DF
$1.19
Dean Foods
$.13
12.26%
Earnings Details
2nd Quarter June 2019
Tuesday, August 6, 2019 6:45:00 AM
Tweet Share Watch
Summary

Dean Foods Misses

Dean Foods (DF) reported a 2nd Quarter June 2019 loss of $0.36 per share on revenue of $1.8 billion. The consensus estimate was a loss of $0.09 per share on revenue of $1.9 billion. The Earnings Whisper number was for a loss of $0.16 per share. Revenue fell 5.5% compared to the same quarter a year ago.

Dean Foods Co process and distribute fluid milk and other dairy products, including ice cream, ice cream mix and cultured products. It also produces and distributes TruMoo®, a reformulated flavored milk, as well as juices, teas, and bottled water.

Results
Reported Earnings
($0.36)
Earnings Whisper
($0.16)
Consensus Estimate
($0.09)
Reported Revenue
$1.84 Bil
Revenue Estimate
$1.89 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Dean Foods Announces Second Quarter 2019 Results

DALLAS, Aug. 6, 2019 /PRNewswire/ -- Dean Foods Company (NYSE: DF) today reported second quarter 2019 results.

Highlights

  • Q2 GAAP net loss per share attributable to Dean Foods was $0.70 and adjusted net loss per share was $0.36; adjusted net loss represents sequential improvement from Q1 2019
  • Full year 2019 capital expenditures remain on-track in the range of $95 million to $110 million

The Company's second quarter results primarily reflect volume pressure associated with the overlap of certain customers exiting our system last year and an accelerated decline in the conventional white milk category.  Dean Foods also experienced higher dairy commodity inflation, which it expects to significantly increase throughout the remainder of 2019.

The Company reported positive quarterly free cash flow in the second quarter driven by working capital management.  However, given the Company's expectations for continued volume pressure and higher input costs, Dean Foods now expects to be a net user of cash for full year 2019.

Newly appointed President and Chief Executive Officer Eric Beringause stated, "Dean Foods is committed to providing consumers with wholesome, nutritious products they need to live healthy and happy lives and I am enthusiastic about joining as CEO.  Since stepping into the role last week, I am taking a fresh look at the direction of the business.  I am committed to thoroughly and swiftly evaluating every aspect of the Company and its operations.  I look forward to working closely with our talented team as we consider new ways to drive Dean Foods forward to profitable growth."

Executive Vice President and Chief Financial Officer Jody Macedonio stated, "Second quarter adjusted results mark the steady progression in our business transformation as we move past the inflection point in the fourth quarter of 2018 and delivered sequential improvement in both the first and second quarters of this year. We are actively implementing our enterprise-wide cost productivity program to address the deleverage from the volume decline and higher dairy commodity inflation. We expect our initiatives to accelerate during the second half of this year as we continue to reset our cost base and drive supply chain productivity to be more agile and cost-efficient.  As we implement these initiatives, we will continue to focus on maintaining the highest levels of quality, service and value that we deliver to our customers, which is paramount to our success."

"As previously announced, we successfully increased our borrowing base availability to $265 million under our senior secured revolving credit facility by completing post-closing appraisal work.  This increases our financial flexibility and further enhances our liquidity.  We are pleased with this commitment from our lenders which demonstrates their support and confidence in Dean Foods.  In addition, our existing $450 million accounts receivable securitization facility provides us with another source of flexible, low-cost access to capital. Together, these facilities provide us with the resources to continue to execute our priorities as we take meaningful actions to drive our plan forward and transform our company to more effectively compete in a challenging market environment," concluded Macedonio.

Second Quarter 2019 Operating Results


Financial Summary *

Three Months Ended June 30


Six Months Ended June 30

(In millions, except per share amounts)

2019


2018


2019


2018









Gross Profit








GAAP

$379


$433


$753


$881

Adjusted

$378


$433


$752


$881









Operating Income (Loss)








GAAP

($52)


($41)


($96)


($26)

Adjusted

($27)


$35


($62)


$67









Interest Expense








GAAP

$16


$14


$35


$28

Adjusted

$16


$14


$31


$28









Income (Loss) from Continuing Operations








GAAP

($65)


($42)


($127)


($42)

Adjusted

($33)


$15


($70)


$28









Earnings (Loss) Per Share (EPS) from continuing operations attributable to Dean Foods Company








GAAP

($0.70)


($0.46)


($1.38)


($0.46)

Adjusted

($0.36)


$0.16


($0.77)


$0.30


* 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 "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.

