INVESTOR PRESENTATION

Transcription

1 INVESTOR PRESENTATION

2 F O RWA R D L O O K I N G S TAT E M E N T S This presentation contains forward-looking information (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding future events or the future financial performance of the Company that involve substantial risks and uncertainties. Actual events or results may differ materially from those in the projections or other forward-looking information set forth herein as a result of certain risk factors. These risk factors include, without limitation; the continued strength of dental and medical markets, the timing, success and market reception for our new and existing products, uncertainty with respect to governmental actions with respect to dental and medical products, outcome of litigation and/or governmental enforcement actions, volatility in the capital markets or changes in our credit ratings, continued support of our products by influential dental and medical professionals, our ability to successfully integrate acquisitions, risks associated with foreign currency exchange rates, risks associated with our competitors introduction of generic or private label products, our ability to accurately predict dealer and customer inventory levels, our ability to successfully realize the benefits of any cost reduction or restructuring efforts, our ability to obtain a supply of certain finished goods and raw materials from third parties and changes in the general economic environment that could affect the business. Changes in such assumptions or factors could produce significantly different results. For additional information regarding the factors that may cause actual results to differ materially from these forward-looking statements, please refer to the Company's most recent Form 10-K and its subsequent periodic reports on Forms 10-Q filed with the Securities and Exchange Commission D E N T S P L Y I N V E S T O R P R E S E N T A T I O N 2

3 N O N - G A A P F I N A N C I A L M E A S U R E S In addition to the results reported in accordance with US GAAP, the Company provides adjusted net income attributable to DENTSPLY International and adjusted earnings per diluted common share ( adjusted EPS ). The Company discloses adjusted net income attributable to DENTSPLY International to allow investors to evaluate the performance of the Company s operations exclusive of certain items that impact the comparability of results from period to period and may not be indicative of past or future performance of the normal operations of the Company and certain large non-cash charges related to purchased intangible assets. The Company believes that this information is helpful in understanding underlying operating trends and cash flow generation. Adjusted net income and adjusted EPS are important internal measures for the Company. Senior management receives a monthly analysis of operating results that includes adjusted net income and adjusted EPS and the performance of the Company is measured on this basis along with other performance metrics. The adjusted net income attributable to DENTSPLY International consists of net income attributable to DENTSPLY International adjusted to exclude the net of tax impact of the following: (1) Business combination related costs. These adjustments include costs related to integrating and consummating recently acquired businesses and costs, gains and losses related to the disposal of businesses or product lines. These items are irregular in timing and as such may not be indicative of past and future performance of the Company and are therefore excluded to allow investors to better understand underlying operating trends. (2) Restructuring, restructuring program related costs and other costs. These adjustments include costs related to the implementation of restructuring initiatives as well as certain other costs. These costs can include, but are not limited to, severance costs, facility closure costs, lease and contract terminations costs, related professional service costs, duplicate facility and labor costs associated with specific restructuring initiatives, as well as, legal settlements and impairments of assets. These items are irregular in timing, amount and impact to the Company s financial performance. As such, these items may not be indicative of past and future performance of the Company and are therefore excluded for the purpose of understanding underlying operating trends. (3) Amortization of purchased intangible assets. This adjustment excludes the periodic amortization expense related to purchased intangible assets. Beginning in 2011, the Company began recording large non-cash charges related to the values attributed to purchased intangible assets. As such, amortization expense has been excluded from adjusted net income attributed to DENTSPLY International to allow investors to evaluate and understand operating trends excluding these large non-cash charges. (4) Credit risk and fair value adjustments. These adjustments include both the cost and income impacts of adjustments in certain assets and liabilities including the Company s pension obligations, that are recorded through net income which are due solely to the changes in fair value and credit risk. These items can be variable and driven more by market conditions than the Company s operating performance. As such, these items may not be indicative of past and future performance of the Company and therefore are excluded for comparability purposes. (5) Certain fair value adjustments related to an unconsolidated affiliated company. This adjustment represents the fair value adjustment of the unconsolidated affiliated company s convertible debt instrument held by the Company. The affiliate is accounted for under the equity method of accounting. The fair value adjustment is driven by open market pricing of the affiliate's equity instruments, which has a high degree of variability and may not be indicative of the operating performance of the affiliate or the Company. (6) Income tax related adjustments. These adjustments include both income tax expenses and income tax benefits that are representative of income tax adjustments mostly related to prior periods, as well as the final settlement of income tax audits, and discrete tax items resulting from the implementation of restructuring initiatives. These adjustments are irregular in timing and amount and may significantly impact the Company s operating performance. As such, these items may not be indicative of past and future performance of the Company and therefore are excluded for comparability purposes. Adjusted earnings per diluted common share is calculated by dividing adjusted net income attributable to DENTSPLY International by diluted weighted-average common shares outstanding. Adjusted net income attributable to DENTSPLY International and adjusted earnings per diluted common share are considered measures not calculated in accordance with US GAAP, and therefore are non-us GAAP measures. These non-us GAAP measures may differ from other companies. Income tax related adjustments may include the impact to adjust the interim effective income tax rate to the expected annual effective tax rate. The non-us GAAP financial information should not be considered in isolation from, or as a substitute for, measures of financial performance prepared in accordance with US GAAP D E N T S P L Y I N V E S T O R P R E S E N T A T I O N 3

