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.
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
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
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,
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 https://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,