Pro Forma Diluted Earnings Per Share Up 14% to $0.64 Per Share
Operating Strength of Core Businesses Fuels Continued Strategic Brand Investment, Resulting in 32% Volume Gains in Strategic Brand Portfolio
Company Reaffirms 2003 Guidance
DALLAS, May 8 /PRNewswire-FirstCall/ — Dean Foods Company (NYSE: DF)
today announced its financial results for the quarter ended March 31, 2003.
Net income for the first quarter was $63.2 million, compared with a loss of
$29.6 million in the first quarter of 2002. Diluted earnings per share were
$0.65, compared with a loss of $0.23 per share in the first quarter of 2002.
First quarter net sales totaled $2.1 billion, a decline of 4% over the first
quarter of 2002. The decline was due primarily to lower raw material costs
that are passed on to customers in the form of lower selling prices.
On a pro forma basis (as defined below), diluted earnings per share for
the first quarter totaled $0.64, an increase of 14% compared with pro forma
earnings of $0.56 per share in last year’s first quarter. Pro forma net
income for the first quarter grew 12% to $62.2 million compared with pro forma
net income of $55.4 million in the first quarter of 2002.
“We again saw strong performance across all of our business units,” said
Gregg Engles, chairman and chief executive officer. “Our branded product
efforts continued to bear fruit, as Morningstar/White Wave showed exceptional
32% volume gains in our strategic brand portfolio. Our growth and investment
behind those brands were driven by strong operating profits and margins in our
Dairy Group, Specialty Foods and International operations.”
The company reported first quarter operating income of $157.0 million
versus $145.8 million in the first quarter of 2002. Pro forma operating
income totaled $155.3 million, an increase of 6% over pro forma operating
income of $147.0 million in the first quarter of 2002. Pro forma first
quarter 2003 operating income margins were 7.24%, an increase of 63 basis
points versus the pro forma results from the first quarter of last year.
Operating income margin improvement was due primarily to improvement in Dairy
Group and Specialty margins, offset by increased investment behind the
strategic brand portfolio.
Long-term debt at March 31, 2003 was approximately $2.8 billion, including
$185.2 million due within one year that is reported as part of current
liabilities. At the end of the quarter, approximately $715 million of the
company’s $2.7 billion bank facility was available for future borrowings.
TIPES REDEMPTION, SHARE REPURCHASE AND STOCK SPLIT
On April 17, Dean Capital Trust, a wholly-owned subsidiary of Dean Foods,
successfully converted approximately 99% of a $100 million tranche of its
5 1/2% Trust Issued Preferred Equity Securities (TIPES) into common stock.
Shortly thereafter, Dean Foods announced the redemption of another
$200 million tranche of TIPES to be completed on May 22, 2003 at a redemption
price of $51.0315 per security. The company anticipates funding any cash
redemptions of TIPES using cash flow from operations and borrowings under the
company’s senior credit facility. Following the completion of the company’s
second partial redemption, approximately $300 million of TIPES will remain
outstanding.
As previously announced, during the first quarter, the company announced
that its Board of Directors approved a total increase of $300 million to the
company’s share repurchase program, allowing the company to purchase shares of
its common stock in open market or privately negotiated transactions.
Pursuant to the share repurchase authorization, the company repurchased
3.24 million shares of common stock during the quarter at an average price of
$39.72 per share, for an aggregate purchase price of $129 million.
Approximately $172 million remains available for spending under the share
repurchase program.
In a separate press release today, the company announced a three-for-two
split of its common stock. The stock split will be payable June 9, 2003 to
stockholders of record as of May 23, 2003.
OUTLOOK
“Given the strength of our underlying businesses, we are excited about our
future as a leading food and beverage company,” Engles said. “We are
confident about the balance of the year, and we are re-affirming our prior
earnings per share goal for 2003.”
The company also noted that it issued a separate press release today
announcing organizational changes designed to enhance its branded foods
strategy and enable the company to realize additional manufacturing
efficiencies.
