DALLAS, Nov. 7, 2018
/PRNewswire/ -- Dean Foods Company (NYSE: DF) today reported
third quarter 2018 results.
Highlights
- Q3 loss from continuing operations per diluted share was
$0.29 and adjusted loss per diluted
share was $0.28
- Closed and consolidated seven manufacturing plants; incurred
higher than expected transitory costs
- Q3 volume in-line with expectations; first full quarter of
anticipated customer volume losses
- Significant inflation in fuel, freight and resin versus prior
year
- Lowers full-year 2018 guidance
Chief Executive Officer Ralph
Scozzafava said, "Our enterprise-wide cost productivity plan
is well underway and we're executing the right initiatives on a
compressed timeline. The third quarter marked an
unprecedented level of activity as we closed and consolidated seven
plants, redistributing the volume into 23 other locations within
six weeks. This work contributed to a very challenging quarter as
these closures were complicated and we made it our top mission to
prioritize service to our customers, above all else. We
incurred significant transitory costs related to ramping up
receiving plant locations while also experiencing deleverage as
volume exited the closing facilities. Third quarter results
included the first full quarter of anticipated volume exiting our
system amplified by incremental short-term costs associated with
plant consolidations. The actions we implemented are critically
important as we are in the process of reducing our fixed cost base
and removing excess capacity to make our business leaner and more
agile as we prepare ourselves for 2019."
"Our overall strategy remains our roadmap and through our
enterprise-wide cost productivity plan, we are transforming the
company to more effectively compete and win. The heavy lifting of
the seven plant closures in the third quarter is now behind
us. However, residual transitory costs associated with our
plant consolidation efforts, retailers continued investment in
private label and higher than expected transportation-related
inflation leads us to lower our guidance. We now anticipate
an adjusted net loss for the full year in the range of $0.10 to $0.30. Our
focused and disciplined approach to our enterprise-wide cost
productivity plan enabled us to reduce our capital expenditure
guidance to between $100 and
$120 million. Our full year
cash flow guidance is reduced to between $30 and $50
million," 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 significantly
affect reported GAAP results.
Third Quarter 2018 Operating Results
Financial Summary
*
|
|
Three Months Ended
September 30
|
|
Nine Months Ended
September 30
|
(In millions,
except per share amounts)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
|
|
|
|
|
|
GAAP
|
|
$
391
|
|
$
442
|
|
$
1,272
|
|
$ 1,372
|
Adjusted
|
|
$
390
|
|
$
448
|
|
$
1,270
|
|
$ 1,373
|
|
|
|
|
|
|
|
|
|
Operating Income
(Loss)(2)
|
|
|
|
|
|
|
|
|
GAAP
|
|
$
(26)
|
|
$
3
|
|
$
(51)
|
|
$
54
|
Adjusted
|
|
$
(20)
|
|
$
47
|
|
$
47
|
|
$
131
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
|
|
|
|
|
|
GAAP
|
|
$
14
|
|
$
17
|
|
$
42
|
|
$
50
|
Adjusted
|
|
$
14
|
|
$
17
|
|
$
42
|
|
$
49
|
|
|
|
|
|
|
|
|
|
Income (Loss) from
Continuing Operations
|
|
|
|
|
|
|
|
|
GAAP
|
|
$
(27)
|
|
$
(10)
|
|
$
(69)
|
|
$
(2)
|
Adjusted
|
|
$
(25)
|
|
$
18
|
|
$
2
|
|
$
50
|
|
|
|
|
|
|
|
|
|
Diluted Earnings
(Loss) Per Share (EPS) from Continuing
Operations
|
|
|
|
|
|
|
|
|
GAAP
|
|
$
(0.29)
|
|
$ (0.11)
|
|
$
(0.75)
|
|
$ (0.03)
|
Adjusted
|
|
$
(0.28)
|
|
$
0.20
|
|
$
0.03
|
|
$
0.55
|
|
* 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
significantly affect reported GAAP results.
