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Executives

Barry Sievert - Investor Relations

Gregg L. Engles - Chairman of the Board, Chief Executive Officer

Jack F. Callahan Jr. - Chief Financial Officer, Executive Vice President

Analysts

Terry Bivens – JP Morgan

Chris Growe – Stifel Nicolaus

Bryan Spillane – Bank of America Merrill Lynch

David Palmer – UBS

Eric Katzman – Deutsche Bank

Alexia Howard – Sanford Bernstein

Robert Moskow – Credit Suisse

Eric Serotta - Consumer Edge Research

Jeff Omohundro - Wells Fargo Securities

Farha Aslam – Stephens Inc.

Jonathan Feeney – Janney Montgomery Scott

Jeff Cantor - UBS O’Connor

Christine McCracken – Cleveland Research

Akshay Jagdale - Keybanc

Dean Foods Company (DF) Q3 2009 Earnings Call November 2, 2009 9:30 PM ET

Operator

Good morning and welcome to the Dean Foods Company third quarter 2009 earnings conference call. Please note that today’s call is being recorded and is also being broadcast live over the Internet on the Dean Foods corporate website. This broadcast is the property of Dean Foods. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of the company is strictly prohibited. At this time, I would like to turn the call over for opening remarks to the Vice President of Investor Relations, Mr. Barry Sievert. Please go ahead sir.

Barry Sievert

Thank you, Barbara and good morning, everyone. Thanks for joining us for our third quarter 2009 conference call. We issued an earnings press release this morning which is available on our website at deanfoods.com. The release is also filed as an 8-K available at the SEC's website at sec.gov. Also available during this call at Dean Foods website is a slide presentation which accompanies today's prepared remarks. A replay of today's call along with the slide presentation will be available on our website beginning this afternoon.

The consolidated earnings per share, operating income and operating margin information that will be provided today are from continuing operations and have been adjusted to exclude the expenses related to facility closings and reorganizations, expenses related to closed and expected to close acquisitions, and non-recurring items in order to enable you to make a meaningful evaluation of our operating performance between periods.

The earnings release contains a more detailed discussion of the reasons why these items are excluded from the consolidated results along with reconciliation between GAAP and adjusted earnings, and between net cash flow from continuing operations and free cash flow from continuing operations.

We also would like to advise you that all forward-looking statements made on today's call are intended to fall within the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements will include among others disclosure of earnings targets, as well as expectations regarding our branding initiatives, expected cost savings, leverage ratios and various other aspects of our business.

These statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today's conference call. Information concerning those risks is contained in the company's periodic reports on Forms 10-K and 10-Q and in today's press release.

With me today is Jack Callahan, our Chief Financial Officer. Also joining us on the phone is our Chairman and CEO, Gregg Engles, who will lead off the call. Following Gregg’s remarks, Jack will offer some additional prepared comments before opening the call to your questions. Gregg.

Gregg L. Engles

Thank you, Barry and thank all of you for joining us on today’s call. This morning we reported another strong quarter of performance with continued solid operating income and earnings per share growth. These strong results highlight the key advantages of our business, including a national footprint that provides an unmatched ability to service customers and unique cost savings opportunities. This breadth is complemented by strong branded and private label positions across the refrigerated case with key offerings in the fastest growing on trend product segments. As we move forward, we will continue to work to maximize our advantage in these areas.

This morning I will focus my comments on three areas. First, I will review our third quarter results. Second, I will update our progress against our strategic initiatives and discuss how Joe Scalzo’s role as our Chief Operating Officer will facilitate further progress. And third, I will review the commodity environment and update you on our forward outlook before turning the call over to Jack for a more detailed review of the third quarter.

Turning to our third quarter results, clearly the business continued to perform well, posting 12% operating income growth and 21% earnings per share growth, with strong contributions across the business. We continue to see results from our across the board focus on becoming a leaner, more efficient company with the goal to extend our low cost position in the marketplace. We are on track to deliver the $75 million of cost savings in our 2009 plan and we remain confident in our ability to deliver our three- to five-year goal of $300 million plus in cost savings.

In the third quarter, WhiteWave Morningstar delivered outstanding operating income growth with both WhiteWave and Morningstar individually posting growth in excess of 50%. WhiteWave, which is a number of years ahead of the rest of the company in its transformation to a low cost, lean operation delivered another excellent quarter. This platform is clearly seeing in its bottom line lower costs from the investments that we made four years ago in supply chain, IT, and research and development. We expect to achieve approximately $15 million in savings at WhiteWave in 2009 from our cost initiatives.

WhiteWave also enjoyed an improved product mix as well as fixed cost leverage in the quarter. Morningstar, which is just beginning its own transformation, benefited from favorable commodities, tight supply chain cost management, and improved management capability to deliver another quarter of very strong profit growth. This strong execution, combined with the solid contribution from the addition of Alpro, resulted in 66% total segment operating income growth for the quarter.

We successfully closed our acquisition of Alpro in early July. Alpro is the European leader in soy beverages and related products and combined with Silk makes Dean the clear global leader in soy with over $1 billion in annual retail sales.

Through our initial strategy and operational work with the Alpro team, I am more excited than ever about the future opportunities to grow our global soy franchise. Also contributing to the solid results in the quarter, fresh dairy direct continued to outperform the balance of the industry with solid volume growth, driven both through the tuck-in acquisitions that we’ve made over the past year as well as our continued execution in the marketplace. This volume growth, combined with the benefits of our cost control initiatives, drove fresh dairy direct operating income growth of 4% despite a tough overlap of 21% growth in the same quarter of last year.

In Fresh Dairy Direct, we are balancing current period performance with the longer term transformation of the business. Our current period focus is to deliver our profit plan and includes the day-to-day management of supply chain costs, consistent high levels of customer service, minimizing waste across our operations, and managing the effective pass-through of changes in dairy input costs. As an example of the industry’s effective pass-through mechanism, class one milk prices have been fairly stable at relatively low levels for much of the year. However, as we closed out the quarter in September, we saw prices take a meaningful step higher. The class one move was $0.78 per hundred weight higher in September than the average of July and August. This amounts to approximately $0.07 per gallon. Our teams pass through the increased milk cost, which resulted in an operating profit per gallon performance in September that was on par with the average of July and August.

However, as we previously discussed, we operate in a competitive market and cannot just rely on current period operating intensity and the pass through mechanism to drive our success going forward. Our very clear long-term strategy in Fresh Dairy Direct is to transform the business, which means first and foremost extending the low cost position of our supply chain. Over time as we succeed, we hope to create an ongoing cycle of value creation. In order to do so, we expect to use a portion of the cost savings from our transformation to drive enhanced consumer value. This should lead to volume games over time, strong market share performance, and additional efficiency opportunities.

