Nov. 2, 2009 (PR Newswire) -- DALLAS, Nov. 2 /PRNewswire-FirstCall/ -- Dean Foods Company (NYSE: DF) today announced continued strong earnings growth in the third quarter with diluted earnings per share of $0.27 for the quarter ended September 30, 2009, a 13% increase over $0.24 per diluted share in the third quarter of 2008. Adjusted (as defined below) diluted earnings per share were $0.34, an increase of 21% from $0.28 per adjusted diluted share in the prior year's third quarter.

"We are reporting another strong quarterly performance with continued solid operating income and earnings per share growth," said Gregg Engles, Chairman and Chief Executive Officer. "These strong results highlight the key advantages of our business, including a national footprint that provides an unmatched ability to service customers, as well as unique cost savings opportunities. This breadth is complemented by strong branded and private label positions across the refrigerated case, with key offerings in the fastest growing on-trend product segments."

Net income for the third quarter totaled $49.7 million, compared with $37.8 million in the prior year's third quarter, an increase of 32%. Solid operating income growth at Fresh Dairy Direct and WhiteWave-Morningstar and lower interest expense offset increases in Corporate and Other expenses to drive 43% growth in adjusted net income for the third quarter to $62.2 million, up from $43.5 million in the third quarter of 2008. Due to lower average debt balances, interest expense in the quarter totaled $59.5 million, compared to $74.7 million in the third quarter of 2008.

DEAN FOODS CONSOLIDATED

Net sales for the third quarter totaled $2.8 billion, a decrease of 13% from net sales in the third quarter of 2008. The net sales decrease in the quarter was primarily due to the pass-through of lower dairy commodity costs, and lower net sales volumes in the WhiteWave-Morningstar operations, offset by acquisition-related volume growth in Fresh Dairy Direct and WhiteWave-Morningstar.

Summary of Dean Foods Third Quarter 2009 Operating Results
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$ millions      % change
(except EPS) from prior year
------------ ---------------
Consolidated Adjusted Operating Income:      $158.0         +12%

Interest Expense:                             $59.5         -20%

Consolidated Adjusted Net Income              $62.2         +43%

Adjusted Diluted Earnings per Share:          $0.34         +21%

Consolidated operating income in the third quarter totaled $137.1 million, as compared to $131.8 million in the third quarter of 2008. Fresh Dairy Direct operating income growth of 4% and WhiteWave-Morningstar operating income growth of 66% combined to offset higher Corporate and Other expense, resulting in third quarter consolidated adjusted operating income of $158.0 million, an increase of 12% from $140.8 million in the third quarter of 2008.

FRESH DAIRY DIRECT

Third Quarter 2009 Fresh Dairy Direct Detail
--------------------------------------------

% change
$ millions       from prior year
----------       ---------------
Fluid Milk Volume               N/A                +2.5%

Operating Income             $145.7                  +4%

Base business volume growth of approximately 1% was augmented by the benefits of recent acquisitions to drive a combined 2.5% growth in fluid milk sales for the third quarter, as compared to the balance of the industry, which was down slightly in the same period, based on Company estimates. Fresh Dairy Direct net sales declined 18% to $2.1 billion from $2.5 billion in the third quarter of 2008 due to the pass-through of lower dairy commodity costs to its customers, which was partially offset by higher volumes.

Relatively favorable commodities, benefits from cost control efforts, and continued volume growth led to Fresh Dairy Direct operating income growth of 4% in the quarter to $145.7 million in the third quarter, from $140.4 million in the same period of 2008.

The Class I mover, which is an indicator of the Company's raw milk costs, averaged $10.41 per hundredweight, a 45% decrease from the same period in 2008 and down 1% from the second quarter of 2009. The Class I mover increased sequentially in September, October, and November and the Company expects prices to continue on a generally increasing trend for the foreseeable future. CME butter prices averaged $1.22 per pound in the third quarter, a decrease of 25% from the same period a year ago and essentially flat with the second quarter of 2009.

