Tuesday, 7 November 2017

Dean Foods Announces Third Quarter 2017 Results

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Tuesday, 7 November 2017

Accelerating Enterprise-Wide Cost Productivity

DALLAS, Nov. 7, 2017 /PRNewswire/ — Dean Foods Company (NYSE: DF) today reported third quarter 2017 results.

Highlights

  • Q3 loss from continuing operations per share was $0.11 and adjusted income from continuing operations per diluted share was $0.20
  • Volume and private label mix challenges continue in the third quarter; new volume wins begin shipping late 2017 and early 2018
  • Enterprise-wide cost productivity program will deliver incremental cost savings in 2018
  • Narrows full-year 2017 adjusted earnings expectation to $0.80 to $0.90 per diluted share(1)

Chief Executive Officer Ralph Scozzafava said, “Our overall performance in the third quarter came in-line with our internal expectations.  We improved overall execution in the quarter despite incurring some incremental costs due to the hurricanes in both Florida and Texas as we continued to service our customers from sister plants. We continue to make strong progress against our cost savings initiatives and are in the early stages of a significant enterprise-wide cost productivity program to secure incremental savings in 2018 and ongoing. Importantly, we have recently won some new business for 2018 behind solid sales execution through the quarter.”

Third Quarter 2017 Operating Results

 

Financial Summary *

 

Three Months Ended September 30

 

Nine Months Ended September 30

(In millions, except per share amounts)

 

2017

 

2016

 

2017

 

2016

                 

Gross Profit

               

GAAP

 

$   442

 

$  489

 

$ 1,371

 

$ 1,486

Adjusted

 

$   448

 

$  493

 

$ 1,373

 

$ 1,488

                 

Operating Income

               

GAAP

 

$       2

 

$    42

 

$      50

 

$    193

Adjusted

 

$     45

 

$    69

 

$    127

 

$    223

                 

Interest Expense

               

GAAP

 

$     17

 

$    17

 

$      50

 

$      50

Adjusted

 

$     17

 

$    17

 

$      49

 

$      50

                 

Income (Loss) from Continuing Operations

               

GAAP

 

$    (10)

 

$    15

 

$      (2)

 

$      87

Adjusted

 

$     18

 

$    33

 

$      50

 

$    110

                 

Diluted Earnings (Loss) Per Share (EPS) from Continuing Operations 

               

GAAP

 

$ (0.11)

 

$ 0.16

 

$ (0.03)

 

$   0.95

Adjusted

 

$  0.20

 

$ 0.37

 

$   0.55

 

$   1.20

 

* Adjustments to GAAP due to the exclusion of expenses, gains or losses associated with certain transactions and other non-recurring items are described and reconciled to the comparable GAAP amounts in the attached tables.

 

(1)  Please refer to “Forward Outlook” and “Non-GAAP Financial Measures” for additional information. We provide guidance on a non-GAAP basis and are unable to provide a full reconciliation to GAAP without unreasonable efforts as we cannot predict the amount or timing of certain elements which are included in reported GAAP results, including mark-to-market adjustments of hedging activities, asset impairment charges, and other non-recurring events or transactions that may have a significant impact to reported GAAP results.

Total volume across all products was 608 million gallons for the third quarter of 2017, a 6.6% decline compared to total volume of 651 million gallons in the third quarter of 2016.

Based on fluid milk sales data published by the USDA through August, U.S. fluid milk volume decreased 2.2% year-over-year quarter to date in the third quarter of 2017 on an unadjusted basis. Dean Foods’ share of U.S. fluid milk volume decreased by 50 basis points versus the second quarter of 2017.

Raw milk costs in the third quarter of 2017 of $16.67 per hundred weight increased roughly 7% from the second quarter of 2017 and increased 10% from the third quarter of 2016.

Cash Flow

Net cash provided by continuing operations for the nine months ended September 30, 2017, totaled $67 million. Free cash flow provided by continuing operations, which is defined as net cash provided by continuing operations less capital expenditures, was $5 million for the nine months ended September 30, 2017, a $98 million decrease as compared to the prior year period. Capital expenditures totaled $61 million for the nine months ended September 30, 2017.

