Hillshire Brands — CAGNY 2014
83 slides from Hillshire Brands's conference presentation, Feb 19, 2014
Slide 1: CAGNY 2014
C A G N Y 2 0 1 4 Exhibit 99
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains forward-looking statements regarding HSH’s business prospects and future financial results and metrics. These statements are typically preceded by terms such as “will,” “anticipates,” “intends,” “expects,” “likely” or “believes” and other similar
Slide 3: What We Want You To Take Away From Today
What We Want You To Take Away From Today Terrific portfolio of leading, iconic brands Delivering on our plan to drive profitable growth Significantly improved capabilities Well-positioned to generate sustainable shareholder returns
Slide 4: What We Will Cover Today
Background on Hillshire Brands Progress report on our core strategies What’s next What We Will Cover Today
Slide 5: Evolution Of Hillshire Brands
Evolution Of Hillshire Brands $20B Global Conglomerate $4B N.A. Food Company
Slide 6: Who We Are
$4B food company Focused on convenient meals and snacks Compete in breakfast, lunch, dinner and snacking New company through and through Who We Are
Slide 7: Branded Portfolio; Primarily Retail Channel
Branded Portfolio; Primarily Retail Channel 89% 11% Branded Unbranded 74% 26% Retail Foodservice Source: FY13 Company financial statement information; based on net sales
Slide 8: Focused Portfolio; Two $1B Brands
Focused Portfolio; Two $1B Brands
Slide 9: Leading Share Positions In Core Categories
Leading Share Positions In Core Categories Brand Category HSH Share Position Relative Market Share Source: Symphony IRI Group, Total US Multi-Outlet, 52 weeks ending 1/5/14 Breakfast Sausage #1 2.8x Frozen Protein Breakfast #1 8.6x Smoked Sausage #1 2.8x Lunchmeat #3 0.3x Hot Dogs #1 1.1x Corn Dogs
Slide 10: Multiple Areas For Growth In Large Categories
Multiple Areas For Growth In Large Categories Size of Category $6.2B $2.5B $1.8B $1.8B $1.5B Dollar Growth (1.5)% +1.1% +4.3% +6.0% +9.6% Lunchmeat Hot Dogs Smoked Sausage Breakfast Sausage Frozen Protein Breakfast 86% 78% 60% 61% 39% 32% 29% 28% 27% 23% Category HH Penetration Brand HH Penetration
Slide 11: Core Categories Have Limited Private Label Penetration
Core Categories Have Limited Private Label Penetration Category Private Label Share Source: Symphony IRI Group, Total US Multi-Outlet, 52 Weeks Ending 1/5/2014 Frozen Protein Breakfast 6% Hot Dogs 4% Corn Dogs 4% Smoked Sausage 5% Cocktail Links 5% Fresh Breakfast Sausage 6% Mainstream Lunchmeat 17%
Slide 12: Vision
Vision Become the most innovative branded food company in the U.S.
Slide 13: Four Strategies To Deliver Long-Term Value Creation
Four Strategies To Deliver Long-Term Value Creation Strengthen The Core Extend Into Adjacencies Acquire On-Trend Brands Fuel Growth Through Efficiency
Slide 14: Our Mid-Term Targets Remain Unchanged
Our Mid-Term Targets Remain Unchanged Net Sales Growth MAP % Of Total Sales Operating Margin 4-5% 5% 10%
Slide 15: Significant Progress In Executing Our Plan
Drive growth through brand building and innovation Partner effectively with customers Reduce costs Improve capabilities Reinvigorate culture Utilize balance sheet to enhance shareholder return Significant Progress In Executing Our Plan
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Slide 18: Brand Building And Innovation Keys To Our Growth
Brand Building And Innovation Keys To Our Growth Brand positioning World-class advertising Pricing execution New line extensions Adjacent category brand introductions Contemporized packaging Brand Building Innovation
Slide 19: Strong Brand Positioning
