- Diluted Earnings Increase 23% to $0.38 per Share
- Adjusted Diluted Earnings Increase 30% to $0.43 per Share
- Increases Full Year Guidance for Adjusted Diluted Earnings to at Least $1.60 per Share
DALLAS, Aug. 5 /PRNewswire-FirstCall/ -- Dean Foods Company (NYSE: DF) today announced continued strong earnings growth in the second quarter with diluted earnings per share of $0.38 for the quarter ended June 30, 2009, a 23% increase over $0.31 per diluted share in the second quarter of 2008. Adjusted (as defined below) diluted earnings per share were $0.43, an increase of 30% from $0.33 per adjusted diluted share in the prior year's second quarter.
"The second quarter marks another solid step forward. Again, we posted strong financial results across the business, made continued progress against our strategic initiatives, and further deleveraged the balance sheet," commented Gregg Engles, Chairman and Chief Executive Officer. "We believe we are firmly on track to deliver very strong full year results."
Net income for the second quarter totaled $64.1 million, compared with $48.9 million in the prior year's second quarter, an increase of 31%. Strong operating income growth in the Fresh Dairy Direct and WhiteWave-Morningstar business segments and lower interest expense offset increases in Corporate and Other expenses to drive 41% growth in adjusted net income for the second quarter to $73.5 million, up from $52.0 million in the second quarter of 2008. Due to lower average debt balances, interest expense in the quarter totaled $60.0 million, compared to $76.5 million in the second quarter of 2008.
DEAN FOODS CONSOLIDATED
Net sales for the second quarter totaled $2.7 billion, a decrease of 14% from net sales in the second quarter of 2008. The net sales decrease in the quarter was primarily due to the pass-through of lower dairy commodity costs offset by higher volumes in Fresh Dairy Direct, and slightly lower net sales in the WhiteWave-Morningstar segment.
Summary of Dean Foods Second Quarter 2009 Operating Results
-----------------------------------------------------------
$ millions % change
(except EPS) from prior year
------------ ---------------
Consolidated Adjusted Operating Income: $179.6 +11%
Interest Expense: $60.0 -22%
Consolidated Adjusted Net Income $73.5 +41%
Adjusted Diluted Earnings per Share: $0.43 +30%
Consolidated operating income in the second quarter totaled $156.5 million, as compared to $157.2 million in the second quarter of 2008. Nine percent growth in Fresh Dairy Direct operating income and 46% growth in WhiteWave-Morningstar operating income, offset by higher Corporate and Other expense, resulted in second quarter consolidated adjusted operating income of $179.6 million, an increase of 11% from $162.4 million in the second quarter of 2008.
FRESH DAIRY DIRECT
Second Quarter 2009 Fresh Dairy Direct Detail
---------------------------------------------
$ millions % change
(except volume) from prior year
--------------- ---------------
Fluid Milk Volume N/A +2.4%
Operating Income $168.6 +9%
Recent acquisitions and strong field execution drove the continued outperformance of Fresh Dairy Direct with fluid milk volume growth of 2.4% versus the balance of the industry, which saw a volume decline of roughly half a percent, based on Company estimates. Fresh Dairy Direct net sales declined due to the pass-through of lower average dairy commodity costs to its customers, consistent with industry practice. As a result, in spite of strong volume growth in the quarter, net sales declined 16% to $2.1 billion, from $2.5 billion in the second quarter of 2008.
Historically low dairy commodity prices, combined with other commodity favorability, benefits from cost control efforts, and continued volume growth led to Fresh Dairy Direct operating income of $168.6 million in the quarter, an increase of 9% from $154.3 million in the second quarter of 2008.
"In the second quarter, the combination of strong volume growth, a favorable commodity environment, solid execution from our field teams, and early benefits from our strategic initiatives across the manufacturing and distribution network led to strong operating results," said Harrald Kroeker, President of Dean's Fresh Dairy Direct segment. "Competitive pressures continue, but the commodity environment remains favorable and our business has solid momentum entering the back half of the year."
The second quarter average Class I mover, which is an indicator of the Company's raw milk costs, remained at historically low levels during the second quarter, averaging $10.47 per hundredweight, a 41% decrease from the same period in 2008 and 13% lower than the first quarter of 2009. CME butter prices averaged $1.23 per pound in the second quarter, a decrease of 16% from the same period a year ago and 8% higher than the first quarter of 2009.