|
|
|
(2)
|
Results for the three
and nine months ended September 30, 2017 have been revised to
reflect the retrospective adoption of Accounting Standards Update
No. 2017-07, Compensation — Retirement Benefits (Topic 715):
Improving the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Cost ("ASU 2017-07"). The adoption of
ASU 2017-07 resulted in a net increase to previously reported
operating income of $1.1 million and $3.2 million for the three and
nine months ended September 30, 2017, respectively, and a
corresponding increase of $1.1 million and $3.2 million to other
expense for the three and nine months ended September 30, 2017,
with no net impact to net income (loss) or earnings (loss) per
share.
|
Cash Flow
Net cash provided by continuing operations for the nine months
ended September 30, 2018, totaled $120
million. Free cash flow provided by continuing operations,
which is defined as net cash provided by continuing operations less
capital expenditures, was $51 million
for the nine months ended September 30, 2018, a $46 million increase as compared to the prior
year period driven in part by the overlap of a $38.5 million defined pension plan contribution
in the second quarter of 2017. Capital expenditures totaled
$69 million for the nine months ended
September 30, 2018.
Debt
Total outstanding debt at September 30, 2018, net of
$22 million cash on hand, was
approximately $870 million. The
Company's net debt to bank EBITDA total leverage ratio, on an
all-cash netted basis, was 3.60 times at the end of the third
quarter 2018.
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 (loss), 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, 2018, and 2017, 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 (loss), interest expense, net income (loss) and
earnings (loss) per diluted share, 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;
- costs associated with our enterprise-wide cost productivity
plan;
- separation costs;
- gains or losses related to step-acquisitions, discontinued
operations and divestitures;
- operating income (loss) attributable to non-controlling
interest;
- 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
26.5%.
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 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. Dean Foods also has a
joint venture with Organic Valley®, distributing fresh organic
products to local retailers. In all, Dean Foods has more than 50
local and regional dairy brands and private labels. Dean Foods also
makes and distributes ice cream, cultured products, juices, teas,
and bottled water. Almost 16,000 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 used by 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 enterprise-wide cost productivity plan
and other cost-saving 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: Investor Relations/External
Communications, Suzanne Rosenberg, +1 214-303-3438. Media
please contact +1 214-721-7766 or media@deanfoods.com.
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
|
|
2018(1)
|
|
2017(1)(2)
|
|
2018(1)
|
|
2017(1)(2)
|
Net sales
|
$
1,894,066
|
|
$
1,937,620
|
|
$
5,825,803
|
|
$
5,860,028
|
Cost of
sales
|
1,503,469
|
|
1,495,782
|
|
4,553,919
|
|
4,488,491
|
Gross
profit
|
390,597
|
|
441,838
|
|
1,271,884
|
|
1,371,537
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
