Dean Foods
Fourth Quarter and Full Year 2014
Earnings Report
February 10, 2015
1
Some of the 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 including statements relating to: (1) projected sales (including specific
product lines and the company as a whole), price realization, profit margins, net income, earnings per share, free cash flow
and debt covenant compliance, (2) our regional and national branding initiatives, (3) our innovation, research and
development plans and our ability to successfully launch new products, (4) commodity prices and other inputs and our ability
to forecast or predict commodity prices, milk production and milk exports, (5) our cost-savings initiatives, including plant
closures and route reductions, and our ability to achieve expected savings, (6) our planned capital expenditures, (7) the status
of our litigation matters, (8) 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, (9) our plans related to our capital
structure and debt refinancing, (10) our dividend policy, and (11) possible 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. The cost and supply of commodities and other raw materials are determined by market
forces over which we have limited or no control. 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 Forms 10-K and 10Q (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, restrictions in our credit agreement and debt covenant compliance, 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 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 release,
including the Morningstar divestiture and the spin-off of our former subsidiary, The WhiteWave Foods Company. A full
reconciliation of these measures calculated according to GAAP and on an adjusted basis is contained in such press release,
which is publicly available on our website at www.deanfoods.com.
2
Scott Vopni, Chief Accounting Officer and SVP Investor Relations
Gregg Tanner, Chief Executive Officer
Chris Bellairs, Chief Financial Officer
3
Q4 results mixed, but in line with guidance
 Solid price execution; sequential improvement in gross profit and operating income on a per gallon basis
 Landed cost per gallon trend takes a step backwards
Full Year performance reflective of difficult operating environment
 Record high dairy commodity prices and softening category volumes
 Mix shifts and transitory costs
(in millions, except per share data and leverage ratio)
Q4 14
Q4 YoY
FY 14
FY YoY
Adj. Operating Income*
$26
$(22)
$36
$(192)
Adj. Net Income*
$7
$(10)
$(13)
$(95)
Adj. Diluted EPS*
$0.08
$(0.10)
$(0.14)
$(1.00)
Adj. FCF*
$25
$(35)
Net Debt to EBITDA**
4.48x
* See Reconciliation of Non-GAAP Financial Measures in the press release earnings tables for computation
* Net Debt is total long term debt less all cash on hand. Calculated per Dean Foods credit agreements
4
U.S. Milk Production
U.S. Exports
U.S. Stocks (Dec. 2014)
U.S./International Price Comparison
Dairy Stocks Volume (MM lbs): Dec 2014 vs. PY
1,200
+3MM
Dec-13
Dec-14
1,000
800
International Prices
-12MM
+114 MM
Butter
Non Fat Dry Milk
% Change
1.05 $
1.08
3%
WMP
$
1.03 $
1.09
6%
Cheddar
$
1.36 $
1.34
-1%
Butter (80% equivalent butter)
$
1.39 $
1.58
13%
NFDM
400
Jan 15
$
U.S. Dairy Prices
600
Dec 14
SMP
Dec 14
$
1.26 $
Jan 15
% Change
Premium over
International Prices
-18%
-5%
1.03
Cheddar Cheese Blocks
$
1.74 $
1.59
-9%
18%
Butter
$
1.90 $
1.57
-18%
0%
200
0
Cheese
Sources: Global Dairy Trade auction (http://www.globaldairytrade.info/en/), monthly CME spot prices, USDA NASS, USDA FAS
5
Class I Mover (per cwt)
January 2013 – March 2015 (monthly)
$18.97
$18.21
$18.93
$17.80
$17.66
$17.76
$20.20
$19.16
$18.91 $18.88
$19.20
$20.37
$21.48 $22.02
$23.64
-34%
YoY
$23.65 $24.47
$23.87 $23.63 $24.19 $24.06
$22.86 $23.02
