Adjusted Diluted Earnings Per Share Improve 10% to $0.33
DSD Dairy Operating Income Up 9% Over Year Ago Period
Consolidated Adjusted Operating Income Increases 3%
DALLAS, Aug. 6 /PRNewswire-FirstCall/ — Dean Foods Company (NYSE: DF)
today announced that the Company earned $0.31 per diluted share from
continuing operations for the quarter ended June 30, 2008, compared with $0.21
per diluted share from continuing operations in the second quarter of 2007.
Net income from continuing operations for the second quarter totaled $48.9
million, compared with $28.2 million in the prior year’s second quarter.
On an adjusted basis (as defined below), diluted earnings per share were
$0.33, compared to $0.30 in the prior year’s second quarter. Adjusted net
income from continuing operations for the second quarter was $52.0 million,
compared to adjusted net income from continuing operations of $41.6 million in
the second quarter of 2007. The increase in adjusted net income and earnings
per share is primarily related to the improved performance in the DSD Dairy
Segment, and lower interest expense versus the year ago period, offset in the
earnings per share calculation by increased diluted shares outstanding.
“Overall, the business is executing well in this unprecedented
inflationary environment and our near term results reflect the consistent
improvement we’ve made since the third quarter of last year. I’m pleased that
we have returned to growth in the second quarter.” commented Gregg Engles,
Chairman and Chief Executive Officer. “While challenges remain at WhiteWave-
Morningstar related to Horizon Organic(R), we are encouraged by DSD Dairy
segment operating income that was 9% above the second quarter of 2007,
consolidated adjusted operating income that was 3% better than last year, and
adjusted diluted earnings per share that were 10% above year ago levels.”
Summary of Dean Foods Second Quarter 2008 Segment and Operating Results
(in millions, except EPS)
Value % Change from Q207
DSD Dairy:
Fluid Milk Volume N/A 1.1%
Operating Income $154.3 9%
WhiteWave - Morningstar:
Net Sales $652.3 10%
Operating Income $49.3 -12%
Consolidated Adjusted Operating Income: $162.4 3%
Adjusted Diluted Earnings per Share: $0.33 10%
DEAN FOODS CONSOLIDATED
Net sales for the second quarter totaled $3.1 billion, an increase of 9%
from net sales in the second quarter of 2007. Net sales increased in the
quarter primarily due to the pass-through of higher dairy commodity costs and
volume growth in DSD Dairy and continued strong sales growth at WhiteWave-
Morningstar.
Consolidated operating income in the second quarter totaled $157.2
million, an increase of 2% from $153.6 million in the second quarter of 2007.
Adjusted second quarter consolidated operating income totaled $162.4 million,
an increase of 3% from $157.4 million in the second quarter of 2007.
DSD DAIRY
DSD Dairy net sales for the second quarter were $2.5 billion, a 9%
increase from $2.3 billion in net sales for the second quarter of 2007. The
sales increase in the quarter was due primarily to the pass-through of higher
overall dairy commodity costs to customers and higher sales volumes. The
second quarter average Class I mover, which is an indicator of the Company’s
raw milk costs, averaged $17.80 per hundred-weight, 10% above the same period
in 2007 and 7% lower than the first quarter of 2008. Class II butterfat prices
averaged $1.55 per pound in the second quarter, down slightly from the same
period a year ago and 16% higher than the first quarter of 2008.
DSD Dairy operating income in the second quarter was $154.3 million, 9%
above the $141.2 million reported in the second quarter of 2007. DSD Dairy
results benefitted from tight cost controls across the business including the
continued benefits from the reduction in workforce completed in the fourth
quarter of 2007, increased proceeds from excess cream sales, and disciplined
pricing execution to offset commodity volatility.
WHITEWAVE – MORNINGSTAR
The WhiteWave-Morningstar segment reported second quarter net sales of
$652.3 million, 10% higher than second quarter 2007 net sales of $590.9
million. Sales of Morningstar’s private label and foodservice cultured and
creamer products increased 7% over the second quarter of 2007 to $284.2
million behind solid growth in ice cream mix and yogurt sales. The WhiteWave
branded portfolio of products increased sales 13% over the prior year period
to $368.2 million. Net sales of Horizon Organic milk increased nearly 30% due
to continued strong volume growth and increased pricing. Silk(R) net sales
increased in the low double digits, driven by continued distribution gains and
the strength of the Silk Plus Omega-3 DHA product. International Delight(R)
and Land O’Lakes(R) creamers increased sales in the high single digits over
the same period last year.
