BUSINESS NEWS: Dean Foods Reports First Quarter 2010 Results

Dean Foods Reports First Quarter 2010 Results

First Quarter Diluted Earnings per Share of $0.24, Adjusted Diluted Earnings per Share of $0.23
Reporting Segments Realigned to Increase Focus on Value-Added Growth and Transformation
Expects Q2 Adjusted Diluted EPS of $0.23-$0.28, Suspends Full Year Guidance
Accelerating and Expanding Cost Reduction Efforts to Combat Pricing Pressures

DALLAS, May 10, 2010 /PRNewswire via COMTEX/ --Dean Foods Company (NYSE: DF) today announced that for the first quarter 2010, the Company earned $0.24 per diluted share, as compared to first quarter 2009 earnings of $0.48 per diluted share. On an adjusted basis, first quarter diluted earnings per share were $0.23, compared to $0.52 per diluted share earned in the prior year's first quarter.

For the first quarter of 2010, net income attributable to Dean Foods totaled $43 million, compared with $76 million in the prior year's first quarter. Adjusted net income for the first quarter was $42 million, compared to adjusted net income of $83 million in the first quarter of 2009.

CONSOLIDATED RESULTS

Consolidated net sales for the first quarter totaled $2.97 billion, compared to $2.70 billion of consolidated net sales in the first quarter of 2009. Consolidated net sales increased in the quarter due to the pass-through of higher overall dairy commodity costs at Fresh Dairy Direct-Morningstar, the acquisition of Alpro and solid net sales growth among the value-added brands at WhiteWave-Alpro.

Consolidated operating income in the first quarter totaled $119 million, compared to $193 million in the first quarter of 2009. First quarter consolidated adjusted operating income totaled $123 million, compared to $205 million in the first quarter of 2009. The decline in first quarter consolidated adjusted operating income is due to significantly lower operating income in the traditional dairy business at Fresh Dairy Direct-Morningstar offset by strong growth in operating income in the value-added, branded WhiteWave-Alpro segment.

Total adjusted operating costs, including distribution, selling, marketing, and general and administrative costs, increased $74 million over the first quarter of 2009. Of this, approximately 60% of the increase in costs is attributable to three acquisitions completed in 2009. The remaining expense growth was primarily driven by transformation initiative support, higher fuel and freight costs at Fresh Dairy Direct-Morningstar and increased marketing support at WhiteWave-Alpro.

CORPORATE EXPENSE

First quarter 2010 corporate expense totaled $48 million, compared to $39 million in the first quarter of 2009. The Company expects very limited year over year growth in corporate expense through the balance of the year.

CASH FLOW

Net cash provided by continuing operations for the three months ended March 31, 2010 totaled $71 million, compared to $185 million in the first quarter of 2009. Free cash flow provided by operations, which is defined as net cash provided by continuing operations less net capital expenditures, totaled $28 million for the three months ended March 31, 2010, compared to $146 million in the first quarter 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 quarter of 2010 totaled $43 million, compared to $38 million in the same period of 2009.

Total debt at March 31, 2010, net of $48 million in cash on hand, was approximately $4.16 billion. The Company's funded debt to EBITDA ratio, as defined by its credit agreements, was 4.43x as of the end of the first quarter, compared to a current covenant of 5.0x and an end of year step down in the covenant to 4.5x. The Company continues to focus on reducing overall leverage.

"Given the continuing challenges in the business, we are not on pace against our goals of deleveraging the balance sheet to approximately 3.5x funded debt to EBITDA by mid-2011," stated Jack Callahan, Chief Financial Officer. "Therefore, we continue to closely monitor the capital markets and may choose to address our refinancing needs sooner than we'd previously anticipated. Both the bank and high yield financing markets have significantly improved over the past year, affording us multiple debt financing options to consider."

SOURCE: Dean Foods Press Release

"We entered 2010 facing substantial margin pressure in our milk business as retailers compressed private label margins to attract value conscious consumers," said Gregg Engles, Chairman and CEO. "Despite a very strong performance at WhiteWave-Alpro, these very low private label retails drained the profit pool of our regional brands, and led to consolidated results that were below our expectations."