Dean Foods rises on Q3 beat

Dean Foods rises on Q3 beat

Dean Foods has seen its share price jump today (10 November) after the US dairy group beat third-quarter analyst expectations and guided to an improved fourth-quarter performance.

Shares were up 13.59% at 11:00 ET, climbing to US$16.35. The US's largest milk processor has seen shares fall around 17% over the past 12 months as weak milk prices hit earnings.

While the company booked a net loss for the three months to 30 September, Dean Foods' performance was not as bad as the market had feared. Dean Foods' net losses totalled US$15.97m in the period, or $0.03 per share, compared to an income of $415.1m in the prior year period. Consensus analyst forecasts had predicted losses of $0.13 a share.

Operating losses fell to $1m from an operating income of $23m last year. On an adjusted basis the company reported an operating income of $10m.

Dean Foods also beat expectations on its top line. Revenue increased to $2.37bn, up from $2.2bn last year and ahead of consensus of $2.35bn.

"Given the continued challenges facing the dairy industry due to the dairy commodity environment, we are encouraged by the sequential improvement of our operating results which we believe reflects the success of our current business efforts," CEO Gregg Tanner said. "This year has clearly been the most difficult operating environment we've ever experienced as a company. And so, we remain rigorous in our focus on the things that we control: price realisation, cost productivity and volume at margins that deliver an appropriate return."

Dean Foods had suspended its full-year earnings outlook in August due to the "unprecedented and volatile" conditions in the dairy market. It said today it now expects fourth quarter earnings of $0.05-0.15 a share.

Show the press release

Q3 Loss from Continuing Operations Attributable to Dean Foods of $0.16 per Share, Q3 Adjusted Diluted Loss from Continuing Operations of $0.03 per Share
- Expects Q4 Income from Continuing Operations Attributable to Dean Foods of $0.05 to $0.15 per Share, Despite the Continuation of Elevated Dairy Commodity Costs

DALLAS, Nov. 10, 2014 /PRNewswire/ -- Dean Foods Company (NYSE: DF) today announced third quarter 2014 results.




























Financial Summary


Three Months Ended September 30


Nine Months Ended September 30

(In million, except per share amounts)


2014

2013

% Change


2014

2013

% Change



















Gross Profit









GAAP


$  417

$ 441

-6%


$1,232

$1,409

-13%

Adjusted


$  417

$ 443

-6%


$1,234

$1,414

-13%










Operating Income (Loss)









GAAP


$     (1)

$   23

-105%


$      1

$     96

-99%

Adjusted


$    10

$   42

-77%


$     11

$   181

-94%










Interest Expense









GAAP


$    15

$   30

-50%


$     45

$   180

-75%

Adjusted


$    15

$   24

-38%


$     44

$     76

-43%










Net Income (Loss) Attributable to Dean Foods









GAAP


$   (16)

$ 415

-104%


$    (26)

$   851

-103%

Adjusted


$     (3)

$   11

-125%


$    (20)

$     65

-131%










Diluted Earnings (Loss) Per Share (EPS)









GAAP


$(0.17)

$4.35

-104%


$ (0.27)

$  9.00

-103%

Adjusted


$(0.03)

$0.12

-125%


$ (0.21)

$  0.69

-130%

 

The Company reported a third quarter 2014 diluted loss from continuing operations attributable to Dean Foods of $0.16 per share, compared to third quarter 2013 diluted income of $4.35 per share. On an adjusted basis, the third quarter 2014 diluted loss from continuing operations was$0.03 per share, compared to third quarter 2013 adjusted earnings of $0.12 per share.

Third quarter 2014 operating loss totaled $1 million, compared to third quarter 2013 operating income of $23 million. Third quarter 2014 adjusted operating income totaled $10 million, compared to adjusted operating income of $42 million in the year-ago period.

"Given the continued challenges facing the dairy industry due to the dairy commodity environment, we are encouraged by the sequential improvement of our operating results which we believe reflects the success of our current business efforts," said Gregg Tanner, Chief Executive Officer of Dean Foods. "This year has clearly been the most difficult operating environment we've ever experienced as a company. And so, we remain rigorous in our focus on the things that we control: price realization, cost productivity and volume at margins that deliver an appropriate return."