Selling and
distribution
|
349,244
|
|
332,551
|
|
1,031,961
|
|
1,015,624
|
General and
administrative
|
66,582
|
|
67,950
|
|
208,076
|
|
238,895
|
Amortization of
intangibles
|
5,150
|
|
5,232
|
|
15,306
|
|
15,542
|
Facility closing and
reorganization costs, net
|
(2,679)
|
|
7,844
|
|
73,444
|
|
22,947
|
Impairment of
long-lived assets
|
—
|
|
24,970
|
|
2,232
|
|
24,970
|
Other operating
income
|
—
|
|
—
|
|
(2,289)
|
|
—
|
Equity in (earnings)
loss of unconsolidated affiliate
|
(1,917)
|
|
—
|
|
(5,516)
|
|
—
|
Total operating costs
and expenses
|
416,380
|
|
438,547
|
|
1,323,214
|
|
1,317,978
|
Operating income
(loss)
|
(25,783)
|
|
3,291
|
|
(51,330)
|
|
53,559
|
Other
expense:
|
|
|
|
|
|
|
|
Interest
expense
|
13,810
|
|
16,527
|
|
41,912
|
|
50,410
|
Other expense,
net
|
432
|
|
414
|
|
1,684
|
|
805
|
Total other
expense
|
14,242
|
|
16,941
|
|
43,596
|
|
51,215
|
Income (loss) before
income taxes
|
(40,025)
|
|
(13,650)
|
|
(94,926)
|
|
2,344
|
Income tax expense
(benefit)
|
(13,377)
|
|
(3,677)
|
|
(25,997)
|
|
4,429
|
Loss from continuing
operations
|
(26,648)
|
|
(9,973)
|
|
(68,929)
|
|
(2,085)
|
Income from
discontinued operations, net of tax
|
—
|
|
11,355
|
|
—
|
|
11,355
|
Gain on sale of
discontinued operations, net of tax
|
—
|
|
—
|
|
1,922
|
|
—
|
Net income
(loss)
|
(26,648)
|
|
1,382
|
|
(67,007)
|
|
9,270
|
Net loss attributable
to non-controlling interest
|
224
|
|
—
|
|
224
|
|
—
|
Net income (loss)
attributable to Dean Foods Company
|
$
(26,424)
|
|
$
1,382
|
|
$
(66,783)
|
|
$
9,270
|
Average common
shares:
|
|
|
|
|
|
|
|
Basic
|
91,372
|
|
90,939
|
|
91,303
|
|
90,845
|
Diluted
|
91,372
|
|
90,939
|
|
91,303
|
|
90,845
|
Basic income (loss)
per common share:
|
|
|
|
|
|
|
|
Loss from continuing
operations attributable to Dean Foods Company
|
$
(0.29)
|
|
$
(0.11)
|
|
$
(0.75)
|
|
$
(0.03)
|
Income from
discontinued operations attributable to Dean Foods
Company
|
—
|
|
0.13
|
|
0.02
|
|
0.13
|
Net income (loss)
attributable to Dean Foods Company
|
$
(0.29)
|
|
$
0.02
|
|
$
(0.73)
|
|
$
0.10
|
Diluted income (loss)
per common share:
|
|
|
|
|
|
|
|
Loss from continuing
operations attributable to Dean Foods Company
|
$
(0.29)
|
|
$
(0.11)
|
|
$
(0.75)
|
|
$
(0.03)
|
Income from
discontinued operations attributable to Dean Foods
Company
|
—
|
|
0.13
|
|
0.02
|
|
0.13
|
Net income (loss)
attributable to Dean Foods Company
|
$
(0.29)
|
|
$
0.02
|
|
$
(0.73)
|
|
$
0.10
|
|
|
(1)
|
Results for the three
and nine months ended September 30, 2018 reflect the adoption
of Accounting Standards Codification Topic 606, Revenue from
Contracts with Customers ("ASC 606"). Historically, we presented
sales of excess raw materials as a reduction of cost of sales
within our unaudited Condensed Consolidated Statements of
Operations. On a prospective basis, effective January 1, 2018, in
connection with the adoption of ASC 606, we began reporting sales
of excess raw materials within the net sales line of our unaudited
Condensed Consolidated Statements of Operations. Sales of excess
raw materials included in net sales were $112.4 million and $387.1
million in the three and nine months ended September 30, 2018,
respectively. Sales of excess raw materials included as a reduction
to cost of sales were $148.3 million and $456.5 million in the
three and nine months ended September 30, 2017, respectively.