WHITEWAVE - MORNINGSTAR

Third Quarter 2009 WhiteWave-Morningstar  Detail
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% change
Net Sales                     $ millions        from prior year
---------                     ----------        ---------------
WhiteWave-Morningstar           $709.7                 6%
Morningstar                 $257.6               -12%
WhiteWave/Alpro             $452.1               +19%

Operating Income
----------------
WhiteWave-Morningstar            $68.6               +66%

Operating income in the third quarter for WhiteWave-Morningstar was $68.6 million, a 66% increase over $41.3 million in the third quarter of 2008. Third quarter 2009 operating margins were 9.7%, compared to 6.2% in the third quarter 2008.

WhiteWave-Morningstar, which includes Alpro, reported third quarter net sales of $709.7 million, 6% higher than third quarter 2008 net sales of $671.3 million. Sales of the branded portfolio at WhiteWave/Alpro increased 19% to $452.1 million as a result of the Alpro acquisition, offset by a previously announced exit of a foodservice relationship in the Silk® brand and the exit of some private label organic milk products in the United Kingdom. Net sales at Morningstar declined 12% to $257.6 million driven by the pass-through of lower dairy commodity costs and modestly lower product sales volumes.

Market share increased across all key areas of the branded portfolio during the quarter. Within the branded portfolio, net sales of the WhiteWave creamer portfolio, which includes International Delight® and Land O'Lakes® brands, increased in the mid-single digits driven by strong performance of International Delight CoffeeHouse Inspirations line as well as strong core business growth. Silk soymilk sales increased low-single digits excluding the sales associated with the Company's 2008 strategic decision to exit a certain foodservice business relationship, and were down slightly including the impact. Horizon Organic® milk net sales decreased slightly against a backdrop of a category that was down mid-single digits, with outperformance driven by continued solid growth in value added segments.

CORPORATE AND OTHER EXPENSE

Corporate and Other expense totaled $56.3 million for the third quarter of 2009, as compared to $41.0 million in the third quarter of 2008. The Company remains strongly focused on improving its cost position in the marketplace with the goal of becoming a leaner, more efficient, and simpler business. In 2009, the Company is making a number of strategic investments to support this goal. These investments are being made in supply chain, to drive best practices across its network of over 100 manufacturing facilities; in information technology, to improve the timeliness and precision of cost data; and in research and development to drive business simplification of products, packages and formulas. Also impacting the corporate line are higher legal, pension, and incentive compensation expense. Additionally, $3.9 million of operating costs related to the Hero/WhiteWave joint venture is included in the corporate and other segment.

The Company recognized approximately $10.6 million of costs associated with closed and anticipated to close transactions in the quarter. Beginning in 2009, these costs are required to be expensed as incurred and no longer 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 nine months of 2009 totaled $502.7 million, compared to $458.7 million for the first nine months of 2008.

Capital expenditures for the first nine months of 2009 totaled $171 million, compared to $171 million for the first nine months of 2008. For the year, the Company continues to expect capital expenditures to be approximately $275 million.

"I am extremely pleased with our continued strong cash flow performance," said Jack Callahan, Chief Financial Officer. "Reducing our leverage continues to be a key area of focus for the Company and we remain committed to achieving our goal of funded debt to EBITDA, as defined by our credit agreement, of 3.5x or below by the first part of 2011."

Total debt at September 30, 2009, net of $38.6 million of cash on hand, was approximately $4.2 billion. The Company's funded debt to EBITDA ratio, as defined by its credit agreement, was 3.97x as of the end of the third quarter.

FORWARD OUTLOOK

"We continue to make excellent progress against our goal of becoming a leaner, more efficient company," continued Engles. "We expect to achieve our 2009 goal of eliminating $75 million of inefficiency in our business system, and remain committed to our 3-5 year goal to achieve $300+ million in cost savings.

Dairy prices began to rise as we closed out the third quarter and have continued to move higher into the fourth quarter. As always, we are focused on passing through these rising dairy costs.