“We continue to sharpen our focus, lower our cost structure and capitalize
on our competitive advantages,” continued Engles. “We remain committed to
driving increased shareholder value, and I am confident that these changes
will enable us to become a stronger organization, capable of capturing the
tremendous opportunities ahead.”
FIRST QUARTER RECONCILIATION OF PRO FORMA RESULTS WITH GAAP RESULTS
For the first quarter of 2003, the pro forma results reported above differ
from the company’s results under Generally Accepted Accounting Principles
(GAAP) by excluding a $1.7 million gain related to the disposition of a Dairy
Group plant in Michigan.
For the first quarter of 2002, the pro forma results reported above differ
from the company’s results under GAAP by excluding the following items:
- $1.2 million in restructuring charges related to a Dairy Group plant
in Michigan, - $0.7 million in income related to discontinued operations in Puerto
Rico, and - A one-time charge of $85.0 million, net of taxes, for the cumulative
effect of an accounting change related to the write-down of certain
trademarks and goodwill due to the implementation of FAS 142,
“Goodwill and Other Intangible Assets.”
Pro forma results are provided in order to allow investors to make
meaningful comparisons of the company’s operating performance between periods.
A reconciliation table between diluted earnings per share calculated according
to GAAP and pro forma diluted earnings per share (as defined above) is
attached.
SEGMENT RESULTS
Dairy Group net sales for the first quarter totaled $1.7 billion, a
decline of 5% over $1.8 billion in the first quarter of 2002. The first
quarter sales decline was due primarily to lower raw material costs that are
passed on to customers in the form of lower selling prices.
Dairy Group pro forma operating income in the first quarter improved 7% to
$136.7 million, and pro forma operating margins increased 95 basis points to
8.12% of sales, due to operating efficiencies and lower raw milk costs. The
first quarter average Class I mover, which is an indicator of the company’s
Class I raw milk prices, was $10.20 per hundred weight in the first quarter of
2003, a 14% decline versus last year.
Morningstar/White Wave net sales in the first quarter totaled
$239.2 million, virtually flat to last year, as the inclusion of White Wave
results in 2003 offset the previously-announced termination of the Nestle and
Lactaid co-packing business.
Pro forma operating income in the first quarter for Morningstar/White Wave
was $12.0 million, and pro forma operating margins were down 465 basis points
to 5.04%, in line with the company’s previously-announced expectations given
heavy spending against its strategic brands. Over half of the margin decline
in the segment is attributable to increased year-over-year marketing spending
at Morningstar, with the balance attributable to the inclusion of White Wave
in the segment following its acquisition in May 2002.
Specialty Foods’ net sales totaled $162.9 million, an increase of 1% over
the prior year first quarter, and operating income was $23.8 million, an
increase of 15%. First quarter operating income margin increased 173 basis
points to 14.62%.
CONFERENCE CALL WEBCAST
A webcast to discuss the company’s financial results and outlook will be
held at 9:00 a.m. ET today and may be heard live by visiting the “Webcasts”
section of the company site at www.deanfoods.com .
