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Press release from PR Newswire

Dean Foods Company Reports Second Quarter Results

Tuesday, August 03, 2010

Dean Foods Company Reports Second Quarter Results07:00 EDT Tuesday, August 03, 2010- Diluted Earnings of $0.25 per Share, Adjusted Diluted Earnings of $0.29 per Share - Conventional Dairy Business Remains Challenged, Value-Added Brands Continue Strong GrowthDALLAS, Aug. 3 /PRNewswire-FirstCall/ -- Dean Foods Company (NYSE: DF) today announced second quarter diluted earnings per share of $0.25 for the quarter ended June 30, 2010, compared to diluted earnings of $0.38 per share in the second quarter of 2009. Adjusted (as defined below) diluted earnings per share in the second quarter were $0.29, compared to $0.44 per share in the year ago period. ?Our results in the quarter remain well below year ago levels, but represent a step forward from the difficult start to 2010,? said Gregg Engles, Chairman and Chief Executive Officer. ?While the challenges in the fluid milk category continue to negatively impact results, we remain focused on significantly lowering our cost structure to position us to win over the longer term.?  Net income attributable to Dean Foods for the second quarter of 2010 totaled $44.8 million, compared with $64.1 million in the prior year?s second quarter. Lower operating income at Fresh Dairy Direct-Morningstar offset improved WhiteWave-Alpro results and lower interest expense in the second quarter. Adjusted net income for the quarter was $53.5 million, a decrease of 28% from $74.5 million in the second quarter of 2009. DEAN FOODS CONSOLIDATEDNet sales for the second quarter totaled $3.0 billion, an increase of 11% from net sales of $2.7 billion in the second quarter of 2009. The net sales increase in the quarter was primarily due to the pass-through of higher dairy commodity costs at Fresh Dairy Direct-Morningstar, the benefits of the acquisition of Alpro and continued strong sales growth at WhiteWave?Alpro. Summary of Dean Foods Second Quarter 2010 Operating ResultsQ2 2010$ millionsY/Y (except EPS)ChangeConsolidated Adjusted Operating Income:$133 -26%Interest Expense:$49 +19%Consolidated Adjusted Net Income$53 -28%Adjusted Diluted Earnings per Share:$0.29 -34%Consolidated operating income in the second quarter totaled $125.0 million, compared to $157.0 million in the second quarter of 2009. Continued pressures in the market for conventional fluid milk and related products drove a 28% decline in Fresh Dairy Direct-Morningstar operating income. This decline was partially offset by an 18% increase in WhiteWave-Alpro operating income and lower Corporate expense, resulting in second quarter consolidated adjusted operating income of $133.4 million, a decrease of 26% from $180.2 million in the second quarter of 2009. FRESH DAIRY DIRECT-MORNINGSTARSecond Quarter 2010 Fresh Dairy Direct-Morningstar  DetailQ2 2010Y/Y $ millionsChangeFluid Milk Volume--+0.2%Operating Income$147-28%Class I Mover$14.10/cwt.+35%Class II Butterfat$1.68/lb.+34%Fresh Dairy Direct-Morningstar fluid milk volume increased 0.2% in the second quarter, including acquisitions, versus the balance of the industry that experienced volume decline of roughly half a percent, based on Company estimates. Fresh Dairy Direct-Morningstar net sales increased due to the pass-through of higher average dairy commodity costs to its customers. As a result, segment net sales increased 8% to $2.5 billion, from $2.3 billion in the second quarter of 2009. The second quarter average Class I Mover was $14.10 per hundred-weight, 4% below the previous quarter, but 35% higher than the second quarter of 2009. Across the balance of the Fresh Dairy Direct-Morningstar portfolio, the ice cream, cultured and creamer businesses experienced modest volume declines in the quarter, while strong demand from quick service restaurants drove a solid increase in ice cream mix and aerosol product sales volumes. Class II butterfat, a primary input for cultured and ice cream products at Fresh Dairy Direct-Morningstar, averaged $1.68 per pound in the second quarter,13% above the previous quarter and 34% above the year earlier period.Fresh Dairy Direct-Morningstar operating income in the second quarter was $146.8 million, a $20.0 million increase over the difficult first quarter of 2010, but a 28% decline from $203.5 million in the second quarter of 2009. Retail pricing for private label milk remains well below historical levels, widening price gaps between