Forward Looking Statements

Transcription

1 Dean Foods Q Earnings Call August 6, 2008

2 Forward Looking Statements The following statements made in this presentation are forward looking and are made pursuant to the safe harbor provision of the Securities Litigation Reform Act of 1995: statements relating to (1) projected sales (including for individual segments, for specific product lines and for the company as a whole), profit margins, net income and earnings per share, (2) our growth strategy, (3) our branding initiatives (4) our integration plans, and (5) our cost-savings initiatives. 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. Sales, profit margins, net income and earnings per share can vary based on a variety of economic, governmental and competitive factors, all of which are identified in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10K (which can be accessed on our website at or the website of the Securities and Exchange Commission at The success of our branding initiatives will depend on a number of factors, including customer and consumer acceptance of both the products themselves and the prices that we intend to charge for those products. We have many competitors with greater resources than ours, and significant additional spending or innovations by our competitors could render our products less successful than we currently expect. 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 and free cash flow for the quarters ended March 31, 2007, June 30, 2007, September 30, 2007, December 31, 2007, March 31, 2008 and June 30, 2008, and consolidated adjusted operating income and consolidated adjusted net income for the quarter ended June 30, 2008, have been adjusted to eliminate the net expense or net gain related to certain items identified in our press releases dated May 3, 2007, August 7, 2007, November 8, 2007, February 13, 2008, April 30, 2008, and August 6, A full reconciliation of these measures calculated according to GAAP and on an adjusted basis is contained in such press releases, which are publicly available on our web site at 2

3 Today s Prepared Remarks Barry Sievert, VP Investor Relations & Corporate FP&A Jack Callahan, Chief Financial Officer Review Financial i Results Gregg Engles, Chief Executive Officer Update of Strategic Initiatives Comments on Forward Outlook 3

4 Q2 Financial Highlights Diluted Adjusted Earnings Per Share + 10% 0.50* Consolidated Adjusted Operating Income +3% 12.2% -9.6% -19.3% -13.5% 3.1% $ % Free Cash Flow** +$96 million 53.4 $ Millions (18.8) (11.9) Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 * Q1 07 Diluted EPS is prior to balance sheet recapitalization ** Free Cash Flow is defined as net cash provided by operating activities less capital expenditures

5 Q2 Segment Performance $ Millions Q2 B/(W) 2008 vs Q2 07 DSD Dairy Fluid Milk Volume 1.1% Operating Profit $ % WhiteWave-Morningstar Net Sales $ % Operating Profit $ 49.3 (11.7%) 5

6 Quarterly Performance DSD Dairy 2.2% Fluid Milk DSD Dairy vs USDA 1.6% 0.2% 0.5% -2.2% 00% 0.0% -0.2% 1.1% -0.9% -0.6% -1.2% estimate -3.5% Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Fluid milk volumes up 1.1% versus last year Continued low category elasticity 6

7 Quarterly Performance DSD Dairy Operating Profit $ Millions $ Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 % PY 8.8% -12.6% -25.6% -16.1% -14.8% 9.3% First positive year over year growth since Q1 07 Tight focus on cost control and pricing execution offset inflationary input costs 7

8 Quarterly Sales Performance WhiteWave Morningstar Net Sales $ Millions $529.7 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 % PY 7.5% 16.3% 20.8% 21.1% 16.8% 10.4% WW-MS Net sales up 10% over Q207 WhiteWave net sales $368 MM, up 13% Morningstar net sales $284 MM, up 7% 8

9 Quarterly Sales Performance WhiteWave Morningstar: Branded Portfolio Q Net Sales High Single Digits High Single Digits Low Double Digits Nearly Thirty Percent* Strong growth across the portfolio *Refers to branded milk sales 9

10 Horizon Organic Continued strong sales growth Price increases have been offset by higher milk costs Costs have risen due to higher feed costs, pay prices to farmers and transportationt ti $3.86 Retail Pricing Horizon Regular White Half Gallon $3.71 $3.56 $3.63 $3.74 $3.89 Private label prices have not moved price gaps Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 have widened ed %PY 49% 4.9% -1.6% 16% -6.4% 64% -5.3% 53% -3.2% 32% 46% 4.6% 10

11 Quarterly Operating Profit Performance WhiteWave Morningstar Operating Profit $ Millions Q2 Highlights $ Strong contribution across branded 93 portfolio excluding Horizon Organic 49.3 Continuing challenges in the Horizon Organic brand Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Commodity challenges at Morningstar and modestly higher SG&A expenses % PY 20.2% 14.0% -18.1% -10.5% 0.5% -11.7% 11

12 Corporate Expense $ $ Millions Q2 Highlights Up slightly from Q2 07 as we balance cost controls with strategic investments Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 For balance of year, expect corporate expense to modestly increase due to transformational capability building and year over year overlaps % PY 7.0% 9.2% 4.5% 12.4% -2.4% 4.1% YTD = 0.9% 12

13 Consolidated Adjusted Operating Income, Net Income & EPS p g, $ Millions, except EPS Q2 B/(W) 2008 vs Q2 07 Operating Income $ % Interest Expense $ 76.5 $12.4 Tax Rate 39.3% Net Income $ % Shares Outstanding M Shares EPS $ % 0% 13

14 Cash Flow $ Millions Six months ended June 30, 2008 Net Cash Provided by Operations $ Capital Expenditures (105.8) Free Cash Flow from Operations $ Cash Outflows for Acquisitions $ (60.9) Repayment of Debt $ (562.9) Issuance of Common Stock $

15 Total Debt Outstanding $ Millions $5,357 5,366 5,272 4, ,724 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Leverage Ratio* 5.64x 5.97x 5.94x 5.56x 5.48x *As defined by credit agreement(s) 15

16 Gregg Engles, CEO Substantial inflationary pressures: Class I Mover up 10% from year ago levels Diesel Fuel up over 50% Resin prices up over 30% Electricity, natural gas, soybeans, and other inputs also increased Returned to growth despite these continued pressures Longer-term transformational planning continues 16

17 DSD Dairy Relatively low category elasticity - Q2 fluid milk volumes up 1.1% Industry practice of monthly price changes - Tightened procedures creating more efficient pass-through Driving increased efficiency and productivity Emerging concern over competitive intensity in certain geographies 17

18 WhiteWave-Morningstar Continued strong net sales performance Balance of branded portfolio profitability is increasing, but Horizon Organic continues to be challenged It is unclear when a recovery in Horizon Organic profitability will occur 18

19 Dean Transformation Excellent management team now in place Good progress has been made on developing long-term strategy 19

20 Summary and Guidance DSD Cautiously optimistic about 2H08 Dairy Heightened level of competitive pressure in some geographies Continue tight cost controls and focus on pricing execution WhiteWave- Morningstar Anticipate continued strong net sales Horizon Organic recovery of profits remains a formidable challenge going forward EPS Third quarter diluted adjusted EPS expect $0.26 to $0.31 Reiterate full year diluted adjusted EPS at least $

21