide 16: Focused for Growth
FOCUSED FOR GROWTH 16 “External opportunities met with internal competencies in a unique way.”
Slide 17: Financial Transformation
FINANCIAL TRANSFORMATION 17 David Bronson, EVP & CFO
Slide 18: 2011 Investor Day Report Card
2011 INVESTOR DAY REPORT CARD 18 FY12 Goal FY12 Actual Revenue Growth 7-9% 3.3% EPS $1.46-1.50 $1.38 Operating Cash Flow $115-120 million $128.4 million
Slide 19: Transforming for Growth
TRANSFORMING FOR GROWTH 19 Focused Growth Leadership Team Experience Strong Financial Base
Slide 20: FY12 Pro Forma Carve-Out Income Statement
($ in millions) FY12 PRO FORMA CARVE-OUT INCOME STATEMENT 20 Skilled Nursing FY12 (As Reported) Consolidated FY12 Pro Forma Specialty Dental Revenue Gross Profit Gross Percentage SG&A Operating Income Operating Percentage Interest/Other Pre-tax Taxes Net Income EPS EBITDA * Pro forma financial infor
Slide 21: FY11-12 Pro Forma Income Statement
FY11-12 PRO FORMA INCOME STATEMENT 21 ($ in millions) FY12 Pro Forma FY11 Pro Forma Percent Change * Pro forma financial information excludes Skilled Nursing and Specialty Dental businesses and represents management’s best estimate as of the date of this presentation and may differ materially from a
Slide 22: Growth Expectations by Vertical
GROWTH EXPECTATIONS BY VERTICAL 22 Physician Total ($ in millions) Laboratory Dispensing Home Care & Hospice * Baseline is estimated FY12 pro forma financial information adjusted for recent acquisitions. $ 1,030 12-13% 3-5% 9-10% $ 1,700 13-15% 5-7% 10% BASELINE Revenue 5 YEAR TARGET Revenue CAGR %
Slide 23: Operating Margin Expansion
OPERATING MARGIN EXPANSION 23 * Base is FY12 Pro Forma income statement operating margin. Pro forma financial information excludes Skilled Nursing and Specialty Dental businesses and represents management’s best estimate as of the date of this presentation and may differ materially from actual pro f
Slide 24: EBITDA Analysis
EBITDA ANALYSIS 24 $ in millions FY13 M&A to Date * Pro forma financial information excludes Skilled Nursing and Specialty Dental businesses and represents management’s best estimate as of the date of this presentation and may differ materially from actual pro forma financial results.
Slide 25: EBITDA Long-Term Outlook
EBITDA LONG-TERM OUTLOOK 25 * Pro forma financial information excludes Skilled Nursing and Specialty Dental businesses and represents management’s best estimate as of the date of this presentation and may differ materially from actual pro forma financial results.
Slide 26: Financial Resources
FINANCIAL RESOURCES 26 ($ in millions) FY13 Est FY14 Est FY15 Est FY16 Est FY17 Est Operating Cash Flow $ 105 $ 125 $ 150 $ 185 $ 220 Capital Expenditures (25) (27) (30) (33) (37) Free Cash Flow Debt Gross Net Leverage Gross 2.8x 2.3x 1.0x 0.8x 0.7x Net 0.7x 1.0x 1.0x 0.7x 0.4x • Includes estimated
Slide 27: Skilled Nursing and Specialty Dental Divestiture Process
Skilled Nursing DIVESTITURE PROCESS 27 Specialty Dental Goldman Sachs $480 million $30 million 6 – 9x 6 – 9 months Strategic or Financial Advisor Revenues Adjusted EBITDA* Expected multiple Expected timing Expected buyer Use of Proceeds: M&A strategy Share repurchases Pay down debt * Information rep
Slide 28: FY13 Financial Guidance
FY13 FINANCIAL GUIDANCE 28 10-12% Consolidated Revenue Growth From FY12 Pro Forma $1.11-1.15 EPS From Continuing Operations $100-110 mm Consolidated Operating Cash Flow
Slide 29: Go to Market Strategies
GO TO MARKET STRATEGIES 29 Eddie Dienes, President, PSS
Slide 30: Our Vision for Moving Forward
OUR VISION FOR MOVING FORWARD 30 Common Distribution Infrastructure World-Class Shared Services Team Information Technology Platform
Slide 31: Go to Market Strategy
GO TO MARKET STRATEGY 31 PSS Generalist Sales Force PSS Home Care & Hospice Sales Force PSS Specialist Health Systems PSS Specialist Laboratory Consultant PSS Specialist Dispensing Solutions Manufacturer’s Specialist Manufacturer’s Specialist Manufacturer’s Specialist
Slide 32: 2013 Sales Force Focus
2013 SALES FORCE FOCUS REACH OUR HEALTH STRENGTHEN SALES FORCE PRODUCTIVITY HEALTH SYSTEMS 32 Improve Caregivers Efficiencies Online Penetration Programs Sales Force Expansion Workflow Improvements Total Customer Solutions Online Sales Growth Increase Caregivers Revenues Reduce Caregivers Expenses M
