DJO Global, Inc. Company Presentation March 2013 Safe Harbor - - PowerPoint PPT Presentation

DJO Global, Inc. Company Presentation

March 2013

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,

• ur 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

• f 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.

Bracing and Vascular 39.1% Recovery Sciences 29.6% International 24.8% Surgical Implant 6.5%

DJO Profile

Business Overview

$898 $949 $946 $966 $1,075 $1,129 $182 $213 $250 $263 $264 $271 2007 2008 2009 2010 2011 2012 Revenue Adjusted EBITDA

(2)

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 2011 and 2012 acquisitions. (2) 2007 pro forma for DJO Merger and other 2007 acquisitions.

 Headquartered near San Diego, CA  Approximately 5,300 employees in 27 countries  A leading orthopedic company with a totally unique

footprint focusing on injury prevention, conservative treatment and rehabilitation

 An innovator with a robust pipeline of products and

solutions that are more cost effective and less invasive than most surgical or pharmaceutical alternatives

 A market leader in orthopedic bracing, vascular health,

rehabilitation, pain management, bone growth, muscle stimulation, and shoulder reconstruction

 A partner with an excellent local service infrastructure,

strong clinician and hospital relationships

 Financial sponsor – The Blackstone Group 3

$293.9 $296.0 $298.8 $311.6 $387.9 $441.3 2007 2008 2009 2010 2011 2012

(3) (2)

Bracing and Vascular – 39.1% of 2012 Sales

 Broad range of soft goods – key to GPO penetration  Rigid knee bracing and Cold therapy  Retail pharmacy offering with Bell Horn  Vascular systems (DVT prophylaxis)  Broad range of compression therapy garments  Diabetic footwear  Acquired Exos on 12/28/2012  #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)

+8.2%(3) In 2012

(1) 2009 Frost & Sullivan. (2) Pro forma for 2007 DJO Merger. (3) Pro forma for 2011 acquisitions.

4

Recovery Sciences – 29.6% 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)

$327.1 $338.6 $342.0 $347.1 $342.6 $334.6 2007 2008 2009 2010 2011 2012

• 2.3% in

2012

(1) 2007 Pro forma for DJO Merger and other 2007 acquisitions.

5

Recovery Sciences Net Sales

(1)

Germany 29.1% ROW 25.2% France 19.7% Canada 8.8% Spain, Benelux & Italy 8.4% Nordic 3.5% UK 5.3%

$219.5 $252.3 $241.5 $244.5 $279.3 $280.5 2007 2008 2009 2010 2011 2012

International – 24.8% of 2012 Sales

International Net Sales 2012 Sales Mix by Geography

($ in millions)

+5.7%(2) in 2012

(1)

(1) 2007 Pro Forma for DJO Merger. (2) Excludes impact from changes in foreign currency exchange rates (constant currency) and pro forma for 2011 acquisitions.

6

(3)

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

$57.5 $61.6 $63.9 $62.7 $64.9 $73.0 2007 2008 2009 2010 2011 2012

($ in millions)

+12.4% in 2012

(1) 2006 Frost & Sullivan.

7

Surgical Implant Net Sales

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

Strong New Product Pipeline

Reaction Knee X-Act ROM Knee X-Act ROM Elbow IceMan CLEAR3 RSP Monoblock Exos OA Nano

9

Attractive Open Market Spaces

CONSERVATIVE CARE TREATMENT OPTIONS FOR KNEE PAIN

10

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

• n 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 39.1% Recovery Sciences 29.6% International 24.8% Surgical Implants 6.5% Healthcare Professionals 39.0% Dealers & Distributors 32.8% Insurances 21.8% Medicare / Medicaid 6.4% 11

