Dean Foods. May 2015

Transcription

1 Dean Foods May

2 Forward-Looking Statements Some of the statements made in this presentation are forward-looking and are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995 including statements relating to: (1) projected sales (including specific product lines and the company as a whole), price realization, profit margins, net income, earnings per share, free cash flow and debt covenant compliance, (2) our regional and national branding initiatives, (3) our innovation, research and development plans and our ability to successfully launch new products or brands (4) commodity prices and other inputs and our ability to forecast or predict commodity prices, milk production and milk exports, (5) our cost-savings initiatives, including plant closures and route reductions, and our ability to achieve expected savings, (6) our planned capital expenditures, (7) the status of our litigation matters, (8) our plans related to our capital structure, (9) our dividend policy, and (10) possible repurchases of shares of our common stock. These statements involve risks and uncertainties that may cause results to differ materially from those set forth in this presentation. Financial projections are based on a number of assumptions. Actual results could be materially different than projected if those assumptions are erroneous. The cost and supply of commodities and other raw materials are determined by market forces over which we have limited or no control. Sales, operating income, net income, debt covenant compliance, financial performance and adjusted earnings per share can vary based on a variety of economic, governmental and competitive factors, which are identified in our filings with the Securities and Exchange Commission, including our most recent Forms 10-K and 10-Q (which can be accessed on our website at or on the website of the Securities and Exchange Commission at Our ability to profit from our branding initiatives depends on a number of factors including consumer acceptance of our products. The declaration and payment of cash dividends under our dividend policy remains at the sole discretion of the Board of Directors or a committee thereof and will depend upon our financial results, cash requirements, future prospects, restrictions in our credit agreement and debt covenant compliance, applicable law and other factors that may be deemed relevant by the Board or such committee. All forward-looking statements in this presentation speak only as of the date of this presentation. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in our expectations with regard thereto or any changes in the events, conditions or circumstances on which any such statement is based. Certain non-gaap financial measures contained in this presentation, including adjusted diluted earnings per share, free cash flow, adjusted EBITDA, consolidated adjusted operating income and consolidated adjusted net income, are from continuing operations and have been adjusted to eliminate the net expense or net gain related to certain items identified in our earnings press release. A full reconciliation of these measures calculated according to GAAP and on an adjusted basis is contained in such press release, which is publicly available on our website at 2

3 Dean Foods: Leader in the Dairy Category National Presence: Largest Player in Dairy National Brands: DairyPure & TruMoo Supply Chain: Sustainable Competitive Advantages Operating Performance: Improving Results & Strengthened Balance Sheet 3

4 Category: A Huge Category Ready for Growth Fluid Milk Category Presents a Compelling Opportunity Dean Foods is Positioned as Industry Leader Ubiquitous large category with strong household penetration One of the largest, most profitable categories for retailers Strong health & wellness credentials On-trend with consumer s growing focus on fresh, local, protein-dense products with clean labels Aligned to new industry marketing campaign Dean Foods the largest player in milk Coast to coast network, enabling strong partnerships with national retail and food service accounts Large network offers opportunities to optimize capacity, to drive efficiency, and to lower unit costs First company to provide a fresh white milk national brand while building on the power and consumer loyalty of our regional brands 4

5 Scale: Dean Foods is the Largest Player in Milk Retail Volume (in millions) Largest U.S. producer and distributor of fluid milk, with 40% (1) share of retail category 40% highly regarded regional and national brands; only producer with a national footprint 34% 26% 1000 National branding for fresh white milk (DairyPure ) and flavored milk (TruMoo ) endorsed by trusted regional brands Annual Volume: >2.6B Gallons Market Cap: $1.8B Vertical Processor Other NYSE: DF (1) Milk Fact-based Survey Internal Dean Survey conducted using Dean account data. External retail data from IRI. Not independently verified. 5