Debt

Total outstanding debt at September 30, 2017, net of $24 million cash on hand, was approximately $928 million. The Company’s net debt to bank EBITDA total leverage ratio, on an all-cash netted basis, increased slightly on a sequential basis to 2.56 times at the end of the third quarter 2017.

Forward Outlook

“As we look to the balance of 2017, we continue to pursue smart volume to drive our top line, build margins and create operating efficiencies,” said Scozzafava. “With momentum building on our commercial and cost productivity initiatives, we expect to deliver full-year adjusted diluted earnings per share of $0.80 to $0.90. We are also updating our full-year free cash flow estimates to $10 million to $20 million and reducing our full-year capital expenditure estimates to $105 million to $115 million.

“Our initiatives to build strong brands and diversify our portfolio will build brand equity on DairyPure through new product innovation and enhanced consumer marketing.  In addition, we are intensely focused on reducing our cost structure across each facet of the organization.  Through a comprehensive productivity program including OPEX 2020 and our enterprise-wide initiatives currently ramping up, we will drive efficiencies across the business to enable us to compete and win.  Lastly, I want to emphasize that we are prudently navigating the macro environment in our industry with a solid strategy that will enable us to be successful,” concluded Scozzafava.

We provide guidance on a non-GAAP basis and are unable to provide a full reconciliation to GAAP without unreasonable efforts as we cannot predict the amount or timing of certain elements which are included in reported GAAP results, including mark-to-market adjustments of hedging activities, asset impairment charges, and other non-recurring events or transactions that may have a significant impact to reported GAAP results.

Non-GAAP Financial Measures

In addition to the results prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), we have presented certain non-GAAP financial measures, including adjusted gross profit, adjusted selling and distribution expenses, adjusted general and administrative expenses, adjusted total operating costs and expenses, adjusted operating income, adjusted interest expense, adjusted income (loss) from continuing operations, adjusted net income (loss), adjusted earnings (loss) from continuing operations per diluted share, adjusted earnings (loss) per diluted share, adjusted EBITDA, Free Cash Flow and total leverage ratio, each as described below.

This non-GAAP financial information is provided as supplemental information for investors and is not in accordance with, or an alternative to, GAAP. Additionally, these non-GAAP measures may be different than similar measures used by other companies.

We believe that the presentation of these non-GAAP financial measures, when considered together with our GAAP financial measures and the reconciliations to the corresponding GAAP financial measures, provides investors with a more complete understanding of the factors and trends affecting our business than could be obtained absent these disclosures. Our management uses these non-GAAP financial measures when evaluating our performance, when making decisions regarding the allocation of resources, in determining incentive compensation for management, and in determining earnings estimates.

A full reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures for the three and nine months ended September 30, 2017 and 2016, is set forth in the tables herein.

Adjusted Operating Results

We have supplemented the presentation of our reported GAAP gross profit, selling and distribution expenses, general and administrative expenses, total operating costs and expenses, operating income, interest expense, net income (loss), income (loss) from continuing operations, earnings (loss) per diluted share,  and earnings (loss) per diluted share from continuing operations, with non-GAAP measures that adjust the GAAP measures to exclude the impact of the following (as applicable):

  • asset impairment charges;
  • incremental non-cash trademark amortization triggered by the launch of a national fresh white milk brand;
  • closed deal costs;
  • facility closing, reorganization and realignment costs;
  • debt issuance costs;
  • costs associated with the early retirement of long-term debt;
  • gains (losses) on the mark-to-market of our derivative contracts;
  • separation costs;
  • gains or losses related to discontinued operations and divestitures;
  • litigation settlements (including any related interest accretion);
  • income tax impacts of the foregoing adjustments; and
  • adjustments to normalize our income tax expense at a rate of 38%.

