Thursday, 7 November 2002

Dean Foods Company Reports Record Third Quarter Results

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Thursday, 7 November 2002

Third Quarter Pro Forma Diluted EPS Grew 20% to $0.71;

Dean Foods Reaffirms 2002 Pro Forma Diluted EPS of $2.75 – $2.78;

Company Announces 2003 Pro Forma Diluted EPS Target of $3.00 to $3.05 Per

Share, Confirming 8-10% Long-Term Annual Growth Goal

DALLAS, Nov. 7 /PRNewswire-FirstCall/ — Dean Foods Company (NYSE: DF)
today announced record results for the quarter ended September 30, 2002.
Diluted earnings per share totaled $0.68, an increase of 45% compared with
$0.47 in the third quarter of 2001. Net income for the third quarter was
$68.7 million, an increase of 134% versus $29.4 million in the third quarter
of 2001. Third quarter net sales totaled $2.3 billion, an increase of 48%
over the third quarter of 2001.

On a pro forma basis, diluted earnings per share for the third quarter
totaled $0.71, an increase of 20% compared with pro forma earnings of
$0.59 per share in last year’s third quarter. Pro forma net income for the
third quarter grew 89% to $71.8 million compared with pro forma net income of
$37.9 million in the third quarter of 2001.

Third quarter 2002 pro forma results exclude restructuring charges of
$4.9 million related to a plant closing in Tempe, Ariz. Third quarter 2001
pro forma results have been adjusted to reflect the elimination of goodwill
and other intangible amortization and non-recurring charges related to the
equity investment in Consolidated Container. A reconciliation table between
earnings per share and pro forma earnings per share is attached.

“We continued to deliver outstanding results this quarter and are on track
to deliver $2.75 to $2.78 in earnings per share this year,” said Gregg Engles,
Chairman and Chief Executive Officer of Dean Foods. “We are very proud of our
accomplishments this year and are poised to have another great year in 2003.
We estimate 2003 diluted earnings per share will be in the range of $3.00 to
$3.05, consistent with our long-term earnings per share growth target of 8% to
10% per year.

“We are also committed to continued investment behind our strategic brand
platforms,” Engles continued. “Volumes of our strategic brands —
International Delight, Silk, Sun Soy, Hershey’s, Folgers Jakada, Land O’Lakes
Dairy Ease and Dean’s and Marie’s dips and dressings — grew 25% this quarter
versus last year. Our current product portfolio is performing very well, and
we are excited about our pipeline of innovative products for 2003 and beyond.”

The company reported third quarter operating income of $169.0 million
versus $98.2 million in the third quarter of 2001, an increase of 72%. Pro
forma operating income totaled $173.9 million, an increase of 57% over pro
forma operating income of $110.8 million in the third quarter of 2001. Pro
forma third quarter 2002 operating income margins were 7.61%, an increase of
45 basis points versus the pro forma results from the third quarter of last
year. Operating income margin improvement was due primarily to merger
synergies, the decline in raw milk costs compared with the prior year and
continued improvement in Specialty Foods’ performance.

Free cash flow for the quarter, defined as pro forma EBITDA less interest,
taxes and capital expenditures was $56.0 million, an increase of 18% over
$47.3 million in free cash flow generated in last year’s third quarter.

Long-term debt at the end of the quarter was approximately $2.9 billion,
including $162.0 million in reported current liabilities, and the company’s
debt-to-pro forma EBITDA ratio was approximately 3.3 times. At September 30,
2002, approximately $700 million of the company’s $2.7 billion bank facility
remained undrawn and available for future investments.

RECENT DEVELOPMENTS

  • Yesterday, Standard & Poor’s announced that it revised its outlook on
    Dean Foods Company and Dean Holding Company to stable from negative.
    At the same time, it affirmed its existing ratings on the company’s
    debt. Standard & Poor’s noted that the revision reflects the progress
    the company has made integrating the legacy Suiza and Dean operations
    and that the company has exceeded its original cost savings plans.

  • In October, Dean Foods completed the sale of its 94% interest in EBI
    Foods Limited. EBI, a U.K.-based developer, manufacturer and marketer
    of food coatings, stabilizers, bakery ingredients and blended products,
    was formerly a subsidiary of the legacy Dean Foods.

“Completing the sale of EBI Foods is consistent with our strategy of
focusing on our core businesses and divesting non-core assets,” said
Engles.

