DEAN FOODS CO - FORM 8-K - EX-99.1 - November 19, 2013

Attached files

file filename
8-K - 8-K - DEAN FOODS COd630340d8k.htm
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

Stock widget

Investing forum

DEAN FOODS CO Reports