Cash Flow

Net cash used in operating activities for the six months ended June 30, 2019, totaled $29 million. Negative free cash flow used in operations was $74 million for the six months ended June 30, 2019, a $158 million decrease as compared to the prior year period driven by two quarters of operating losses and less favorable working capital changes as a result of inventory builds. Capital expenditures totaled $45 million for the six months ended June 30, 2019.

Net Debt

Total net debt at June 30, 2019, net of $21 million cash on hand, was approximately $968 million.

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 net income (loss), adjusted earnings (loss) per diluted share, adjusted EBITDA, net debt and free cash flow, 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 six months ended June 30, 2019, and 2018, 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;
  • facility closing, reorganization and realignment costs;
  • debt issuance costs;
  • gains (losses) on the mark-to-market of our derivative contracts;
  • costs associated with our enterprise-wide cost productivity plan;
  • separation costs;
  • litigation settlements:
  • operating income (loss) attributable to non-controlling interest;
  • 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).

Free Cash Flow

We define Free Cash Flow as net cash provided by operating activities 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.

Quarterly Free Cash Flow

We define Quarterly Free Cash Flow as net cash provided by operating activities for the three months ending June 30, September 30, and December 31 less cash payments for capital expenditures made within the respective three-month periods. We believe Quarterly Free Cash Flow is a meaningful non-GAAP measure that offers supplemental information and insight regarding the liquidity of our operations within a quarter and our ability to generate sufficient cash flow within a particular period. A limitation of Quarterly Free Cash Flow is that it does not represent the total increase or decrease in the cash balance for the three-month 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, national white milk 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 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. Approximately 15,000 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 and free cash flow, (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-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, (11) potential acquisitions, and (12) the Company's exploration of strategic alternatives and any potential results thereof. 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 the Company's 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 agreements 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.  There are no assurances that the Company's exploration of strategic alternatives will result in a transaction or other strategic change or outcome.  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 June 30


 Six Months Ended June 30


2019


2018


2019


2018









Net sales 

$ 1,843,498


$ 1,951,230


$ 3,638,932


$ 3,931,737

Cost of sales 

1,464,018


1,518,446


2,885,699


3,050,450

 Gross profit 

379,480


432,784


753,233


881,287









Operating costs and expenses: 








Selling and distribution  

335,852


336,721


673,564


682,717

General and administrative  

71,546


65,972


144,631


141,494

Amortization of intangibles 

5,150


5,078


10,300


10,156

Facility closing and reorganization costs, net 

7,400


67,661


11,732


76,123

Impairment of long-lived assets 

11,860


2,232


11,860


2,232

Other operating income 

-


(2,289)


-


(2,289)

Equity in earnings of unconsolidated affiliate 

(688)


(1,699)


(2,643)


(3,599)

Total operating costs and expenses 

431,120


473,676


849,444


906,834









Operating loss 

(51,640)


(40,892)


(96,211)


(25,547)









Interest expense 

16,200


14,069


35,200


28,102

Other expense, net 

1,500


782


1,712


1,252









Loss before income taxes 

(69,340)


(55,743)


(133,123)


(54,901)









Income tax benefit 

(4,477)


(13,727)


(6,433)


(12,620)









Loss from continuing operations 

(64,863)


(42,016)


(126,690)


(42,281)

Gain on sale of discontinued operations, net of tax 

-


1,922


-


1,922

Net loss 

(64,863)


(40,094)


(126,690)


(40,359)

Net loss attributable to non-controlling interest 

392


-


645


-

Net loss attributable to Dean Foods Company 

$    (64,471)


$    (40,094)


$  (126,045)


$    (40,359)









Average common shares: 








Basic 

91,759


91,343


91,643


91,268

Diluted 

91,759


91,343


91,643


91,268









Basic earnings per common share: 








Loss from continuing operations attributable to Dean Foods Company 

$        (0.70)


$        (0.46)


$        (1.38)


$        (0.46)

