Pro Forma Diluted Earnings Per Share Grew 15% to $0.76
CEO and CFO File Sworn Statements With SEC Regarding Integrity of Financial
DALLAS, Aug. 8 /PRNewswire-FirstCall/ — Dean Foods Company (NYSE: DF)
today announced record results for the quarter ended June 30, 2002. Second
quarter net sales totaled $2.4 billion, growing 55% over the second quarter of
2001. Diluted earnings per share totaled $0.72, an increase of 31% compared
with $0.55 in the second quarter of 2001. Net income for the second quarter
was $73.2 million, an increase of 112% versus $34.6 million in the second
quarter of 2001.
On a pro forma basis, diluted earnings per share for the second quarter
totaled $0.76, an increase of 15% over pro forma earnings of $0.66 per share
in last year’s second quarter. Pro forma net income for the second quarter
grew 84% to $77.4 million, compared with pro forma net income of $42.1 million
in the second quarter of 2001.
Second quarter 2002 pro forma results exclude restructuring charges of
$6.7 million related to plant closings in Puerto Rico and Vermont and a Dairy
Group distribution facility in Virginia. Second quarter 2001 pro forma
results have been adjusted to reflect the elimination of goodwill and other
intangible amortization. A reconciliation table between earnings per share
and pro forma earnings per share is attached.
“We are proud of our performance this quarter and are on track to deliver
outstanding results in 2002,” said Gregg Engles, Chairman and Chief Executive
Officer of Dean Foods. “We achieved approximately $29 million in merger
synergies during the second quarter and anticipate that we will deliver total
synergies in excess of $100 million this year, significantly more than our
original estimate. As a result, we are raising our estimate for 2002 pro
forma diluted earnings per share to a range of $2.75 to $2.78 per share. We
expect third quarter pro forma diluted earnings per share to be in the range
of $0.67 to $0.69 per share.”
The company reported second quarter operating income of $178.4 million
versus $102.9 million in the second quarter of 2001, an increase of 73%.
Pro forma operating income totaled $185.0 million, an increase of 60% over
pro forma operating income of $115.6 million in the second quarter of 2001.
Pro forma second quarter 2002 operating income margins were 7.87%, an increase
of 26 basis points versus the pro forma results from the second quarter of
last year. Operating income margin gains were due primarily to realized
merger synergies and the decline in raw milk costs compared with the prior
Free cash flow for the quarter, defined as pro forma EBITDA less interest,
taxes and capital expenditures was $59.1 million. In the second quarter of
2001, free cash flow totaled $45.3 million.
The company’s long-term debt, including $139 million in current
liabilities, at the end of the quarter was approximately $3.0 billion, and the
Debt-to-EBITDA ratio was approximately 3.4 times. At June 30, 2002,
approximately $693 million of the company’s $2.7 billion bank facility
remained undrawn and available for future investments.
Today the company’s CEO and CFO filed the sworn statements required by
the Securities and Exchange Commission of the country’s 947 largest
public companies. The statements were signed in the form mandated by
the SEC without exception.
“We have always taken our financial reporting responsibility extremely
seriously, and we stand by the integrity of our financial statements,”
In July, the company announced a new licensing arrangement with Land
O’Lakes. The new arrangement grants Dean Foods a perpetual license to
use the Land O’Lakes(R) brand name nationally on a broad range of fluid
milk and cultured dairy products, including all basic fluid dairy
products, as well as a variety of other value-added products.
In mid-August 2002, Morningstar Foods will launch Land O’Lakes Dairy
Ease lactose-free milk, the first new product resulting from the
“By strengthening our alliance with Land O’Lakes, we are another step
closer to our stated goal of building a more branded food and beverage
company,” said Engles. “Because we now have greater rights to use the
Land O’Lakes brand, as well as increased marketing and distribution
responsibilities for the products, we will be better positioned to
invest in the continued growth of the Land O’Lakes brand. Our efforts,
together with Land O’Lakes’ continued promotion of the brand on its
core products should significantly strengthen the entire Land O’Lakes
In May, the company acquired the assets of Marie’s Quality Foods,
Marie’s Dressings, Inc. and Marie’s Associates, makers of Marie’s(R)
brand dips and dressings in the western United States. Prior to the
acquisition, Dean Foods licensed the Marie’s brand to Marie’s Quality
Foods and Marie’s Dressings, Inc. for use in connection with the
manufacturing and sale of dips and dressings in the western United
States. With this acquisition, Dean Foods is now the sole owner,
manufacturer and marketer of Marie’s brand products nationwide.
