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8-K - FORM 8-K - DEAN FOODS COd345747d8k.htm

Exhibit 99.1

 

LOGO       NEWS RELEASE
   Contact:    Barry Sievert
Vice President, Investor Relations
(214) 303-3437

DEAN FOODS REPORTS STRONG FIRST QUARTER RESULTS

 

   

Solid Growth Across All Operating Segments

 

   

Q1 Diluted Earnings per Share of $0.20, Adjusted Diluted Earnings per Share Increase 121% to $0.31

 

   

Segment Operating Income Increases 31% at WhiteWave, 18% at Fresh Dairy Direct, 13% at Morningstar

 

   

Corporate Expense Declines on Tight Cost Control

 

   

Second Quarter 2012 Guidance of $0.28-$0.33 per Adjusted Diluted Share

 

   

Full Year 2012 Guidance Increased to $1.10-$1.20 per Adjusted Diluted Share

DALLAS, May 9, 2012 – Dean Foods Company (NYSE: DF) today announced strong first quarter results driven by solid growth across all operating segments, and supported by tight expense control. The Company reported first quarter 2012 earnings of $0.20 per diluted share, compared to first quarter 2011 earnings of $0.14 per diluted share. On an adjusted basis, first quarter 2012 diluted earnings per share were $0.31, a 121% increase from the $0.14 per diluted share earned in the prior year’s first quarter.

First quarter consolidated operating income totaled $123 million, compared to consolidated operating income of $106 million in the first quarter of 2011. Adjusted first quarter consolidated operating income totaled $152 million, a 42% increase compared to $107 million reported in the first quarter of 2011.

“Today we announced strong first quarter results, driven by stronger than forecasted growth across each of our three operating segments, and supported by tight expense control across the business,” said Gregg Engles, Chairman and CEO. “As a result, consolidated adjusted operating income increased 42% above year ago levels.

“Our financial performance was further bolstered by declining interest expense, resulting in first quarter adjusted diluted earnings per share of $0.31, more than double the previous year and the sixth straight quarter we have delivered adjusted EPS at or above our guidance.”


Net income attributable to Dean Foods totaled $38 million, compared to net income of $25 million in the prior year’s first quarter. Adjusted net income for the first quarter was $57 million, a 129% increase from $25 million in the first quarter of 2011.

Net sales for the first quarter totaled $3.2 billion, compared to $3.0 billion of net sales in the first quarter of 2011.

Summary of Dean Foods First Quarter 2012 Operating Results

 

     Q1 2012         
     $ millions      Y/Y  
     (except EPS)      Change  

Consolidated Adjusted Operating Income

   $ 152         +42

Adjusted Interest Expense

   $ 60         -8

Consolidated Adjusted Net Income

   $ 57         +129

Adjusted Diluted Earnings per Share

   $ 0.31         +121

WHITEWAVE – ALPRO

For the first quarter of 2012, the WhiteWave-Alpro segment reported net sales of $571 million, 13% higher than first quarter 2011 net sales of $507 million, and the highest net sales in the history of the segment. Strong category growth, and continued investment in brand building, innovation, and marketing drove the first quarter performance.

First Quarter 2012 WhiteWave-Alpro Summary

 

     Q1 2012      Y/Y  
     $ millions      Change  

Net Sales

   $ 571         +13

Operating Income

   $ 60         +31

Among the product categories at WhiteWave-Alpro, sales in the Coffee Creamers and Beverages platform increased more than 20% in the first quarter, driven by strong International Delight creamers sales and augmented by the rollout of new iced coffee products. The Coffee Creamers and Beverages platform includes coffee creamers under the International Delight®, Land O’Lakes®, Silk® and Horizon Organic® brands, as well as International Delight Iced Coffee. Sales of Plant-based Beverages, which includes Silk® soy, almond and coconut milk products, also increased more than 20% in the first quarter on accelerating growth of Silk PureAlmond®. Sales of Value-Added Dairy, which includes Horizon Organic® branded milk and other products, increased mid-single digits as mild winter weather resulted in higher organic raw milk supply than initially forecasted and price increases to offset higher milk costs were put into the marketplace. Alpro net sales increased mid-single digits in the first quarter on a Euro basis and were approximately flat after currency translation.