Extending our low-cost position will also create an investment pool to be applied against future productivity initiatives, marketing, and innovation that will drive an improved sales mix and continue to fuel the growth engine at fresh dairy direct, creating sustained operating profit progression for our shareholders.

As I mentioned, we are making solid progress against our cost savings initiatives and are on track to deliver over $75 million of value in 2009, $60 million of which is coming from Fresh Dairy Direct.

We continue to see substantial value creation across all of our key initiatives, including distribution, where year-to-date employee costs are flat and fuel usage is well below year-ago levels in spite of higher product volumes; conversion, where costs have been held essentially flat this year, offsetting inflation; network optimization, where we are closing four facilities this year to drive utilization and improved efficiency; and in procurement, where our efforts to simplify our purchase requirements behind a centralized professional purchasing effort will yield over $10 million in 2009 savings. And as is evidenced from their very strong 2009 results this year, we continue to realize ongoing cost reductions within our WhiteWave operations.

As part of our continuing efforts to transform the business, I am very pleased that Joe Scalzo will bring his experience and expertise to bear against a broader set of responsibilities as the new Chief Operating Officer of Dean Foods. Joe and I will work together closely to optimize our businesses and to maximize the value of Dean Foods for our shareholders. In his new role, Joe will oversee all of the Dean Foods operating businesses, including Fresh Dairy Direct, WhiteWave, Morningstar, Alpro, and the Hero joint venture, as well as key operating functions including worldwide supply chain, R&D, and innovation. Joe’s most important near-term objective is to deliver the transformation of Fresh Dairy Direct and Morningstar and to prioritize, sequence, and resource this large body of inter-related work.

Joe’s assumption of the company’s operating responsibilities will allow me to focus more intently on Dean’s long-term strategy to shape its portfolio and structure and make decisions on key strategic issues. In addition, this change will give me the opportunity to focus critical attention on the external environment, including the ever-changing public policy and political environment. I am looking forward to partnering closely with Joe as we leverage our respective strengths to drive the business forward.

Turning back to the business environment and forward outlook, as I mentioned, Dairy prices began to rise as we closed out the third quarter and have continued to move higher into the fourth quarter. As always, we are focused on passing through these rising dairy costs. We expect dairy prices will continue a general upward trend through next year and we are building our forward plans accordingly. However, with U.S. and global dairy inventories at relatively high levels, what looks like solid production in Oceania and continued sluggish global demand, we do not foresee a return in 2010 to the record dairy price levels we experienced over 2007 and 2008.

With this in mind, and with the business performing well and our strategic initiatives delivering strong benefits, we are looking forward to closing out the year with a solid fourth quarter. We are forecasting fourth quarter adjusted diluted earnings to be at least $0.36 per share and to finish the full year with adjusted diluted earnings per share of at least $1.63. We are still in the process of building our plans for 2010 and look forward to sharing our expectations for next year with you on our fourth quarter conference call in February and in more detail at Cagney.

With that, I would like to thank our team for an outstanding first nine months of 2009, congratulate Joe Scalzo on his promotion to a new, very important, and well-deserved role, and thank you for joining us on this morning’s call.

I will now turn the call over to Jack for a more detailed review of our financial results in the quarter. Jack.

Jack F. Callahan Jr.

Thank you, Gregg and good morning, everyone. To reiterate Gregg’s comments, I am very pleased with the continued progress of the business. We are reporting $0.34 of adjusted diluted earnings per share, 21% ahead of last year’s results, marking the fifth straight quarter of 20% plus EPS growth for the business. Through the first three quarters of 2009, we have delivered $1.28 in adjusted diluted earnings per share, 52% growth over 2008. Both operating segments continue to perform well, highlighting the strong competitive positions and solid expense control. Total Dean operating profits grew 12% in the quarter, and we continued to fund foundational capability in supply chain, R&D, and IT.

Let’s take a closer look at the performance of each of the business segments in more detail, starting with Fresh Dairy Direct. As Gregg said, our Fresh Dairy Direct business continues to win share in the marketplace. Base business growth of approximately 1% combined with the benefits of our recent acquisitions to drive 2.5% volume growth in our fluid milk business. This solid volume growth, continued commodity favorability, and the cost progress we have made toward becoming a leaner, more efficient company, drove Fresh Dairy Direct operating income growth of 4% in the quarter to $146 million in what continues to be a tough competitive and economic environment.

In the quarter, dairy commodities were below year-ago levels but have begun to increase sequentially. The class 1 milk price averaged $10.41 per hundred weight for the quarter, 45% below the $18.97 average in the same period a year ago, and roughly flat with the second quarter of this year. As Gregg mentioned, prices did begin to rise as we exited the quarter with September, October, and November’s price all increasing over the previous month. We expect the class one price to rise again in December with forecasts showing expectations of closing out the year well over $13 per hundred weight, and for prices to be on a moderately increasing path through much of 2010 but to remain well below the highs experienced in 2007 and 2008.

Furthermore, we expect to pass along the vast majority of these increased costs in the normal course of business through the monthly pricing adjustments.

The average CME butter price of $1.22 per pound was flat sequentially in the quarter and down 25% from the third quarter of 2008. Butter prices have also begun to rise and we expect some modest inflation going forward. In aggregate, other non-dairy commodities also continue to be favorable on a year-over-year basis but some began to show signs of trending higher.

In the WhiteWave Morningstar segment, net sales increased 6% for the segment to $710 million, including sales from our Alpro acquisition, which was completed in July. Within this, WhiteWave Alpro sales increased 19% to $452 million due to the benefits of the acquisition offset by the previously discussed exit of some business lines in WhiteWave.

As Gregg mentioned, we were happy to have closed the Alpro acquisition early in the quarter. Alpro net sales increased mid-single-digits on a constant currency basis in the quarter, driven by continued solid performance in conventional retail channels. Importantly, we increased our share positions across all of our key branded product lines in soy, organic milk, and creamers.

Also impacting WhiteWave Morningstar segment sales in the quarter was a 12% decline in Morningstar sales to $258 million, due primarily to the pass through of lower commodity costs and modestly lower sales volumes related to continued softness in the food service channel.

Looking a bit closer at the sales performance in the quarter across our key national brands, the organic milk category sales remain sluggish in response to the difficult economy and a wider-than-average price gap to conventional milk. Horizon organic milk outperformed the category and increased its market share with sales that were down slightly in the quarter. The brand continues to benefit from strength in single serve and DHA enhanced offerings.

