DALLAS, Nov. 7 /PRNewswire-FirstCall/ -- Dean Foods Company today announced that the Company earned $0.54 per diluted share from continuing operations for the quarter ended September 30, 2006, as compared to $0.40 per diluted share from continuing operations for the quarter ended September 30, 2005. On an adjusted basis (as defined below), diluted earnings per share were $0.56, an increase of 19% from $0.47 in last year's third quarter.
Consolidated operating income from continuing operations in the third quarter totaled $169 million, an increase of 22% from $138 million in the third quarter of 2005. Adjusted third quarter operating income totaled $174 million, an increase of 12% from $156 million in the third quarter of 2005. The adjusted third quarter operating margin was 6.92%, up 85 basis points versus the third quarter last year.
Net income from continuing operations for the third quarter totaled $74 million, compared with $62 million in the prior year third quarter. Adjusted net income for the third quarter was $78 million, 6% higher than the $73 million reported in the third quarter of 2005.
Net sales for the third quarter totaled $2.5 billion, a decrease of 2% from the third quarter of 2005, due to the pass through of lower raw dairy input costs, partially offset by fluid milk volume growth at the Dairy Group and continued sales growth at WhiteWave Foods.
"I am very pleased with the operating profit and earnings per share growth in the third quarter," said Gregg Engles, chairman and chief executive officer. "Our portfolio of businesses continues to perform well, with especially robust results from the Dairy Group this quarter. WhiteWave Foods posted solid sales growth, while making considerable progress against its supply chain and information technology initiatives. As we look forward to 2007, we are confident that we are well positioned for sustained double-digit EPS growth."
DAIRY GROUP
Dairy Group net sales were $2.2 billion in the third quarter of 2006, down 3% from the prior year third quarter. The sales decrease was due to the pass through of lower dairy input costs that were partially offset by a 1.3% increase in fluid milk volumes. The third quarter Class I mover, which is an indicator of the Company's raw milk costs, averaged $11.05 per hundred-weight, a 21% decrease from the same period in 2005. Class II butterfat prices averaged $1.32 per pound in the third quarter, 28% lower than the third quarter of 2005.
Dairy Group segment operating income in the third quarter was $173 million, an increase of 10% year-over-year. Dairy Group operating margin increased 94 basis points to 7.83% of sales. Segment operating income growth was driven by increased fluid milk volumes and operational efficiencies resulting from ongoing plant rationalization activities and continuing productivity initiatives. In addition, there were a number of specific items in the quarter, including a favorable resolution of a dispute with a supplier, which on balance added approximately 3 percentage points to Dairy Group operating income growth in the quarter, or approximately 20 basis points of operating margin.
WHITEWAVE FOODS
WhiteWave Foods reported third quarter net sales of $314 million, a 5% increase compared to third quarter 2005 net sales of $299 million. The sales increase was driven by strong sales growth in the core branded portfolio, partly offset by the SKU reduction activities undertaken late in 2005 and slower growth in non-core products.
WhiteWave's core products continued to post double-digit growth in the third quarter. Net sales of Horizon Organic(R) milk increased in the high teens in the quarter as the category continues to expand. Both Silk(R) soymilk and Land O' Lakes fluid and cultured products grew in the low double digits and International Delight(R) coffee creamers grew in the low single digits in the third quarter.
Consistent with previous expectations, segment operating income in the third quarter for WhiteWave Foods was $36.5 million, with operating margins of 11.6%, compared to $36.2 million, and operating margins of 12.1% in the prior year third quarter. WhiteWave operating margin decreased due to higher organic milk, sugar and fuel costs, SAP transition costs, and higher overall investments in information technology and support infrastructure. These increased costs were partially offset by supply chain efficiencies related to WhiteWave's ongoing business consolidation and integration project.
CORPORATE
Corporate expense was $35 million in the third quarter of 2006, 5% lower than in the same period of the prior year. The decrease in corporate expense is primarily related to lower share-based compensation expense.
During the quarter, the Company reduced outstanding debt by $210 million, including over $96 million in proceeds from the sale of Leche Celta. Long-term debt at September 30, 2006 was under $3.2 billion, including $485 million due within one year that is reported as part of current liabilities. Interest expense during the quarter was $48 million, 27% higher than in the third quarter a year ago, due to higher average debt balances and the current interest rate environment.
Through October 31, 2006, the Company has repurchased 4.5 million shares of its stock in 2006. As a result of its ongoing share repurchase program, diluted shares outstanding were 16 million shares lower in the third quarter of 2006 than in the same period a year earlier.
Based on management's review of historical stock option grants, certain administrative errors have been identified relating to certain stock option grants in 1997 and 2000. As the aggregate differences were not deemed material, the Company will not restate its historical results and the full impact of the pretax cumulative non-cash charge of approximately $500,000 was recognized in the third quarter, 2006.
