DEL MONTE FOODS 2007 ANALYST AND INVESTOR DAY JULY 10, 2007 DEL MONTE FOODS

Transcription

1 DEL MONTE FOODS 2007 ANALYST AND INVESTOR DAY JULY 10, 2007 DEL MONTE FOODS JPMorgan Global High Yield and Leveraged Finance 1 Conference January 2008

2 FORWARD LOOKING STATEMENT DISCLAIMER During the course of our discussion today, we will make statements that may constitute projections, expectations, beliefs or similar forward-looking statements. We would like to caution you that the Company s actual results could differ materially from the results anticipated or projected in these forward-looking statements. Additional detailed information concerning important factors that could cause Del Monte s actual future results to differ materially from the information we will give you today is included in our public filings, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q, which are available on the SEC s EDGAR database or on our website. The Company does not undertake to update any of these forward-looking statements in light of new information or future events. 2

3 ADD IMAGE HERE COMPANY OVERVIEW 3

4 DEL MONTE FOODS DEL MONTE - COMPETITIVELY POSITIONED Balanced portfolio Pet/Consumer Strong brands across the portfolio Large categories Pet/Consumer Value-added innovation brand-based, consumer-driven Scalable go-to-market platform focused on U.S. retail market Leadership talent taking Company to the next level KEY MACRO TRENDS Pet growing pet population, growing importance of pets Consumer health & wellness, taste, convenience Private Label stable presence Challenging cost environment fish, grains, fats and oils 4

5 DEL MONTE A BRANDED LEADER F07 Net Sales Consumer Products ~60% Pet Products ~40% F07 Operating Income Branded portfolio - Works well together - Creates competitive strength in market Shared Drivers Branded retail disciplines marketing, sales Customer base Center store promotional merchandising execution Center store events - creates scale impact for customer Business Impact Strengthen consumer & customer interface Consumer Products ~40% Pet Products ~60% Go-to-market platform - greater scale in market Dry grocery supply chain - increased efficiencies Brand-focused talent skills Drive cost efficiency Create broader team capability 5

6 DEL MONTE A BRANDED LEADER Structure is strong 1. Branded leadership Net sales ~90% are branded ~80% are branded #1 or #2 Large Brands Del Monte > ~$1B in sales 2. Participation in large categories 1 Consumer Categories = ~$8B Pet Categories = ~$15B 3. Brand-leveraged innovation against core Consumer/Pet growth trends Brand platforms support broad array of opportunities Robust pipeline of value-added new products in place Line extensions and white space opportunities 1 Reflects 07 All-Outlet sales Source: Nielsen All-Outlet Household Panel and internal estimates ended Fiscal

7 DEL MONTE A BRANDED LEADER Structure is strong 4. Powerful go-to-market platform with competitive scale 5. Integrated supply chain across portfolio drives efficiency and competitive cost structure Top 10 dry-grocer marketer in the center store 1 Direct sales majority customer base Leveragable and expandable platform >98% customer service levels Cost advantaged in Consumer Cost parity in Pet 6. Balanced portfolio generates operating income and strong cash flow NSV = ~60/40% Consumer/Pet OI = ~40/60% Consumer/Pet Cash flow yield = top quartile of peer set 2 1. Excluding beverage companies. Source: Nielsen All-Outlet Household Panel and internal estimates ended Fiscal Source: Deutsche Bank Estimates, 1/4/08. 7

8 GO-FORWARD FOCUS 8

9 GO-FORWARD FOCUS Key areas of focus - Action plans in place Drive Value-Added Innovation Build Share Strength Offset Inflationary and Other Costs Generate Strong Cash Flow 9

10 VALUE-ADDED INNOVATION Powerful Brand Platforms / Built on Strong Equities / Connect with Consumer Consumer Driven Insights - Matched to Brand Equities Brands Product Development Consumer Del Monte brand endorsing equities with sub-brands Pet Strategic brands leverage specific equities Leverage Brand Platform in Market Consumer & Customer Support Broad Array of Consumer Driven Product Opportunities 10

11 VALUE-ADDED INNOVATION - CONSUMER Core consumer forces creating Del Monte opportunity Big Gaps in Diets the pyramid is upside down Today s Famine is Time fewer family dinners = less healthy families Obesity at all-time High People want help We are eating 1/3 the fruits <2/3 the vegetables 1/2 the fish #1 vegetable in the US: french fries Kids health declines as families eat together less 62% of the U.S. is overweight 15% of kids under 20 are obese We are eating 2x the grains, 2x the fat, >2x the sugar 90% want to improve their health 64% are trying Only 3% live truly healthy lifestyles 11