We believe these non-GAAP measures provide useful information to investors by excluding expenses, gains or losses that are not indicative of the company’s ongoing operating performance. In addition, we cannot predict the timing and amount of gains or losses associated with certain of these items. We believe these non-GAAP measures provide more accurate comparisons of our ongoing business operations and are better indicators of trends in our underlying business. In addition, these adjustments are consistent with how management views our business. Management uses these non-GAAP financial measures in making financial, operating and planning decisions and evaluating the Company’s ongoing performance. Further, adjusted gross profit and adjusted operating income are used by management to evaluate key performance indicators of brand mix and low cost, respectively.

Adjusted EBITDA

Adjusted EBITDA is defined as net income before interest expense, income tax expense, depreciation and amortization, as further adjusted to exclude the impact of the adjustments discussed under “Adjusted Operating Results” above (other than the adjustments for incremental trademark amortization and interest expense and the normalized income tax rate, as Adjusted EBITDA excludes the full amount of these expenses). This information is provided to assist investors in making meaningful comparisons of our operating performance between periods and to view our business from the same perspective as our management. We believe Adjusted EBITDA is a useful measure for analyzing the performance of our business and is a widely-accepted indicator of our ability to incur and service indebtedness and generate free cash flow. We also believe that EBITDA measures are commonly reported and widely used by investors and other interested parties as measures of a company’s operating performance and debt servicing ability because such measures assist in comparing performance on a consistent basis without regard to capital structure, depreciation or amortization (which can vary significantly) and non-operating factors (such as historical cost).

Total Leverage Ratio

Our total leverage ratio is calculated as net debt divided by Bank EBITDA for the trailing four quarters. Net debt is calculated as consolidated funded indebtedness in accordance with our credit agreement, except on an all cash netted basis. Bank EBITDA is calculated as Adjusted EBITDA, as further adjusted to exclude certain non-cash and non-recurring or extraordinary expenses as permitted in calculating covenant compliance under our credit agreement. Management believes analysts and investors commonly use our total leverage ratio as an indicator of our ability to service existing debt and our liquidity.

Free Cash Flow

We define Free Cash Flow as net cash provided by operating activities from continuing operations less cash payments for capital expenditures. We believe Free Cash Flow is a meaningful non-GAAP measure that offers supplemental information and insight regarding the liquidity of our operations and our ability to generate sufficient cash flow to, among other things, repay debt, invest in our business and repurchase shares of our common stock. A limitation of Free Cash Flow is that it does not represent the total increase or decrease in the cash balance for the period.

Conference Call/Webcast

A webcast to discuss the Company’s financial results and outlook will be held at 9:00 a.m. ET today and may be heard live by clicking the earnings button on the Company’s website at http://www.deanfoods.com. A slide presentation will accompany the webcast.

About Dean Foods

Dean Foods is a leading food and beverage company and the largest processor and direct-to-store distributor of fresh fluid milk and other dairy and dairy case products in the United States. Headquartered in Dallas, Texas, the Dean Foods portfolio includes DairyPure®, the country’s first and largest fresh, white milk national brand, and TruMoo®, the leading national flavored milk brand, along with well-known regional dairy brands such as Alta Dena®, Berkeley Farms®, Country Fresh®, Dean’s®, Friendly’s®, Garelick Farms®, LAND O LAKES®* milk and cultured products, Lehigh Valley Dairy Farms®, Mayfield®, McArthur®, Meadow Gold®, Oak Farms®, PET®**, T.G. Lee®, Tuscan® and more. In all, Dean Foods has more than 50 national, regional and local dairy brands as well as private labels. Dean Foods also makes and distributes ice cream, cultured products, juices, teas, and bottled water. Almost 17,000 employees across the country work every day to make Dean Foods the most admired and trusted provider of wholesome, great-tasting dairy products at every occasion. For more information about Dean Foods and its brands, visit www.deanfoods.com.

*The LAND O LAKES brand is owned by Land O’Lakes, Inc. and is used by license.

