Company Reports Third Quarter Adjusted Diluted Earnings From Continuing
Operations of $0.50 Per Share
Board of Directors Approves Additional $300 Million Share Repurchase
Authorization
DALLAS, Nov. 2 /PRNewswire-FirstCall/ — Dean Foods Company (NYSE: DF)
today announced that the Company earned $0.43 per diluted share from
continuing operations for the quarter ended September 30, 2005, as compared to
$0.24 per diluted share from continuing operations in the third quarter of
2004. Net income from continuing operations for the third quarter of 2005
totaled $66.4 million, compared with $37.8 million in the prior year third
quarter.
On an adjusted basis (as defined below), diluted earnings from continuing
operations increased 22% to $0.50 per share, compared to $0.41 in last year’s
third quarter. Adjusted net income from continuing operations for the third
quarter was $77.7 million compared to $65.9 million in the third quarter of
2004.
“Our businesses performed well despite a very challenging environment
which included two hurricanes and rapidly rising fuel and resin costs,” said
Gregg Engles, chairman and chief executive officer. “Consistent with recent
trends, our Dairy Group again posted strong volume increases and our WhiteWave
division posted strong growth in both net sales and profitability.”
Net sales for the third quarter totaled $2.6 billion, an increase of 2.4%
over the third quarter of 2004. The increase in net sales was primarily due
to higher fluid dairy volumes and increased sales at WhiteWave Foods, which
were offset by the pass-through of lower raw milk and butterfat costs in the
Dairy Group.
Consolidated operating income from continuing operations in the third
quarter totaled $145.7 million, versus $139.3 million in the third quarter of
2004. Adjusted third quarter operating income from continuing operations
totaled $163.7 million, an 8.5% increase over the $150.9 million reported in
the third quarter of 2004. The Company’s adjusted third quarter 2005
operating margin was 6.2%, up 35 basis points over the third quarter of the
prior year. The increase in adjusted operating income was primarily due to
the positive impact of lower raw milk and butterfat costs and increased
profitability at WhiteWave Foods, which was partially offset by higher
packaging and distribution costs. Included in adjusted operating income for
the third quarter of 2005 is a $3.9 million charge ($0.02 net of tax), which
represents the second half of the total expense related to the accelerated
vesting of stock units issued to key employees in January 2003.
Long-term debt as of September 30, 2005 was approximately $3.1 billion,
including $67 million due within one year that is reported as part of current
liabilities. At the end of the quarter, approximately $940 million of the
Company’s senior credit facility was available for future borrowings.
SEGMENT RESULTS
Dairy Group net sales for the third quarter were $2.3 billion, 1.5% higher
than the third quarter of 2004. The sales increase was primarily due to a
3.4% increase in fluid milk volumes that was partially offset by the pass-
through of lower raw milk and butterfat costs. The Class I mover, which is an
indicator of the Company’s raw milk costs, averaged $14.01 per hundredweight
in the third quarter of 2005, 10% lower than the same period in 2004.
Dairy Group operating income in the third quarter was $156.2 million, an
increase of 4.8% over last year. Operating margins increased 22 basis points
to 6.9% of sales due primarily to the positive impact of higher raw milk
volumes and lower raw milk and butterfat costs, partially offset by higher
distribution and packaging costs and the effects of hurricanes Katrina and
Rita.
WhiteWave Foods reported third quarter net sales of $284.9 million, a 9.6%
increase compared to the third quarter of 2004. The increase was driven by
sales growth in most of the Company’s core brands.
Operating income for WhiteWave Foods in the third quarter was
$35.9 million, an increase of 41.9% over the $25.3 million reported in the
third quarter of 2004. Operating margin for the third quarter of 2005 was
12.6%, an increase of 287 basis points over the prior year third quarter. The
improvement in operating income was the result of strong sales growth and
increased manufacturing and operating efficiency offset by higher distribution
costs due to increased fuel prices.
