Friday, 1 May 2009

Dean Foods Company Reports Strong First Quarter Results

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Friday, 1 May 2009

  • Earnings per Share Increase 129% to $0.48, Adjusted Diluted Earnings per Share Increase 126% to $0.52
  • Reiterates Full Year Guidance for Adjusted Diluted Earnings of at Least $1.55 per Share

DALLAS, May 1, 2009 /PRNewswire-FirstCall via COMTEX/ — Dean Foods Company (NYSE: DF) today announced that the Company earned $0.48 per diluted share for the quarter ended March 31, 2009, a 129% increase over $0.21 per diluted share in the first quarter of 2008. Net income from continuing operations for the first quarter totaled $75.3 million, compared with $30.8 million in the prior year’s first quarter.

On an adjusted basis (as defined below), diluted earnings per share were $0.52, an increase of 126% from $0.23 per adjusted diluted share in the prior year’s first quarter. Adjusted net income for the first quarter was $81.4 million, an increase of 151% from adjusted net income of $32.4 million in the first quarter of 2008. The increase in adjusted net income is due primarily to strong growth in operating income across the business and lower interest expense. Interest expense in the quarter totaled $68.3 million, compared to $83.8 million in the first quarter of 2008.

“Clearly, the business was very strong in the first quarter, and we are off to a fast start in 2009,” commented Gregg Engles, Chairman and Chief Executive Officer. “Both of our operating segments contributed to the strong results, and we continued to move forward on our strategic initiatives. The strong performance across the business drove consolidated adjusted operating income growth of 47% in the quarter. DSD Dairy, which has recently been renamed Fresh Dairy Direct, contributed to this strong result with operating income growth of 39% over the year ago period. WhiteWave-Morningstar also had a particularly strong quarter with operating income growth of 40% over the year ago period.”


              Summary of Dean Foods First Quarter 2009 Segment and
                                Operating Results
              ----------------------------------------------------
                            (in millions, except EPS)

                                         Value       % Change from Q108
                                         -----       ------------------
    Fresh Dairy Direct:
      Fluid Milk Volume                    N/A             1.4%
      Operating Income                  $181.7              39%

    WhiteWave - Morningstar:
      Net Sales                         $604.3              -2%
      Operating Income                   $63.5              40%

    Consolidated Adjusted
     Operating Income:                  $202.8              47%

    Interest Expense:                    $68.3             -19%

    Adjusted Diluted
     Earnings per  Share:                $0.52             126%

DEAN FOODS CONSOLIDATED

Net sales for the first quarter totaled $2.7 billion, a decrease of 12% from net sales in the first quarter of 2008. The net sales decrease in the quarter was due to the pass-through of lower dairy commodity costs and slightly lower net sales in the WhiteWave branded portfolio, offset by volume growth in the Fresh Dairy Direct and Morningstar businesses.

Consolidated operating income in the first quarter totaled $192.8 million, an increase of 42% from $136.1 million in the first quarter of 2008. Adjusted first quarter consolidated operating income totaled $202.8 million, an increase of 47% from $138.3 million in the first quarter of 2008.

FRESH DAIRY DIRECT

Fresh Dairy Direct net sales for the first quarter were $2.1 billion, a 15% decrease from $2.5 billion in net sales for the first quarter of 2008. The net sales decrease was due primarily to the pass-through of lower overall dairy commodity costs to customers, offset by continued volume growth. The first quarter average Class I mover, which is an indicator of the Company’s raw milk costs, averaged $11.96 per hundredweight, a 37% decrease from the same period in 2008 and 26% lower than the fourth quarter of 2008. CME butter prices averaged $1.13 per pound in the first quarter, a decrease of 10% from the same period a year ago and 26% lower than the fourth quarter of 2008.

Fresh Dairy Direct segment operating income in the first quarter was $181.7 million, an increase of 39% from the $130.9 million in the first quarter of 2008. A favorable commodity environment, strong execution across the business, continued progress against the Company’s transformation initiatives and continued volume growth all contributed to the improvement in quarterly results versus the year ago period.

