Dean Foods Co. (DF) reported Thursday a loss for the first quarter compared to a profit last year, as sales to schools suffered from widespread closings related to the brutal winter weather.
High raw milk prices also hurt the company's bottom line, which fell short of Dean's previously stated expectations. The loss of a "major retailer" as a customer, reportedly Wal-Mart, also weighed.
The company also provided guidance for the second quarter, below Street view, and trimmed its adjusted earnings forecast for the full-year 2014.
"We reported first quarter results that were below our previously articulated adjusted diluted earnings per share guidance range of approximately break-even with $0.03 of potential risk or benefit," CEO Gregg Tanner said in a statement.
Tanner added that the results are estimated to have a negative impact of about $0.03 per share associated with weather disruptions, in the form of lost school milk business and incremental costs.
Dallas, Texas-based Dean Foods reported a net loss of $8.96 million or $0.09 per share, compared to net income of $495.80 million or $5.30 per share in the prior-year quarter, which included a gain on disposition of Morningstar.
Loss from continuing operations for the quarter was $9.80 million or $0.10 per share, narrower than $20.74 million or $0.22 per share in the year-ago quarter.
Excluding items, adjusted loss from continuing operations was $4.59 million or $0.05 per share, compared to adjusted income of $29.53 million or $0.31 per share last year.
The prior year results reflected a hefty gain on the of its Morningstar breakfast foods business.
On average, 11 analysts polled by Thomson Reuters expected the company to report earnings of $0.01 per share for the quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter increased to $2.34 billion from $2.29 billion in the same quarter last year, and topped nine Wall Street analysts' consensus estimate of $2.27 billion.
Total operating costs and expenses for the quarter decreased to $410.88 million from $465.44 million in the prior-year quarter.
Dean Foods' share of U.S. fluid milk sales volume in the first quarter declined to 35.9 percent from 37.8 percent in the prior-year quarter. Industry fluid milk volumes declined about 2.1 percent year-over-year in the first quarter on an unadjusted basis, based on USDA data and company estimates.
Dean Foods noted that its unadjusted fluid milk volumes declined 6.7 percent on a year-over-year basis, due to the previously disclosed loss of business at a large retailer.
Excluding this loss of business at a major customer and another customer's decision to vertically integrate its dairy operations last year, Dean Foods' milk volumes grew 1.1 percent in the quarter. Total volumes across all products declined 5.9 percent to 685 million gallons.
The first-quarter 2014 average Class I Mover, a measure of raw milk costs, was $22.38 per hundred-weight, an all-time quarterly high and an increase of 22 percent from the year-ago quarter.
Looking ahead to the second quarter, Dean Foods expects adjusted loss in a range of $0.02 to $0.08 per share. Analysts expect the company to report earnings of $0.13 per share for the quarter.
For fiscal 2014, Dean Foods trimmed its adjusted earnings forecast to be about $0.60 per share from the prior adjusted earnings guidance range of $0.73 to $0.86 per share. Street is currently looking for full-year 2014 earnings of $0.76 per share.
Dean Foods also said it continues to make solid progress with its cost reduction efforts, including the closure of eight manufacturing facilities in 2013, and the planned closures of three more stores. As at the end of the first quarter, eight of the announced closures have ceased operations.
"Turning to the forward outlook, we expect the second quarter to be particularly difficult given historically high raw milk costs, continued overlaps of the RFP driven volume loss, and category declines that may be worse than recent run rates. However, as we lap the most difficult challenges and our cost reduction efforts continue to take hold, we expect results to strengthen in the back half and exceed 2013 performance in the third and fourth quarters," Tanner added.
In Thursday's regular trading session, DF is currently trading at $14.59, down $0.76 or 4.95% on a volume of 1.13 million shares. In the past 52-week period, the stock has been trading in a range of $13.59 to $22.96.
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