Thursday, 3 May 2007

Dean Foods Company Reports Solid First Quarter Results

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Thursday, 3 May 2007

Strong Performance Across Both Divisions Supply-Demand Imbalance in the Organic Dairy Markets and Expectations for Rising Commodity Costs Result in Adjustment of Full Year Guidance to Low End of Previous RangeDALLAS, May 3, 2007 /PRNewswire-FirstCall via COMTEX News Network/ — Dean Foods Company (NYSE: DF)
today announced that the Company earned $0.47 per diluted share from
continuing operations for the quarter ended March 31, 2007, compared with
$0.38 per diluted share from continuing operations in the first quarter of
2006. Net income from continuing operations for the first quarter totaled
$63.2 million, compared with $54.7 million in the prior year’s first quarter.

On an adjusted basis (as defined below), diluted earnings per share were
$0.50, an increase of 25% from $0.40 in the prior year’s first quarter.
Adjusted net income for the first quarter was $67.0 million, an increase of
17% over adjusted net income of $57.4 million in the first quarter of 2006.

“I’m pleased with our results for the first quarter,” said Gregg Engles,
Chairman and Chief Executive Officer. “The Dairy Group continued its trend of
solid volume and operating income growth and WhiteWave Foods posted balanced
growth across our core branded portfolio while leveraging operational
efficiencies to achieve 25% growth in operating income for the quarter.”

    Summary of Dean Foods First Quarter 2007 Segment and Operating Results

                                                      % Growth Rate
     Dairy Group Fluid Milk Volume                          2%
     Dairy Group Operating Income                           9%
     WhiteWave Foods Net Sales                              7%
     WhiteWave Foods Operating Income                      25%
     Consolidated Adjusted Operating Income                12%

Net sales for the first quarter totaled $2.6 billion, an increase of 5%
from net sales for the first quarter of 2006, due to strong volume growth at
the Dairy Group coupled with the pass-through of higher overall dairy
commodity costs and continued sales growth at WhiteWave Foods.

Consolidated operating income in the first quarter totaled $154.2 million
versus $138.1 million in the first quarter of 2006. Operating margin for the
first quarter was 5.9%, as compared to 5.5% in the first quarter of the prior
year. Adjusted first quarter operating income totaled $159.9 million, an
increase of 12% from $142.5 million in the first quarter of 2006. The
adjusted first quarter operating margin was 6.1%, up 40 basis points from the
first quarter of the prior year.

Long-term debt at March 31, 2007, before the recapitalization and special
cash dividend discussed below, was approximately $3.36 billion.

DAIRY GROUP

Dairy Group net sales for the first quarter were $2.3 billion, a 4.5%
increase from $2.2 billion in net sales for the first quarter of 2006. The
sales increase was due primarily to increased volumes and the pass-through of
higher overall dairy commodity costs to customers. The first quarter average
Class I mover, which is an indicator of the Company’s raw milk costs, averaged
$13.74 per hundred-weight, a 5% increase from the same period in 2006. Class
II butterfat prices averaged $1.34 per pound in the first quarter, 2% lower
than the first quarter of 2006.

Dairy Group segment operating income in the first quarter was
$171.1 million, an increase of 9% year-over-year. Dairy Group operating
margin increased 32 basis points to 7.4% of sales. Approximately half of the
Dairy Group segment’s operating income growth was driven by a settlement with
a grocery customer releasing certain stores they had sold from a supply
agreement with Dean. This settlement will be largely offset by reduced
volumes and profits in those affected areas over the balance of the year.
Dairy Group operating income growth was also driven by a 2% increase in fluid
milk volumes and improved operational efficiencies.

WHITEWAVE FOODS

WhiteWave Foods segment reported first quarter net sales of
$322.7 million, a 7% increase compared to first quarter 2006 net sales of
$301.4 million. Sales growth was balanced across the branded portfolio with
net sales of Horizon Organic Milk increasing in the mid teens, while net sales
of Silk, International Delight and Land O’Lakes brands each increased in the
high single digits over the first quarter of 2006.

Segment operating income in the first quarter for WhiteWave Foods was
$27.8 million, an increase of 25% from the $22.2 million reported in the first
quarter of 2006. Segment operating margins improved 124 basis points for the
quarter to 8.6% due to higher sales volumes and more efficient operations.

CORPORATE EXPENSE

Corporate and other expenses totaled $38.9 million, a 7% increase from the
first quarter of 2006. The increase was largely due to professional fees in
support of strategic projects and a modest write-off of a prior investment.

