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Dean FoodsFourth Quarter and Year End 2008Fourth 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 andstrategy, (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 numberwww.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
t diti i t hi h h t t t i b d C t i GAAPevents, 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, 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
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p gan adjusted basis is contained in such press releases, which are publicly available on our web site at www.deanfoods.com/investors.
Today’s Prepared Remarks
Barry Sievert, VP Investor Relations & Corporate FP&A
Jack Callahan, Chief Financial OfficerR i Fi i l R ltReview Financial ResultsComments on Forward Outlook
Gregg Engles, Chairman and Chief Executive OfficerBusiness and Commodity ReviewUpdate of Strategic Initiatives
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Agenda: Jack Callahan, CFO
Dean FoodsDean Foods
Segment PerformanceSegment Performance
Cash Flow
Outlook
4
Dean Foods: 4Q 2008 Best Quarter in Company History
Adjusted Operating Income$ Millions Highlights
$185
149138
162
141
190$ Millions
Highest quarterly adjusted operating income in history of company138 141 company
Excellent profit growth across both operating segments due to top line growth strong execution
4Q 06 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08
top line growth, strong execution and a favorable dairy and energy commodity environment
Accumulating benefits of strategic% PY -19.3% -13.5% 3.1% 14.3% 27.3%
Accumulating benefits of strategic initiatives
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Significant EPS Leverage
$ Millions, except EPS 4Q4Q20082008
B/(W) vs B/(W) vs 4Q 20074Q 200720082008 4Q 20074Q 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%
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j $
Dean Foods 2008: Solid Recovery
676
Adjusted Operating Income$ Millions
Highlights
619
676
590
631 Strengthening results driven by operational improvements, strategic initiatives, and branded
$554strategic initiatives, and branded growth
Full year results reflect the resiliency of the business
2004 2005 2006 2007 2008
resiliency of the business despite a weak Q1 and volatile energy costs
Quarterly profit growth
% PY 7.3% 11.6% 9.2% -12.7% 7.1%
2004 2005 2006 2007 2008 Quarterly profit growthQ1 = -14%Q2 = + 3%Q3 = +14%Q4 = +27%
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Q4 27%
Renewed EPS growth
$ Millions, except EPS FY FY 20082008
B/(W) vsB/(W) vsFY 2007FY 200720082008 FY 2007FY 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%
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Adjusted Diluted EPS $ 1.30 8%
Agenda: Jack Callahan, CFO
Dean FoodsDean Foods
Segment PerformanceSegment Performance
Cash Flow
Outlook
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Accelerating Share Gain
2.8%3 0%
4.0%
DSD DairyFluid Milk
DSD Dairy Competition
1 0%
2.0%
3.0%
1 0%
0.0%
1.0%
-1.3%-2.0%
-1.0%Competition1
-4.0%
-3.0%
1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08
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*Competitor estimates derived from subtracting DSD Dairy pounds from USDA sales poundsQ4 contains an estimate for USDA/Competitor December sales
$22
Improving Dairy Commodity Trends
$18
$20
$22 Class I Mover
$14
$16
20082007Avg: $18.97
-12% Y-YAvg: $16.10
-23% Y-Y
$10
$12
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
-12% Y-Y -23% Y-Y
$1.55
$1.65
$1.75 CME Butter
$1.25
$1.35
$1.45
20082007 Avg: $1.62+13% Y Y
Avg: $1.52+14% Y Y
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$1.05
$1.15
J F M A M J J A S O N D J F M A M J J A S O N D
3Q 4Q+13% Y-Y +14% Y-Y
DSD Dairy: 4Q 2008 Best Quarter Ever
Operating Income$ Millions Highlights
$127 131
154140
166
Highest DSD Dairy operating income in company history
$127Strategic initiatives benefitting results:
Reduction in force
4Q 07 1Q 08 2Q 08 3Q 08 4Q 08
Plant closures
Route productivity
Private label trade-down continues% PY -16.1% -14.8% 9.3% 20.5% 30.9% Private label trade-down continues
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DSD Dairy: Solid Recovery Despite High Dairy Inputs
Operating Income$ Millions Highlights
$549577
610
538
591 Operating income growth of 10% from 2007 despite continued commodity challenges
Class I Mover$549 538 commodity challenges
Profit recovery from 2007 demonstrates ability to manage high input costs over time
18.14 18.00
2004 2005 2006 2007 2008
high input costs over time
11.88
$14.98
14.9814 98
14.40
% PY -8.3% 5.1% 5.7% -11.8% 9.9% 14.98
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WhiteWave–Morningstar: Solid 4Q 2008 Sales Growth
WhiteWave Morningstar
Net Sales$ Millions B/(W) vs
4Q 07Brand Performance
$672
619652
671708
WhiteWave Morningstar
1.5%
5% Nearly Fifteen
Percent*288
8%
High-Single Digits
Mid-Single 420
4Q 07 1Q 08 2Q 08 3Q 08 4Q 08
% PY 21 1% 16 8% 10 4% 8 6% 5 3%
ModestGrowth
Digits
% PY 21.1% 16.8% 10.4% 8.6% 5.3%
