Earnings Review and Webcast Fourth Quarter and Full Year Fiscal 2009 June 11, 2009

Transcription

1 Earnings Review and Webcast Fourth Quarter and Full Year Fiscal 2009 June 11, 2009

2 Family Larry Bodner Senior Vice President

3 Forward-Looking Statement Disclaimer Statements made during this conference call which are not historical facts - including any statements about the Company s targets, beliefs, plans or expectations - are forward-looking statements and are based on management s current plans, estimates and projections. The Company does not undertake to update any of these statements in light of new information or future events. Forward-looking statements involve inherent risks and uncertainties and investors should not place undue reliance on them. There are a number of important factors that could cause actual results to differ materially from those contained in such statements. These factors are described in more detail in the earnings release we issued today and in our filings with the SEC. Del Monte Foods Company reports its financial results in accordance with generally accepted accounting principles in the United States (GAAP). In this press release and the accompanying webcast, Del Monte is also providing certain non-gaap financial measures of cash flow. The non- GAAP cash flow measures that the Company is using to compare its fiscal 2009 results to its fiscal 2009 guidance and its fiscal 2008 results exclude the impact of the sale of the seafood business (including Starkist) on the fiscal 2009 consolidated statement of cash flows. Fiscal 2008 had not included such a large divestiture. Del Monte internally uses cash flow, which it defines as cash provided by operating activities less cash used in investing activities. Additionally, Del Monte uses adjusted cash flow to compare its fiscal 2009 guidance to its fiscal 2009 cash flow or to compare cash flow year-over-year. Del Monte uses this non-gaap financial measure internally to benchmark its performance period-to-period and believes this information is also helpful to investors. When looking internally at year-over-year changes in cash flow, the Company generally excludes the impact on the period s consolidated statement of cash flows of large acquisition or divestiture transactions, such as the fiscal 2009 divestiture of the seafood business, the fiscal 2007 acquisitions of Meow Mix and Milk- Bone and the fiscal 2006 divestiture of its soup and infant feeding businesses, and generally provides guidance on the same basis. The Company cautions investors that the non-gaap financial measures presented are intended to supplement the Company s GAAP results and are not a substitute for such results. Additionally, the Company cautions investors that the non-gaap financial measures used by Del Monte may differ from the non-gaap measures used by other companies. 3

4 Rick Wolford Chairman and CEO 4

5 Q4F09 and Fiscal 2009 Highlights Extremely pleased with Q4 and F09 financial performance Strong execution against Accelerated Growth Plan Solid financial results delivered by both Consumer and Pet Consumer and Pet categories continue to be healthy F09 Consumer category up high-single-digits F09 Pet category up double-digits Reflects aggressive F09 pricing actions taken by the category to combat inflationary cost increases which more than offset category volume declines Consumer category volume declines reflect impact of pricing related elasticity Pet category volume trends were positive in Dry Pet Food and Pet Snacks Consumer trends: People making more meals at home Increased importance of pets in today s family Increased focus on buying on deal and bigger package sizes Consumers migrating to value channels and shifting toward mainstream brands DLM exceeded category volume trends in F09 with overall volume growth of +1.5% 5

6 Del Monte Foods: F09 Financial Results Net Sales Drivers ($MM) $4,000 $3,000 $2,000 $1,000 ($/share) $0.75 $0.50 $0.25 $0.00 Transformationrelated expense $3,180 $3,627 F08 $0.58 FY08 F09 GAAP EPS (from Continuing Operations) $0.08 YOY change: +14.1% $0.74 FY09 Net sales up Pricing actions taken across portfolio Total volume increase driven by: New product volume growth Partially offset by declines in existing product volume primarily due to elasticity GAAP EPS up Topline and productivity savings more than offset inflationary cost increases Higher SG&A Almost 50% YOY increase in marketing investment 6

7 Update: Accelerated Growth Strategy Executing Pricing and Productivity to Address Cost Pressures Unleash Potential of Core Brands Drive Accelerated Growth with Key Growth Engines F09 Accomplishments: Pricing and productivity more than offset operational cost increases Achieved pricing target of > 3X F08 Over-delivered productivity target by $20M ($70M total) F10 Expectations: Pricing and productivity to fully offset operational cost increases F09 Accomplishments: Increased marketing by almost 50% Strong programs behind Pup-Peroni and Milk-Bone F10 Expectations: Continue to focus on increased marketing support for both Pet and Consumer F09 Accomplishments: Introduced several new innovations Step-up in marketing spend behind Fruit Undressed campaign F10 Expectations: Continue to drive Packaged Produce 7

