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DJO Global, Inc. Company Presentation...DJO Global, Inc. Company Presentation June 2013 Safe Harbor...

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DJO Global, Inc. Company Presentation June 2013
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Page 1: DJO Global, Inc. Company Presentation...DJO Global, Inc. Company Presentation June 2013 Safe Harbor Statement 2 This presentation has been prepared by DJOFL. The information contained

DJO Global, Inc. Company Presentation

June 2013

Page 2: DJO Global, Inc. Company Presentation...DJO Global, Inc. Company Presentation June 2013 Safe Harbor Statement 2 This presentation has been prepared by DJOFL. The information contained

Safe Harbor Statement

2

This presentation has been prepared by DJOFL. The information contained in this presentation is for information purposes only. The information contained in this presentation is not investment or financial product advice and is not intended to be used as the basis for making an investment decision. This presentation has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person.

No representation or warranty, expressed or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. To the maximum extent permitted by law, none of DJOFL, its directors, employees or agents, nor any other person accepts any liability, including, without limitation, any liability arising out of fault or negligence for any loss arising from the use of the information contained in this presentation.

The historical and projected financial information in this presentation includes financial information that is not presented in accordance with generally accepted accounting principles (GAAP). Non-GAAP financial measures may be considered in addition to GAAP financial information, but should not be used as substitutes for the corresponding GAAP measures. Non-GAAP measures in this presentation may be calculated in a way that is not comparable to similarly titled measures reported by other companies.

This presentation includes “forward-looking statements” that reflect DJOFL’s current views and information currently available. This information is, where applicable, based on assumptions and analysis that DJOFL believes, as of the date hereof, provide a reasonable basis for the data contained herein. Forward-looking statements can generally be identified by the use of forward-looking words such as “may”, “will”, “would”, “could”, “expect”, “intend”, “plan”, “aim”, “estimate”, “target”, “anticipate”, “believe”, “continue”, “objectives”, “outlook”, “guidance” or other similar words, and include statements regarding DJOFL’s plans, strategies, objectives, targets and expected financial performance. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, capital expenditures, future results, our competitive strengths, our business strategy, the trends in our industry and the benefits of and the anticipated cost savings related to our recent acquisitions. These forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which are outside the control of DJOFL and its officers, employees, agents or associates. Actual results, performance or achievements may vary materially from any projections and forward-looking statements and the assumptions on which those forward statements are based. Readers are cautioned not to place undue reliance on forward-looking statements as a predictor of future performance. These forward looking statements are within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, and are intended to be covered by the safe harbors created thereby. Some of the factors that we believe could affect our results include the risks discussed in the “Risk Factors” section in DJOFL’s Annual Report on Form 10-K for the year ended December 31, 2012, filed on February 27, 2013 with the Securities and Exchange Commission. We caution you that in light of the risks and uncertainties described in this “Risk Factors” section, the matters referred to in the forward looking statements contained in this presentation may not in fact occur. There can be no assurance that the data contained herein is reflective of future performance to any degree. All information herein speaks only as of (1) the date hereof, in the case of information about DJOFL, or (2) the date of such information, in the case of information from persons other than DJOFL. DJOFL undertakes no duty to update or revise the information contained herein, publicly or otherwise. Forecasts and estimates regarding DJOFL’s industry and end markets are based on sources we believe to be reliable, however there can be no assurance these forecasts and estimates will prove accurate in whole or in part.

Page 3: DJO Global, Inc. Company Presentation...DJO Global, Inc. Company Presentation June 2013 Safe Harbor Statement 2 This presentation has been prepared by DJOFL. The information contained

$948.5 $946.2 $966.0 $1,074.7

$1,129.4

$212.7 $250.4 $262.4 $264.3 $271.0

2008 2009 2010 2011 2012

Revenue Adjusted EBITDA

Bracing and Vascular

39.4%

Recovery Sciences

29.3%

International24.8%

Surgical Implant

6.5%

DJO Profile Business Overview Net Sales and Adjusted EBITDA(1)

2012 Net Sales by Segment

($ in millions)

(1) Adjusted EBITDA for all periods presented excludes impact of non-recurring costs and other adjustments as permitted by Senior Secured Credit Agreement; excludes pre-acquisition EBITDA and future cost savings related to acquisitions.