6 Our Portfolio: Fluid Milk and More 2014 Net Sales by Product Diverse product offerings provide platform for line extensions and innovation 2% OTHER (4) 26% DEAN BRANDED WHITE Dean Foods mix 47% brands and 53% private label across all of our products (1) ; historically consistent branded white milk share 9% ICE CREAM (3) 5% OTHER BEVERAGES (2) 4% CULTURED 7% TRUMOO 73% FLUID MILK Ice cream, cultured products, creamers, juice, tea and water fill out the Dean Foods portfolio 7% CREAMERS (1) 40% PL WHITE AND FLAVORED (1) Includes half-and-half and whipping cream, creamers and other ESL fluids (2) Includes fruit juice, fruit-flavored drinks, iced tea and water (3) Includes ice cream, ice cream mix and ice cream novelties (4) Includes items for resale such as butter, cheese, eggs and milkshakes 6

7 National Customer Base: Great Partnerships Across Diversified Channels Large Format 61% Small Format 12% Foodservice 13% School/Other 14% 7 Source: Internal sales data. Based on 2014 Volume.

8 National Brands: A Catalyst for Growth National Brands Backed by Regional Brands Dean is the ONLY producer with a national footprint and the ability to launch fresh milk national brands National brands resonate with customers and consumers, and are a game changer for our company Success with TruMoo has exceeded expectations since launch in

9 National Brands: Consumer Perspective Consumer Insights Emphasize a Focus on Four Consumer Priorities Value 1 Pure & Natural 2 Functional 3 Permissible Indulgence 4 9 Sources: 2011 Consumer Demand Landscape, Landis Healthy Food Database, Landis U.S. Beverage Database.

10 National Brands: The Evolution of TruMoo Branded Flavored Milk: 2011 TruMoo Category Share & ACV Category Share: 20% share of fresh flavored milk category Brand Penetration: In 55% of available outlets Solid positioning, but opportunity for growth TruMoo : % 20% Category Share % ACV 73% 10 Category Share: 25% share of fresh flavored milk category- a 500 basis point increase since launch (+25%) Brand Penetration: In 73% of available outlets an 1,800 basis point increase since launch (+33%) Significant growth within category TruMoo significantly outperforming the flavored milk category Source: IRI. TruMoo is Outperforming Flavored Milk Category Trends 2.2% Flavored Milk Category Dollars % Chg. Vs. Year Ago 3.7%

11 National Brands: The Evolution of TruMoo Since launch, the Company has focused on capitalizing on TruMoo s strong brand awareness by investing in new growth opportunities: Marketing opportunities around key seasons Line extensions, such as ice cream and protein TruMoo Brand Awareness is 84% Nationally, up From 59% in Year One 59% 84% Brand Awareness Driving availability via extended shelf life products Key Seasons Line Extensions 11

12 DairyPure : What it Means First fresh, white milk national brand DairyPure and regional brands working together to unlock national growth potential 12

13 13 DairyPure : What it Means

14 DairyPure : What it Means A national brand with sales larger than several well recognized consumer package products Potential for partnerships with other leaders in the food industry 14

15 DairyPure : A Winning Proposition Only Company Able to Offer a National Fresh Dairy Solution While Continuing to be Endorsed by Regional Brands CONSUMER CATEGORY CUSTOMERS COMPANY On trend with desire for clean label, local, fresh, protein- and nutrient-packed products Not just a new label Five Point Purity Promise is a message consumers value Fills a void in the category National platform to articulate health & nutritional benefits Elevates fresh, pure, white milk in the minds of consumers Single UPC code simplifies, reduces administrative costs Benefits of national brand while retaining regional brand equity Speak with one voice via national media efficiencies in marketing spend Opportunities to cross promote with various CPG companies National platform for future innovation 15

16 Operations: Taking Actions for the Long-Term Continuing to Create an Efficient Plant Network Optimization: Consolidation of network provides long-term opportunity Safety & Quality: Notably outperforming beverage industry average safety rate (1) Cost: Continuing to reduce cost & shrink through continuous improvement Procurement: Milk, ingredients & packaging savings 16 (1) Comparing 2014 Dean Foods data to US Department of Labor BLS (bureau of labor statistics) data for Food and Beverage drink manufacturing category.

