Hillshire Brands — Barclays Back to School Conference 2013
50 slides from Hillshire Brands's conference presentation, Sep 3, 2013
Slide 1: Barclays Back to School Conference
Barclays Back to School Conference September 3, 2013 Sean Connolly, President & CEO Maria Henry, EVP & CFO Exhibit 99
Slide 2: Forward-Looking Statements
Forward-Looking Statements We caution you that our remarks this morning contain forward-looking statements about HSH’s future operations, financial performance, business conditions and our outlook for FY14 and future fiscal years. These forward-looking statements are based on currently available com
Slide 3: What We Want You to Take Away From Today
What We Want You to Take Away From Today We have a terrific portfolio of leading, iconic brands We compete in attractive categories We expect to grow through disciplined investments in brand building and innovation We will fuel our growth through rigorous cost management We will pursue targeted M&A
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Slide 6: $4B Revenue North American, Focused Food Company
$4B Revenue North American, Focused Food Company 74% 26% Retail Foodservice 89% 11% Branded Unbranded Source: Company Financial Statement information
Slide 7: Strong Brand Portfolio; Two $1B Brands
Strong Brand Portfolio; Two $1B Brands
Slide 8: 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 7/21/13 Brand Category HSH Share Position Relative Market Share Breakfast Sausage #1 2.9x Frozen Protein Breakfast #1 8.1x Lunchmeat #
Slide 9: Compete in Large Categories With Multiple Areas for Growth
Compete in Large Categories With Multiple Areas for Growth Size of Category $5.1B $2.8B $1.8B $1.8B $1.5B Volume Growth +0.2% (1.2)% +0.7% +5.0% +10.5% 78% 78% 60% 61% 38% 30% 30% 29% 28% 22% Lunchmeat Hot Dogs Smoked Sausage Breakfast Sausage Frozen Protein Breakfast Category HH Penetration Brand H
Slide 10: Core Categories Have Limited Private Label Penetration
Core Categories Have Limited Private Label Penetration Category Private Label Dollar Share Source: Symphony IRI Group, Total US Multi-Outlet, 52 Weeks Ending 8/11/2013 Category Private Label Dollar Share Frozen Protein Breakfast 6% Hot Dogs 4% Corn Dogs 4% Smoked/Cooked Sausage 5% Cocktail Links 5%
Slide 11: Four Strategies to Deliver Long-Term Value Creation
Four Strategies to Deliver Long-Term Value Creation Extend Into Adjacencies Strengthen the Core Acquire On-Trend Brands Fuel Growth Through Efficiency
Slide 12: Brand Building and Innovation Key to Growth Agenda
Brand Building and Innovation Key to Growth Agenda Brand Building Innovation Brand positioning World-class advertising Category management Upgrade existing quality and packaging New line extensions Adjacent innovations
Slide 13: Increasing Investment in MAP Behind Our Core Brands
Increasing Investment in MAP Behind Our Core Brands 3.5% 4.4% 5% Historic Average FY13 FY15E MAP Spending as % of Sales
Slide 14: Where We Increase MAP Support We See Good Growth
FY13 YoY Percent Change in Sales Where We Increase MAP Support We See Good Growth FY13 MAP Increase Allocation High single digits Low single digits High single digits Other
Slide 15: peppy-anjena/uonenuaayig
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Slide 16: peppy-anjea/uonenuaeyig
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Slide 17: Innovation Focused on Differentiated, Value-Added Products
Innovation Focused on Differentiated, Value-Added Products 0% 5% 10% 15% 20% 25% 30% 35% 40% Gross Margin Commodity Unbranded Branded Meal Components Branded Ready Meals $0.5B $2.6B $0.8B Source: Company Financial Statement information
Slide 18: Over $300MM in Revenue From Products Introduced Within Three Years
Over $300MM in Revenue From Products Introduced Within the Last Three Years
Slide 19: Well on Our Way to Achieve Our Innovation Goals
Well on Our Way to Achieve Our Innovation Goals 2013 Editors' Top New Picks Revenue From New Innovations* *Percent annual revenue from past three years’ rolling innovations, Retail segment only
Slide 20: Overall, Good Progress in First Year… More Work to Do
Overall, Good Progress in First Year… More Work to Do Percent Change in Total Consumption Volume FY12 FY13 Source: Symphony IRI Group, Total US Multi-Outlet, 52 weeks ending July 1, 2012 and June 30, 2013 FY12 FY13 Hillshire Farm (5.9)% (1.9)% Jimmy Dean +1.3% +7.3% Ball Park (4.7)% +5.0% State Fair
Slide 21: What's Next… Continue Working the Plan
What’s Next… Continue Working the Plan Grow Core Brands Rigorous Cost Management Acquire New, On-Trend Brands
Slide 22: We Will Activate Our Core Brands Behind Broadened Positionings
We Will Activate Our Core Brands Behind Broadened Brand Positionings “Farm House Quality Meats” “Hearty Comfort Food” “Better Guy Food for Better Guy Times” “Smart and Sensible Family Choices” “Authentic Ingredients, Exceptional Tastes” “Artisanal Italian Meats”
Slide 23: Jimmy Dean Expanding Hispanic Reach
Jimmy Dean Expanding Hispanic Reach
Slide 24: Robust Innovation Slate Planned for FY14
Robust Innovation Slate Planned for FY14 First Half FY14 Second Half FY14 Ramp up distribution for FY13 innovations New line extensions in Jimmy Dean, Aidells, Sara Lee and Foodservice Build presence in value channel Represents bulk of FY14 innovation activity Introduce new products and platforms un
Slide 25: M&A Will Complement Organic Growth
M&A Will Complement Organic Growth Value-added categories Strong brands Complementary / additive capabilities Scale with suppliers and customers Top-line growth EPS contribution Attractive financial returns Alignment with Strategic Vision Shareholder Value Creation
Slide 26: M&A Will Leverage Strong Infrastructure Capabilities
M&A Will Leverage Strong Infrastructure Capabilities Assets Consumer insights Frozen / Breakfast / Meals expertise Category captaincies in key product areas Robust R&D and innovation focus History of success integrating acquired businesses Efficient supply chain and production Fully-integrated SAP e
Slide 27: Golden Island Acquisition Provides Initial Entry to Meat Snacking Market
Golden Island Acquisition Provides Initial Entry to the Attractive Meat Snacking Market $59B 2.6% CAGR $0.9B +5% CAGR Meat-Centric Snacks Total Snacking Market Source: Symphony IRI Group, Total U.S. FDMx data, ending CY 2011 $59B 2.6% CAGR $0.9B +5% CAGR
Slide 28: What is Golden Island?
