FOCUS November 2013 Exhibit 99.1 |
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 specific product lines and the company as a whole), profit margins, net income, volumes, short term incentive compensation costs, earnings per share, free cash flow and debt covenant compliance, (2) our branding initiatives, (3) our innovation, and research and development plans, (4) our cost-savings initiatives, including plant closures and route reductions, and our ability to accelerate any such initiatives, (5) our plans related to our leverage, including our pending tender offer, (6) our plans to divest non-core operations, (7) our planned capital expenditures, (8) the status of our litigation matters, (9) the impact of divestitures including the sale of Morningstar and tax payments related thereto and the divestiture and spin-off of our former subsidiary, The WhiteWave Foods Company, (10) our planned dividend policy, (11) our pending tender offer, and (12) any future 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. 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 Form 10-K (which can be accessed on our website at www.deanfoods.com or on the website of the Securities and Exchange Commission at www.sec.gov). 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, 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 pro forma adjusted and historical non-GAAP financial measures contained in this presentation, including adjusted diluted earnings per share, free cash flow, , adjusted 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 releases, including the Morningstar divestiture. A full reconciliation of these measures calculated according to GAAP and on an adjusted basis is contained in such press releases, which is publicly available on our website at www.deanfoods.com/investors and at the end of this presentation. 2 |
Today’s agenda Who we are Leadership team, vision and direction Business strategy and company advantages Financial performance Conclusion 3 |
Who we are Trusted regional brands: 50+ Manufacturing facilities: 70+ Total employees: 19,000 Nearly 3.0B gallons produced annually Over 37,000 points of distribution More than 2/3 of U.S. households purchase a Dean Foods branded product annually 1 NYSE: DF Market cap: $1.7B 2 Revenues: $9.0+B Headquarters: Dallas 4 1. Source IRI 2. As of 11/13/2013 |
Today’s agenda Who we are Leadership team, vision and direction Business strategy and company advantages Financial performance Conclusion 5 |
Marty Devine Chief Commercial Officer Strong management team and vision Gregg Tanner Chief Executive Officer Rachel Gonzalez General Counsel Kim Warmbier Chief HR Officer Shay Braun Operations & Procurement Chris Bellairs Chief Financial Officer Brian Murphy Chief Information Officer Tony Brooks Logistics To be the most admired and trusted provider of wholesome, great-tasting dairy products at every occasion 6 |
Operational imperatives Never compromise on quality, safety or customer service Volume Performance Cost Productivity Effective Pricing Drive volume growth at appropriate economic returns Gain share through low cost, high service, valued brands model Augment volumes with differentiated products like TruMoo ® Build on unique opportunities to create a cost-advantaged position Expedite closure of under-utilized plants, routes Use cost savings to enable future growth Improve pricing tools and protocols to ensure pass-through of commodity inflation Reduce commodity- driven volatility Protect margins 7 |
Today’s agenda Who we are Leadership team, vision and direction Business strategy and company advantages Financial performance Conclusion 8 |
Dean Foods at a glance Largest U.S. processor and distributor of fluid milk Portfolio of trusted brands, complementary products – milk, ice cream, cultured dairy products, creamers, ice cream mix, and other dairy Best-in-class nationwide distribution platform with extensive refrigerated “direct store delivery” systems Cost control is part of our DNA 9 |
