DALLAS, Feb. 13 /PRNewswire-FirstCall/ — Dean Foods Company (NYSE: DF)
today announced that the Company earned $0.24 per diluted share from
continuing operations for the quarter ended December 31, 2007, compared with
$0.56 per diluted share from continuing operations in the fourth quarter of
2006. Net income from continuing operations for the fourth quarter totaled
$32.6 million, compared with $76.3 million in the prior year’s fourth quarter.
On an adjusted basis (as defined below), diluted earnings per share were
$0.27, compared to $0.61 in the prior year’s fourth quarter. Adjusted net
income from continuing operations for the fourth quarter was $37.1 million,
compared to adjusted net income of $83.9 million in the fourth quarter of
2006. The decrease in adjusted net income and earnings per share is related to
the increase in interest expense as a result of the recapitalization and the
special cash dividend of $15 per share that was paid in April 2007 and a
decline in operating results in the quarter. Interest expense in the quarter
totaled $88.8 million, compared to $50.2 million in the fourth quarter of
2006.
Summary of Dean Foods Segment and Operating Results
Q4 2007 FY 2007
(in millions, except EPS) Value % Change Value % Change
Dairy Group:
Fluid Milk Volume flat flat
Operating Income $150.9 -13% $624.5 -9%
WhiteWave Foods:
Net Sales $388.4 13% $1,372.5 9%
Operating Income $36.6 -20% $118.4 -11%
Consolidated Adjusted Operating
Income: $149.2 -19% $589.7 -13%
Interest Expense: $88.8 77% $319.7 64%
Adjusted Diluted Earnings per
Share: $0.27 -56% $1.20 -43%
Diluted earnings per share from continuing operations for the full year
ended December 31, 2007 totaled $0.95, compared to $2.01 for the full year
2006. Net income from continuing operations for the full year 2007 totaled
$130.5 million, compared with $280.3 million in 2006.
Adjusted diluted earnings per share from continuing operations for the
full year 2007 totaled $1.20, compared to $2.12 in 2006. On an adjusted basis
(as defined below), net income from continuing operations for the full year
2007 totaled $164.5 million, compared to $295.7 million in 2006. The decline
in full year adjusted net income and diluted earnings per share for the year
is attributable to the 64.3% increase in interest expense related to the
recapitalization in connection with the special cash dividend of $15 per share
that was paid in April 2007 and the 12.7% decline in consolidated operating
income.
Net sales for the fourth quarter totaled $3.2 billion, an increase of
24.6% from net sales in the fourth quarter of 2006. For the full year ended
December 31, 2007, net sales totaled $11.8 billion, an increase of 17.1% from
net sales in the previous year. Net sales increases in both the quarter and
full year were due to the pass-through of higher dairy commodity costs and
strong sales growth at WhiteWave Foods.
Consolidated operating income in the fourth quarter totaled
$142.5 million, a decrease of 17.4% from $172.6 million in the fourth quarter
of 2006. Adjusted fourth quarter consolidated operating income totaled
$149.2 million, a decrease of 19.3% from $184.9 million in the fourth quarter
of 2006.
For the full year, consolidated operating income declined 14.9% to
$553.6 million from $650.7 million in 2006. On an adjusted basis, consolidated
operating income declined 12.7% for the year, to $589.7 million from $675.8
million in 2006.
“2007 was the most challenging year in the history of Dean. We were faced
with steeply rising and record high dairy commodity costs in our Dairy Group
operations. At the same time, WhiteWave Foods was challenged by a severe
oversupply of organic milk that drove down realized prices and increased
competitive intensity in the industry,” commented Gregg Engles, Chairman and
Chief Executive Officer. “However, while 2007 was a difficult year
operationally, these near-term challenges did not slow our progress toward
transforming the Company into a stronger long-term competitor. In 2007, we
laid much of the groundwork that we will build on as we transform the business
to drive productivity and increase efficiency in the years to come.”
DAIRY GROUP
Dairy Group net sales for the fourth quarter were $2.8 billion, a
26.4% increase from $2.2 billion in net sales for the fourth quarter of 2006.
The sales increase was due primarily to the pass-through of higher overall
dairy commodity costs to customers. The fourth quarter average Class I mover,
which is an indicator of the Company’s raw milk costs, averaged $21.03 per
hundred-weight, a 69% increase from the same period in 2006 and just 2% lower
than all time high levels reached in the third quarter of 2007. Class II
butterfat prices averaged $1.42 per pound in the fourth quarter, 2% higher
than the fourth quarter of 2006.
Dairy Group segment operating income in the fourth quarter was
$150.9 million, compared to $173.1 million in the fourth quarter of 2006, 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.