branded and private label offerings and driving continued consumer trade-down to lower-margin private label products. Tight cost control and sequential improvements in net pricing across much of the portfolio drove a sequential improvement over the first quarter in segment operating income results. WHITEWAVE ? ALPROSecond Quarter 2010 WhiteWave-Alpro  DetailQ2 2010Y/YNet Sales$ millionsChangeWhiteWave-Alpro$459+31%WhiteWave$377+8%Alpro$82N/AOperating IncomeWhiteWave-Alpro$39+23%WhiteWave-Alpro, adjusted to exclude non-contolling Hero JV interest$41+18%For the second quarter of 2010, the WhiteWave-Alpro segment reported net sales of $459.0 million, 31% higher than second quarter 2009 net sales of $349.1 million. This increase was a result of the benefits of the Alpro acquisition and continued strong volume driven net sales growth across the WhiteWave portfolio. Among the key brands at WhiteWave-Alpro, the non-dairy milk alternatives business, which includes both Silk and Alpro, continued to post strong results. Silk sales increased low-double digits in the quarter as a result of the strong performance of Silk PureAlmond®. Alpro sales increased in the high-single digits in the quarter on a constant currency basis. International Delight® Coffee Creamer net sales grew in the mid-teens on continued strength behind product and packaging innovation. Land O?Lakes® brand creamers increased sales in the mid-single digits. Horizon Organic® milk sales again outpaced the organic milk category to report high-single digit net sales growth. The acquisition of Alpro and reduced investment in the Hero/WhiteWave joint venture contributed to an 18% increase in segment operating income in the second quarter to $41.0 million, from $34.7 million in the second quarter of 2009. WhiteWave operating profits were essentially flat due to increased distribution costs and the timing of marketing spending against new products. The WhiteWave-Alpro segment operating income includes a $1.9 million loss related to the Company?s interest in the Hero/WhiteWave joint venture, but excludes a $1.9 million loss from the joint venture attributable to the non-controlling interest.DISCONTINUED OPERATIONSThe Company announced that it has entered into an agreement to sell its Rachel?s U.K. business, which consists of yogurt and other dairy products, and has reclassified results for the business under discontinued operations. The transaction is expected to close in the third quarter. The sale of Rachel?s is not expected to have a material impact on earnings.  CORPORATE AND OTHER EXPENSECorporate and Other expense totaled $54.4 million for the second quarter of 2010, as compared to $58.0 million in the second quarter of 2009. For the balance of the year, the Company expects Corporate expense to be roughly flat compared to year ago levels.CASH FLOWNet cash provided by continuing operations for the six months ended June 30, 2010 totaled $243.5 million, compared to $348.3 million in the first half of 2009. Free cash flow provided by operations, which is defined as net cash provided by continuing operations less net capital expenditures, totaled $130.6 million for the six months ended June 30, 2010, compared to $247.4 million in the first half of 2009.  A reconciliation between net cash provided by continuing operations and free cash flow provided by continuing operations is provided below. Net capital expenditures for the first half of 2010 totaled $112.9 million, compared to $100.8 million in the same period of 2009. The Company expects full year capital expenditures to be between $250 and $300 million for 2010.Total debt at June 30, 2010, net of $61.2 million in cash on hand, was approximately $4.1 billion. The Company?s funded debt to EBITDA ratio, as defined by its credit agreements, was 4.68x as of the end of the second quarter, compared to a current covenant of 5.5x. FORWARD OUTLOOK ?At a high level, our current outlook for the business is fundamentally unchanged from the first quarter,? said Engles. ?Consumers, particularly working class consumers, remain underemployed and over leveraged. Their economic anxiety is reflected in a highly promotional retail environment for private label milk that is driving negative private label versus branded mix for our Fresh Dairy Direct-Morningstar business. Despite aggressive retail pricing, category volumes are soft. As a result, our expectations for Fresh Dairy Direct-Morningstar performance have not changed from last quarter?s call. ?On the other hand, our