Company Reports First Quarter GAAP Earnings From Continuing Operations of
$0.37 Per Share, Adjusted Earnings of $0.40 Per Share
Company Reaffirms Full Year Guidance of $2.10 to $2.15 Per Share
Board of Directors Approves Additional $300 Million Share Repurchase
Authorization
DALLAS, May 3 /PRNewswire-FirstCall/ — Dean Foods Company (NYSE: DF)
today announced that the Company earned $0.37 per diluted share from
continuing operations for the quarter ended March 31, 2006, compared with
$0.33 per diluted share from continuing operations in the first quarter of
2005. Net income from continuing operations for the first quarter totaled
$52.8 million, compared with $51.1 million in the prior year first quarter.
On an adjusted basis (as defined below), diluted earnings per share were
$0.40, an increase of 8% from $0.37 in last year’s first quarter. Adjusted
net income for the first quarter was $56.3 million, versus $56.9 million
reported in the first quarter of 2005.
“Both the Dairy Group and WhiteWave Foods performed well in the first
quarter,” said Gregg Engles, chairman and chief executive officer. “Our Dairy
Group again outpaced the industry, growing fluid milk volumes by 3.4%. Sales
of our key brands at WhiteWave Foods continue to grow at a robust pace, and
our supply chain initiatives are driving significant operational
improvements.”
Net sales for the first quarter totaled $2.6 billion, an increase of 1%
over the first quarter of 2005, due to strong sales growth at the Dairy Group
and WhiteWave Foods, partially offset by the pass through of lower dairy
commodity costs.
Consolidated operating income from continuing operations in the first
quarter totaled $137.0 million versus $125.9 million in the first quarter of
2005. Operating margin for the first quarter was 5.3%, as compared to 4.9% in
the first quarter of the prior year. Adjusted first quarter operating income
totaled $142.9 million, an increase of 5.5% from $135.4 million in the first
quarter of 2005. The adjusted first quarter operating margin was 5.5%, up 23
basis points versus the first quarter last year.
Long-term debt at March 31, 2006 was approximately $3.5 billion, including
$170 million due within one year that is reported as part of current
liabilities. As of March 31, 2006, approximately $552 million of the
Company’s senior credit facility was available for future borrowings.
SEGMENT RESULTS
Dairy Group net sales increased $12 million to $2.20 billion in the first
quarter of 2006. The sales increase was due to a 3.4% increase in fluid milk
volumes that was partially offset by the pass through of lower dairy commodity
costs to our customers. The first quarter Class I mover, which is an
indicator of the Company’s raw milk costs, averaged $13.08 per hundred-weight,
a 14% decrease from the same period in 2005. Class II butterfat prices
averaged $1.37 per pound in the first quarter, 22% lower than the first
quarter of 2005.
Dairy Group segment operating income in the first quarter was
$152.7 million, an increase of 3% year-over-year. Dairy Group operating
margin increased 15 basis points to 6.9% of sales. Segment operating income
growth was driven by increased fluid milk volumes and operational efficiencies
resulting from ongoing plant rationalization activities.
WhiteWave Foods reported first quarter net sales of $307 million, an 8%
increase compared to first quarter 2005 net sales of $285 million. The
increase was driven by strong sales growth in the branded portfolio,
particularly in our Silk, Horizon Organic, and International Delight brands.
Segment operating income in the first quarter for WhiteWave Foods was
$26.1 million, with operating margins of 8.5%, compared to $12.9 million, and
operating margins of 4.5% in the prior year first quarter. Segment operating
income increased due to strong sales growth and increased operational
efficiencies that were partially offset by higher organic milk, sugar and
energy costs.
Corporate and Other sales were $83 million in the first quarter of 2006,
5% lower than in the same period of the prior year. Corporate and Other
operating loss was $36.0 million, $10 million higher than the first quarter of
2005. The increase in operating loss is due to increased corporate expenses
related to higher employee benefit and retirement costs and lower operating
income contribution from Leche Celta.