For the full year 2007, Dairy Group net sales were $10.4 billion, an
increase of 18.2% from 2006 levels due to the pass-through of higher dairy
commodity costs to customers. Full year segment operating income for the Dairy
Group totaled $624.5 million, 8.8% below 2006 results as steeply rising and
record high dairy commodity costs and cost friction items such as shrink,
lower proceeds from excess cream sales, and consumer mix shift toward private
label products pressured results in the second through fourth quarters of the
year.
WHITEWAVE FOODS
WhiteWave Foods segment reported fourth quarter net sales of
$388.4 million, 12.5% higher than fourth quarter 2006 net sales of
$345.1 million. Sales growth was strong across the entire branded portfolio
with net sales of Horizon Organic(R) milk increasing over 20% due to volume
growth of nearly 40% that was driven by increased promotional activity and
lower average prices. International Delight(R) and Silk(R) sales both
increased in the low double digits and Land O’Lakes(R) sales grew in the
mid-teens over the same period last year, driven by high-single digit volume
growth and commodity based price increases.
Segment operating income in the fourth quarter for WhiteWave Foods was
$36.6 million, compared to $45.8 million in the fourth quarter of 2006.
Segment operating margins were 9.4%, compared to 13.3% in the fourth quarter
of 2006, due to the lower contribution from Horizon Organic related to
increased brand spending and lower overall gross profit margins.
“Overall, we are pleased with the results we’ve seen from our strategy to
invest aggressively behind the Horizon Organic brand through this period of
industry oversupply,” added Mr. Engles. “We’ve successfully defended our
marketshare during this period of rapid industry growth. Our increased
investment has resulted in volume growth that has outpaced the industry,
helping to extend the brand’s leading position in the market and positioning
us to maximize its long-term value.”
For the full year, WhiteWave net sales increased 9.2% to $1.4 billion. For
the year, Horizon Organic milk sales increased 18%, due to the accelerated
growth in the back half of the year fueled by the strong growth in raw milk
supply and increased promotional spending. Silk sales increased 8%. Land
O’Lakes sales increased 13% due to solid volume growth and commodity based
price increases. International Delight sales increased 11% for the year.
Segment operating income for the year declined 10.8% to $118.4 million,
from $132.7 million in 2006. The decline in operating income is primarily due
to the increase in promotional spending in support of Horizon Organic and
higher infrastructure and distribution costs.
CORPORATE EXPENSE
Corporate and other expenses totaled $38.3 million, compared to
$34.1 million in the fourth quarter of 2006. For the full year, corporate
expense was $153.2 million, compared to $141.6 million for the full year 2006.
The increase in both the quarter and full year was largely driven by
investments in support of the Company’s strategic initiatives.
CASH FLOW
Net cash provided by continuing operations for the full year 2007 totaled
$350.3 million, compared to $561.6 million for the full year 2006. The decline
in net cash provided by continuing operations is due primarily to higher year
over year interest expense, lower operating results, and an increase in
working capital requirements.
Capital expenditures for the full year 2007 totaled $241.4 million,
compared to $237.2 million for the full year 2006.
In the fourth quarter, debt outstanding decreased by $93.7 million. Total
debt at December 31, 2007, net of $32.6 million in cash on hand, was
approximately $5.2 billion. The Company’s funded debt to EBITDA ratio, as
defined by the senior credit agreement dated April 2, 2007 related to its bank
debt, was 5.95x.
FORWARD OUTLOOK
“Turning to the outlook for 2008, it’s clear that our results will
continue to be driven primarily by swings in the dairy commodity markets,
including the organic milk market,” said Mr. Engles. “In 2007, we learned how
difficult it is to forecast these markets given the impact of global dairy
demand swings and a highly challenged organic milk supply chain. Faced with
these highly volatile and uncertain markets, we believe it is prudent to
provide a wider guidance range for quarterly guidance than previous practice,
and limited guidance for the full year.”
For the first quarter, the Company currently expects earnings per share to
be between $0.15 and $0.20 per share. For the full year 2008, the Company
expects earnings per share to be at least $1.20 per share.
“Dairy commodity markets remain meaningfully above year ago levels,
creating a significant drag on our near term earnings power,” continued
Mr. Engles. “For the first quarter, the Class I mover stepped higher in
January, followed by a decline in February and what is expected to be another
decline in March. As we look beyond the first quarter, we find it difficult to
have much confidence in current dairy commodity forecasts given these
unprecedented levels of dairy commodity market instability. In fact, given
recent volatility in the markets, it now appears likely that the April Class I
mover will be set above expected March levels. Beyond that, there is wide
disparity of expectations for the balance of the year. Given the volatile
trading in dairy commodities, prices may continue to vacillate between strong
up months and strong down months. Additionally, the organic milk markets are
evolving rapidly and it is difficult for us to predict exactly how the rest of
the year will unfold for WhiteWave Foods as brand economics for Horizon
Organic could swing materially as the year progresses. Despite this level of
uncertainty, we anticipate strong EPS growth in the second half of 2008.