more value-added business at WhiteWave-Alpro, bolstered by increasingly confident upper income consumers, continue to post strong volume, revenue, and operating profit growth ? a trend we expect to continue, which should result in very solid annual profit growth for that segment.?Finally, we have put one of the major risks to our business behind us, with the successful amendment and extension of our credit facilities. The increased flexibility of loosened covenants and extended maturities came at a cost of additional interest expense of approximately $0.06 from the second to the third quarter. In keeping with our recent practice, we will offer guidance only for the upcoming quarter. Given our view that business conditions have not materially changed from the second quarter, and given typical seasonal weakness in the third quarter versus the second, we expect earnings of $0.17 to $0.22 per share in the third quarter. Adjusting for the six cents of additional third quarter interest expense, our range of guidance for the third quarter is essentially unchanged from the second quarter.?RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2010Net sales for the six months ended June 30, 2010 totaled $5.9 billion, an increase of 10% from net sales for the same period of last year, due to the pass-through of higher dairy commodity costs, the impact of acquisitions, and strong growth in net sales at WhiteWave-Alpro. Net income for the first half of the year totaled $87.9 million, compared with $140.4 million in the first six months of 2009.  Diluted earnings per share from continuing operations for the six months ended June 30, 2010 totaled $0.48, compared to $0.86 for the first six months of 2009.On an adjusted basis, net income for the six months ending June 30, 2010 totaled $96.5 million, compared to $156.7 million in the same period of 2009.  Adjusted diluted earnings per share for the first six months of 2010 totaled $0.53 compared to $0.95 in the first six months of 2009.COMPARISON OF ADJUSTED INFORMATION TO GAAP INFORMATIONThe adjusted financial results contained in this press release are from continuing operations and are adjusted to eliminate the net expense or net gain related to the items identified below. This information is provided in order to allow investors to make meaningful comparisons of the Company's operating performance between periods and to view the Company's business from the same perspective as Company management. Because the Company cannot predict the timing and amount of charges associated with non-recurring items, write off of financing costs, closed or anticipated to close deal costs, gains or losses on foreign exchange forward contracts or facility closings and reorganizations, management does not consider these costs when evaluating the Company's performance, when making decisions regarding the allocation of resources, in determining incentive compensation for management, or in determining earnings estimates. These costs are not presented in any of the Company?s operating segments. This non-GAAP financial information is provided as additional information for investors and is not in accordance with or an alternative to GAAP. These non-GAAP measures may be different than similar measures used by other companies. A full reconciliation for the three and six month periods ended June 30, 2010, and 2009 calculated according to GAAP on an adjusted basis is attached. CONFERENCE CALL WEBCASTA webcast to discuss the Company?s financial results and outlook will be held at 9:30 a.m. ET today and may be heard live by visiting the ?Webcast? section of the Company?s site at www.deanfoods.com/investors. A slide presentation will accompany the webcast. ABOUT DEAN FOODSDean Foods is one of the leading food and beverage companies in the United States. The Company?s Fresh Dairy Direct-Morningstar business is the largest processor and distributor of milk and other dairy products in the country. The WhiteWave-Alpro business produces and sells a variety of nationally branded soy, dairy and dairy-related products. Popular brands include: Silk® and Alpro® dairy milk alternatives, Horizon Organic® milk and dairy products, International Delight® coffee creamers, and LAND O?LAKES® creamers. FORWARD-LOOKING STATEMENTSSome of the statements in this press release are "forward-looking" and are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These "forward-looking" statements include statements relating to, among other things, projected sales, operating