**PET is a trademark of Eagle Family Foods Group LLC, under license.

Some of the statements made in this press release are “forward-looking” and are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995, including statements relating to: (1) our financial forecast, including projected sales (including specific product lines and the Company as a whole), total volume, price realization, profit margins, net income, earnings per share, free cash flow, our leverage ratio, and debt covenant compliance, (2) the Company’s regional and national branding and marketing initiatives, (3) the Company’s innovation, research and development plans and its ability to successfully launch new products or brands, (4) commodity prices and other inputs and the Company’s ability to forecast or predict commodity prices, milk production and milk exports, (5) the Company’s commercial and cost productivity initiatives, including plant closures and route reductions, and its ability to achieve expected savings, (6) planned capital expenditures, (7) the status of the Company’s litigation matters,  (8) the Company’s plans related to its capital structure, (9) the Company’s dividend policy, (10) possible repurchases of shares of the Company’s common stock, and (11) potential acquisitions. These statements involve risks and uncertainties that may cause results to differ materially from those set forth in this press release, including the risks disclosed by the Company in its filings with the Securities and Exchange Commission. Financial projections are based on a number of assumptions.  Actual results could be materially different than projected if those assumptions are erroneous.  The cost and supply of commodities and other raw materials are determined by market forces over which the Company has limited or no control. Sales, operating income, net income, debt covenant compliance, financial performance and earnings per share can vary based on a variety of economic, governmental and competitive factors, which are identified in the Company’s filings with the Securities and Exchange Commission, including its most recent Forms 10-K and 10-Q. The Company’s ability to profit from its branding and marketing initiatives depends on a number of factors including consumer acceptance of its products.  The declaration and payment of cash dividends under the Company’s dividend policy remains at the sole discretion of the Board of Directors and will depend upon its financial results, cash requirements, future prospects, restrictions in its credit agreement and debt covenant compliance, applicable law and other factors that may be deemed relevant by the Board. All forward-looking statements in this press release speak only as of the date of this press release.  The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in its expectations with regard thereto or any changes in the events, conditions or circumstances on which any such statement is based except as required by law.

CONTACT: Corporate Communications, Jamaison Schuler, +1-214-721-7766; or Investor Relations, Sherri Baker, +1-214-303-3438

DEAN FOODS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

 
 

Three Months Ended
September 30

 

Nine Months Ended
September 30

 

2017

 

2016

 

2017

 

2016

Net sales

$ 1,937,620

 

$ 1,964,601

 

$ 5,860,028

 

$ 5,692,217

Cost of sales

1,495,880

 

1,475,826

 

4,488,783

 

4,206,121

Gross profit

441,740

 

488,775

 

1,371,245

 

1,486,096

Operating costs and expenses:

             

Selling and distribution

332,683

 

341,477

 

1,016,023

 

1,005,514

General and administrative

68,796

 

90,840

 

241,432

 

262,605

Amortization of intangibles

5,232

 

5,151

 

15,542

 

15,596

Facility closing and reorganization costs, net

7,844

 

9,297

 

22,947

 

9,063

Impairment of long-lived assets

24,970

 

 

24,970

 

Total operating costs and expenses

439,525

 

446,765

 

1,320,914

 

1,292,778

Operating income

2,215

 

42,010

 

50,331

 

193,318

Other (income) expense:

             

Interest expense

16,527

 

16,564

 

50,410

 

50,270

Other income, net

(662)

 

(1,178)

 

(2,423)

 

(4,385)

Total other expense

15,865

 

15,386

 

47,987

 

45,885

Income (loss) from continuing operations before income taxes

(13,650)

 

26,624

 

2,344

 

147,433

Income tax expense (benefit)

(3,677)

 

12,098

 

4,429

 

60,335

Income (loss) from continuing operations

(9,973)

 

14,526

 

(2,085)

 

87,098

Income from discontinued operations, net of tax

11,355

 

 

11,355

 

Net income

$        1,382

 

$      14,526

 

$        9,270

 

$      87,098

Average common shares:

             

Basic

90,939

 

90,423

 

90,845

 

91,077

Diluted

90,939

 

90,965

 

90,845

 

91,695

Basic income (loss) per common share:

             

Income (loss) from continuing operations

$        (0.11)

 

$          0.16

 

$        (0.03)

 

