DALLAS, Feb. 16, 2017 /PRNewswire/ -- Dean Foods Company
(NYSE: DF) today reported fourth quarter and full year 2016
results.
Highlights
- Q4 net income per diluted share was $0.36 and adjusted net income per diluted share
was $0.38
- Full year net income per diluted share was $1.31 and adjusted net income per diluted share
was $1.57
- Continued year-over-year improvement in total volume
performance, operating income, and earnings per share
- Significant cost productivity throughout the entire supply
chain, delivering over $80 million of
gross savings
- Growing strong brands through line extensions in DairyPure,
Friendly's acquisition, and Organic Valley partnership
- Full year 2017 adjusted diluted earnings are expected to be
$1.35 to $1.55 per diluted share; Q1
2017 adjusted diluted earnings are expected to be $0.12 to $0.20 per diluted share
(1)
Chief Executive Officer Ralph
Scozzafava said, "2016 was a strong year for Dean Foods. In
the fourth quarter, we delivered 6% growth in both adjusted
operating income per gallon and adjusted earnings per share. For
the full year, our operating income per gallon grew nearly 21%
versus prior year. Our adjusted earnings per share of $1.57 represents a nearly 28% increase over 2015.
I am very pleased with the hard work this organization has
dedicated to driving improved results in support of our long-term
strategic agenda."
Business
Updates
In November 2016, the company
announced a strategic joint venture with CROPP, the largest
independent organic farmer cooperative in the U.S., to bring the
Organic Valley brand and its organic milk to retailers and
consumers by leveraging Dean Foods' selling organization,
processing plants and refrigerated direct-to-store delivery ("DSD")
distribution system. The joint venture, called Organic Valley
Fresh, will operate on a 50/50 basis of ownership, governance and
profit, with a dedicated management team working in the interest of
the joint venture and its objectives. For Dean Foods, this brings a
strong organic brand to our existing portfolio of category-leading
brands, a reliable supply of organic milk, and a new channel for
profitable growth. Adding the Organic Valley® brand to the current
portfolio of Dean Foods' branded dairy products such as DairyPure®
and TruMoo® enables Dean Foods to offer retail customers the
largest and most comprehensive lineup of dairy offerings across
multiple segments with national brands that consumers know and
trust. The joint venture, which we expect to begin shipping product
in mid-to-late 2017, brings the best capabilities of both
organizations together for a common goal of profitable brand
growth, driving awareness through increased reach and availability
of great tasting organic products. Due to ramp-up, earnings
accretion in 2017 is expected to be minimal, but the company is
excited about the potential for growth starting in 2018.
Fourth Quarter and Full Year 2016 Operating Results
Chief Financial Officer Chris
Bellairs said, "We delivered a fourth quarter and full year
of exceptional financial performance. For the full year 2016, we
delivered $257 million of net cash
from operating activities and $113
million of free cash flow. On an all-cash netted basis, our
total leverage improved to 1.89 times net debt to bank EBITDA.
Importantly, we returned nearly half of our 2016 free cash flow to
shareholders through dividends and opportunistic share
repurchases."
- 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.
Financial Summary
*
|
|
Three Months Ended
December 31
|
|
Twelve Months
Ended December 31
|
(In millions,
except per share amounts)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
|
|
|
|
|
|
GAAP
|
|
$
501
|
|
$
508
|
|
$ 1,988
|
|
$ 1,974
|
Adjusted
|
|
$
497
|
|
$
509
|
|
$ 1,985
|
|
$ 1,973
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
|
|
|
|
|
|
|
|
GAAP
|
|
$
70
|
|
$
45
|
|
$
264
|
|
$
93
|
Adjusted
|
|
$
70
|
|
$
67
|
|
$
293
|
|
$
248
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
|
|
|
|
|
|
GAAP
|
|
$
17
|
|
$
16
|
|
$
67
|
|
$
67
|
Adjusted
|
|
$
17
|
|
$
16
|
|
$
66
|
|
$
66
|
|
|
|
|
|
|
|
|
|
Net Income
(Loss)
|
|
|
|
|
|
|
|
|
GAAP
|
|
$
33
|
|
$
18
|
|
$
120
|
|
$
(9)
|
Adjusted
|
|
$
34
|
|
$
33
|
|
$
144
|
|
$
115
|
|
|
|
|
|
|
|
|
|
Diluted Earnings
(Loss) Per Share (EPS)
|
|
|
|
|
|
|
|
|
GAAP
|
|
$ 0.36
|
|
$ 0.20
|
|
$
1.31
|
|
$ (0.09)
|
Adjusted
|
|
$ 0.38
|
|
$ 0.36
|
|
$
1.57
|
|
$
1.23
|
|
*
|
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.