8 Del Monte Foods: Q4 Financial Results Net Sales Drivers $1,000 ($MM) $500 YOY change: +20.7% $1,057 $876 FY08 Q4 FY09 Q4 Net sales up Pricing actions Volume growth driven by: Existing volume New Products ($/share) $0.30 $0.20 $0.10 $0.00 GAAP EPS (from Continuing Operations) $0.20 FY08 Q4 Transformationrelated expense $0.04 $0.35 FY09 Q4 GAAP EPS up Pricing and cost reduction actions offset inflationary and other cost increases Higher SG&A +150% YOY increase in marketing investment Lower taxes 8

9 Consumer Products: Q4 Financial Results ($MM) $600 $400 $200 $0 ($MM) $80 $60 $40 $20 $0 Net Sales YOY change: +20.0% $474 $569 FY08 Q4 FY09 Q4 Operating Income YOY change: +54.6% $71 $46 FY08 Q4 FY09 Q4 Drivers Net Sales up Pricing actions taken across portfolio Existing product volume growth in Vegetables Tomatoes New product growth driven by Fruit Chillers Tubes Citrus Bowls Super Fruit Operating income up Impact of pricing actions Productivity gains Partially offset by: Operational cost increases Increased marketing investment Higher G&A 9

10 Pet Products: Q4 Financial Results $600 $400 $200 $0 $100 $50 ($MM) ($MM) $0 Net Sales YOY change: +21.6% $402 $489 FY08 Q4 FY09 Q4 Operating Income YOY change: +7.5% $76 $82 FY08 Q4 FY09 Q4 Drivers Net sales up Pricing actions Increased volume Existing volume growth, primarily in Dry Pet New product growth Operating income up Pricing and productivity savings offset inflationary and other cost increases Higher G&A Included the impact of the write-off of secondary Pet trademarks Reflected the absence of the pet recall insurance proceeds recognized in the year ago period Higher marketing investment 10

11 Cat (green dress) Dave Meyers CFO

12 Results vs. Expectations Q4 Net Sales Drivers Net Sales Growth 20.7% Exceeded expectations Reflects strong execution across key levers in both Consumer and Pet EPS from Continuing Operations EPS: 35 cents Exceeded expectations Reflects strong execution across key levers in both Consumer and Pet 12

13 Q4 and F09: Drivers of Net Sales Q4F % 25.0% 20.0% 15.0% 13.7% 13.2% Net Sales Drivers 1.9% (8.1%) 20.7% 10.0% 5.0% 0.0% F % 15.0% 10.0% Pricing Existing Product Volume New Product Volume Elasticity / Other Spending Total 2.7% 5.3% 14.1% 11.9% (5.8)% 5.0% 0.0% Pricing Existing Product Volume New Product Volume Elasticity / Other Spending Total 13

14 Q4 and F09: Drivers of Net Gross Margin Q4F09 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% F09 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Gross Margin Drivers 8.1% (0.3)% +4.1% (3.7)% Pricing Volume/Mix Costs Total 8.1% (6.6)% (0.8)% +0.7% Pricing Volume/Mix Costs Total 14

15 Q4 and F09: Selected Financial Results Continuing Operations ($ s in Millions, except EPS) Fourth Quarter Full Year F 2008 F 2009 % Change F 2008 F 2009 % Change Net Sales $ $ 1, % $ 3,179.8 $ 3, % Gross Profit % , % Gross Margin (% of Sales) 26.9% 31.0% 27.0% 27.7% SG&A % % SG&A Margin (% of Sales) 15.9% 18.3% 17.0% 17.7% Operating Income % % OI Margin (% of Sales) 11.0% 12.7% 10.0% 10.0% Interest Expense % % Taxes % % Tax Rate 39.8% 33.9% 37.9% 34.8% Inc. from Continuing Ops % % EPS ($ per share) % % Shares (M) % % 15