$          0.96

Income from discontinued operations

0.13

 

 

0.13

 

Net income

$          0.02

 

$          0.16

 

$          0.10

 

$          0.96

Diluted income (loss) per common share:

             

Income (loss) from continuing operations

$        (0.11)

 

$          0.16

 

$        (0.03)

 

$          0.95

Income from discontinued operations

0.13

 

 

0.13

 

Net income

$          0.02

 

$          0.16

 

$          0.10

 

$          0.95

 

DEAN FOODS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

 
   

September 30, 2017

 

December 31, 2016

ASSETS

       

Cash and cash equivalents

 

$          24,348

 

$         17,980

Other current assets

 

992,075

 

1,040,650

Total current assets

 

1,016,423

 

1,058,630

Property, plant and equipment, net

 

1,091,429

 

1,163,851

Intangibles and other assets, net

 

398,859

 

383,746

Total

 

$     2,506,711

 

$    2,606,227

LIABILITIES AND STOCKHOLDERS’ EQUITY

       

Total current liabilities, excluding debt

 

$        648,298

 

$       706,981

Total long-term debt, including current portion

 

946,481

 

886,051

Other long-term liabilities

 

307,514

 

402,639

Total stockholders’ equity

 

604,418

 

610,556

Total

 

$     2,506,711

 

$    2,606,227

 

DEAN FOODS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 
   

Nine Months Ended September 30

   

2017

 

2016

Operating Activities 

       

Net cash provided by operating activities

 

$ 66,725

 

$ 184,618

         

Investing Activities 

       

Payments for property, plant and equipment

 

(61,384)

 

(81,305)

Payments for acquisitions, net of cash acquired

 

(21,596)

 

(157,321)

Proceeds from sale of fixed assets

 

3,112

 

13,742

Other investments

 

(11,000)

 

Net cash used in investing activities

 

(90,868)

 

(224,884)

         

 Financing Activities

       

Net proceeds from debt

 

57,582

 

58,822

Payments of financing costs

 

(1,767)

 

Repurchase of common stock

 

 

(25,000)

Cash dividends paid

 

(24,540)

 

(24,681)

Issuance of common stock, net of share repurchases for withholding taxes

 

(764)

 

(775)

Other

 

 

678

Net cash provided by financing activities

 

30,511

 

9,044

Effect of exchange rate changes on cash and cash equivalents

 

 

(1,354)

Change in cash and cash equivalents

 

6,368

 

(32,576)

Cash and cash equivalents, beginning of period

 

17,980

 

60,734

Cash and cash equivalents, end of period

 

$ 24,348

 

$   28,158

 

DEAN FOODS COMPANY

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES*

(Unaudited)

(In thousands, except per share data)

 
 

Three Months Ended September 30, 2017

     

Asset write-
downs
and (gain)
loss on
sale of assets

 

Closed deal
costs

 

Facility
closing

and
reorganization
costs, net 

 

Mark-to-
market
on derivative
contracts

 

Other
adjustments

 

Income
tax

   
 

GAAP

 

(a)

 

(b)

 

(c)

 

(d)

 

(f)

 

(g)

 

Adjusted*

Gross profit

$  441,740

 

$                     —

 

$                    —

 

$                     —

 

$          6,312

 

$                    —

 

$         —

 

$    448,052

                               

Selling and distribution  

332,683

 

 

 

 

2,012

 

 

 

334,695

                               

General and administrative

68,796

 

 

(50)

 

 

 

(2,116)

 

 

66,630

                             

Amortization of intangibles

5,232

 

(3,935)

 

 

 

 

 

 

1,297

 

General and administrative, including Amortization of intangibles

74,028

 

(3,935)

 

(50)

 

 

 

(2,116)

 

 

67,927

                               

Total operating costs and expenses 

439,525

 

(28,905)

 

(50)

 

(7,844)

 

2,012

 

(2,116)

 

 

402,622

                               

Operating income

2,215

 

28,905

 

50

 

7,844

 

4,300

 

2,116

 

 

45,430

                               

Income (loss) from continuing operations

(9,973)