Distribution: Broad nationwide distribution across channels The country’s only coast-to-coast processor and distributor of fresh milk Large Format 69% Small Format 11% Foodservice 13% School/Govt 7% 10 |
Portfolio: Strength across the dairy case Dean Foods - fluid milk and more Dean Foods’ share of national branded fluid milk has increased over the past three years Ice cream, cultured products, creamers, juice, tea and water fill out the Dean Foods portfolio 3% FRESH CREAM (1) 2% ESL & ESL CREAMERS (2) 4% CULTURED 5% OTHER BEVERAGES (3) 9% ICE CREAM (4) 2% OTHER (5) 26% DEAN BRANDED WHITE 40% PL WHITE AND FLAVORED 74% FLUID MILK (1) Includes half-and-half and whipping cream (2) Includes creamers and other ESL fluids (3) Includes fruit juice, fruit-flavored drinks, iced tea and water (4) Includes ice cream, ice cream mix and ice cream novelties (5) Includes items for resale such as butter, cheese, eggs and milkshakes 8% TRUMOO 11 2012 NET SALES BY PRODUCTS |
White milk is a compelling, sustainable market opportunity Ubiquitous: in 90% of U.S. homes, over $20B of annual U.S. retail sales One of the largest, most profitable categories for retailers Strong health & wellness credentials Industry remains fragmented, large sophisticated platform provides significant competitive advantages Relatively Stable Long-term White Milk Consumption Trend 12 1. Symphony IRI Group, “Refrigerated Conventional White Milk Overview: Category Decline Review”, July, 2010. 2. IRI Panel, Total All Outlet, Calendar Year 2009 – 2012, 2006-2008 from IRI study published in 2011 Fluid Milk Category Dynamics 1 2 |
Scale: Dean Foods is the largest player in milk We have the #1 or #2 position, as measured by sales of branded white milk, in 80% of the IRI defined geographies in which we operate 35% 34% 31% -150 Players averaging 0.2% share each 13 |
Brands: Growing TruMoo 1.SymphonyIRI MULO 14 Flavored milk is a $1B category, and TruMoo is the largest flavored milk brand TruMoo was recently ranked as the fourth most successful consumer packaged goods brand of 2012 by Information Resources, Inc. (IRI) TruMoo is Dean Foods’ largest national brand at $636M of retail and school sales in 2012 No high fructose corn syrup, lower total sugar, low fat, all the great nutrition of milk Retail volumes up 8% in 2012, 1% YTD 2013 1 |
Portfolio: Ice cream Strong regional ice cream business Over $800 million in annual sales Mix of regional brands, foodservice, and private label Company-owned frozen distribution network 15 |
Dean Foods: Focused, disciplined, profitable Extend our sustainable competitive advantages Our relative size and capabilities afford us significant advantages versus our competitive set – we plan to extend those advantages Continued focus on cost, volume outperformance, effective pricing Lay the foundation for longer-term growth Focus on cash flow generation and total shareholder returns 16 |
Extend our sustainable competitive advantages: Manufacturing and Procurement Accelerating cost reduction across the P&L – targeting $120 million in 2013 savings Large network provides opportunities to reduce capacity to drive efficiency and unit costs lower – in the process of closing 10-15% of production facilities Eight plant closures announced over the past twelve months Seven closures completed this year 17 Leading network drives in-plant efficiency through ongoing continuous improvement program that works to alleviate efficiency bottlenecks and spread best practices through employee-led initiatives Leveraging the volume of our overall purchases to obtain favorable pricing across non-dairy commodities – typically a 10-15% cost advantage |
Extend our sustainable competitive advantages: Logistics We have a significant opportunity to drive additional logistics savings Leveraging technology XataNet GPS units provide detailed analysis of location, speed, stop length, etc. Also eliminates roughly 45 min per day of driver paperwork RoadNet enables significant improvements in routing efficiency Large opportunity to reduce and variablize our distribution assets 18 We are instituting the same continuous improvement processes in distribution that have been delivering manufacturing savings |