“By completing this transaction, we consolidated the Marie’s brand
nationally, allowing us greater ability to invest efficiently in
product innovation and branding,” Engles said. “It is another
important step toward focusing our efforts on brands that we own or
In May, Dean Foods completed the acquisition of the remaining
64% equity interest in White Wave, Inc. it did not already own.
White Wave, based in Boulder, Co., is the maker of Silk(R), the leading
refrigerated soymilk in the country. For financial reporting purposes,
White Wave’s results will be aggregated with the company’s Morningstar
“We believe that soymilk is one of the most promising branded growth
opportunities in the food and beverage industry today,” said Engles.
“With its proven record of success in the soymilk category, we believe
White Wave is well positioned to take advantage of the explosive growth
potential that this category holds. Dean Foods is committed to
investing, innovating and branding in the functional beverage arena,
and this transaction is another step toward delivering on that
Dean Foods completed its two-for-one common stock split and began
trading on a split-adjusted basis on April 24, 2002. All share and per
share amounts in this press release have been adjusted to reflect the
Dairy Group sales for the second quarter totaled $1.8 billion, an increase
of 45% over $1.2 billion in the second quarter of 2001. The sales growth was
due primarily to the addition of the legacy Dean dairies.
Dairy Group pro forma operating income in the second quarter improved 66%
to $142.4 million, and pro forma operating margins increased 102 basis points
to 7.92% of sales, due to synergies from the merger transaction and lower raw
milk costs. The average Class I mover, as determined on a monthly basis by
the USDA, declined 21% in the second quarter to $11.25 per hundred weight in
comparison to the comparable period in 2001.
Morningstar/White Wave sales in the second quarter totaled $263.8 million,
an increase of 47%. The increase was due primarily to the addition of legacy
Dean’s National Refrigerated Products segment and White Wave.
Pro forma operating income in the second quarter for Morningstar/White
Wave was $30.8 million, up 16% compared to last year, and operating margins
were down 315 basis points to 11.69%, due to the previously announced
phase-out of the Lactaid and Nestle brands and incremental marketing spending
toward the company’s branded and value-added growth platforms, including White
Specialty Foods sales totaled $177.4 million and operating income was
$25.4 million, or 14.3% of sales. “We are very proud of the accomplishments
of our Specialty Foods segment in the second quarter,” said Engles. “The
Specialty Foods team has moved aggressively to reduce costs, innovate in
packaging and drive profitability, resulting in substantial margin improvement
over last year.”
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2002
The company recorded net sales growth of 55% to $4.6 billion for the
six months ended June 30, 2002, compared with $3.0 billion during the first
half of 2001. Net income for the first six months totaled $81.3 million,
compared with $56.7 million in the first six months of 2001. Pro forma net
income for the six months totaled $133.5 million, an increase of 82% over
$73.5 million in the first half of 2001.
Diluted earnings per share for the six months ended June 30, 2002 declined
to $0.85, compared with $0.94 in the first half of 2001. Pro forma diluted
earnings per share for the six months totaled $1.33, an increase of 14%
compared with $1.17 in the first half of 2001.
Pro forma results for the six months ended June 30, 2002 exclude
restructuring charges of $7.9 million related to plant closings and exclude a
one-time charge of $47.3 million, net of income tax, related to the write-down
of certain trademarks due to the implementation of Financial Accounting
Standard (FAS) 142, “Goodwill and Other Intangible Assets.” Pro forma results
for the first six months of 2001 have been adjusted to exclude plant closing
charges and to reflect the elimination of goodwill and other intangible
amortization. In addition, pro forma 2001 results exclude the cumulative
effect of the accounting change for the adoption of FAS 133 in the first
quarter of 2001. A reconciliation table between earnings per share and pro
forma earnings per share is attached.
The company reported operating income for the six months of $326.7 million
versus $186.8 million in the first six months of 2001, an increase of 75%.
Pro forma operating income totaled $334.6 million, an increase of 57% over pro
forma $212.9 million in the first half of 2001. Pro forma operating income
margins for the first half of 2002 were 7.22%, an increase of 8 basis points
versus the pro forma results from the first six months of last year.
Free cash flow for the first six months of 2002 was $131.5 million,
compared with $92.7 million in the first half of 2001.
CONFERENCE CALL WEBCAST
A webcast to discuss the company’s financial results and outlook will be
held at 10:00 a.m. eastern today and may be heard live by visiting the
“Webcasts” section of the company web site at www.deanfoods.com .