RECENT DEVELOPMENTS
- From the beginning of the third quarter through today, the Company
made open market purchases of its common stock totaling 11.3 million
shares for a total cost of $415 million. Today, the Board of
Directors increased the Company’s repurchase authorization by an
additional $300 million. Including this new authorization the Company
currently has a total of $303 million remaining under its repurchase
authorizations. - On October 11, 2005 Joseph Scalzo assumed the post of President and
CEO of WhiteWave Foods. Mr. Scalzo comes to WhiteWave from Gillette,
where he served as Group President, Personal Care and Global Value
Chain. - The Company recently announced that Pete Schenkel will assume the role
of vice-chairman of Dean Foods, and that Alan Bernon will succeed him
as President of Dean Foods Dairy Group, effective January 1, 2006. - The Company also recently announced the planned retirement of Barry
Fromberg, Executive Vice President and Chief Financial Officer
effective March 31, 2006. - As part of management’s strategy to further focus the Company on its
core dairy and branded businesses, Dean Foods completed the sale of
its Marie’s(R) dips and dressings and Dean’s(R) dips businesses in the
third quarter. As a result of this sale, the Company recorded a net
gain on sale of $37.8 million in the third quarter. Those businesses
have been reclassified as discontinued operations.
OUTLOOK FOR THE FOURTH QUARTER OF 2005 AND FULL YEAR 2006
“While our businesses continue to demonstrate very strong performance,
there are several obvious headwinds affecting our near-term business outlook,
including high fuel, energy and packaging costs. We expect between $35 and
$40 million higher overall costs related to these items in the fourth quarter
of this year than we had last year. We are working hard to mitigate the
impact of these increased costs through price increases, but expect near-term
operating performance to be negatively impacted by these issues. We are
therefore adjusting our expectations for the remainder of 2005,” said Engles.
“We expect fourth quarter earnings of approximately $0.52 to $0.55 per share,
resulting in full year 2005 adjusted earnings of approximately $1.93 to $1.96
per share, a 14% to 16% increase over 2004 adjusted earnings from continuing
operations of $1.69 per share. Looking forward to 2006, we believe we will be
able to largely mitigate the impact of the higher fuel, energy and resin costs
early in the year through price increases on our products. Assuming a
relatively stable dairy commodity environment, we expect full year sales of
$10.5 billion. We expect earnings per share to be in the range of $2.20 to
$2.25 per diluted share before the effects of stock option expensing.”
In accordance with FAS 123(R), the Company will begin expensing stock
options in 2006 and estimates the impact of stock option expensing will be
approximately $0.09 to $0.10 per share in 2006, roughly the same as in 2005,
had FAS 123(R) been in place.
The Company’s earnings guidance excludes the impact of discontinued
operations, facility closing and reorganization costs and any non-recurring or
one-time gains or losses.
RESULTS FOR NINE MONTHS ENDED SEPTEMBER 30, 2005
The Company’s net sales from continuing operations increased 4.9% to
$7.8 billion for the nine months ended September 30, 2005, compared with
$7.4 billion during the first nine months of 2004. The increase was due to
sales growth at WhiteWave Foods and volume growth in the Dairy Group, which
was partially offset by the pass-through of lower average raw dairy commodity
costs. Income from continuing operations for the first nine months of the
year totaled $201.8 million, compared with $154.0 million in the first nine
months of 2004. Diluted earnings per share from continuing operations for the
nine months ended September 30, 2005 totaled $1.29, compared with $0.95 in the
first nine months of 2004.
On an adjusted basis (as defined below), net income for the nine months
totaled $220.3 million, an increase of 18% over $186.7 million in the same
period of 2004. Adjusted diluted earnings per share for the first nine months
of 2005 totaled $1.41 compared with $1.15 in the first nine months of 2004, an
increase of 23%.
The Company reported operating income from continuing operations for the
nine month period ended September 30, 2005 of $447.1 million versus
$410.0 million in the same period of 2004. Adjusted operating income for the
first nine months of 2005 totaled $477.0 million, an increase of 11.1% versus
$429.2 million in the same period of last year. Adjusted operating income
margins for the nine months were 6.11%, an increase of 35 basis points versus
the prior year’s first nine months.
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. 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 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
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 and nine month
periods ended September 30, 2005 calculated according to GAAP and on an
adjusted basis is attached.