Chris Bellairs, Chief Financial Officer of Dean Foods, added, "Against the backdrop of this difficult environment, we are seeing positive signs of progress resulting from the focused efforts of our employees to drive improvement throughout all aspects of our operations."

"In the third quarter, these efforts allowed us to deliver sequentially improving adjusted operating income. We believe they will pave the way for us to begin rebuilding our profitability in 2015 and position us for long term success," added Tanner.

Net loss attributable to Dean Foods totaled $16 million for the third quarter of 2014 compared to $415 million of net income attributable to Dean Foods for the year-ago period. On an adjusted basis, third quarter net loss attributable to Dean Foods totaled $3 million, compared to $11 millionof net income attributable to Dean Foods for the third quarter of 2013.

Net sales for the third quarter of 2014 totaled $2.4 billion, compared to $2.2 billion of net sales in the third quarter of 2013.

Dean Foods' unadjusted fluid milk volumes declined 1% on a year-over-year basis. This quarter's volumes reflect the last of the negative impacts of the RFP-driven volume loss from a significant customer in 2013. Excluding the impact of the RFP, Dean Foods' fluid milk volumes decreased 0.6% in the quarter.

The USDA has not published category data for any of the months in the third quarter.

"Our visibility into our share performance is hampered by USDA data now lagging longer than usual. But, when published, we believe the USDA data will show that the category continued to decline in the third quarter," added Tanner. "With our volume performance in the third quarter, if the USDA data were to report a category decline of 3% our share would approximate 35.6%. This would represent a 0.7% increase in our share of the fluid milk category since bottoming out in the third quarter of 2013, at 34.9%. With pricing actions beginning to take effect we may have experienced a sequential decline in our share, which was 35.9% in the second quarter."

The third quarter 2014 average Class I Mover, a measure of raw milk costs, was $23.51 per hundred-weight, an increase of 24% from the third quarter of 2013. The third quarter 2014 average was the second highest quarterly Class I Mover average in the history of the U.S. dairy industry, just less than one percent below the second quarter of 2014. The Company anticipates the elevated Class I Mover trend to continue and the fourth quarter average to be among the highest averages ever.

CASH FLOW
Consolidated net cash from continuing operations for the nine months ended September 30, 2014, totaled $48 million. Free cash flow used in continuing operations, which is defined as net cash provided by or used in continuing operations less capital expenditures, was $41 million for the nine months ended September 30, 2014. On an adjusted basis, which excludes certain other items as outlined within the reconciliation tables below, Dean Foods utilized $11 million of free cash flow through the first nine months of 2014.

DEBT
Total debt at September 30, 2014, net of $30 million cash on hand, was approximately $948 million. The Company's funded net debt to EBITDA ratio calculated in accordance with its credit agreements was 4.23 times as of the end of the third quarter of 2014.

Subject to obtaining board approval, the Company intends to redeem the $23.8 million of remaining senior notes due 2018 during the fourth quarter.

Forward Outlook 
"Turning to the forward outlook for the fourth quarter, although challenges remain, we expect to deliver sequentially improving results," continued Tanner. "The dairy commodity environment remains extremely challenging and for the fourth quarter we expect raw milk costs will remain stubbornly high despite continued strong global production growth and waning demand. We don't expect much relief on raw milk costs until early 2015, but we do expect significant butterfat cost declines at the end of the fourth quarter. Industry volumes remain soft and we expect our fourth quarter volumes to be down low single digits, as compared to prior year, but with a continued improvement to net price realization. Further, as we move past our extended period of heavy plant closure activity and realize further costs reductions, we believe the rate of per-unit production and distribution costs will continue to decline and flatten from a year over year basis."

"All told, we expect fourth quarter adjusted diluted earnings of between $0.05 and $0.15 per share, resulting in full year 2014 adjusted diluted net loss per share of between $0.06 and $0.16."

"We now expect full year 2014 adjusted EBITDA to be between $193 and $208 million and adjusted free cash flow to end the year at approximately breakeven. We also expect to be at the low end of our prior 2014 capital expenditure guidance of $150-175 million."

 

 

Original source: Dean Foods