Dean Foods Fourth Quarter and Year End 2008 Earnings Report February 11, 2009
Forward Looking Statements The following 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: 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, innovation, and research and development 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, which are identified in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K (which can be accessed on our website at www.deanfoods.com or the website of the Securities and Exchange Commission at www.sec.gov). The Company's ability to profit from its branding initiatives depends on a number of factors including consumer acceptance of the Company's products. 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 h any such statement t t is based. Certain non-gaap financial measures contained in this presentation, including adjusted diluted earnings per share, free cash flow, consolidated adjusted operating income and consolidated adjusted net income, have been adjusted to eliminate the net expense or net gain related to certain items identified in our press releases. 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 www.deanfoods.com/investors. 2
Today s Prepared Remarks Barry Sievert, VP Investor Relations & Corporate FP&A Jack Callahan, Chief Financial Officer Review Financial i Results Comments on Forward Outlook Gregg Engles, Chairman and Chief Executive Officer Business and Commodity Review Update of Strategic Initiatives 3
Agenda: Jack Callahan, CFO Dean Foods Segment Performance Cash Flow Outlook 4
Dean Foods: 4Q 2008 Best Quarter in Company History $185 Adjusted Operating Income $ Millions Highlights 149 162 190 138 141 company Highest quarterly adjusted operating income in history of company Excellent profit growth across both operating segments due to top line growth, strong execution and a favorable dairy and energy commodity environment 4Q 06 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 % PY -19.3% -13.5% 3.1% 14.3% 27.3% Accumulating benefits of strategic initiatives 5
Significant EPS Leverage $ Millions, except EPS 4Q B/(W) vs 2008 4Q 2007 Adjusted Operating Income $ 190 27% Interest Expense $ 73 $ 15.8 Tax Rate 38.8% Adjusted Net Income from Continuing Operations $ 71 92% Shares Outstanding 156 +18.3M Adjusted Diluted EPS $ 0.46 70% 6
Dean Foods 2008: Solid Recovery Adjusted Operating Income $ Millions 676 Highlights $554 619 590 631 Strengthening results driven by operational improvements, strategic initiatives, and branded growth Full year results reflect the resiliency of the business despite a weak Q1 and volatile energy costs 2004 2005 2006 2007 2008 Quarterly profit growth Q1 = -14% Q2 = + 3% Q3 = +14% Q4 = +27% % PY 7.3% 11.6% 9.2% -12.7% 7.1% 7
Renewed EPS growth $ Millions, except EPS FY B/(W) vs 2008 FY 2007 Adjusted Operating Income $ 631 7% Interest Expense $ 308 $ 11.6 Tax Rate 38.3% Adjusted Net Income from Continuing Operations $ 199 21% Average Shares Outstanding 153 +16.1M Adjusted Diluted EPS $ 1.30 8% 8
Agenda: Jack Callahan, CFO Dean Foods Segment Performance Cash Flow Outlook 9
Accelerating Share Gain 4.0% 30% 3.0% Fluid Milk DSD Dairy Competition DSD Dairy 2.8% 2.0% 10% 1.0% 0.0% -1.0% 10% -2.0% Competition 1-1.3% -3.0% -4.0% 1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 *Competitor estimates derived from subtracting DSD Dairy pounds from USDA sales pounds Q4 contains an estimate for USDA/Competitor December sales 10
Improving Dairy Commodity Trends $22 $20 Class I Mover $18 $16 $14 $12 $10 $1.75 $1.65 2007 2008 Avg: $18.97 Avg: $16.10-12% Y-Y -23% Y-Y 3Q 4Q J F M A M J J A S O N D J F M A M J J A S O N D CME Butter $1.55 $1.45 $1.35 $1.25 $1.15 $1.05 2008 2007 Avg: $1.62 Avg: $1.52 +13% Y-Y Y +14% Y-YY J F M A M J J A S O N D J F M A M J J A S O N D 3Q 4Q 11
DSD Dairy: 4Q 2008 Best Quarter Ever $127 Operating Income $ Millions 131 154 140 166 Highlights Highest DSD Dairy operating income in company history Strategic initiatives benefitting results: Reduction in force Plant closures 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 % PY -16.1% -14.8% 9.3% 20.5% 30.9% Route productivity Private label trade-down continues 12
DSD Dairy: Solid Recovery Despite High Dairy Inputs Operating Income $ Millions Highlights $549 577 610 591 Operating income growth of 10% from 2007 despite continued 538 commodity challenges Class I Mover $14.98 14.40 18.14 18.00 Profit recovery from 2007 demonstrates ability to manage high input costs over time 11.88 2004 14.98 2005 14.98 2006 2007 2008 % PY -8.3% 5.1% 5.7% -11.8% 9.9% 13