Slide 33: Physician Keys to Success and FY13 Milestones
33 KEYS TO SUCCESS FY13 MILESTONES PHYSICIAN 33 • Consultative selling • Account penetration • Expanding sales force • Increased national account expertise • Build a focused leadership team • Align compensation programs • Continue growth of Our Brands • Complete expansion of our health systems resou
Slide 34: Health Systems: Impact of Consolidation
HEALTH SYSTEMS: IMPACT OF CONSOLIDATION 34 34 Ownership Caregiver Locations
Slide 35: Large and Growing Customer Base
LARGE AND GROWING CUSTOMER BASE 35 35 PSS Serves a Broad Range of Health Systems
Slide 36: Health System Competitive Advantages
HEALTH SYSTEM COMPETITIVE ADVANTAGES 36 • High Level Service Model of Distribution – Ease of ordering & returns; late cut off times – Next day delivery by PSS Delivery Professionals • Product & Pricing Standardization – Product formularies – GPO relationships • Breadth of Products – Our Brands • Lar
Slide 37: Focused Investment in Health Systems
FOCUSED INVESTMENT IN HEALTH SYSTEMS 37 FY12 FY13 Strategic Account Executives Strategic Account Managers GPO Directors Health System Analysts Dedicated Marketing Managers Total
Slide 38: Superior Level of Service
SUPERIOR LEVEL OF SERVICE 38 LISA BOYD Account Representative Health System with 55,000 employees, including several thousand physicians; PSS ships to more than 400 locations in 12 states in the South and Midwest “The reason I prefer PSS is simple. It is the level of service we receive from your sup
Slide 39: Our Brands Provide Attractive Solution
39 OUR BRANDS PROVIDE ATTRACTIVE SOLUTION “Baptist Health System cemented a partnership with PSS to streamline and standardize the supply acquisition process in our clinics. PSS turned out to be the perfect partner to bring the necessary resources to help BHS make changes to be successful. From elec
Slide 40: Breadth of Inventory
BREADTH OF INVENTORY 40 “CFMG chose PSS as a service provider because of their quality medical products and outstanding customer service. Our physician’s network benefits tremendously from the size of their medical services inventory and participating manufacturers.” LENDA TOWNSEND-WILLIAMS, MBA Chi
Slide 41: Easy to Do Business With
EASY TO DO BUSINESS WITH 41 “For the nurses dealing with the PSS drivers – in-stock items, next-day delivery of orders placed by 8:00 pm, a reliable delivery fleet and a promise to understand each physician customer – made the difference.” MICHAEL REICH Director for Lab & Medical Sourcing Health Sys
Slide 42: Focus on Supporting Caregivers
FOCUS ON SUPPORTING CAREGIVERS 42 “Private Practice Doctors and PSS share the vision of preserving high quality patient care through private practice medicine. PPD is thrilled to be working with PSS.” ALEXANDRA BROUSSEAU, PHD PPD Membership Management Services Organization with 180 physicians; PSS s
Slide 43: Our Vision for Moving Forward
OUR VISION FOR MOVING FORWARD 43 Common Distribution Infrastructure World-Class Shared Services Team Information Technology Platform
Slide 44: Laboratory Keys to Success and FY13 Milestones
44 LABORATORY KEYS TO SUCCESS FY13 MILESTONES • Laboratory expertise • Competency in complex capital equipment sales • Differentiated offering • Sourcing and Our Brands • Build a focused leadership team • Define and realign roles for sales force • Expand product offering • Establish key GPO relation
Slide 45: Dispensing Keys to Success and FY13 Milestones
45 DISPENSING FY13 MILESTONES KEYS TO SUCCESS • Turnkey installation and solution management • Claims processing expertise • Repackaging and fulfillment capabilities • Leveraging generalist sales force • Build a focused leadership team • Integrate acquired businesses • Implement branding of offering
Slide 46: Easy to Use Solution
46 EASY TO USE SOLUTION
Slide 47: Home Care & Hospice Keys to Success and FY13 Milestones
47 KEYS TO SUCCESS FY13 MILESTONES HOME CARE & HOSPICE • Dedicated, experienced sales force • Logistics expertise • Differentiated service model • Navigation of reimbursement and competitive bidding • Build a focused leadership team • Transition to separate sales team split from Skilled Nursing Faci
Slide 48: Superior Combination of Services
