WhiteWave Foods Conference Call Highlights

WhiteWave Foods Co WWAV reported its third quarter earnings on Monday. Shares of the company are down 2.5 percent.

Below are some key highlights from tis conference call.

• Our top line increased 34% from our acquisition of Earthbound Farm earlier in the year and strong 12% organic net sales growth in the quarter.
• Our 12% organic growth rate is the highest we've produced this year, driven by strong growth across all our business platforms.
• Earthbound continued its trajectory of strong growth as well.
• Operating income increased 50% in Q3 from the continued strong operating performance of all of our platforms and the contribution of Earthbound.
• Excluding Earthbound and joint venture related investments, our organic operating income grew at roughly two times the rate of our organic top line during the quarter.
• Importantly, we achieved this operating performance while increasing our marketing investments in our category leading brands.
• Our strong top line growth and operating margin expansion resulted in earnings per share growth of 42% to $0.27, excluding our China joint venture costs.
• This exceeded the high end of our guidance by $0.01.
• Including business startup costs at our China joint venture, our earnings per share for the quarter was $0.26, as we continued to move towards commercializing this business.
• In addition to delivering these great financial results, we also completed several proactive strategic initiatives this past quarter, including increasing and extending our bank credit facilities, completing a $500 million inaugural unsecured notes issuance, and announcing the planned acquisition of the So Delicious Plant-based Foods.
• We exited Q3 with strong momentum across our brands and a solid balance sheet with significant liquidity to support our continued growth initiatives.
• As I have highlighted, our strong top line growth continued in Q3, as our net sales increased to $857 million, another record sales quarter for WhiteWave.
• Absent the impact of Earthbound, our sales increased more than 12%, behind growth in both our North America and Europe segments that was broad-based across all of our brands.
• Volume growth continues to be our primary top line driver, but we also saw some benefit this past quarter from price increases we implemented over the past 12 months to offset higher input costs.
• Sales in our North America segment increased 36%, with 10% organic growth in the quarter behind the continued strength of our plant-based beverages, coffee creamers, and premium dairy platforms.
• This organic growth came from core retail channels as well as a couple of points of growth from other channels, such as foodservice and C-Stores and our growing presence outside of the United States, where we see continued growth opportunities.
• Our organic greens and produce platform also produced solid growth, with Earthbound Farms growing in the high single digits this past quarter.
• Our Europe segment continues to generate exceptional results, with Q3 net sales increasing 24% and up 21% on a constant currency basis.
• Our Europe segment again posted outstanding results, with sales increasing 24% on a reported basis and 21% on a constant currency basis in Q3.
• At the same time we expanded margins in this segment by 338 basis points, leading to operating income growth of 82% in the quarter.
• This robust margin expansion is principally driven by the increased scale our continued strong growth in this segment is creating, enabling us to realize significant cost leverage across our European infrastructure.
• Our strong operating performance resulted in Q3 adjusted earnings per share of $0.27, exceeding the high end of our expected range for the quarter by $0.01 and representing growth of 42% over last year.
• This revised guidance excludes what we now expect to be about $0.06 EPS investment for the year in our China joint venture. This is $0.01 higher than our previous forecast.

Guidance:

• On a full-year basis, we're now forecasting low to mid-30%s sales growth.
• This guidance includes the expectation that we will generate approximately 8% organic growth in Q4.
• This rate is slightly slower than the first three quarters, due primarily to the foreign currency and milk supply headwinds I just mentioned, and a very strong comp from the prior year.
• This Q4 growth rate would result in us producing around 11% organic growth on a full-year basis for 2014.
• We forecast this continued strong top line growth along with ongoing margin expansion will deliver operating income growth in the low-to-mid 40%s in Q4.
• For the full year, we now expect operating income growth in the mid-40%.
• Interest expense for the fourth quarter of 2014 is expected to be approximately $14 million to $15 million, reflecting higher interest cost related to our notes issuance in the third quarter of 2014, resulting in annual interest expense of around $36 million to $37 million.
• We are now calling for our effective tax rate to range between 34% and 35% for the fourth quarter and for the full year.