ABOUT DEAN FOODS
Dean Foods Company is one of the nation’s leading food and beverage
companies. The company produces a full line of company-branded and private
label dairy products such as milk and milk-based beverages, ice cream, coffee
creamers, half and half, whipping cream, whipped toppings, sour cream, cottage
cheese, yogurt, dips, dressings and soy milk. The company is also a leading
supplier of pickles and other specialty food products, juice, juice drinks and
water. The company operates over 120 plants in 38 U.S. states and
3 countries, and employs more than 30,000 people.
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, the company’s projected earnings per share, merger
synergies, cash flow and capital expenditures, as well as the company’s
expectations concerning its branding initiatives. 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 during the remainder of 2002,
including targeted sales, operating margins, earnings per share and cash flow
depends on a variety of economic, competitive and governmental factors, 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 primarily 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)
REPORTED PRO FORMA (A) Three months ended Three months ended June 30, June 30, 2002 2001 2002 2001 Net sales $2,350,956 $1,517,541 $2,350,956 $1,517,541 Cost of sales 1,738,644 1,163,947 1,738,644 1,163,947 Gross profit 612,312 353,594 612,312 353,594 Operating costs and expenses 427,265 250,691 427,265 238,027 Plant closing costs 6,665 Operating income 178,382 102,903 185,047 115,567 Interest expense & financing charges on preferred securities 60,709 34,330 60,709 34,330 (Earnings) from unconsolidated affiliates (1,404) (1,186) (1,404) (2,066) Other (income) expense 739 (189) 739 (189) Income before income taxes and minority interest 118,338 69,948 125,003 83,492 Income taxes 45,104 25,982 47,570 29,602 Minority interest 7 9,363 7 11,759 Net income $73,227 $34,603 $77,426 $42,131 Basic earnings per share $0.81 $0.63 $0.86 $0.76 Basic average common shares (000's) 90,050 55,121 90,050 55,121 Diluted earnings per share $0.72 $0.55 $0.76 $0.66 Diluted average common shares (000's) 108,989 72,228 108,989 72,228
(A) Pro forma results for second quarter 2002 are adjusted to exclude
plant closing costs. Pro forma results for second quarter 2001 are adjusted to eliminate goodwill and other intangible amortization. DEAN FOODS COMPANY (Dollars in thousands, except per share data)
REPORTED PRO FORMA (B) Six months ended Six months ended June 30, June 30, 2002 2001 2002 2001 Net sales $4,632,941 $2,982,613 $4,632,941 $2,982,613 Cost of sales 3,464,340 2,281,774 3,464,340 2,281,774 Gross profit 1,168,601 700,839 1,168,601 700,839 Operating costs and expenses 834,032 513,215 834,032 487,960 Plant closing costs 7,898 843 Operating income 326,671 186,781 334,569 212,879 Interest expense & financing charges on preferred securities 120,982 70,028 120,982 70,028 (Earnings) from unconsolidated affiliates (1,807) (2,859) (1,807) (4,593) Other expense 453 502 453 502 Income before income taxes and minority interest 207,043 119,110 214,941 146,942 Income taxes 78,442 44,649 81,383 52,199 Minority interest 16 16,341 16 21,293 Net income before cumulative effect of accounting change 128,585 58,120 133,542 73,450 Cumulative effect of accounting change (47,316) (1,446) Net income $81,269 $56,674 $133,542 $73,450 Basic earnings per share: Income before cumulative effect of accounting change $1.44 $1.06 Cumulative effect of accounting change (0.53) (0.03) Net income $0.91 $1.03 $1.49 $1.34 Basic average common shares (000's) 89,466 54,917 89,466 54,917 Diluted earnings per share: Income before cumulative effect of accounting change $1.29 $0.96 Cumulative effect of accounting change (0.44) (0.02) Net income $0.85 $0.94 $1.33 $1.17 Diluted average common shares (000's) 108,484 71,897 108,484 71,897
(B) Pro forma results for the first six months of 2002 are adjusted to