4 A B O U T D E N T S P LY I N T E R N AT I O N A L Leading professional dental consumables company $3 billion revenue base 90+% value-added consumables portfolio Global infrastructure Sales in more than 120 countries Large sales force in both distributed and direct channels Operations in more than 40 countries Innovation & education R&D: over 50 clinical studies 30+ significant new products annually Clinical educator: train ~250,000 each year Consolidator in a fragmented market Selective; reinvest for growth Financially strong Deploying free cash flow: repurchases, dividends, M&A $7.5 billion market cap D E N T S P L Y I N V E S T O R P R E S E N T A T I O N 4

5 T H E G L O B A L M A R K E T Dental ~$21 billion; $17 billion in consumables Less volatile than broader economy Market typically grows 1 to 2 times GDP Fragmented Top 10 competitors: only 60% of market End-user customer: generally 1 to 3 dentists per office Less government reimbursement dependent than medical market Medical Consumable medical devices Focused on Urology segment: $1 billion addressable market Primarily single-use catheters 6% 5% Preventive 22% 13% 15% 22% 17% Restoratives Large Equipment Implants Prosthetics Orthodontics Endodontics D E N T S P L Y I N V E S T O R P R E S E N T A T I O N 5

6 M A R K E T O P P O R T U N I T Y Developed markets - 18% of global population ~1.2 billion people Over 65: +20% spending per patient Retaining natural dentition longer Link to medical health Emerging markets - 82% of global population ~5.5 billion people Access to dental care improving Middle class population to double by 2020 Discretionary spending power Dental markets: Grow 1-2x underlying GDP growth U S P O P U L AT I O N A G E 6 5 A N D O V E R I N M I L L I O N S D E N T S P L Y I N V E S T O R P R E S E N T A T I O N 6

7 D E N T S P LY S G L O B A L F O OT P R I N T P E R C E N T O F S A L E S B Y R E G I O N E X C L U D I N G P R E C I O U S M E T A L C O N T E N T N O R T H A M E R I C A 37% E U R O P E 45% A S I A 6% J A P A N 3% M I D D L E E A S T & A F R I C A 3% L A T I N A M E R I C A 4% A U S T R A L I A 2% D E N T S P L Y I N V E S T O R P R E S E N T A T I O N 7

8 U N PA R A L L E L E D P RO D U C T L I N E B R E A D T H P E R C E N T O F S A L E S E X C L U D I N G P R E C I O U S M E T A L C O N T E N T P R O S T H E T I C S Artificial Teeth, Denture Bases, Crown and Bridge, CAD/CAM 13% 10% 28% C H A I R S I D E C O N S U M A B L E S Restorative, Preventive 49% M E D I C A L Urology, Surgery, Instruments S P E C I A LT I E S Implants, Endodontics, Orthodontics D E N T S P L Y I N V E S T O R P R E S E N T A T I O N 8

9 B A R R I E R S TO E N T R Y: C O M P E T I T I V E A D V A N TAG E Fragmented Market ~3,600 highly trained product-specific sales and technical staff Complexity and global scale in manufacturing Established brand names Extensive patent portfolio Strong relationships: dental schools and end-users Professional services: clinical education, opinion leadership D E N T S P L Y I N V E S T O R P R E S E N T A T I O N 9

10 M A R K E T L E A D I N G I N N O V AT I O N Solutions that improve/deliver: Clinical effectiveness Clinical efficiency Patient-preference Committed to Innovation: 30+ significant new products annually 50+ clinical studies ongoing Enhancements to existing products Consistent investment: internal projects, licensed technology and acquisitions D E N T S P L Y I N V E S T O R P R E S E N T A T I O N 10

11 P RO F E S S I O N A L S E R V I C E S Strong key opinion leader support & customer reach Approximately 250,000 dental professionals trained in clinical programs ~5,500 programs annually in more than 34 countries on 6 continents Leveraging both web-based and classroom CE D E N T S P L Y I N V E S T O R P R E S E N T A T I O N 11