RECAPITALIZATION

At the end of the first quarter, approximately $950 million of the
Company’s senior credit facility was available for future borrowings.
Subsequent to the close of the first quarter, the Company completed a
recapitalization of its balance sheet through the placement of $4.8 billion of
new senior credit facilities and the return of $1.94 billion to shareholders
through a $15.00 per share special cash dividend.

The new facilities consist of a combination of a $1.5 billion 5-year
senior secured revolving credit facility, a $1.5 billion 5-year senior secured
term loan A, and a $1.8 billion 7-year senior secured term loan B. The
Company also replaced its receivables facility with a new three year,
$600 million receivables facility.

In connection with the recapitalization, the Company entered into
approximately $3 billion of fixed rate interest hedges to take advantage of
the inversion in the forward yield curve and mitigate interest rate risk for a
significant portion of its interest expense going forward.

Immediately following the April 2, 2007 recapitalization, total debt
outstanding was $5.3 billion, including approximately $250 million due within
one year.

OUTLOOK FOR THE REMAINDER OF 2007

“As we look ahead to the remainder of the year at WhiteWave, we expect a
solid year of top-line growth from Silk, Land O’Lakes and International
Delight,” said Engles. “However, it has become clear that this will be a year
of significant challenges for Horizon Organic. Estimates vary; but, the
industry-wide raw organic milk supply appears to be increasing over 40% this
year, while category growth has been steadily increasing approximately 20-25%
per year over the recent past. This significant supply-demand imbalance in
the organic milk market creates a very challenging and volatile marketplace
for Horizon Organic as competitors attempt to stimulate demand through lower
retail prices and aggressive distribution expansion. As the market leader, we
will respond quickly and meaningfully to protect our business through
increased investment behind Horizon Organic. We expect this investment to
negatively impact short-term profitability during this supply imbalance, but
we are willing to make this investment to maximize the sizeable long-term
potential of the business.”

“Looking ahead to the balance of the year in the Dairy Group, we remain
confident in our long-term strategies and our market position. However, we
are increasingly concerned about rising industry estimates for conventional
dairy commodity price increases through the rest of the year. In the past,
our Dairy Group has generally been very effective at passing through changes
in the underlying commodities. However, with expectations for consistently
increasing prices throughout the remainder of 2007, we expect some challenges
in the business, making us more cautious as we move forward.”

Jack Callahan, Chief Financial Officer added, “Balancing the strong
operating performance of the business in the first quarter and the effective
pulling forward of approximately three cents of earnings per share from the
customer settlement with the market challenges we’ve outlined, we believe it
is prudent to guide investors to the low end of our previous guidance range
for adjusted earnings of $1.72 -$1.78 per share. For the second quarter,
although there is a fair amount of uncertainty, we are currently targeting
adjusted earnings of approximately $0.37-$0.38 per share.”

CHANGES IN SEGMENT REPORTING

Due to changes in the Company’s business strategy, primary responsibility
for the Hershey relationship has been moved into the Dairy Group beginning in
the first quarter. In order to present 2007 results on a comparable basis,
segment results for 2006 and 2005 with these adjustments are shown in the
tables attached below.

COMPARISON OF ADJUSTED INFORMATION TO GAAP INFORMATION

The adjusted financial results contained in this press release are from
continuing operations and are adjusted to eliminate the net expense or net
gain related to the items identified below. This information is provided in
order to allow investors to make meaningful comparisons of the Company’s
operating performance between periods and to view the Company’s business from
the same perspective as company management. Because the Company cannot
predict the timing and amount of charges associated with non-recurring items
or facility closings and reorganizations, management does not consider these
costs when evaluating the Company’s performance, when making decisions
regarding the allocation of resources, in determining incentive compensation
for management, or in determining earnings estimates. These costs are not
presented in any of the Company’s operating segments. This non-GAAP financial
information is provided as additional information for investors and is not in
accordance with or an alternative to GAAP. These non-GAAP numbers may be
different than similar measures used by other companies. A full
reconciliation table between earnings per share for the three month period
ended March 31, 2007 calculated according to GAAP and on an adjusted basis is
attached.

For the quarter ended March 31, 2007, the adjusted results reported above
differ from the Company’s results under GAAP by excluding the following
facility closing, reorganization, and other nonrecurring charges:

  • a $3.4 million charge ($2.1 million net of income tax) related to
    plant closures in Akron, OH and Detroit, MI as well as other
    previously announced facility closings;
  • a $2.4 million charge ($1.5 million net of income tax) related to the
    realignment of our Dairy Group’s finance organization; and
  • a $0.4 million charge ($0.2 million net of income tax) related to
    non-recurring special cash dividend costs.