Headquartered near San Diego, CA

Approximately 5,300 employees in 27 countries

Leading orthopedic company with unique strategy focusing on injury prevention, conservative treatment and rehabilitation

Innovator with robust pipeline of products and solutions that are more cost effective and less invasive than most surgical or pharmaceutical alternatives

Solutions that keep people active – “Motion is Medicine”

Financial sponsor – The Blackstone Group

3

4.5% CAGR Net Sales

6.2% CAGR Adjusted EBITDA

Page 4: DJO Global, Inc. Company Presentation...DJO Global, Inc. Company Presentation June 2013 Safe Harbor Statement 2 This presentation has been prepared by DJOFL. The information contained

$312.2

$388.9$444.4

$105.8 $108.1

2010 2011 2012 Q1-2012 Q1-2013

Bracing and Vascular 39.4 % of 2012 Sales

Broad range of soft goods – key to GPO penetration

Innovative rigid bracing, walking boots and cold therapy

Exos thermoformable bracing and splinting

Retail pharmacy offering with Bell Horn

Vascular systems (DVT prophylaxis)

Broad range of compression therapy garments

Diabetic footwear

#1 share in U.S. Bracing and Supports market of approximately $1.7 billion(1)

Bracing and Vascular Net Sales

Bracing Products Vascular Products

Bracing and Vascular Highlights ($ in millions)

(1) 2009 Frost & Sullivan. (2) Growth rate based on average sales per day.

4

Page 5: DJO Global, Inc. Company Presentation...DJO Global, Inc. Company Presentation June 2013 Safe Harbor Statement 2 This presentation has been prepared by DJOFL. The information contained

$346.6 $341.7 $331.5

$83.7 $75.5

2010 2011 2012 Q1-2012 Q1-2013

Recovery Sciences 29.3% of 2012 Sales

Promotes healing of Non-Union Bone Fractures and Spinal Repair Surgery

Home Electrotherapy - TENS Pain Management & NMES Muscle Stimulation

Home Traction Devices

Iontophoresis

Clinical Electrotherapy

Continuous Passive Motion

Clinical Traction Devices

Treatment Tables

($ in millions)

5

Recovery Sciences Net Sales

(1) Growth rate based on average sales per day.

Page 6: DJO Global, Inc. Company Presentation...DJO Global, Inc. Company Presentation June 2013 Safe Harbor Statement 2 This presentation has been prepared by DJOFL. The information contained

Germany29.2%

ROW25.3%

France19.7%

Canada8.8%

Spain, Benelux &

Italy

8.4%

Nordic3.5%

UK5.1%

$244.5$279.3 $280.5

$71.5 $73.9

2010 2011 2012 Q1-2012 Q1-2013

International – 24.8% of 2012 Sales

International Net Sales 2012 Sales Mix by Geography ($ in millions)

(1) Excludes impact from changes in foreign currency exchange rates (constant currency) and based on average sales per day.

6

Page 7: DJO Global, Inc. Company Presentation...DJO Global, Inc. Company Presentation June 2013 Safe Harbor Statement 2 This presentation has been prepared by DJOFL. The information contained

Surgical Implant – 6.5% of 2012 Sales

Diverse portfolio of orthopedic reconstructive joint products for knees, hips and shoulders

Primary focus on shoulder segment with a track record of innovation – over 50% of net sales

Niche market position with less than 1% share in total, but higher in shoulders

U.S. market over $5 billion(1)

Knees Hips Shoulders

$62.7 $64.9$73.0

$17.9 $21.5

2010 2011 2012 Q1-2012 Q1-2013

($ in millions)

(1) 2006 Frost & Sullivan. (2) Based on average sales per day.

7

Surgical Implant Net Sales

Page 8: DJO Global, Inc. Company Presentation...DJO Global, Inc. Company Presentation June 2013 Safe Harbor Statement 2 This presentation has been prepared by DJOFL. The information contained

Leading Market Positions: Defensible, Comprehensive Product Offering

Market leader in multiple market segments and product categories

Established global presence with over 60 years of history in the physical therapy market and over 30 years of history in orthopedics market

Brand recognition and comprehensive product range promotes loyalty from prescribing physicians and physical therapists

Low regulatory and technology substitution risk

Strong brand names

8

Page 9: DJO Global, Inc. Company Presentation...DJO Global, Inc. Company Presentation June 2013 Safe Harbor Statement 2 This presentation has been prepared by DJOFL. The information contained

Significant Diversification Reduces Risk

Sales Channels Patient Need Customers

We treat a diverse set of patient needs, making us less reliant than many medical device companies

on one technology, one reimbursement code, or one

treatment protocol

We call on many providers and prescribers minimizing risk that

products are dispensed beyond our reach

No customer greater than 3% of revenue and top 10 customers

less than 10% of revenue

2012 Sales by Payor 2012 Sales by Segment

Bracing and Vascular

39.4%

Recovery Sciences

29.3%

International24.8%

Surgical Implants

6.5%

Healthcare Professionals

39.0%

Dealers & Distributors

32.8%

Insurances21.8%

Medicare / Medicaid

6.4%

9

Page 10: DJO Global, Inc. Company Presentation...DJO Global, Inc. Company Presentation June 2013 Safe Harbor Statement 2 This presentation has been prepared by DJOFL. The information contained

= primary market(s)

Distribution

Diverse Sales Forces Provide Differentiated Presence with Multiple Prescriber & Provider Groups

10

Page 11: DJO Global, Inc. Company Presentation...DJO Global, Inc. Company Presentation June 2013 Safe Harbor Statement 2 This presentation has been prepared by DJOFL. The information contained

