Pro Forma Diluted Earnings Per Share Up 10% to $0.56, In Line With
Previously-Stated Expectations of $0.55-$0.56
DALLAS, Aug. 7 /PRNewswire-FirstCall/ — Dean Foods Company (NYSE: DF)
today announced record results for the quarter ended June 30, 2003. Net
income for the second quarter totaled $83.8 million, compared with
$73.2 million in the second quarter of 2002. Diluted earnings per share were
$0.54, compared with $0.48 per share in the second quarter of 2002. Second
quarter net sales totaled $2.2 billion in 2003, a decline of 3% over the
second quarter of 2002, 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 second quarter totaled $0.56, an increase of 10% compared with pro forma
earnings of $0.51 per share in last year’s second quarter. Dean Foods noted
that its second quarter pro forma earnings were in line with its announced
target of $0.55 to $0.56 per share, on a split-adjusted basis. Pro forma net
income for the second quarter grew 11% to $85.6 million compared with pro
forma net income of $77.3 million in the second quarter of 2002.
“We are pleased with our performance and delivered earnings per share at
the high end of our previously-stated guidance,” said Gregg Engles, chairman
and chief executive officer. “Our Dairy Group and Specialty segments
continued to turn in outstanding results, and our strategic brand portfolio
continues to grow at an impressive rate.”
The company reported second quarter operating income of $184.5 million
versus $178.4 million in the second quarter of 2002. Pro forma operating
income totaled $187.5 million, an increase of 2% over pro forma operating
income of $183.6 million in the second quarter of 2002. Pro forma second
quarter 2003 operating income margins were 8.44%, an increase of 44 basis
points versus the pro forma results from the second quarter of last year.
Operating income margin improvement was due primarily to improved results in
the Dairy Group and Specialty Foods segments, offset by a decline in
Morningstar margins due primarily to increased investment behind the company’s
strategic brands. The company’s strategic brand portfolio includes Silk(R)
and Sun Soy(R) soymilk, International Delight(R) and Land O Lakes (R) coffee
creamers, Hershey’s(R) milks and milkshakes, Land O Lakes Dairy Ease(R),
Folgers(R) Jakada(R) single-serve chilled coffee and milk beverages,
Marie’s(R) dips and dressings and Dean’s(R) dips.
Long-term debt at June 30, 2003 was approximately $2.8 billion, including
$175.5 million due within one year that is reported as part of current
liabilities. At the end of the quarter, approximately $667 million of the
company’s $2.7 billion bank facility was available for future borrowings.
STOCK SPLIT AND TIPES CONVERSION
On June 9, Dean Foods completed a three-for-two common stock split. All
of the per share information in this release has been adjusted to reflect the
split.
As of June 23, the company completed the redemption of its $600 million
Dean Capital Trust 5 1/2% Trust Issued Preferred Equity Securities (TIPES),
successfully converting over 99% into common stock.
ACQUISITIONS AND DIVESTITURES
In June 2003, Dean Foods completed the acquisition of Melody Farms, based
in Livonia, Mich. With annual sales of approximately $116 million, Melody
Farms is a leading processor and distributor of dairy products in the Michigan
marketplace and operates under the brand names of Melody Farms(R), Stroh’s(R),
Mooney’s(R), Nafzinger’s(R) and Sealtest(R).
On June 30, Dean Foods announced that it had signed a definitive agreement
to purchase Horizon Organic Holdings Corp. for $24 per share and assume
approximately $40 million in debt. In 2002, Horizon Organic reported revenues
of approximately $187 million, and in April 2003, the company announced that
it had reached a milestone of $200 million in annual sales. The transaction
is subject to approval by Horizon Organic’s shareholders and expiration of the
waiting period under the Hart-Scott Rodino Antitrust Improvements Act. The
companies continue to expect the transaction to close in the fourth quarter of
2003.