Income from discontinued operations attributable to Dean Foods Company 

-


0.02


-


0.02

Net loss attributable to Dean Foods Company 

$        (0.70)


$        (0.44)


$        (1.38)


$        (0.44)









Diluted earnings per common share: 








Loss from continuing operations attributable to Dean Foods Company 

$        (0.70)


$        (0.46)


$        (1.38)


$        (0.46)

Income from discontinued operations attributable to Dean Foods Company 

-


0.02


-


0.02

Net loss attributable to Dean Foods Company 

$        (0.70)


$        (0.44)


$        (1.38)


$        (0.44)

 

 DEAN FOODS COMPANY 

 Condensed Consolidated Balance Sheets 

 (Unaudited) 

 (In thousands) 






June 30,


 December 31, 

 ASSETS 

2019


2018





 Cash and cash equivalents 

$      20,947


$           24,176





 Other current assets 

840,255


888,104





 Total current assets 

861,202


912,280





 Property, plant and equipment, net 

965,334


1,006,182





 Operating lease right of use asset 

303,928


-





 Intangibles and other assets, net 

191,833


200,030





 Total Assets 

$ 2,322,297


$      2,118,492









 LIABILITIES AND STOCKHOLDERS' EQUITY 








 Total current liabilities, excluding debt 

$    654,035


$         699,661





 Total long-term debt, including current portion 

984,935


906,344





 Total operating lease liabilities, including current portion 

318,697


-





 Other long-term liabilities 

168,871


197,755





 Total Dean Foods Company stockholders' equity 

184,660


302,960





 Non-controlling interest 

11,099


11,772





 Total stockholders' equity 

195,759


314,732





 Total Liabilities and Stockholders' Equity 

$ 2,322,297


$      2,118,492

 

 DEAN FOODS COMPANY 

 Condensed Consolidated Statements of Cash Flows (GAAP Basis) 

 (Unaudited) 

 (In thousands) 








 Six Months Ended June 30

Operating Activities 

2019


2018

Net cash provided by (used in) operating activities 

$(29,206)


$ 120,760






Investing Activities 




Payments for property, plant and equipment 

(44,983)


(37,292)

Payments for acquisitions, net of cash acquired 

-


(13,324)

Proceeds from sale of fixed assets 

4,632


12,418


Net cash used in investing activities 

(40,351)


(38,198)






Financing Activities 




Net proceeds from (repayment of) debt 

76,327


(56,789)

Payments of financing costs 

(9,561)


-

Cash dividends paid 

-


(16,438)

Issuance of common stock, net of share repurchases for withholding taxes 

(438)


(413)


Net cash used in financing activities 

66,328


(73,640)






Change in cash and cash equivalents 

(3,229)


8,922

Cash and cash equivalents, beginning of period 

24,176


16,512






Cash and cash equivalents, end of period 

$  20,947


$   25,434

 

 DEAN FOODS COMPANY 


 Reconciliation of Non-GAAP Financial Measures 


 (Unaudited) 


 (In thousands, except per share data) 




































 Three Months Ended 



June 30, 2019




















Asset write-downs


Facility closing


Mark-to-market


Cost


Non-controlling








and (gain) loss on


and reorganization


on derivative


productivity


interest in 


Income






sale of assets


costs, net


contracts


plan


Good Karma


tax




GAAP


(a)


(b)


(c) 


(e) 


(f)


(h)


Adjusted*

















Gross profit 

$   379,480


$                          -


$                           -


$              (1,125)


$                -


$                      -


$           -


$   378,355

Selling and distribution  

335,852


-


-


25


-


-


-


$   335,877

General and administrative 

71,546


-


-


-


(2,419)


-


-


$     69,127

Total operating costs and expenses 

431,120


(15,795)


(7,400)


25


(2,419)


-


-


405,531

Operating loss 

(51,640)


15,795


7,400


(1,150)


2,419


515


-


(26,661)

Loss from continuing operations  

(64,863)


15,795


7,400


(1,150)


2,419


515


7,278


(32,606)

















Diluted loss per share from continuing operations attributable to Dean Foods Company 

$       (0.70)


$                    0.17


$                     0.08


$                (0.01)


$          0.02


$                 -


$      0.08


$       (0.36)



