For the quarter ended March 31, 2006, the adjusted results reported above
differ from the Company’s results under GAAP by excluding the following
facility closing and reorganization charges:

  • a $2.7 million charge ($1.7 million net of income tax) related to
    Dairy Group facility closings and restructurings, including the
    closing of our Union, NJ facility; and
  • a $1.7 million charge ($1.0 million net of income tax) related to
    reorganization and consolidation activities at WhiteWave Foods.

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 products
sold under more than 50 familiar local and regional brands and a wide array of
private labels. The Company’s WhiteWave Foods subsidiary markets and sells a
variety of well-known dairy and dairy-related products, such as Silk(R)
soymilk, Horizon Organic(R) milk and other dairy products and International
Delight(R) coffee creamers. WhiteWave Foods’ Rachel’s Organic(R) brand is the
largest organic milk brand and third largest organic yogurt brand in the
United Kingdom.

FORWARD-LOOKING STATEMENTS

Some of the statements in this press release are “forward-looking” and are
made pursuant to the safe harbor provision of the Securities Litigation Reform
Act of 1995. These “forward-looking” statements include statements relating
to, among other things, projected sales, operating income, net income and
earnings per share. These statements involve risks and uncertainties that may
cause results to differ materially from the statements set forth in this press
release. The Company’s ability to meet targeted financial and operating
results, including targeted sales, operating income, net income and earnings
per share depends on a variety of economic, competitive and governmental
factors, including raw material availability and costs, the demand for the
company’s products, 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
March 31, March 31,
2007 2006 2007 2006

Net sales $2,629,749 $2,509,041 $2,629,749 $2,509,041
Cost of sales 1,942,474 1,857,695 1,942,474 1,857,695

Gross profit 687,275 651,346 687,275 651,346

Operating costs and
expenses 527,347 508,847 527,347 508,847
Facility closings and
reorganization costs 5,775 4,402 --- ---

Operating income 154,153 138,097 159,928 142,499

Interest expense 52,241 47,536 52,241 47,536
Other (income) expense 300 100 (78) 100

Income from continuing
operations before
income taxes 101,612 90,461 107,765 94,863
Income taxes 38,409 35,767 40,735 37,490

Income from continuing
operations 63,203 54,694 67,030 57,373
Income (loss) from
discontinued operations,
net of tax 617 (1,902) --- ---

Net income $63,820 $52,792 $67,030 $57,373

Basic earnings per share:
Income from continuing
operations $0.49 $0.40 $0.52 $0.42
Income (loss) from
discontinued operations 0.01 (0.01) --- ---
Net income $0.50 $0.39 $0.52 $0.42

Basic average common
shares (000's) 128,890 135,170 128,890 135,170

Diluted earnings per share:
Income from continuing
operations $0.47 $0.38 $0.50 $0.40
Income (loss) from
discontinued operations --- (0.01) --- ---
Net income $0.47 $0.37 $0.50 $0.40

Diluted average common
shares (000's) 134,521 142,410 134,521 142,410

[A] Adjusted results differ from results reported under GAAP by
excluding income and expense related to discontinued operations,
facility closings, reorganizations and other. 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
March 31,
2007 2006
GAAP diluted earnings per share from
continuing operations $0.47 $0.38

Adjustments:
Facility closings, reorganization
costs and other 0.03 0.02

Adjusted diluted earnings per share $0.50 $0.40

Segment Information
(Dollars in thousands)

Three Months Ended March 31,
2007 2006
Net sales
Dairy Group $2,307,062 $2,207,660
WhiteWave Foods Company 322,687 301,381
Total $2,629,749 $2,509,041

Segment operating income (loss)
Dairy Group $171,053 $156,632
WhiteWave Foods Company 27,775 22,213
Corporate / Other (38,900) (36,346)
Subtotal 159,928 142,499
Facility closings and reorganization costs (5,775) (4,402)
Total operating income $154,153 $138,097

Note: Due to changes in the Company's business strategy, primary
responsibility for the Hershey relationship has been moved into the Dairy
Group from WhiteWave Foods beginning in the first quarter of 2007. In
addition we have made several changes in responsibility for certain
foodservice items. In order to present all periods on a comparable
basis, segment results for prior periods have been revised. See tables
attached below for revised segments for the years 2006, 2005 and 2004.