Silk soy milk net sales were up low single digits when adjusted for the unprofitable food service contract we exited late last year. We are beginning to see the market share growth and resurgent sales we expected from the selected promotional pricing actions we’ve taken this year, as well as the increased targeted marketing behind the launch of our heart health product and the improved packaging that has hit the market in recent months.

And our creamers business had an exceptionally strong quarter, which I will discuss more in just a moment. The bottom line results for the WhiteWave Morningstar segment were impressive, as the benefits of our Alpro acquisition, our cost initiatives and tight overall SG&A expense control combine to increase segment operating income to $69 million in the third quarter, 66% above year-ago results.

One real highlight in the quarter was our branded creamers business, which was particularly strong. Creamer sales grew mid-single-digits in the quarter as consumers continue to consume more coffee at home and in food service channels where our brands have solid positions.

Within our branded creamers business, International Delight sales were especially positive, bolstered by strong core business growth as well as the strong consumer response to our new coffee house inspirations line. This line of flavors, including White Chocolate Mocha, Caramel Machiato, and Vanilla Latte, allows consumers to bring the coffee house to their home.

Strength across these new introductions helped drive low double-digit net sales growth and continued market share increases for International Delight in the quarter, providing solid momentum as prepare to launch additional seasonal items in anticipation of the stronger winter and holiday months.

Now let me turn to corporate and other costs, which at $56 million in the quarter were down a bistro sequentially but up versus last year due in part to foundational funding in areas such as supply chain, IT, and R&D. These capabilities are essential to our goal of creating a leaner, more efficient company. Also having a meaningful impact on the corporate line are higher legal, pension, and incentive compensation expense and approximately $4 million of expense related to the Hero WhiteWave joint venture. Going forward, these costs will continue to trend above year-ago levels through the first quarter of next year when we lap the investments that began in the second quarter of this year. We anticipate the growth rate will moderate beginning in the second quarter of 2010.

On a consolidated basis, we are reporting $158 million of operating income for the period an increase of 12% over last year’s third quarter. With the benefit of lower average debt balances, interest expense in the quarter was $15 million below year-ago levels. This helped to increase net income by 43% and adjusted diluted earnings per share by 21% in the quarter to $0.34 per share.

Turning to our cash flow performance, the business continues to generate strong cash flow. Free cash flow from continuing operations through the first three quarters of the year was a very strong $331 million. Capital expenditures through the first nine months were $171 million. The pace of capital spending is expected to pick up in the fourth quarter and we now expect to end the year with approximately $275 million in CapEx spending, down a bit from our previous guidance of $300 million, as the timing of spend on several major projects is shifting into next year.

So given these strong cash flow results, let’s review our progress against our balance sheet objectives. As of September 30th, total outstanding debt stood at $4.2 billion. Our leverage ratio of funded debt to EBITDA, as defined by our credit agreement, stepped up a bit this quarter due to the timing of the close of the Alpro acquisition and was at 3.97 at quarter end. We remain committed to deleveraging the balance sheet and are on a solid path towards our goal of reaching 3.5 times funded debt to EBITDA or below by the first part of 2011.

We continue to enjoy strong levels of liquidity. As of September 30th, total un-funded debt and available revolver and accounts receivable securitization capacity stood at approximately $1.3 billion.

So to summarize, the third quarter results demonstrated the strength of our business model. The $0.34 of adjusted diluted earnings per share in the quarter marks the fifth quarter in a row of 20% plus earnings per share growth. WhiteWave Morningstar delivered outstanding 66% growth in operating income with strong performance in key brands as well as the welcome addition of the Alpro business to the portfolio. Fresh Dairy Direct leveraged solid volume growth and continued cost control to post 4% growth on top of a challenging overlap of 21% growth last year.

Looking ahead, we see dairy commodities beginning to increase but do not expect a return to the type of extremes we experienced in 2007 and 2008. The next couple of quarters present challenging overlaps, giving the significant commodity favorability that helped drive exceptionally strong earnings in the fourth quarter of last year and the first quarter of 2009. We are forecasting adjusted diluted earnings per share of at least $0.36 for the fourth quarter, a bit below the very strong results of the fourth quarter in 2008.

For the full year, we are expecting adjusted diluted earnings per share to be at least $1.63 or 25% above 2008 earnings based on a full year diluted share count of approximately 174 million shares.

Please keep in mind due to the timing of our equity offering this year the full year earnings per share is likely to be less than the summation of the four quarters. The difference will likely amount to a penny or two between the addition of the four quarters and the full year earnings per share number.

As Gregg mentioned, we are in the process of completing our plans for 2010 and we will have more to discuss with you on our expectations for next year on our fourth quarter earnings call in February and at the Cagney conference.

With that, I will conclude my comments by again congratulating our teams on another very successful quarter and a strong first nine months of the year. We are working to finish the year out strong while continuing to build the necessary capability to drive strong results well into the future. I’d like to thank you for joining us today and would now ask the Operator to open up the call to your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Terry Bivens of JP Morgan.

Terry Bivens – JP Morgan

Gregg, I guess one of the things I get the most questions about is this whole calculus between the savings but the degree of investment that will be required to drive those savings. Now, I know you guys have been crystal clear about the savings tally but what about the investment tally? Can you shed anymore light on what sort of investment you think is going to be necessary to get to where you want to go?

Gregg L. Engles

Well, there’s two types of investments that we are going to have to make, Terry. There are investments that we are going to have to make in building capabilities. Those will be reflected as expenses in our P&L. And then there are capital expenses that are going -- or capital investments that will have to be made that will be put up on our balance sheet as -- primarily as PP&E and to some degree as information technology investment. So I think it is really important to parse those two out.

What we said back in February when we talked about our earnings algorithm was that a portion of this $300 million in savings over time would have to be reinvested back and by that I mean primarily reinvestments through capability building that will be expressed as expenses over this time horizon to generate the savings. Frankly, we will step up our level of capital spending but most of the savings that we are talking about in this initial three to five year plan and initial $300 million really will be derived by operating our businesses better as opposed to putting new physical assets on the ground. So there will be -- most of the reinvestment will be in terms of expense.

So while we have not directly dimensionalized how the expense portion, and you are seeing it play out in our corporate expense, will evolve because frankly we have to have more -- we have to be closer in time to the capabilities we are going to build to put a direct number on it.

What we were confident enough to say was that the net of the $300 million and the investment in the P&L and capability would be sufficient enough to generate double-digit earnings per share gains and mid single digits operating income gains over time. So that’s probably the best way to go back and factor it into your model, is to see what sort of net operating income progression you need to generate that double-digit earnings per share growth and mid-single-digits to upper-mid-single digits operating income growth to generate that algorithm and it’s that net that will be the difference between the savings we realize and the costs expressed in our P&L that it takes to get there.