SUPERIOR COMBINATION OF SERVICES 48 BONNIE ALKEMA Executive Director Hospice Agency based in Miami, FL with 4 branches servicing 600+ patients; Supplies are shipped to more than 700,000 patient’s homes across the country each year “We are very excited to have chosen your Company as our supplier for
Slide 49: Robust Technology Integration
ROBUST TECHNOLOGY INTEGRATION 49 BARRY DAVIS Chief Operation Officer Home Health and Hospice Agency based in Jackson, MS with 35 branches “Sta-Home chose your Company because of the cost containment program, sales rep support and most importantly, because you were fully interfaced with our Point- of
Slide 50: Our Vision for Moving Forward
OUR VISION FOR MOVING FORWARD 50 Common Distribution Infrastructure World-Class Shared Services Team Information Technology Platform
Slide 51: Operations Overview
OPERATIONS OVERVIEW 51 Brad Hilton, Chief Service Officer
Slide 52: Our Vision for Moving Forward
OUR VISION FOR MOVING FORWARD 52 Common Distribution Infrastructure World-Class Shared Services Team Information Technology Platform
Slide 53: One Common Distribution Infrastructure
53 Customer Solutions Professional Delivery Order Fulfillment ONE COMMON DISTRIBUTION INFRASTRUCTURE
Slide 54: One World-Class Shared Services Team
ONE WORLD-CLASS SHARED SERVICES TEAM 54 Customer Service Supplier Services Team Member Services Financial Legal & Compliance Information Technology
Slide 55: One Information Technology Platform
ONE INFORMATION TECHNOLOGY PLATFORM 55 Customer Experience Systems Order Processing Systems IT Infrastructure Business Information & Reporting Systems
Slide 56: Our Vision for Moving Forward
OUR VISION FOR MOVING FORWARD 56 Common Distribution Infrastructure World-Class Shared Services Team Information Technology Platform
Slide 57: Summary
SUMMARY 57 Gary Corless, President & CEO
Slide 58: Experienced Team Reduces Risk
EXPERIENCED TEAM REDUCES RISK 58 2003 Strategic Transformation: • Divested imaging business • Consolidated distribution infrastructure, rationalizing half of existing locations • Implemented standardized ERP system • Launched global sourcing effort Then Now Revenues $1.1 bn $2.1 bn Margins 2% 6% ROC
Slide 59: Transformation Driven by Our Purpose and Mission
TRANSFORMATION DRIVEN BY OUR PURPOSE AND MISSION 59 PURPOSE Strengthen the clinical success and financial health of caregivers by solving their biggest problems. MISSION Improve caregivers’ financial performance by 20%.
Slide 60: Our Vision for Moving Forward
OUR VISION FOR MOVING FORWARD 60 Common Distribution Infrastructure World-Class Shared Services Team Information Technology Platform
Slide 61: PSS World Medical Investor Day 2012
PSS WORLD MEDICAL INVESTOR DAY 2012 May 24, 2012 InterContinental Hotel - Times Square New York, NY
Slide 62: Pss|\WoriD MEDICAL”
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Slide 63: FY11 Pro Forma Continuing Operations Reconciliation
63 FY11 PRO FORMA CONTINUING OPERATIONS RECONCILIATION ($ in millions) FY11 (As Reported) Consolidated Skilled Nursing Specialty Dental FY11 Pro Forma Continuing Operations * Pro forma financial information excludes Skilled Nursing and Specialty Dental businesses and represents management’s best est
Slide 64: FY11-12 Pro Forma Skilled Nursing & Specialty Dental
64 ($ in millions) FY12 FY11 FY11-12 PRO FORMA SKILLED NURSING & SPECIALTY DENTAL Revenues $ 531 $ 550 Gross Profit Gross Percentage 28.7% 28.6% SG&A Operating Income Operating Percentage 4.6% 6.2% Net Income EPS $ 0.30 $ 0.38 EBITDA $ 30 $ 41 * Pro forma financial information for Skilled Nursing an
Slide 65: FY12 EBITDA Calculation
FY12 EBITDA CALCULATION ($ in millions) FY12 (as reported) Skilled Nursing Specialty Dental FY12 Pro Forma 65 NET INCOME $ 74 $ 11 $ 4 $ 59 Plus: Interest expense - - Less: Interest and investment income - - - - Plus: Provision for income taxes Plus: Depreciation - - EBITDA $ 171 $ 23 $ 7 $ 141 * Pr
Slide 66: FY11 EBITDA Calculation
FY11 EBITDA CALCULATION ($ in millions) FY11 (as reported) Skilled Nursing Specialty Dental FY11 Pro Forma 66 NET INCOME $ 75 $ 17 $ 5 $ 53 Plus: Interest expense - - Less: Interest and investment income - - - - Plus: Provision for income taxes Plus: Depreciation - - EBITDA * Pro forma financial inf