 

28,905

 

50

 

7,844

 

4,300

 

2,116

 

(14,912)

 

18,330

                               

Diluted earnings (loss) per share from continuing operations (h)

$        (0.11)

 

$                 0.32

 

$                    —

 

$                0.09

 

$            0.05

 

$                 0.01

 

$   (0.16)

 

$           0.20

                               
 

Three Months Ended September 30, 2016

     

Asset write-
downs
and (gain)
loss on
sale of assets

 

Closed deal
costs

 

Facility
closing
and
reorganization
costs, net

 

Mark-to-market
on derivative
contracts

 

Other
adjustments

 

Income
tax

   
 

GAAP

 

(a)

 

(b)

 

(c)

 

(d)

 

(f)

 

(g)

 

Adjusted*

Gross profit

$  488,775

 

$                     —

 

$                    —

 

$                     —

 

$         4,382

 

$                    —

 

$         —

 

$      493,157

                               

Selling and distribution  

341,477

 

 

 

 

793

 

 

 

342,270

                               

General and administrative

90,840

 

 

(350)

 

 

 

(10,125)

 

 

80,365

                               

Amortization of intangibles

5,151

 

(3,935)

 

 

 

 

 

 

1,216

                               

General and administrative, including Amortization of intangibles

95,991

 

(3,935)

 

(350)

 

 

 

(10,125)

 

 

81,581

                               

Total operating costs and expenses 

446,765

 

(3,935)

 

(350)

 

(9,297)

 

793

 

(10,125)

 

 

423,851

                               

Operating income

42,010

 

3,935

 

350

 

9,297

 

3,589

 

10,125

 

 

69,306

                               

Net income

14,526

 

3,935

 

350

 

9,297

 

3,589

 

10,125

 

(8,392)

 

33,430

                               

Diluted earnings per share

$         0.16

 

$                 0.04

 

$                 0.01

 

$                 0.10

 

$           0.04

 

$                  0.11

 

$  (0.09)

 

$            0.37

 

* See Notes to Earnings Release Tables

 

DEAN FOODS COMPANY

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES*

(Unaudited)

(In thousands, except per share data)

 
 

Nine Months Ended September 30, 2017

     

Asset write-
downs
and (gain)
loss on
sale of assets

 

Closed deal
costs

 

Facility
closing
and
r
eorganization
costs,
net 

 

Mark-to-
market
on derivative
contracts

 

Other
adjustments

 

Income
tax

   
 

GAAP

 

(a)

 

(b)

 

(c)

 

(d)

 

(f)

 

(g)

 

Adjusted*

Gross profit

$    1,371,245

 

$                     —

 

$                    —

 

$                       —

 

$                 1,802

 

$                    —

 

$          —

 

$   1,373,047

                               

Selling and distribution

1,016,023

 

 

 

 

(2)

 

 

 

1,016,021

                               

General and administrative

241,432

 

 

(372)

 

 

 

(15,255)

 

 

225,805

                               

Amortization of intangibles

15,542

 

(11,805)

     

 

 

 

 

3,737

                               

General and administrative, including Amortization of intangibles

256,974

 

(11,805)

 

(372)

 

 

 

(15,255)

 

 

229,542

                               

Total operating costs and expenses

1,320,914

 

(36,775)

 

(372)

 

(22,947)

 

(2)

 

(15,255)

 

 

1,245,563

                               

Operating income

50,331

 

36,775

 

372

 

22,947

 

1,804

 

15,255

 

 

127,484

                               

Interest expense

50,410

 

 

 

 

 

(1,080)

 

 

49,330

                               

Income (loss) from continuing operations

(2,085)

 

36,775

 

372

 

22,947

 

1,804

 

16,335

 

(26,190)

 

49,958

                               

Diluted earnings (loss) per share from continuing operations (h)

$          (0.03)

 

$                 0.40

 

$                    —

 

$                   0.25

 

$                  0.03

 

$                 0.19

 

$   (0.29)

 

$             0.55

                               
 

Nine Months Ended September 30, 2016

     