Terry Bivens – JP Morgan

Okay, thanks for that detail. And just one quick one here on Horizon Organic, obviously it’s a tough category in this economic environment. How do you see that playing out?

Gregg L. Engles

Horizon Organic is, you heard from Jack’s description of the various brands, is today the weakest of our categories. So we have a combination of both high organic milk prices and a big spread to conventional and is causing the category to be flat to down roughly 1%. And that dynamic is playing out in Horizon Organic as well. I expect one of those factors to change as conventional milk prices rise and we are also seeing some slight diminishment in organic milk prices, so that will be reflected in the marketplace over time. But organic milk continues to be a weak category. The best news about the organic milk category, however, is that with demand coming down and the category looking to be a low growth to flat category, it’s becoming much easier to plan the supply necessary to sustain our business and it is that imbalance between supply and demand that has caused such great profitability problems in Horizon Organic.

So while the category is slowing, the ability to plan for and therefore manage towards a more profitable horizon business is becoming more clear.

Terry Bivens – JP Morgan

Okay. Thanks very much.

Operator

Your next question comes from Chris Growe of Stifel Nicolaus.

Chris Growe – Stifel Nicolaus

My first question for you is to get a little more detail on the quarter and to be clear, like in the Fresh Dairy division, in general terms was the gross margin a little softer this quarter say sequentially versus second quarter? I’m trying to get at the competitive environment and are you reinvesting more heavily, if you will, or being more competitive on price? We should be able to see that in the gross margin for the dairy division. Was that up or down for the quarter sequentially?

Gregg L. Engles

Jack, would you take that?

Jack F. Callahan Jr.

The gross margin was essentially flat, maybe down a bit in the quarter. The big issue was in this tough competitive environment out there and then this challenging economic times is just that a little bit of compression in gross margins but we have been able to realize the step up in dairy prices, particularly in September. But we are seeing a little bit of compression on both the private label and maybe a bit more on our branded business.

Chris Growe – Stifel Nicolaus

Okay, and I guess somewhat in line with your answer to Terry’s question, Gregg, like in this year, in 2009, with the $60 million in cost savings coming through in Fresh Dairy, is there spending in Fresh Dairy against that? So that $60 million is actually a gross number -- there’s some spending against that as well in that division?

Gregg L. Engles

Yes, there is some spending against that as well and a significant part of what you see in terms of stepped up corporate spending is also an investment against that. But yes, to the extent we are building capabilities directly in Fresh Dairy, those costs are being born in Fresh Dairy.

Chris Growe – Stifel Nicolaus

Okay. And my last question is really just for Jack, a quick one on the tax rate -- it was lower this quarter. Is that an Alpro benefit or was there something unique in the quarter or how should we look at that going forward?

Jack F. Callahan Jr.

It was -- we had some one-time benefits, so it was a little bit lower than our average long-term guidance, which is more around 38.5% to 39%. Longer term, we may get some benefits as we structure in the Alpro business but we did have some one-time benefits that helped us a tad in this quarter. But again, we also -- if you look back, we also had some similar benefits a year ago at this time also, kind of consistent with our reconciliation of past audits.

Chris Growe – Stifel Nicolaus

Okay. Thanks for the time.

Operator

Your next question comes from Bryan Spillane of Bank of America.

Bryan Spillane – Bank of America Merrill Lynch

Just one further clarification on Fresh Dairy Direct in the third quarter and maybe I’m just thinking about this a little too simplistically but the class one mover was so much lower than it was a year ago and yet the profitability is not as great as you’d expect, I guess, given where it was sequentially for the quarter. So was there a lot of incremental spending in the quarter that caused the profitability to maybe be a little bit lighter or is there just -- or was there pricing pressure that caused it? It just seems like you should have realized a much better margin in this quarter than you did.

Gregg L. Engles

I would continue to remind the analysts and investment community that we do have a very effective course of dealing in this business that passes through milk price changes to our customers, so the net result of that is that the profitability of FDD from any period to period is much more a function of the trajectory of milk prices than the level of milk prices, so yes, the class one mover was meaningfully below year-ago level but that change happened in Q4 and Q1 of this year, not from Q2 to Q3. So our profitability as it relates to our milk cost inputs has been effectively fully baked in to our Fresh Dairy Direct results now for several months as we have hit this sort of $10 level and stayed there. The increment that you would expect to see in margin, that happened in Q1 and Q2 as milk prices were coming down but once they hit the bottom and the lag effect takes its effect, the margin from milk price changes has come back to its normalized margin. That’s industry practice, it happens on the way down and it’s going to happen on the way back up and that will be good news on the way back up. So again, it’s trajectory, not level, as it relates to milk prices, that’s the biggest driver of our profitability.

Now, if you want to talk about Q2 to Q3 levels, it goes to this issue that Chris Growe raised and that Jack addressed, which is that we continue to see a pretty difficult trading environment out there in terms of our customers and end consumers. End consumers are clearly under pressure. They are clearly continue to trade down to find value wherever they can, whether that’s into discount channels in terms of where they shop or whether it is from private -- or from brands to private label and those impacts are having some modest affect on our gross margins.

So I think that’s the best framework I can give you for thinking about the profitability of FDD. Nonetheless, we continue to drive efficiency into FDD and we continue to be confident about our ability to manage through the trading environment that we are in and the upcoming increase in milk costs as we move into 2010.

Bryan Spillane – Bank of America Merrill Lynch

Great. Thank you.

Operator

Your next question comes from David Palmer of UBS.

David Palmer – UBS

Just a couple of questions -- your goal of generating annual growth of at least double-digit, is that true for any given year? In other words, how are you thinking about that in terms of delivering on a particular year? Are you trying in any way to make sure that you deliver at least a certain goal with the contrast, of course, being that you double up in one year when the environment is right and maybe take one year off in terms of earnings growth?

Jack F. Callahan Jr.

If you go back to our investor conference in February, we -- in terms of this double-digit earnings per share progression, you should view that as a compounded growth over multiple years of at least three and just kind of given the nature of the commodity volatility that we’ve seen both in dairy and other the last few years, it is not going to be a straight path. So we are at a point right now where we are seeing a very strong earnings per share growth, well above the low double-digit we talked about. We are seeing earnings per share growth the last five quarters upwards of 20%. That’s -- and so we will have to see how we work through this upcoming commodity cycle but you should not look for at least double-digit EPS growth every quarter. And particularly 2010 will present a challenging overlap, at least in Q1, just given the commodity favorability that was there as we started this year. The lower level of corporate spending and the fact we are also leveraging a lower share count due to our equity offering this year in May. So I wouldn’t look at it from quarter to quarter. It’s over a multiple year period.