Strong Brand Positioning “Farm House Quality Meats” “Hearty Comfort Food” “Better Guy Food For Better Guy Times” “Smart & Sensible Family Choices” “Authentic Ingredients, Exceptional Tastes” “Artisanal Italian Meats”
Slide 20: Significant Progress Against Innovation Imperative
Significant Progress Against Innovation Imperative 9% 11% 13-15% Historical FY13 FY15E % Sales From New Innovations Note: Percent of annual Retail segment sales from innovations launched in the past three years, rolling
Slide 21: Over $300MM Annual Sales From New Products
Over $300MM Annual Sales From New Products
Slide 22: Investing Behind Our Brands
Investing Behind Our Brands MAP Spending As % Of Sales 3.5% 4.1% 5% Historical Average Since Spin FY15E Note: Spin effective at beginning of FY13
Slide 23: Improving Return On MAP Investment
Improving Return On MAP Investment GRPs Per MAP Dollar +33% H1 FY13 H1 FY14 Source: Gross Rating Points (GRPs) provided by Nielsen People Meter Panel
Slide 24: Partnering Effectively With Customers
Partnering Effectively With Customers 2012 2013 2014 Category Captaincies 20 23 31
Slide 25: Driving Distribution Gains
Driving Distribution Gains Fiscal YTD Growth In Total Distribution Points 2.4% 4.4% Other Brands HSH Brands Source: Symphony IRI Group, Total US Multi-Outlet, data ending 12/8/13 for Frozen Breakfast, Breakfast Sausage, Hot Dogs, Corn Dogs, Cocktail Links, Smoked Sausage, Lunchmeat, Frozen Burgers,
Slide 26: Company Embracing Efficiency Mindset
Company Embracing Efficiency Mindset Reduced costs by $90MM pre-spin On track for $145MM of additional efficiencies Achieved $40MM cost savings goal in FY13 Plans in place to execute remaining $105MM Efficiency programs also strengthening core capabilities for sustainable growth and profitability
Slide 27: Committed To A Lean SG&A Structure
Committed To A Lean SG&A Structure 12.2% 10.3% 9.9% 8.9% FY10PF FY12 FY13 1H FY14 Adjusted Core SG&A % Of Sales Note: “Adjusted” terms are non-GAAP financial measures. See our reconciliation to the most directly comparable GAAP measure at the end of this presentation. Core SG&A excludes Distribution
Slide 28: Key Capabilities Identified And Improved
Key Capabilities Identified And Improved Consumer Marketing Advanced Analytics Innovation Customer Partnering M&A LEAN
Slide 29: Culture Reinvigorated
Culture Reinvigorated Moved headquarters to Chicago Revamped values and operating principles Upgraded skills Over half of management new to role or position since spin Strengthened incentive programs to align results and rewards –
Slide 30: Shareholder Returns Enhanced Through Capital Deployment
Shareholder Returns Enhanced Through Capital Deployment Share Buy Back Dividends $200MM Program Increased Dividend M&A Acquired Golden Island
Slide 31: Continued Progress Against FY12 Baseline: Sales Growth
Continued Progress Against FY12 Baseline Sales Growth vs FY12 +3.9% H1 FY12 H1 FY14
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Slide 34: Continued Progress Against FY12 Baseline: Adjusted Operating Income
Continued Progress Against FY12 Baseline Adjusted Operating Income Growth vs FY12 +35.8% H1 FY12 H1 FY14 Note: “Adjusted” terms are non-GAAP financial measures. See our reconciliation to the most directly comparable GAAP measure at the end of this presentation.
Slide 35: Continued Progress Against FY12 Baseline: Adjusted EPS
Continued Progress Against FY12 Baseline Adjusted EPS Growth vs FY12 +36.5% H1 FY12 H1 FY14 Note: “Adjusted” terms are non-GAAP financial measures. See our reconciliation to the most directly comparable GAAP measure at the end of this presentation.