|
Total volume across all products was 653 million gallons for the
fourth quarter of 2016, a 0.8% decline compared to total volume of
658 million gallons in the fourth quarter of 2015. Full year 2016
volumes totaled 2.6 billion gallons, a 2.1% decline versus full
year 2015.
Based on fluid milk sales data published by the USDA through
December, fluid milk volume decreased 1.2% year-over-year in the
fourth quarter of 2016 on an unadjusted basis. On this same basis,
Dean Foods' share of U.S. fluid milk volumes increased by 10 basis
points year-over-year.
Raw milk costs in the fourth quarter of 2016 increased roughly
6% from the third quarter of 2016 and decreased 2% from the fourth
quarter of 2015. On a full year basis, the average Class I Mover
was $14.80 per hundred-weight, a 9%
decrease over full year 2015. For 2017, dairy commodity inflation
is expected to be in the range of 15-20%, with the highest
inflationary levels expected in the first half of 2017.
Cash Flow
Net cash provided by continuing operations for the twelve months
ended December 31, 2016, totaled
$257 million. Free cash flow provided
by continuing operations, which is defined as net cash provided by
continuing operations less capital expenditures, was $113 million for the twelve months ended
December 31, 2016, a $133 million decrease as compared to the prior
year period. Year-to-date free cash flow is comparable to the prior
year period after reconciling for higher incentive compensation
payouts in the first quarter of 2016 and the $56 million associated with the Company's 2014
federal tax refund received in the first quarter of 2015. Capital
expenditures totaled $63 million for
the quarter and $145 million for the
full year 2016. For the full year 2017, we expect capital
expenditures of $120 million to $130
million, and free cash flow of $125
million to $150 million.
Debt
Total outstanding debt at December 31,
2016, net of $18.0 million
cash on hand, was approximately $877.1
million. The Company's net debt to bank EBITDA total
leverage ratio, on an all-cash netted basis, decreased sequentially
to 1.89 times at the end of the fourth quarter of 2016 due to
strong free cash flow and increased bank EBITDA.
Forward Outlook
Going forward, we will transition to providing guidance on an
annual basis only. We are driving our strategy with a
long-term perspective and feel it's appropriate to give a better
view that emphasizes sustainable value creation for our
shareholders.
"Our 2017 growth and productivity agendas are robust and will
ramp up through the year, driving a larger portion of our earnings
into the back half. We expect to deliver full-year adjusted
earnings per share of $1.35 to $1.55.