This change in presentation has no net impact on gross
profit.
|
|
|
(2)
|
Results for the three
and nine months ended September 30, 2017 have been revised to
reflect the retrospective adoption of ASU 2017-07. The adoption of
ASU 2017-07 resulted in a net increase to previously reported
operating income of $1.1 million and $3.2 million for the three and
nine months ended September 30, 2017, respectively, and a
corresponding increase of $1.1 million and $3.2 million to other
expense, net for the three and nine months ended September 30,
2017, respectively, with no net impact to net loss or loss per
share.
|
DEAN FOODS
COMPANY
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In
thousands)
|
|
|
|
September 30,
2018
|
|
December 31,
2017
|
ASSETS
|
|
|
|
|
Cash and cash
equivalents
|
|
$
21,785
|
|
$
16,512
|
Other current
assets
|
|
916,856
|
|
1,003,367
|
Total current
assets
|
|
938,641
|
|
1,019,879
|
Property, plant and
equipment, net
|
|
999,438
|
|
1,094,064
|
Intangibles and other
assets, net
|
|
416,383
|
|
389,886
|
Total
|
|
$
2,354,462
|
|
$
2,503,829
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
Total current
liabilities, excluding debt
|
|
$
644,383
|
|
$
671,070
|
Total long-term debt,
including current portion
|
|
887,164
|
|
913,199
|
Other long-term
liabilities
|
|
238,581
|
|
263,613
|
Total Dean Foods
Company stockholders' equity
|
|
572,452
|
|
655,947
|
Non-controlling
interest
|
|
11,882
|
|
—
|
Total stockholders'
equity
|
|
584,334
|
|
655,947
|
Total
|
|
$
2,354,462
|
|
$
2,503,829
|
DEAN FOODS
COMPANY
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In
thousands)
|
|
|
|
Nine Months Ended
September 30
|
|
|
2018
|
|
2017
|
Operating
Activities
|
|
|
|
|
Net cash provided by
operating activities
|
|
$ 119,798
|
|
$ 66,725
|
|
|
|
|
|
Investing
Activities
|
|
|
|
|
Payments for
property, plant and equipment
|
|
(68,680)
|
|
(61,384)
|
Payments for
acquisitions, net of cash acquired
|
|
(13,324)
|
|
(21,596)
|
Proceeds from sale of
fixed assets
|
|
19,083
|
|
3,112
|
Other
investments
|
|
—
|
|
(11,000)
|
Net cash used in
investing activities
|
|
(62,921)
|
|
(90,868)
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
Net proceeds from
(repayment of) debt
|
|
(26,859)
|
|
57,582
|
Payments of financing
costs
|
|
—
|
|
(1,767)
|
Proceeds from
issuance of subsidiary's common stock
|
|
354
|
|
—
|
Cash dividends
paid
|
|
(24,663)
|
|
(24,540)
|
Issuance of common
stock, net of share repurchases for withholding taxes
|
|
(436)
|
|
(764)
|
Net cash provided by
(used in) financing activities
|
|
(51,604)
|
|
30,511
|
Change in cash and
cash equivalents
|
|
5,273
|
|
6,368
|
Cash and cash
equivalents, beginning of period
|
|
16,512
|
|
17,980
|
Cash and cash
equivalents, end of period
|
|
$
21,785
|
|
$ 24,348
|
DEAN FOODS
COMPANY
RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES*
(Unaudited)
(In thousands,
except per share data)
|
|
|
Three Months Ended
September 30, 2018
|
|
|
|
Asset
write- downs and (gain) loss
on sale of assets
|
|
Facility
closing and reorganization costs,
net
|
|
Mark-to- market on
derivative contracts
|
|
Cost productivity plan
|
|
Non- controlling interest
in Good
Karma
|
|
Other adjustments
|
|
Income tax
|
|
|
|
GAAP
|
|
(a)
|
|
(c)
|
|
(d)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
Adjusted*
|
Gross
profit
|
$
390,597
|
|
$
—
|
|
$
—
|
|
$
(1,009)
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$
389,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and
distribution
|
349,244
|
|
—
|
|
—
|
|
(42)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
349,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
66,582
|