Segment operating income in the second quarter for WhiteWave-Morningstar
was $49.3 million, compared to $55.8 million in the second quarter of 2007.
Segment operating margins were 7.6%, compared to 9.5% in the second quarter of
2007. Segment operating income in the quarter continued to be adversely
affected by challenges in the Horizon Organic brand where price increases were
offset by higher milk and other commodity costs. Other items impacting
WhiteWave-Morningstar operating income included higher administrative costs
and increased marketing spending in the quarter as well as lower profitability
at Morningstar related to commodity cost inflation and sales mix.
CORPORATE EXPENSE
Corporate and other expenses totaled $41.2 million, compared to $39.5
million in the second quarter of 2007. The increase in the quarter reflects
the balancing of tight cost controls with strategic investments behind
building capabilities to support the Company’s strategic initiatives. Through
June 30, Corporate and other expenses were $79.2 million, a 1% increase from
the $78.4 million through the first half of 2007.
CASH FLOW
Net cash provided by continuing operations for the six months ended June
30, 2008 totaled $315 million, compared to $170 million for the first half of
2007. The increase in net cash provided by continuing operations is due
primarily to decreased working capital requirements, offset by higher year
over year interest expense and lower operating results.
Free cash flow provided by operations in the six months ended June 30,
2008 totaled $210 million, a $142 million increase over the $67 million in the
first two quarters of 2007. A reconciliation between net cash provided by
continuing operations and free cash flow provided by operations is provided
below.
Capital expenditures for the first six months of 2008 totaled $106
million, compared to $103 million for the first half of 2007.
Through June 30, debt outstanding has decreased by $548 million since
December 31, 2007. Total debt at June 30, 2008, net of $39 million in cash on
hand, was approximately $4.7 billion. The Company’s funded debt to EBITDA
ratio, as defined by its credit agreements, declined to 5.48x as of the end of
the second quarter.
FORWARD OUTLOOK
“Overall, we are cautiously optimistic about the back half of the year,”
continued Mr. Engles. “Despite the continued challenging commodity cost
inflation we’ve faced, our business teams are executing well. Back half
overlaps in the areas of shrink and excess cream sales should be favorable.
Tempering our confidence for the balance of the year, however, is a heightened
level of competitive pressure we are seeing in certain areas of our business,
as well as continued volatility and inflationary pressure across the cost
spectrum. Nonetheless, on balance, we are confident our DSD Dairy segment will
continue to perform well in the third and fourth quarters.
At WhiteWave-Morningstar, the majority of the businesses continue to
perform well. However, the anticipated recovery in Horizon Organic
profitability is taking longer than we had hoped due to higher raw organic
milk and other commodity costs, and a highly competitive market. We remain
focused on maintaining our leading branded position in the category as we
balance market share considerations against profitability.
In light of these factors, we are comfortable reiterating our guidance for
2008 adjusted diluted earnings of at least $1.20 per share. For the third
quarter, we expect adjusted diluted EPS to be between $0.26 and $0.31 per
share.”
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2008
Net sales for the six months ended June 30, 2008 totaled $6.2 billion, an
increase of 13% from net sales for the same period of last year, due to the
pass-through of higher dairy commodity costs and increased sales at WhiteWave-
Morningstar. Net income from continuing operations for the first half of the
year totaled $79.7 million, compared with $91.4 million in the first six
months of 2007. Diluted earnings per share from continuing operations for the
six months ended June 30, 2008 totaled $0.53, compared to $0.67 for the first
six months of 2007.
On an adjusted basis (as defined below), net income from continuing
operations for the six months totaled $84.5 million, compared to $108.7
million in the same period of 2007. Adjusted diluted earnings per share from
continuing operations for the first six months of 2008 totaled $0.56 compared
to $0.80 in the first six months of 2007.
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 June 30, 2008 and 2007 calculated according
to GAAP and on an adjusted basis is attached.
