October 2/Dallas/PRNewswire-FirstCall -- Dean Foods Company today announced a reduction in its expectations for third-quarter and full-year adjusted earnings per share.

"Rapidly increasing and record high dairy commodity costs have created a very challenging operating environment and 2007 results have been well short of our expectations," said Gregg Engles, chairman and CEO. "The third quarter has been particularly challenging as dairy commodity costs have risen sharply, hitting all time highs. This is by far the most difficult operating environment in the history of the company, reinforcing the importance of the long-term strategic initiatives we have underway. These efforts will better position us to face future challenges."

Jack Callahan, chief financial officer of Dean Foods, added, "As a result of this extreme commodity environment, we face unprecedented cost challenges in our Dairy Group operations, including increased shrink costs and materially reduced profits from excess cream sales. At the same time, sales volumes in the Dairy Group have softened as consumers react to the record high prices. We are also seeing a pronounced shift from branded products to private label in some of our regional brands. At WhiteWave, results continue to be negatively impacted by the oversupply of organic milk."

Continued Callahan, "With these challenges in mind, it is now clear that our adjusted results for the third quarter will be below our previous guidance, and we now expect earnings per share to be approximately $0.15 per share in the third quarter and approximately $1.25 per share for the full year."

"While we had expected strong growth in milk supply to lead to lower conventional dairy commodity prices toward the end of the year, it now appears that prices will likely remain high for the balance of the year, due in part to continued strong export demand for non-fat dry milk powder," added Callahan. "However, we expect more favorable price movements as we get farther into 2008. We also expect the organic milk oversupply to continue to negatively affect results for the balance of this year and into at least the first half of 2008, despite the recent volume acceleration of the Horizon Organic brand."

As part of its ongoing initiative to streamline operations, the company also announced a reduction in workforce that is expected to affect approximately 600-700 positions. Implementation will begin immediately with a voluntary reduction program followed by an involuntary reduction, if necessary. The program is expected to conclude by late October.

Engles continued, "Over the past 18 months, we have been working to increase the efficiency and capability of our Dairy Group operations. We are now ready to move forward with a workforce reduction. Our decision is part of our multi-year productivity initiative which will help better position the company during this incredibly difficult period for Dean Foods and the industry. It is a tough decision but it is a necessary action to improve our competitive position."

The reduction in workforce will affect Dean Foods Dairy Group employees from across the country. The company expects to take a restructuring charge in the third quarter related to the reduction in force.

From the October 8, 2007, Prepared Foods e-Flash