Wednesday, 4 August 2004

Dean Foods Company Reports Second Quarter 2004 Results

Back to all newsroom
Wednesday, 4 August 2004
             Company Reports Second Quarter Diluted EPS of $0.47;

Unprecedented Rise in Raw Material Costs Impacts Second Quarter Earnings;
Dean Foods Reiterates 8-10% Adjusted Diluted EPS Growth Expectations for 2004

DALLAS, Aug. 4 /PRNewswire-FirstCall/ — Dean Foods Company (NYSE: DF)
announced today that it earned $0.47 per diluted share for the quarter ended
June 30, 2004, a decline of 13% compared with $0.54 per diluted share in the
second quarter of 2003. Net income in the second quarter declined 8% to
$77.1 million, compared with $83.8 million in the second quarter of 2003.

Net sales for the second quarter totaled $2.8 billion, an increase of 26%
over the second quarter of 2003, due to increased selling prices resulting
from the pass through of increases in raw milk costs. The Class I mover,
which is an indicator of the price the company pays for raw milk, increased
87% in the second quarter compared with last year’s second quarter, and Class
II butterfat prices increased 105% in the same period. Solid growth in the
Branded Products Group segment and the acquisitions of Horizon Organic and
Ross-Swiss Dairies in 2004 and Kohler Mix Specialties in 2003 also contributed
to revenue growth.

On an adjusted basis (as defined below), diluted earnings per share for
the second quarter declined 16%, and net income for the second quarter was
down 10%.

“As we expected, this year’s second quarter was a difficult one for Dean
Foods,” said Gregg Engles, chairman and chief executive officer. “During the
quarter, dairy commodities rose to historic highs, as did many other
agricultural inputs and energy prices. We did a reasonably good job of
passing these cost increases along, particularly in our dairy business.
Nonetheless, our adjusted net income was down 10% to last year and at the low
end of our expectations. Increased spending against our brands also impacted
our results compared to last year.

“The Dairy Group turned in a respectable performance given the commodity
environment. Our Branded Products Group continued to deliver solid volume,
sales and profitability growth, even while increasing investment in marketing
and promoting our brands. Our Specialty Foods Group continues to face
significant cost pressure and competitive challenges this year. We expect
these operational and competitive challenges will continue for the Specialty
Foods Group through the second half of the year,” Engles said.

Operating income in the second quarter totaled $169.0 million, an 8%
decline versus $184.5 million in the second quarter of 2003. Adjusted second
quarter operating income of $169.0 million declined 10% compared to adjusted
operating income of $187.5 million in the second quarter of 2003.

Operating income margins were 6.02% for the second quarter of 2004, down
228 basis points compared to 8.30% in the second quarter of 2003. On an
adjusted basis, operating income margins were down 242 basis points compared
to 8.44% in the second quarter of 2003.

The decline in consolidated operating income and margins was due to higher
raw milk, butterfat, fuel and other commodity costs, as well as increased
brand spending compared to the prior year.

Long-term debt at June 30, 2004 was approximately $3.1 billion, including
$300 million due within one year that is reported as a current liability. At
the end of the quarter, approximately $711 million was available for future
borrowings under the company’s senior credit facilities.

OUTLOOK FOR THE BALANCE OF 2004

“The raw milk environment is showing signs of returning to more normal
levels in the third quarter,” said Engles. “However, market uncertainty
remains among both consumers and customers caused by the rapid run-up and pull
back in milk prices over the last four months. We also face continuing cost
pressures from other inputs, including agricultural commodities, packaging and
fuel. Nevertheless, we continue to expect to grow adjusted diluted earnings
per share in the range of 8 to 10%, to $2.21 to $2.26 per share, in line with
our long-term growth goals.”

The company reiterated its quarterly adjusted earnings per share guidance
of $0.54 to $0.57 per diluted share in the third quarter and between $0.72 and
$0.76 per diluted share in the fourth quarter.

SECOND QUARTER SEGMENT RESULTS

Dairy Group net sales for the second quarter rose 25% to $2.3 billion,
from $1.8 billion in the second quarter of 2003. The sales increase was due
to previously-announced acquisitions and increased selling prices in response
to higher raw milk and butterfat costs. The second quarter Class I mover
averaged $18.14 per hundred-weight in the second quarter of 2004, an 87%
increase versus last year. Class II butterfat costs averaged $2.38 per pound
in the second quarter, an increase of 105% over last year.