OUTLOOK FOR THE REMAINDER OF 2006 AND FULL YEAR 2007
"Looking to the end of this year, we believe we will finish the year with earnings per share growth of 15%-16% and are comfortable with estimates for full year 2006 adjusted earnings per share between $2.10 and $2.12," said Engles. "Looking forward to 2007, we expect to enter the new year with considerable momentum and are comfortable with expectations for 11%-13% growth in adjusted earnings per share."
RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006
The Company's net sales from continuing operations decreased slightly to $7.5 billion for the nine months ended September 30, 2006. The decrease was due to the pass through of lower raw dairy commodity costs which were offset by sales growth at WhiteWave Foods and volume growth in the Dairy Group. Net income from continuing operations for the first nine months of the year totaled $204 million, compared with $187 million in the first nine months of 2005. Diluted earnings per share from continuing operations for the nine months ended September 30, 2006 totaled $1.45, compared to $1.20 for the first nine months of 2005.
On an adjusted basis (as defined below), net income for the nine months totaled $212 million, compared to $205 million in the same period of 2005. Adjusted diluted earnings per share from continuing operations for the first nine months of 2006 totaled $1.51 compared with $1.32 in the first nine months of 2005.
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 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, 2006 and September 30, 2005 calculated according to GAAP and on an adjusted basis is attached.
For the quarter ended September 30, 2006, the adjusted results reported above differ from the Company's results under GAAP by excluding the following facility closing and reorganization charges:
a) a $5.5 million ($3.4 million net of tax) charge related to the
Madison, WI warehouse closing , ice cream production facility
consolidation in the East Region, and other announced facility
closings and reorganizations.
For the quarter ended September 30, 2005, the adjusted results reported above differ from the Company's results under GAAP by excluding the following facility closing and reorganization charges:
a) an $18.0 million charge ($11.3 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.
For the nine months ended September 30, 2006, the adjusted results reported above differ from the Company's results under GAAP by excluding the following facility closing, reorganization and non-recurring charges:
a) a $12.8 million ($7.8 million net of tax) charge related to the
Madison, WI warehouse closing, ice cream production facility
consolidation in the East Region , and other previously announced
facility closings and reorganizations.
For the nine months ended September 30, 2005, the adjusted results reported above differ from the Company's results under GAAP by excluding the following facility closing, reorganization and non-recurring charges:
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.
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 intended to qualify for 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.
Contact: Barry Sievert
Senior Director, Investor Relations
(214) 303-3437
Marguerite Copel
Vice President, Corporate Communications
(214) 721-1273
(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,
2006 2005 2006 2005
Net sales $2,517,792 $2,569,405 $2,517,792 $2,569,405
Cost of sales 1,823,786 1,918,356 1,823,786 1,918,356
Gross profit 694,006 651,049 694,006 651,049
Operating costs and
expenses 519,789 495,082 519,789 495,082
Facility closings,
reorganization costs and
other 5,471 17,993 --- ---
Operating income 168,746 137,974 174,217 155,967
Interest expense 48,031 37,837 48,031 37,837
Other (income) expense (60) (173) (60) (173)
Income from continuing
operations before
income taxes 120,775 100,310 126,246 118,303
Income taxes 46,277 38,129 48,374 44,823
Income from continuing
operations 74,498 62,181 77,872 73,480
Income (loss) from
discontinued operations,
net of tax (3,705) 37,203 --- ---
Net income $70,793 $99,384 $77,872 $73,480
Basic earnings per share:
Income from continuing
operations $0.56 $0.42 $0.58 $0.50
Income (loss) from
discontinued operations (0.03) 0.25 --- ---
Net income $0.53 $0.67 $0.58 $0.50
Basic average common
shares (000's) 133,739 148,098 133,739 148,098
Diluted earnings per
share:
Income from continuing
operations $0.54 $0.40 $0.56 $0.47
Income (loss) from
discontinued operations (0.03) 0.24 --- ---
Net income $0.51 $0.64 $0.56 $0.47
Diluted average common
shares (000's) 139,160 155,536 139,160 155,536
[A] 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
(Dollars in thousands, except per share data)
GAAP ADJUSTED [B]
Nine Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