  • During the quarter, the company announced the closure of a Morningstar
    Foods plant in Tempe, Ariz. Operations at the Tempe facility will be
    relocated to Morningstar facilities in City of Industry, Calif. and
    Frederick, Md. The company noted that plant rationalization continues
    to be part of its overall cost savings initiative.

SEGMENT RESULTS

Dairy Group sales for the third quarter totaled $1.8 billion, an increase
of 39% over $1.3 billion in the third quarter of 2001. Third quarter sales
growth was due primarily to the addition of the legacy Dean dairies.

Dairy Group pro forma operating income in the third quarter improved 57%
to $134.8 million, and pro forma operating margins increased 87 basis points
to 7.64% of sales, due to synergies from the merger transaction and lower raw
milk costs. The average Class I mover in the third quarter was $10.52 per
hundred weight, as determined on a monthly basis by the USDA, representing a
32% decline versus last year.

Morningstar/White Wave sales in the third quarter totaled $261.1 million,
an increase of 46%. 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 third quarter for Morningstar/White Wave
was $24.8 million, up 5% compared to last year, and operating margins were
down 371 basis points to 9.49%, due to incremental marketing spending toward
the company’s branded and value-added growth platforms, including White Wave,
and the previously announced phase-out of the Lactaid and Nestle brands.

Specialty Foods’ sales totaled $164.1 million and operating income was
$28.3 million, or 17.3% of sales.

RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002

The company recorded net sales growth of 53% to $6.9 billion for the
nine months ended September 30, 2002, compared with $4.5 billion during the
first nine months of 2001. Net income for the first nine months totaled
$150.0 million, compared with $86.1 million in the first nine months of 2001.
Pro forma net income for the nine months totaled $205.3 million, an increase
of 84% over $111.4 million in the first nine months of 2001.

Diluted earnings per share for the nine months ended September 30, 2002
totaled $1.53, compared with $1.41 in the first nine months of 2001. Pro
forma diluted earnings per share for the nine months totaled $2.04, an
increase of 16% compared with $1.76 in the first nine months of 2001.

Pro forma results for the nine months ended September 30, 2002 exclude
restructuring charges of $12.8 million related to plant closings and also
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 nine months of 2001 exclude plant closing charges
and restructuring from equity investments and 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 nine months of
$495.7 million versus $284.9 million in the first nine months of 2001, an
increase of 74%. Pro forma operating income totaled $508.5 million, an
increase of 57% over pro forma $323.7 million in the first nine months of
2001. Pro forma operating income margins for the first nine months of 2002
were 7.35%, an increase of 20 basis points versus the pro forma results from
the first nine months of last year.

Free cash flow for the first nine months of 2002 was $187.6 million,
compared with $140.1 million in the first nine months 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 and dairy-related 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, Puerto Rico and Spain, 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. 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.

Contacts: Cory Olson

                Senior Vice President and Treasurer
                (214) 303-3645

                P.I. Aquino
                Assistant Treasurer
                (214) 303-3437

                              (Tables to follow)


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

                                   REPORTED               PRO FORMA [A]
                              Three months ended        Three months ended
                                 September 30,             September 30,
                               2002          2001        2002          2001

    Net sales              $2,286,061    $1,547,785  $2,286,061    $1,547,785
    Cost of sales           1,680,610     1,195,435   1,680,610     1,195,435

      Gross profit            605,451       352,350     605,451       352,350

    Operating costs and
     expenses                 431,507       254,183     431,507       241,524
    Plant closing costs         4,921

      Operating income        169,023        98,167     173,944       110,826

    Interest expense &
     financing charges
     on preferred
     securities                58,068        31,653      58,068        31,653
    (Earnings) loss from
     unconsolidated
     affiliates                  (254)        5,424        (254)        2,820
    Other expense                 348         1,097         348         1,097

      Income before
       income taxes and
       minority interest      110,861        59,993     115,782        75,256

    Income taxes               42,137        20,803      43,982        25,160
    Minority interest              25         9,768          25        12,163

        Net income            $68,699       $29,422     $71,775       $37,933

    Basic earnings per
     share                      $0.76         $0.53       $0.79         $0.68

        Basic average
         common shares
         (000's)               90,570        55,721      90,570        55,721

    Diluted earnings per
     share                      $0.68         $0.47       $0.71         $0.59

        Diluted average
         common shares
         (000's)              109,051        73,208     109,051        73,208

[A] Pro forma results for the third quarter of 2002 exclude the costs of

         closing a Morningstar plant in Arizona.  Pro forma results for the
         third quarter of 2001 eliminate goodwill and other intangible
         amortization, and also exclude restructuring costs incurred at
         Consolidated Container, an unconsolidated affiliate in which we hold
         a minority interest.