Asset write-
downs
and (gain)
loss on
sale of assets

 

Closed deal
costs

 

Facility
closing
and
reorganization
costs, net

 

Mark-to-
market
on derivative
contracts

 

Other
adjustments

 

Income
tax

   
 

GAAP

 

(a)

 

(b)

 

(c)

 

(d)

 

(f)

 

(g)

 

Adjusted*

Gross profit

$  1,486,096

 

$                     —

 

$                    —

 

$                       —

 

$                  1,795

 

$                    —

 

$          —

 

$   1,487,891

                               

Selling and distribution

1,005,514

 

 

 

 

9,035

 

 

 

1,014,549

                               

General and administrative

262,605

 

 

(4,433)

 

 

 

(10,125)

 

 

248,047

                               

Amortization of intangibles

15,596

 

(12,908)

 

 

 

 

 

 

2,688

                               

General and administrative, including Amortization of intangibles

278,201

 

(12,908)

 

(4,433)

 

 

 

(10,125)

 

 

250,735

                               

Total operating costs and expenses 

1,292,778

 

(12,908)

 

(4,433)

 

(9,063)

 

9,035

 

(10,125)

 

 

1,265,284

                               

Operating income

193,318

 

12,908

 

4,433

 

9,063

 

(7,240)

 

10,125

 

 

222,607

                               

Interest expense

50,270

 

 

 

 

 

(436)

 

 

49,834

                               

Net income

87,098

 

12,908

 

4,433

 

9,063

 

(7,240)

 

10,561

 

(6,987)

 

109,836

                               

Diluted earnings per share

$            0.95

 

$                  0.14

 

$                0.05

 

$                   0.10

 

$                (0.08)

 

$                 0.12

 

$   (0.08)

 

$             1.20

 

* See Notes to Earnings Release Tables

 

DEAN FOODS COMPANY

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES*

(Unaudited)

(In thousands, except ratio data)

 
   

Three Months Ended September 30

 

Nine Months Ended September 30

 

Trailing Twelve
Months Ended
September 30,

   

2017

 

2016

 

2017

 

2016

 

2017

Reconciliation of Net Income to Adjusted EBITDA and Bank EBITDA

Net income

 

$   1,382

 

$   14,526

 

$     9,270

 

$   87,098

 

$            42,101

Interest expense

 

16,527

 

16,564

 

50,410

 

50,270

 

66,935

Income tax expense (benefit)

 

(3,677)

 

12,098

 

4,429

 

60,335

 

26,128

Depreciation and amortization

 

41,849

 

43,406

 

125,721

 

128,435

 

169,901

Asset write-downs and (gain) loss on sale of assets (a)

 

24,970

 

 

24,970

 

 

24,970

Closed deal costs (b)

 

50

 

350

 

372

 

4,433

 

865

Facility closing and reorganization costs, net (c)

 

7,844

 

9,297

 

22,947

 

9,063

 

22,603

Mark-to-market on derivative contracts (d)

 

4,300

 

3,589

 

1,804

 

(7,240)

 

(3,752)

Discontinued operations (e)

 

(11,355)

 

 

(11,355)

 

 

(10,667)

Other adjustments (f)

 

2,116

 

10,125

 

15,255

 

10,125

 

16,691

 Adjusted EBITDA

 

$ 84,006

 

$ 109,955

 

$ 243,823

 

$ 342,519

 

355,775

                     

Non-cash share-based compensation expense

                 

7,057

 Bank EBITDA

                 

$          362,832

                     
                   

September 30, 2017

Reconciliation of net debt and total leverage ratio

Total long-term debt, including current portion

$          946,481

Unamortized discounts and debt issuance costs

6,181

Cash and cash equivalents

(24,348)

Net debt

$          928,314

Bank EBITDA

362,832

 Total leverage ratio

2.56

                     
               

Nine Months Ended September 30

               

2017

 

2016

Reconciliation of Free Cash Flow provided by continuing operations

Net cash provided by operating activities

$   66,725

 

$          184,618

Payments for property, plant and equipment

(61,384)

 

(81,305)

  Free Cash Flow provided by continuing operations

$     5,341

 

$          103,313

 

* See Notes to Earnings Release Tables

Notes to Earnings Release Tables

For the three and nine months ended September 30, 2017 and 2016, the adjusted results and certain other non-GAAP financial measures differ from the Company’s results under GAAP due to the exclusion of expenses, gains or losses associated with certain transactions and other non-recurring items that we believe are not indicative of our ongoing operating results. For additional information on our non-GAAP financial measures, see the section entitled “Non-GAAP Financial Measures” in this release.