For the quarter ended September 30, 2005, the adjusted results reported
above differ from the Company’s results under GAAP by excluding an
$18.0 million charge ($11.3 million net of tax) primarily related to the
closure of a facility in Union, NJ and the consolidation of WhiteWave Foods
Company.
For the quarter ended September 30, 2004, the adjusted results reported
above differ from the Company’s results under GAAP by excluding
a) $32.6 million of costs ($21.2 million net of tax) related to the
early extinguishment of debt, and
b) $11.6 million ($6.8 million net of tax) in facility closing and
reorganization costs primarily related to Dairy Group facility
closings in Madison, WI and Westwego, LA and consolidation activities
at WhiteWave Foods.
For the nine months ended September 30, 2005, the adjusted results
reported above differ from the Company’s results under GAAP by excluding
a) a $26.8 million charge ($16.7 million net of tax) related to the
closure of a facility in Union, NJ, consolidation activities at
WhiteWave Foods and previously announced reorganizations and facility
closings in the Dairy Group, and
b) a $3.1 million charge ($1.9 million net of tax) related to severance
payments made to the former president of WhiteWave Foods.
For the nine months ended September 30, 2004, the adjusted results
reported above differ from the Company’s results under GAAP by excluding
a) $32.6 million of costs ($21.2 million net of tax) related to the
early extinguishment of debt and
b) a net amount of $19.3 million ($11.5 million net of tax) in facility
closing and reorganization costs primarily related to Dairy Group
facility closings in Madison, WI, Westwego, LA, South Gate, CA, San
Leandro, CA, and Wilkesboro, NC partly offset by a gain on the sale
of a Dairy Group facility closed in Hawaii in 2003 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 .
SUPPLEMENTAL INFORMATION
The Company has adjusted its historical financial results for the years
2002 through 2004 and the first three quarters of 2005 to reflect the Marie’s
dips and dressings and Dean’s dips businesses that were sold in the third
quarter of 2005 as discontinued operations. These adjusted financial results
are included in a schedule titled, ‘Revised Historical Results to Reflect
TreeHouse Foods Spin-off and Marie’s dips and dressings and Dean’s dips Sale’
which is available on the investor relations section of the Company’s website
at http://www.deanfoods.com .
ABOUT DEAN FOODS
Dean Foods is one of the leading food and beverage companies in the United
States. Its Dairy Group is the largest processor and distributor of fresh
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 is the nation’s leading organic foods
company. WhiteWave Foods markets and sells a variety of well-known dairy and
dairy-related products, such as Silk(R) soymilk, Horizon Organic(R) dairy
products and juices, International Delight(R) coffee creamers and LAND
O’LAKES(R) creamers and cultured products. Dean Foods Company also owns the
fourth largest dairy processor in Spain and the leading brand of organic dairy
products 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 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
September 30, September 30,
2005 2004 2005 2004
Net sales $2,646,613 $2,583,578 $2,646,613 $2,583,578
Cost of sales 1,997,188 1,977,934 1,997,188 1,977,934
Gross profit 649,425 605,644 649,425 605,644
Operating costs and
expenses 485,723 454,742 485,723 454,742
Facility closings and
reorganization costs 17,993 11,590 --- ---
Operating income 145,709 139,312 163,702 150,902
Interest expense 40,163 41,780 40,163 41,780
Costs related to early
extinguishment of debt --- 32,613 --- ---
Other (income) expense (197) 415 (197) 415
Income from continuing
operations before
income taxes 105,743 64,504 123,736 108,707
Income taxes 39,335 26,678 46,029 42,825
Income from continuing
operations 66,408 37,826 77,707 65,882
Gain on sale of
discontinued operations,
net of tax 37,766 --- --- ---
Income from discontinued
operations, net of tax (299) 2,366 --- ---
Net income $103,875 $40,192 $77,707 $65,882
Basic earnings per share:
Income from continuing
operations $0.45 $0.24 $0.52 $0.42
Gain on sale of
discontinued operations 0.25 --- --- ---
Income from discontinued
operations --- 0.02 --- ---
Net income $0.70 $0.26 $0.52 $0.42
Basic average common
shares (000's) 148,098 155,921 148,098 155,921