$22.53
$18.58
$16.24
Forecast
~ $15.70
Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec Jan Feb Mar
Quarterly Average 2011-2015
-25%
YoY
FY $23.29; +24%
FY $19.13; +25%
$23.66
$23.51
$23.59
$22.38
$21.41
$19.83
FY $18.84; +8%
FY $17.46; -9%
$20.32
$18.83
$18.33
$17.38
$16.44
$18.12
$18.98
$19.92
Forecast
~$16.84
$16.55
$15.58
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
6
Margin over
Milk
Class I Raw Milk
Price per Gallon
Private Label Retail Price Less Class I Raw Milk Cost
Conventional White Milk Gallons
$1.80
$2.40
$1.75
$1.70
$1.65
$2.20
Class I Raw
Milk Price
$2.00
$1.60
$1.80
$1.55
December’s Margin
over Milk: $1.47
$1.60
$1.50
$1.45
$1.40
$1.40
$1.20
$1.35
$1.00
$1.30
2011
2012
Source: IRI, USDA. Class I mover converted at 11.6 gallons per cwt
Chart is a 90 day rolling average
2013
2014
7
YoY Volume
Growth
Q1 2014:
Q2 2014:
Q3 2014:
Q4 2014:
FY 2014:
(millions of gallons)
762
748
749
-6%
-4%
-2%
-2%
-4%
760
727
703
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Note: Total Dean Foods volume excluding WhiteWave and Morningstar
685
Q3 2013
699
Q4 2013
685
Q1 2014
674
673
683
Q2 2014
Q3 2014
Q4 2014
8
Dean Foods Share
Dean Fluid Milk Share
USDA Fluid Milk Volume YoY
IRI Fluid Milk Volume YoY
42.0%
4.0%
 Category continues to decline above
long-term norm due to record high40.0%
commodity costs
38.0%
3.0%
38.1% 38.3% 38.3% 38.3% 37.8%
2.0%
36.3%
 Q4 fluid milk volume decline
year-over-year of 2%; fluid milk
decline of 4% in 2014, 0.6%
excluding RFP impact
36.0%
34.9%
35.9% 35.9% 35.6% [2]
35.4% 35.7%
1.0%
0.0%
34.0%
32.0%
-1.2%
-1.4%
-1.4%
-1.9%
30.0%
-2.5%
-1.0%
-1.5%
-1.9% -2.1% -1.9%
-2.0%
-3.5%
 Improving net pricing realization and
28.0%
gross margin per gallon, but pricing
actions beginning to impact share26.0%
-2.7%
-3.0%
-2.9%
-3.7%
-3.9%
-4.2%
-4.5%
24.0%
-4.2% [1]
-4.0%
-3.7%
-3.2% -2.8%
-3.2%
-4.5% [2] -5.0%
-6.0%
22.0%
Q1
Q2
Q3
2012
1
2
Source: IRI
Based on USDA data through November 2014
Q4
Q1
Q2
Q3
2013
Q4
Q1
Q2
Q3
Q4
2014
9
 Balancing net price realization with
demand destruction; market driven
management of retail price points and
price gaps versus private label – within
grocery channel, price gap remains at
66 cents in Q4
 Volumes down 5% for the quarter and
4% for the full year
 Brand mix down below 35.5%; On a
year-over-year basis, our share of
branded white milk at retail declined
4% for the quarter and 1% for the year
 Expect an increase in mix and margins
with declining raw milk costs
*As defined by IRI FOOD (Grocery) Channel
10
•
Category weakness, especially in the large format channel, reflects consumer reactions to high price
•
On a year-over-year basis, overall flavored milk volumes down 2% for the quarter and 3% for the full
year;
•
For 2014, TruMoo’s MULO ACV grows to 73.3%; TruMoo volumes up 8.6% in C-stores and net sales
up 3.0% across all channels
•
Continue to grow TruMoo brand – pleased with innovation efforts and line extensions into new
categories
11
Total Landed Cost per Gallon YoY Growth (%)
 Plant closures have reduced
excess capacity in our network
and driven asset utilization and
efficiency higher. In January, we
announced another plant closure
6
5.2%
5
YoY Growth (%)
 Trend of reducing the rate of
year over year landed cost per
gallon increases taking a step
backwards
5.0%
4.2%
4.1%
4
2.6%
3
2
1.8%
1.3%
1
0.2%
0
Q1 13
Q2 13
Q3 13
Q4 13
Q1 14
Q2 14
Q3 14
Q4 14
YoY Change on CPG
 Within logistics we continue to
see several years of opportunity
ahead of us to drive meaningful
cost savings
*Excluding incentive compensation and certain other insurance adjustments
12
Adjusted Operating Income
Overview
($ Millions, except per gallon)

Q4 adjusted operating income of
$26 million; $16 million increase
sequentially