Main manufacturing facility in Tijuana, Mexico (286,000 square feet) is renowned for operational excellence and low cost manufacturing

Best practices in “lean manufacturing” in all facilities and culture of continuous improvement yield margin expansion

Expanded plant in Tunisia for European products

Vertically integrated manufacturing competencies

Efficient, automated distribution capabilities

Comprehensive mechanical and electronic R&D competencies

Competitive Advantages in Manufacturing, Distribution and R&D

11

Page 12: DJO Global, Inc. Company Presentation...DJO Global, Inc. Company Presentation June 2013 Safe Harbor Statement 2 This presentation has been prepared by DJOFL. The information contained

$948.5 $946.2 $966.0 $1,074.7 $1,129.4

2008 2009 2010 2011 2012

Q1-2012 Q1-2013

Net Sales $ 278.9 $ 279.1

Adjusted Gross Profit(1) $ 171.5 $ 170.2

% of Net Sales 61.5% 61.0%

Adjusted Opex(1) $ 113.7 $ 118.1

% of Net Sales 40.8% 42.3%

Adjusted EBITDA(1) $ 65.1 $ 59.8

% of Net Sales 23.3% 21.4%

Net Sales

Adjusted EBITDA(1)

Selected Income Statement Metrics

Strong, consistent historical financial performance with healthy growth and margins

Historical Financial Summary

($ in millions)

$212.7

$250.4 $262.4 $264.3

$271.0

2008 2009 2010 2011 2012

($ in millions)

% margin 22% 27% 27% 25% 24%

($ in millions)

(1) Excludes impact of non-recurring costs and other adjustments as permitted by Senior Secured Credit Agreement; excludes pre-acquisition EBITDA and future cost savings related to acquisitions. (2) Growth rate based on average sales per day.

+1.9%(2)

12

-8.1%

Page 13: DJO Global, Inc. Company Presentation...DJO Global, Inc. Company Presentation June 2013 Safe Harbor Statement 2 This presentation has been prepared by DJOFL. The information contained

Strong Cash Flow Generation

Strong EBITDA margins with opportunity to expand further

Low capex business model ~ 3% of revenue

Opportunities to decrease working capital

Favorable cash tax position

Substantial cash flow should permit significant de-leveraging

(1) Represents Adjusted EBITDA including permitted adjustments related to pre-acquisition Adjusted EBITDA and future cost savings.

2012 Free Cash Flow

Adjusted EBITDA(1) $274.0

Capital expenditures (33.0)

Increase in working capital (27.1)

Subtotal – Cash flow before interest,

taxes and monitoring $213.9

Cash flow conversion % 78.1%

Cash interest expense (162.6)

Cash taxes (4.7)

Blackstone monitoring fee (7.0)

Free cash flow $39.6

Free cash flow conversion % 14.5%

($ in millions)

13

Page 14: DJO Global, Inc. Company Presentation...DJO Global, Inc. Company Presentation June 2013 Safe Harbor Statement 2 This presentation has been prepared by DJOFL. The information contained

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($ in millions)

Debt: Rate Maturity

Revolver ($100 million available) $ 18.0 L+4.75% Mar-2017

Term loans (3) 859.9 L+3.75% Sep-2017

Second priority senior secured notes (3) 330.0 8.75% Mar-2018

New Senior unsecured notes due 2018 (3) 440.0 9.875% Apr-2018

Senior unsecured notes due 2018 300.0 7.75% Apr-2018

Senior subordinated notes due 2017 300.0 9.75% Oct-2017

Total Debt $ 2,247.9

Total Contributed Equity $ 839.8

Total Capitalization $ 3,087.7

Pro forma LTM Adjusted EBITDA(1) $ 266.9

First lien debt(2) / Adjusted EBITDA(1) 3.1x

Total debt(2) / Adjusted EBITDA (1) 8.3x

Equity / Total capitalization 27.2%

(4)

March 30, 2013 Capitalization Table

14

1) Includes net pre-acquisition EBITDA and expected future cost savings related to recent acquisitions and other adjustments as permitted by Senior Secured Credit Agreement.

2) Net of $36.2 million cash.

3) Exclusive of unamortized original issue discounts and premiums.

4) Subject to Libor Floor of 1.00%.

Page 15: DJO Global, Inc. Company Presentation...DJO Global, Inc. Company Presentation June 2013 Safe Harbor Statement 2 This presentation has been prepared by DJOFL. The information contained

Key Credit Highlights

Leading market positions with defensible, comprehensive product offering

Significant diversification in products, customers, payors and geography

Diverse sales forces provide distinctive presence with multiple prescriber groups over a broad geographical footprint

Payor / provider relationships create a high barrier to entry

Low cost manufacturing – 15 years in Mexico, 7 years in Tunisia

Strong financial results

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Page 16: DJO Global, Inc. Company Presentation...DJO Global, Inc. Company Presentation June 2013 Safe Harbor Statement 2 This presentation has been prepared by DJOFL. The information contained

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