12 VALUE-ADDED INNOVATION - CONSUMER Fruit Naturals Good for You Convenience Del Monte Brand Healthy Snacking Chillers Freeze & Eat Launched Nationally Category: Value-Added Produce Size: ~$1B Growth: ~17% Category: Single Serve Plastic Fruit Size: ~$800M Growth: ~14% Source: Nielsen Homescan Panel All Outlet Size and Growth Estimates FY

13 VALUE-ADDED INNOVATION - CONSUMER Del Monte Brand Healthy Convenient Meals Test Market Harvest Selections Heat & Serve / Portable Category: Non-prep Microwavable Meals Size: ~$300M Growth: ~27% Source: Nielsen Homescan Panel All Outlet Size and Growth Estimates FY

14 VALUE-ADDED INNOVATION - CONSUMER Launched Launched Nationally Nationally Del Monte Brand Healthy Snacking Healthy Healthy Kids Kids Healthy Healthy Snacking Snacking z z z Calorie Calorie Fruit Fruit Healthy Healthy Snacking Snacking Category: Fruit Size: ~$2.3B Growth: +6% Source: Nielsen Homescan Panel All Outlet Size and Growth Estimates FY

15 VALUE-ADDED INNOVATION - PET Key consumer trends drive value-add pet innovation Growing Pet Population Growing Spending in the Combined Pet Food & Snacks Category 1 # of HHs (in millions) Dog and Cat Owning HHs Dogs Cats ($ in billions) $11.9 $13.4 $14.4 F04-F07 CAGR = ~9% $15.3 F04 F05 F06 F07 1 Excludes rawhide Source APPMA National Pet Owners Survey; Nielsen Homescan Panel All Outlet Estimates FY

16 VALUE-ADDED INNOVATION - PET Strategic pet brands leverage specific equities Launched Nationally Natures Recipe Farm Stand Selects Premium Nutrition 9 Lives Daily Essentials Healthy/Better Nutrition Category: Premium Dog, Pet Specialty Size: ~$1.4B Growth: +8% Category: Dry Cat Size: ~$2.8B Growth: +6% Source: Nielsen Homescan Panel All Outlet Size and Growth Estimates FY

17 VALUE-ADDED INNOVATION PET Strategic pet brands leverage specific equities Launched Nationally Milk-Bone SteakChew Value-Added Occupiers Meow Mix Market Select Cups Premium Taste Category: Long Lasting Chew Size: ~$0.4B Growth: +10% Category: Premium Wet Cat Size: ~$1.0B Growth: +13% Source: Nielsen Homescan Panel All Outlet Size and Growth Estimates FY

18 VALUE-ADDED INNOVATION PET Strategic pet brands leverage specific equities Jan 08 Launch Jerky Treats Premium Taste Pup-Peroni 50 Calorie Snacks Health/Better Nutrition Category: Soft & Chewy Snacks Size: ~$740M Growth: +17% Source: Nielsen Homescan Panel All Outlet Size and Growth Estimates FY

19 VALUE-ADDED INNOVATION - PET Strategic pet brands leverage specific equities Jan 08 Launch Wholesome Goodness Simple, Recognizable Ingredients Wholesome Medley Simple, Recognizable Ingredients Category: Dry Cat Size: ~$2.8B Growth: +6% Source: Nielsen Homescan Panel All Outlet Size and Growth Estimates FY2007. Category: Dry Dog Size: ~$6.6B Growth: +7% 19

20 GO-FORWARD FOCUS Key areas of focus - Action plans in place Drive Value-Added Innovation Build Share Strength Offset Inflationary and Other Costs Generate Strong Cash Flow 20

21 BUILD SHARE STRENGTH Brand Leverage Innovation Driven Category Vitality Merchandising Excitement - Consumer Driven Thought Leadership / Category Management Shopper Insights Supply Chain Excellence 21

22 BUILD SHARE STRENGTH Innovative Marketing Driving customer business through effective marketing and merchandising 22

23 BUILD SHARE STRENGTH Focus on the Shelf Category Thought Leadership Practical applications of category management Pet Snacks STAR Set Brand Block Set B E F O R E A F T E R Del Monte Pet +6%! B E F O R E A F T E R Del Monte Consumer +6%! 23

