DSD Dairy Operations Post Improvement Over Previous Quarters
Strong Sales Growth Across WhiteWave-Morningstar Helps Drive Results</br.
Earnings of $0.21 per Share, $0.23 Adjusted Earnings per Share
Reporting Segments Realigned to Reflect Changes in the Business
DALLAS, April 30 /PRNewswire-FirstCall/ — Dean Foods Company (NYSE: DF)
today announced that the Company earned $0.21 per diluted share from
continuing operations for the quarter ended March 31, 2008, compared with
$0.47 per diluted share from continuing operations in the first quarter of
2007. Net income from continuing operations for the first quarter totaled
$30.8 million, compared with $63.8 million in the prior year’s first quarter.
On an adjusted basis (as defined below), diluted earnings per share were
$0.23, compared to $0.50 in the prior year’s first quarter. Adjusted net
income from continuing operations for the first quarter was $32.4 million,
compared to adjusted net income of $67.0 million in the first quarter of 2007.
The decrease in adjusted net income and earnings per share is related to the
increase in interest expense as a result of the special cash dividend of $15
per share that was paid in April 2007 and lower operating results in the
quarter. Interest expense in the quarter totaled $83.8 million, compared to
$52.2 million in the first quarter of 2007, accounting for the majority of the
year over year decline in adjusted net income.
“On the heels of the most challenging year in our history, I am pleased
with the progress we’ve made in the first quarter of this new year across our
business,” commented Gregg Engles, Chairman and Chief Executive Officer.
“While we expect continued challenges in the balance of 2008, we believe the
difficulties of last year have strengthened our ability to navigate the
continued volatility we anticipate in the commodity markets going forward.”
In the first quarter, as reflected in this earnings release, the Company
realigned its reporting segments to reflect recent changes in the business
reporting relationships along business platforms. Morningstar Foods, which is
primarily a private label, warehouse delivered, extended shelf life and
cultured dairy products business, has been combined with WhiteWave Foods to
create the WhiteWave-Morningstar reporting segment, with $2.4 billion in 2007
net sales, reporting to Joe Scalzo. Morningstar results were previously
reported as part of the Dairy Group reporting segment.
The newly created DSD Dairy segment, under the leadership of Harrald
Kroeker, primarily consists of the Company’s conventional fluid milk, ice
cream, creamers and other dairy, juice, and tea operations. These products are
generally shorter-shelf life products that are produced in local facilities
and distributed through the Company’s national refrigerated direct store
delivery (DSD) system. The DSD Dairy segment had full year net sales of $9.4
billion in 2007.
The Company expects this realignment to allow WhiteWave and Morningstar to
leverage the combined operational, selling systems and research and
development expertise across this larger base of longer-shelf life, warehouse
delivered business over time. For the DSD Dairy business, there is now
increased focus on lowering costs and continuing to deliver consistently
superior customer service in its high velocity, direct to customer business
model. Recast historical financial information reflecting the change in
reporting segments is included as an attachment to this press release.
Summary of Dean Foods First Quarter 2008 Segment and Operating Results
(in millions, except EPS)
Value % Change from Q107
DSD Dairy:
Fluid Milk Volume N/A -1.2%
Operating Income $130.9 -15%
WhiteWave - Morningstar:
Net Sales $618.5 17%
Operating Income $45.4 1%
Consolidated Adjusted Operating Income: $138.3 -14%
Interest Expense: $83.8 61%
Adjusted Diluted Earnings per Share: $0.23 -54%
DEAN FOODS CONSOLIDATED
Net sales for the first quarter totaled $3.1 billion, an increase of 17%
from net sales in the first quarter of 2007. Net sales increase in the quarter
was due to the pass-through of higher dairy commodity costs and strong sales
growth at WhiteWave-Morningstar.
Consolidated operating income in the first quarter totaled $136.1 million,
a decrease of 12% from $154.2 million in the first quarter of 2007. Adjusted
first quarter consolidated operating income totaled $138.3 million, a decrease
of 14% from $159.9 million in the first quarter of 2007.
DSD DAIRY
DSD Dairy net sales for the first quarter were $2.5 billion, a 17%
increase from $2.1 billion in net sales for the first quarter of 2007. The
sales increase was due primarily to the pass-through of higher overall dairy
commodity costs to customers. The first quarter average Class I mover, which
is an indicator of the Company’s raw milk costs, averaged $19.12 per hundred-
weight, a 39% increase from the same period in 2007 and 9% lower than the
fourth quarter of 2007. Class II butterfat prices averaged $1.34 per pound in
the first quarter, flat with the same period a year ago and 6% lower than the
fourth quarter of 2007.