Slide 36: Margins Have Improved
Margins Have Improved Adjusted Gross Margin vs FY12 Adjusted Operating Margin vs FY12 28.5% 29.6% 8.3% 9.7% FY12 Average Since Spin FY12 Average Since Spin Note: Spin effective at beginning of FY13; “Adjusted” terms are non-GAAP financial measures. See our reconciliation to the most directly compara
Slide 37: What's Next
What’s Next Continue brand building Continue innovation Continue cost efficiency Continue acquisitions
Slide 38: Multiple Approaches To Brand Building
Multiple Approaches To Brand Building
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Slide 40: What's Next – Strengthening The Core
What’s Next – Strengthening The Core
Slide 41: Expanding Healthier Options In Fully Cooked Sausage
Expanding Healthier Options In Fully Cooked Sausage Launch: Q3 FY14
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Slide 44: Adding On-Trend Flavors To Roll Sausage
Adding On-Trend Flavors To Roll Sausage Launch: H1 FY15
Slide 45: Bringing Angus Beef To Ball Park Lean
Bringing Angus Beef To Ball Park Lean Launch: Q3 FY14
Slide 46: Launching New Hillshire Farm American Craft Links
Launching New Hillshire Farm American Craft Links Launch: Q3 FY14
Slide 47: Launching New Hillshire Farm American Craft Links
Launching New Hillshire Farm American Craft Links Launch: Q1 FY15
Slide 48: Extending Hillshire Farm Into Natural Lunchmeat Segment
Extending Hillshire Farm Into Natural Lunchmeat Segment Launch: Q1 FY15
Slide 49: Extending Hillshire Farm Into Value Lunchmeat Segment
Launch: Q1 FY15 Extending Hillshire Farm Into Value Lunchmeat Segment
Slide 50: Aidells Adding New Exciting Flavors
Aidells Adding New Exciting Flavors Launch: CY 2014
Slide 51: Launching New State Fair Varieties
Launching New State Fair Varieties Launch: H2 FY14 – H2 FY15
Slide 52: New Distribution On Premium Foodservice Desserts
New Distribution On Premium Foodservice Desserts Bistro Brownie Luxe Layer Pie
Slide 53: What's Next – Extending Into Adjacencies
What’s Next – Extending Into Adjacencies
Slide 54: Jimmy Dean Extending Beyond Breakfast – Sandwiches
Jimmy Dean Extending Beyond Breakfast – Sandwiches Launch: Q1 FY15
Slide 55: Jimmy Dean Extending Beyond Breakfast – Entrees
Jimmy Dean Extending Beyond Breakfast – Entrees Launch: Q1 FY15
Slide 56: JD Delights Extending Beyond Breakfast – Sandwiches
JD Delights Extending Beyond Breakfast – Sandwiches Launch: Q1 FY15
Slide 57: JD Delights Extending Beyond Breakfast – Entrees
JD Delights Extending Beyond Breakfast – Entrees Launch: Q1 FY15
Slide 58: Hillshire Snacking – A New, Convenient Option
Hillshire Snacking – A New, Convenient Option Launch: Q4 FY14
Slide 59: Hillshire Snacking – A New, Convenient Option
Hillshire Snacking – A New, Convenient Option Launch: Q4 FY14
Slide 60: Introducing Park's Finest Premium Hot Dogs
Introducing Park’s Finest Premium Hot Dogs Launch: Q3 FY14
Slide 61: Expanding Ball Park Burgers
Expanding Ball Park Burgers Launch: Q3 FY14
Slide 62: Aidells Bringing Flavor Adventure To Deli Lunchmeat
Aidells Bringing Flavor Adventure To Deli Lunchmeat Launch: Q3 FY14
Slide 63: Contemporizing Golden Island Jerky
Contemporizing Golden Island Jerky
Slide 64: Multiple Approaches For Cost Efficiencies To Fuel Growth
Multiple Approaches For Cost Efficiencies To Fuel Growth Formal Cost Savings Programs Base Productivity Culture Of Overhead Management
Slide 65: We Have Validated Our Core Investment Thesis
Compete in attractive and profitable categories Key to success is disciplined investment in brand building and innovation Cost efficiencies help fund growth agenda Potential to deliver significant shareholder return We Have Validated Our Core Investment Thesis
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Slide 68: Strong Shareholder Returns
Strong Shareholder Returns +45% Aug 10, 2012 Price Appreciation Dividends Feb 13, 2014 Note: August 10, 2012 was the first trading day after Q4 FY12 earnings results, when the company provided guidance for FY13
Slide 69: Healthy Financial Position