 

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A culture of efficiency and expense control at WhiteWave-Alpro leveraged 13% top-line growth to 31% operating income growth in the first quarter. For the quarter, WhiteWave-Alpro operating income was $60 million, versus $46 million in the first quarter of 2011.

FRESH DAIRY DIRECT

First Quarter 2012 Fresh Dairy Direct Summary

 

            Y/Y  
     Q1 2012      Change  

Fluid Milk Volume

     —           +0.4

Fluid Milk Volume, adjusted*

     —           +1.8

Operating Income ($ millions)

   $ 101         +18

 

* adjusted to exclude the estimated impact of the September 2011 Waukesha, WI plant divestiture

A more favorable commodity environment and a continued focus on the fundamentals of cost reduction, price realization, and sales volume growth led to a strong quarterly performance at Fresh Dairy Direct. For the first quarter, Fresh Dairy Direct fluid milk volumes increased 0.4% on a year-over-year basis. This compares to the balance of the industry that experienced a volume decline of approximately 2.9% on a year-over-year basis, based on USDA data and company estimates. Excluding the estimated impact of the September 2011 divestiture of the Waukesha facility, Fresh Dairy Direct fluid milk volumes increased 1.8% in the first quarter of 2012.

The pass-through of higher average commodity costs and volume growth resulted in Fresh Dairy Direct net sales of $2.3 billion, a 4% increase from $2.2 billion in net sales for the first quarter of 2011. The first quarter 2012 average Class I Mover, a measure of raw milk costs, was $17.38 per hundred-weight, an increase of 6% over the first quarter of 2011, but a decrease of 8% from the fourth quarter of 2011.

First quarter Fresh Dairy Direct operating income was $101 million, an 18% increase from the $86 million in the first quarter of 2011.

 

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MORNINGSTAR

First Quarter 2012 Morningstar Summary

 

            Y/Y  
     Q1 2012      Change  

Volume

     —           flat   

Volume, adjusted*

     —           +16

Operating Income ($ millions)

   $ 29         +13

 

* adjusted to exclude the estimated impact of April 2011 yogurt divestiture

First quarter Morningstar volumes were essentially flat, reflecting strong core volume sales across both retail and foodservice channels, offset by the impact of the April 2011 divestiture of its yogurt business. Excluding the impact of the divestiture, first quarter 2012 Morningstar volume increased 16% from the first quarter of 2011, reflecting the Company’s continued success in partnering with winning customers to drive growth. Volumes were also supported by warmer weather, which helped drive ice cream mix sales.

Core volume growth and a more favorable commodity environment drove Morningstar net sales of $325 million, a 5% increase over the prior year first quarter, despite the April 2011 divestiture of its yogurt business. Morningstar operating income increased 13% in the first quarter to $29 million, from $25 million in the first quarter of 2011.

CORPORATE EXPENSE

Managements’ efforts to reduce SG&A expense resulted in a significant decline in Corporate expense in the quarter. First quarter 2012 Corporate expense totaled $38 million, compared to $60 million in the year ago period. First quarter 2012 adjusted Corporate expense totaled $38 million, a 27% decline from the $53 million reported in the first quarter of 2011.

CASH FLOW

Net cash provided by continuing operations for the quarter ended March 31, 2012 totaled $3 million, compared to $37 million in the first quarter of 2011. Free cash flow used in operations, which is defined as net cash provided by continuing operations less capital expenditures, was $41 million, compared to $3 million in the first quarter of 2011. Management expects positive free cash flow throughout the balance of the year. A reconciliation between net cash provided by continuing operations and free cash flow used in continuing operations is included below.