Progress behind price realization
is evident
74
65
42
Per
gallon
10.2₵
9.2₵
6.1₵
% PY
48
-46%
26
6.9₵
10
7
1.0₵
(6)
3.8₵
1.5₵
-1.0₵
Q1
Q2
Q3
2013
Q4
Q1
Q2
Q3
— Q4 gross margin per gallon
improved 2.9 cents,
sequentially
— Q4 gross margin per gallon
up 1% versus prior year
Q4
2014
13
($ millions, except EPS)
Adjusted Gross Profit
Q4
2014
$ B/(W)
vs Q4 13
FY 2014
$ B/(W)
vs 2013
$443
$(4)
$1,676
$(185)
340
(8)
1,352
(17)
77
(10)
288
9
417
(18)
1,640
(7)
Consolidated Adjusted
Operating Income
26
(22)
36
(192)
Adjusted EBITDA
67
(21)
196
(193)
Interest Expense
15
5
59
38
4
6
(8)
58
$0.08
$(0.10)
$(0.14)
$(1.00)
Selling & Logistics
G&A
Total Adjusted Operating Costs
Taxes @ 38%
Adjusted Diluted EPS
* See Reconciliation of Non-GAAP Financial Measures in the press release earnings tables for computation
14
Overview
Dean Foods
Net Debt
 Q4 total net debt of $901 million
 Disciplined cash and working
capital management
($ Millions)
3,651
 Q4 net debt to EBITDA ratio of
4.48x* vs. 5.25x covenant
2,298
 Evaluating refinancing options to
improve capital structure,
liquidity and availability
Total Net Debt/EBITDA Ratio
881
906
927
948
901
Q1
Q2
Q3
Q4
FY
FY
FY
2011
2012
2013
4.62x
3.52x
2.21x
* Net debt is total long term debt less all cash on hand. Calculated per Dean Foods credit agreements
2014
2.75x
3.61x
4.23X
4.48x
15
($ millions)
Net Cash Provided by
Continuing Operations
Twelve months ended
December 30, 2014
Twelve months ended
December 30, 2014 (adjusted *)
$153
$175
Net Capital Expenditures
$(149)
$(149)
Free Cash Flow Provided
by Continuing Operations
$4
$25
* See Reconciliation of Non-GAAP Financial Measures in the press release earnings tables for computation
16
Dean Foods
Q1 15 Adjusted Diluted
EPS
Approximately $0.12 to $0.22
We expect our 2015 financial results to be substantially better than 2014
However, we believe there are key factors or variables that could have a material
impact on our full year results and these factors remain difficult to quantify:
•
Dairy commodity environment continues to be volatile and unpredictable over the mid
term
•
Coming out of a prolonged period of record high costs, we have no precedent to indicate
how retailers and consumers will behave
•
Uncertain whether the health of the category will improve, or if it does, when and to what
extent
•
With industry over capacity, the competitive environment may heighten with declining
dairy costs
17
Fluid Milk Category Presents a
Compelling 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
Fluid Milk Benefits on Trend with
Current Consumer Dynamics
‣ Aligned to new industry marketing campaign
‣ Locally sourced – over 70% of consumers indicated
locally sourced products are an important consideration
when making purchasing decisions
‣ Protein dense – industry will spend over $60MM in
advertising reminding consumers milk is one of the most
naturally occurring protein dense foods available
‣ Clean label – no added thickeners, sugars, or salts like
some plant-based alternatives
Sources: Symphony IRI Group, MilkPEP, Harris Interactive, Harris Poll Mary 7-14, 2011, FMI Grocery Shopper Trends 2011
18
• We are executing a clear and focused vision for our Company - to be the most
admired and trusted provider of wholesome, great-tasting dairy products at every
occasion
• With the progress achieved in our cost reduction initiatives, we believe we are well
positioned and are excited about the future direction of the business
•
We will continue to drive improved efficiency and capability across the organization to
begin rebuilding our profitability in 2015 and position the Company for long term
success
Thank you for your continued interest and support
19
Dean Foods
Fourth Quarter and Full Year 2014
Earnings Report
February 10, 2015
20