DSD Dairy segment operating income in the first quarter was $130.9
million, compared to $153.7 million in the first quarter of 2007, as the
impact of the pass-through of high dairy commodity costs and other items such
as shrink, lower proceeds from excess cream sales, higher fuel costs and
consumer mix shift toward private label products continued to pressure
results. Additionally, first quarter 2007 results for the DSD Dairy segment
include approximately $12 million of one-time benefits not included in the
2008 period.
WHITEWAVE – MORNINGSTAR
The WhiteWave-Morningstar segment reported first quarter net sales of
$618.5 million, 17% higher than first quarter 2007 net sales of $529.7
million. Sales growth was strong across the Morningstar business, as well as
the entire branded portfolio with net sales of Horizon Organic(R) milk
increasing nearly 30% due to continued strong volume growth that was driven by
increased promotional activity and lower average prices versus the year ago
period. Strong category growth and market share performance led to
International Delight(R) and Silk(R) net sales increases in the low double-
digits and Land O’Lakes(R) sales grew in the high single-digits over the same
period last year.
Segment operating income in the first quarter for WhiteWave-Morningstar
was $45.4 million, compared to $45.2 million in the first quarter of 2007.
Segment operating margins were 7.3%, compared to 8.5% in the first quarter of
2007, due to the lower contribution from Horizon Organic as a result of
increased brand spending and lower overall gross profit margins.
CORPORATE EXPENSE
Corporate and other expenses totaled $38.0 million, compared to $38.9
million in the first quarter of 2007. The decrease in the quarter was driven
by on-going cost controls in base general and administrative costs offset by
continued investments in support of the Company’s strategic initiatives.
CASH FLOW
Net cash provided by continuing operations for the first quarter of 2008
totaled $158 million, compared to $138 million for the first quarter of 2007.
The increase in net cash provided by continuing operations is due primarily to
decreased working capital requirement, offset by higher year over year
interest expense and lower operating results. Also in the first quarter, the
company raised approximately $400 million through a stock offering totaling
18.7 million shares.
Capital expenditures for the first quarter of 2008 totaled $45 million,
compared to $52 million for the first quarter of 2007.
In the first quarter, debt outstanding decreased by $460 million. Total
debt at March 31, 2008, net of $41 million in cash on hand, was approximately
$4.8 billion. The Company’s funded debt to EBITDA ratio, as defined its credit
agreements, declined to 5.56x as of the end of the first quarter.
FORWARD OUTLOOK
“It’s clear that our results this year will largely be driven by the
commodity markets, which remain highly unsettled and inflationary,” continued
Mr. Engles. “Longer term, we expect our transformational efforts to
increasingly drive our results.”
“For the second quarter, the conventional commodity markets remain
volatile,” commented Jack Callahan, Chief Financial Officer. “Furthermore, the
organic milk market is shifting rapidly from a state of oversupply to one of
undersupply. Given the current instability in these markets, balanced against
the momentum in the business coming off of a strong first quarter, we
currently expect adjusted earnings per share for the second quarter in a range
of $0.26 to $0.31 per share.”
“For the full year 2008, we have relatively greater confidence today
compared to the start of the year,” However, we believe it is too early to
reassess our full year guidance given the dynamic volatility in the commodity
markets. Therefore, we are maintaining our full year outlook for adjusted
earnings per share of at least $1.20, and we will revisit this guidance in
conjunction with our second quarter earnings report.”
COMPARISON OF ADJUSTED INFORMATION TO GAAP INFORMATION
The adjusted financial results contained in this press release are from
continuing operations and are adjusted to eliminate the net expense or net
gain related to the items identified below. This information is 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 Company management. Because the Company cannot predict
the timing and amount of charges associated with non-recurring items or
facility closings and reorganizations, management does not consider these
costs when evaluating the Company’s performance, when making decisions
regarding the allocation of resources, in determining incentive compensation
for management, or in determining earnings estimates. These costs are not
presented in any of the Company’s operating segments. This non-GAAP financial
information is provided as additional information for investors and is not in
accordance with or an alternative to GAAP. These non-GAAP measures may be
different than similar measures used by other companies. A full reconciliation
for the three month periods ended March 31, 2008 and 2007 calculated according
to GAAP and on an adjusted basis is attached.
For the quarter ended March 31, 2008, the adjusted results reported above
differ from the Company’s results under GAAP by excluding the following
facility closing reorganization and other nonrecurring charges:
-- $2.2 million charge ($1.3 million net of income tax) related to the
realignment of the Dairy Group's finance and accounting organization,
the closure of our Denver, CO manufacturing facility and other
previously announced facility closings; and
-- $0.6 million charge ($0.3 million net of income tax) related to
non-recurring special cash dividend costs.