David Palmer – UBS

You’ve mentioned in the past and you’ve touched on it here that Dean is becoming more sophisticated at price pass through. Would you -- if we exclude the timing of expenses and savings from your restructuring, is your EPS sensitivity significantly lower for say a 10% move in dairy -- and why not throw energy in there -- then it was even a year ago or so? Can you give any numbers and feeling about that?

Jack F. Callahan Jr.

I think we are doing a better job of having a more forward view of our costs as we work that into our pricing decision. I don’t have any strict quantification of what it is like today versus two years ago but it is our belief that our process is stronger but you know, it’s also a challenge to tease out the extreme volatility that we live through two years ago.

Gregg L. Engles

David, I just want to make it clear -- no one on this side of the phone is saying that we have repealed the commodity cycle as it relates to our earnings from period to period. That is simply not possible to do in this environment so as Jack mentioned, I think we have much better visibility into the drivers of our cost and therefore we have better control over some of them. There are some of them, for example, the relationship between the value of protein or skim milk and the value of butter in milk is very difficult to influence, even though we understand it vastly better than we did before. And in response to another aspect of your question, I would say that we are more highly evolved as an industry and remember, we have got to keep in mind our competitive frame as we change prices in the marketplace from time to time.

But we are much more highly evolved as a company and as an industry as it relates to the dairy commodity than we are our other input costs, primarily energy and petrochemical derived costs. So they work their way into the pricing algorithm in the competitive nature of the marketplace more slowly than milk does.

David Palmer – UBS

Okay. Thank you very much.

Operator

Your next question comes from Eric Katzman with Deutsche Bank.

Eric Katzman – Deutsche Bank

I guess this kind of goes back to Terry’s question a little bit -- it just seems to me, given that a year ago or so you started out with an earnings outlook of $1.40 for this year and now you are saying well over $1.63, with reinvestment et cetera, that the market just isn’t willing to give you credit, it seems, for the reinvestment or the ability to take these savings and let’s say differentiate yourself from the competition. It’s almost as if the market is kind of suggesting that it is going to be so competitive that the extra profitability that you are trying to squeeze out of the company is going to be competed away and I guess kind of a long question but Gregg, is there a way that you could kind of frame why you believe the savings, the net savings will be achievable, whether it is coming from the dairy side or the combination of the dairy and the WhiteWave.

Gregg L. Engles

I think it’s a really good question, Eric. First of all, I would point you to 2009, right? We’re delivering I think in spades against our preliminary profit estimates for this period, some of which is commodity driven, some of which is driven by efficiencies that are flowing through in the market but the ultimate answer to your question I think derives from our understanding of our competitive set and frankly, we do not believe there is anybody else in the industry who is attacking their cost structure with the same level of investment, intensity, and vigor as we are, which is why we continually talk about and we believe that we are differentially lowering our cost structure vis-à-vis the rest of the industry.

Well, if that is true and that is a supposition because the other companies have to make their own decisions but if it is true, then one of two things will have to be true over time -- either our profitability will go up because we are maintaining pricing against a more static competitive set and lowering our cost structure, or we will flow some of those cost savings back into the marketplace, we will lower price and that will result in greater share.

The other possibility is that each of those two things will happen. That is the fundamental thesis of our investment to transform the FDD business, is that our investments will be differential with respect to the rest of the industry, therefore they will stick either as improved operating profitability or as greater share or both and we very firmly believe that.

Eric Katzman – Deutsche Bank

And so I guess my next question has to do with the capital structure and to the extent that you have lowered the net debt to EBITDA ratio and there’s pretty clear visibility but I think you also have used the last nine months or so to restructure your debt to the point where you have more private holdings and a -- maybe a more diversified group of lenders. I guess my point is to the extent that the market today is not willing to give you credit for -- at least the equity market is not willing to give you credit for everything you just said, is there room in the cash flow and capital structure restrictions to buy back stock as opposed to whatever else you would use the cash for?

Gregg L. Engles

You know, I don’t think we are going to make any comments around what we might use our cash flow for in the future. What I would say is we are committed to getting our leverage down to this 3.5 times debt to EBITDA. We think that will happen within the next few quarters, at which point in time I think we will survey the landscape of the debt in the equity markets and decide what a prudent path forward would be.

Eric Katzman – Deutsche Bank

Okay, and then last question --

Jack F. Callahan Jr.

Eric, one clarification -- we really have had no -- in terms of our lending base, it’s been remarkably stable. We have not restructured anything relative back to our facility that was put in place in early 2007, and so we still benefit from that whole structure.

Eric Katzman – Deutsche Bank

Okay, and then one last quick question -- on the Alpro business, what is the roughly the average share that that business enjoys in the E.U.?

Jack F. Callahan Jr.

It varies by country quite considerably but I believe on average if you were to aggregate it, sort of mid 40s.

Eric Katzman – Deutsche Bank

Okay, mid 40s and you are up above 70 still on Silk here?

Jack F. Callahan Jr.

Around 75.

Eric Katzman – Deutsche Bank

Okay. Thank you.

Operator

Your next question comes from Alexia Howard of Sanford Bernstein.

Alexia Howard – Sanford Bernstein

A couple of quick ones -- private label, the mix shift at the moment, is that still going fairly heavily into private label? And if so, can you quantify by how much in percentage terms?

Jack F. Callahan Jr.

In our FDD business, it is -- it has shifted a bit to private label. It has shifted about a point per quarter as we have gone progressively through the year.

Alexia Howard – Sanford Bernstein

Okay, great, thank you very much and then are you able to quantify how much Alpro contributed to sales and operating profit in the WhiteWave business?

Jack F. Callahan Jr.

Well, WhiteWave ex the exit of those businesses grew about 3% on a pro forma basis and so the rest of the growth was largely delivered by Alpro.

Alexia Howard – Sanford Bernstein

That’s on the sales side?

Jack F. Callahan Jr.

That’s on the sales side.

Alexia Howard – Sanford Bernstein

And on the operating profit side, any thoughts on that?

Jack F. Callahan Jr.

If you excluded Alpro, the combined profitability profit growth of WhiteWave Morningstar still would have been above 50%.

Alexia Howard – Sanford Bernstein

Okay, great. Thank you so much. I’ll pass it on.

Operator

Your next question comes from Robert Moskow of Credit Suisse.

Robert Moskow – Credit Suisse

Most of my questions have been answered -- I guess one question, thanks for Alexia for peeling that out for us on Alpro but why not provide that information up-front, guys, on how much Alpro contributed to the quarter? Just about every packaged food company we cover will tell us how much acquisitions contribute to growth on both the sales and operating income side.

