Dean Foods Company Earnings Call Nuggets: Capacity Timeline and Retail Pricing Dynamics
Amit Sharma – BMO Capital Markets: Gregg you mentioned 10% to 15% of capacity coming out and can you provide a little bit more color of what is the time line of that capacity coming on and as it comes on, I mean understanding what the volume impact for this year is, next year in 2014, how does that impact operating leverage for the business?
Gregg A. Tanner – CEO: Let me start with our network and the opportunity and ability to optimize it, I think gives us a real competitive advantage, and I’ll reiterate again that our balance sheet allows us to accelerate much of this optimization plan. Now, we’re currently working through the sequencing and timing of each of those closures. We’ve already announced two of those and we’ll announce more in the coming weeks ahead, but as far as the impact to 2013, we had identified about $80 million in cost reductions that were in our ongoing cost reduction program, and we think that these incremental or the acceleration of these closures would give us another 50% on top of that. So, you could take another $40 million for 2013. Then you could translate that as you go into ’14.
Amit Sharma – BMO Capital Markets: As a follow-up, what gives you the confidence that the volume loss that we had in the second quarter will not repeat as we go along as other competitors come in and bid below you?
Gregg A. Tanner – CEO: I’m sorry, the volume loss…?
Amit Sharma – BMO Capital Markets: What I’m saying is, you showed pretty significant pricing discipline and gave up the volume to preserve margins in that business, what gives us the confidence that more of these volume losses will not occur in future?
Gregg A. Tanner – CEO: I think the biggest thing is being the low cost provider. We’re going to assure ourselves that we’re the low cost provider no matter how – whether it’s in the private label business or the branded business. I think the other thing that I would look to is if you look back to the past two years, we have gained a share in almost every quarter for the last two years, so we’ve been winning bids and taking share for the last two years, it just happens to be that this business was one where it got to the point where we didn’t feel like we could go there.
Amit Sharma – BMO Capital Markets: If I may have a quick, quick follow-up, the total shareholder return, is dividend part of that equation as well?
Shaun Mara – EVP and CFO: What’s the question again, I’m sorry.
Amit Sharma – BMO Capital Markets: I’m saying that you talked about total shareholder return, given the strong cash flow is dividend part of that equation as well?
Shaun Mara – EVP and CFO: I think in the future we’ll talk through that. I think right now we’re working through the details on this.
Retail Pricing Dynamics
Matthew Grainger – Morgan Stanley: Just wanted to ask first about retail pricing dynamics during the fourth quarter and into January as we saw Class I Mover push-up to relatively high levels. Did you see anything in the terms of retail margins suggested a greater willingness short-term to sacrifice margin on their part.
Gregg A. Tanner – CEO: No we have seen nothing; in fact it’s been interesting to see that the category actually improved in the fourth quarter with increased retail pricing. So, we have seen no activity, which would have a negative impact to that.
Matthew Grainger – Morgan Stanley: Just one quick follow-up. Just the interest expense guidance that you provided of $115 million, just to clarify is that ex-WhiteWave and does that include the recognition of swap losses?
Shaun Mara – EVP and CFO: It excludes WhiteWave and does not include swap losses.
Matthew Grainger – Morgan Stanley: Does not include swap losses.
Shaun Mara – EVP and CFO: Yes. It’s based on what we think the capital will be during the year.
A Closer Look: Dean Foods Earnings Cheat Sheet>>