Thursday, 8 May 2003

Dean Foods Company Announces Record First Quarter Results

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Thursday, 8 May 2003

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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