At the end of July, Dean Foods completed the sale of Morningstar Foods’
frozen whipped topping and frozen creamer business based in Arlington, Tenn.,
to Rich Products Corporation. In 2002, the divested business had sales of
approximately $55 million, and cash proceeds from the sale totaled
$91 million. The sale of the frozen business is approximately 5 cents
dilutive to earnings per share on an annual basis. However, the company noted
that due to its significant seasonality, approximately 4 cents of the dilution
from the sale of this business will be reflected in the balance of 2003.
The company noted that the anticipated accretion from the acquisition of
Melody Farms and the pending acquisitions of Horizon Organic and Kohler Mix
Specialties is expected to offset the dilutive impact of the frozen business
divestiture in 2004. As a result, the net effect of all these transactions is
expected to be neutral to earnings in 2004. However, because the pending
Horizon Organic and Kohler acquisitions are not expected to occur until late
2003, the pre-whip topping divestiture is expected to be dilutive to the third
and fourth quarters of 2003.
“As we create a world-class food and beverage company, we continue to
sharpen our focus and look at acquisitions and divestitures that make strong
strategic sense for our business,” said Engles. “This quarter’s announced
acquisitions and divestiture have the effect of redeploying our resources into
those areas where we have the greatest competitive advantage and opportunity.
“Melody Farms is a valuable tuck-in acquisition for our Dairy Group and
reflects our commitment to continue to build our core business. With the
acquisition of Horizon Organic, we will add the leading organic milk brand in
the U.S. and the U.K. to our portfolio. In our Silk and Horizon Organic
brands, we will have the nation’s number one and number two organic brands.
With aggregate 2003 sales of approximately $475 million and growing rapidly,
Silk and Horizon Organic, both based in Boulder, Colorado, will form the basis
of a powerful wellness platform from which we intend to build a family of
innovative, value-added and better-for-you products,” Engles continued.
OUTLOOK
The company re-affirmed its 12-14% growth expectations for 2003, before
adjusting for the dilutive effect of the sale of Morningstar’s frozen
business. “We expect 2003 earnings to be in the range of $2.03 to $2.07 per
share, which reflects our earlier guidance of $2.07 to $2.11 per share,
reduced by 4 cents for the dilution of the sale of the frozen
business,” Engles said.
“Rising raw milk prices in the coming months have been incorporated into
our outlook for the year, and we are confident we will manage through this
environment effectively,” continued Engles. “We anticipate third quarter
earnings will be in the range of $0.51 to $0.53 per share, and we expect to
deliver $0.54 to $0.56 per share in the fourth quarter. We have accomplished
a great deal so far this year and remain enthusiastic and committed to
increasing shareholder value at Dean Foods.”
SECOND QUARTER RECONCILIATION OF PRO FORMA RESULTS WITH GAAP RESULTS
For the second quarter of 2003, the pro forma results reported above
differ from the company’s results under Generally Accepted Accounting
Principles (GAAP) by excluding a $3.0 million charge ($1.9 million net of
income tax) related primarily to closing an ice cream plant in Hawaii.
For the second quarter of 2002, the pro forma results reported above
differ from the company’s results under GAAP by excluding $5.3 million of
restructuring charges ($3.3 million net of income tax) related to closing a
Dairy Group plant in Vermont and a distribution center in Virginia, as well as
a $0.8 million net loss related to discontinued operations in Puerto Rico.
Pro forma results are provided in order to allow investors to make
meaningful comparisons of Dean Foods’ operating performance between periods
and to view the company’s business from the same perspective as the company’s
management. 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 second quarter totaled $1.7 billion, a
decline of 4% from $1.8 billion in the second quarter of 2002. The second
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 second quarter improved 16%
to $165.4 million, and pro forma operating margins increased 169 basis points
to 9.61% of sales, due primarily to lower raw milk costs and realized
synergies. The second quarter average Class I mover, which is an indicator of
the company’s Class I raw milk prices, was $9.70 per hundred-weight in the
second quarter of 2003, a 14% decline versus last year.