24 BUILD SHARE STRENGTH Private Label Stability Private Label market share in Fruit, Vegetables and Tomatoes has remained relatively stable 60 Private Label Share Vegetables Fruit 30 Tomatoes F02 F03 F04 F05 F06 F07 Source: ACNielsen SCANTRACK,. Reflects Solid Tomatoes and Fruit Majors/Fruit Cups 24

25 GO-FORWARD FOCUS Key areas of focus - Action plans in place Drive Value-Added Innovation Build Share Strength Offset Inflationary and Other Costs Generate Strong Cash Flow 25

26 OFFSET INFLATIONARY AND OTHER COSTS Overall, we have a competitive cost structure in most businesses, with initiatives in place to narrow or eliminate gaps in areas that are disadvantaged Consumer Products Pet Products Fruit Advantaged Dry Pet Disadvantaged Vegetables Advantaged Wet Pet Advantaged Tomatoes At Parity Pet Snacks At Parity Tuna Advantaged Note: Reflects comparable products across key SKU s. 26

27 OFFSET INFLATIONARY AND OTHER COSTS Operational costs continue to challenge EPS growth Gross Inflationary Cost Increases vs. Preceding Year (Excludes Savings Initiatives) $M $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 $30 $120 $150 $145 ~$170 Key Operational Cost Components Cost Bucket Packaging Logistics Raw Products Other Total % of Op Costs ~25% ~15% ~35% ~25% 100% F07 Increase ($M) ~$25 ~$15 ~$60 ~$45 ~$145 F08 Increase 1 ($M) ~$20-25 ~$10-15 ~$ ~$30 ~$170 F04 F05 F06 F07 F08E % Increase ~6% ~6% ~7% 1 1. Reflects information that was provided Q2F08 earning call. This presentation does not, and we can not, update or comment on this guidance. 27

28 OFFSET INFLATIONARY AND OTHER COSTS VIP and Transformation Plan savings combat escalating costs and build the overall competitiveness of the business % of Cost Increases Offset in that year $M $M $120 $100 Cumulative Gross Cost Change $270 $205 $415 $295 $585 $380 Cumulative Net Cost Change F05 F06 F07 F08e ~15% ~30% ~40% ~50% 1 VIP and Transformation Savings Key Drivers 1. Reflects information that was provided Q2F08 earning call. This presentation does not, and we can not, update or comment on this guidance. 1 VIP Cost Reduction Programs Lean Operations Hedging Global Sourcing Economic Return Projects Transformation Plan Savings Supply Chain Optimization Dry Pet Food Distributed Manufacturing 28

29 OFFSET INFLATIONARY AND OTHER COSTS Lean Operations is about the identification and elimination of the seven forms of waste VIP TRANSPORTATION INVENTORY MOTION WAITING OVER PRODUCTION OVER PROCESSING DEFECTS 29

30 OFFSET INFLATIONARY AND OTHER COSTS Restructured dry pet manufacturing footprint to reduce ~5M miles in F07 and F08 Transformation Bloomsburg & Buffalo Topeka Decatur Pet acquisitions have enabled a more efficient manufacturing footprint 30

31 OFFSET INFLATIONARY AND OTHER COSTS Network Optimization and Supply Chain transformation initiatives delivered ~10% more product with ~8M fewer miles in F07 and 1H08 Lathrop Fontana Transformation Midwest Ft Worth Atlanta Jacksonville Northeast Redesigning delivery network to better match customer locations Enhancing customer service levels More efficient branded operational platform driven by pet acquisitions 31

32 OFFSET INFLATIONARY AND OTHER COSTS Pricing actions taken to help offset cost pressures PRICING ACTIONS TAKEN F05 F06 F07 F08 YTD Fruit Veg Tomato Continuously evaluate pricing actions Tuna Pet Food Pet Snacks TOTAL ~2.8% ~3.9% ~2.8% ~2.3% 1 1. Reflects impact of pricing actions as of Q2F08. Tomato, Vegetable and Pet Food/Snack pricing actions were implemented after the end of Q2F08. 32

33 GO-FORWARD FOCUS Key areas of focus - Action plans in place Drive Value-Added Innovation Build Share Strength Offset Inflationary and Other Costs Generate Strong Cash Flow 33

