Dean Foods Co. reported a loss of $8.39 per diluted share, as compared to third quarter 2010 earnings of $0.13 per diluted share. The loss per share in the quarter includes a $1.9 billion, or $1.6 billion net of tax, non-cash goodwill impairment charge, which is described below.
On an adjusted basis, third quarter 2011 diluted earnings per share were $0.18, a 39 percent increase from $0.13 per adjusted diluted share in the prior year's third quarter. A full reconciliation between GAAP earnings per share and adjusted earnings per share is provided in the tables below.
For the third quarter of 2011, the net loss attributable to Dean Foods totaled $1.5 billion, compared to net income of $24 million in the prior year's third quarter. Adjusted net income for the third quarter was $33 million, compared to adjusted net income of $23 million in the third quarter of 2010.
"The third quarter marks a return to growth for Dean," said Gregg Engles, chairman and CEO in a prepared statement. "Consolidated adjusted operating income increased 5 percent and adjusted diluted earnings per share increased 39 percent in the quarter. While Fresh Dairy Direct continued to face challenges in the quarter, WhiteWave-Alpro posted exceptional results and corporate costs declined due to our focus on reducing SG&A costs, resulting in the return to growth in the quarter."
Net sales for the third quarter totaled $3.4 billion, compared to $3.1 billion of net sales in the third quarter of 2010. Net sales for the third quarter increased due to the pass-through of higher dairy and overall commodity costs at Fresh Dairy Direct-Morningstar and continued solid sales growth at WhiteWave-Alpro, partially offset by lower volumes at Fresh Dairy Direct-Morningstar.
Consolidated operating loss in the third quarter totaled $1.9 billion, compared to consolidated operating income of $93 million in the third quarter of 2010. Third quarter consolidated adjusted operating income totaled $108 million, a 5 percent increase from $103 million in the third quarter of 2010. The increase in third quarter consolidated adjusted operating income was due to $13.5 million of operating income growth at WhiteWave-Alpro and a $12.5 million decline in corporate expense driven by the company's ongoing cost savings initiatives, offset by a $21.2 million decline in operating income at Fresh Dairy Direct-Morningstar.
Fresh Dairy Direct-Morningstar fluid milk volumes were essentially flat in the third quarter, compared to the overall industry that experienced a volume decline of approximately 0.9 percent on a year-over-year basis, based on USDA data and company estimates. The company's outperformance of the industry was driven primarily by the addition of new customers. Sales volume in other product categories served by Fresh Dairy Direct-Morningstar remained below year ago levels. Total volumes from the Fresh Dairy Direct-Morningstar segment declined 1 percent from the third quarter of 2010 excluding the impact of divested businesses, or 3.6 percent in total.
Despite lower volumes, Fresh Dairy Direct-Morningstar net sales increased 12 percent to $2.9 billion from $2.6 billion in net sales for the third quarter of 2010. The increase in net sales for the segment is driven by the pass-through of higher dairy commodity costs. The third quarter average Class I mover, a measure of the company's cost of milk, was $21.41 per hundred-weight, 8 percent above the previous quarter and 37 percent above the third quarter of 2010.
Fresh Dairy Direct-Morningstar operating income in the third quarter was $95 million, a decrease of 18 percent from the $116 million reported in the third quarter of 2010. The year-over-year decline in operating income is primarily the result of continued soft volumes in non-milk categories and pricing pressures across the portfolio, which offset the Company's cost reduction initiatives.
For the third quarter of 2011, the WhiteWave-Alpro segment reported net sales of $531 million, 11 percent above third quarter 2010 net sales of $478 million due to continued strong growth across the product portfolio. Among the key brands at WhiteWave-Alpro, net sales of Horizon Organic® branded milk increased low-double digits in the third quarter. Branded creamer sales, which includes both International Delight® and LAND O LAKES® creamers, increased mid-teens on continued strength behind International Delight and other innovation. Silk® sales increased mid-single digits on continued strength of Silk PureAlmond® and Silk PureCoconut®. Alpro sales increased low-single digits in the quarter on a constant currency basis, and high-single digits after currency translation.
On a reported basis, segment operating income in the third quarter for WhiteWave-Alpro was $52 million, 39 percent above the $37 million reported in third quarter of 2010. On an adjusted basis, which excludes the impact of the 50 percent interest in the Hero/WhiteWave joint venture that WhiteWave does not own, the segment reported operating income of $53 million, an increase of 34 percent from $39 million in the third quarter of 2010.