 = primary market(s) Distribution

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

12

 Main manufacturing facility in Tijuana, Mexico

(285,000 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

13

2012 Highlights

14

• Successful Business Acceleration Plan
• Create the “best” customer experience
• Accelerate differentiated products and get key new products to launch
• Focus on talent
• Manage expenses tightly and repurpose spend to invest in revenue acceleration
• Full year 2012 results highlight improving financial metrics
• Revenue growth accelerated to 4.5% (constant currency and pro forma for acquisitions)
• EBITDA results improving as revenue accelerates
• Non-recurring and integration charges reduced by nearly 50% from 2011, as acquisition integration and

ERP implementation wind down

• Completed Exos acquisition in late December to drive improved margins from sales of very

successful new product platform

$898 $949 $946 $966 $1,075 $1,129 2007 2008 2009 2010 2011 2012

2011 2012 Net Sales $ 1,095 $ 1,129 Adjusted Gross Profit(2) $ 687 $ 689 % of Net Sales 63% 61% Adjusted Opex(2) $ 443 $ 448 % of Net Sales 40% 40% Adjusted EBITDA(2) $ 272 $ 271 % of Net Sales 25% 24%

Net Sales Adjusted EBITDA(2) Selected Income Statement Metrics

Strong, consistent historical financial performance with healthy growth and margins

Historical Financial Summary

($ in millions)

$182 $213 $250 $263 $264 $271 2007 2008 2009 2010 2011 2012

($ in millions)

% margin 20% 22% 27% 27% 25% 24%

($ in millions) (1) (1) (1) 2007 pro forma for DJO Merger and other 2007 acquisitions. (2) 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 2011 and 2012 acquisitions. (3) In constant currency and pro forma for 2011 acquisitions, and for Adjusted EBITDA, excludes $4.2 million credit in 2011 for prior period adjustment.

+4.5%(3) 15 +2.4%(3)

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)

16

Unsaved Document / 3/19/2011 / 14:36

($ in millions) Debt: 12/31/12 Rate Maturity Revolver ($100 million available) $ 3.0 L+4.75% Mar-2017 Extended term loans (3) 385.5 L+5.00% Nov-2016 New term loans (3) 476.5 L+5.00% 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 $ 2,235.0 Total Contributed Equity $ 839.2 Total Capitalization $ 3,074.2 Pro forma LTM Adjusted EBITDA(1) $ 274.0 First lien debt(2) / Adjusted EBITDA 3.0x Total debt(2) / Adjusted EBITDA 8.0x Equity / Total capitalization 27.3%

(4)

December 31, 2012 Capitalization Table

17

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 $31.2 million cash. 3) Exclusive of unamortized original issue discounts and premiums. 4) Subject to Libor Floor of 1.25%.

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 EBITDA and FCF generation, Business Acceleration Plan driving improving

financial results

18

Unsaved Document / 3/19/2011 / 14:36

Adjusted EBITDA Reconciliation – 2012

($ in millions)

Net Loss ($119.2) Interest Expense, net 182.9 Income Tax Benefit (4.9) Depreciation and Amortization 127.5 Non-Cash Charges (1) 10.7 Non-Recurring and Integration Charges (2) 32.6 Other Adjustments (3) 41.4 Subtotal 271.0 Future Cost Savings Related to Acquisitions 3.0 Adjusted EBITDA $274.0

(1) Non-Cash Charges:

Impairment of Goodwill/Intangibles $7.4 Impairment of fixed assets and assets held for sale 1.0 Stock Compensation and Other 2.3 $10.7

(2) Non-Recurring and Integration Charges:

ERP Implementation $5.6 Litigation and regulatory costs and settlements, net 12.6 Integration charges 14.4 $32.6

20

(3) Other adjustments:

Blackstone monitoring fee $7.0 Noncontrolling interests 0.8 Loss on modification and extinguishmnet of debt 36.9 Other; primarily Fx related (3.3) $41.4

Adjustments Adjusted EBITDA reconciliation

($ in millions)

Non-recurring and integration charges decreased nearly 50%

2011 2012 % Variance $63.7 $32.6

• 48.8%

($ in millions)