Wednesday, 4 May 2005

Dean Foods Company Reports First Quarter Results

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Wednesday, 4 May 2005

Company Reports First Quarter Adjusted Diluted Earnings Per Share of $0.48 Full Year Adjusted Diluted Earnings Guidance Raised to a Range of $2.28 to $2.33 Per Share Company Receives Favorable IRS Ruling Regarding Its Spin-Off of Specialty Foods

DALLAS, May 4, 2005 /PRNewswire-FirstCall via COMTEX/ — Dean Foods Company (NYSE: DF)
today announced that the company earned $0.43 per diluted share for the
quarter ended March 31, 2005, flat compared to $0.43 per diluted share in the
first quarter of 2004. Net income for the first quarter totaled
$66.2 million, compared with $69.2 million in the prior year first quarter.

On an adjusted basis (as defined below), diluted earnings per share
increased 7% to $0.48, compared to $0.45 in last year’s first quarter.
Adjusted net income for the first quarter was $74.2 million compared with
adjusted net income of $73.9 million in the first quarter of 2004.

“I am pleased with our results for the first quarter,” said Gregg Engles,
chairman and chief executive officer. “Our Dairy Group performed very well,
exceeding our expectations, and we continued to see strong growth in demand
for our national brands. Also, our strategic initiatives to consolidate our
branded businesses and spin-off our Specialty Foods Group are progressing as
expected. We believe this quarter marks the beginning of what should be a
year of significant progress.”

Net sales for the first quarter totaled $2.7 billion, an increase of 12%
over the first quarter of 2004, primarily due to increased selling prices in
the Dairy Group resulting from the pass through of higher raw milk costs and
continued strong volume growth in the Dairy Group’s fluid milk operations and
at WhiteWave Foods.

Consolidated operating income in the first quarter totaled $150.1 million
versus $152.4 million in the first quarter of 2004. Adjusted first quarter
operating income totaled $163.1 million, a 2% increase compared to
$160.0 million in the first quarter of 2004. The company’s adjusted 2005
operating income margin was 5.95%, down 57 basis points versus the first
quarter of the prior year. The decline in the consolidated margin was
primarily due to higher raw milk costs and increased costs for resin, fuel,
and other key inputs.

The company repaid a net amount of $151.7 million of debt during the
quarter. Long-term debt as of March 31, 2005 was approximately $3.1 billion,
including $145.7 million due within one year that is reported as part of
current liabilities. At the end of the quarter, approximately $1 billion of
the company’s senior credit facility was available for future borrowings.

OUTLOOK FOR THE REMAINDER OF 2005

“As a result of our stronger than expected first quarter results, we are
increasing our earnings guidance for the remainder of the year. We now expect
diluted adjusted earnings per share to be between $2.28 and $2.33 in 2005,
representing growth of between 13% and 15%,” said Engles. “For the second
quarter, we anticipate adjusted diluted earnings per share of between
$0.54 and $0.56.”

All earnings estimates exclude the anticipated effects of the spin-off of
the Specialty unit, including the related transaction expenses. The company’s
earnings guidance also excludes the impact of stock option expensing, as well
as facility closing and reorganization costs and any non-recurring or one-time
gains or losses.

SEGMENT RESULTS

Dairy Group net sales for the first quarter rose 12% to $2.2 billion, from
$2.0 billion in the first quarter of 2004. The sales increase was primarily
due to higher raw milk costs that were passed along to customers in the form
of increased selling prices and a 1.2% increase in fluid milk volumes. The
Class I mover, which is an indicator of the company’s raw milk costs, averaged
$15.29 per hundred-weight in the first quarter of 2005, a 30% increase over
the same period in 2004.

Dairy Group operating income in the first quarter was $149.8 million, an
increase of 7% over last year. Operating margins decreased 30 basis points to
6.8% of sales due primarily to the increased raw milk costs.

WhiteWave Foods reported first quarter net sales of $286.5 million, a 19%
increase compared to the first quarter of 2004. The increase was driven by
strong sales growth in the company’s national brands, particularly Horizon
Organic, Silk and International Delight.

Operating income in the first quarter for WhiteWave Foods was
$14.6 million, a slight increase over the prior year. Operating margin for
the first quarter of 2005 was 5.1%, a decrease of 84 basis points compared to
the prior year first quarter. Operating margin was affected by an increase in
marketing related spending over the prior year and temporary supply-chain
challenges at Horizon Organic related to an industry-wide shortage of raw
organic milk during the quarter.

Specialty Foods’ net sales in the first quarter totaled $157.2 million,
down 5% from the first quarter of 2004 primarily due to the company’s exit
from the nutritional drinks business in the fourth quarter of 2004 and lower
pickle sales, somewhat offset by increased creamer sales. Operating income
was $18.4 million, a decrease of 5% from the prior year, due to the decrease
in sales. Operating margin was 11.7%, consistent with the first quarter of
2004.