 

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Capital expenditures for the first quarter of 2012 totaled $45 million, compared to $40 million in the year ago period. During the quarter, total debt outstanding, net of cash on hand, increased by $36 million to $3.7 billion. The increase in net debt in the quarter is largely due to litigation settlement payments and a small increase in working capital. The Company’s funded debt to EBITDA ratio, as defined by its credit agreements, declined to 4.41x as of the end of the first quarter versus a maximum leverage covenant ratio of 5.5x. Management continues to focus on reducing its overall leverage and now expects Dean Foods leverage ratio to be at or below 4.0x by year end.

FORWARD OUTLOOK

“Given our significant momentum in the first quarter, the cautious optimism that we expressed last quarter has turned less cautious” continued Engles. “All three operating segments performed well in the first quarter, and we expect strong full year growth across the business.

“At WhiteWave-Alpro, first quarter top-line growth accelerated behind strength in our core products as well as strong early consumer interest in our new product introductions. Looking ahead, we expect continued solid top and bottom-line growth. Our Dallas plant start-up costs and marketing spend in support of new product launches will increase in the second quarter from the first quarter. Given the first quarter’s strong performance, however, we now expect full-year WhiteWave-Alpro operating income growth to be in the high-teens.

“Fresh Dairy Direct continued to outperform the industry from a volume perspective. This, combined with price realization and cost reductions, resulted in strong first quarter profit growth for FDD. Looking ahead, we will continue to focus on the fundamentals of the business: volume, price realization, and cost reduction. With our outlook for a relatively more stable commodity environment through 2012, we expect continued strong growth for the second quarter and the full year. For the full year, we expect low-teens operating income growth for Fresh Dairy Direct.

“Morningstar’s balanced business across foodservice and retail also produced solid first quarter results as we continue to partner with winning customers. Given Morningstar’s strong start, we expect full year operating income growth in the mid-teens.

“In light of our more favorable operating outlook, our expectations for continued SG&A savings, and lower interest expense over the balance of the year, we expect second quarter adjusted earnings per share of $0.28- $0.33. We are also increasing our full year guidance to a range of $1.10-$1.20 in adjusted earnings per share.”

CONFERENCE CALL WEBCAST

A 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.

 

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ABOUT DEAN FOODS

Dean Foods is a leading food and beverage company in the United States and a European leader in branded plant-based foods and beverages. The Company’s Fresh Dairy Direct segment is one of the nation’s largest processors and direct-to-store distributors of fluid milk marketed under more than 50 local and regional dairy brands and private labels. Fresh Dairy Direct also distributes ice cream, cultured products, juices, teas, bottled water and other products. The WhiteWave-Alpro segment produces and sells an array of nationally and internationally branded dairy, plant-based food and beverages, and coffee creamers. WhiteWave brands—including Silk®, Horizon Organic®, International Delight®, and LAND O’LAKES®—are category leaders and consumer favorites. Alpro is the pan-European leader in branded soy food and beverage products with the Alpro® soya and Provamel® brands. Morningstar Foods is a leading warehouse delivery dairy business that produces and sells traditional and specialty dairy items, including cultured dairy products, ice cream mixes, coffee creamers, aerosol whipped toppings, traditional and value-added milks, and blended iced beverages to retailers and foodservice providers nationwide. For more information, visit www.deanfoods.com.

CONTACT: Corporate Communications, Liliana Esposito, +1-214-721-7766; or Investor Relations, Barry Sievert, +1-214-303-3438

FORWARD-LOOKING STATEMENTS

Some 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, cost reduction strategies, divestitures, capital expenditures, new product launches and expected financial performance. 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 cost reductions, sales, operating income, net income and earnings per share depends on a variety of economic, competitive and governmental factors, including raw material availability and costs, the demand for the Company’s products, 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.

