Food and beverage company Dean Foods Co. (DF) on Monday posted higher profit for the third quarter, reflecting lower interest expense and higher sales at WhiteWave-Morningstar. Adjusted per share earnings advanced 21% from last year and topped the Street view. In addition, the company issued earnings forecast for the fourth quarter and lifted earnings outlook for the full year.
Q3 Results
The Dallas, Texas-based company's third-quarter net income totaled $47.1 million, up from $37.8 million in the same quarter of last year. Net income attributable to Dean Foods Co. was $49.7 million, an increase from $37.8 million reported a year ago. Per share earnings grew 13% to $0.27 from $0.24 per share in the year-earlier quarter.
The company said the third-quarter GAAP results is adjusted by $3.8 million charge related to announced facility closings, reorganizations and other costs; $8.2 million charge for transaction-related fees on acquisitions that have closed or are anticipated to close; and $0.6 million loss related to a foreign currency forward contract entered into in conjunction with acquisition of the Alpro Division of Vandemoortele, N.V. The year-ago results exclude $9.0 million charge related to previously announced facility closings, reorganizations and other costs.
On an adjusted basis, net income attributable to Dean Foods Co. rose to $62.2 million or $0.34 per share from $43.5 million or $0.28 per share in the comparable quarter of the previous year.
Quarterly net sales dropped 13% to $2.77 billion from the prior-year's net sales of $3.19 billion, and fell shy of the $2.94 billion revenue consensus estimate of nine analysts surveyed by Thomson Reuters.
The company blamed the pass-through of lower dairy commodity costs, and lower net sales volumes in the WhiteWave-Morningstar operations for the decline in third-quarter net sales. This decrease was offset by acquisition-related volume growth in Fresh Dairy Direct and WhiteWave-Morningstar.
Gregg Engles, Chairman and Chief Executive Officer, said, "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."
Operating income in the latest quarter totaled $137.1 million, as compared to $131.8 million in the third quarter of 2008. Adjusted operating income rose 12% to $158.0 million from $140.8 million in the year-earlier quarter.
Interest expense during the most recent quarter dropped to $59.5 million from $74.7 million incurred in the comparable quarter of the previous year.
Fresh Diary Direct
The company's Fresh Dairy Direct division fetched third-quarter net sales of $2.1 billion, a decline of 18%, compared to $2.5 billion in the same period last year, due to the pass-through of lower dairy commodity costs to its customers, which was partially offset by higher volumes. Segment operating income grew 4% to $145.7 million from $140.4 million in 2008, led by relatively favorable commodities, benefits from cost control efforts, and continued volume growth.
WhiteWave-Morningstar
WhiteWave-Morningstar, which includes Alpro, generated quarter net sales of $709.7 million, 6% higher than the prior-year's 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 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 fell 12% to $257.6 million impacted by the pass-through of lower dairy commodity costs and modestly lower product sales volumes.
Operating income at the WhiteWave-Morningstar segment jumped 66% to $68.6 million from $41.3 million reported in the same quarter of last year. Third quarter 2009 operating margins were 9.7%, versus 6.2% in the third quarter 2008.
Year-To-Date Synopsis
For the nine-month period, the company reported net income attributable to Dean Foods Co. of $190.0 million or $1.11 per share, compared to $117.4 million or $0.77 per share in the prior-year period.
Adjusted net income attributable to Dean Foods Co. was $218.2 million or $1.28 per share, compared to $127.9 million or $0.84 per share in the previous year.
Net sales for the nine months ended September 30, 2009 were $8.16 billion, a decline from $9.37 billion in the corresponding period of last year.
Road Ahead
Looking forward to the fourth quarter, the company projects adjusted earnings to be at least $0.36 per share. Wall Street analysts have a consensus earnings estimate of $0.39 per share for the fourth quarter.
Engles added, "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."
For fiscal 2009, Dean Foods raised its adjusted earnings forecast to $1.63 per share, from its previously communicated outlook of at least $1.60 per share. Analysts expect the company to report earnings of $1.66 per share for fiscal 2009.
Further, the company expects the dairy prices to continue a general upward trend through next year. However, with U.S. and global dairy inventories at relatively high levels, what looks like solid production in Oceana, and continued sluggish global demand, the company said it does not foresee a return in 2010 to the record dairy price levels it experienced over 2007 and 2008.
Inducement Grants
Additionally, the company announced that it has agreed to grant stock options to purchase an aggregate of 97,656 common shares and 52,778 restricted stock units or RSUs to a newly hired, non-executive officer employee, of which 48,828 Options and 40,278 RSUs were granted in September 2009, 37,977 Options and 9,722 RSUs would be granted in February 2010, and 10,851 Options and 2,778 RSUs would be granted in August 2010.
Peer Performance
Among Dean Foods' rivals, Kraft Foods Inc. (KFT) is due to release its third-quarter results at 4:00 pm ET on November 3, with analysts forecasting earnings of $0.48 per share on revenues of $10.32 billion. For the third-quarter of fiscal 2008, the company reported adjusted earnings of $0.44 per share on net revenue of $10.5 billion. The foodmaker, in August, raised its fiscal 2009 earnings outlook to $1.93 per share from its prior expectation of $1.88 per share. The company continues to expect 2009 organic net revenue growth of about 3%.
Stock Quotes
Dean Foods shares, which have been trading between $11.20 and $22.31 in the past 52 weeks, closed Friday's trading session at $18.23.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.