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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