16 Q4 and F09: Selected Financial Results Fourth Quarter F 2008 F 2009 Capital Projects $ 30 $ 33 ($ s in Millions) D&A 28 (1) 27 Fee Amortization 1 2 Full Year F 2008 F 2009 Capital Projects $ 97 $ 89 D&A 106 (2) 105 (2) Fee Amortization 5 6 Cash Flow (3) Adj. Cash Flow (4) (1) Includes ~$3M related to seafood business in Q4F08 (2) Includes ~$10M related to seafood business in F08 and includes ~$2M related to the seafood business in F09. (3) DLM defines cash flow as cash from operations, less cash from investing. (4) DLM also uses adjusted cash flow which, in general, excludes the impact on the period s consolidated statement of cash flow of large acquisitions or divestitures. Adjusted cash flow for F09 excludes ~$310M of cash provided by the seafood divestiture. The reconciliation of cash flow and adjusted cash flow are included at the end of this presentation. 16

17 F10 Guidance Themes Driving Results in F10 1. Further strengthen key brands with an additional increase in marketing support 2. Strong productivity savings to largely mitigate inflationary cost pressures of ~3% 3. Further gross margin expansion from cumulative pricing actions in F09 which will fund our marketing investments 17

18 Fiscal 2010: Guidance Net Sales Growth: Gross Margin: Operating Margin: Interest Expense Tax Rate: EPS Continuing Operations: Capital Expenditures: D&A: Cash Flow/Adjusted Cash Flow (5) : F10E 4% 6% 28.2% 29.2% 9.5% 10.5% $115 $125M 38% 40% $ $0.80 (1) $85 $95M $90 $100M (2) $160 - $170M F09A 14.1% 27.7% 10.0% $ % $0.74 $89 $105M (3)(4) $167M (1) Within the next 12 months, the Company expects to pursue a refinancing of some or all of its debt, particularly its debt under its senior credit facility. A refinancing may change fiscal 2010 guidance. (2) Includes ~$7M amortization of financing fees expected to be included in interest expense in F10 (3) Includes ~$6M amortization of financing fees included in interest expense in F09 (4) Includes ~$2M related to seafood business in F09 (5) DLM defines cash flow as cash from operating activities, less cash used in investing activities. Del Monte also uses adjusted cash flow which, in general, excludes the impact of large acquisitions or divestitures on the period s consolidated statement of cash flows. Adjusted Cash Flow for F09A excludes $310 million related to the sale of the seafood business, including StarKist. 18

19 Fiscal 2010: Costs F10E Gross Cost Increases vs. Prior Year % Increase YOY 1 $90 ~3% Cost Bucket F10E vs. F09 Gross Cost Increases % of F09 Op Costs F09 Increase ($M) F10E Increase ($M) F09 $300 ~12% Packaging ~20% ~$50 ~$60-$70 F08 F07 $100 $145 ~7% ~5% Logistics Raw Products Other ~15% ~40% ~25% ~$15 ~$180 ~$55 $0 ~($10) - $0 ~$25-$35 F06 $80 ~4% Total 100% ~$300 ~$90 F05 $70 $0 $100 $200 $300 $400 1 Excluding seafood business. 19

20 Refinancing Fiscal 2010: Continue to benefit from focus on debt reduction Expect to drive Net Debt/EBITDA below 3x Historically: Consistent cash flow generation very well received by debt markets Debt has historically traded very well Many alternatives as look to refinance our Term loans and Revolver Current Plan: Access the market in stages to achieve best possible refinancing terms and rate while also extending the maturity horizon Potential first step: Issue a $300M high yield note during 1H F10 Use proceeds to reduce reliance on Senior Lending Market Impact of potential high yield note is reflected in F10 guidance Seek to refinance additional components of Debt structure; impact not reflected in F10 guidance Optimize the mix of debt instruments based on market conditions which may also affect timing of when we enter the market 20

21 Fiscal 2010: Cash Flow Guidance FY10 Cash Flow Guidance: FY09 Adjusted Cash Flow (1) $167M Incremental Pension Contribution _ Cash Taxes _ Pre-Tax Earnings + FY10E Midpoint Cash Flow ($160-$170M) ~$165M FY10 Expected Uses of Cash Net debt reduction Maintain dividend payout Expect to conclude F10 at the low end or below long-term leverage targets (1) DLM defines cash flow as cash from operating activities, less cash used in investing activities. Del Monte also uses adjusted cash flow which, in general, excludes the impact of large acquisitions or divestitures on the period s consolidated statement of cash flows. Adjusted Cash Flow for FY09 excludes ~$310 million related to the sale of the seafood business, including StarKist. 21