In the first quarter, we expect dairy commodity inflation of nearly
20% and a roughly 1% decline in total volume performance versus
prior year. As we continue to invest in our strategic initiatives
and brand building for future growth, we expect first quarter
adjusted earnings per share in the range of $0.12 to $0.20," 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 net income (loss), 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 twelve
months ended December 31, 2016 and
2015 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) 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;
- separation costs;
- gains or losses related to discontinued operations and
divestitures;
- 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 core operating performance. In
addition, we cannot predict the timing and amount of gains or
losses associated with such 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 normalized
income tax rate, as Adjusted EBITDA excludes the full amount of
income tax expense). 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 cost-savings 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. 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
December 31
|
|
Twelve Months
Ended
December 31
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net sales
|
$
|
2,018,009
|
|
|
$
|
2,022,500
|
|
|
$
|
7,710,226
|
|
|
$
|
8,121,661
|
|
Cost of
sales
|
1,516,589
|
|
|
1,514,029
|
|
|
5,722,710
|
|
|
6,147,252
|
|
Gross
profit
|
501,420
|
|
|
508,471
|
|
|
1,987,516
|
|
|
1,974,409
|
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
Selling and
distribution
|
342,835
|
|
|
355,548
|
|
|
1,348,349
|
|
|
1,379,317
|
|
General and
administrative
|
83,423
|
|
|
90,689
|
|
|
346,028
|
|
|
350,324
|
|
Amortization of
intangibles
|
5,156
|
|
|
6,340
|
|
|
20,752
|
|
|
21,653
|
|
Facility closing and
reorganization costs, net
|
(344)
|
|
|
10,482
|
|
|
8,719
|
|
|
19,844
|
|
Impairment of
intangible assets
|
—
|
|
|
—
|
|
|
—
|
|
|
109,910
|
|
Total operating costs
and expenses
|
431,070
|
|
|
463,059
|
|
|
1,723,848
|
|
|
1,881,048
|
|
Operating
income
|
70,350
|
|
|
45,412
|
|
|
263,668
|
|
|
93,361
|
|
Other (income)
expense:
|
|
|
|
|
|
|
|
Interest
expense
|
16,525
|
|
|
16,308
|
|
|
66,795
|
|
|
66,813
|
|
Loss on early
retirement of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
43,609
|
|
Other income,
net
|
(1,393)
|
|
|
(2,047)
|
|
|
(5,778)
|
|
|
(3,751)
|
|
Total other
expense
|
15,132
|
|
|
14,261
|
|
|
61,017
|
|
|
106,671
|
|
Income (loss) from
continuing operations before income taxes
|
55,218
|
|
|
31,151
|
|
|
202,651
|
|
|
(13,310)
|
|
Income tax expense
(benefit)
|
21,699
|
|
|
12,333
|
|
|
82,034
|
|
|
(5,229)
|
|
Income (loss) from
continuing operations
|
33,519
|
|
|
18,818
|
|
|
120,617
|
|
|
(8,081)
|
|
Loss from
discontinued operations, net of tax
|
(312)
|
|
|
(1,095)
|
|
|
(312)
|
|
|
(1,095)
|
|
Gain (loss) on sale
of discontinued operations, net of tax
|
(376)
|
|
|
757
|
|
|
(376)
|
|
|
668
|
|
Net income
(loss)
|
$
|
32,831
|
|
|
$
|
18,480
|
|
|
$
|
119,929
|
|
|
$
|
(8,508)
|
|
Average common
shares:
|
|
|
|
|
|
|
|
Basic
|
90,508
|
|
|
91,363
|
|
|
90,934
|
|
|
93,298
|
|
Diluted
|
91,131
|
|
|
92,028
|
|
|
91,510
|
|
|
93,298
|
|
Basic income (loss)
per common share:
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations
|
$
|
0.37
|
|
|
$
|
0.20
|
|
|
$
|
1.33
|
|
|
$
|
(0.09)
|
|
Loss from
discontinued operations
|
(0.01)
|
|
|
—
|
|
|
(0.01)
|
|
|
—
|
|
Net income
(loss)
|
$
|
0.36
|
|
|
$
|
0.20
|
|
|
$
|
1.32
|
|
|
$
|
(0.09)
|
|
Diluted income (loss)
per common share:
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations
|
$
|
0.37
|
|
|
$
|
0.20
|
|
|
$
|
1.32
|
|
|
$
|
(0.09)
|
|
Loss from
discontinued operations
|
(0.01)
|
|
|
—
|
|
|
(0.01)
|
|
|
—
|
|
Net income
(loss)
|
$
|
0.36
|
|
|
$
|
0.20
|
|
|
$
|
1.31
|
|
|
$
|
(0.09)
|
|
DEAN FOODS
COMPANY
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Unaudited)
|
(In
thousands)