 Three Months Ended 



June 30, 2018




















Asset write-downs


Facility closing


Mark-to-market


Cost










and (gain) loss on


and reorganization


on derivative


productivity


Other


Income






sale of assets


costs, net


contracts


plan


adjustments


tax




GAAP


(a)


(b)


(c) 


(e) 


(g)


(h)


Adjusted*

















Gross profit 

$   432,784


$                          -


$                           -


$                 (157)


$                -


$                      -


$           -


$   432,627

Selling and distribution  

336,721


-


-


990


-


-


-


337,711

General and administrative 

65,972


-


-


-


(5,579)


-


-


60,393

Total operating costs and expenses 

473,676


(6,167)


(67,661)


990


(5,579)


2,289


-


397,548

Operating income (loss) 

(40,892)


6,167


67,661


(1,147)


5,579


(2,289)


-


35,079

Income (loss) from continuing operations 

(42,016)


6,167


67,661


(1,147)


5,579


(2,289)


(19,087)


14,868

















Diluted earnings (loss) per share from continuing operations attributable to Dean Foods Company 

$       (0.46)


$                    0.07


$                     0.74


$                (0.01)


$          0.06


$               (0.03)


$    (0.21)


$         0.16


 * See Notes to Earnings Release Tables 

 

 DEAN FOODS COMPANY 

 Reconciliation of Non-GAAP Financial Measures 

 (Unaudited) 

 (In thousands, except per share data) 






































 Six Months Ended 




June 30, 2019
























Asset write-downs


Facility closing


Mark-to-market


Cost


Non-controlling










and (gain) loss on


and reorganization


on derivative


productivity


interest in 


Other


Income






sale of assets


costs, net


contracts


plan


Good Karma


adjustments


tax




GAAP


(a)


(b)


(c)


(e)


(f)


(g)


(h)


Adjusted*



















Gross profit 

$ 753,233


$                           -


$                           -


$            (1,329)


$                -


$                      -


$               -


$                 -


$     751,904

Selling and distribution  

673,564


-


-


3,257


-


-


-


-


676,821

General and administrative 

144,631


-


-


-


(6,018)


-


-


-


138,613

Total operating costs and expenses 

849,444


(19,730)


(11,732)


3,257


(6,018)


-


-


-


815,221

Operating loss 

(96,211)


19,730


11,732


(4,587)


6,018


838


-


-


(62,480)

Interest expense 

35,200


-


-


-


-


-


(3,755)


-


31,445

Loss from continuing operations 

(126,690)


19,730


11,732


(4,587)


6,018


838


3,755


18,911


(70,293)



















Diluted loss per share from continuing operations attributable to Dean Foods Company 

$     (1.38)


$                      0.22


$                     0.12


$              (0.05)


$          0.06


$                0.01

#

$          0.04


$           0.21


$          (0.77)






































 Six Months Ended 




June 30, 2018
























Asset write-downs


Facility closing


Mark-to-market


Cost












and (gain) loss on


and reorganization


on derivative


productivity


Other


Income








sale of assets


costs, net


contracts


plan


adjustments


tax






GAAP


(a)


(b)


(c)


(e)


(g)


(h)


Adjusted*





















Gross profit 

$ 881,287


$                           -


$                           -


$               (602)


$                -


$                      -


$               -


$     880,685



Selling and distribution  

682,717


-


-


588


-


-


-


683,305



General and administrative 

141,494


-


-


-


(9,712)


(188)


-


131,594



Total operating costs and expenses 

906,834


(10,102)


(76,123)


588


(9,712)


2,101


-


813,586



Operating income (loss) 

(25,547)


10,102


76,123


(1,190)


9,712


(2,101)


-


67,099



Income (loss) from continuing operations 

(42,281)


10,102


76,123


(1,190)


9,712


(2,101)


(22,622)


27,743





















Diluted earnings (loss) per share from continuing operations attributable to Dean Foods Company 

$     (0.46)


$                      0.11


$                     0.83


$              (0.01)


$          0.11


$               (0.03)


$        (0.25)


$           0.30




 * See Notes to Earnings Release Tables 

 

 DEAN FOODS COMPANY 

 Reconciliation of Non-GAAP Financial Measures* 

 (Unaudited) 

 (In thousands) 
























