Dean Foods reorganizes, cuts jobs
Dean said it earned $0.24 per diluted share, as compared to first quarter 2009 earnings of $0.48 per diluted share. On an adjusted basis, first quarter diluted earnings per share were $0.23, compared to $0.52 per diluted share earned in the prior year's first quarter.
Officials said net income attributable to Dean Foods totaled $43 million, compared with $76 million in the prior year's first quarter. Adjusted net income for the first quarter was $42 million, compared to adjusted net income of $83 million in the first quarter of 2009.
"We entered 2010 facing substantial margin pressure in our milk business as retailers compressed private label margins to attract value conscious consumers," said Engles. "Despite a very strong performance at WhiteWave-Alpro, these very low private label retails drained the profit pool of our regional brands, and led to consolidated results that were below our expectations."
Consolidated net sales for the first quarter totaled $2.97 billion, compared to $2.70 billion of consolidated net sales in the first quarter of 2009. Officials attributed the consolidated net sales increase to (1) the pass-through of higher overall dairy commodity costs at Fresh Dairy Direct-Morningstar, (2) the acquisition of Alpro and (3) solid net sales growth among the value-added brands at WhiteWave-Alpro.
In conjunction with today's earnings report, Engles said Dean realigned its reporting segments. It has organized its traditional dairy business under a Fresh Dairy Direct-Morningstar unit and the value-added, branded businesses under WhiteWave-Alpro.
Engles said the two segments differ in their development, strategies and objectives. WhiteWave-Alpro, with $1.8 billion in annual sales, is a more highly developed business platform, focused on growth through value-added brands.
"This segment's mission is to drive profitable growth through effective marketing and consumer resonant innovation," he said.
Fresh Dairy Direct-Morningstar, with $9.5 billion in annual sales, is focused on traditional dairy products sold under private labels and regional brands, where low cost is the critical factor to success. This segment is in the midst of a multi-year transformation initiative to significantly lower costs while increasing organizational capability, officials said.
To accelerate its cost reduction and capability building efforts, Dean said it increasing the "scale and scope" of its efforts to reduce costs to every area of its business including business segments, supply chain and corporate functions.
In conjunction, Dean said its Fresh Dairy Direct-Morningstar segment will eliminate 350 to 400 positions in addition to the approximately 150 positions that have already been eliminated so far in 2010. The action will be rolled out over the balance of the year and is expected to result in approximately $25 million in annualized savings.
"The cost reduction strategy we have been pursuing is our single most important area of focus," continued Engles. "We have discussed goals of $90 million in cost savings in 2010 and $300 million over three to five years. It's now clear that we have to be much more aggressive in both the timing and magnitude of our efforts.
"Going forward, these efforts will include an increase in the scale of the initiatives we currently have underway, as well as an increase in the scope of those efforts across the business. We are developing plans to accelerate productivity across our entire cost structure, including production, distribution, sales, administration and corporate expenditures."