Morningstar/White Wave net sales in the second quarter totaled
$262.9 million, down 0.3% compared to last year. Strong results at White Wave
offset the previously-announced termination of the Nestle co-packing business
at Morningstar; lower selling prices due to the decline in raw material costs;
and increased couponing, slotting and market development spending for
Morningstar’s strategic brands, which under GAAP are recorded as a reduction
to sales.
Pro forma operating income in the second quarter for Morningstar/White
Wave was $10.5 million, and pro forma operating margins were down 768 basis
points to 4.01%, in line with the company’s previously-announced expectations
for heavy spending against its strategic brands. Most of the decline in the
segment’s margin is attributable to increased year-over-year brand spending at
Morningstar and White Wave, partially offset by operating improvements at
White Wave.
Specialty Foods’ net sales totaled $175.7 million, a decline of 1% over
the prior year second quarter, and operating income was $27.0 million, an
increase of 7%. Second quarter operating income margin increased 108 basis
points to 15.38%.
RESULTS FOR SIX MONTHS ENDED JUNE 30, 2003
The company’s net sales declined 3% to $4.4 billion for the six months
ended June 30, 2003, compared with $4.5 billion during the first six months of
2002. The decline is due primarily to lower raw material costs in the first
half of the year that are passed on to customers in the form of lower selling
prices. Net income for the first half of the year totaled $147.0 million,
compared with $43.6 million in 2002. Diluted earnings per share for the six
months ended June 30, 2003 totaled $0.97, compared with $0.33 in the first six
months of 2002.
Pro forma net income for the six months (as defined below) totaled
$147.8 million, an increase of 11% over $132.7 million last year. Pro forma
diluted earnings per share for the first six months of 2003 totaled $0.98, an
increase of 11% compared with $0.88 in the first six months of 2002.
The company reported operating income for the period ended June 30, 2003
of $341.4 million versus $324.2 million in 2002, an increase of 5%. Pro forma
operating income for the first six months of 2003 totaled $342.8 million, an
increase of 4% over pro forma operating income of $330.7 million last year.
Pro forma operating income margins for the six months were 7.85%, an increase
of 54 basis points versus the pro forma results of the prior year’s first six
months.
SIX MONTH RECONCILIATION OF PRO FORMA RESULTS WITH GAAP RESULTS
For the six months ended June 30, 2003 the pro forma results reported
above differ from the company’s results reported under GAAP by excluding
restructuring charges of $1.3 million ($0.8 million net of income tax) related
to plant closings.
For the first six months of 2002, the pro forma results reported above
differ from the company’s 2002 results reported under GAAP by excluding the
following: $6.5 million ($4.0 million net of income tax) in plant closing
charges; $0.1 million net loss from discontinued operations; and a one-time
total charge of $85.0 million, net of income tax, related to the write-down of
certain trademarks and goodwill due to the implementation of Financial
Accounting Standard (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
and to view the company’s business from the same perspective as the company’s
management. A reconciliation table between earnings per share calculated
according to GAAP and pro forma earnings per share (as defined above) is
attached.
