Dean Foods Company (NYSE:DF) Q4 2014 Earnings Conference Call - Final Transcript
Feb 10, 2015 • 09:00 am ET
Thank you. [Operator Instructions] The question is from the line of Eric Katzman from Deutsche Bank. Please go ahead.
Hi, good morning, everybody.
Good morning, Eric.
I guess my question goes to the excess capacity still in the industry. You obviously took out a lot over the last 18 months. It sounds, Gregg, like you continue to do that. We don't have a lot of visibility into what remains a fragmented competitive set. Can you just give us a sense of -- as to roughly where you think capacity utilization is? And I suppose, if it's still quite low, that's one of the things you are concerned about?
Yes, I mean Eric I think it's -- when I think about what we've done in taking 10% to 15% of our capacity out, and I think we've seen a little more de-leverage with the volume doing what it's done and what we had expected, so we're probably looking at somewhere in the low 60s. And again it's so dependent upon different regions of the country and we're have locations or not because there are certain locations that we have that are going to have considerably lower than that from the utilization perspective, obvious states like Montana, where we might be in the 30-40% type utilization, but we don't see an opportunity necessarily to consolidate in that area. And then there's other parts of the country where we'll see it up in the 75% to 80% range, which is a range with fresh product where we would like to see it be.
So I think from our perspective, we are continuing to do what we need to do to try and give the utilizations and the asset utilizations up to a much higher level. As far as what the competitors are doing, you can read it as well as I can read it, there's -- we'll see what happens as time goes by.
Okay. And then just as my one follow-up, I was a little bit surprised that your -- albeit short term, but I was a little bit surprised that you are looking for such softness in volume in the first quarter. Is there anything specifically going on there? Or have you just see the category, I don't know, weaken surprisingly a bit or competition is a little bit greater as we have started the new year? And then I will pass it on. Thank you.
It's all right. Thanks, Eric. No I think its just playing off of the trends. If you look, in second quarter we were down 3-2,3-5 the third quarter was down 3-7. The fourth quarter looks to be projected at 4-5 for the category. I think these high prices have just -- we crossed price points that we didn't anticipate. We got above $4 in some cases. I think our average in the fourth quarter was $4.08 a gallon. We're not sure because we are in uncharted waters, what's going to happen once these prices start coming