Healthy Financial Position Great Underlying Cash Flow ($ in millions) Strong Balance Sheet Note: “Adjusted” terms are non-GAAP financial measures. See our reconciliation to the most directly comparable GAAP measure at the end of this presentation. Adjusted EBITDA (Last 4 Quarters) $ 488 Adjusted Fre
Slide 70: Capital Allocation Priorities
Capital Allocation Priorities Top priority Competitive with CPG food peers Expect to be acquisitive $200MM through FY15 Not a near-term priority Invest In Business Dividends Acquisitions Share Repurchases Debt Reduction
Slide 71: Disciplined Acquisition Approach
Disciplined Acquisition Approach Attractive Top-Line Margin Accretive Strong Financial Return Strong Brands Leverage Hillshire Capabilities Provide New Capabilities Increase Scale With Customers And Suppliers Strategic Fit Financial Fit
Slide 72: Full Year Guidance
FY13 Original FY14 Guidance Updated FY14 Guidance Full Year Guidance ($ in millions, except EPS) Net Sales $3,920 Increase slightly Increase slightly Adjusted Diluted EPS $1.72 Flat to down mid-single digits High end of range % growth +18.6% Note: “Adjusted” terms are non-GAAP financial measures. Se
Slide 73: Our Mid-Term Targets Remain Unchanged
Our Mid-Term Targets Remain Unchanged Net Sales Growth MAP % Of Total Sales Operating Margin 4-5% 5% 10%
Slide 74: Key Takeaways
Key Takeaways Terrific portfolio of leading, iconic brands Delivering on our plan to drive profitable growth Significantly improved capabilities Well-positioned to generate sustainable shareholder returns
Slide 75: Hillshire Brands
A Hillshire BRANDS
Slide 76: Hillshire Brands
9 Hillshire BRANDS
Slide 77: Income Statement Reconciliation – H1 FY14
Income Statement Reconciliation – H1 FY14 As Reported Impact of Significant Items Dispositions As Adjusted (1) (1) “Adjusted” terms are non-GAAP financial measures. See our press release dated January 30, for definitions. Net Sales $ $ $ $ Cost of Sales 1,476 - 1,467 Gross Profit (9) - MAP Expense -
Slide 78: Income Statement Reconciliation – FY13
Income Statement Reconciliation – FY13 As Reported Impact of Significant Items Dispositions As Adjusted (1) (1) “Adjusted” terms are non-GAAP financial measures. See our press release dated January 30, for definitions. Net Sales 3,920 - - 3,920 Cost of Sales 2,758 - 2,747 Gross Profit 1,162 (11) - 1
Slide 79: Income Statement Reconciliation – FY12
Income Statement Reconciliation – FY12 As Reported Impact of Significant Items Dispositions As Adjusted (1) Net Sales $ $ - $ $ Cost of Sales 2,857 2,789 Gross Profit 1,101 (28) 1,114 MAP Expense - - Distribution Expense - SG&A (Excluding MAP & Distribution) Net Charges for Exit Activities, Asset an
Slide 80: Income Statement Reconciliation – H1 FY12
Income Statement Reconciliation – H1 FY12 As Reported Impact of Significant Items Dispositions As Adjusted (1) (1) “Adjusted” terms are non-GAAP financial measures. See our press release dated January 30, for definitions. Net Sales 2,040 - 1,988 Cost of Sales 1,469 1,421 Gross Profit (11) MAP Expens
Slide 81: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation H1 FY14 FY13 H1 FY13 Last Four Quarters Ended Q2 FY14 (1) “Adjusted” terms are non-GAAP financial measures. See our press release dated January 30, for definitions. Note: Last Four Quarters Ended Q2FY14 calculated by adding H1FY14 to FY13 and then subtracting H1 FY13. N
Slide 82: EBITDA Reconciliation
EBITDA Reconciliation H1 FY14 FY13 H1 FY13 Last Four Quarters Ended Q2 FY14 (1) “Adjusted” terms are non-GAAP financial measures. See our press release dated January 30, for definitions. Note: Last Four Quarters Ended Q2FY14 calculated by adding H1FY14 to FY13 and then subtracting H1 FY13. Reported
Slide 83: Net Sales and SG&A Reconciliation – FY10 Pro Forma
Net Sales and SG&A Reconciliation – FY10 Pro Forma Net Sales SG&A (Excluding MAP & Distribution) As Reported 3,842 Less: Impact of 53 rd Week (71) Less: Dispositions (195) Plus: Pro Forma Adjustments 3,656 $ $ As Reported – Segments Less: Impact of Significant Items Less: Impact of 53 rd Week (11) L