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
June 30, June 30,
2003 2002 2003 2002
Net sales $2,222,572 $2,295,243 $2,222,572 $2,295,243
Cost of sales 1,621,419 1,694,786 1,621,419 1,694,786
Gross profit 601,153 600,457 601,153 600,457
Operating costs and
expenses 413,662 416,814 413,662 416,814
Plant closing costs 3,025 5,269
Operating income 184,466 178,374 187,491 183,643
Interest expense &
financing charges
on preferred
securities 50,110 59,298 50,110 59,298
(Earnings) loss from
unconsolidated
affiliates 17 (1,404) 17 (1,404)
Other (income) expense (304) 744 (304) 744
Income from continuing
operations before
income taxes 134,643 119,736 137,668 125,005
Income taxes 50,854 45,706 52,020 47,725
Income from continuing
operations 83,789 74,030 85,648 77,280
Loss from discontinued
operations (804)
Net income $83,789 $73,226 $85,648 $77,280
Basic earnings per share:
Income from continuing
operations $0.60 $0.55
Loss from discontinued
operations (0.01)
Net income $0.60 $0.54 $0.61 $0.57
Basic average
common shares (000's) 139,477 135,075 139,477 135,075
Diluted earnings per share:
Income from continuing
operations $0.54 $0.49
Loss from discontinued
operations (0.01)
Net income $0.54 $0.48 $0.56 $0.51
Diluted average
common shares
(000's) 160,758 163,483 160,758 163,483
(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 second quarter of 2003 pro forma results exclude plant
closing costs. In the second quarter of 2002 pro forma results
exclude plant closing costs and the results of discontinued
operations.
DEAN FOODS COMPANY
(Dollars in thousands, except per share data)
GAAP PRO FORMA (B)
Six Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Net sales $4,367,450 $4,521,463 $4,367,450 $4,521,463
Cost of sales 3,195,064 3,376,174 3,195,064 3,376,174
Gross profit 1,172,386 1,145,289 1,172,386 1,145,289
Operating costs and
expenses 829,603 814,601 829,603 814,601
Plant closing costs 1,335 6,503
Operating income 341,448 324,185 342,783 330,688
Interest expense &
financing charges
on preferred
securities 105,376 118,213 105,376 118,213
Earnings from
unconsolidated
affiliates (179) (1,807) (179) (1,807)
Other (income) expense (771) 464 (771) 464
Income from continuing
operations before
income taxes 237,022 207,315 238,357 213,818
Income taxes 90,024 78,622 90,532 81,116
Income from continuing
operations 146,998 128,693 147,825 132,702
Loss from discontinued
operations (108)
Net income before
cumulative effect
of accounting
change 146,998 128,585 147,825 132,702
Cumulative effect of
accounting change (84,983)
Net income $146,998 $43,602 $147,825 $132,702
Basic earnings per
share:
Income from continuing
operations $1.09 $0.96
Loss from discontinued
operations
Cumulative effect of
accounting change (0.64)
Net income $1.09 $0.32 $1.10 $0.99
Basic average common
shares (000's) 134,908 134,199 134,908 134,199
Diluted earnings per
share:
Income from continuing
operations $0.97 $0.86
Loss from discontinued
operations
Cumulative effect of
accounting change (0.53)
Net income $0.97 $0.33 $0.98 $0.88
Diluted average common
shares (000's) 160,073 162,725 160,073 162,725
(B) 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 six months of 2003 pro forma results exclude plant
closing costs and a gain on the disposition of a closed plant. In
the first six months 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 Six Months Ended
June 30, June 30,
2003 2002 2003 2002
GAAP diluted earnings per share $0.54 $0.48 $0.97 $0.33
Pro forma adjustments:
Plant closing costs 0.02 0.02 0.01 0.02
Loss from discontinued operations 0.01
Cumulative effect of accounting
change (C) 0.53
Pro forma diluted earnings per share $0.56 $0.51 $0.98 $0.88
(C) 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 (D)
Three Months Ended Three Months Ended
June 30, June 30,
2003 2002 2003 2002
Revenue
Dairy Group $1,720,705 $1,798,715 $1,720,705 $1,798,715
Morningstar Foods/White
Wave 262,898 263,796 262,898 263,796
Specialty Foods 175,676 177,363 175,676 177,363
Corporate / Other 63,293 55,369 63,293 55,369
Consolidated $2,222,572 $2,295,243 $2,222,572 $2,295,243
Operating Income
Dairy Group $162,345 $137,138 $165,370 $142,407
Morningstar Foods/White
Wave 10,538 30,835 10,538 30,835
Specialty Foods 27,018 25,367 27,018 25,367
Corporate / Other (15,435) (14,966) (15,435) (14,966)
Consolidated $184,466 $178,374 $187,491 $183,643
GAAP Pro Forma (E)
Six Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Revenue
Dairy Group $3,404,374 $3,576,218 $3,404,374 $3,576,218
Morningstar Foods/White
Wave 502,146 502,376 502,146 502,376
Specialty Foods 338,614 338,578 338,614 338,578
Corporate / Other 122,316 104,291 122,316 104,291
Consolidated $4,367,450 $4,521,463 $4,367,450 $4,521,463
Operating Income
Dairy Group $300,711 $263,347 $302,046 $269,850
Morningstar Foods/White
Wave 22,587 53,940 22,587 53,940
Specialty Foods 50,845 46,154 50,845 46,154
Corporate / Other (32,695) (39,256) (32,695) (39,256)
Consolidated $341,448 $324,185 $342,783 $330,688
(D) 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 second quarter of both years, pro forma results exclude
plant closing costs.
