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."
1. 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 Twelve Months Ended December 31 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- Closed deal Facility closing Mark-to-market Other Income downs costs and on derivative adjustments tax and (gain) loss on reorganization contracts sale of assets costs, net 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- Closed deal Facility closing Mark-to-market Other Income downs costs and on derivative adjustments tax and (gain) loss on reorganization contracts sale of assets costs, net 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 Closed deal Facility closing Loss on early Mark-to- Other Income and (gain) loss on costs and retirement of market adjustments tax sale of assets reorganization costs, net debt on derivative contracts 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- Closed deal Facility closing Loss on early Mark-to- Other Income downs costs and reorganization retirement of market adjustments tax and (gain) loss costs, net debt on derivative on contracts sale of assets 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.
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SOURCE Dean Foods Company