For the quarter ended March 31, 2007, the adjusted results reported above
differ from the Company’s results under GAAP by excluding the following
facility closing and reorganization charges:
-- a $3.4 million charge ($2.1 million net of income tax) related to
previously announced facility closings;
-- a $2.4 million charge ($1.5 million net of income tax) related to the
realignment of our Dairy Group's finance organization; and
-- a $0.4 million charge ( $0.2 million net of income tax) related to
non-recurring special cash dividend costs.
CONFERENCE CALL WEBCAST
A webcast to discuss the Company’s financial results and outlook will be
held at 9:30 a.m. ET today and may be heard live by visiting the “Webcast”
section of the Company site at http://www.deanfoods.com/investors. There will
be a slide presentation along with the webcast.
ABOUT DEAN FOODS
Dean Foods Company is the largest processor and distributor of milk and
other dairy products in the United States. The Company sells milk and a full
range of other dairy products under more than 50 well-known local and regional
brands and a wide array of private labels. The Company’s WhiteWave Foods
division produces a variety of nationally-branded dairy and dairy-related
products, such as Horizon Organic (R) dairy products, Silk (R) soymilk, and
International Delight (R) coffee creamers. WhiteWave Foods’ Rachel’s Organic
(R) brand is the largest organic milk brand and second largest organic yogurt
brand in the United Kingdom.
FORWARD-LOOKING STATEMENTS
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, projected sales, operating income, net income and
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, including targeted sales, operating income, net income and earnings
per share depends on a variety of economic, competitive and governmental
factors, including raw material availability and costs, the demand for the
Company’s products, and the Company’s ability to access capital under its
credit facilities or otherwise, 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 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.
Contact:
Investors:
Barry Sievert
Investor Relations
(214) 303-3437
Media:
Marguerite Copel
Corporate Communications
(214) 721-1273
(Tables to follow)
DEAN FOODS COMPANY
Condensed Consolidated Income Statements
Three months ended March 31, 2008 and 2007
(Unaudited)
(dollars in thousands, except per share data)
2008 2007
Net sales $3,076,960 $2,629,749
Cost of sales 2,388,386 1,942,474
Gross profit 688,574 687,275
Operating costs and expenses 550,255 527,347
Facility closings, reorganizations and
other costs 2,215 5,775
Operating income 136,104 154,153
Interest expense 83,832 52,241
Other (income) expense 619 300
Income from continuing operations
before income taxes 51,653 101,612
Income taxes 20,881 38,409
Income from continuing operations 30,772 63,203
Income (loss) from discontinued
operations, net of tax - 617
Net income $30,772 $63,820
Basic earnings per share:
Income from continuing operations $0.22 $0.49
Income (loss) from discontinued operations - 0.01
Net income $0.22 $0.50
Basic average common shares (000's) 137,883 128,890
Diluted earnings per share:
Income from continuing operations $0.21 $0.47
Income (loss) from discontinued operations - -
Net income $0.21 $0.47
Diluted average common shares (000's) 143,289 134,521
DEAN FOODS COMPANY
Condensed Consolidated Balance Sheets
(Unaudited)
(dollars in thousands)
March 31, December 31,
ASSETS 2008 2007
Cash and cash equivalents $40,976 $32,555
Other current assets 1,440,803 1,499,429
Total current assets 1,481,779 1,531,984
Property, plant & equipment 1,807,868 1,798,378
Intangibles & other assets 3,724,434 3,702,994
Total Assets $7,014,081 $7,033,356
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities, excluding debt $960,153 $907,270
Total long-term debt, including
current portion 4,812,379 5,272,351
Other long-term liabilities 805,053 802,468
Stockholders' equity:
Common stock 1,515 1,322
Additional paid-in capital 483,976 70,214
Retained earnings 98,305 67,533
Other comprehensive income (loss) (147,300) (87,802)
Total stockholders' equity 436,496 51,267
Total Liabilities and Stockholders'
Equity $7,014,081 $7,033,356
DEAN FOODS COMPANY
Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 2008 and 2007
(Unaudited)
(dollars in thousands)
Operating Activities 2008 2007
Net income $30,772 $63,820
(Income) loss from discontinued
operations - (617)
Depreciation and amortization 59,379 57,343
Deferred income taxes 26,709 -
Share-based compensation 8,491 8,303
Write-down of impaired assets 649 4,760
