Dean Foods Co. Reports Second Quarter Loss

Aug. 5, 2011

Dean Foods Co. reported a loss of $0.28 per diluted share, as compared to second quarter 2010 earnings of $0.25 per diluted share. The loss per share in the quarter includes a $131 million charge related to the previously disclosed Tennessee dairy farmer class action litigation. On an adjusted basis, second quarter 2011 diluted earnings per share were $0.18, compared to $0.29 per adjusted diluted share in the prior year's second quarter.

For the second quarter of 2011, the net loss attributable to Dean Foods totaled $51 million, compared to net income of $45 million in the prior year's second quarter. Adjusted net income for the second quarter was $32 million, compared to adjusted net income of $53 million in the second quarter of 2010.

"In many ways the second quarter of 2011 is a continuation of the trends we have seen over the last several quarters." said Gregg Engles, chairman and CEO in a prepared statement. "WhiteWave-Alpro again posted strong results and Fresh Dairy Direct-Morningstar continued to make progress toward profit stability against a backdrop of weak industry volumes. We continued to execute our plan to drive costs out of the business, and progress in this area has been solid."

Net sales for the second quarter totaled $3.3 billion, compared to $3.0 billion of net sales in the second quarter of 2010. Net sales for the second quarter increased due to the pass-through of higher dairy and overall commodity costs that were partially offset by lower volumes at Fresh Dairy Direct-Morningstar, as well as continued solid sales growth at WhiteWave-Alpro.

Consolidated operating loss in the second quarter totaled $16 million, compared to consolidated operating income of $125 million in the second quarter of 2010. Second quarter consolidated adjusted operating income totaled $114 million, compared to $133 million in the second quarter of 2010. The decline in second quarter consolidated adjusted operating income was due to a $31 million decline in operating income at Fresh Dairy Direct-Morningstar, offset by $6 million of operating income growth at WhiteWave-Alpro, and a $6 million decline in corporate expense driven by the company's ongoing cost savings initiatives.

Fresh Dairy Direct-Morningstar fluid milk volumes decreased by 1.1 percent in the second quarter, compared to the overall industry that experienced a volume decline of approximately 1.9 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. Other product categories served by Fresh Dairy Direct-Morningstar remained soft, including ice cream, cottage cheese and sour cream. Total volumes from the Fresh Dairy Direct-Morningstar segment declined 4.3 percent from the second quarter of 2010, including the impact from the divestiture of its yogurt businesses. The soft volume in the quarter was offset by the pass-through of higher average commodity costs, resulting in Fresh Dairy Direct-Morningstar net sales of $2.8 billion, a 12 percent increase from $2.5 billion in net sales for the second quarter of 2010. The second quarter average Class I mover, a measure of the company's cost of milk, was $19.83 per hundred-weight, 21 percent above the previous quarter and 41 perent above the second quarter of 2010.

For the second quarter of 2011, the WhiteWave-Alpro segment reported net sales of $514 million, 12 percent above second quarter 2010 net sales of $459 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 mid-teens in the second quarter. Branded creamer sales, which includes both International Delight® and LAND O LAKES® creamers, also increased mid-teens on continued strength behind International Delight 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 mid-teens after currency translation, the company reported.