|
—
|
|
—
|
|
—
|
|
(4,968)
|
|
—
|
|
(17)
|
|
—
|
|
61,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs
and expenses
|
416,380
|
|
(3,935)
|
|
2,679
|
|
(42)
|
|
(4,968)
|
|
—
|
|
(17)
|
|
—
|
|
410,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
(25,783)
|
|
3,935
|
|
(2,679)
|
|
(967)
|
|
4,968
|
|
316
|
|
17
|
|
—
|
|
(20,193)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations
|
(26,648)
|
|
3,935
|
|
(2,679)
|
|
(967)
|
|
4,968
|
|
316
|
|
17
|
|
(4,252)
|
|
(25,310)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
(loss) per share from continuing operations (j)
|
$
(0.29)
|
|
$
0.04
|
|
$
(0.03)
|
|
$
(0.01)
|
|
$
0.05
|
|
$
—
|
|
$
—
|
|
$
(0.04)
|
|
$
(0.28)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
(h)
|
|
(i)
|
|
Adjusted*
|
|
|
Gross
profit(1)
|
$
441,838
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$
6,312
|
|
$
—
|
|
$
—
|
|
$
448,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and
distribution(1)
|
332,551
|
|
—
|
|
—
|
|
—
|
|
2,012
|
|
—
|
|
—
|
|
334,563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative(1)
|
67,950
|
|
—
|
|
(50)
|
|
—
|
|
—
|
|
(2,116)
|
|
—
|
|
65,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs
and expenses(1)
|
438,547
|
|
(28,905)
|
|
(50)
|
|
(7,844)
|
|
2,012
|
|
(2,116)
|
|
—
|
|
401,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income(1)
|
3,291
|
|
28,905
|
|
50
|
|
7,844
|
|
4,300
|
|
2,116
|
|
—
|
|
46,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 (j)
|
$
(0.11)
|
|
$
0.32
|
|
$
—
|
|
$
0.09
|
|
$
0.05
|
|
$
0.01
|
|
$
(0.16)
|
|
$
0.20
|
|
|
|
|
(1)
|
Results for the
quarter ended September 30, 2017 have been revised to reflect
the retrospective adoption of ASU 2017-07. The adoption of ASU
2017-07 resulted in a net increase to previously reported operating
income of $1.1 million for the three months ended
September 30, 2017 and a corresponding increase of $1.1
million to other expense, net for the three months ended
September 30, 2017, with no net impact to net loss or loss per
share.
|
|
* 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, 2018
|
|
|
|
Asset
write- downs and loss on sale of
assets
|
|
Facility closing and reorganization costs,
net
|
|
Mark-to- market on
derivative contracts
|
|
Cost productivity plan
|
|
Non- controlling interest
in Good Karma
|
|
Other adjustments
|
|
Income tax
|
|
|
|
GAAP
|
|
(a)
|
|
(c)
|
|
(d)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
Adjusted*
|
Gross
profit
|
$
1,271,884
|
|
$
—
|
|
$
—
|
|
$
(1,611)
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$
1,270,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and
distribution
|
1,031,961
|
|
—
|
|
—
|
|
546
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,032,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
208,076
|
|
—
|
|
—
|
|
—
|
|
(14,680)
|
|
—
|
|
(206)
|
|
—
|
|
193,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs
and expenses
|
1,323,214
|
|
(14,037)
|
|
(73,444)
|
|
546
|
|
(14,680)
|
|
—
|
|
2,083
|
|
—
|
|
1,223,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
(51,330)
|
|
14,037
|
|
73,444
|
|
(2,157)
|
|
14,680
|
|
316
|
|
(2,083)
|
|
—
|
|
46,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations
|
(68,929)
|
|
14,037
|
|
73,444
|
|
(2,157)
|
|
14,680
|
|
316
|
|
(2,083)
|
|
(26,875)
|
|
2,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
(loss) per share from continuing operations (j)
|
$
(0.75)
|
|
$
0.15
|
|
$
0.80
|
|
$
(0.02)
|
|
$
0.16
|
|
$
—
|
|
$
(0.02)
|
|
$
(0.29)
|
|
$
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2017
|
|
|
|
|
|
Asset
write- downs and 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)