And then secondly on the CapEx guidance, I noticed it’s now I think around 275 for the year and then you said in the press release that you continue to think that it is 275 but really last quarter, it was 300. Maybe that’s just verbiage but why use the word we continue to think if it’s really going to be down and what got pushed out into 2010?

Jack F. Callahan Jr.

Let me take the second one first. So I’d focus on 275 right now for 2009. We just had a couple of major projects that -- we’re not working on them, it’s just that some of the aggregate of spend will shift into next year, so we’ve been spending -- we said when we came into this year around $300 million of CapEx spending but we think at least $25 million of that will shift into next year.

Robert Moskow – Credit Suisse

Okay, and then the Alpro, can we get acquisition contribution going forward in the press release?

Jack F. Callahan Jr.

There will be incremental disclosures in the Q as they come out.

Robert Moskow – Credit Suisse

Okay. One more question actually for Gregg -- Gregg, you mentioned that you need to spend more time on the political elements of the dairy industry. I imagine what you are talking about is some of the controversy around pricing and protection for dairy farmers. How intense do you expect that to get in 2010?

Gregg L. Engles

That’s actually not what I said, Robert. I said I needed to spend some more time on the political environment generally, not just limited to dairy. And there are, as you know, lots of things happening in the political environment, almost all of which will have if they are enacted meaningful impacts on our business and everybody else’s business. At the top of that list is healthcare. Depending upon what if anything passes, I think you will see corporate America quickly have to look at the impact of those changes on how it provides benefits broadly. If cap and trade passes, that will cause an entire set of activity around policy responses by companies, almost all of whom are emitters and will be covered in some form or fashion by the proposed legislation. And then of course you do have some dairy specific environments. I don’t actually expect those dairy issues to be legislative so much, although there is an effort kicking off in which the U.S. Department of Agriculture is going to sponsor an industry wide committee, so spanning everybody from the producer through the manufacturers to look at how dairy industry regulation might be reformed in a regulatory action that would mitigate some of the volatility that we have seen over the last several years, so there is a lot of policy activity ongoing in Washington -- almost all of it will have some impact on business and businesses I promise you are all paying attention to it.

Robert Moskow – Credit Suisse

Do you think that your business is more susceptible to all of these issues because it’s -- I guess because it’s labor intensive and that specifically points to the healthcare issues?

Gregg L. Engles

Well, we have 27,000 U.S. employees so clearly we’ve got -- we are a big manufacturing and distribution company. Clearly we have a lot of workers but regardless of what kind of business you are in, this healthcare legislation depending upon what passes, is going to have a big impact on people.

Robert Moskow – Credit Suisse

Okay. Thank you very much.

Operator

Your next question comes from Eric Serotta at Consumer Edge Research.

Eric Serotta - Consumer Edge Research

Just wanted to circle back on the competition question. Did you see things getting materially more competitive in the third quarter versus the second quarter? And then conceptually as we look out to 2010 in a rising dairy cost environment where perhaps the dairy farmer should be realizing better profitability and some of the co-ops and other integrated processors, for lack of a better term, wouldn’t be under the pressure they have been in the past few years -- as you look out, could those factors lead to a lessening of the competitive environment than what we have seen? Or are there factors at play that the economy aside that would offset that?

Gregg L. Engles

Let me address both of those issues -- I don’t know that we have seen the competitive intensity change really during the balance of this year, so starting in the fall of last year we had the economic collapse that everybody is very well familiar with. That has driven consumers, as you all that followed the packaged goods industry know very clearly, into a deep value mindset that is causing them to switch channels, that’s causing them to shop for value, it’s causing retailer to try and position themselves for value. And that fact in itself is probably the biggest factor driving competitive intensity in the marketplace.

So it’s been with us. We’ve been managing through it. We’ll continue to do so and we don’t see it meaningfully different.

I do think, however, that your point around what happens in a rising commodity environment is a very important point because as we said in February and as I alluded to in my response to Eric Katzman’s question, I believe that Dean earns a disproportionate share of the profit pool here which means we have disproportionately large margins which means the rest of the industry I believe is functioning closer to a break even level than we are.

As the value of commodities starts to rise, pressure will be felt pretty immediately on a significant portion of our competitive set to maintain profitability and reflect those increasing costs in price. I believe that will be the case.

Eric Serotta - Consumer Edge Research

Great. Thanks a lot. I’ll pass it on.

Operator

Your next question comes from Jeff Omohundro of Wells Fargo Securities.

Jeff Omohundro - Wells Fargo Securities

I just have a question on your branded businesses and specifically incremental growth opportunities -- just maybe an update on your thinking around the line extensions and perhaps on recent efforts such as the Silk [inaudible]. Thanks.

Gregg L. Engles

The most cost effective way to innovate is to extend off of a strong base that you already have. We have recently introduced Heart Health. We are advertising around that. We have seen -- we didn’t really spend very much time talking about it on this call but we have seen Silk return ex the exit of this food service aseptic contract last year. We have seen Silk return to volume growth and frankly in the last few periods, we are seeing that trend begin to accelerate, so we are heartened by what appears to be the firming and acceleration of some of these premium categories off of what had been modest declines over the last few periods. So the Silk business is performing well. The International Delight business is performing spectacularly well. Jack broke it down for you. We include in creamers both Land O'Lakes which is a traditional half and half creaming business and International Delight. The International Delight business is experiencing sales increases in the double-digits and we are really on the front-end of some very, very interesting innovations there around our coffee house inspiration lines. Interestingly, if you get it right with consumers, which we feel like we have here, even a premium margin product like International Delight can become a way for consumers to save money because they are bringing that coffee house experience home at a dramatically lower price because they are brewing their own coffee, and they are getting the experience with these wonderful creamers that we have created that mimic the coffee house lines.

So we are absolutely innovating. We are innovating in close to our base and those innovations are proving quite successful so far.

Jeff Omohundro - Wells Fargo Securities

Thanks.

Operator

Your next question comes from Farha Aslam of Stephens Inc.

Farha Aslam – Stephens Inc.

Historically you have given guidance for the next year in your third quarter call but today you deferred it to the fourth quarter. What were the factors that caused you to defer that guidance?

Gregg L. Engles

Actually we’ve only done it one time, which was last year, so we are going back to our traditional practice.

Farha Aslam – Stephens Inc.

Okay. And then when you look at the futures curve for dairy commodities, do you generally agree with it, disagree with any points in the curve?

Jack F. Callahan Jr.

Right now as we -- our sort of view, particularly for class one, is not so much from a futures point of view but at least in terms of the other forecasts that are out there right now, we are generally in line with a sort of a steady increase as we walk through 2010 and our all-in sort of average pricing assumption for next year is around $15 per hundred weight. And so I think that seems to be consistent with most of the points of view right now.