RECENT EVENTS
* On April 27, 2006 Jack F. Callahan Jr. was named Executive Vice
President and Chief Financial Officer of Dean Foods, reporting
directly to Gregg Engles, Chairman and Chief Executive Officer. He is
expected to begin his tenure at Dean in May. Previously, Mr. Callahan
served as Senior Vice President of Corporate Strategy and Development
at PepsiCo, where he oversaw all corporate strategy and merger and
acquisition activity.
* During the first quarter of 2006, the Company made open market
purchases of its common stock totaling 400,000 shares for a total cost
of $15 million. Today, the Board of Directors increased the Company's
repurchase authorization by an additional $300 million. Including
this new authorization, the Company has a total of $303 million
remaining under its repurchase authorizations.
* Beginning in the first quarter of 2006, the Company has adopted the
provisions of FAS 123(R) related to the expensing of stock-based
compensation on a retroactive basis. Historical financial results
have been restated to include stock option expenses. On a GAAP basis,
restated diluted earnings per share from continuing operations for
2005 are $1.65, an increase of 28% over $1.29 in 2004. Restated
adjusted diluted earnings per share for 2005 are $1.82, an increase of
22% over $1.49 in 2004.
OUTLOOK FOR THE REMAINDER OF 2006
“Although rising fuel prices are a concern, volume trends are strong in
the Dairy Group and dairy commodity prices are trending favorably. At
WhiteWave Foods, we expect continued strong sales trends throughout the year.
However, commodity costs in organic milk, energy, and sugar have increased,”
said Engles. “Balancing the benefits of a favorable dairy commodity
environment against increased commodity costs throughout much of our WhiteWave
Foods business, we are leaving our full year guidance unchanged with
expectations for $2.10 to $2.15 earnings per share. For the second quarter,
we are expecting earnings of approximately $0.52 to $0.54 per share.”
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
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 periods
ended March 31, 2006 and March 31, 2005 calculated according to GAAP and on an
adjusted basis is attached.
For the quarter ended March 31, 2006, 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) $2.7 million charge ($1.7 million net of income tax) related to Dairy
Group facility closings and restructurings, including the closing of
our Union, NJ plant,
b) $1.7 million charge ($1.0 million net of income tax) related to
reorganization and consolidation activities at WhiteWave Foods, and
c) $1.4 million charge ($0.9 million net of income tax) related to the
restructuring of Leche Celta's operations.
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) $3.7 million charge ($2.2 million net of income tax) primarily
related to previously announced Dairy Group facility closings and
restructurings, and
b) $5.8 million charge ($3.5 million net of income tax) related to the
reorganization and consolidation of WhiteWave Foods, and severance
payments made to a former employee.
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 Company is one of the leading food and beverage companies in
the United States. Its Dairy Group division is the largest processor and
distributor of 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 markets and sells a
variety of well-known dairy and dairy-related products, such as Silk(R)
soymilk, Horizon Organic(R) milk and other dairy products 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. Dean Foods is also one of the largest processors and
distributors of fluid milk in Spain and Portugal.