|
|
|
|
December 31,
2016
|
|
December 31,
2015
|
ASSETS
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
17,980
|
|
|
$
|
60,734
|
|
Other current
assets
|
|
1,040,650
|
|
|
1,016,829
|
|
Total current
assets
|
|
1,058,630
|
|
|
1,077,563
|
|
Property, plant
and equipment, net
|
|
1,163,851
|
|
|
1,174,137
|
|
Intangibles and
other assets, net
|
|
383,746
|
|
|
268,463
|
|
Total
|
|
$
|
2,606,227
|
|
|
$
|
2,520,163
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
Total current
liabilities, excluding debt
|
|
$
|
706,981
|
|
|
$
|
760,402
|
|
Total long-term
debt, including current portion
|
|
886,051
|
|
|
834,573
|
|
Other long-term
liabilities
|
|
402,639
|
|
|
379,684
|
|
Total
stockholders' equity
|
|
610,556
|
|
|
545,504
|
|
Total
|
|
$
|
2,606,227
|
|
|
$
|
2,520,163
|
|
DEAN FOODS
COMPANY
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
(In
thousands)
|
|
|
|
Twelve Months
Ended December 31
|
|
|
2016
|
|
2015
|
Operating
Activities
|
|
|
|
|
Net cash provided by
operating activities
|
|
$ 257,413
|
|
$ 408,153
|
|
|
|
|
|
Investing
Activities
|
|
|
|
|
Payments for
property, plant and equipment
|
|
(144,642)
|
|
(162,542)
|
Payments for
acquisitions, net of cash acquired
|
|
(158,203)
|
|
—
|
Proceeds from sale of
fixed assets
|
|
14,705
|
|
18,495
|
Other
|
|
—
|
|
(2,200)
|
Net cash used in
investing activities
|
|
(288,140)
|
|
(146,247)
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
Net proceeds from
debt
|
|
47,868
|
|
393,283
|
Early retirement of
long-term debt
|
|
—
|
|
(476,188)
|
Premiums paid on
early retirement of long-term debt
|
|
—
|
|
(37,309)
|
Payments of financing
costs
|
|
—
|
|
(16,816)
|
Repurchase of common
stock
|
|
(25,000)
|
|
(53,010)
|
Cash dividends
paid
|
|
(32,828)
|
|
(26,182)
|
Issuance of common
stock, net of share repurchases for withholding taxes
|
|
(720)
|
|
(16)
|
Other
|
|
746
|
|
342
|
Net cash used in
financing activities
|
|
(9,934)
|
|
(215,896)
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
(2,093)
|
|
(1,638)
|
Change in cash and
cash equivalents
|
|
(42,754)
|
|
44,372
|
Cash and cash
equivalents, beginning of period
|
|
60,734
|
|
16,362
|
Cash and cash
equivalents, end of period
|
|
$
17,980
|
|
$
60,734
|
DEAN FOODS
COMPANY
|
RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES
|
(Unaudited)
|
(In thousands,
except per share data)
|
|
|
Three Months Ended
December 31, 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)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
Adjusted*
|
Gross
profit
|
$ 501,420
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$
(3,938)
|
|
$
—
|
|
$
—
|
|
$ 497,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and
distribution
|
342,835
|
|
—
|
|
—
|
|
—
|
|
1,620
|
|
—
|
|
—
|
|
344,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
83,423
|
|
—
|
|
(493)
|
|
—
|
|
—
|
|
(1,436)
|
|
—
|
|
81,494
|
Amortization of
intangibles
|
5,156
|
|
(3,935)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,221
|
General and
administrative, including Amortization of intangibles
|
88,579
|
|
(3,935)
|
|
(493)
|
|
—
|
|
—
|
|
(1,436)
|
|
—
|
|
82,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs
and expenses
|
431,070
|
|
(3,935)
|
|
(493)
|
|
344
|
|
1,620
|
|
(1,436)
|
|
—
|
|
427,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
70,350
|
|
3,935
|
|
493
|
|
(344)
|
|
(5,558)
|
|
1,436
|
|
—
|
|
70,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
16,525
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
16,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
33,519
|
|
3,935
|
|
493
|
|
(344)
|
|
(5,558)
|
|
1,436
|
|
731
|
|
34,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
discontinued operations, net of tax
|
(688)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
688
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
32,831
|
|
3,935
|
|
493
|
|
(344)
|
|
(5,558)
|
|
2,124
|
|
731
|
|
34,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
$
0.36
|
|
$