Extend our sustainable competitive advantages: Pricing and Selling Passthrough is an effective hedge against most milk commodity volatility Prices are reset monthly in concert with changes in Class I mover Customers expect and accept these changes We have developed and are implementing technology to increase precision of pricing across all SKUs Utilizing risk management capabilities to offer customers innovative pricing solutions Reducing overhead to drive competitiveness 19 |
Building long-term opportunities to grow Investing in the R&D pipeline Historical spending was skewed toward WhiteWave and Morningstar We have the opportunity to utilize our broad manufacturing and distribution capabilities for expansion into new value-added products and extensions Expect to begin increasing the innovation we bring to market in 18-24 months 20 TruMoo demonstrates that consumers value additional benefits in fluid dairy |
Today’s agenda Who we are Leadership team, vision and direction Business strategy and company advantages Financial performance Conclusion 21 |
Financial performance Net Sales $6.7B $9.3B* $181M** $256M* 2.1B 3.0B Operating Profit 9/30/13 Leverage Ratio *** : 1.64x Market Capitalization: $1.7B 22 Gallons 3Q13 YTD 2012 *On a rebased basis, excluding among other items the results of Morningstar and WhiteWave, See Reconciliation of Non-GAAP Financial Measures in the appendix to this presentation for computation and reconciliations **See Reconciliation of Non-GAAP Financial Measures in the third quarter 2013 press release earnings tables for computations and reconciliations *** Net Debt (Total long-term debt less all cash on hand) to EBITDA; Calculated per Dean Foods’ Credit Agreement would be 2.3x Note: Market Capitalization as of November 13, 2013 |
Volume and operating profit performance Adjusted Operating Income per Gallon ($) *See Reconciliation of Non-GAAP Financial Measures in our earnings releases for the relevant quarters and in the appendix to this presentation for computations and reconciliations $66 $71 $62 $74 23 $65 $42 $57 |
Dramatic debt and leverage reduction Ongoing Dean Foods Net Debt $ Millions • $1.6B of Dean Foods net debt reduction this year • Q3 total net debt of $671 million • Q3 net debt to EBITDA ratio of 1.64x** • Q3 includes the receipt of $589 million of net proceeds from July WWAV share monetization Overview 2011 2012 2013 **Net debt is total long term debt less all cash on hand. Calculated per Dean Foods credit agreement would be 2.3x 24 2010 Total Leverage Ratio 5.12x 4.62x 3.52x 2.12x 2.67x 1.64x |
Focus on cash flow generation & total shareholder returns Immediate Shareholder Returns Future Shareholder Returns Mid-single Avg EBIT Growth Liability Mgmt Cap-Ex Reduction Over Time 25 We expect $100 million of normalized 2013 Free Cash Flow before one-time items and litigation payments Next 3-5 Years *Free cash flow is a non-GAAP measure and is defined as net cash provided by continuing operations less capital expenditures Free Cash Flow Growth Productivity Investment Growth Investment Debt Paydown Share Repurchase and Regular Dividend |
26 Approval of dividend policy instituting regular quarterly dividends • Expected initial dividend rate of $0.07 per quarter beginning in Q1 2014 • Provides solid return for stockholders while maintaining flexibility Increase in amount available for share repurchases to $300 million • Additional tool for shareholder value creation to be used opportunistically Cash tender offer for $400 million aggregate principal amount of 9.75% 2018 bonds and 7.0% 2016 bonds • Preference given to the 2018 bonds • Funded with balance sheet cash and revolver borrowings • Expected to close late in Q4 2013 • Significant interest savings going forward |
2013 Expectations 27 * See Reconciliation of Non-GAAP Financial Measures in the Q3 2013 earnings release earnings tables for computation 2014 Considerations: Challenging volume overlaps through Q2 STI overlap headwind of approximately $30M Q4 Adjusted Diluted EPS* FY 13 Adjusted Diluted EPS* FY 13 Adjusted EBITDA* FY 13 Capital Expenditures FY 13 Adjusted FCF $0.85 - $0.91 per share Approximately $391 – 400 million Approximately $160 – 170 million $0.17 - $0.23 per share Approximately $100 million |