(Tables to follow)

# # #

 

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DEAN FOODS COMPANY

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)

 

     GAAP     ADJUSTED*  
     Three months ended
March 31,
   

Three months ended

March 31,

 
     2012      2011     2012     2011  

Net sales

   $ 3,214,094       $ 3,049,854      $ 3,214,094      $ 3,049,854   

Cost of sales

     2,426,241         2,299,572        2,426,241        2,299,572   
  

 

 

    

 

 

   

 

 

   

 

 

 

Gross profit

     787,853         750,282        787,853        750,282   

Operating costs and expenses:

         

Selling and distribution

     504,235         485,802        504,235        485,802   

General and administrative

     129,505         164,662        129,505        156,811 (a) 

Amortization of intangibles

     2,285         2,738        2,285        2,738   

Facility closing and reorganization costs

     28,822         10,643        —   (b)      —   (b) 

Other operating income

     —           (19,490     —          —   (a) 

Loss attributable to non-controlling interest in Hero JV

     —           —          —          (1,837 )(c) 
  

 

 

    

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     664,847         644,355        636,025        643,514   
  

 

 

    

 

 

   

 

 

   

 

 

 

Operating income

     123,006         105,927        151,828        106,768   

Interest expense

     60,747         65,270        59,897 (d)      65,270   

Other (income) expense, net

     554         (48     554        (45
  

 

 

    

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes

     61,705         40,705        91,377        41,543   

Income tax expense

     23,822         17,323        34,528 (e)      16,734 (e) 
  

 

 

    

 

 

   

 

 

   

 

 

 

Net income

     37,883         23,382        56,849        24,809   

Net loss attributable to non-controlling interest

     —           1,881        —          —   (c) 
  

 

 

    

 

 

   

 

 

   

 

 

 

Net income attributable to Dean Foods Company

   $ 37,883       $ 25,263      $ 56,849      $ 24,809   
  

 

 

    

 

 

   

 

 

   

 

 

 

Average common shares:

         

Basic

     184,105         182,817        184,105        182,817   

Diluted

     184,948         183,293        184,948        183,293   

Basic earnings per common share:

         

Net income attributable to Dean Foods Company

   $ 0.21       $ 0.14      $ 0.31      $ 0.14   
  

 

 

    

 

 

   

 

 

   

 

 

 

Diluted earnings per common share:

         

Net income attributable to Dean Foods Company

   $ 0.20       $ 0.14      $ 0.31      $ 0.14   
  

 

 

    

 

 

   

 

 

   

 

 

 

 

* See notes to Earnings Release Tables

 

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DEAN FOODS COMPANY

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

 

     March 31,
2012
    December 31,
2011
 

ASSETS

    

Cash and cash equivalents

   $ 130,309      $ 114,851   

Other current assets

     1,592,580        1,601,471   
  

 

 

   

 

 

 

Total current assets

     1,722,889        1,716,322   

Property, plant and equipment, net

     2,083,432        2,114,380   

Intangibles and other assets, net

     1,952,311        1,923,661   
  

 

 

   

 

 

 

Total Assets

   $ 5,758,632      $ 5,754,363   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

    

Total current liabilities, excluding debt

   $ 1,173,221      $ 1,293,003   

Total long-term debt, including current portion

     3,817,740        3,765,928   

Other long-term liabilities

     820,403        794,083   

Total deficit

     (52,732     (103,398

Non-controlling interest

     —          4,747   
  

 

 

   

 

 

 

Total Dean Foods Company stockholders’ deficit

     (52,732     (98,651
  

 

 

   

 

 

 

Total Liabilities and Stockholders’ Deficit

   $ 5,758,632      $ 5,754,363   
  

 

 

   

 

 

 

 

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DEAN FOODS COMPANY

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

     Three months ended March 31,  
     2012     2011  

Operating Activities

    

Net cash provided by operating activities

   $ 3,222      $ 37,183   

Investing Activities

    

Payments for property, plant and equipment

     (44,517     (40,411

Proceeds from insurance claims

     2,996        —     

Proceeds from divestitures

     —          91,780   

Other, net

     (790     —     

Proceeds from sale of fixed assets

     1,554        1,807   
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (40,757     53,176   

Financing Activities

    

Net proceeds from (repayment of) debt

     51,604        (79,037

Issuance of common stock, net

     (2,255     (580

Capital contribution from non-controlling interest

     —          2,913   

Tax savings on share-based compensation

     286        —     
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     49,635        (76,704

Effect of exchange rate changes on cash and cash equivalents

     3,358        2,947   
  

 

 

   

 

 

 