0.04
|
|
$
0.01
|
|
$
—
|
|
$
(0.06)
|
|
$
0.02
|
|
$
0.01
|
|
$
0.38
|
|
Three Months Ended
December 31, 2015
|
|
|
|
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)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
Adjusted*
|
Gross
profit
|
$ 508,471
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$
217
|
|
$
—
|
|
$
—
|
|
$ 508,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and
distribution
|
355,548
|
|
—
|
|
—
|
|
—
|
|
(5,236)
|
|
—
|
|
—
|
|
350,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
90,689
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(12)
|
|
—
|
|
90,677
|
Amortization of
intangibles
|
6,340
|
|
(5,589)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
751
|
General and
administrative, including Amortization of intangibles
|
97,029
|
|
(5,589)
|
|
—
|
|
—
|
|
—
|
|
(12)
|
|
—
|
|
91,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs
and expenses
|
463,059
|
|
(5,589)
|
|
—
|
|
(10,482)
|
|
(5,236)
|
|
(12)
|
|
—
|
|
441,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
45,412
|
|
5,589
|
|
—
|
|
10,482
|
|
5,453
|
|
12
|
|
—
|
|
66,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
16,308
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(218)
|
|
—
|
|
16,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
18,818
|
|
5,589
|
|
—
|
|
10,482
|
|
5,453
|
|
230
|
|
(7,772)
|
|
32,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
discontinued operations, net of tax
|
(338)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
338
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
18,480
|
|
5,589
|
|
—
|
|
10,482
|
|
5,453
|
|
568
|
|
(7,772)
|
|
32,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
$
0.20
|
|
$
0.06
|
|
$
—
|
|
$
0.11
|
|
$
0.06
|
|
$
0.01
|
|
$ (0.08)
|
|
$
0.36
|
|
*
|
See notes to
Earnings Release Tables
|
DEAN FOODS
COMPANY
|
RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES
|
(Unaudited)
|
(In thousands,
except per share data)
|
|
|
Twelve Months
Ended December 31, 2016
|
|
|
|
Asset
write-downs
and (gain) loss on
sale of assets
|
|
Closed deal
costs
|
|
Facility
closing
and
reorganization costs, net
|
|
Loss on early
retirement of
debt
|
|
Mark-to-
market
on derivative
contracts
|
|
Other
adjustments
|
|
Income
tax
|
|
|
|
GAAP
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
Adjusted*
|
Gross
profit
|
$
|
1,987,516
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(2,143)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,985,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and
distribution
|
1,348,349
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,655
|
|
|
—
|
|
|
—
|
|
|
1,359,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
346,028
|
|
|
—
|
|
|
(4,926)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,561)
|
|
|
—
|
|
|
329,541
|
|
Amortization of
intangibles
|
20,752
|
|
|
(16,843)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,909
|
|
General and
administrative, including Amortization of intangibles
|
366,780
|
|
|
(16,843)
|
|
|
(4,926)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,561)
|
|
|
—
|
|
|
333,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs
and expense
|
1,723,848
|
|
|
(16,843)
|
|
|
(4,926)
|
|
|
(8,719)
|
|
|
—
|
|
|
10,655
|
|
|
(11,561)
|
|
|
—
|
|
|
1,692,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
263,668
|
|
|
16,843
|
|
|
4,926
|
|
|
8,719
|
|
|
—
|
|
|
(12,798)
|
|
|
11,561
|
|
|
—
|
|
|
292,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
66,795
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(436)
|
|
|
—
|
|
|
66,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
120,617
|
|
|
16,843
|
|
|
4,926
|
|
|
8,719
|
|
|
—
|
|
|
(12,798)
|
|
|
11,997
|
|
|
(6,256)
|
|
|
144,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
discontinued operations, net of tax
|
(688)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
688
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
119,929
|
|
|
16,843
|
|
|
4,926