RECENT DEVELOPMENTS

The company also announced that it has received a favorable ruling from
the Internal Revenue Service regarding the planned spin-off of its Specialty
Foods unit. The planned debt-free spin-off will create a publicly traded
private label and regionally branded packaged foods company with estimated
2005 revenues of approximately $700 million.

The spin-off is expected to be completed in the third quarter of 2005,
subject to registration of the new securities of the spin-off company with the
Securities and Exchange Commission and other customary closing conditions.

COMPARISON OF ADJUSTED INFORMATION TO GAAP INFORMATION

The adjusted financial information contained in this press release
eliminates non-recurring or one-time gains or losses, as well as facility
closing and reorganization costs, and 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 the
company’s management.

For the quarter ended March 31, 2005, the adjusted results reported above
differ from the company’s results under GAAP by excluding the following
facility closing, reorganization, and non-recurring charges:

a)  $6.9 million charge ($4.3 million net of tax) related to previously
         announced reorganizations and facility closings, including
         consolidation of the WhiteWave Foods Company.

     b)  $6.1 million charge ($3.7 million net of tax) related to severance
         payments made to a former employee and transaction costs related to
         the planned spin-off of the Specialty Foods Group.

For the quarter ended March 31 2004, the adjusted earnings per share,
operating income and operating margins reported above differ from the
company’s results under GAAP by excluding a $7.6 million charge related
primarily to facility closings at Madison, WI, Southgate, CA and San Leandro,
CA.

The adjusted financial results contained in this press release are non-
GAAP financial measures that eliminate the net expense or net gain related to
the items identified above. These numbers 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. Because the company cannot predict
the timing and amount of charges associated with facility closings and
reorganizations or non-recurring items associated with the company’s
operations, management does not consider facility closing or reorganization
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. Facility closing and
reorganization costs are not recorded 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 numbers may be different than similar measures used by
other companies. A full reconciliation table between earnings per share for
the three-month period ended March 31, 2005 calculated according to GAAP and
on an adjusted basis 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 http://www.deanfoods.com .

ABOUT DEAN FOODS

Dean Foods is one of the leading food and beverage companies in the United
States. Its Dairy Group is the largest processor and distributor of fresh
milk and other dairy products in the country, with products sold under more
than 50 familiar local and regional brands and a wide array of private labels.
The company’s WhiteWave Foods subsidiary is the nation’s leading organic foods
company. WhiteWave Foods markets and sells a variety of well-known dairy and
dairy-related products, such as Silk(R) soymilk, Horizon Organic(R) dairy
products and juices, International Delight(R) coffee creamers and LAND
O’LAKES(R) creamers and cultured products. The company’s Specialty Foods
Group is the nation’s leading manufacturer of private label pickles and non-
dairy powdered coffee creamer, and maker of a variety of other specialty food
products. Dean Foods Company also owns the fourth largest dairy processor in
Spain and the leading brand of organic dairy products 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 costs, 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.

(Tables to follow)



                                DEAN FOODS COMPANY
                  (Dollars in thousands, except per share data)


                                       GAAP                 ADJUSTED (A)
                                 Three Months Ended      Three Months Ended
                                     March 31,                March 31,
                                  2005        2004        2005        2004

    Net sales                  $2,743,228  $2,452,151  $2,743,228  $2,452,151
    Cost of sales               2,085,264   1,839,706   2,085,264   1,839,706

      Gross profit                657,964     612,445     657,964     612,445

    Operating costs and expenses  500,948     452,470     494,873     452,470
    Facility closings and
     reorganization costs, net      6,937       7,573

      Operating income            150,079     152,402     163,091     159,975

    Interest expense               42,612      42,501      42,612      42,501
    Other (income) expense           (171)     (1,485)       (171)     (1,485)

      Income before income taxes  107,638     111,386     120,650     118,959
    Income taxes                   41,441      42,146      46,451      45,084

        Net income                $66,197     $69,240     $74,199     $73,875


    Basic earnings per share:
        Net income                  $0.44       $0.44       $0.50       $0.47

        Basic average common
         shares (000's)           149,822     156,105     149,822     156,105

    Diluted earnings per share:
        Net income                  $0.43       $0.43       $0.48       $0.45

        Diluted average common
         shares (000's)           155,663     162,730     155,663     162,730


     (A)  Adjusted results differ from results reported under GAAP by
          excluding income and expense related to facility closings,
          reorganizations, and the spinoff of Specialty Foods Group.  More
          information about these items is included in the earnings release
          under the heading "Comparison of Adjusted Information to GAAP
          Information."