For the quarter ended June 30, 2008, the adjusted results reported above
differ from the Company’s results under GAAP by excluding the following
facility closing and reorganization charges:
— a $5.2 million charge ($3.2 million net of income tax) related to
previously announced facility closings.
For the quarter ended June 30, 2007, the adjusted results reported above
differ from the Company’s results under GAAP by excluding the following
facility closing and reorganization charges, and other nonrecurring charges:
— a $2.5 million charge ($1.5 million net of income tax) related to the
realignment of the DSD Dairy segment’s finance and accounting organization, as
well as previously announced facility closings;
— a $1.3 million charge ($0.8 million net of income tax) resulting from
the sale of its tofu business;
— a $13.5 million write-off ($8.3 million net of income tax) of financing
costs resulting from the completion of the Company’s new senior credit
facility; and
— a $4.5 million charge ($2.8 million net of income tax) related to non-
recurring special dividend costs.
For the six months ended June 30, 2008, 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 $7.4 million charge ($4.5 million net of income tax) related to
previously announced facility closings; and
— $0.6 million charge ($0.3 million net of income tax) related to non-
recurring special dividend costs.
For the six months ended June 30, 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:
— an $8.3 million charge ($5.1 million net of income tax) related to the
realignment of the DSD Dairy segment’s finance and accounting organization as
well as previously announced facility closings;
— a $1.3 million charge ($0.8 million net of income tax) resulting from
the sale of its tofu business;
— a $13.5 million write-off ($8.4 million net of income tax) of financing
costs resulting from the completion of the Company’s new senior credit
facility; and
— a $4.9 million charge ($3.0 million net of income tax) related to non-
recurring special 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 http://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 DSD Dairy 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. Our WhiteWave-Morningstar segment’s
Rachel’s Organic(R) dairy products brand is the second largest organic yogurt
brand in the United Kingdom. Additionally, our WhiteWave-Morningstar segment
markets and sells private label cultured and extended shelf life dairy
products through our Morningstar platform.
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,
adjusted diluted earnings per share, debt covenant compliance and expected
financial performance. 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.
CONTACT: Corporate Communications, Marguerite Copel, +1-214-721-1273; or
Investor Relations, Barry Sievert, +1-214-303-3437
DEAN FOODS COMPANY
Condensed Consolidated Income Statements
(Unaudited)
(dollars in thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
2008 2007 2008 2007
Net sales $3,102,559 $2,843,645 $6,179,519 $5,473,394
Cost of sales 2,363,239 2,155,595 4,751,625 4,098,070
Gross profit 739,320 688,050 1,427,894 1,375,324
Operating costs and
expenses 576,947 530,613 1,127,202 1,057,959
Facility closings,
reorganizations and
other costs 5,195 3,800 7,410 9,575
Operating income 157,178 153,637 293,282 307,790
Interest expense 76,485 102,486 160,317 154,727
Other (income) expense 138 4,546 757 4,846
Income from continuing
operations before
income taxes 80,555 46,605 132,208 148,217
Income taxes 31,670 18,428 52,551 56,837
Income from continuing
operations 48,885 28,177 79,657 91,380
Income (loss) from
discontinued operations,
net of tax - 239 - 856
Net income $48,885 $28,416 $79,657 $92,236
Basic earnings per share:
Income from continuing
operations $0.32 $0.22 $0.55 $0.70
Income (loss) from
discontinued
operations - - - 0.01
Net income $0.32 $0.22 $0.55 $0.71
Basic average common
shares (000's) 151,984 130,017 144,934 129,457
Diluted earnings per share:
Income from continuing
operations $0.31 $0.21 $0.53 $0.67
Income (loss) from
discontinued
operations - - - 0.01
Net income $0.31 $0.21 $0.53 $0.68
Diluted average common
shares (000's) 156,352 138,385 149,922 136,562