WHITEWAVE – MORNINGSTAR

The WhiteWave-Morningstar segment reported first quarter net sales of $604.3 million, 2% lower than first quarter 2008 net sales of $618.5 million. Sales of the branded portfolio at WhiteWave decreased one percent to $359 million as a result of slowing category sales growth and the previously announced exit of a foodservice relationship in the Silk brand as well as some private label organic milk business in the United Kingdom. Volume growth was strong in the Morningstar business, particularly in the yogurt and cottage cheese segments. Weakness in the casual dining channel was offset by relative strength in quick service restaurants and retail channels. Volume growth at Morningstar was offset by lower overall pricing related to the pass-through of lower dairy commodity prices to customers, resulting in a net decline in sales in the first quarter of 4% to $245 million.

Within the branded portfolio, net sales of Horizon Organic(R) milk increased in the low single digits amidst slowing growth in the organic milk category. Silk(R) soymilk sales increased mid-single digits excluding the sales associated with the Company’s 2008 strategic decision to exit a certain foodservice business relationship. International Delight(R) flavored coffee creamer sales increased slightly. Net sales increased in the high single-digits for the Land O’Lakes(R) branded creamer products over the same period last year.

Segment operating income in the first quarter for WhiteWave-Morningstar was $63.5 million, a 40% increase over $45.4 million in the first quarter of 2008. Segment operating margins were 10.5%, compared to 7.3% in the first quarter of 2008. Favorable dairy and energy commodities and solid cost management drove strong growth in profitability for the WhiteWave-Morningstar segment.

CORPORATE AND OTHER EXPENSE

Corporate and Other expense totaled $44.1 million for the first quarter of 2009, as compared to $38.0 million in the first quarter of 2008.

Adjusted Corporate and Other segment expenses totaled $42.4 million, compared to $38.0 million in the first quarter of 2008. The increase in the quarter was driven by higher professional fees, employee-related costs and insurance expenses. Also included in the corporate and other segment is $1.7 million of operating costs related to the Fruit2Day joint venture, as well as approximately $2.6 million of transaction related costs. Beginning in 2009, transaction related costs are required to be expensed as incurred and will no longer be capitalized on the balance sheet.

CASH FLOW

Net cash provided by continuing operations for the first quarter of 2009 totaled $184.7 million, compared to $158.3 million for the first quarter of 2008.

Capital expenditures for the first quarter of 2009 totaled $42 million, compared to $45 million for the first quarter of 2008. For the year, the Company continues to expect capital expenditures to be approximately $300 million.

In the first quarter, debt outstanding decreased by $121 million. Total debt at March 31, 2009, net of $63 million in cash on hand, was approximately $4.3 billion. The Company’s funded debt to EBITDA ratio, as defined by its credit agreements, declined to 4.45x as of the end of the first quarter, which is below the final leverage covenant step down to 4.5x that will take place on December 31, 2010.

FORWARD OUTLOOK

“We have significant momentum in our business with an exceptionally strong first quarter behind us and indications of a solid start to the second quarter,” stated Jack Callahan, Chief Financial Officer. “We are expecting adjusted diluted earnings to be at least $0.38 per share for the second quarter, assuming the issuance of approximately $465 million of new shares of common stock.”

“For the full year, flowing through some of the upside from the first quarter, assuming the issuance of approximately $465 million of new shares of common stock, we are maintaining our guidance of at least $1.55 of adjusted earnings per diluted share, which is nearly 20% EPS growth over 2008.”

RECENT EVENTS

  • On February 26, 2009, the Company hosted its first ever Investor Day in
    New York City, where management discussed its strategic plans for the
    next several years. These plans include an aggressive efficiency program
    that targets savings in excess of $300 million over the next three to
    five years.

  • Following the close of the first quarter, the Company acquired dairy
    processing businesses from Foremost Farms in De Pere and Waukesha,
    Wisconsin. The Company has also signed an agreement to acquire Heartland
    Farms, a captive dairy processing facility in southern California, from
    Stater Brothers Markets. The agreement is subject to customary closing
    conditions, including regulatory approval.

  • The Company has also announced the planned closure of two processing
    facilities within the Fresh Dairy Direct segment. Facilities in Lincoln,
    Nebraska and Flint, Michigan will close this year as part of the
    Company’s ongoing network optimization and cost reduction efforts.

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 measures may be different than similar measures used by other companies. A full reconciliation for the three month periods ended March 31, 2009 and 2008 calculated according to GAAP and on an adjusted basis is attached.

