Dean Foods Company Earnings Call Insights: Senior Notes and EPS Range

Dean Foods Company (NYSE:DF) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.

Senior Notes

John Baumgartner – Wells Fargo: Chris, just wondering if you could speak a little bit to the 9.75 2018 senior notes in terms of bringing those in early with some lower cost bank debt here given the environment?

Chris Bellairs – EVP and CFO: You bet, John, obviously, a very active conversation for us here. As I think you’re probably aware of the takeout premium for those right now is a fairly substantial number. So, we are sort of doing the assessment right now of the balancing act of when that takeout premium comes down relative to our first opportunity to call those at the end of next year.

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John Baumgartner – Wells Fargo: Then, in terms of the larger inventories of butter and ice cream, was that just typical seasonality or was there anything opportunistic in terms of the build getting ahead of the cost inflation later this year?

Chris Bellairs – EVP and CFO: It’s a little bit of both. Some of it was driven by commodity input cost, some of it was driven by sort of the best scheduling for both the ice cream plants and our butter churn.

EPS Range

Christopher Growe – Stifel, Nicolaus: Just want to ask you a question, actually two if I could. The first one would just be, as you think about the gap you have in your earnings range for say the second quarter or even obviously little bit wider gap for the year, I just want to understand, obviously there’s a lot of variability in those numbers and one can go into that, but would you attribute the variability mostly to volumes and maybe just try to be conservative with your volume outlook for the year? Would that be the biggest factor in that EPS range?

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Gregg A. Tanner – CEO: Chris, I would tell you that I am not sure – volume obviously is one of the concerns coming out of the first quarter, but I think it’s just that there are so many moving parts right now as we start to exit some of the business with the customer that we lost the RFP to, that I think the second quarter we’re just trying to be as prudent as we can with our forecast because of the second quarter and third quarter volume that will be moving out.

Christopher Growe – Stifel, Nicolaus: Okay. And I had a second question just in relation to pricing and pricing protocols and the success that you’ve had and be a little more diligent around the milk price change every month and getting that through really managing your mix. There’s a lot of factors that go into that I realize, so just curious if you could speak to that and the kind of progress you’re seeing there and how that’s aiding profitability? We saw it in Q4. I guess we saw it to a degree this quarter as well.

Chris Bellairs – EVP and CFO: Yes, so I think we continue to make good progress on that. We actually reviewed some of the new tools the team is working with last week. Some of the new things they’ve put together to work with our field sales teams as they set price every month. The first quarter was maybe a little bit of an interesting quarter to test those because with milk moving down sequentially as you saw in the numbers our gross profit per gallon did increase sequentially. So, those two will probably come to be tested more fully in quarters and months where we are seeing sequential movement up in the milk price, but right now we feel pretty good about the tools being develop, how they are being rolled out and how they are being adopted.