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

                                   REPORTED               PRO FORMA [B]
                              Nine months ended         Nine months ended
                                September 30,             September 30,
                              2002          2001        2002          2001

    Net sales              $6,919,002    $4,530,397  $6,919,002    $4,530,397
    Cost of sales           5,144,950     3,477,209   5,144,950     3,477,209

      Gross profit          1,774,052     1,053,188   1,774,052     1,053,188

    Operating costs and
     expenses               1,265,538       767,397   1,265,538       729,482
    Plant closing costs        12,820           843

      Operating income        495,694       284,948     508,514       323,706

    Interest expense &
     financing charges
     on preferred
     securities               179,049       101,680     179,049       101,680
    (Earnings) loss from
     unconsolidated
     affiliates                (2,061)        2,565      (2,061)       (1,773)
    Other expense                 801         1,600         801         1,600

      Income before
       income taxes and
       minority interest      317,905       179,103     330,725       222,199

    Income taxes              120,579        65,452     125,365        77,359
    Minority interest              41        26,109          41        33,456

        Net income before
         cumulative effect
         of accounting
         change               197,285        87,542     205,319       111,384

    Cumulative effect of
     accounting change        (47,316)       (1,446)

        Net income           $149,969       $86,096    $205,319      $111,384

    Basic earnings per
     share:
        Income before
         cumulative effect of
         accounting change      $2.20         $1.59
        Cumulative effect of
         accounting change      (0.53)        (0.03)
        Net income              $1.67         $1.56       $2.29         $2.02

        Basic average
         common shares
         (000's)               89,835        55,189      89,835        55,189

    Diluted earnings per
     share:
        Income before
         cumulative effect of
         accounting change      $1.96         $1.43
        Cumulative effect of
         accounting change      (0.43)        (0.02)
        Net income              $1.53         $1.41       $2.04         $1.76

        Diluted average
         common shares
         (000's)              108,674        72,360     108,674        72,360

[B] Pro forma results for the first nine months of 2002 exclude costs

         related to plant closings in Arizona, Puerto Rico, Vermont and
         Michigan as well as a Dairy Group distribution facility.  Also
         excluded is 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 the first nine months of 2001 eliminate goodwill and other
         intangible amortization; restructuring costs incurred at Consolidated
         Container, an unconsolidated affiliate in which we hold a minority
         interest; the costs of closing a plant in Mississippi; and the
         cumulative effect of accounting change due to the implementation of
         FAS 133, "Accounting for Derivative Instruments and Hedging
         Activities".


                              DEAN FOODS COMPANY

                           Condensed Balance Sheet
                            (Dollars in Thousands)

                                                September 30,     December 31,
    ASSETS                                          2002              2001

    Cash and cash equivalents                      $49,153           $78,260
    Other current assets                         1,315,969         1,403,924
      Total current assets                       1,365,122         1,482,184

    Property, plant & equipment                  1,633,701         1,668,592

    Intangibles & other assets                   3,853,961         3,581,121

        Total Assets                            $6,852,784        $6,731,897

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Total current liabilities                   $1,212,836        $1,174,963

    Long-term debt                               2,741,053         2,971,525

    Other long-term liabilities                    576,454           524,924

    Mandatorily redeemable TIPES                   585,032           584,605

    Stockholders' equity:
      Common stock                                     911               879
      Additional paid-in capital                 1,073,136           961,705
      Retained earnings                            693,108           543,139
      Other comprehensive income                   (29,746)          (29,843)
         Total stockholders' equity              1,737,409         1,475,880

        Total Liabilities and
         Stockholders' Equity                   $6,852,784        $6,731,897


                Earnings Per Share Summary and Reconciliation

                                          Three Months Ended Nine Months Ended
                                             September 30,     September 30,
                                             2002     2001     2002     2001
    Diluted earnings per share              $0.68    $0.47    $1.53    $1.41