For the quarter ended March 31, 2009, the adjusted results reported above differ from the Company’s results under GAAP by excluding the following:

GAAP operating income is adjusted by the following:

  • $8.2 million charge related to announced facility closings; and
  • $1.7 million operating loss reflecting the non-controlling interest in
    the Hero/WhiteWave joint venture

GAAP net income attributable to Dean Foods Company is adjusted by the following:

  • $5.1 million charge net of income tax related to announced facility
    closings

For the quarter ended March 31, 2008, the adjusted results reported above differ from the Company’s results under GAAP by excluding the following:

GAAP operating income is adjusted by the following:

  • $2.2 million charge related to the realignment of Fresh Dairy
    Direct’s finance and accounting organization, the closure of our
    Denver, Colorado manufacturing facility and other previously announced
    facility closings.

GAAP net income attributable to Dean Foods Company is adjusted by the following:

  • $1.3 million charge net of income tax related to the realignment of
    Fresh Dairy Direct’s finance and accounting organization, the
    closure of our Denver, Colorado manufacturing facility and other
    previously announced facility closings, and

  • $0.3 million charge net of income tax related to non-recurring special
    cash dividend costs.

CONFERENCE CALL WEBCAST

A webcast to discuss the Company’s financial results and outlook will be held at 9:30 a.m. ET today and may be heard live by visiting the “Webcast” section of the Company’s site at www.deanfoods.com/investors. There will be a slide presentation along with the webcast.

ABOUT DEAN FOODS

Dean Foods is one of the leading food and beverage companies in the United States. The Company’s Fresh Dairy Direct segment 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-Morningstar segment markets and sells a variety of nationally branded dairy and dairy-related products, such as Silk(R) soymilk and cultured soy products, Horizon Organic(R) milk and other dairy products, International Delight(R) coffee creamers, LAND O’LAKES(R) creamers and other fluid dairy products, and Rachel’s Organic(R) dairy products. Additionally, our WhiteWave-Morningstar segment markets and sells private label cultured and extended shelf life dairy products.

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 Private Securities Litigation Reform Act of 1995. These “forward-looking” statements include statements relating to, among other things, projected sales, operating income, net income, adjusted diluted earnings per share, debt covenant compliance, expected financial performance and capital structure. 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, and the Company’s ability to access capital under its credit facilities or otherwise, 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
            Condensed Consolidated Income Statements
                           (Unaudited)
              (In thousands, except per share data)

                                            Three months ended
                                                 March 31,
                                             2009        2008
                                             ----        ----

     Net sales                            $2,702,938  $3,076,960
     Cost of sales                         1,944,251   2,388,386
                                           ---------   ---------

       Gross profit                          758,687     688,574

     Operating costs and expenses            557,613     550,255
     Facility closings,
      reorganizations and
      other costs                              8,248       2,215
                                               -----       -----

       Operating income                      192,826     136,104

     Interest expense                         68,299      83,832
     Other (income) expense, net                 195         619
                                                 ---         ---

       Income from continuing
        operations before
        income taxes                         124,332      51,653

     Income taxes                             48,990      20,881
                                              ------      ------

     Income from continuing
      operations                              75,342      30,772
     Loss from discontinued
      operations,
      net of tax                                (142)          -
                                                ----       ----

       Net income                             75,200      30,772
         Net loss attributable to
          noncontrolling interest              1,046           -
                                               -----       -----
       Net income attributable to
        Dean Foods Company                   $76,246     $30,772
                                             =======     =======

     Average common shares:
       Basic                                 154,300     137,883
       Diluted                               157,255     143,289

     Net Income attributable to Dean Foods
      Company per share:
       Basic                                   $0.49       $0.22
       Diluted                                 $0.48       $0.21



                        DEAN FOODS COMPANY
                        Segment Information
                            (Unaudited)
                          (In thousands)

                                         Three months ended
                                              March 31,
                                          2009        2008
                                          ----        ----
     Net sales:
       Fresh Dairy Direct              $2,098,534  $2,458,476
       WhiteWave-Morningstar              604,344     618,484
       Corporate and other                     60           -
                                            -----       -----
           Total                       $2,702,938  $3,076,960
                                       ==========  ==========

     Segment operating income (loss):
       Fresh Dairy Direct                $181,668    $130,908
       WhiteWave-Morningstar               63,473      45,392
       Corporate and Other                (44,067)    (37,981)
                                          -------     -------
         Subtotal                         201,074     138,319
         Facility closings,
          reorganizations and other
          costs                            (8,248)     (2,215)
                                           ------      ------
           Total operating income        $192,826    $136,104
                                         ========    ========