                               DEAN FOODS COMPANY

                  Earnings per Share Summary and Reconciliation

                                                       Three Months Ended
                                                            March 31,
                                                      2005              2004
    GAAP diluted earnings per share                  $0.43             $0.43

    Adjustments:
      Facility closings and reorganization costs, net 0.03              0.02
      Other nonrecurring operating costs              0.02

    Adjusted diluted earnings per share              $0.48             $0.45



                               Segment Information
                              (Dollars in thousands)

                                        GAAP                Adjusted (B)
                                 Three Months Ended      Three Months Ended
                                      March 31,               March 31,
                                  2005        2004        2005        2004
    Net sales
      Dairy Group              $2,196,448  $1,963,543  $2,196,448  $1,963,543
      WhiteWave Foods Company     286,509     240,480     286,509     240,480
      Specialty Foods Group       157,157     165,483     157,157     165,483
      Corporate / Other           103,114      82,645     103,114      82,645
        Total                  $2,743,228  $2,452,151  $2,743,228  $2,452,151

    Segment operating income (loss)
      Dairy Group                $149,780    $139,895    $149,780    $139,895
      WhiteWave Foods Company      11,536      14,273      14,609      14,273
      Specialty Foods Group        17,667      19,306      18,390      19,306
      Corporate / Other           (21,967)    (13,499)    (19,688)    (13,499)
        Subtotal                  157,016     159,975     163,091     159,975
    Facility closings and
     reorganization costs, net     (6,937)     (7,573)
        Total operating income   $150,079    $152,402    $163,091    $159,975


     (B)  Adjusted results differ from results reported under GAAP by
          excluding income and expense related to facility closings,
          reorganizations, and the spinoff of Specialty Foods Group.  More
          information about these items is included in the earnings release
          under the heading "Comparison of Adjusted Information to GAAP
          Information."



                               DEAN FOODS COMPANY

                             Condensed Balance Sheet
                             (Dollars in Thousands)

                                                 March 31,        December 31,
    ASSETS                                         2005              2004

    Cash and cash equivalents                      $29,108           $27,572
    Other current assets                         1,543,641         1,568,852
      Total current assets                       1,572,749         1,596,424

    Property, plant & equipment                  1,952,506         1,946,992

    Intangibles & other assets                   4,209,755         4,212,952

        Total Assets                            $7,735,010        $7,756,368


    LIABILITIES AND STOCKHOLDERS' EQUITY

    Total current liabilities                   $1,145,685        $1,106,426

    Long-term debt                               2,958,844         3,116,032

    Other long-term liabilities                    886,779           872,773

    Stockholders' equity:
      Common stock                                   1,503             1,492
      Additional paid-in capital                 1,330,481         1,308,172
      Retained earnings                          1,425,829         1,359,632
      Other comprehensive income                   (14,111)           (8,159)
         Total stockholders' equity              2,743,702         2,661,137

        Total Liabilities and
         Stockholders' Equity                   $7,735,010        $7,756,368



                               DEAN FOODS COMPANY

                        Condensed Statement of Cash Flows
                             (Dollars in Thousands)


                                                  Three Months Ended March 31,
    Operating Activities                             2005              2004
      Net income                                   $66,197           $69,240
      Depreciation and amortization                 58,526            54,802
      Deferred income taxes                         15,703            16,704
      (Gain) loss on disposition of assets             803              (638)
      Tax savings on equity compensation             5,245            11,763
      Write-down of impaired assets                    478             2,194
      Changes in current assets and liabilities     55,881           (65,112)
      Other                                         (1,704)            1,574
          Net cash provided by operations          201,129            90,527

    Investing Activities
      Additions to property, plant and equipment   (66,608)          (71,306)
      Cash outflows for acquisitions                (1,702)         (305,446)
      Proceeds from sale of fixed assets             3,364             3,221
          Net cash used in investing activities    (64,946)         (373,531)

    Financing Activities
      Proceeds from the issuance of debt            30,561           273,528
      Repayment of debt                           (182,253)          (43,162)
      Issuance of common stock, net of expenses     17,076            37,882
      Redemption of common stock                                      (5,163)
      Other                                            (31)             (100)
          Net cash provided (used) in
           financing activities                   (134,647)          262,985

    Increase (decrease) in cash and cash
     equivalents                                     1,536           (20,019)
    Beginning cash balance                          27,572            47,143

    Ending cash balance                            $29,108           $27,124


     Contact:  Barry Sievert
               Senior Director, Investor Relations
               (214) 303-3437

SOURCE Dean Foods Company

Barry Sievert, Senior Director, Investor Relations of Dean Foods Company,
+1-214-303-3437

http://www.prnewswire.com

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