What is Golden Island? Manufactures and sells all natural pork and beef jerky Among top ten jerky brands Differentiated technology to make a more tender jerky
Slide 29: Remain Committed to Achieving Our Mid-Term Targets
Remain Committed to Achieving Our Mid-Term Targets Net Sales Growth MAP % of Total Revenue Operating Margin 4-5% 5% 10%
Slide 30: Maria Henry, EVP & CFO
Maria Henry, EVP & CFO
Slide 31: Hillshire
Hillshire
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Slide 33: Total Hillshire Brands Income Statement
Total Hillshire Brands Income Statement Continuing Operations ($ millions, excluding significant items) FY12 FY13 YoY Adjusted Net Sales $3,903 $3,920 +0.4% Adjusted Op Income 323 363 +12.5% Adjusted Op Margin 8.3% 9.3% +100 bps Adjusted Diluted EPS $1.45 $1.72 +18.6% “Adjusted” terms are non-GAAP f
Slide 34: Hillshire
Hillshire
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Slide 36: Cost Management Programs Progressing
Cost Management Programs Progressing On track for $145MM of efficiencies Achieved $40MM cost savings goal in FY13 Plans in place to execute remaining $105MM Efficiency programs will also strengthen core capabilities for sustainable growth and profitability Company culture embracing efficiency mindse
Slide 37: Hillshire
Hillshire
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Slide 39: Strong Balance Sheet
Strong Balance Sheet ($ millions, excluding significant items) FY13 Adjusted Cash Flow $ 312 Adjusted EBITDA $ 509 Cash $ 400 Debt $ 951 Net Debt $ 551 “Adjusted” terms are non-GAAP financial measures. See our reconciliation to the most directly comparable GAAP measure in our press release dated Aug
Slide 40: Hillshire
Hillshire
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Slide 42: Capital Allocation Strategy
Capital Allocation Strategy Continue to invest in the business Increased dividend 40% to $0.70 per share annual rate Targeting $200 million in share repurchases over the next two years Committed to M&A as a value creation lever No plans to significantly reduce debt at this time
Slide 43: FY14 Outlook
FY14 Outlook Perspective Facing near-term inflation, lapping one-time benefits Continue disciplined investment in brand building Defend market positions where necessary Sales increase slightly Adjusted diluted EPS flat to down mid-single digits Guidance
Slide 44: Summary
Summary We have a terrific portfolio of leading, iconic brands We compete in attractive categories We expect to grow through disciplined investments in brand building and innovation We will fuel our growth through rigorous cost management We will pursue targeted M&A opportunities to further accelera
Slide 45: Hillshire Brands
Hillshire BRANDS
Slide 46: Hillshire Brands
Hillshire BRANDS
Slide 47: EPS Reconciliation—Reported to Adjusted
(1) Represents a non-GAAP financial measure. See detailed explanation of these and other non-GAAP measures in the release dated August 8, 2013. EPS Reconciliation—Reported to Adjusted Twelve Months ended June 29, 2013 Twelve Months Ended June 30, 2012 As Reported Impact of Significant Items Adjusted
Slide 48: Operating Income Reconciliation—Reported to Adjusted
(1) Represents a non-GAAP financial measure. See detailed explanation of these and other non-GAAP measures in the release dated August 8, 2013. Operating Income Reconciliation—Reported to Adjusted Twelve Months ended June 29, 2013 As Reported Impact of Significant Items Dispositions Adjusted (1) Net
Slide 49: Cash Flow Reconciliation - Reported to Adjusted
(1) Represents the change in cash, excluding the impact of significant items. See the press release dated August 8, 2013 for a detailed definition of significant items. Cash Flow Reconciliation - Reported to Adjusted Twelve Months ended June 29, 2013 (in millions, except per share data - unaudited)
Slide 50: EBITDA Reconciliation - Reported to Adjusted
(1) EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization and is a non-GAAP number EBITDA Reconciliation - Reported to Adjusted Twelve Months ended June 29, (in millions, except per share data - unaudited) Reported Net Income Income tax expense - continuing operations Inc
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