Increase in cash and cash equivalents

     15,458        16,602   

Cash and cash equivalents, beginning of period

     114,851        92,007   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 130,309      $ 108,609   
  

 

 

   

 

 

 

Computation of Free Cash Flow used in continuing operations

    

Net cash provided by continuing operations

   $ 3,222      $ 37,183   

Net additions to property, plant and equipment

     (44,517     (40,411
  

 

 

   

 

 

 

Free cash flow used in continuing operations

   $ (41,295   $ (3,228

 

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DEAN FOODS COMPANY

Segment Information and Reconciliation of GAAP to Adjusted Earnings

(Unaudited)

(In thousands, except per share data)

 

     Three months ended
March 31, 2012
 
     GAAP     Asset write-down
& (gain) loss on
sales of assets

(a)
     Facility closing
& reorganization
costs

(b)
     Non-controlling
interest in

Hero JV
(c)
     Other
adjustments
(d)
     Adjusted*  

Segment operating income (loss):

                

Fresh Dairy Direct

   $ 101,196      $ —         $ —         $ —         $ —         $ 101,196   

Morningstar

     28,750        —           —           —           —           28,750   

Whitewave - Alpro

     60,310        —           —           —           —           60,310   

Corporate

     (38,428     —           —           —           —           (38,428

Facility closing and reorganization costs

     (28,822     —           28,822         —           —           —     
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total operating income

   $ 123,006      $ —         $ 28,822       $ —         $ —         $ 151,828   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income attributable to Dean Foods Company (e)

   $ 37,883      $ —         $ 18,418       $ —         $ 548       $ 56,849   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Diluted earnings per share

   $ 0.20      $ —         $ 0.11       $ —         $ —         $ 0.31   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Three months ended
March 31, 2011
 
     GAAP     Asset write-down
& (gain) loss on
sales of assets

(a)
    Facility closing
& reorganization
costs

(b)
     Non-controlling
interest in

Hero JV
(c)
     Other
adjustments
     Adjusted*  

Segment operating income (loss):

               

Fresh Dairy Direct

   $ 86,038      $ —        $ —         $ —         $ —         $ 86,038   

Morningstar

     25,444        —          —           —           —           25,444   

Whitewave - Alpro

     46,091        —          —           1,837         —           47,928   

Corporate

     (60,493     7,851        —           —           —           (52,642

Facility closing and reorganization costs

     (10,643     —          10,643         —           —           —     

Other income

     19,490        (19,490     —           —           —           —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total operating income

   $ 105,927      $ (11,639   $ 10,643       $ 1,837       $ —         $ 106,768   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Net income attributable to Dean Foods Company (e)

   $ 25,263      $ (7,003   $ 6,549       $ —         $ —         $ 24,809   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Diluted earnings per share

   $ 0.14      $ (0.04   $ 0.04       $ —         $ —         $ 0.14   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

* See notes to Earnings Release Tables

 

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For the three months ended March 31, 2012 and 2011, the adjusted results and certain other non-GAAP financial measures differ from the Company’s results under GAAP by excluding the following:

 

  (a) The adjustment reflects the elimination of the following:

 

  a. A net gain resulting from the sale of our Mountain High yogurt operations, which closed on February 1, 2011, offset by charges recorded in conjunction with the divestiture of our manufacturing facility in Waukesha, Wisconsin; and

 

  b. Charges associated with the cease of use of certain corporate assets.

 

  (b) The adjustment reflects the elimination of charges related to announced facility closings and reorganization costs.

 

  (c) In 2011, the results of operations for the Hero/WhiteWave joint venture were 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. As of March 31, 2012, we have completed the shutdown of the operations and only an immaterial amount of assets remain as part of the investment. We may incur additional charges related to the final settlement with Hero Group.

 

  (d) The adjustment reflects the elimination of interest accretion in connection with our previously disclosed dairy farmer class action lawsuit filed in the United States District Court for the Eastern District of Tennessee.

 

  (e) The adjustment reflects the income tax impact for income from continuing operations before income taxes on adjustments (a) through (d).

 

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