 Three Months Ended June 30


 Six Months Ended June 30


Trailing Twelve Months Ended June 30


2019


2018


2019


2018



2019














Reconciliation of Net Income (Loss) to Adjusted EBITDA and Bank EBITDA 












Net income (loss) 

$         (64,863)


$         (40,094)


$ (126,690)


$ (40,359)



$ (413,689)


Interest expense 

16,200


14,069


35,200


28,102



63,541


Income tax benefit (expense) 

(4,477)


(13,727)


(6,433)


(12,620)



(36,096)


Depreciation and amortization 

37,466


39,391


74,540


78,832



149,159


Asset write-downs and loss on sale of assets (a) 

11,860


2,232


11,860


2,232



214,042


Facility closing and reorganization costs, net (b) 

7,400


67,661


11,732


76,123



10,601


Mark-to-market on derivative contracts (c) 

(1,150)


(1,147)


(4,587)


(1,190)



508


Discontinued operations (d) 

-


(1,922)


-


(1,922)



(2,950)


Cost productivity plan (e) 

2,419


5,579


6,018


9,712



14,935


Non-controlling interest in Good Karma (f) 

515


-


838


-



1,464


Other adjustments (g) 

-


(2,289)


-


(2,101)



17


Adjusted EBITDA 

5,370


69,753


2,478


136,809



1,532















June 30, 2019











Reconciliation of net debt 












Total long-term debt, including current portion 

$         984,935











Unamortized debt issuance costs 

4,025











Cash and cash equivalents 

(20,947)











Net debt 

$         968,013
























 Six Months Ended June 30









Reconciliation of Free Cash Flow provided by (used in) operations 

2019


2018









Net cash provided by (used in) operating activities 

(29,206)


120,760









Capital spending 

(44,983)


(37,292)









Free Cash Flow provided by (used in) operations 

(74,189)


83,468

































Reconciliation of Quarterly Free Cash Flow provided by (used in) operations 

 Three Months Ended 










March 31, 2019


June 30, 2019









Net cash provided by (used in) operating activities 

(72,046)


42,840









Capital spending 

(26,518)


(18,465)









Quarterly Free Cash Flow provided by (used in) operations 

(98,564)


24,375






















 * See Notes to Earnings Release Tables 

 

Notes to Reconciliation of Non-GAAP Financial Measures





For the three and six months ended June 30, 2019, and 2018, 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 June 30, 2019 and 2018 and $7.9 million for each of the six months ended June 30, 2019 and 2018.



ii.

Asset impairment charges on certain fixed assets of $11.9 million and $2.2 million for the three and six months ended June 30, 2019 and 2018. 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; and



iii.

The full goodwill impairment charge of $190.7 million recorded in the three months ended December 31, 2018.






(b)

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.






(c)

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.






(d)

The adjustment reflects the elimination of net gains from discontinued operations for the three months ended June 30, 2018 and the three months ended December 31, 2018.






(e)

The adjustment reflects the elimination of certain direct expenses incurred as a result of our enterprise-wide cost productivity plan. The charges were $2.4 million and $6.1 million for the three and six months ended June 30, 2019, respectively, and $5.6 million and $9.7 million for the three and six months ended June 30, 2018, respectively.






(f)

The adjustment reflects the elimination of the operating loss attributable to the non-controlling interest in Good Karma Foods, Inc. ("Good Karma").






(g)

The adjustment reflects the elimination of the following: 



i.

The write off of unamortized deferred financing costs of $3.8 million in connection with the new credit agreement and amendment to our receivables securitization facility during the six months ended June 30, 2019.



ii.

Separation charges related to the previously disclosed departures of certain executive officers of $0.2 million in the six months ended June 30, 2018; and



iii.

A charge related to litigation settlements reached in the six months ended June 30, 2018.






(h)

The adjustment reflects the income tax impact of adjustments (a) through (g) as well as an adjustment to our income tax expense, reflective of an income tax rate of 26.5% for the three and six months ended June 30, 2019 and June 30, 2018, respectively. We believe this rate represents our long-term normalized tax rate as a U.S. domiciled business. Our effective tax rate on a GAAP basis was 6.5% and 24.6% for the three months ended June 30, 2019 and June 30, 2018, respectively.

 

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SOURCE Dean Foods Company