Dean Foods Posts Loss After Settling Lawsuit

DALLAS (AP) — Shares of Dean Foods Co. fell more than 8 percent on Thursday after the company reported that it lost almost $51 million in the second quarter. The net loss came largely because the company took a $131 million charge to settle a four-year-old lawsuit in which it was accused of fixing the price of milk.

DALLAS (AP) — Shares of Dean Foods Co. fell more than 8 percent on Thursday after the company reported that it lost almost $51 million in the second quarter.

The net loss came largely because the company took a $131 million charge to settle a four-year-old lawsuit in which it was accused of fixing the price of milk.

Dean agreed last month to settle the lawsuit, saying it believed it had "operated lawfully and fairly" but that a settlement was in the best interest of shareholders. Five small dairy farmers in Virginia and Alabama sued Dean and other dairy companies in 2007, saying the companies collaborated to keep the price of milk low so they could pay less when buying milk from independent farmers.

Dean Foods agreed to pay the farmers and others who joined the class-action lawsuit up to $140 million over four to five years. However, last week the U.S. district court in eastern Tennessee issued an order partially decertifying the class of farmers who were due payments. Dean Foods said it plans to ask the court to review its settlement agreement because of the new order.

The $51 million net loss compares to nearly $45 million in net income during the same period a year ago. After stripping out the litigation costs and other one-time items, Dean Foods made 18 cents per share, beating analysts' estimates of 17 cents.

Revenue rose 12 percent to $3.29 billion, beating analysts' estimates for $3.15 billion.

Dean's strong point was the WhiteWave-Alpro unit, where branded creamers and other name brands helped drive sales of Silk soy milk, Horizon Organic milk, International Delight coffee creamers and Land O'Lakes creamers.

The company said that its other unit, Fresh Dairy Direct-Morningstar, was moving "toward profit stability," though sales of ice cream, cottage cheese and sour cream were soft. Fresh Dairy Direct-Morningstar processes and distributes milk and other dairy products under store-brand and local labels.

Like its peers in the food industry, Dean faces higher costs for the materials it needs to make and transport its goods, and is raising prices to customers to offset that. Higher prices helped the total revenue number, the company said, though customers bought less from Fresh Dairy Direct-Morningstar.

Dean said it remains focused on trimming expenses, including supply-chain costs, but didn't provide many details on what it plans to do. CEO Gregg Engles said he expects volumes will continue to be squeezed until the unemployment rate improves, particularly among lower-income customers.

Dean shares fell 90 cents, or 8.7 percent, to $9.45 in morning trading.

More in Home