|
|
(h)
|
|
(i)
|
|
Adjusted*
|
|
|
Gross
profit(1)
|
$
1,371,537
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$
1,802
|
|
$
—
|
|
$
—
|
|
$
1,373,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and
distribution(1)
|
1,015,624
|
|
—
|
|
—
|
|
—
|
|
(2)
|
|
—
|
|
—
|
|
1,015,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative(1)
|
238,895
|
|
—
|
|
(372)
|
|
—
|
|
—
|
|
(15,255)
|
|
—
|
|
223,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs
and expenses(1)
|
1,317,978
|
|
(36,775)
|
|
(372)
|
|
(22,947)
|
|
(2)
|
|
(15,255)
|
|
—
|
|
1,242,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income(1)
|
53,559
|
|
36,775
|
|
372
|
|
22,947
|
|
1,804
|
|
15,255
|
|
—
|
|
130,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 (j)
|
$
(0.03)
|
|
$
0.40
|
|
$
—
|
|
$
0.25
|
|
$
0.03
|
|
$
0.19
|
|
$
(0.29)
|
|
$
0.55
|
|
|
|
|
(1)
|
Results for the nine
months ended September 30, 2017 have been revised to reflect
the retrospective adoption of ASU 2017-07. The adoption of ASU
2017-07 resulted in a net increase to previously reported operating
income of $3.2 million for the nine months ended September 30,
2017 and a corresponding increase of $3.2 million to other expense,
net for the nine months ended September 30, 2017, with no net
impact to net loss or loss per share.
|
|
* 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
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
Reconciliation of
Net Income (Loss) to Adjusted EBITDA and Bank EBITDA
|
Net income
(loss)
|
|
$ (26,648)
|
|
$
1,382
|
|
$ (67,007)
|
|
$
9,270
|
|
$
(14,689)
|
Interest
expense
|
|
13,810
|
|
16,527
|
|
41,912
|
|
50,410
|
|
56,463
|
Income tax expense
(benefit)
|
|
(13,377)
|
|
(3,677)
|
|
(25,997)
|
|
4,429
|
|
(56,605)
|
Depreciation and
amortization
|
|
37,472
|
|
41,849
|
|
116,303
|
|
125,721
|
|
156,395
|
Asset write-downs and
loss on sale of assets (a)
|
|
—
|
|
24,970
|
|
2,232
|
|
24,970
|
|
5,080
|
Closed deal costs
(b)
|
|
—
|
|
50
|
|
—
|
|
372
|
|
—
|
Facility closing and
reorganization costs, net (c)
|
|
(2,679)
|
|
7,844
|
|
73,444
|
|
22,947
|
|
75,410
|
Mark-to-market on
derivative contracts (d)
|
|
(967)
|
|
4,300
|
|
(2,157)
|
|
1,804
|
|
(1,145)
|
Discontinued
operations (e)
|
|
—
|
|
(11,355)
|
|
(1,922)
|
|
(11,355)
|
|
(4,733)
|
Cost productivity
plan (f)
|
|
4,968
|
|
—
|
|
14,680
|
|
—
|
|
20,418
|
Non-controlling
interest in Good Karma (g)
|
|
316
|
|
—
|
|
316
|
|
—
|
|
316
|
Other adjustments
(h)
|
|
17
|
|
2,116
|
|
(2,083)
|
|
15,255
|
|
121
|
Adjusted
EBITDA
|
|
$
12,912
|
|
$ 84,006
|
|
$ 149,721
|
|
$ 243,823
|
|
237,031
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash share-based
compensation expense
|
|
|
|
|
|
|
|
|
|
4,393
|
Bank
EBITDA
|
|
|
|
|
|
|
|
|
|
$
241,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30, 2018
|
Reconciliation of
net debt and total leverage ratio
|
Total long-term debt,
including current portion
|
$
887,164
|
Unamortized debt
issuance costs
|
4,848
|
Cash and cash
equivalents
|
(21,785)
|
Net debt
|
$
870,227
|
Bank
EBITDA
|
241,424
|
Total
leverage ratio
|
3.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
Reconciliation of
Free Cash Flow provided by continuing operations
|
|
|
|
|
Net cash provided by
operating activities
|
|
|
|
|
|
|
|
$ 119,798
|
|
$
66,725
|
Payments for
property, plant and equipment
|
|
|
|
|
|
|
|
(68,680)
|
|
(61,384)
|
Free Cash
Flow provided by continuing operations
|
|
$
51,118
|
|
$
5,341
|
|
* See Notes to
Earnings Release Tables
|
Notes to
Earnings Release Tables
|
|
For the three and
nine months ended September 30, 2018, and 2017, 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.