Net sales $7,504,717 $7,559,106 $7,504,717 $7,559,106
Cost of sales 5,475,518 5,649,599 5,475,518 5,649,599
Gross profit 2,029,199 1,909,507 2,029,199 1,909,507
Operating costs and
expenses 1,538,244 1,458,413 1,538,244 1,458,413
Facility closings,
reorganization costs and
other 12,823 29,894 --- ---
Operating income 478,132 421,200 490,955 451,094
Interest expense 144,335 115,681 144,335 115,681
Other (income) expense (46) (455) (46) (455)
Income from continuing
operations before
income taxes 333,843 305,974 346,666 335,868
Income taxes 129,856 119,075 134,844 130,398
Income from continuing
operations 203,987 186,899 211,822 205,470
Income (loss) from
discontinued operations,
net of tax (51,534) 55,580 --- ---
Net income $152,453 $242,479 $211,822 $205,470
Basic earnings per share:
Income from continuing
operations $1.51 $1.25 $1.57 $1.37
Income (loss) from
discontinued operations (0.38) 0.37 --- ---
Net income $1.13 $1.62 $1.57 $1.37
Basic average common
shares (000's) 134,644 149,578 134,644 149,578
Diluted earnings per
share:
Income from continuing
operations $1.45 $1.20 $1.51 $1.32
Income (loss) from
discontinued operations (0.36) 0.35 --- ---
Net income $1.09 $1.55 $1.51 $1.32
Diluted average common
shares (000's) 140,501 156,137 140,501 156,137
[B] 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
Earnings Per Share Summary and Reconciliation
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
GAAP diluted earnings per share from
continuing operations $0.54 $0.40 $1.45 $1.20
Adjustments:
Facility closings, reorganization
costs and other 0.02 0.07 0.06 0.12
Adjusted diluted earnings per share $0.56 $0.47 $1.51 $1.32
Segment Information
(Dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
Net sales
Dairy Group $2,204,143 $2,270,310 $6,576,901 $6,690,986
WhiteWave Foods Company 313,649 299,095 927,816 868,120
Total $2,517,792 $2,569,405 $7,504,717 $7,559,106
Segment operating income
(loss)
Dairy Group $172,653 $156,498 $505,878 $476,890
WhiteWave Foods Company 36,484 36,188 92,560 77,394
Corporate / Other (34,920) (36,719) (107,483) (103,190)
Subtotal 174,217 155,967 490,955 451,094
Facility closings,
reorganization costs and
other (5,471) (17,993) (12,823) (29,894)
Total operating income $168,746 $137,974 $478,132 $421,200
DEAN FOODS COMPANY
Condensed Balance Sheets
(Dollars in thousands)
September 30, December 31,
ASSETS 2006 2005
Cash and cash equivalents $43,070 $24,456
Other current assets 1,321,906 1,376,737
Total current assets 1,364,976 1,401,193
Property, plant & equipment 1,792,145 1,776,801
Intangibles & other assets 3,588,500 3,571,163
Assets of discontinued operations 17,587 301,727
Total Assets $6,763,208 $7,050,884
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities, excluding
debt $864,808 $960,608
Total long-term debt, including
current portion 3,176,373 3,386,848
Other long-term liabilities 719,560 675,186
Liabilities of discontinued
operations 6,490 126,029
Stockholders' equity:
Common stock 1,344 1,342
Additional paid-in capital 874,924 922,791
Retained earnings 1,156,466 1,004,013
Other comprehensive income (loss) (36,757) (25,933)
Total stockholders' equity 1,995,977 1,902,213
Total Liabilities and
Stockholders' Equity $6,763,208 $7,050,884
DEAN FOODS COMPANY
Condensed Statements of Cash Flows
(Dollars in thousands)
Nine Months Ended September 30,
Operating Activities 2006 2005
Net income $152,453 $242,479
(Income) loss from discontinued
operations 51,534 (55,580)
Depreciation and amortization 169,029 159,929
Deferred income taxes 61,802 43,569
Share-based compensation 28,554 32,280
Changes in current assets and
liabilities (43,307) 38,005
Other 6,887 7,542
Net cash provided by
continuing operations 426,952 468,224
Net cash (used in) provided
by discontinued operations (900) 7,552
Net cash provided by
operating activities 426,052 475,776
Investing Activities
Additions to property, plant and
equipment (174,913) (206,035)
Cash outflows for acquisitions (16,819) (361)
Proceeds from divestitures 96,280 189,862
Proceeds from sale of fixed assets 5,619 7,021
Net cash used in continuing
operations (89,833) (9,513)
Net cash used in
discontinued operations (14,696) (22,636)
Net cash used in investing
activities (104,529) (32,149)
Financing Activities
Proceeds from the issuance of debt 498,020 9,100
Repayment of debt (729,381) (196,301)
Issuance of common stock, net 28,049 46,051
Redemption of common stock (135,679) (345,087)
Tax savings on share-based
compensation 31,211 16,895
Other (6,889) (3,281)
Net cash used in continuing
operations (314,669) (472,623)
Net cash provided by
discontinued operations 11,760 33,321
Net cash used in financing
activities (302,909) (439,302)
Increase in cash and cash equivalents 18,614 4,325
Beginning cash balance 24,456 25,357
Ending cash balance $43,070 $29,682
