The story begins:
Dean Foods Company (NYSE: DF) today announced that the Company earned $0.50 per diluted share for the full year 2010, as compared to $1.38 per diluted share for the full year 2009. On an adjusted basis (as defined below), the Company earned $0.80 per diluted share for the full year 2010, compared to $1.59 for the full year 2009.
For the fourth quarter 2010, the Company recorded a loss of $0.11 per diluted share, as compared to fourth quarter 2009 earnings of $0.27 per diluted share. The loss for the fourth quarter of 2010 includes a $20 million charge (net of tax) associated with an agreement in a previously disclosed legal matter, a $10.8 million write down of deferred tax assets, as well as $17 million (net of tax) of restructuring charges, and other one time or non-recurring items, as more fully described in the attached tables. On an adjusted basis, fourth quarter 2010 diluted earnings per share were $0.15, compared to $0.32 per diluted share earned in the prior year's fourth quarter.
"2010 was an exceptionally difficult year for Dean Foods, and our fourth quarter results reflect many of the same trends that have impacted the business all year," said Gregg Engles, Chairman and CEO. "At Fresh Dairy Direct-Morningstar, wholesale pricing for private label milk remained pressured during the quarter, and volume softened. As a consequence, Fresh Dairy Direct-Morningstar operating profit was little changed from the third quarter.
"We have, however, begun to see signs that the fluid milk category is stabilizing, albeit at historically low levels of profitability. Some retailers have taken early steps to reduce heavy private label promotions and our regional brand volume mix has begun to stabilize. Regional branded milk volumes outperformed private label on a year-over-year basis in the fourth quarter. Moreover, private label wholesale prices appear to have stopped declining, although we have not yet seen them rise. Volume, however, remains weak, which we believe will limit upward price mobility. The net result is an industry that appears to be stabilizing at a price and profit level meaningfully below historical norms. To move forward in such an environment means that we must continue to optimize our network to offset volume weakness and drive efficiency to rebuild profits, which is the path that we are on.
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Margin Compression.... Even the Fed admitted to it for the first time yesterday:
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