Dean Foods Management Discusses Q4 2011 Results - Earnings Call Transcript

Dean Foods (DF)

Q4 2011 Earnings Call

February 15, 2012 9:30 am ET

Executives

Barry Sievert - Vice President of Investor Relations

Gregg L. Engles - Chairman, Chief Executive officer and Chairman of Executive Committee

Shaun P. Mara - Chief Financial Officer and Executive Vice President

Analysts

Judy E. Hong - Goldman Sachs Group Inc., Research Division

Amit Sharma - BMO Capital Markets U.S.

Farha Aslam - Stephens Inc., Research Division

Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division

Reza Vahabzadeh - Barclays Capital Inc.

Christopher Growe - Stifel, Nicolaus & Co., Inc., Research Division

Ryan Oksenhendler - BofA Merrill Lynch, Research Division

Jonathan P. Feeney - Janney Montgomery Scott LLC, Research Division

Robert Moskow - Crédit Suisse AG, Research Division

Carla Casella - JP Morgan Chase & Co, Research Division

Presentation

Operator

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Good morning, and welcome to the Dean Foods Company Fourth Quarter 2011 Earnings Conference Call. Please note today's call is being recorded and is also being broadcast live over the Internet on the Dean Foods corporate website. This broadcast is the property of Dean Foods. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of the company is strictly prohibited. At this time, I'd like to turn the call over for opening remarks to Vice President of Investor Relations, Mr. Barry Sievert. Please go ahead.

Barry Sievert

Thank you, Katie, and good morning, everyone. Thanks for joining us for our fourth quarter 2011 earnings conference call. We issued an earnings press release this morning, which is available on our website at deanfoods.com. The release is also filed as an exhibit to Form 8-K available on the SEC's website at sec.gov. Also available during this call at the Dean Foods website is a slide presentation, which accompanies today's prepared remarks. A replay of today's call, along with the slide presentation, will be available on our website beginning this afternoon.

The earnings per share, operating income and interest expense information that will be provided today are from continuing operations and have been adjusted to exclude the expenses related to facility closings and reorganizations, expenses related to litigation matters, expenses related to goodwill impairment and other asset write-downs, gains or losses from the divestiture of assets and other nonrecurring items in order to enable you to make a meaningful evaluation of our operating performance between periods. The earnings release contains a more detailed discussion of the reasons why these items are excluded from the consolidated results, along with reconciliations between GAAP and adjusted earnings and between net cash flow from continuing operations and free cash flow from continuing operations.

We would also like to advise you that all forward-looking statements made on today's call are intended to fall within the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements will include, among others, disclosure of earnings targets, as well as expectations regarding our branding initiatives, expected cost savings, leverage ratios and various other aspects of our business. These statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today's conference call. Information concerning these risks is contained in the company's periodic reports on forms 10-K and 10-Q and in today's press release.

Participating with me in the prepared section of today's call are Gregg Engles, our Chairman and CEO; and Shaun Mara, our Chief Financial Officer. Gregg will start us off by providing an overview of our reporting segments and a review of their recent results. Following Gregg, Shaun will offer some additional perspective on our financial results before turning the call back to Gregg for some commentary on the forward outlook and other closing comments. We will then open the call for your questions.

With that, I will turn the call over to Gregg for his opening remarks. Gregg?

Gregg L. Engles

Thank you, Barry, and good morning, everyone. Today, we reported Q4 adjusted diluted earnings of $0.27 per share, $0.02 above the high end of our guidance of $0.20 to $0.25 for the quarter. I'm pleased with the results of the quarter but even more pleased that we've continued to meet our financial and operational commitments to our stockholders.

While 2011 was not without its challenges, we met or exceeded our guidance in all 4 quarters and finished the year with $464 million of full year operating income and adjusted diluted earnings of $0.77 per share. We will continue to strive to build on this track record in 2012 and beyond.

In addition to the EPS results, other Q4 highlights include consolidated adjusted operating income growth of 21%; year-over-year profit growth in our Fresh Dairy Direct business, which posted an 11% increase in Q4 operating income; and continued strong performance of WhiteWave-Alpro, which closed out a highly successful year with 6% top line and 17% adjusted operating income growth for the quarter.

I'll discuss these results in more detail in a moment, but before I do, I wanted to address the change in segment reporting we've made beginning with this earnings report. As discussed in the earnings release we issued this morning, we have broken Morningstar Foods out as a separate reportable segment from our FDD fresh milk business. Significant changes in the fresh milk business and diverging market conditions, go-to-market models and customer bases have increasingly led us to view the FDD and Morningstar businesses differently. Going forward, we'll manage, invest in and develop strategy for these businesses separately. Therefore, we will now report the business in 3 segments: Fresh Dairy Direct, WhiteWave-Alpro and Morningstar. Our upcoming 10-K filings will include 2010 and 2009 results, recast to reflect the new segment alignment. Additionally, we will post unaudited supplemental information on our website this morning to assist you in further understanding the financial performance of these segments.

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