    1. The adjustment reflects the elimination of the following:
      1. In conjunction with our decision to launch DairyPure® in the first quarter of 2015, we reclassified certain of our indefinite-lived trademarks to finite-lived, resulting in a triggering event for impairment testing purposes. The related adjustment reflects the elimination of amortization expense recorded on these finite-lived trademarks of $3.9 million for each of the three months ended September 30, 2017 and 2016, and $11.8 million and $12.9 million for the nine months ended September 30, 2017 and 2016, respectively; and
      2. Asset impairment charges on certain fixed assets of $25.0 million for each of the three and nine months ended September 30, 2017. We evaluate our long-lived assets for impairment when circumstances indicate that the carrying value of an asset group may not be recoverable. Indicators of impairment could include, among other factors, significant changes in the business environment, the planned closure of a facility or a decline in operating cash flows of an asset group.
    2. The adjustment reflects the elimination of expenses related to completed acquisitions and other transactional activities of $0.1 million and $0.4 million for the three months ended September 30, 2017 and 2016, respectively, and $0.4 million and $4.4 million for the nine months ended September 30, 2017 and 2016, respectively.
    3. The adjustment reflects the elimination of severance charges and non-cash asset impairments, net of (gains) losses on related asset sales, for approved facility closings and restructuring plans.
    4. The adjustment reflects the elimination of the (gain) loss on the mark-to-market of our commodity derivative contracts. All of our commodity derivative contracts are marked to market in our statement of operations during each reporting period with a corresponding derivative asset or liability on our balance sheet.
    5. The adjustment reflects the elimination of net gains from discontinued operations of $11.4 million recognized in the three and nine months ended September 30, 2017 due to the lapse of a statute of limitation related to an unrecognized tax benefit previously established as a direct result of the spin-off of the WhiteWave Foods Company, which was completed on May 23, 2013.
    6. The adjustment reflects the elimination of the following:
      1. A charge related to litigation settlements reached in the nine months ended September 30, 2017;
      2. The write off of unamortized deferred financing costs of $1.1 million in connection with the January 4, 2017 amendments to our senior secured revolving credit facility and receivables securitization facility in the nine months ended September 30, 2017;
      3. In connection with the Company’s previously disclosed CEO succession plan, a separation charge of $10.1 million for each of the three and nine months ended September 30, 2016, and a reduction to separation charges of $1.4 million and $2.5 million for the three and nine months ended September 30, 2017, respectively;
      4. A separation charge of $3.5 million for each of the three and nine months ended September 30, 2017 in connection with the previously disclosed CFO departure; and
      5. Interest accretion in connection with the settlement of a previously disclosed dairy farmer class action lawsuit filed in the United States District Court for the Eastern District of Tennessee.  The Court granted final approval of the settlement agreement on June 15, 2012 and the final installment payment was made in June of 2016.
    7. The adjustment reflects the income tax impact of adjustments (a) through (f) and an adjustment to our income tax expense to reflect income tax at a tax rate of 38%, which we believe represents our normalized long-term effective tax rate as a U.S. domiciled business.
    8. Includes an adjustment to diluted shares outstanding to reflect an add-back of approximately 200 thousand dilutive shares and 449 thousand dilutive shares for the three and nine months ended September 30, 2017, respectively, which were anti-dilutive for GAAP purposes.

 

View original content:http://www.prnewswire.com/news-releases/dean-foods-announces-third-quarter-2017-results-300550549.html

SOURCE Dean Foods Company

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