WHITEWAVE - MORNINGSTAR
Second Quarter 2009 WhiteWave-Morningstar Detail
------------------------------------------------
% change
Net Sales $ millions from prior year
--------- ---------- ---------------
WhiteWave-Morningstar $622.2 -5%
Morningstar $263.4 -7%
WhiteWave $358.9 -3%
Operating Income
----------------
WhiteWave-Morningstar $72.0 +46%
Operating income in the second quarter for WhiteWave-Morningstar was $72.0 million, a 46% increase over $49.3 million in the second quarter of 2008. Operating margins were 11.6%, compared to 7.6% in the second quarter of 2008 driven by favorable dairy and energy commodities, cost initiatives, and supply chain efficiencies across the segment.
"While we continue to see growth slowing in our core categories due to the current economic situation, we believe that we have made the necessary investments to maintain our share position while attacking our cost structure. Consequently, we had a strong operating profit performance driven by tight SG&A expense control and aggressive cost initiatives combined with generally more favorable commodities," said Joe Scalzo, CEO, WhiteWave-Morningstar. "We continue to focus on improving operating leverage, while also investing to reignite growth in our premium categories and drive bottom-line performance."
WhiteWave-Morningstar reported second quarter net sales of $622.2 million, 5% lower than second quarter 2008 net sales of $652.3 million. Sales of the branded portfolio at WhiteWave decreased 3% to $358.9 million as a result of slowing category sales growth and the previously announced exit of a foodservice relationship in the Silk brand and some private label organic milk business in the United Kingdom. Net sales at Morningstar declined 7% to $263.4 million driven by the pass-through of lower dairy commodity costs and slightly lower product volumes that were impacted by weakness in the foodservice channel.
Within the branded portfolio, net sales of the WhiteWave creamer portfolio, which includes International Delight(R) and Land O'Lakes(R) brands, increased in the low-single digits driven by improved packaging and strong seasonal flavor performance of International Delight and strong net sales growth of Land O'Lakes creamers. Silk(R) soymilk sales increased slightly excluding the sales associated with the Company's 2008 strategic decision to exit a certain foodservice business relationship, and were down mid-single digits including the impact. Consistent with the organic milk category, Horizon Organic(R) milk increased slightly driven by solid growth in key segments such as DHA organic milk.
ALPRO
During the second quarter, the Company announced its intention to purchase the Alpro division of Vandemoortele N.V. for a transaction price of approximately euro 325 million. The transaction was completed early in the third quarter.
Alpro is the European leader in branded soy-based beverage and food products with net sales of approximately euro 260 million in 2008 sold under the Alpro(R) soya and Provamel(R) brands. Alpro has five manufacturing sites in Belgium, the United Kingdom, France and the Netherlands and employs approximately 750 people.
"We are excited to have successfully completed the acquisition of Alpro," commented Engles. "The acquisition of Alpro brings a wealth of opportunity as we work with their strong management team to drive soy consumption in their established markets, as well as expand the brand's reach into new markets across the European Union. We also see important synergies with our Silk brand to share best practices in product formulation and innovation, processing technologies and consumer insights. We look forward to telling you more about the Alpro business as we go forward."
Dean's acquisition of Alpro establishes Dean as a clear global leader in soy-based beverages and food products, with leading brands Silk in North America and Alpro soya and Provamel in Europe, and over $1 billion in combined retail sales.
CORPORATE AND OTHER EXPENSE
Corporate and Other expense totaled $61.0 million for the second quarter of 2009, as compared to $41.2 million in the second quarter of 2008. The increase in the quarter was driven by the Company's decision to accelerate investments in supply chain, information technology, and research and development, as well as increased employee-related costs and legal expenses. Also included in the corporate and other segment is $3.0 million of operating costs related to the Hero/WhiteWave joint venture.
The Company recognized approximately $8.8 million of costs associated with closed and anticipated to close transactions in the quarter. These costs are required to be expensed as incurred and will no longer be capitalized on the balance sheet. The impact of these costs is excluded from the Company's adjusted results to aid period to period comparisons of operating performance.
CASH FLOW
Net cash provided by continuing operations for the first half of 2009 totaled $349.8 million, compared to $315.3 million for the first half of 2008.