Diluted earnings per share:
Income from continuing
operations $0.43 $0.24 $0.50 $0.41
Gain on sale of
discontinued operations 0.24 --- --- ---
Income from discontinued
operations --- 0.01 --- ---
Net income $0.67 $0.25 $0.50 $0.41
Diluted average common
shares (000's) 155,536 162,101 155,536 162,101
[A] Adjusted results differ from results reported under GAAP by excluding
income and expense related to discontinued operations, facility
closings, reorganizations and the early extinguishment of debt. 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]
Nine Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Net sales $7,810,916 $7,447,075 $7,810,916 $7,447,075
Cost of sales 5,895,088 5,689,084 5,895,088 5,689,084
Gross profit 1,915,828 1,757,991 1,915,828 1,757,991
Operating costs and
expenses 1,441,940 1,328,677 1,438,867 1,328,799
Facility closings and
reorganization costs 26,821 19,295 --- ---
Operating income 447,067 410,019 476,961 429,192
Interest expense 121,912 125,456 121,912 125,456
Costs related to early
extinguishment of debt --- 32,612 --- ---
Other income (536) (1,244) (536) (1,244)
Income from continuing
operations before
income taxes 325,691 253,195 355,585 304,980
Income taxes 123,918 99,218 135,241 118,307
Income from continuing
operations 201,773 153,977 220,344 186,673
Gain on sale of
discontinued operations,
net of tax 37,690 --- --- ---
Income from discontinued
operations, net of tax 17,257 32,528 --- ---
Net income $256,720 $186,505 $220,344 $186,673
Basic earnings per share:
Income from continuing
operations $1.35 $0.98 $1.47 $1.19
Gain on sale of
discontinued operations 0.25 --- --- ---
Income from discontinued
operations 0.12 0.21 --- ---
Net income $1.72 $1.19 $1.47 $1.19
Basic average common
shares (000's) 149,578 156,450 149,578 156,450
Diluted earnings per share:
Income from continuing
operations $1.29 $0.95 $1.41 $1.15
Gain on sale of
discontinued operations 0.24 --- --- ---
Income from discontinued
operations 0.11 0.20 --- ---
Net income $1.64 $1.15 $1.41 $1.15
Diluted average common
shares (000's) 156,137 162,793 156,137 162,793
[B] Adjusted results differ from results reported under GAAP by excluding
income and expense related to discontinued operations, facility
closings, reorganizations and the early extinguishment of debt. 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 Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
GAAP diluted earnings per share from
continuing operations $0.43 $0.24 $1.29 $0.95
Adjustments:
Facility closings and
reorganization costs 0.07 0.04 0.11 0.07
Costs related to early
extinguishment of debt --- 0.13 --- 0.13
Other nonrecurring operating costs --- --- 0.01 ---
Adjusted diluted earnings per share $0.50 $0.41 $1.41 $1.15
Segment Information
(Dollars in thousands)
GAAP ADJUSTED [C]
Three Months Ended Three Months Ended
September 30, September 30,
2005 2004 2005 2004
Net sales
Dairy Group $2,267,527 $2,234,296 $2,267,527 $2,234,296
WhiteWave Foods Company 284,860 259,920 284,860 259,920
Corporate / Other 94,226 89,362 94,226 89,362
Total $2,646,613 $2,583,578 $2,646,613 $2,583,578
Segment operating income
(loss)
Dairy Group $156,223 $149,069 $156,223 $149,069
WhiteWave Foods Company 35,910 25,307 35,910 25,307
Corporate / Other (28,431) (23,474) (28,431) (23,474)
Subtotal 163,702 150,902 163,702 150,902
Facility closings and
reorganization costs (17,993) (11,590) --- ---
Total operating income $145,709 $139,312 $163,702 $150,902
GAAP ADJUSTED [C]
Nine Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Net sales
Dairy Group $6,681,897 $6,462,261 $6,681,897 $6,462,261
WhiteWave Foods Company 827,157 722,962 827,157 722,962
Corporate / Other 301,862 261,852 301,862 261,852
Total $7,810,916 $7,447,075 $7,810,916 $7,447,075
Segment operating income
(loss)
Dairy Group $475,804 $442,168 $475,804 $442,168
WhiteWave Foods Company 73,647 45,407 76,720 45,407
Corporate / Other (75,563) (58,261) (75,563) (58,383)
Subtotal 473,888 429,314 476,961 429,192
Facility closings and
reorganization costs (26,821) (19,295) --- ---
Total operating income $447,067 $410,019 $476,961 $429,192
[C] Adjusted results differ from results reported under GAAP by excluding
income and expense related to discontinued operations, facility
closings and reorganizations. More information about these items is
included in the earnings release under the heading "Comparison of
Adjusted Information to GAAP Information."