However, it remains unclear just how favorable the year on year comparisons
may be. We will update you more specifically on this outlook as the year
unfolds.”
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 and twelve month periods ended December 31, 2007 and 2006
calculated according to GAAP and on an adjusted basis is attached.
For the quarter ended December 31, 2007, the adjusted results reported
above differ from the Company’s results under GAAP by excluding the following
facility closing reorganization and other nonrecurring charges:
-- $6.7 million charge ($4.1 million net of income tax) related to the
realignment of the Dairy Group's finance and accounting organization,
workforce reduction activities in the Dairy Group's operations and
previously announced facility closings; and
-- $0.6 million charge ($0.4 million net of income tax) related to
non-recurring special dividend costs.
For the quarter ended December 31, 2006, the adjusted results reported
above differ from the Company’s results under GAAP by excluding the following
facility closing and reorganization charges:
-- $12.3 million charge ($7.6 million net of income tax) related to the
closing of our Akron, OH manufacturing facility and other announced
facility closings and reorganizations.
For the year ended December 31, 2007, the adjusted results reported above
differ from the Company’s results under GAAP by excluding the following
facility closing, reorganization, and other nonrecurring charges:
-- $36.1 million charge ($22.0 million net of income tax) related to the
realignment of our Dairy Group's finance and accounting organization,
the Dairy Group's management realignment, workforce reduction
activities in the Dairy Group's operations, and previously announced
facility closings, as well as the sale of our tofu business; and
-- $19.8 million charge ($12.0 million net of income tax) related to
non-recurring special dividend costs, including the write-off of
finance costs resulting from the completion of our new senior credit
facility.
For the full year ended December 31, 2006, the adjusted results reported
above differ from the Company’s results under GAAP by excluding the following
facility closing and reorganization charges:
-- $25.1 million charge ($15.4 million net of income tax) related to the
closing of our Akron, OH manufacturing facility, the closing of our
Union, NJ facility, the closing of our Madison, WI distribution center
and other announced facility closings and reorganizations.
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.
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, International
Delight(R) coffee creamers, and Land O’Lakes(R) creamers and other fluid dairy
products. 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
(Unaudited)
(dollars in thousands, except per share data)
Three months ended Twelve months ended
December 31, December 31,
2007 2006 2007 2006
Net sales $3,231,713 $2,593,838 $11,821,903 $10,098,555
Cost of sales 2,528,776 1,883,158 9,084,318 7,358,676
Gross profit 702,937 710,680 2,737,585 2,739,879
Operating costs and
expenses 553,718 525,824 2,147,879 2,064,068
Facility closings,
reorganizations and
other costs 6,718 12,293 36,109 25,116
Operating income 142,501 172,563 553,597 650,695
Interest expense 88,818 50,212 319,657 194,547
Debt refinancing and
special dividend costs 592 - 19,787 -
Other (income) expense (124) 481 (316) 435
Income from
continuing
operations before
income taxes 53,215 121,870 214,469 455,713
Income taxes 20,650 45,594 84,007 175,450
Income from continuing
operations 32,565 76,276 130,462 280,263
Income (loss) from
discontinued
operations,
net of tax 70 (3,314) 891 (54,849)
Net income $32,635 $72,962 $131,353 $225,414
Basic earnings per
share:
Income from
continuing
operations $0.25 $0.58 $1.00 $2.09
Income (loss) from
discontinued
operations - (0.03) 0.01 (0.41)
Net income $0.25 $0.55 $1.01 $1.68
Basic average common
shares (000's) 131,630 131,847 130,311 133,939
Diluted earnings per
share:
Income from
continuing
operations $0.24 $0.56 $0.95 $2.01
Income (loss) from
discontinued
operations - (0.03) 0.01 (0.40)
Net income $0.24 $0.53 $0.96 $1.61
Diluted average
common shares
(000's) 137,787 137,379 137,292 139,762
DEAN FOODS COMPANY
Segment Information
(Unaudited)
(dollars in thousands)
Three months ended Twelve months ended
December 31, December 31,
2007 2006 2007 2006
Net sales:
Dairy Group $2,843,290 $2,248,709 $10,449,378 $8,841,839
WhiteWave Foods
Company 388,423 345,129 1,372,525 1,256,716
Total $3,231,713 $2,593,838 $11,821,903 $10,098,555
Segment operating
income (loss):
Dairy Group $150,886 $173,112 $624,510 $684,659
WhiteWave Foods
Company 36,618 45,812 118,404 132,704