DEAN FOODS COMPANY
Condensed Consolidated Balance Sheets
(Unaudited)
(dollars in thousands)
June 30, December 31,
ASSETS 2008 2007
Cash and cash equivalents $38,848 $32,555
Other current assets 1,429,305 1,499,429
Total current assets 1,468,153 1,531,984
Property, plant & equipment 1,810,726 1,798,378
Intangibles & other assets 3,731,372 3,702,994
Total Assets $7,010,251 $7,033,356
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities, excluding debt $942,279 $907,270
Total long-term debt, including
current portion 4,724,460 5,272,351
Other long-term liabilities 778,799 802,468
Total stockholders' equity 564,713 51,267
Total Liabilities and Stockholders'
Equity $7,010,251 $7,033,356
DEAN FOODS COMPANY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(dollars in thousands)
Six months ended June 30,
Operating Activities 2008 2007
Net cash provided by operating
activities $315,304 $170,483
Investing Activities
Additions to property, plant and
equipment (105,762) (103,092)
Cash outflows for acquisitions and
investments, net of cash received (60,889) (129,636)
Net proceeds from divestitures - 12,551
Proceeds from sale of fixed assets 5,594 3,228
Net cash used in investing activities (161,057) (216,949)
Financing Activities
Proceeds from the issuance of debt - 1,912,500
Repayment of debt (16,791) (69,516)
Net proceeds from (payments for) revolver
and receivables-backed facility (546,100) 147,200
Payments of financing costs - (31,281)
Issuance of common stock, net 413,892 26,501
Payment of special cash dividend - (1,942,738)
Tax savings on share-based compensation 1,045 10,086
Net cash provided (used) by financing
activities (147,954) 52,752
Increase in cash and cash equivalents 6,293 6,286
Beginning cash balance 32,555 31,140
Ending cash balance $38,848 $37,426
DEAN FOODS COMPANY
Segment Information
(Unaudited)
(dollars in thousands)
Three months ended Six months ended
June 30, June 30,
2008 2007 2008 2007
Net sales:
DSD Dairy $2,450,239 $2,252,786 $4,908,715 $4,352,852
WhiteWave-Morningstar 652,320 590,859 1,270,804 1,120,542
Total $3,102,559 $2,843,645 $6,179,519 $5,473,394
Segment operating income
(loss):
DSD Dairy $154,254 $141,154 $285,162 $294,804
WhiteWave-Morningstar 49,299 55,824 94,691 101,002
Corporate / Other (41,180) (39,541) (79,161) (78,441)
Subtotal 162,373 157,437 300,692 317,365
Facility closings,
reorganizations and
other costs (5,195) (3,800) (7,410) (9,575)
Total operating
income $157,178 $153,637 $293,282 $307,790
DEAN FOODS COMPANY
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(dollars in thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
2008 2007 2008 2007
Reconciliation of GAAP to adjusted
operating income from continuing
operations
GAAP operating income from
continuing operations $157,178 $153,637 $293,282 $307,790
Adjustment:
Facility closings,
reorganizations and other costs 5,195 3,800 7,410 9,575
Adjusted operating income from
continuing operations $162,373 $157,437 $300,692 $317,365
Reconciliation of GAAP to
adjusted net income from
continuing operations
GAAP net income from continuing
operations $48,885 $28,177 $79,657 $91,380
Adjustments, net of tax:
Facility closings,
reorganizations and other costs 3,149 2,312 4,469 5,904
Debt refinancing and special
dividend costs - 11,136 340 11,371
Adjusted net income from
continuing operations $52,034 $41,625 $84,466 $108,655
Reconciliation of GAAP to
adjusted diluted earnings per
share
GAAP diluted earnings per share
from continuing operations $0.31 $0.21 $0.53 $0.67
GAAP diluted earnings per share
from discontinued operations - - - 0.01
Adjustments, net of tax 0.02 0.09 0.03 0.12
Adjusted diluted earnings per
share $0.33 $0.30 $0.56 $0.80
Computation of Free Cash Flow
provided by operations
Net cash provided by continuing
operations $157,043 $32,475 $315,304 $170,483
Additions to property, plant and
equipment (61,003) (51,311) (105,762) (103,092)
Free cash flow provided by
operations $96,040 $(18,836) $209,542 $67,391
SOURCE Dean Foods Company
CONTACT: Corporate Communications, Marguerite Copel, +1-214-721-1273, or
Investor Relations, Barry Sievert, +1-214-303-3437, both of Dean Foods
Company
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