Dairy Group segment operating income in the second quarter declined
$18.7 million to $154.4 million and operating margins declined 273 basis
points to 6.81% of sales, due to the negative impact of higher raw milk and
butterfat prices and the sale of the pre-whipped topping business in the third
quarter of last year. Additionally, higher fuel costs impacted the Dairy
Group’s results by approximately $3.0 million in the second quarter.

The Branded Products Group’s net sales increased 70% in the second quarter
to $288.5 million, driven by increased volumes across the strategic brand
portfolio and the acquisition of Horizon Organic. Volumes of the company’s
strategic brands grew 16% and sales grew 29% during the second quarter, fueled
by the performance of the Silk, Horizon Organic and International Delight
brands. Dean Foods’ strategic brands include Silk(R) and Sun Soy(R) soymilk,
Horizon Organic(R) branded products, International Delight(R) coffee creamers,
Hershey’s(R) milks and milkshakes, Land O’Lakes(R) nationally-distributed
products, Marie’s(R) dips and dressings, The Organic Cow of Vermont(R) organic
milk, Rachel’s Organic(TM) organic dairy products sold in the U.K., and
Dean’s(R) dips. The strategic brand portfolio is a subset of the Branded
Products Group and excludes Horizon Organic’s and White Wave’s private label
business, White Wave’s cultured soy and tofu products, Folgers(R) Jakada(R)
milk and coffee beverages, and certain non-core brands sold by the Dean
National Brands Group.

Second quarter volumes for the Branded Products Group segment in total
were up 14% over last year, assuming Horizon Organic and the Land O’Lakes
sublicense were owned in the comparable period in 2003. Sales dollars for the
Branded Products Group segment in total were up 29% over last year.

Second quarter operating income for the Branded Products Group totaled
$17.3 million, up from $3.3 million in last year’s second quarter. Segment
operating margins were 5.98%, an improvement of 405 basis points compared to
the prior year. Despite increased brand spending of $6 million in the second
quarter, Branded Products Group segment operating results improved due to
margin improvement across the branded portfolio, the contribution of Horizon
Organic and the elimination of the White Wave management incentive accrual.

Specialty Foods’ net sales in the second quarter totaled $174.2 million, a
0.9% decline compared with the second quarter of 2003. Segment operating
income was $19.8 million, a decline of $6.8 million compared to last year, and
segment operating income margins declined 374 basis points to 11.4%, due to
high commodity, packaging and transportation costs, as well as lower volumes
in the segment’s nutritional drinks business.

RESULTS FOR SIX MONTHS ENDED JUNE 30, 2004

The company’s net sales increased 20% to $5.3 billion for the six months
ended June 30, 2004, compared with $4.4 billion during the first six months of
2003. The increase was due to higher raw material costs that were passed on
to customers in the form of higher selling prices, growth in the Branded
Products Group and the acquisitions of Horizon Organic, Ross-Swiss Dairies,
Melody Farms and Kohler Mix Specialties. Net income for the first half of the
year totaled $146.3 million, compared with $147.0 million in 2003. Diluted
earnings per share for the six months ended June 30, 2004 totaled $0.90,
compared with $0.97 in the first six months of 2003.

On an adjusted basis (as defined below), net income for the six months
totaled $151.0 million, an increase of 2% over $147.8 million last year.
Adjusted diluted earnings per share for the first six months of 2004 totaled
$0.93 compared with $0.98 in the first six months of 2003.

The company reported operating income for the period ended June 30, 2004
of $321.4 million versus $341.4 million in 2003. Adjusted operating income
for the first six months of 2004 totaled $329.0 million, a decline of 4%
versus $342.8 million last year. Adjusted operating income margins for the
six months were 6.26%, a decline of 159 basis points versus the prior year’s
first six months.

COMPARISON OF ADJUSTED INFORMATION TO GAAP INFORMATION

The adjusted earnings, operating income and operating margin information
contained in this press release are non-GAAP financial measures that eliminate
the net expense related to plant closings and restructurings. These numbers
are 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 the company’s management. Because the
company cannot predict the timing and amount of charges associated with plant
closings and restructurings, management does not consider plant closing or
restructuring costs when evaluating the company’s performance, when making
decisions regarding the allocation of resources, or in determining incentive
compensation for management. Plant closing and restructuring 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 and six-
month periods ended June 30, 2004 calculated according to GAAP and on an
adjusted basis is attached. Additionally, the company’s earnings guidance for
2004 excludes any potential non-recurring or one-time gains and losses and
plant closing and restructuring charges.