34 DEL MONTE CASH FLOW GENERATOR Historically strong cash flow generation despite incremental headwinds Adjusted Cash Flow 1 ($ M) $250 $221 $202 $196 $200 $180-$200 $150 $100 $50 $0 Cash Flow Includes: Transformation Costs Incremental Pension Contribution (PPA) F05 F06 F07 F08E $0M $0M $0M $0M $19M 2 $0M $25M-$35M ~$12M 1 DLM defines cash flow as cash from operations, less cash from investing. DLM also uses adjusted cash flow which, in general, excludes cash used in or provided by large acquisitions or divestitures. Adjusted cash flow for F06 and F07 excludes $265.7M in net proceeds from the disposal of Soup and Infant Feeding Businesses and $1,310.6M of cash used in business acquisitions, respectively. Cash flow for F08 is expected to be cash from operations, less cash from investing. 2 Adjusted for inventory reductions and integration expense. 3. Reflects 1. information that was provided Q2F08 earning call. This presentation does not, and we can not, update or comment on this guidance 3 34

35 DEL MONTE CASH FLOW GENERATOR Strong cash flow generator with cash flow yield at the top of its peer group CF Yield (%) = Cash Flow/Market Cap 8% F08E 1 Cash Flow Yield 6% DLM ~5.5% Peer Average = 4.0% 4% 2% 0% 1 Reflects the cash flow yield of peers fiscal year which is most equivalent to DLM s fiscal Peer group includes CPB, CAG, DF, GIS, HNZ, HSY, HRL, K, KFT, MKC, SJM, TSN, WWY. Source: Deutsche Bank Estimates, 1/4/08. 35

36 DEL MONTE CASH FLOW GENERATOR Significant cash flow provides flexibility beyond base business needs F08E Uses of Operating Cash Flow 1 ( 1 Adjusted for transformation and incremental pension contribution) F08E Potential Uses of Other Cash Flow Dividend 2 & CAPEX (ex. Transformation) Required Debt Payments Other Transformation & Incremental Pension Contribution $200M share repurchase authorization over 36 months Further reduce debt Regularly evaluate other uses of cash flow, including dividend Pursue M&A 1 The actual declaration and payment of future dividends and the establishment of record and payment dates, if any, is subject to final determination by our Board of Directors each quarter after its review of our then current strategy, applicable debt covenants and financial performance and position, among other things 36

37 ADD IMAGE HERE CONCLUDING REMARKS 37

38 DEL MONTE FOODS DEL MONTE - COMPETITIVELY POSITIONED Balanced portfolio Pet/Consumer Strong brands across the portfolio Large categories Pet/Consumer Value-added innovation brand-based, consumer-driven Scalable go-to-market platform focused on U.S. retail market Leadership talent taking Company to the next level KEY MACRO TRENDS Pet growing pet population, growing importance of pets Consumer health & wellness, taste, convenience Private Label stable presence Challenging cost environment fish, grains, fats and oils 38

39 DEL MONTE FOODS 2007 ANALYST AND INVESTOR DAY JULY 10, 2007 DEL MONTE FOODS 39 Appendix

40 APPENDIX For purposes of today's discussion, we have provided certain non-gaap financial measures. To the extent the reconciliation of such non-gaap financial measure has not already been included in this presentation, such reconciliations follow. The Company cautions investors that the non-gaap financial measures presented by the Company are intended to supplement the Company s GAAP results and are not a substitute for such results. 40

41 Non-GAAP Reconciliation Del Monte Foods Company Reconciliations of Non-GAAP Financial Measures (in millions) Selected Cash Flow Data April 29, 2007 Fiscal Year Ended April 30, 2006 May 1, 2005 Net cash provided by operating activities, as reported (GAAP) $ $ $ Net cash provided by (used in) investing activities, as reported (GAAP) (1,344.8) (71.8) Cash flow (1,114.7) Net cash used in business acquisitions (proceeds from the sale of assets) 1,310.6 (1) (265.7) (2) - Mandatory debt prepayments, due to the sale of the Soup and Infant Feeding Businesses Cash flow, as adjusted $ $ $ (1) Represents cash used in business acquisitions of $1,310.6M in fiscal (2) Represents net proceeds from disposal of Soup and Infant Feeding Businesses of $265.7M in fiscal