The WhiteWave Foods Company (the "Company") today reported strong third quarter 2013 results.
For the third quarter of 2013, the Company reported adjusted diluted earnings per share of $0.19, a 21 percent increase compared to third quarter 2012. Net sales for the third quarter of 2013 were $639 million, a 10 percent increase from adjusted net sales of $581 million in the third quarter of 2012, driven primarily by continued volume growth across the Company's North America and Europe segments. Adjusted operating income for the third quarter of 2013 totaled $54 million, representing an increase of 19 percent compared to $46 million in the third quarter of 2012, even as the Company continues to experience higher supply chain costs.
"As we mark our one year anniversary as a stand-alone, public company, I am very pleased with our progress and performance," said Gregg Engles, Chairman and Chief Executive Officer of WhiteWave. "Our third quarter results - reflecting strong organic, profitable revenue growth across our businesses - demonstrate that we are maintaining our momentum and delivering on our objectives. Of course, we recognize that we must continue to stay focused on driving results while innovating and exploring new opportunities. WhiteWave has a bright future and we intend to play a significant role in changing the way the world eats for the better."
BASIS OF PRESENTATION
Financial results for 2012 are presented on a pro forma adjusted basis and financial results for 2013 are presented on an adjusted basis. North America segment financial results for 2013 are adjusted for the reclassification of an asset as held for sale and a related non-cash charge to reflect the estimated fair value. All other 2013 adjustments relate to Corporate and other items. Europe segments results are not adjusted. See reconciliations at the end of this release for further details.
NORTH AMERICA SEGMENT
The Company's North America segment is comprised of three platforms: Plant-based Foods and Beverages, Premium Dairy, and Coffee Creamers and Beverages. In the third quarter of 2013, net sales for the North America segment were $534 million, an 8 percent increase over the third quarter 2012, reflecting strong performance in both Plant-based Foods and Beverages and Coffee Creamers and Beverages. The growth in the North America segment continues to be driven by category expansion, increased volumes, and new product innovations. Adjusted operating income for the North America segment increased 12 percent to $59 million for the third quarter of 2013, compared to the same period in 2012.
Plant-Based Foods & Beverages
In the North America Plant-based Foods and Beverages platform, which includes Silk(R) soymilk, almondmilk, and coconutmilk, net sales increased 14 percent in the third quarter of 2013 compared to the third quarter of 2012, driven primarily by continued strong growth of Silk almondmilk which grew over 60 percent during the third quarter. The overall Plant-based Foods and Beverages category remained strong with over 13 percent category growth in the third quarter of 2013. Almond's share of the overall category continues to grow and now represents an estimated 59% of the overall plant-based foods and beverages category. WhiteWave's Silk(R) brand continues to hold the #1 market positions in each of its product subcategories.
Premium Dairy
In Premium Dairy, which includes Horizon Organic(R) branded dairy products, volume growth drove net sales to increase 3 percent in the third quarter of 2013 compared to the third quarter of 2012. Growth was driven by Horizon Organic(R) brand half-gallon offerings. The growth rate in the quarter was negatively impacted by approximately 3 percentage points due to the Company's decision to exit some private label manufacturing arrangements, and the discontinuation of a contract with a national coffee chain that is now focused on only offering its own brands within its stores. The volume associated with these two arrangements was not a material profit contributor for the Company. The organic milk category grew by 3 percent during the third quarter, and Horizon Organic(R) continues to hold a leading market share.
Coffee Creamers & Beverages
In Coffee Creamers and Beverages, which includes coffee creamers under the International Delight(R) and LAND O LAKES(R) brands, as well as International Delight Iced Coffee(R), net sales increased 9 percent in the third quarter of 2013 compared to the third quarter of 2012, due in part to strong growth in club stores, foodservice, convenience stores and other away-from-home channels. The refrigerated flavored creamer category grew 8 percent during the third quarter, driven by continued increases in coffee consumption and coffee flavoring trends.
EUROPE SEGMENT
The Company's Europe segment is comprised of its European Plant-based Foods and Beverages platform, which operates primarily under the Alpro(R) name. Net sales in the segment increased 19 percent in the third quarter of 2013 compared to the third quarter of 2012, on a reported basis; and increased 15 percent on a constant currency basis. Operating income in the segment increased 23 percent to $8 million for the third quarter of 2013, compared to the same period in 2012.
Growth in the Europe segment was driven by continued robust volume growth of products launched in the prior year, including almond and hazelnut beverages, along with continued growth in non-dairy yogurt offerings. Volume growth in the Europe segment continues to be strongest in its core Northern European geographies.
PURSUING SALE OF IDAHO FARM
The Company announced today it is pursuing a sale of its Idaho organic dairy farm, to allow its Horizon Organic business to focus on what it does best - processing, marketing and distributing great-tasting, high-quality Horizon milk and dairy products. As a result, the Company reclassified the related assets as held for sale and recorded a $7.4 million non-cash write down to reflect the estimated fair value. The related non-cash charge is excluded from adjusted results. The Company intends to use the proceeds from any sale to reduce indebtedness and other general corporate purposes. Historically, approximately 5% of the Company's milk supply has come from this farm. Horizon will remain steadfast in its commitment to organic dairy and focused on growing the category.
FORWARD OUTLOOK
The Company expects continued growth of its Plant-based Foods and Beverages and Coffee Creamers and Beverages platforms in the fourth quarter. Due to the impact of the private label exit and contract discontinuation, the Company anticipates sales in its Premium Dairy platform to be flat on a year over year basis in the fourth quarter. Overall the Company expects a sales growth rate in the high single digits for the fourth quarter, and consistent with previous guidance, the Company expects a high single digit growth rate for the full year 2013.
Driven by continued topline growth, management anticipates an adjusted total operating income growth rate in the mid to high-teens for the fourth quarter 2013. On a full year basis for 2013, the Company now expects an adjusted total operating income growth rate in the mid to high-teens.
The Company continues to estimate approximately $55 million in corporate costs for full year 2013, and maintains its capital expenditures forecast in a range of $150 million to $160 million for 2013. Management anticipates a tax rate of approximately 33 percent to 34 percent for the fourth quarter.
The Company expects adjusted diluted earnings of between $0.19 to $0.20 per share for the fourth quarter. For the full year 2013, the Company now anticipates adjusted diluted earnings per share of between $0.71 and $0.72.
"We are pleased with our strong third quarter results, as we were able to once again deliver EPS growth at two times our topline growth rate," said Kelly Haecker, Executive Vice President and Chief Financial Officer. "Although we are facing some inflationary pressures, our capacity expansions projects are starting to come on line, providing greater opportunities to leverage our cost structure and expand margins over time. In short, we remain focused on continually improving our operating performance and look to close out the year with a strong fourth quarter."