(E) 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 six months of 2003 pro forma results exclude plant
closing costs and a gain on the disposition of a closed plant. In
the first six months of 2002 pro forma results exclude plant
closing costs.
DEAN FOODS COMPANY
Condensed Balance Sheet
(Dollars in Thousands)
June 30, December 31,
ASSETS 2003 2002
Cash and cash equivalents $28,003 $45,896
Other current assets 1,252,430 1,265,250
Total current assets 1,280,433 1,311,146
Property, plant & equipment 1,689,176 1,628,424
Intangibles & other assets 3,683,745 3,642,696
Total Assets $6,653,354 $6,582,266
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $1,158,293 $1,268,143
Long-term debt 2,603,030 2,554,482
Other long-term liabilities 566,376 531,171
Mandatorily redeemable TIPES 585,177
Stockholders' equity:
Common stock 1,550 1,330
Additional paid-in capital 1,513,380 979,113
Retained earnings 865,552 718,555
Other comprehensive income (54,827) (55,705)
Total stockholders' equity 2,325,655 1,643,293
Total Liabilities and
Stockholders' Equity $6,653,354 $6,582,266 DEAN FOODS COMPANY
Condensed Statement of Cash Flows
(Dollars in Thousands)
Six Months Ended June 30,
Operating Activities 2003 2002
Net income $146,998 $43,602
Depreciation and amortization 94,120 87,688
Income from unconsolidated affiliates (179) (1,807)
Cumulative effect of accounting change 84,983
Deferred income taxes 52,755 (17,044)
Changes in current assets and liabilities (71,196) 84,192
Other (5,529) 6,997
Net cash provided
by continuing operations 216,969 288,611
Net cash used
in discontinued operations (1,216)
Net cash provided by operations 216,969 287,395
Investing Activities
Net additions to property, plant
and equipment (130,580) (89,383)
Cash outflows for acquisitions (52,048) (214,900)
Net proceeds from divestitures 2,561
Proceeds from sale of fixed assets 5,170 2,122
Net cash used in continuing operations (177,458) (299,600)
Net cash used
in discontinued operations (2,313)
Net cash used in investing activities (177,458) (301,913)
Financing Activities
Proceeds from the issuance of debt 131,049 189,235
Repayment of debt (107,745) (242,102)
Issuance of common stock, net of expenses 64,277 51,209
Redemption of common stock (142,565)
Other (2,420) (762)
Net cash used in financing activities (57,404) (2,420)
Decrease in cash and cash equivalents (17,893) (16,938)
Beginning cash balance 45,896 78,260
Ending cash balance $28,003 $61,322
Contact: Cory Olson
Senior Vice President and Treasurer
(214) 303-3645
P.I. Aquino
Assistant Treasurer
(214) 303-3437
SOURCE Dean Foods Company
-0- 08/07/2003
/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
AH-GN
— DATH017 —
3650 08/07/2003 06:45 EDT http://www.prnewswire.com
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