12 I N N O V AT I O N & L E A D I N G B R A N D S C O N S U M A B L E S S P E C I A L T I E S M E D I C A L PREVENTIVE RESTORATIVE PROSTHETICS ENDODONTIC IMPLANTS ORTHODONTIC UROLOGY N E W P R O D U C T S L E A D I N G B R A N D S D E N T S P L Y I N V E S T O R P R E S E N T A T I O N 12

13 P E R F O R M A N C E L E V E R AG E P O I N T S Market improvement US: signals of improvement Europe: ~45% of sales Currency: Euro and EM Internal changes: on track toward 20% adj. operating margin Expecting +240 bps over 3 years; 80bps in 2014 Reinvest for growth Innovation Clinical Sales force M&A Flexibility to deploy capital: ~$460MM 2014 FCF* Internal investment Acquisitions Share repurchases * Represents cash flow from operations less capital expenditures D E N T S P L Y I N V E S T O R P R E S E N T A T I O N 13

14 TA R G E T S & D R I V E R S O F G ROW T H Targets of: 3-6% average internal growth (10%- 20% premium to dental market growth) 20% adjusted operating margin in 2017 ROIC in the range of 12-15% Cash flow growth drivers: Market opportunities Dental: premium to GDP Emerging markets: 2014 ~16% Global efficiency program: Global procurement Better asset turnover and utilization SG&A leverage Reinvestment Innovation Acquisitions Sales and marketing D E N T S P L Y I N V E S T O R P R E S E N T A T I O N 14

15 R E C E N T R E S U LT S Q1 2015: Sales, ex PM, declined 8.4% Currency translation headwind -9.7% Constant currency growth +1.3% Internal growth +1.3% Adjusted operating margin expanded 100 bps to 18.7% Operating cash flow increased 2% to a first quarter record $66 million Free cash flow up 26% to $49 million EPS on an adjusted basis flat at $0.59 Adjusted EPS grew ~6% ex. currency impact Currency ~3.5 cent headwind D E N T S P L Y I N V E S T O R P R E S E N T A T I O N 15

16 C U R R E N C Y R AT E C H A N G E S 2015 Current Rates vs Average Rates Negative values indicate foreign currencies are weakening vs. USD -11.9% AUD -21.4% BRL -8.6% CAD -2.2% CHF -15.4% EUR -6.9% GBP -10.9% JPY -1.6% KRW -17.5% SEK Negative values indicate EUR is weakening vs. foreign currencies EUR/SEK 2.5% -13.5% EUR/CHF -22.0% -20.0% -18.0% -16.0% -14.0% -12.0% -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% D E N T S P L Y I N V E S T O R P R E S E N T A T I O N 16

17 A D J U S T E D O P E R AT I N G M A R G I N * % % % % % * A non-gaap measure that excludes certain items. For a reconciliation to the GAAP measure, refer to our SEC filings including 8-K s and annual report on form 10-K D E N T S P L Y I N V E S T O R P R E S E N T A T I O N 17

18 A D J U S T E D E P S * & E A R N I N G S G ROW T H $ $ $ $ $ $ $ * A non-gaap measure that excludes certain items. For a reconciliation to the GAAP measure, refer to our SEC filings including 8-K s and annual report on form 10-K D E N T S P L Y I N V E S T O R P R E S E N T A T I O N 18

19 S T RO N G F I N A N C I A L P O S I T I O N Q Cash and cash equivalents $ Total assets $ 4, , , Total debt, current and long term $ 1, , , , Net debt 1 $ 1, , , , Equity $ 2, , , , Net debt to total capitalization % % % % Net debt to adjusted EBITDA x 1. 9 x 2. 5 x 2. 6 x 1 Long-term debt and notes payable minus cash and equivalents 2 Net debt plus total equity 3 Calculated using adjusted operating income, TTM, and adding depreciation D E N T S P L Y I N V E S T O R P R E S E N T A T I O N 19

20 B A L A N C E D C A P I TA L D E P L OY M E N T A C Q U I S I T I O N G R O W T H B Y Y E A R % % % % % % % L E V E R A G E R AT I O : N E T D E B T / E B I T D A Priorities: next $1 billion of FCF Reinvest for internal growth Fund R&D projects Geographic expansion Field sales representatives Acquisitions Repurchase shares Increase dividend D E N T S P L Y I N V E S T O R P R E S E N T A T I O N 20

21 D E N T S P L Y I N V E S T O R P R E S E N T A T I O N 21