Today’s agenda 28 Who we are Leadership team, vision and direction Business strategy and company advantages Financial performance Conclusion |
Summary We have built sustainable competitive advantages through our scale and capabilities. We are working to extend these advantages. We are putting pieces in place to build for the future through: Reducing and variablizing our cost structure Improving pricing tools and protocols to reduce volatility Increasing R&D and innovation efforts We believe profit growth, combined with a focus on free cash flow generation and rewarding shareholders will result in superior returns We aim to be a sustainable creator of value for shareholders Thank you for your interest 29 |
Appendix: Reconciliation of Non-GAAP Financial Measures (cont) 30 DEAN FOODS COMPANY Reconciliation of GAAP to Adjusted Operating Income (Unaudited) (In thousands) Twelve months ended December 31, 2012 Adjustments to GAAP GAAP Asset write-down and (gain) loss on sale of assets Facility closing and reorganization costs Deal, integration and separation costs WhiteWave separation and discontinued operations Adjusted Operating income (loss): Ongoing Dean Foods 233,558 $ 5,983 $ - $ 24,654 $ (8,111) $ 256,084 $ WhiteWave 192,557 - - 1,085 (193,642) - Facility closing and reorganization costs (55,787) - 55,787 - - - Other operating income (expense) 57,459 (57,459) - - - - Total operating income 427,787 $ (51,476) $ 55,787 $ 25,739 $ (201,753) $ 256,084 $ |
Appendix: Reconciliation of Non-GAAP Financial Measures (cont) 31 Three months ended March 31, 2012 Adjustments to GAAP GAAP Asset write-down and (gain) loss on sale of assets Facility closing and reorganization costs Deal, integration and separation costs WhiteWave separation and discontinued operations Adjusted Operating income (loss): Ongoing Dean Foods 68,079 $ - $ - $ - $ (2,234) $ 65,845 $ WhiteWave 46,995 - - - (46,995) - Facility closing and reorganization costs (25,435) - 25,435 - - - Other operating income (expense) - - - - - - Total operating income 89,639 $ - $ 25,435 $ - $ (49,229) $ 65,845 $ Three months ended June 30, 2012 Adjustments to GAAP GAAP Asset write-down and (gain) loss on sale of assets Facility closing and reorganization costs Deal, integration and separation costs WhiteWave separation and discontinued operations Adjusted Operating income (loss): Ongoing Dean Foods 69,001 $ - $ - $ 4,000 $ (1,262) $ 71,739 $ WhiteWave 45,085 - - - (45,085) - Facility closing and reorganization costs (6,217) - 6,217 - - - Other operating income (expense) - - - - - - Total operating income 107,869 $ - $ 6,217 $ 4,000 $ (46,347) $ 71,739 $ |
Appendix: Reconciliation of Non-GAAP Financial Measures (cont) 32 Three months ended September 30, 2012 Adjustments to GAAP GAAP Asset write-down and (gain) loss on sale of assets Facility closing and reorganization costs Deal, integration and separation costs WhiteWave separation and discontinued operations Adjusted Operating income (loss): Ongoing Dean Foods 46,224 $ 5,983 $ - $ 8,000 $ (3,448) $ 56,759 $ WhiteWave 50,435 - - - (50,435) - Facility closing and reorganization costs (6,080) - 6,080 - - - Other operating income (expense) 56,339 (56,339) - - - - Total operating income 146,918 $ (50,356) $ 6,080 $ 8,000 $ (53,883) $ 56,759 $ Three months ended December 31, 2012 Adjustments to GAAP GAAP Asset write-down and (gain) loss on sale of assets Facility closing and reorganization costs Deal, integration and separation costs WhiteWave separation and discontinued operations Adjusted Operating income (loss): Ongoing Dean Foods 50,254 $ - $ - $ 12,654 $ (1,167) $ 61,741 $ WhiteWave 50,042 - - 1,085 (51,127) - Facility closing and reorganization costs (18,055) - 18,055 - - - Other operating income (expense) 1,120 (1,120) - - - - Total operating income 83,361 $ (1,120) $ 18,055 $ 13,739 $ (52,294) $ 61,741 $ |
FOCUS November 2013 |