For the quarter ended June 30, 2004, the adjusted results reported above
do not differ from the company’s results under GAAP. The company recorded a
net $11,000 charge ($7,000 net of income tax) related to plant closings,
including closings in Madison, South Gate, and Wilkesboro, and almost entirely
offset by a gain on the sale of a plant closed in Hawaii in 2003.

For the quarter ended June 30, 2003, the adjusted results reported above
differ from the company’s results under GAAP by excluding a $3.0 million
charge ($1.9 million net of income tax) largely related to closing an ice
cream plant in Hawaii.

For the six months ended June 30, 2004, the adjusted results reported
above differ from the company’s results under GAAP by excluding a net
$7.6 million charge ($4.6 million net of income tax) mostly related to plant
closings in Madison, South Gate, San Leandro, and Wilkesboro, and partly
offset by a gain on the sale of a plant closed in Hawaii in 2003.

For the six months ended June 30, 2003 the adjusted results reported above
differ from the company’s results reported under GAAP by excluding several
restructuring charges totaling $1.3 million ($0.8 million net of income tax),
including closing an ice cream plant in Hawaii, partly offset by a gain on the
sale of a previously-closed plant in Michigan.

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 an extensive
refrigerated direct-store-delivery network. Through its White Wave and
Horizon Organic subsidiaries, Dean Foods Company is also the nation’s leading
manufacturer of soymilk, organic milk and other branded organic foods. The
company’s Specialty Foods Group is a leading manufacturer of pickles and other
specialty food products. Dean Foods Company and its subsidiaries operate
approximately 120 plants in 36 U.S. states, Spain and the United Kingdom, and
employ approximately 29,000 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 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 during 2004, 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
                                      June 30,                June 30,
                                  2004        2003        2004        2003

    Net sales                  $2,806,564  $2,222,572  $2,806,564  $2,222,572
    Cost of sales               2,168,366   1,621,419   2,168,366   1,621,419

      Gross profit                638,198     601,153     638,198     601,153

    Operating costs and
     expenses                     469,174     413,662     469,174     413,662
    Plant closing and
     restructuring costs               11       3,025

      Operating income            169,013     184,466     169,024     187,491

    Interest expense               44,079      44,341      44,079      44,341
    Financing charges on
     preferred securities                       5,769                   5,769
    Other income                      (76)       (287)        (76)       (287)

      Income before income
       taxes                      125,010     134,643     125,021     137,668
    Income taxes                   47,937      50,854      47,941      52,020

        Net income                $77,073     $83,789     $77,080     $85,648

    Basic earnings per share:
        Net income                  $0.49       $0.60       $0.49       $0.61

        Basic average common
         shares (000's)           157,331     139,477     157,331     139,477

    Diluted earnings per share:
        Net income                  $0.47       $0.54       $0.47       $0.56

        Diluted average common
         shares (000's)           163,634     160,758     163,634     160,758

     [A] Adjusted results differ from results reported under GAAP by
         excluding income and expense related to plant closings and
         restructurings.  More information about these items is included in
         the earnings release under the heading "Comparison of Adjusted
         Information to GAAP Information."


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

                                        GAAP                ADJUSTED [B]
                                  Six Months Ended        Six Months Ended
                                      June 30,                June 30,
                                  2004        2003        2004        2003

    Net sales                  $5,258,715  $4,367,450  $5,258,715  $4,367,450
    Cost of sales               4,008,072   3,195,064   4,008,072   3,195,064

      Gross profit              1,250,643   1,172,386   1,250,643   1,172,386

    Operating costs and
     expenses                     921,644     829,603     921,644     829,603
    Plant closing and
     restructuring costs            7,584       1,335

      Operating income            321,415     341,448     328,999     342,783

    Interest expense               86,580      91,212      86,580      91,212
    Financing charges on
     preferred securities                      14,164                  14,164
    Other income                   (1,561)       (950)     (1,561)       (950)

      Income before income
       taxes                      236,396     237,022     243,980     238,357
    Income taxes                   90,083      90,024      93,025      90,532

        Net income               $146,313    $146,998    $150,955    $147,825

    Basic earnings per share:
        Net income                  $0.93       $1.09       $0.96       $1.10