                          DEAN FOODS COMPANY
                Condensed Consolidated Balance Sheets
                             (Unaudited)
                            (In thousands)

                                             March 31,    December 31,
     ASSETS                                    2009           2008
    --------                                   ----           ----

     Cash and cash equivalents                 $62,995        $35,979
     Other current assets                    1,318,678      1,445,214
                                             ---------      ---------
       Total current assets                  1,381,673      1,481,193

     Property, plant and
      equipment, net                         1,812,440      1,821,892

     Intangibles and other assets            3,721,973      3,737,107
                                             ---------      ---------

     Total Assets                           $6,916,086     $7,040,192
                                            ==========     ==========


     LIABILITIES AND STOCKHOLDERS' EQUITY
    --------------------------------------

     Total current liabilities,
      excluding debt                        $1,014,719     $1,111,741

     Total long-term debt, including
      current portion                        4,367,908      4,489,251

     Other long-term liabilities               868,304        880,966

       Total Dean Foods stockholders'
        equity                                 647,683        558,234
     Noncontrolling interest                    17,472              -
                                                ------          -----
       Total stockholders' equity              665,155        558,234
                                               -------        -------

     Total Liabilities and Stockholders'
      Equity                                $6,916,086     $7,040,192
                                            ==========     ==========



                             DEAN FOODS COMPANY
                Condensed Consolidated Statements of Cash Flows
                                 (Unaudited)
                               (In thousands)

                                                          Three months ended
                                                                March 31,
    Operating Activities                                     2009      2008
    ----------------------                                   ----      ----
      Net cash provided by continuing operations          $184,736  $158,261
      Net cash used in discontinued operations                (142)        -
                                                              ----     -----
      Net cash provided by operating activities           $184,594  $158,261

    Investing Activities
    ----------------------
    Additions to property, plant and equipment             (42,092)  (44,759)
    Payments for acquisitions, net of cash
     received                                               (1,384)  (51,800)
    Proceeds from sale of fixed assets                       3,672     2,550
                                                             -----     -----
      Net cash used in investing activities                (39,804)  (94,009)

    Financing Activities
    ----------------------
    Net repayment of debt                                 (122,433) (461,295)
    Issuance of common stock, net                              640   405,464
    Capital contribution from noncontrolling
     interest                                                4,019         -
                                                             -----     -----
      Net cash used in financing activities               (117,774)  (55,831)
                                                          --------   -------

    Increase in cash and cash equivalents                   27,016     8,421
    Beginning cash balance                                  35,979    32,555
                                                            ------    ------

    Ending cash balance                                    $62,995   $40,976
                                                           =======   =======



                               DEAN FOODS COMPANY
                     Reconciliation of Non-GAAP Financial Measures
                                  (Unaudited)
                    (In thousands, except per share data)

                                             Three months ended
                                                   March 31,
                                                2009      2008
                                                ----      ----

     Reconciliation of GAAP to adjusted
      operating income

     GAAP operating income                    $192,826  $136,104

     Adjustments:
       Facility closings, reorganizations
        and other costs                          8,248     2,215
       Operating loss from noncontrolling
        interest in joint venture                1,713         -
                                                 -----     -----

       Adjusted operating income              $202,787  $138,319
                                              ========  ========



     Reconciliation of GAAP to adjusted net
      income attributable to Dean Foods
      Company

     GAAP net income
      attributable to
      Dean Foods
      Company                                  $76,246   $30,772

     Adjustment, net of tax:
       Facility closings, reorganizations
        and other costs                          5,132     1,660
                                                 -----     -----

       Adjusted net income attributable to
        Dean Foods Company                     $81,378   $32,432
                                               =======   =======



     Reconciliation of GAAP to adjusted
      diluted earnings per share

     GAAP diluted earnings per share             $0.48     $0.21

     Adjustment, net of tax
       Facility closings, reorganizations
        and other costs                           0.04      0.02
                                                  ----      ----

       Adjusted diluted earnings per share       $0.52     $0.23
                                                 =====     =====



     Computation of Free Cash Flow provided
      by continuing operations

     Net cash provided by continuing
      operations                              $184,736  $158,261

     Additions to property, plant
      and equipment                            (42,092)  (44,759)
                                               -------   -------

       Free cash flow provided by
        continuing operations                 $142,644  $113,502
                                              ========  ========

SOURCE Dean Foods Company

https://www.deanfoods.com

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