income, net income, adjusted diluted earnings per share, debt covenant compliance, expected financial performance and capital structure. These statements involve risks and uncertainties that may cause results to differ materially from the statements set forth in this press release. The Company's ability to meet targeted financial and operating results, including targeted sales, operating income, net income, earnings per share, and to maintain compliance with financial covenants depends on a variety of economic, competitive and governmental factors, including raw material availability and costs, the demand for the Company?s products, the Company?s ability to integrate its acquisitions and the Company?s ability to access capital under its credit facilities or otherwise, many of which are beyond the Company's control and which are described in the Company's filings with the Securities and Exchange Commission. The Company's ability to profit from its branding initiatives depends on a number of factors including consumer acceptance of the Company's products. The forward-looking statements in this press release speak only as of the date of this release. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to such statements to reflect any change in its expectations with regard thereto or any changes in the events, conditions or circumstances on which any such statement is based.CONTACT:  Corporate Communications, Marguerite Copel, +1-214-721-1273; or Investor Relations, Barry Sievert, +1-214-303-3438(Tables to follow)DEAN FOODS COMPANY Condensed Consolidated Income Statements   (Unaudited) (In thousands, except per share data) GAAP ADJUSTED Three months ended Three months ended June 30,June 30,2010200920102009 Net sales $ 2,954,653$ 2,669,853$ 2,954,653$ 2,669,853 Cost of sales 2,203,2301,908,2032,203,2301,908,203 Gross profit 751,423761,650751,423761,650 Operating costs and expenses: Selling and distribution  457,705438,028457,705438,028 General and administrative  159,423153,167159,423144,407 (a) Amortization of intangibles 2,8072,0062,8072,006 Facility closing and reorganization costs 6,50911,414- (b) - (b) Loss attributable to noncontrolling interest in Hero JV --(1,897) (c ) (2,977) (c ) Total operating costs and expenses 626,444604,615618,038581,464 Operating income 124,979157,035133,385180,186 Interest expense 55,36959,96448,668 (d) 59,964 Other (income) expense, net (306)(5,072)(306)35 (e) Income from continuing operations before income taxes 69,916102,14385,023120,187 Income taxes 26,45538,72731,544 (f) 45,721 (f) Income from continuing operations 43,46163,41653,47974,466 Loss from discontinued operations, net of tax (609)(1,100)- (g) - (g) Net income 42,85262,31653,47974,466 Net loss attributable to noncontrolling interest 1,9351,827- (c ) - (c ) Net income attributable to Dean Foods Company     $      44,787$      64,143$      53,479$      74,466 Average common shares: Basic 181,636168,332181,636168,332 Diluted 182,391170,991182,391170,991Basic earnings per common share:Income from continuing operations attributable to Dean Foods Company $          0.25$          0.39$          0.29$          0.44Loss  from discontinued operations-(0.01)--Net income attributable to Dean Foods Company$          0.25$          0.38$          0.29$          0.44Diluted earnings per common share:Income from continuing operations attributable to Dean Foods Company $          0.25$          0.38$          0.29$          0.44Loss  from discontinued operations----Net income attributable to Dean Foods Company$          0.25$          0.38$          0.29$          0.44 * See notes to Earnings Release Tables DEAN FOODS COMPANY Condensed Consolidated Income Statements   (Unaudited) (In thousands, except per share data) GAAP ADJUSTED Six months ended Six months ended June 30,June 30,2010200920102009 Net sales $ 5,915,796$ 5,361,326$ 5,915,796$ 5,361,326 Cost of sales 4,416,5793,844,1494,416,5793,844,149 Gross profit 1,499,2171,517,1771,499,2171,517,177 Operating costs and expenses: Selling and distribution  930,432860,170930,432860,170 General and administrative  310,388283,975310,388273,317 (a) Amortization of intangibles 5,6703,9145,6703,914 Facility closing and reorganization costs 8,06019,662- (b) - (b) Loss attributable to noncontrolling interest in Hero JV --(4,111) (c ) (4,690) (c ) Total operating costs and expenses 1,254,5501,167,7211,242,3791,132,711 Operating income 244,667349,456256,838384,466 Interest expense 113,438128,254106,737 (d) 128,254 Other (income) expense, net (485)(4,902)(485)205 (e) Income from continuing operations before income taxes 131,714226,104150,586256,008 Income taxes 48,44287,68854,121 (f) 99,355 (f) Income from continuing operations 83,272138,41696,465156,653 Loss from discontinued operations, net of tax (1,342)(900)- (g) - (g) Gain on sale of discontinued operations, net of tax 1,837-- (g) - (g) Net income 83,767137,51696,465156,653 Net loss attributable to noncontrolling interest 4,1722,873- (c ) - (c ) Net income attributable to Dean Foods Company     $      87,939$    140,389$      96,465$    156,653 Average common shares: Basic 181,436161,355181,436161,355 Diluted 183,116164,260183,116164,260Basic earnings per common share:Income from continuing operations attributable to Dean Foods Company $          0.48$          0.88$          0.53$          0.97Income (loss)  from discontinued operations-(0.01)--Net income attributable to Dean Foods Company$          0.48$          0.87$          0.53$          0.97Diluted earnings per common share:Income from continuing operations attributable to Dean Foods Company $          0.48$          0.86$          0.53$          0.95Income (loss)  from discontinued operations-(0.01)--Net income attributable to Dean Foods Company$          0.48$          0.85$          0.53$          0.95 * See notes to Earnings Release Tables DEAN FOODS COMPANY Condensed Consolidated Balance Sheets (Unaudited) (In thousands) June 30, December 31, ASSETS 20102009 Cash and cash equivalents $      61,247$          45,190 Other current assets 1,573,4891,600,996 Total current assets 1,634,7361,646,186 Property, plant and equipment, net 2,056,9792,102,253 Intangibles and other assets 4,087,2814,095,502 Total Assets $ 7,778,996$     7,843,941 LIABILITIES AND STOCKHOLDERS' EQUITY Total current liabilities, excluding debt $ 1,172,422$     1,234,062 Total long-term debt, including current portion 4,153,4514,228,979 Other long-term liabilities 1,006,1241,013,668 Dean Foods stockholders' equity 1,431,2641,351,946 Noncontrolling interest 15,73515,286 Total stockholders' equity 1,446,9991,367,232 Total Liabilities and Stockholders' Equity $ 7,778,996$     7,843,941DEAN FOODS COMPANY Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) Six months ended June 30,   Operating Activities 20102009 Net cash provided by continuing operations $  243,486$  348,285 Net cash provided by discontinued operations 7931,261 Net cash provided by operating activities $  244,279$  349,546 Investing Activities Additions to property, plant and equipment (112,893)(100,847) Payments for acquisitions, net of cash received -(34,963) Proceeds from sale of fixed assets 5,0814,789 Net cash used in investing activities (107,812)(131,021) Net cash used in discontinued operations (133)(249) Net cash used in investing activities $ (107,945)$ (131,270) Financing Activities Net repayment of debt (88,654)(654,304) Payment of financing costs (34,234)- Issuance of common stock, net of share repurchases for withholding taxes 1,586446,760 Capital contribution from noncontrolling interest 4,6216,433 Other -- Net cash used in financing activities (116,681)(201,111) Effect of exchange rate changes on cash and cash equivalents (3,596)- Increase in cash and cash equivalents 16,05717,165 Beginning cash balance 45,19035,979 Ending cash balance $    61,247$    53,144  Computation of Free Cash Flow provided by continuing operations    Net cash provided by continuing operations  $  243,486$  348,285  Net additions to property, plant and equipment  (112,893)(100,847)  Free cash flow provided by continuing operations  $130,593$247,438DEAN FOODS COMPANY Segment Information and Reconciliation of GAAP to Adjusted Earnings (Unaudited) (In thousands) Three months ended June 30, 2010 Closed Facility Closing & Non-ControllingDealReorganizationInterest inOther AdjustmentsGAAPCosts (a)Costs (b)Hero JV (c) (d) (f) (g)Adjusted Segment operating income (loss): Fresh Dairy Direct - Morningstar $ 146,799$          -$                       -$                   -$                         -$ 146,799 Whitewave - Alpro 39,057--1,897-40,954 Corporate (54,368)----(54,368) Facility closing and reorganization costs (6,509)-6,509--- Total operating income $ 124,979$          -$                6,509$            1,897$                         -$ 133,385 Net income attributable to Dean Foods Company  $   44,787$          -$                3,963$                   -$                  4,729$   53,479 Diluted earnings per share $       0.25$          -$                  0.02$                   -$                    0.02$       0.29 Three months ended June 30, 2009 Closed Facility Closing & Non-ControllingDealReorganizationInterest inOther AdjustmentsGAAPCosts (a)Costs (b)Hero JV (c)(e) (f) (g)Adjusted Segment operating income (loss): Fresh Dairy Direct - Morningstar $ 203,498$          -$                       -$                   -$                         -$ 203,498 Whitewave - Alpro 31,736--2,977-34,713 Corporate (66,785)8,760---(58,025) Facility closing and reorganization costs (11,414)-11,414--- Total operating income $ 157,035$  8,760$              11,414$            2,977$                         -$ 180,186 Net income attributable to Dean Foods Company  $   64,143$  5,350$                6,988$                   -$                (2,015)$   74,466 Diluted earnings per share $       0.38 $    0.03 $                  0.04 $                   - $                  (0.01) $       0.44 * See notes to Earnings Release Tables DEAN FOODS COMPANY Segment Information and Reconciliation of GAAP to Adjusted Earnings (Unaudited) (In thousands) Six months ended June 30, 2010 Closed Facility Closing & Non-ControllingDealReorganizationInterest inOther AdjustmentsGAAPCosts (a)Costs (b)Hero JV (c)(d) (f) (g) Adjusted Segment operating income (loss): Fresh Dairy Direct - Morningstar $ 273,570$           -$                       -$                   -$                         -$ 273,570 Whitewave - Alpro 81,381--4,111-85,493 Corporate (102,224)----(102,225) Facility closing and reorganization costs (8,060)-8,060--- Total operating income $ 244,667$           -$                8,060$            4,111$                         -$ 256,838 Net income attributable to Dean Foods Company  $   87,939$           -$                4,902$                   -$                  3,624$   96,465 Diluted earnings per share $       0.48 $           - $                  0.03 $                   - $                    0.02 $       0.53 Six months ended June 30, 2009 Closed Facility Closing & Non-ControllingDealReorganizationInterest inOther AdjustmentsGAAPCosts (a)Costs (b)Hero JV (c)(e) (f) (g) Adjusted Segment operating income (loss): Fresh Dairy Direct - Morningstar $ 418,087$           -$                       -$                   -$                         -$ 418,087 Whitewave - Alpro 58,455--4,690-63,143 Corporate (107,424)10,658---(96,764) Facility closing and reorganization costs (19,662)-19,662--- Total operating income $ 349,456$ 10,658$              19,662$            4,690$                         -$ 384,466 Net income attributable to Dean Foods Company  $ 140,389$   6,500$              11,978$                   -$                (2,214)$ 156,653 Diluted earnings per share $       0.85$     0.04$                  0.08$                   -$                  (0.02)$       0.95 * See notes to Earnings Release Tables For the three and six months ended June 30, 2010 and 2009, the adjusted results and certain other non-GAAP financial measures differ from the Company?s results under GAAP by excluding the following:(a) In accordance with the change in generally accepted accounting principles, effective January 1, 2009 all transaction-related fees on acquisitions are expensed as incurred. The adjustment reflects the elimination of transaction-related fees on acquisitions that have closed or are expected to close. (b) The adjustment reflects the elimination of charges related to announced facility closings and reorganization costs.(c) Effective January 1, 2009 the results of operations for the Hero/WhiteWave joint venture have been consolidated for financial reporting purposes. The adjustment reflects the operating loss attributable to the 50% interest in the Hero/WhiteWave joint venture that we do not own.(d) The adjustment reflects the write-off of financing costs associated with the amendment of our senior secured credit facility.(e) The adjustment reflects the elimination of a gain related to a foreign currency forward contract entered into in conjunction with our acquisition of the Alpro Division of Vandemoortele, N.V.   (f) The adjustment reflects the income tax impact for income from continuing operations before income taxes adjustments (a) through (e). (g) The adjustment reflects the elimination of discontinued operations, net of tax.SOURCE Dean Foods CompanyFor further information: Corporate Communications, Marguerite Copel, +1-214-721-1273; or Investor Relations, Barry Sievert, +1-214-303-3438, both of Dean Foods Company