|
|
|
(a)
|
The adjustment
reflects the elimination of the following:
|
|
i.
|
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, 2018, and 2017, and $11.8 million for each of
the nine months ended September 30, 2018, and 2017;
and
|
|
ii.
|
Asset impairment
charges on certain fixed assets of $2.2 million for the nine months
ended September 30, 2018 and $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.
|
|
|
(b)
|
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 and nine months ended September 30,
2017, respectively.
|
|
|
(c)
|
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.
|
|
|
(d)
|
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.
|
|
|
(e)
|
The adjustment
reflects the elimination of net gains from discontinued operations
of $1.9 million for the nine months ended September 30, 2018
and $11.4 million for each of the three and nine months ended
September 30, 2017.
|
|
|
(f)
|
The adjustment
reflects the elimination of certain direct expenses incurred as a
result of our enterprise-wide cost productivity plan. The charges
were $5.0 million and $14.7 million for the three and nine months
ended September 30, 2018, respectively.
|
|
|
(g)
|
The adjustment
reflects the elimination of operating loss attributable to the
non-controlling interest in Good Karma Foods, Inc. ("Good
Karma").
|
|
|
(h)
|
The adjustment
reflects the elimination of the following:
|
|
i.
|
The non-cash gain
from the remeasurement of our investment in Good Karma. We
increased our ownership interest in Good Karma with an additional
investment of $15 million through a step-acquisition during the
three months ended June 30, 2018;
|
|
ii.
|
Separation charges
related to the previously disclosed departures of certain executive
officers of $0.2 million in the nine months ended
September 30, 2018;
|
|
iii.
|
A reduction to
separation charges of $1.4 million and $2.5 million for the three
and nine months ended September 30, 2017, respectively, in
connection with the Company's previously disclosed CEO succession
plan;
|
|
iv.
|
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;
|
|
v.
|
A charge related to
litigation settlements reached in the nine months ended
September 30, 2017; and
|
|
vi.
|
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.
|
|
|
(i)
|
The adjustment
reflects the income tax impact of adjustments (a) through (d) and
(f) through (h) and an adjustment to our income tax expense to
reflect income tax at a tax rate of 26.5% for the three and nine
months ended September 30, 2018, respectively, and 38% for the
three and nine months ended September 30, 2017, respectively,
which we believe represents our normalized effective tax rate as a
U.S. domiciled business. The reduction in our normalized effective
tax rate beginning in 2018 is associated with the December 22,
2017, enactment of the Tax Cuts and Jobs Act.
|
|
|
(j)
|
Includes an
adjustment to diluted shares outstanding to reflect an add-back of
approximately 159,000 dilutive shares and 183,000 dilutive shares
for the three and nine months ended September 30, 2018,
respectively, and approximately 200,000 dilutive shares and 449,000
dilutive shares for the three and nine months ended
September 30, 2017, respectively, which were anti-dilutive for
GAAP purposes.
|
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content:http://www.prnewswire.com/news-releases/dean-foods-announces-third-quarter-2018-results-300745298.html
SOURCE Dean Foods Company