POSITIONED FOR GROWTH. Delivering Results

Transcription

1 Delivering Results POSITIONED FOR GROWTH Analyst & Investor Day October 14, 2015 Ann B. Gugino Executive Vice President, CFO & Treasurer Patterson Companies

2 Ann Gugino Executive Vice President, CFO & Treasurer Former vice president of strategy and planning at Patterson Companies Former vice president of finance and operations at Patterson Dental Previously worked for Ernst & Young LLP 2

3 Financial Platform Strengths Strong cash flow enables key investments Poised to accelerate return on invested capital (ROIC) Multi-pronged capital allocation strategy Conservative, well-capitalized balance sheet Financial flexibility 3

4 Transformation Overview Acquisition of Animal Health International Terms Purchase price $1.1B in cash Represented approx 16 multiple of LTM March 2015 EBITDA of $68M or 11.5 multiple post-synergy benefits Financing New $1.5B unsecured credit facilities Currently levered at 2.2x Benefits Benefits Transaction will be accretive from year one onward Proceeds of $715M from sale of Medical used to offset purchase price 4

5 Revenue Breakdown Fiscal Pro Forma Pro Forma by Geography 11% 56% 49% 51% 20% 80% 33% Medical Veterinary Dental Animal Health Dental United States International 5

6 Net Synergies of $20M-30M Over 3 Years Benefit ($M) Back Office/Shared Services $8 12 Supply Chain Companion Health 3 5 Dis-Synergies Net Synergies Range (3) (4) $

7 ROIC Analysis FY15 Reported Consolidated ROIC 12.8% Less: Patterson Medical ROIC 5.8% Continuing Operations ROIC 17.4% 7

8 Sustained Sales Growth (Continuing Operations) In millions of $ $ 4,000 CAGR = 11.7% 3,585 3,911 3,500 3,135 3, ,203 1,457 2,500 2,000 1,500 2,380 2,382 2,454 1,000 FY13 FY14 FY15 Dental Veterinary 8

9 Consistent Adjusted Diluted EPS Growth (Continuing Operations) $ 2.00 CAGR = 8.0% FY13* FY14* FY15** * Excludes deal amortization ** Excludes deal amortization and transaction costs 9

10 Cash Returned to Shareholders In millions of $ $ FY11 FY12 FY13 FY14 FY15 FY16 (E) * Share Repurchases Dividends * Subject to market conditions and operating performance 10

11 Capital Allocation In millions of $ $ Expect to generate $1.5B of free cash flow over next 5 years 50 0 FY (E) 17(E) 18(E) 19(E) 20(E) Investments to drive organic growth Opportunistic acquisitions/ investments Continuous dividend growth Share repurchases 11

12 Cash Repatriation Acquisition of Animal Health International & sale of Medical created unique opportunity to efficiently repatriate excess foreign cash balances Repatriating roughly $200M in cash from both Patterson Medical & Patterson Dental Canada Performing all repatriations in same FY creates tax synergies, with estimated tax savings in the range of $15M 20M Also allowed us to pay down $100M on revolving credit line needed for acquisition, save on future interest expense & invest in buybacks Full cost of repatriation recorded as additional income tax expense in FY16 Q1, about $12M For full year, expect normalized income tax rate of about 35% 12

13 Patterson Has Focused on Investing in the Business, Returning Excess Capital In millions of $ Operating CF. $124 $125 FY: $32.. $266 $12 $54 $30 $263 $97 $50 $52 $37 30% $362 $55 $23 $ $321 $299 $179 $43 $15 $22 23% $96 28%. $86 $196 $146 $40 $97. $263 $8 6 $48 $82 $11 $ year total capital allocation as % OCF Capex Acquisitions Dividends Share Repurchases Total 15% 25% 19% 45% 104% Capex Acquisitions Dividends Share Repurchases 13

14 Returning Capital to Shareholders (% of cumulative 3-year operating cash flow)* 17% 23% 28% 43% 110% 61% 81% 62% 12% 215% 11% 48% 20% 32% 111% 12% 45% 14% 38% 12% 46% 46% 103% 109% Peer median % of Cumulative OCF 109% 16% 52% 7% 11% 85% *Source: J.P. Morgan Capex Acquisitions Dividends Share Repurchases 14

15 Adjusted Operating Margin FY2015 FY16 Target FY17-20 Dental* 12.6% % Up 30-50bps Animal Health 4.4%** % Up 30-50bps Consolidated 8.1% % Depends on mix Target Assumptions Minimum of 2-3% sales growth required to maintain margin levels 3-5% sales growth results in 20-30bps increase in margins 5+% sales growth yields 50bps gain in margins * Excludes Corporate ** Companion only 15

16 Perform FY16 Q1 Performance Sales from continuing operations of $1.1B Dental consumables sales rise 3.8% in constant currency, excluding Q1 s extra week Animal Health sales climbed 48% in constant currency, reflecting contribution of acquisition Adjusted EPS from continuing operations of $0.47, plus EPS from discontinued Medical operations of $

17 Adjusted EPS: $ (Continuing Operations) $ FY13* FY14* FY15** FY16E * Excludes deal amortization ** Excludes deal amortization and transaction costs Fiscal 2016 Guidance Guidance Assumptions Stable North American & international markets; conditions similar to FY15 Excludes transaction-related costs, integration expense & deal amortization, non-recurring IT initiative training costs & financial impact from cash repatriation Includes 10.5 months of contribution from Animal Health International acquisition Includes impact of extra week in FY16 vs. previous year 17

18 Aggressive, Yet Realistic Organic Targets % 5-Year Financial Objectives 8-12% 4-6% 15+% EPS Growth Organic Revenue Growth ROIC Free Cash Flow Conversion 18

19 Delivering Results POSITIONED FOR GROWTH Questions? 19