        Basic average common
         shares (000's)           156,718     134,908     156,718     134,908

    Diluted earnings per share:
        Net income                  $0.90       $0.97       $0.93       $0.98

        Diluted average common
         shares (000's)           163,149     160,073     163,149     160,073

     [B] Adjusted results differ from results reported under GAAP by
         excluding income and expense related to plant closings and
         restructurings.  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  Six Months Ended
                                              June 30,           June 30,
                                           2004     2003      2004     2003
    GAAP diluted earnings per share        $0.47    $0.54     $0.90    $0.97

    Adjustments:
      Plant closing and restructuring
       costs                                         0.02      0.03     0.01

    Adjusted diluted earnings per share    $0.47    $0.56     $0.93    $0.98


                             Segment Information
                            (Dollars in thousands)

                        Three Months Ended June 30,  Six Months Ended June 30,
                            2004          2003          2004          2003
    Revenue
      Dairy Group        $2,265,849    $1,814,240    $4,219,167    $3,580,598
      Branded Products
       Group                288,520       169,363       550,909       325,922
      Specialty Foods
       Group                174,168       175,676       339,651       338,614
      Corporate / Other      78,027        63,293       148,988       122,316
        Total            $2,806,564    $2,222,572    $5,258,715    $4,367,450

    Segment operating income
     (loss)
      Dairy Group          $154,410      $173,079      $292,716      $314,103
      Branded Products
       Group                 17,263         3,263        33,558        11,600
      Specialty Foods
       Group                 19,832        26,584        39,138        49,775
      Corporate / Other     (22,481)      (15,435)      (36,413)      (32,695)
        Subtotal            169,024       187,491       328,999       342,783
    Plant closing costs         (11)       (3,025)       (7,584)       (1,335)
        Total operating
         income            $169,013      $184,466      $321,415      $341,448


                              DEAN FOODS COMPANY

                           Condensed Balance Sheet
                            (Dollars in Thousands)

                                                 June 30,        December 31,
    ASSETS                                         2004              2003

    Cash and cash equivalents                      $29,617           $47,143
    Other current assets                         1,575,865         1,353,738
      Total current assets                       1,605,482         1,400,881

    Property, plant & equipment                  1,875,429         1,773,555

    Intangibles & other assets                   4,151,712         3,818,100

      Total Assets                              $7,632,623        $6,992,536

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Total current liabilities                   $1,318,996        $1,170,393

    Long-term debt                               2,818,939         2,611,356

    Other long-term liabilities                    715,667           667,974

    Stockholders' equity:
      Common stock                                   1,577             1,550
      Additional paid-in capital                 1,581,241         1,498,025
      Retained earnings                          1,220,572         1,074,258
      Other comprehensive income                   (24,369)          (31,020)
        Total stockholders' equity               2,779,021         2,542,813

        Total Liabilities and
         Stockholders' Equity                   $7,632,623        $6,992,536


                              DEAN FOODS COMPANY

                      Condensed Statement of Cash Flows
                            (Dollars in Thousands)

                                                   Six Months Ended June 30,
    Operating Activities                            2004              2003
      Net income                                  $146,313          $146,998
      Depreciation and amortization                112,034            94,120
      Deferred income taxes                         37,101            52,755
      Tax savings on equity compensation            15,298            15,771
      Changes in current assets and
       liabilities                                (187,640)          (88,837)
      Other                                          1,695            (3,838)
        Net cash provided by operations            124,801           216,969

    Investing Activities
      Net additions to property, plant
       and equipment                              (164,021)         (130,580)
      Cash outflows for acquisitions              (351,289)          (52,048)
      Proceeds from disposal of fixed
       assets                                        7,493             5,170
        Net cash used in investing
         activities                               (507,817)         (177,458)

    Financing Activities
      Proceeds from the issuance of debt           478,688           131,049
      Repayment of debt                           (159,369)         (107,745)
      Issuance of common stock, net of
       expenses                                     52,474            64,277
      Redemption of common stock                    (5,163)         (142,565)
      Other                                         (1,140)           (2,420)
        Net cash provided by (used in)
         financing activities                      365,490           (57,404)

    Decrease in cash and cash equivalents          (17,526)          (17,893)
    Beginning cash balance                          47,143            45,896

    Ending cash balance                            $29,617           $28,003

     Contact:  Cory Olson
               Senior Vice President and Treasurer
               (214) 303-3645

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

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

All the latest from Dean Foods

familyofproducts

Latest news

Find out how we’re fueling lives from the farm to the table.