DEAN FOODS COMPANY
Revised Segments
(Dollars in thousands)

Years Ended December 31,
2006 2005 2004
Dairy Group
Net Sales $8,841,839 $8,999,522 $8,712,415
Operating Income 684,659 647,218 604,222

WhiteWave Foods Company
Net Sales $1,256,716 $1,175,196 $1,013,133
Operating Income 132,703 109,774 81,514

Dean Foods Company
Net Sales $10,098,555 $10,174,718 $9,725,548
Operating Income 675,811 618,695 554,421

Quarterly Results for 2006
Q1 Q2 Q3 Q4
Dairy Group
Net Sales $2,207,660 $2,176,058 $2,209,411 $2,248,710
Operating Income 156,632 181,167 173,749 173,111

WhiteWave Foods Company
Net Sales $301,381 $301,826 $308,381 $345,128
Operating Income 22,213 29,289 35,389 45,812

Dean Foods Company
Net Sales $2,509,041 $2,477,884 $2,517,792 $2,593,838
Operating Income 142,499 174,239 174,218 184,855

DEAN FOODS COMPANY

Condensed Balance Sheets
(Dollars in thousands)

March 31, December 31,
ASSETS 2007 2006

Cash and cash equivalents $37,954 $31,140
Other current assets 1,376,351 1,348,150
Total current assets 1,414,305 1,379,290

Property, plant & equipment 1,785,656 1,786,907

Intangibles & other assets 3,696,454 3,583,996
Assets of discontinued operations --- 19,980

Total Assets $6,896,415 $6,770,173

LIABILITIES AND STOCKHOLDERS' EQUITY

Total current liabilities, excluding debt $851,542 $852,898

Total long-term debt, including
current portion 3,363,441 3,355,851

Other long-term liabilities 786,924 743,234
Liabilities of discontinued
operations --- 8,791

Stockholders' equity:
Common stock 1,295 1,284
Additional paid-in capital 656,307 624,475
Retained earnings 1,287,520 1,229,427
Other comprehensive income (loss) (50,614) (45,787)
Total stockholders' equity 1,894,508 1,809,399

Total Liabilities and
Stockholders' Equity $6,896,415 $6,770,173

DEAN FOODS COMPANY

Condensed Statements of Cash Flows
(Dollars in thousands)

Three Months Ended March 31,
Operating Activities 2007 2006
Net income $63,820 $52,792
(Income) loss from discontinued
operations (617) 1,902
Depreciation and amortization 57,343 55,518
Deferred income taxes 5,756 38,106
Share-based compensation 8,303 9,389
Changes in current assets and
liabilities (2,026) (134,307)
Other 5,429 1,849
Net cash provided by
continuing operations 138,008 25,249
Net cash used in
discontinued operations --- (3,155)
Net cash provided by
operating activities 138,008 22,094

Investing Activities
Additions to property, plant and
equipment (51,781) (54,989)
Cash outflows for acquisitions (125,839) (9,760)
Proceeds from divestitures 10,706 ---
Proceeds from sale of fixed assets 1,550 1,836
Net cash used in continuing
operations (165,364) (62,913)
Net cash used in
discontinued operations --- (5,509)
Net cash used in investing
activities (165,364) (68,422)

Financing Activities
Proceeds from the issuance of debt 83,500 65,200
Repayment of debt (73,175) (37,792)
Issuance of common stock, net 18,026 5,438
Repurchase of common stock --- (15,357)
Tax savings on share-based
compensation 5,819 22,680
Net cash provided by
continuing operations 34,170 40,169
Net cash provided by
discontinued operations --- 8,588
Net cash provided by
financing activities 34,170 48,757

Increase in cash and cash equivalents 6,814 2,429
Beginning cash balance 31,140 24,456

Ending cash balance $37,954 $26,885

Free Cash Flow Summary and Reconciliation
(Dollars in thousands)

Three Months Ended March 31,
2007 2006
Net cash provided by continuing
operations $138,008 $25,249
Additions to property, plant and
equipment (51,781) (54,989)
Free cash flow provided by (used in)
operations $86,227 $(29,740)

Contact: Investors:
Barry Sievert
Senior Director, Investor Relations
(214) 303-3437

Media:
Marguerite Copel
V. P. Corporate Communications
(214) 721-1273

SOURCE Dean Foods Company

investors, Barry Sievert, Senior Director, Investor Relations, +1-214-303-3437, or
media, Marguerite Copel, V. P. Corporate Communications, +1-214-721-1273, both of
Dean Foods Company

http://www.deanfoods.com

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