|
|
|
8,719
|
|
|
—
|
|
|
(12,798)
|
|
|
12,685
|
|
|
(6,256)
|
|
|
144,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
$
|
1.31
|
|
|
$
|
0.18
|
|
|
$
|
0.05
|
|
|
$
|
0.10
|
|
|
$
|
—
|
|
|
$
|
(0.14)
|
|
|
$
|
0.14
|
|
|
$
|
(0.07)
|
|
|
$
|
1.57
|
|
|
Twelve Months
Ended December 31, 2015
|
|
|
|
Asset write-
downs
and (gain) loss
on
sale of assets
|
|
Closed deal
costs
|
|
Facility
closing
and reorganization
costs, net
|
|
Loss on early
retirement of
debt
|
|
Mark-to-
market
on derivative
contracts
|
|
Other
adjustments
|
|
Income
tax
|
|
|
|
GAAP
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
Adjusted*
|
Gross
profit
|
$
|
1,974,409
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(970)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,973,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and
distribution
|
1,379,317
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,939)
|
|
|
—
|
|
|
—
|
|
|
1,372,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
350,324
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
350,330
|
|
Amortization of
intangibles
|
21,653
|
|
|
(18,629)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,024
|
|
General and
administrative, including Amortization of intangibles
|
371,977
|
|
|
(18,629)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
353,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs
and expenses
|
1,881,048
|
|
|
(128,539)
|
|
|
—
|
|
|
(19,844)
|
|
|
—
|
|
|
(6,939)
|
|
|
6
|
|
|
—
|
|
|
1,725,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
93,361
|
|
|
128,539
|
|
|
—
|
|
|
19,844
|
|
|
—
|
|
|
5,969
|
|
|
(6)
|
|
|
—
|
|
|
247,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
66,813
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,288)
|
|
|
—
|
|
|
65,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations
|
(8,081)
|
|
|
128,539
|
|
|
—
|
|
|
19,844
|
|
|
43,609
|
|
|
5,969
|
|
|
1,282
|
|
|
(75,885)
|
|
|
115,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
discontinued operations, net of tax
|
(427)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
427
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
(8,508)
|
|
|
128,539
|
|
|
—
|
|
|
19,844
|
|
|
43,609
|
|
|
5,969
|
|
|
1,709
|
|
|
(75,885)
|
|
|
115,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
(loss) per share (h)
|
$
|
(0.09)
|
|
|
$
|
1.38
|
|
|
$
|
—
|
|
|
$
|
0.21
|
|
|
$
|
0.46
|
|
|
$
|
0.06
|
|
|
$
|
0.02
|
|
|
$
|
(0.81)
|
|
|
$
|
1.23
|
|
|
|
*
|
See notes to
Earnings Release Tables
|
DEAN FOODS
COMPANY
|
RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES*
|
(Unaudited)
|
(In thousands,
except per ratio data)
|
|
|
|
Three
Months Ended December 31
|
|
Twelve Months
Ended December 31
|
|
Trailing
Twelve
Months
Ended
December 31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
Reconciliation of
Net Income to Adjusted EBITDA and Bank EBITDA
|
Net income
(loss)
|
|
$
32,831
|
|
$
18,480
|
|
$ 119,929
|
|
$
(8,508)
|
|
$
119,929
|
Interest
expense
|
|
16,525
|
|
16,308
|
|
66,795
|
|
66,813
|
|
66,795
|
Income tax expense
(benefit)
|
|
21,699
|
|
12,333
|
|
82,034
|
|
(5,229)
|
|
82,034
|
Depreciation and
amortization
|
|
44,182
|
|
43,506
|
|
172,617
|
|
171,328
|
|
172,617
|
Asset write-downs and
(gain) loss on sale of assets (a)
|
|
—
|
|
—
|
|
—
|
|
109,910
|
|
—
|
Closed deal costs
(b)
|
|
493
|
|
—
|
|
4,926
|
|
—
|
|
4,926
|
Facility closing and
reorganization costs, net (c)
|
|
(344)
|
|
10,482
|
|
8,719
|
|
19,844
|
|
8,719
|
Loss on early
retirement of debt (d)
|
|
—
|
|
—
|
|
—
|
|
43,609
|
|
—
|
Mark-to-market on
derivative contracts (e)
|
|
(5,558)
|
|
5,453
|
|
(12,798)
|
|
5,969
|
|
(12,798)
|
Other adjustments
(f)
|
|
2,124
|
|
350
|
|
12,249
|
|
421
|
|
12,249
|
Adjusted
EBITDA
|
|
$ 111,952
|
|
$ 106,912
|
|
$ 454,471
|
|
$ 404,157
|
|
454,471
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash share-based
compensation expense
|
|
|
|
|
|
|
|
|
|
9,116
|
Bank
EBITDA
|
|
|
|
|
|
|
|
|
|
$
463,587