WhiteWave Morningstar: Solid 4Q 2008 Sales Growth $672 WhiteWave 619 Net Sales $ Millions 652 Morningstar 671 708 288 B/(W) vs 4Q 07 5% 1.5% Brand Performance High-Single Digits Nearly Fifteen Percent* 420 8% Mid-Single Digits 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 %PY 21.1% 1% 16.8% 10.4% 8.6% 5.3% Modest Growth *Refers to branded milk sales 14
WhiteWave Morningstar: Strong 4Q 2008 Profit Growth Operating Income $ Millions Highlights $61 69 Strong volume leverage, pricing execution and cost management 45 49 41 Improving pricing on the Horizon Brand Declining butter prices late in the quarter favorable for Morningstar 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 % PY -10.5% 0.5% -11.7% -4.0% 13.9% 15
WhiteWave Morningstar: 10% 2008 Sales Growth WhiteWave $1,981 2,068 Net Sales $ Millions Morningstar 2,411 B/(W) vs FY07 2,650 10% 1,120 8% Brand Performance Low-Double Digits Over Twenty Percent* 1,530 12% WW High-Single Digits 2005 2006 2007 2008 Mid-Single Digits % PY 12.4% 4.4% 16.6% 9.9% *Refers to branded milk sales 16
WhiteWave Morningstar: 2008 Profit Flat Operating Income $ Millions Highlights $136 180 207 205 205 Flat full year profit due to difficult commodity environment for Morningstar and organic milk investments Expect renewed profit growth in 2009* 2004 2005 2006 2007 2008 % PY 31.8% 15.3% -1.1% 0.2% *before Hero investment 17
Agenda: Jack Callahan, CFO Dean Foods Segment Performance Cash Flow Outlook 18
Exceptional Cash Flow $ Millions Twelve Months ended Dec 31, 2008 Net Cash Provided by Continuing Operations $ 719.3 Capital Expenditures (257.0) Free Cash Flow from Operations $ 462.3 Cash Outflows for Acquisitions $ (95.9) Net Debt Reduction $ (783.1) Issuance of Common Stock $ 419.7 Expecting capital expenditures up to $300 million in 2009 19
$877 Million of Debt Reduction Since 3Q07 Peak $ Millions $5,357 5,366 5,272 4,812 4,724 4,635 4,489 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2007 2008 Leverage Ratio* 5.63x 5.97x 5.94x 5.56x 5.48x 5.35x 4.92x *As defined by credit agreement(s) 20
Agenda: Jack Callahan, CFO Dean Foods Segment Performance Cash Flow Outlook 21
Solid Growth Expected in 2009 DSD Dairy Significant ifi momentum heading into 2009 Favorable commodity environment for now, continued volatility likely Competitive intensity remains WhiteWave- Morningstar Expect dampened net sales growth due to category trends and non-core product exits Anticipate WhiteWave-Morningstar return to profit growth Hero JV promising new platform for growth requiring approximately six cents per share investment Dean Foods Selectively investing to support longer-term strategy Increased pension expense of five cents per share Adjusted Diluted EPS At least $1.50 per share for full year At least $0.38 per share in first quarter 22
Gregg Engles, CEO Highlights Strong Fourth Quarter DSD Dairy operating income increased 31% WhiteWave-Morningstar operating income increased 14% Dean Foods adjusted operating income increased 27% Adjusted diluted earnings per share increased 70% Solid Recovery in 2008 DSD Dairy operating income increased 10% WhiteWave-Morningstar W i t operating income flat Dean Foods adjusted operating income increased 7% Adjusted diluted earnings per share increased 8% Record free cash flow at $462 million 23
Dairy Inputs Have Collapsed $22 $20 Class I Mover $18 $16 $14 $12 $10 $1.75 $1.65 2007 2008 2009 J F M A M J J A S O N D J F M A M J J A S O N D J F CME Butter 3Q 4Q $1.55 $1.45 $1.35 $1.25 $1.15 $1.05 2007 2008 2009 J F M A M J J A S O N D J F M A M J J A S O N D J 3Q 4Q 24
Lower Prices, A Rising Trend, Varied Forecasts $22 Class I Mover: 2009 Forecasts from Six Leading Dairy Economists $20 $18 2008 Actual: $18.00 Average $16 $13.80 High 2009 Average Estimates $14 $12.09 Mid $10.98 Low $12 $10 $8 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec 25
Our strategies leverage these unique advantages to win A Three Part Strategy to Win Drive to Lowest Strengthen our Build for the Cost Position Core Franchises Future Improve supply chain productivity Organize for success Expand our leadership in milk Increase the power of our brands Lead growth & innovation in the chilled space Leverage deep executive expertise to deliver goals 26
Summary Single best quarter in Dean Foods history 2008 full year results demonstrate a solid recovery after commodity shock of 2007 2008 Free Cash Flow of $462 million Favorable commodities and benefits from strategic initiatives position us well heading into 2009 First quarter off to a strong start. t Confident in full year earnings expectations for at least $1.50 per share Look forward to meeting with you in New York 27
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