ABOUT DEAN FOODS
Dean Foods Company is one of the nation’s leading food and beverage
companies. The company produces a full line of company-branded and private
label dairy and dairy-related products such as milk and milk-based beverages,
ice cream, coffee creamers, half and half, whipping cream, whipped toppings,
sour cream, cottage cheese, yogurt, dips, dressings and soy milk. The company
is also a leading manufacturer of pickles and other specialty food products,
juice, juice drinks and water. The company operates over 120 plants in
36 U.S. states and Spain, and employs approximately 28,000 people.
Some of the statements in this press release are “forward-looking” and are
made pursuant to the safe harbor provision of the Securities Litigation Reform
Act of 1995. These “forward-looking” statements include statements relating
to, among other things, the company’s projected earnings per share. These
statements involve risks and uncertainties that may cause results to differ
materially from the statements set forth in this press release. The company’s
ability to meet targeted financial and operating results during 2003,
including targeted sales, operating margins, earnings per share and cash flow
depends on a variety of economic, competitive and governmental factors, many
of which are beyond the company’s control and which are described in the
company’s filings with the Securities and Exchange Commission. The company’s
ability to profit from its branding initiatives depends on a number of factors
including primarily consumer acceptance of the company’s products. The
forward-looking statements in this press release speak only as of the date of
this release. The company expressly disclaims any obligation or undertaking
to release publicly any updates or revisions to such statements to reflect any
change in its expectations with regard thereto or any changes in the events,
conditions or circumstances on which any such statement is based.
(Tables to follow)
DEAN FOODS COMPANY
(Dollars in thousands, except per share data)
GAAP PRO FORMA [A]
Three Months Ended Three Months Ended
March 31, March 31,
2003 2002 2003 2002
(unaudited) (unaudited)
Net sales $2,144,878 $2,226,220 $2,144,878 $2,226,220
Cost of sales 1,573,645 1,681,388 1,573,645 1,681,388
Gross profit 571,233 544,832 571,233 544,832
Operating costs and
expenses 415,941 397,787 415,941 397,787
Plant closing (gain)
loss (1,690) 1,234
Operating income 156,982 145,811 155,292 147,045
Interest expense &
financing charges
on preferred
securities 55,266 58,915 55,266 58,915
Earnings from
unconsolidated
affiliates (196) (403) (196) (403)
Other income (467) (280) (467) (280)
Income from continuing
operations before
income taxes 102,379 87,579 100,689 88,813
Income taxes 39,170 32,916 38,512 33,391
Income from continuing
operations 63,209 54,663 62,177 55,422
Income from
discontinued
operations 696
Net income before
cumulative effect
of accounting
change 63,209 55,359 62,177 55,422
Cumulative effect of
accounting change (84,983)
Net income $63,209 $(29,624) $62,177 $55,422
Basic earnings per share:
Income from continuing
operations $0.73 $0.62
Income from
discontinued
operations 0.01
Cumulative effect
of accounting
change (0.96)
Net income $0.73 $(0.33) $0.72 $0.62
Basic average common
shares (000's) 86,859 88,876 86,859 88,876
Diluted earnings per share:
Income from continuing
operations $0.65 $0.55
Income from
discontinued
operations 0.01
Cumulative effect
of accounting
change (0.79)
Net income $0.65 $(0.23) $0.64 $0.56
Diluted average
common shares
(000's) 106,201 107,903 106,201 107,903
[A] Pro forma results differ from our results reported under GAAP by
excluding the following items in order to report both periods on a
comparable basis:
In the first quarter of 2003 pro forma results exclude a gain on the
disposition of a closed plant. In the first quarter of 2002 pro
forma results exclude plant closing costs, the results of
discontinued operations, and the cumulative effect of accounting
change related to the write-down of certain trademarks and goodwill
due to the implementation of FAS 142, "Goodwill and Other Intangible
Assets".
DEAN FOODS COMPANY
Earnings per Share Summary and Reconciliation
Three Months Ended
March 31,
2003 2002
(unaudited)
GAAP diluted earnings (loss) per share $0.65 $(0.23)
Pro forma adjustments:
Plant closing (gain) loss (0.01) 0.01
Income from discontinued operations (0.01)
Cumulative effect of accounting change [B] 0.79
Pro forma diluted earnings per share $0.64 $0.56
[B] Cumulative effect of accounting change in 2002 related to the write-
down of certain trademarks and goodwill due to the implementation of
FAS 142, "Goodwill and Other Intangible Assets".