22 First Quarter Outlook First Quarter Outlook Solid Q1 topline growth Pet: Driver of topline Consumer: Lapping a strong Q1F09 that benefitted from pricing-related activity in vegetables and tomatoes Expect Q1F10 EPS to be well above Q1F09 of $(0.04) Benefit from cumulative pricing actions Recoup some of the margin contraction realized over past few years Increased marketing spending 22

23 Dog wash Rick Wolford Chairman and CEO

24 Key Takeaways Strong Q4 and F09 performance Reflects successful execution against all key strategic initiatives of Accelerated Growth Plan Solid topline results reflect: Strength of large, healthy categories Increasing momentum of Brands Significant increase in marketing investment Successful execution of pricing actions Strong topline results combined with the over delivery of productivity savings: Offset the impact of cost increases Supported a significant increase in marketing investment Led to strong EPS growth for F09 Fiscal 2010 Enter F10 with strong momentum Confident in our ability to continue to execute against our strategy to deliver F10 targets and drive long term sustainable EPS growth 24

25 2009 Analyst and Investor Day Del Monte 2009 Analyst and Investor Day July 7, 2009 New York City Electronic invitation was sent last week with details Questions? Contact 25

26 Soccer Q&A

27 Appendix The following All Outlet share data are estimates based on Nielsen grocery/mass scan data and Nielsen All Outlet panel data. Unless otherwise noted, the data is for the 52 or 13 weeks ended May 2, 2009 and is on a unit volume share basis, except for pet snacks, which is on a dollar share basis, a more appropriate measure for that business. 27

28 F09: Share Performance All-Outlet Share Fruit: Vegetable: Tomato: College Inn: Dry Dog: Wet Dog: Dry Cat: Wet Cat: Pet Food: Pet Snacks: F % 27.8% 17.4% 13.2% 5.6% 4.9% 18.1% 20.0% 12.4% 28.0% F09* 31.4% 25.6% 15.6% 12.4% 7.2% 4.8% 21.2% 17.6% 13.4% 27.0% Note: Fruit includes COS Fruit and Produce Fruit, but excludes applesauce; Vegetable excludes greens; Tomato excludes ketchup, spaghetti & pizza sauce; Pet Snacks excludes rawhide. *F09 based on 52 WE 5/02/09; FY08 based on 52 WE 4/26/08. 28

29 Q4F09: Share Performance All-Outlet Share Fruit: Vegetable: Tomato: College Inn: Dry Dog: Wet Dog: Dry Cat: Wet Cat: Pet Food: Pet Snacks: Q4F % 24.9% 17.0% 13.5% 6.5% 4.4% 18.1% 19.2% 12.4% 27.6% Q4F09* 32.3% 26.6% 15.9% 12.9% 7.4% 4.3% 24.9% 16.3% 14.2% 27.4% Note: Fruit includes COS Fruit and Produce Fruit, but excludes applesauce; Vegetable excludes greens; Tomato excludes ketchup, spaghetti & pizza sauce; Pet Snacks excludes rawhide. * Q4F09 based on 13 WE 5/02/09; Q4F08 based on 13 WE 4/26/08. 29

30 Non-GAAP Reconciliation Del Monte Foods Company Reconciliations of Non-GAAP Financial Measures (in millions) Selected Cash Flow Data Fiscal Year Ended May 3, April 27, Net cash provided by operating activities, as reported (GAAP) $ $ Net cash provided by (used in) investing activities, as reported (GAAP) (79.7) Cash flow Net proceeds from large divestitures 1 (310.5) - Cash flow, as adjusted $ $ Consists of: Fiscal Year Ending May 3, 2009 Net proceeds from disposal of assets (large divestiture) $ Restricted cash related to mandatory debt prepayments, resulting from large divestiture transaction $ - Working capital reflected in purchase price proceeds due to timing of closing $ (23.0) Cash tax payments related to asset sale paid during the period $ (32.3) $

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