|
Reconciliation of
net debt and total leverage ratio
|
December 31,
2016
|
Total long-term debt,
including current portion
|
$
886,051
|
Unamortized discounts
and debt issuance costs
|
9,029
|
Cash and cash
equivalents
|
(17,980)
|
Net debt
|
$
877,100
|
Bank
EBITDA
|
463,587
|
Total
leverage ratio
|
1.89
|
|
|
Twelve Months
Ended December 31
|
2016
|
|
2015
|
Reconciliation of
Free Cash Flow provided by continuing operations
|
|
|
|
Net cash provided by
operating activities
|
$
257,413
|
|
$
408,153
|
Payments for
property, plant and equipment
|
(144,642)
|
|
(162,542)
|
Free Cash
Flow provided by continuing operations
|
$
112,771
|
|
$
245,611
|
|
*
|
See Notes to
Earnings Release Tables
|
Notes to Earnings
Release Tables
|
|
|
|
For the three and
twelve months ended December 31, 2016 and 2015, 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
|
|
core operating
results. For additional information on our non-GAAP financial
measures, see the section entitled "Non-GAAP
|
|
Financial Measures"
in this release.
|
|
|
|
(a)
|
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 the following:
|
|
|
i.
|
A non-cash charge of
$109.9 million ($68.7 million net of tax) in the first quarter of
2015 related to the
|
|
|
|
impairment of certain
intangible assets, and related amortization expense of $5.6 million
and $18.6
|
|
|
|
million for the three
and twelve months ended December 31, 2015, respectively;
and
|
|
|
ii.
|
Amortization expense
recorded on these finite-lived trademarks of $3.9 million and $16.8
million for
|
|
|
|
the three and twelve
months ended December 31, 2016, respectively.
|
|
(b)
|
The adjustment
reflects the elimination of expenses related to the acquisition of
Friendly's Ice Cream
|
|
|
Holdings Corp.
completed on June 20, 2016, and an immaterial amount of expenses
related to other
|
|
|
transactional
activities, of $0.5 million and $4.9 million for the three and
twelve months ended December 31,
|
|
|
2016,
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)
|
During the first
quarter of 2015, we redeemed the remaining outstanding principal
amount of $476.2 million of
|
|
|
our 2016 senior
notes. The adjustment reflects the related elimination of the
following:
|
|
|
i.
|
A $38.3 million
pre-tax loss on the early extinguishment of debt in the first
quarter of 2015, which
|
|
|
|
consisted of debt
redemption premiums of $37.3 million, a write-off of unamortized
debt issue costs
|
|
|
|
of $0.8 million, and
a write-off of the remaining bond discount and interest rate swaps
of $0.2 million; and
|
|
|
ii.
|
In conjunction with
the execution of our current credit agreement and the amendment of
our
|
|
|
|
receivables-backed
facility in the first quarter of 2015, the write-off of unamortized
debt issue costs
|
|
|
|
related to our
previous credit facility of $5.3 million.
|
|
(e)
|
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.
|
|
(f)
|
The adjustment
reflects the elimination of the following:
|
|
|
i.
|
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;
|
|
|
ii.
|
Interest expense on
uncertain tax positions that we retained in connection with
prior
|
|
|
|
discontinued
operations;
|
|
|
iii.
|
Separation charge of
$1.4 million and $11.6 million for the three and twelve months
ended
|
|
|
|
December 31, 2016,
respectively, in connection with the Company's CEO succession plan;
and
|
|
|
iv.
|
Loss on sale of
discontinued operations, net of tax.
|
|
(g)
|
The adjustment
reflects the income tax impact of adjustments (a) through (f) and
an adjustment to our
|
|
|
income tax expense
(benefit) 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.
|
|
(h)
|
Includes an
adjustment to diluted shares outstanding to reflect an add-back of
approximately 540
|
|
thousand dilutive
shares, which were anti-dilutive for GAAP purposes.
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/dean-foods-announces-strong-fourth-quarter-and-full-year-2016-results-300408470.html
SOURCE Dean Foods Company