Corporate / Other (38,285) (34,068) (153,208) (141,552)
Subtotal 149,219 184,856 589,706 675,811
Facility closings,
reorganizations
and other costs (6,718) (12,293) (36,109) (25,116)
Total operating
income $142,501 $172,563 $553,597 $650,695
DEAN FOODS COMPANY
Condensed Consolidated Balance Sheets
(Unaudited)
(dollars in thousands)
December 31, December 31,
ASSETS 2007 2006
Cash and cash equivalents $32,555 $31,140
Other current assets 1,499,429 1,348,150
Total current assets 1,531,984 1,379,290
Property, plant & equipment 1,798,378 1,786,907
Intangibles & other assets 3,702,994 3,583,996
Assets of discontinued operations - 19,980
Total Assets $7,033,356 $6,770,173
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities, excluding debt $907,270 $852,898
Total long-term debt, including
current portion 5,272,351 3,355,851
Other long-term liabilities 802,468 743,234
Liabilities of discontinued
operations - 8,791
Stockholders' equity:
Common stock 1,322 1,284
Additional paid-in capital 70,214 624,475
Retained earnings 67,533 1,229,427
Other comprehensive income (loss) (87,802) (45,787)
Total stockholders' equity 51,267 1,809,399
Total Liabilities and Stockholders'
Equity $7,033,356 $6,770,173
DEAN FOODS COMPANY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(dollars in thousands)
Twelve months ended December 31,
Operating Activities 2007 2006
Net income $131,353 $225,414
(Income) loss from discontinued
operations (891) 52,871
(Income) loss on sale of
discontinued operations - 1,978
Depreciation and amortization 231,898 227,682
Deferred income taxes 10,578 66,994
Share-based compensation 34,817 36,871
Write-off of deferred financing
costs 13,545 -
Changes in current assets and
liabilities (83,481) (75,089)
Other 12,431 24,831
Net cash provided by continuing
operations 350,250 561,552
Net cash used in discontinued
operations - (334)
Net cash provided by operating
activities 350,250 561,218
Investing Activities
Additions to property, plant and
equipment (241,448) (237,242)
Cash outflows for acquisitions (132,204) (17,244)
Proceeds from divestitures 12,241 95,982
Proceeds from sale of fixed assets 20,192 6,190
Net cash used in continuing
operations (341,219) (152,314)
Net cash used in discontinued
operations - (15,151)
Net cash used in investing
activities (341,219) (167,465)
Financing Activities
Proceeds from the issuance of debt 1,912,500 498,020
Repayment of debt (336,880) (70,473)
Net proceeds from revolver and
receivables backed facility 324,300 (481,000)
Payment of deferred financing costs (31,281) (6,974)
Issuance of common stock, net 48,114 32,311
Payment of dividend (1,942,738) -
Repurchase of common stock - (400,062)
Tax savings on share-based
compensation 18,369 31,211
Net cash provided (used) by
continuing operations (7,616) (396,967)
Net cash provided by discontinued
operations - 9,898
Net cash provided (used) by
financing activities (7,616) (387,069)
Increase in cash and cash
equivalents 1,415 6,684
Beginning cash balance 31,140 24,456
Ending cash balance $32,555 $31,140
Computation of Free Cash Flow Provided by Operations
(dollars in thousands)
Twelve months ended December 31,
2007 2006
Net cash provided by continuing
operations $350,250 $561,552
Additions to property, plant and
equipment (241,448) (237,242)
Free cash flow provided by operations $108,802 $324,310
DEAN FOODS COMPANY
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(dollars in thousands, except per share data)
Three months ended Twelve months ended
December 31, December 31,
2007 2006 2007 2006
Reconciliation of GAAP to
adjusted operating income from
continuing operations
GAAP operating income from
continuing operations $142,501 $172,563 $553,597 $650,695
Adjustment:
Facility closings,
reorganizations and other
costs 6,718 12,293 36,109 25,116
Adjusted operating income from
continuing operations $149,219 $184,856 $589,706 $675,811
Reconciliation of GAAP to
adjusted net income from
continuing operations
GAAP net income from continuing
operations $32,565 $76,276 $130,462 $280,263
Adjustments, net of tax:
Facility closings,
reorganizations and other
costs 4,121 7,611 21,965 15,446
Debt refinancing and special
dividend costs 383 - 12,036 -
Adjusted net income from
continuing operations $37,069 $83,887 $164,463 $295,709
Reconciliation of GAAP to
adjusted diluted earnings per
share
GAAP diluted earnings per share
from continuing operations $0.24 $0.56 $0.95 $2.01
Adjustments, net of tax:
Facility closings,
reorganizations and other
costs 0.03 0.05 0.25 0.11
Debt refinancing and special
dividend costs - - - -
Adjusted diluted earnings per
share $0.27 $0.61 $1.20 $2.12
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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