17 Logistics: Taking Actions for the Long-Term Optimizing Routes to Ensure Sustainable Lowest Landed Cost Frequency: Focus on filling trucks & optimizing deliveries Technology: Increased use of routing tools, software & in-cab safety solution Utilization: Exploring opportunities to add complementary products to our distribution Sustainability: Adding compressed natural gas (CNG) trucks to fleet 17

18 Per gallon Operating Results: Improving Performance Adjusted operating income rebounding after difficult 2014; Q reflects third consecutive quarter of improvement Adjusted operating income*; total and per gallon 52 Benefits of lower raw milk costs, declining shrink costs and significantly improved price realization Gross profit per gallon up 7.1 cents sequentially in Q over prior quarter Branded Mix in Q1 flat sequentially and up YOY, despite private label gap Category volumes improving with lower retail prices, but rate of decline remains above historical norm (6) Q1 Q2 Q3 Q4 Q $ millions, except per gallon 18 * See Reconciliation of Non-GAAP Financial Measures in appendix for computation

19 Balance Sheet & Cash Flow: Strengthened with Refinancing & Operating Performance 19 Strong free cash flow performance reflects improving operating results, commodity cost declines and lower working capital Comprehensive refinancing and free cash flow performance enhances liquidity and financial flexibility More than doubled average weighted debt maturities, enhanced accessible liquidity, improved covenant flexibility, and reduced pricing Q1 total leverage improved more than a full turn to 3.35 times net debt to EBITDA* $800 $700 $600 $500 $400 $300 $200 $100 $0 Q (Pre Debt Refinancing) $ millions $800 $700 $600 $500 $400 $300 $200 $100 $ Notes AR Outstanding AR Commitment Revolver Outstanding Revolver Commitment Q (Post Debt Refinancing) $ millions Notes AR Outstanding AR Commitment Revolver Outstanding Revolver Commitment notes are prepayable at 25% over par in 2021, and par thereafter *Not a financial covenant but calculated in accordance with Total Net Leverage Ratio per our credit agreement 700

20 Summary and Looking Ahead Largest player in the milk industry Significant opportunity to expand our leadership role with national brands Improving operating results and free cash flow performance Enhanced capital structure Incremental opportunities associated with DairyPure 20

21 21 Appendix

22 Reconciliation of GAAP to Adjusted Income Three months ended March 31, 2015 Asset write-downs Facility closing, Loss on early and (gain) loss on reorganization and retirement of Other Income sale of assets realignment costs long-term debt adjustments tax GAAP (a) (b) (c) (d) (e) Adjusted * Operating income (loss): Dean Foods $ 51,943 $ - $ - $ - $ (309) $ - $ 51,634 Facility closing and reorganization costs (1,245) - 1, Impairment on intangibles (109,910) 109, Total operating income (loss) (59,212) 109,910 1,245 - (309) - 51, Interest expense 16, (426) - 16,102 Loss on early retirement of long-term debt 43, (43,609) Other income, net (446) (446) Income tax expense (benefit) (45,252) ,924 13,672 Income (loss) from continuing operations (73,651) 109,910 1,245 43, (58,924) 22, Loss on sale from discontinued operations, net of tax (89) Net income (loss) $ (73,740) $ 109,910 $ 1,245 $ 43,609 $ 206 $ (58,924) $ 22, Diluted earnings (loss) per share (f) $ (0.78) $ 1.17 $ 0.01 $ 0.46 $ 0.01 $ (0.63) $ 0.24 $ - $ - Three months ended March 31, 2014 Asset write-downs Facility closing, Loss on early and (gain) loss on reorganization and retirement of Other Income sale of assets realignment costs long-term debt adjustments tax GAAP (a) (b) (c) (d) (e) Adjusted * 22 Operating income (loss): Dean Foods $ 3,753 $ 426 $ 3,654 $ - $ (979) $ - $ 6,854 Facility closing and reorganization costs (977) Litigation settlements 2, (2,521) - - Total operating income 5, ,631 - (3,500) - 6, Interest expense 15, (446) - 14,577 Other income, net (321) (321) Income tax expense (3,200) (2,813) Income (loss) from continuing operations (9,792) 426 4,631 - (3,054) 3,200 (4,589) - - Income from discontinued operations, net of tax (836) - - Net income (loss) $ (8,956) $ 426 $ 4,631 $ - $ (3,890) $ 3,200 $ (4,589) - - Diluted earnings (loss) per share $ (0.09) $ - $ 0.05 $ - $ (0.04) $ 0.03 $ (0.05)