Investors always want to invest in those companies which are performing well, especially in those which have pulled themselves up from several turmoils. Dean Foods Company (DF, Financial) is one of them, which has faced several hiccups during the last few quarters. But, as we know that every cloud has a silver lining similarly, Dean Foods has also performed well in this quarter by posting positive results. Nothing could deter its progress.
Headquartered in Dallas, Dean Foods is a leading food and beverage company and the largest processor and direct-to-store distributor of fluid milk (marketed under more than 50 local and regional dairy brands and private labels) and other fluid dairy products in the United States. The company manufactures, markets and distributes a range of branded and private label dairy case products, including fluid milk, ice cream, cultured dairy products, creamers, ice cream mix, and other dairy products to retailers, distributors, food service outlets, educational institutions, and governmental entities across the United States. Dean Foods’ products are processed with the help of its more than 17,000 dedicated employees working in approximately 75 plants across the U.S. Some of its brands are shown below.
Performance check: Impressive figures posted
On Nov. 10, 2014, this largest player in milk reported adjusted net sales of $2,373.28 million for the third quarter 2014, an increase of 7.83% year over year from $2,200.89 million in the prior-year quarter. Operating loss for the quarter totaled $1 million, compared to third quarter 2013 operating income of $23 million. Dean Foods reported an adjusted operating income of $9.78 million for the quarter compared to $41.63 million in the prior-year quarter. High raw milk price is the main reason behind this decline.
Net loss attributable to Dean Foods totaled $16 million for the third quarter of 2014 compared to $415 million of net income attributable to Dean Foods for the year-ago period. On an adjusted basis, third quarter net loss attributable to the company totaled $3 million, compared to $11 million of net income for the third quarter of 2013. The third quarter 2014 average Class I Mover, a measure of raw milk costs, was $23.51 per hundred-weight, an increase of 24% from the third quarter of 2013. The third quarter 2014 average was the second highest quarterly Class I Mover average in the history of the U.S. dairy industry, just less than 1% below the second quarter of 2014. The company ended the quarter with cash and cash equivalents of $30.38 million. Further, a chart has been provided below to show Dean Foods’ free cash flow performance.
Total debt at September 30, 2014, net of $30 million cash on hand, was approximately $948 million. The company's funded net debt to EBITDA ratio calculated in accordance with its credit agreements was 4.23 times as of the end of the third quarter of 2014.
Positive outlook
Dean Foods anticipates the elevated Class I Mover trend to continue, and the fourth-quarter average to be among the highest averages ever. The company expects positive results for its fourth quarter. Despite continued strong global production growth and waning demand, Dean Foods expect raw milk costs will remain stubbornly high as the environment is quite challenging. The company expects that its rate of per unit production and logistics costs will continue to decline as it is moving past plant closure activity.
The company expects fourth quarter adjusted diluted earnings of between $0.05 and $0.15 per share, resulting in full year 2014 adjusted diluted net loss per share of between $0.06 and $0.16. Its full year 2014 adjusted EBITDA will be between $193 million and $208 million, and adjusted free cash flow to end the year will be at approximately break even. Dean Foods also expects to be at the low end of its prior 2014 capital expenditure guidance of $150-175 million. A chart has been provided below to show the company’s clear focus on strategic priorities.
On a concluding note
Although Dean Foods has faced several hiccups in the last few quarters, it will continue to drive improved efficiency and capability across the organization to begin rebuilding its profitability in 2015 and position the company for long-term success. Dean Foods' aim is to be a sustainable creator of value for shareholders. Its vision is to the most admired and trusted provider of wholesome, great-tasting dairy products for every occasion. Further, Dean Foods is the largest player in milk, which is shown below.
Source: Company website
I feel pretty bullish that this largest player in milk won’t let its valued customers as well as customers down in the long run.