Segment Information
(Dollars in thousands)
GAAP Pro Forma [C]
Three Months Ended Three Months Ended
March 31, March 31,
2003 2002 2003 2002
Revenue (unaudited) (unaudited)
Dairy Group $1,683,669 $1,777,503 $1,683,669 $1,777,503
Morningstar Foods/White
Wave 239,248 238,580 239,248 238,580
Specialty Foods 162,938 161,215 162,938 161,215
Corporate / Other 59,023 48,922 59,023 48,922
Consolidated $2,144,878 $2,226,220 $2,144,878 $2,226,220
Operating Income
Dairy Group $138,366 $126,209 $136,676 $127,443
Morningstar Foods/White
Wave 12,049 23,105 12,049 23,105
Specialty Foods 23,827 20,787 23,827 20,787
Corporate / Other (17,260) (24,290) (17,260) (24,290)
Consolidated $156,982 $145,811 $155,292 $147,045
[C] Pro forma results differ from our results reported under GAAP by
excluding the following items in order to report both periods on a
comparable basis:
In the first quarter of 2003 pro forma results exclude a gain on the
disposition of a closed plant. In the first quarter of 2002 pro
forma results exclude plant closing costs.
DEAN FOODS COMPANY
Condensed Balance Sheet
(Dollars in Thousands)
March 31, December 31,
2003 2002
ASSETS (unaudited) (audited)
Cash and cash equivalents $26,780 $45,896
Other current assets 1,253,827 1,265,250
Total current assets 1,280,607 1,311,146
Property, plant & equipment 1,645,269 1,628,424
Intangibles & other assets 3,645,137 3,642,696
Total Assets $6,571,013 $6,582,266
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $1,180,590 $1,268,143
Long-term debt 2,618,113 2,554,482
Other long-term liabilities 547,494 531,171
Mandatorily redeemable TIPES 585,034 585,177
Stockholders' equity:
Common stock 873 886
Additional paid-in capital 907,824 979,557
Retained earnings 781,764 718,555
Other comprehensive income (50,679) (55,705)
Total stockholders' equity 1,639,782 1,643,293
Total Liabilities and
Stockholders' Equity $6,571,013 $6,582,266 DEAN FOODS COMPANY
Condensed Statement of Cash Flows
(Dollars in Thousands)
Three Months Ended March 31,
2003 2002
Operating Activities (unaudited)
Net income (loss) $63,209 $(29,624)
Depreciation and amortization 46,666 45,922
Income from unconsolidated
affiliates (196) (403)
Cumulative effect of accounting
change 84,983
Deferred income taxes 35,439 (2,947)
Changes in current assets and
liabilities (80,473) (16,826)
Other (190) 1,844
Net cash provided by continuing
operations 64,455 82,949
Net cash provided by discontinued
operations 111
Net cash provided by operations 64,455 83,060
Investing Activities
Net additions to property, plant
and equipment (53,713) (30,293)
Cash outflows for acquisitions (476) (15,901)
Net proceeds from divestitures 2,561
Proceeds from sale of fixed assets 4,496 1,013
Net cash used in continuing
operations (49,693) (42,620)
Net cash used in discontinued
operations (728)
Net cash used in investing
activities (49,693) (43,348)
Financing Activities
Proceeds from the issuance of debt 350,094 33,755
Repayment of debt (286,581) (169,619)
Issuance of common stock, net of
expenses 45,174 40,809
Redemption of common stock (142,565)
Net cash used in financing
activities (33,878) (95,055)
Decrease in cash and cash equivalents (19,116) (55,343)
Beginning cash balance 45,896 74,731
Ending cash balance $26,780 $19,388
Contact: Cory Olson
Senior Vice President and Treasurer
(214) 303-3645
P.I. Aquino
Assistant Treasurer
(214) 303-3437
SOURCE Dean Foods Company 05/08/2003
CONTACT: Cory Olson, Senior Vice President and Treasurer,
+1-214-303-3645, or P.I. Aquino, Assistant Treasurer, +1-214-303-3437, both of
Dean Foods Company
Web site: http://www.deanfoods.com
(DF)
CO: Dean Foods Company
ST: Texas
IN: FOD REA
SU: ERN ERP CCA MAV
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