Changes in current assets and
liabilities 32,604 3,730
Other (343) 669
Net cash provided by continuing
operations 158,261 138,008
Net cash used in discontinued
operations - -
Net cash provided by operating
activities 158,261 138,008
Investing Activities
Additions to property, plant and
equipment (44,759) (51,781)
Cash outflows for acquisitions (51,800) (125,839)
Proceeds from divestitures - 10,706
Proceeds from sale of fixed assets 2,550 1,550
Net cash used in continuing
operations (94,009) (165,364)
Net cash used in discontinued
operations - -
Net cash used in investing
activities (94,009) (165,364)
Financing Activities
Repayment of debt (8,995) (61,075)
Net proceeds from (payments for)
revolver and receivables-backed
facility (452,300) 71,400
Issuance of common stock, net 405,464 18,026
Tax savings on share-based
compensation - 5,819
Net cash provided (used) by
continuing operations (55,831) 34,170
Net cash provided by discontinued
operations - -
Net cash provided (used) by
financing activities (55,831) 34,170
Increase in cash and cash equivalents 8,421 6,814
Beginning cash balance 32,555 31,140
Ending cash balance $40,976 $37,954
Computation of Free Cash Flow
Provided by Operations
Three months ended March 31, 2008
and 2007
(dollars in thousands)
2008 2007
Net cash provided by continuing operations $158,261 $138,008
Additions to property, plant and equipment (44,759) (51,781)
Free cash flow provided by operations $113,502 $86,227
DEAN FOODS COMPANY
Segment Information
Three months ended March 31, 2008 and 2007
(Unaudited)
(dollars in thousands)
2008 2007
Net sales:
DSD Dairy $2,458,476 $2,100,066
WhiteWave-Morningstar 618,484 529,683
Total $3,076,960 $2,629,749
Segment operating income (loss):
DSD Dairy $130,908 $153,650
WhiteWave-Morningstar 45,392 45,178
Corporate / Other (37,981) (38,900)
Subtotal 138,319 159,928
Facility closings, reorganizations and
other costs (2,215) (5,775)
Total operating income $136,104 $154,153
DEAN FOODS COMPANY
Recast Historical Segment Information (1)
Fiscal Years ended December 31, 2005, 2006, and 2007
(Unaudited)
(dollars in thousands)
2007
Quarter ended
March 31 June 30 Sept 30 Dec 31
Net sales:
DSD Dairy $2,100,066 $2,252,786 $2,498,634 $2,559,616
WhiteWave-Morningstar 529,683 590,859 618,162 672,097
Total $2,629,749 $2,843,645 $3,116,796 $3,231,713
Segment operating income
(loss):
DSD Dairy $153,650 $141,154 $116,543 $126,616
WhiteWave-Morningstar 45,178 55,824 43,062 60,887
Corporate / Other (38,900) (39,541) (36,483) (38,284)
Subtotal 159,928 157,437 123,122 149,219
Facility closings,
reorganizations and
other costs (5,775) (3,800) (19,816) (6,718)
Total operating
income $154,153 $153,637 $103,306 $142,501
2007 2006 2005
Net sales:
DSD Dairy $9,411,102 $8,030,637 $8,194,208
WhiteWave-Morningstar 2,410,801 2,067,918 1,980,510
Total $11,821,903 $10,098,555 $10,174,718
Segment operating income (loss):
DSD Dairy $537,963 $610,223 $577,269
WhiteWave-Morningstar 204,951 207,140 179,724
Corporate / Other (153,208) (141,552) (141,447)
Subtotal 589,706 675,811 615,546
Facility closings,
reorganizations and other
costs (36,109) (25,116) (35,451)
Total operating income $553,597 $650,695 $580,095
(1) The historical segment information has been recast to reflect the
change in reporting segments. The change in presentation had no
impact on consolidated net sales or operating income.
DEAN FOODS COMPANY
Reconciliation of Non-GAAP Financial Measures
Three months ended March 31, 2008 and 2007
(Unaudited)
(dollars in thousands, except per share data)
2008 2007
Reconciliation of GAAP to adjusted operating
income from continuing operations
GAAP operating income from continuing
operations $136,104 $154,153
Adjustment:
Facility closings, reorganizations and
other costs 2,215 5,775
Adjusted operating income from continuing
operations $138,319 $159,928
Reconciliation of GAAP to adjusted net
income from continuing operations
GAAP net income from continuing operations $30,772 $63,203
Adjustments, net of tax:
Facility closings, reorganizations and other
costs 1,320 3,592
Debt refinancing and special dividend costs 340 235
Adjusted net income from continuing
operations $32,432 $67,030
Reconciliation of GAAP to adjusted
diluted earnings per share
GAAP diluted earnings per share from
continuing operations $0.21 $0.47
Adjustments, net of tax 0.02 0.03
Adjusted diluted earnings per share $0.23 $0.50
SOURCE Dean Foods Company
CONTACT: Investors, Barry Sievert, Investor Relations, +1-214-303-3437,
or Media, Marguerite Copel, Corporate Communications, +1-214-721-1273, both of
Dean Foods Company
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