Farha Aslam – Stephens Inc.

That’s helpful. And then when you look at interest expense, you haven’t restructured much of your debt. What are your plans in terms of debt financing over the next few months?

Jack F. Callahan Jr.

I don’t want to comment on anything -- right now we are just intensely focused on leveraging the good deal that we have, driving cash flow to pay down debt and to reduce our interest expense. We think kind of getting to all that, our stated target of around 3.5 times funded debt to EBITDA positions us well to restructure the balance sheet as we move forward 12 to 18 months from now.

Farha Aslam – Stephens Inc.

So you are thinking 12 to 18 months before you’d refinance debt?

Jack F. Callahan Jr.

Well, we are always staying on top of the markets and we will be opportunistic if there was a unique opportunity but right now, we are not planning anything major over the near term.

Farha Aslam – Stephens Inc.

Okay. Final question in terms of corporate expense for next year, we are looking for slightly higher net year-over-year?

Jack F. Callahan Jr.

Largely driven by the Q1 overlap.

Farha Aslam – Stephens Inc.

Okay, great. Thank you very much.

Operator

Your next question comes from Jonathan Feeney of Janney Montgomery Scott.

Jonathan Feeney – Janney Montgomery Scott

Gregg, I wanted to follow-up on some of your industry discussion because I think it’s interesting. Could you -- just two detail points and I’m not sure if you have them off the top of your head but could you estimate, you said you had gained share maybe in Fresh Dairy Direct -- could you maybe estimate what you think the fluid milk category as a whole is growing? And secondarily, kind of comment on -- excellent detail about sort of your projections about your relative costs but I wonder if -- you know, the obvious implication is people can't operate below break-even but history indicates that in slower growth industries sometimes people aren’t always rational when they are making a little bit less money, so what effect maybe does your share gain in Fresh Dairy Direct -- and I’m talking from a longer term perspective -- perhaps have on the category?

Gregg L. Engles

Well, we --

Jonathan Feeney – Janney Montgomery Scott

I’m sorry, I mean the competition, I’m sorry.

Gregg L. Engles

Yeah. We get pretty clear visibility into the category on an aggregate basis because everybody who purchases class one raw milk has to report that to what are called the market administrators, which are a function of the FDA and those statistics are publicly available. So not by participant but we know what ours are and we can aggregate the rest of the industry, so when we put that slide up in our call every quarter showing how much we grew and how much the industry grew, it’s pretty easy to tell whether you are gaining or losing share and of course, we can disaggregate whatever comes from acquisitions to know whether we are gaining or losing base share or not in addition to what happens from acquisitions.

And you can also see very clearly in there what the industry is doing. Right now the industry is -- for the last 30 years, the industry has been flat effectively in terms of volume. Maybe it’s oscillated around that flat line by 1% or 2% but that’s sort of the extent of the volatility of volume. So share in this category approximates a zero sum gain and as we take share in the category, which we have consistently done for the last several quarters and consistently done for the last several years, we are in effect delevering the rest of the industry. Now, it’s not happening at every plant but it’s happening in the industry in the aggregate and this is a high fixed cost business.

You have plants and those plants have costs that at some level you cannot change and as those plants become to lever their cost structure on a per unit basis rises and that continues to separate us from the rest of the crowd because we are driving increasing volumes through as you know by the plant closures we announced, a decreasing number of facilities over time.

So going back to this question of why do we believe so strongly that we have the -- both a current cost advantage and the ability to continue to drive cost advantage vis-à-vis our competitive set comes back to two things. First of all, as to our existing profitability while everybody else is a private company, we by virtue of our acquisition activity and the fact that some of them publish financial statements for their -- either members or shareholders, we’ve got a pretty good sense of how the major players operate in terms of profitability and we are hundreds of basis points in excess of them in terms of operating margins and more importantly for the long run, we have a network in our Fresh Dairy Direct of over 80 facilities. A lot of these other players that we compete against have only a handful or maybe only one or two facilities. I can continually take costs out of my system by rationalizing what are by and large older, smaller, less efficient facilities into the larger among my population, the more efficient among my population and ultimately what will be new facilities that will consolidate multiple plants within my system.

No one else really even has the network opportunity to do that and it’s a tremendous cost advantage for us over time.

Jonathan Feeney – Janney Montgomery Scott

It makes perfect sense. I guess I just wonder where people don’t have -- if people don’t have those opportunities, you make them marginally sort of desperate for volume. I mean, does this five, 10 years down the road does this lead to people exiting the industry or are there more -- does that -- are there other consolidators out there who would actually take out capacity? Would you long-term plan to play a role in that? I mean, I guess I’m asking -- how is the industry structure going to change to support a sort of more rational behavior over time?

Gregg L. Engles

Well, you can only fund losses for so long. I won't predict how long any individual player can fund them but you will only fund the for so long. Beyond that, then people either exit the business and typically they exit the business by trying to get something for the assets they own, which means they try and sell them. Inevitably, another consolidator will arrive on the scene. It’s inevitable. We can't buy a lot of what is out there, so another consolidator will arrive, they will arrive with a financial model that I promise you will be built upon taking costs out of their system and increasing their system profitability.

Jonathan Feeney – Janney Montgomery Scott

Great, and just one detail question -- I’m sorry, Jack, you had talked about or I think it was you, Jack, talking about the apples-to-apples sales volume in WhiteWave Morningstar. Maybe this is too nit-picky but could you give me what the apples-to-apples volume was in WhiteWave Morningstar?

Jack F. Callahan Jr.

Volumes across WhiteWave Morningstar were actually down. WhiteWave Morningstar was down due to softness in the food service channel and WhiteWave was down primarily due to the exit of some of those situations we’ve talked about previously.

Jonathan Feeney – Janney Montgomery Scott

And you said volumes down modestly, pricing up modestly?

Jack F. Callahan Jr.

Yes, remember though on a total segment basis, remember you have Morningstar sales are down around 12%. Part of that is the modest decline in volume but a lot of that is just the natural recognition of butter price is down this year versus the last, which you know, Morningstar operates a lot like FDD where you have the pricing reset every month based on the commodity movement, so that also needs to be taken into consideration, whereas WhiteWave has a much more traditional packaged goods sort of relationship between volume and price.

Jonathan Feeney – Janney Montgomery Scott

Great. Thank you very much.

Operator

Your next question comes from Jeff Cantor of UBS O’Connor.

Jeff Cantor - UBS O’Connor

Jack, a quick question for you -- your goal for 3.5 times EBITDA for early 2011, if I look at where consensus is, it’s about $1 billion plus for EBITDA in 2010. So based on where you are right now, are you assuming -- that assumes like anywhere from $400 million to $500 million worth of debt pay-down based on how it is defined in your credit agreement. Is that correct for next year?