DEAN FOODS COMPANY
Condensed Balance Sheet
(Dollars in Thousands)
September 30, December 31,
ASSETS 2005 2004
Cash and cash equivalents $32,381 $27,407
Other current assets 1,399,439 1,409,675
Total current assets 1,431,820 1,437,082
Property, plant & equipment 1,846,764 1,813,284
Intangibles & other assets 3,755,442 3,773,298
Assets of discontinued operations --- 732,704
Total Assets $7,034,026 $7,756,368
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $1,059,787 $1,050,175
Long-term debt 3,025,944 3,110,716
Other long-term liabilities 820,847 805,918
Liabilities of discontinued
operations --- 125,960
Stockholders' equity:
Common stock 1,425 1,492
Additional paid-in capital 1,023,501 1,308,172
Retained earnings 1,123,992 1,359,632
Other comprehensive income (21,470) (5,697)
Total stockholders' equity 2,127,448 2,663,599
Total Liabilities and
Stockholders' Equity $7,034,026 $7,756,368
DEAN FOODS COMPANY
Condensed Statement of Cash Flows
(Dollars in Thousands)
Nine Months Ended September 30,
Operating Activities 2005 2004
Net income $256,720 $186,505
Income from discontinued operations (17,257) (32,528)
Depreciation and amortization 164,978 153,598
Deferred income taxes 48,028 122,897
Gain on sale of discontinued
operations (37,690) ---
Loss (gain) on disposition of
assets 808 (979)
Costs related to early
extinguishment of debt --- 32,613
Tax savings on equity compensation 16,895 17,548
Write-down of impaired assets 9,051 6,346
Changes in current assets and
liabilities 24,285 (280,645)
Other (3,056) (631)
Net cash provided by
continuing operations 462,762 204,724
Net cash provided by
discontinued operations 16,978 63,195
Net cash provided by
operating activities 479,740 267,919
Investing Activities
Additions to property, plant and
equipment (220,955) (248,285)
Cash outflows for acquisitions (767) (366,990)
Net proceeds from divestitures 189,862 ---
Proceeds from sale of fixed assets 7,586 9,451
Net cash used in continuing
operations (24,274) (605,824)
Net cash used in
discontinued operations (7,875) (16,543)
Net cash used in investing
activities (32,149) (622,367)
Financing Activities
Proceeds from the issuance of debt 27,488 1,731,695
Repayment of debt (192,521) (1,204,314)
Issuance of common stock, net of
expenses 59,631 62,371
Redemption of common stock (345,087) (257,343)
Other (3,281) (9,309)
Net cash provided by (used)
in continuing operations (453,770) 323,100
Net cash provided by (used)
in discontinued operations 11,153 (3,615)
Net cash provided by (used)
in financing activities (442,617) 319,485
Increase (decrease) in cash and cash
equivalents 4,974 (34,963)
Beginning cash balance 27,407 46,037
Ending cash balance $32,381 $11,074
Contact: Barry Sievert
Senior Director, Investor Relations
(214) 303-3437
SOURCE Dean Foods Company
/CONTACT: Barry Sievert, Senior Director,
Investor Relations of Dean Foods Company,
+1-214-303-3437/
/Web site: http://www.deanfoods.com /
(DF)
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