    Elimination of amortization:
          Goodwill amortization                       0.10              0.29
          Trademark amortization                      0.01              0.02

    Nonrecurring losses:
          Plant closing costs (1)            0.03     0.01     0.08     0.02

    Cumulative effect of accounting
     change (2)                                                0.43     0.02

    Pro forma diluted earnings per share    $0.71    $0.59    $2.04    $1.76

(1) Plant closing costs in the third quarter of 2002 related to the

         closing of a Morningstar plant in Arizona.  Plant closing costs in
         the third quarter of 2001 related to restructuring costs incurred at
         Consolidated Container, an unconsolidated affiliate in which we hold
         a minority interest.  Costs in the nine month period of 2002 related
         to plant closings in Arizona, Puerto Rico, Vermont and Michigan as
         well as a Dairy Group distribution facility.  In the nine month
         period of 2001, plant closing costs include charges incurred at
         Consolidated Container and the closing of a plant in Mississippi.

(2) 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 [C]
                                 Three Months Ended      Three Months Ended
                                    September 30,           September 30,
                                   2002        2001        2002        2001
    Revenue
      Dairy Group              $1,763,726  $1,269,727  $1,763,726  $1,269,727
      Morningstar Foods/White
       Wave                       261,099     178,912     261,099     178,912
      Specialty Foods             164,103                 164,103
      Corporate / Other            97,133      99,146      97,133      99,146
      Consolidated             $2,286,061  $1,547,785  $2,286,061  $1,547,785

    Operating Income
      Dairy Group                $134,835     $76,146    $134,835     $85,996
      Morningstar Foods/White
       Wave                        19,862      21,825      24,783      23,626
      Specialty Foods              28,321                  28,321
      Corporate / Other           (13,995)        196     (13,995)      1,204
      Consolidated               $169,023     $98,167    $173,944    $110,826

                                      Reported             Pro Forma [D]
                                 Nine Months Ended       Nine Months Ended
                                    September 30,           September 30,
                                   2002        2001        2002        2001
    Revenue
      Dairy Group              $5,339,943  $3,710,500  $5,339,943  $3,710,500
      Morningstar Foods/White
       Wave                       763,475     524,539     763,475     524,539
      Specialty Foods             502,681                 502,681
      Corporate / Other           312,903     295,358     312,903     295,358
      Consolidated             $6,919,002  $4,530,397  $6,919,002  $4,530,397

    Operating Income
      Dairy Group                $398,182    $218,458    $404,685    $248,816
      Morningstar Foods/White
       Wave                        73,801      68,090      78,722      73,457
      Specialty Foods              74,475                  74,475
      Corporate / Other           (50,764)     (1,600)    (49,368)      1,433
      Consolidated               $495,694    $284,948    $508,514    $323,706


                        Summary Financial Information
                            (Dollars in thousands)

                                       Reported               Pro Forma
                                   Three Months Ended      Three Months Ended
                                     September 30,           September 30,
                                    2002        2001        2002        2001

    Depreciation                  $39,119     $23,748     $39,119     $23,748
    Amortization of intangibles     3,049      13,116       3,049         457
    Amortization shown in
     interest expense               3,244         643       3,244         643
    Capital expenditures           60,864      34,051      60,864      34,051

                                   Nine Months Ended       Nine Months Ended
                                     September 30,           September 30,
                                    2002        2001        2002        2001

    Depreciation                 $121,235     $71,578    $121,235     $71,578
    Amortization of intangibles     6,390      39,914       6,390       1,999
    Amortization shown in
     interest expense               9,043       1,975       9,043       1,975
    Capital expenditures          152,392      89,368     152,392      89,368

[C] Pro forma results for the third quarter of 2002 exclude the costs of

         closing a Morningstar plant in Arizona.  Pro forma results for the
         third quarter of 2001 eliminate goodwill and other intangible
         amortization.

[D] Pro forma results for the first nine months of 2002 exclude costs

         related to closing Dairy Group plants in Vermont and Michigan, a
         Dairy Group distribution facility, a Morningstar plant in Arizona,
         and a plant in Puerto Rico (which is reflected in Corporate/Other).
         Pro forma results for the first nine months of 2001 eliminate
         goodwill and other intangible amortization and the costs of closing a
         Dairy Group plant in Mississippi.

                     

SOURCE Dean Foods Company

-0- 11/07/2002

/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/

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