Jack F. Callahan Jr.

I think that is why we are now saying early 2011, Jeff, some time in the first part of 2011 versus in the past we were trying to get there by 2010 but our decision in terms of the Alpro acquisition is probably to push that back a bit. But we’ve had strong free cash flow in this business. Last year 2008 was $460 million. We are on track to -- you know, we are 331 so far this year. We are on track to do 375 or better this year so we are -- we would look to have another very strong cash flow year as we go into 2010 and early part of 2011 to continue to pay down debt.

Jeff Cantor - UBS O’Connor

But that math is right though, right, Jack?

Jack F. Callahan Jr.

Absolutely.

Jeff Cantor - UBS O’Connor

All right, so figure four through early 2011. Okay, thanks for that. Gregg, your stock is down 8%. As people just believe that you can't make money in a rising milk cost environment, so if you could maybe if I could push you back a little bit, the cost saves that you have this year of $75 million, do you expect a comparable level? I know that you don’t want to talk about 2010 but people clearly aren’t waiting for that to make investment decisions, at least today. Is that kind of a ballpark cost save that you expect to get for 2010 as well, or is it more back-end loaded, this 300 -- you know, the remaining $225 million over your three-year plan?

Gregg L. Engles

No, it is definitely not more back-end loaded, so I would expect that we have delivered a similar amount of savings or more in 2010.

Jeff Cantor - UBS O’Connor

Okay. And so you have -- and the level of investment when 2009 -- or level of reinvestment when 2009 kind of closes and we are looking at 2010, is it at a comparable level do you think in 2010 or does it come down a little bit because there is reinvestment not only in the corporate expense line but also in the dairy group line as well. What is your sense there and can you put some number, order of magnitude -- is it half, 75%, or what have you?

Gregg L. Engles

Well, keep in mind much of this capability that we have built is permanent capability. So what you will see, as Jack I think very clearly said, is you will see it stop growing at the corporate line as we get through Q1 and we have overlapped the growth that we had this year. It will start moving around to other activities because we have a succession of things that we have to do in the business. But we have significantly stepped up the level of investment in capability as we began this transformation process. That’s what you would expect and much of that early phase of significant investment has been made in 2009.

Jeff Cantor - UBS O’Connor

And just a last thing, Jack, and getting back to the balance sheet, the debt pay-down, that $400 million, which is $400 million to $500 million worth of debt pay-down, is that just internal? I know that Gregg mentioned that you are studying ice cream, for instance. Are there portfolio changes that are embedded in that debt to EBITDA goal for early 2011?

Jack F. Callahan Jr.

Jeff, we’re not contemplating any changes in the portfolio at this time. We are -- and so it is based on an as-is basis we are -- and the only other thing that I think at all kind of impacts both the sequencing and our thinking on this side would be what tuck-in acquisitions present themselves which you know, that pace does appear to be slowing. But again, if we choose, if the right one is available, they also provide us incremental EBITDA, which also continues to get us to our stated goal.

Jeff Cantor - UBS O’Connor

Okay. Thank you very much.

Operator

Your next question comes from Christine McCracken of Cleveland Research.

Christine McCracken – Cleveland Research

I just have a quick follow-up on Morningstar WhiteWave here, given what you have talked about in terms of volume and your pricing expectations around dairy, is it fair to assume that we might see incremental pricing hit here in the next year? And how might we think about the timing of that given the unique structure of how that pricing is set? In terms of as you mentioned, it’s not a complete pass-through obviously with rising dairy prices. I think that there would be a little bit of lumpiness around how pricing might move through the year.

Jack F. Callahan Jr.

Well, you can see in our discussion today we explicitly identified Morningstar sales. They effectively move their price pretty much like FDD does on a monthly basis to -- on the change on the monthly butter price, so that gives you some range of thinking about how that -- so whatever assumption you want to make on change in that particular class would have an impact.

Christine McCracken – Cleveland Research

Okay. And the remainder, like International Delight, are you looking forward to making any kind of pricing announcements there with rising dairy costs or no?

Jack F. Callahan Jr.

We are still finalizing our plans but I think this is not the time period to be incredibly aggressive in terms of pricing actions and as you can tell, we are getting some good productivity in that P&L.

Gregg L. Engles

International Delight is a non-dairy product.

Christine McCracken – Cleveland Research

Okay. I guess I was just looking at overall kind of costs, the costs outlook for the coming year. I’ll leave it there given the time. Thanks.

Operator

We have time for one more question and that comes from Akshay Jagdale of Keybanc.

Akshay Jagdale - Keybanc

Jack, just a little bit of follow-up -- most of my questions have been answered but on the cost side for your restructuring program, can you give us a better sense of what your CapEx is going to look like next year? I mean, it seems like you pushed $25 million into next year, you’ve made some directional comments on free cash flow but given that people are thinking about the cost benefit analysis, can you give us a sense of what CapEx is going to be, at least directionally next year?

Jack F. Callahan Jr.

View this as directional, not guidance, so we have not finalized our plans but if we came into this year targeting a number of around $300 million, and about $25 million of that would push into next year, so we will probably end up giving guidance somewhere in the range of somewhere between 300 and 325.

Akshay Jagdale - Keybanc

Okay and just one for Jack, just last one, you talked a little bit about how conceptually or in theory you will try to reinvest some of these savings to gain share. If I do the math and -- you know, on your FDD segment, six years out if you are going to grow 6%, that translates into roughly $250 million in growth and EBIT over six years, relative to the $300 million you are saving, which is another way to look at it in my view is to say that you gain about 1.5 points of share in the milk business. I mean, can you just give a little bit more color wherever you can in terms of how you think of if all of the savings from this program or benefits are going to come from share gains, how do you think of that?

Jack F. Callahan Jr.

Going back to some of the earlier discussion we had about the difficulty in predicting exactly how the competitive structure plays out, we really don’t have a good point of view on that right now honestly but I would point to our results in this quarter, which is we had roughly 1% volume growth in our base business ex acquisitions in a relatively flat category. So you know, I would like to think as we move forward in our programs you will see continued share gains as we start -- but again it’s going to be very -- probably more organically based versus acquisitions. The limited number of corporate development opportunities that are likely left out there for us.

Akshay Jagdale - Keybanc

Okay. Thanks for taking the question.

Operator

This concludes today’s question-and-answer session. At this time, I would like to turn the conference back over to Mr. Gregg Engles for closing remarks.

Gregg L. Engles

Thank you, Operator. Thank you all for joining us on the call this morning. We appreciate your questions and we look forward to speaking with you again soon.

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