14*Refers to branded milk sales
WhiteWave–Morningstar: Strong 4Q 2008 Profit Growth
Operating Income Highlights
$6169 Strong volume leverage, pricing
execution and cost management
$ Millions
45 4941
Improving pricing on the Horizon Brand
Declining butter prices late in the
4Q 07 1Q 08 2Q 08 3Q 08 4Q 08
Declining butter prices late in the quarter favorable for Morningstar
% PY -10.5% 0.5% -11.7% -4.0% 13.9%
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WhiteWave–Morningstar: 10% 2008 Sales Growth
B/(W) vsFY07
Net Sales$ Millions
Brand Performance
FY07
$1,981 2,068
2,4112,650
WhiteWave Morningstar
8%
10% Over TwentyPercent*
Low-Double1,120$ ,
WW12%High-Single
Digits
Low-Double Digits
1,530
2005 2006 2007 2008Mid-Single
Digits
g
% PY 12.4% 4.4% 16.6% 9.9%
16*Refers to branded milk sales
WhiteWave–Morningstar: 2008 Profit Flat
Operating Income Highlights
180207 205 205
$ Millions
Flat full year profit due to difficult commodity environment for Morningstar and organic milk
$136Morningstar and organic milk investments
Expect renewed profit growth in 2009*
2004 2005 2006 2007 2008
2009
% PY 31.8% 15.3% -1.1% 0.2%
17*before Hero investment
Agenda: Jack Callahan, CFO
Dean FoodsDean Foods
Segment PerformanceSegment Performance
Cash Flow
Outlook
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Exceptional Cash Flow
$ MillionsTwelve Months endedTwelve Months ended
DecDec 31, 200831, 2008
Net Cash Provided by Continuing Operations $ 719.3
Capital Expenditures (257 0)Capital Expenditures (257.0)
Free Cash Flow from Operations $ 462.3
Cash Outflows for Acquisitions $ (95.9)
N t D bt R d ti $ (783 1)Net Debt Reduction $ (783.1)
Issuance of Common Stock $ 419.7
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Expecting capital expenditures up to $300 million in 2009
$877 Million of Debt Reduction Since 3Q07 Peak
$ Millions
$5,357 5,366 5,272
4 8124,812 4,724
4,635 4,489
2Q 3Q 4Q 1Q 2Q 3Q 4Q2Q 3Q 4Q 1Q 2Q 3Q 4Q
Leverage Ratio* 5.63x 5.97x 5.94x 5.56x 5.48x 5.35x 4.92x
2007 2008
20*As defined by credit agreement(s)
Agenda: Jack Callahan, CFO
Dean FoodsDean Foods
Segment PerformanceSegment Performance
Cash Flow
Outlook
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Si ifi t t h di i t 2009
Solid Growth Expected in 2009
Significant momentum heading into 2009
Favorable commodity environment for now, continued volatility likely
DSDDairy
Competitive intensity remains
Expect dampened net sales growth due to category trends d d t it
WhiteWave-and non-core product exits
Anticipate WhiteWave-Morningstar return to profit growth
Hero JV promising new platform for growth requiring
Morningstar
p g p g q gapproximately six cents per share investment
Selectively investing to support longer-term strategyD F d
y g pp g gy
Increased pension expense of five cents per shareDean Foods
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At least $1.50 per share for full year
At least $0.38 per share in first quarterAdjusted
Diluted EPS
Gregg Engles, CEO
Highlights
Strong Fourth QuarterStrong Fourth QuarterDSD 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 2008DSD Dairy operating income increased 10%Whit W M i t ti i fl tWhiteWave-Morningstar operating income flatDean Foods adjusted operating income increased 7%Adjusted diluted earnings per share increased 8%
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Record free cash flow at $462 million
$22
Dairy Inputs Have Collapsed
$18
$20
$22 Class I Mover
$14
$16
20082007 2009
$10
$12
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
3Q 4Q
$1.55
$1.65
$1.75 CME Butter
$1.25
$1.35
$1.45
20082007 2009
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$1.05
$1.15
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
Lower Prices, A Rising Trend, Varied Forecasts
$20
$22
2008 Actual:
Class I Mover: 2009 Forecasts from Six Leading Dairy Economists
$18
2008 Actual: $18.00 Average
$14
$16 $13.80 High
$12.09 Mid2009 Average
$12
$ $
$10.98 Low
Estimates
$8
$10
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$8 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
Our strategies leverage these unique advantages to win
A Three Part Strategy to Wing
Drive to Lowest C t P iti
Strengthen our C F hi
Build for the F tCost Position Core Franchises Future
Improve supply chain productivity
Expand our leadership in milk
Lead growth & innovation in thechain productivity
Organize for success
leadership in milk
Increase the power of our brands
innovation in the chilled space
Leverage deep executive expertiseexecutive expertise to deliver goals
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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 strategicFavorable commodities and benefits from strategic initiatives position us well heading into 2009
Fi t t ff t t t t C fid t i f llFirst quarter off to a strong start. Confident in full year earnings expectations for at least $1.50 per share
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Look forward to meeting with you in New York
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