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,
2006 2005 2006 2005
Net sales $2,591,968 $2,561,751 $2,591,968 $2,561,751
Cost of sales 1,936,464 1,948,455 1,936,464 1,948,455
Gross profit 655,504 613,296 655,504 613,296
Operating costs and
expenses 512,624 477,917 512,624 477,917
Facility closings,
reorganization costs and
other 5,837 9,463 --- ---
Operating income 137,043 125,916 142,880 135,379
Interest expense 50,215 41,035 50,215 41,035
Other (income) expense 73 (110) 73 (110)
Income from continuing
operations before
income taxes 86,755 84,991 92,592 94,454
Income taxes 33,963 33,858 36,248 37,551
Income from continuing
operations 52,792 51,133 56,344 56,903
Income from discontinued
operations, net of tax --- 10,336 --- ---
Net income $52,792 $61,469 $56,344 $56,903
Basic earnings per share:
Income from continuing
operations $0.39 $0.34 $0.42 $0.38
Income from discontinued
operations --- 0.07 --- ---
Net income $0.39 $0.41 $0.42 $0.38
Basic average common
shares (000's) 135,170 149,822 135,170 149,822
Diluted earnings per share:
Income from continuing
operations $0.37 $0.33 $0.40 $0.37
Income from discontinued
operations --- 0.06 --- ---
Net income $0.37 $0.39 $0.40 $0.37
Diluted average common
shares (000's) 142,410 155,663 142,410 155,663
[A] Adjusted results differ from results reported under GAAP by
excluding income and expense related to discontinued operations,
facility closings and reorganizations. 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,
2006 2005
GAAP diluted earnings per share from
continuing operations $0.37 $0.33
Adjustments:
Facility closings, reorganization
costs and other 0.03 0.04
Adjusted diluted earnings per share $0.40 $0.37
Segment Information
(Dollars in thousands)
Three Months Ended March 31,
2006 2005
Net sales
Dairy Group $2,202,067 $2,189,774
WhiteWave Foods Company 306,975 284,797
Corporate / Other 82,926 87,180
Total $2,591,968 $2,561,751
Segment operating income (loss)
Dairy Group $152,748 $148,606
WhiteWave Foods Company 26,097 12,925
Corporate / Other (35,965) (26,152)
Subtotal 142,880 135,379
Facility closings, reorganization
costs and other (5,837) (9,463)
Total operating income $137,043 $125,916
DEAN FOODS COMPANY
Condensed Balance Sheet
(Dollars in Thousands)
March 31, December 31,
ASSETS 2006 2005
Cash and cash equivalents $28,341 $25,120
Other current assets 1,387,831 1,451,848
Total current assets 1,416,172 1,476,968
Property, plant & equipment 1,881,118 1,874,486
Intangibles & other assets 3,717,868 3,699,430
Total Assets $7,015,158 $7,050,884
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities, excluding
debt $846,334 $1,029,087
Total long-term debt, including
current portion 3,474,729 3,436,835
Other long-term liabilities 704,504 682,749
Stockholders' equity:
Common stock 1,362 1,342
Additional paid-in capital 944,923 922,791
Retained earnings 1,056,805 1,004,013
Other comprehensive income (13,499) (25,933)
Total stockholders' equity 1,989,591 1,902,213
Total Liabilities and
Stockholders' Equity $7,015,158 $7,050,884
DEAN FOODS COMPANY
Condensed Statement of Cash Flows
(Dollars in Thousands)
Three Months Ended March 31,
Operating Activities 2006 2005
Net income $52,792 $61,469
Income from discontinued operations --- (10,336)
Depreciation and amortization 57,229 54,226
Deferred income taxes 38,244 12,281
Share-based compensation 9,391 8,491
Changes in current assets and liabilities (136,691) 41,488
Other 1,921 (424)
Net cash provided by
continuing operations 22,886 167,195
Net cash provided by
discontinued operations --- 31,083
Net cash provided by
operating activities 22,886 198,278
Investing Activities
Additions to property, plant and equipment (60,500) (63,883)
Cash outflows for acquisitions (9,760) (1,702)
Proceeds from sale of fixed assets 1,838 3,364
Net cash used in continuing operations (68,422) (62,221)
Net cash used in
discontinued operations --- (2,725)
Net cash used in investing
activities (68,422) (64,946)
Financing Activities
Proceeds from the issuance of debt 73,788 30,627
Repayment of debt (37,792) (182,273)
Issuance of common stock, net 5,438 14,760
Redemption of common stock (15,357) ---
Tax savings on equity compensation 22,680 5,245
Other --- (31)
Net cash provided by (used in)
continuing operations 48,757 (131,672)
Net cash used in
discontinued operations --- (46)
Net cash provided by (used in)
financing activities 48,757 (131,718)
Increase in cash and cash equivalents 3,221 1,614
Beginning cash balance 25,120 27,407
Ending cash balance $28,341 $29,021
Contact: Barry Sievert
Senior Director, Investor Relations
(214) 303-3437
SOURCE Dean Foods Company
CONTACT: Barry Sievert, Senior Director, Investor Relations of Dean
Foods Company, +1-214-303-3437
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