Dean Foods Co. made several significant announcements this week, the largest of which was that it has commenced a review to explore and evaluate potential strategic alternatives to enhance shareholder value. Its latest financial results showed a net loss of $327 million for 2018, down from the $62 million profit the company saw in 2017.
In addition to the review, the company also announced that it has suspended financial guidance and quarterly dividends for the time being as it determines a path forward.
“Our 2018 financial results reflect volume deleverage from certain customers exiting our business, coupled with significant inflation in fuel, freight and resin costs,” Dean Foods chief executive officer Ralph Scozzafava said. “While we made significant progress executing our enterprise-wide cost productivity plan, the cost savings were mitigated by incremental transitory costs associated with a recent comprehensive plant consolidation. Despite these challenges, we continued to generate positive free cash flow from operations in 2018.”
As the company looks for new direction, it said some alternatives it will explore could include, among others: continuing to execute on its business plan with an increased focus on certain stand-alone strategic initiatives, the disposition of certain assets, the formation of a joint venture, a strategic business combination, a transaction that results in private ownership or a sale of the company or some combination of these.
“As one of America’s largest dairy providers, Dean Foods is committed to delivering significant value to all our stakeholders, including our customers, consumers, shareholders, communities and employees,” Scozzafava said. “We are taking vital, transformative actions to maximize the benefits of our scale and position the company for the long term, including implementing an enterprise-wide cost productivity plan and investing in core capabilities, technology, infrastructure, people and systems.”
Scozzafava continued, “As we seek to accelerate our business transformation and enhance shareholder value, the board has initiated a review of a range of potential strategic alternatives to best position the company for the future.”
Dean Foods said it has not set a timetable for the conclusion of this review, nor has it made any decisions related to any potential strategic alternatives at this time. Additionally, it said there can be no assurance that the strategic exploration review will result in a transaction or other strategic change or outcome.
Further, the company said it does not intend to provide updates unless or until it determines that further disclosure is appropriate or necessary.
“Complemented by our transformation strategy, we’re reshaping ourselves into a company that will be more competitive, lean and agile,” Scozzafava said during a conference call. “Our primary focus is and will continue to be providing our customers and consumers with the brands and products that they love and the same great quality and excellent service that they have come to expect from us.”
Dean Foods has retained Evercore Group LLC to serve as financial advisor to assist in this review. Gibson, Dunn & Crutcher LLP is acting as the company’s legal advisor.