exclude plant closing costs and the cumulative effect of accounting change related to the write-down of certain trademarks due to the implementation of FAS 142, "Goodwill and Other Intangible Assets". Pro forma results for first six months of 2001 are adjusted to exclude plant closing costs, to exclude the cumulative effect of accounting change due to the implementation of FAS 133, "Accounting for Derivative Instruments and Hedging Activities", and to eliminate goodwill and other intangible amortization. DEAN FOODS COMPANY Condensed Balance Sheet (Dollars in Thousands)
June 30, December 31, ASSETS 2002 2001 Cash and cash equivalents $67,350 $78,260 Other current assets 1,313,941 1,403,924 Total current assets 1,381,291 1,482,184 Property, plant & equipment 1,620,119 1,668,592 Intangibles & other assets 3,841,513 3,581,121 Total Assets $6,842,923 $6,731,897 LIABILITIES AND STOCKHOLDERS' EQUITY Total current liabilities $1,159,318 $1,174,963 Long-term debt 2,886,912 2,971,525 Other long-term liabilities 561,791 524,924 Mandatorily redeemable TIPES 584,886 584,605 Stockholders' equity: Common stock 903 879 Additional paid-in capital 1,051,666 961,705 Retained earnings 624,409 543,139 Other comprehensive income (26,962) (29,843) Total stockholders' equity 1,650,016 1,475,880 Total Liabilities and Stockholders' Equity $6,842,923 $6,731,897 Earnings Per Share Summary and Reconciliation
Three Months Ended Six Months Ended June 30, June 30, 2002 2001 2002 2001 Diluted earnings per share $0.72 $0.55 $0.85 $0.94 Elimination of amortization: Goodwill amortization 0.10 0.19 Trademark amortization 0.01 0.02 Nonrecurring losses: Plant closing costs (A) 0.04 0.04 Cumulative effect of accounting change (B) 0.44 0.02 Pro forma diluted earnings per share $0.76 $0.66 $1.33 $1.17
(A) Plant closing costs in the second quarter of 2002 related to the
closings of plants in Puerto Rico and Vermont, as well as a Dairy Group distribution facility; in addition, a Dairy Group plant in Michigan was closed in the six month period.
(B) Cumulative effect of accounting change in 2002 was related to the
write-down of certain trademarks due to the implementation of FAS 142, "Goodwill and Other Intangible Assets". In 2001 the cumulative effect of accounting change was the result of the adoption of FAS 133, "Accounting for Derivative Instruments and Hedging Activities". DEAN FOODS COMPANY Segment Information (Dollars in thousands)
Reported Pro Forma Three Months Ended Three Months Ended June 30, June 30, 2002 2001 2002 2001 Revenue Dairy Group $1,798,714 $1,240,098 $1,798,714 $1,240,098 Morningstar Foods/White Wave 263,796 178,938 263,796 178,938 Specialty Foods 177,364 177,364 Corporate / Other 111,082 98,505 111,082 98,505 Consolidated $2,350,956 $1,517,541 $2,350,956 $1,517,541 Operating Income Dairy Group $137,113 $75,681 $142,382 $85,545 Morningstar Foods/White Wave 30,835 24,748 30,835 26,550 Specialty Foods 25,367 25,367 Corporate / Other (14,933) 2,474 (13,537) 3,472 Consolidated $178,382 $102,903 $185,047 $115,567 Reported Pro Forma Six Months Ended Six Months Ended June 30, June 30, 2002 2001 2002 2001 Revenue Dairy Group $3,576,218 $2,440,772 $3,576,218 $2,440,772 Morningstar Foods/White Wave 502,376 345,627 502,376 345,627 Specialty Foods 338,578 338,578 Corporate / Other 215,769 196,214 215,769 196,214 Consolidated $4,632,941 $2,982,613 $4,632,941 $2,982,613 Operating Income Dairy Group $263,347 $142,312 $269,849 $162,819 Morningstar Foods/White Wave 53,940 46,265 53,940 49,831 Specialty Foods 46,154 46,154 Corporate / Other (36,770) (1,796) (35,373) 229 Consolidated $326,671 $186,781 $334,570 $212,879 Summary Financial Information (Dollars in thousands)
Reported Pro Forma Three Months Ended Three Months Ended June 30, June 30, 2002 2001 2002 2001 Depreciation $39,157 $24,008 $39,157 $24,008 Amortization of intangibles 1,135 13,456 1,135 792 Amortization shown in interest expense 3,237 666 3,237 666 Capital expenditures 60,498 35,585 60,498 35,585 Six Months Ended Six Months Ended June 30, June 30, 2002 2001 2002 2001 Depreciation $82,115 $47,830 $82,115 $47,830 Amortization of intangibles 3,347 26,797 3,347 1,542 Amortization shown in interest expense 5,799 1,332 5,799 1,332 Capital expenditures 91,528 55,317 91,528 55,317
|Senior Vice President and Treasurer|
SOURCE Dean Foods Company
/CONTACT: Cory Olson, Senior Vice President and Treasurer,
+1-214-303-3645, or P.I. Aquino, Assistant Treasurer, +1-214-303-3437, both of
Dean Foods Company/