6 May, 2020
Dean Foods Completes Sale of its Miami, Florida Facility to Mana Saves McArthur, LLC
DALLAS--(BUSINESS WIRE)--Dean Foods today announced that it has completed the previously announced s...
learn-more
1 May, 2020
Dean Foods Completes Sale of Assets to Dairy Farmers of America
DALLAS--( BUSINESS WIRE )--Dean Foods Company ("Dean Foods" or the "Company") today announced that i...
learn-more
30 April, 2020
Dean Foods Completes Sales of its Uncle Matt’s Business and the Majority of the Meadow Gold Hawaii...
DALLAS--(BUSINESS WIRE)--Dean Foods ("Dean Foods" or the "Company") today announced that it has comp...
learn-more
22 April, 2020
Dean Foods Announces Asset Purchase Agreement with MGD Acquisition, LLC for the Sale of the Majority...
MGD Acquisition to Operate Meadow Gold Hawaii as an Ongoing Business to Continue Serving the Hawaiia...
learn-more
13 April, 2020
Dean Foods Announces Termination of Agreement in Principle with Industrial Realty Group, LLC for the...
Reached Agreement in Principle with an Interested Party for the Sale of Dean Foods’ Hilo Facility ...
learn-more
4 April, 2020
Dean Foods Receives Court Approval for the Sale of Substantially All of Its Assets
DALLAS--(BUSINESS WIRE)--Dean Foods Company ("Dean Foods" or the "Company") today announced that the...
learn-more
1 April, 2020
Dean Foods Reaches Agreement in Principle With Industrial Realty Group, LLC for the Sale of Dean Foo...
DALLAS--(BUSINESS WIRE)--Dean Foods Company ("Dean Foods" or the "Company") today announced that it ...
learn-more
31 March, 2020
Dean Foods Announces Dairy Farmers of America as Winning Bidder for Substantially All of Its Assets
Prairie Farms Dairy, Mana Saves McArthur, LLC, Producers Dairy Foods and Harmoni, Inc. to Purchase A...
learn-more
17 February, 2020
Dean Foods Enters Into Asset Purchase Agreement with Dairy Farmers of America
Dairy Farmers of America to Serve as Proposed “Stalking Horse Bidder” in a Court-Supervised Sale...
learn-more
20 December, 2019
Dean Foods Receives Final Court Approval for $850 Million in Debtor-In-Possession Financing
DALLAS --(BUSINESS WIRE)--Dec. 20, 2019-- Dean Foods Company (NYSE: DF) (“Dean Foods” or the “...
learn-more
14 November, 2019
Dean Foods Company Receives Court Approval of “First Day” Motions to Support Normal Busi...
Obtains Interim Approval to Access DIP Financing Customers Receiving Uninterrupted Supply of Dairy P...
learn-more
12 November, 2019
Dean Foods Company Initiates Voluntary Reorganization with New Financial Support from Existing Lende...
Company Secures Commitments for $850 Million in DIP Financing to Support Operations In Advanced Disc...
learn-more
25 October, 2019
Dean Foods Company Announces Date for Third Quarter 2019 Earnings Release and Conference Call
DALLAS , Oct. 25, 2019 /PRNewswire/ --  Dean Foods Company (NYSE: DF) today announced that it will ...
learn-more
6 September, 2019
Dean Foods Concludes Strategic Alternatives Review; Focuses on Go-Forward Strategy Under New Leaders...
DALLAS , Sept. 6, 2019 /PRNewswire/ --  Dean Foods Company (NYSE: DF) (" Dean Foods " or the "Compa...
learn-more
6 August, 2019
Dean Foods Announces Second Quarter 2019 Results
DALLAS , Aug. 6, 2019 /PRNewswire/ -- Dean Foods Company (NYSE: DF) today reported second quarter 20...
learn-more
26 July, 2019
Dean Foods Appoints Eric Beringause as President and CEO
Industry Veteran Brings More Than Three Decades of Experience in Food, Beverage and Consumer Product...
learn-more
View the newsroom

We’re proud to support national organizations that are nourishing children, promoting animal welfare, and helping in times of disaster.

White papers
farm