Dean Foods Company Reports Second Quarter Results
Second Quarter GAAP Earnings From Continuing Operations Increase 13% to $0.53
Per Share;
Adjusted Earnings Rise 15% to $0.55 Per Share;
Reaffirms Full Year Guidance of $2.10 to $2.15 Per Share
DALLAS, Aug. 2 /PRNewswire-FirstCall/ -- Dean Foods Company (NYSE: DF) today announced that the Company earned $0.53 per diluted share from continuing operations for the quarter ended June 30, 2006, an increase of 13% from $0.47 per diluted share from continuing operations in the second quarter of 2005. On an adjusted basis (as defined below), diluted earnings per share were $0.55, an increase of 15% from $0.48 in last year's second quarter.
Consolidated operating income in the second quarter totaled $171.3 million, an increase of 7% from $159.7 million in the second quarter of 2005. Adjusted second quarter operating income totaled $174.2 million, an increase of 7% from $162.2 million in the second quarter of 2005. The adjusted second quarter operating margin was 7.0%, up 58 basis points versus the second quarter last year.
"I am pleased with the direction and momentum of our businesses," said Gregg Engles, chairman and chief executive officer. "Our Dairy Group continues to outperform the industry, increasing marketshare and growing operating profits. At WhiteWave, our brands continue to demonstrate robust growth, and we believe our supply chain and information technology initiatives are on track to deliver significant operating benefits in the future."
Net income from continuing operations for the second quarter totaled $74.8 million, compared with $74.0 million in the prior year second quarter. Adjusted net income for the second quarter was $76.6 million, versus $75.5 million reported in the second quarter of 2005.
Net sales for the second quarter totaled $2.5 billion, a decrease of 1% from the second quarter of 2005, due to the pass through of lower raw dairy input costs, partially offset by strong volume growth at the Dairy Group and continued strong sales growth at WhiteWave Foods.
Long-term debt at June 30, 2006 was under $3.4 billion, including $182 million due within one year that is reported as part of current liabilities. As of June 30, 2006, approximately $1.1 billion of the Company's senior credit facility was available for future borrowings.
DAIRY GROUP
Dairy Group net sales were $2.17 billion in the second quarter of 2006, down 2.6% from the prior year second quarter. The sales decrease was due to the pass through of lower dairy input costs that were partially offset by a 2.1% increase in fluid milk volumes. The second quarter Class I mover, which is an indicator of the Company's raw milk costs, averaged $10.98 per hundred- weight, a 23% decrease from the same period in 2005. Class II butterfat prices averaged $1.25 per pound in the second quarter, also 23% lower than the second quarter of 2005.
Dairy Group segment operating income in the second quarter was $180.5 million, an increase of 5% year-over-year. Dairy Group operating margin increased 61 basis points to 8.3% of sales. Segment operating income growth was driven by increased fluid milk volumes and operational efficiencies resulting from ongoing plant rationalization activities and productivity initiatives.
WHITEWAVE FOODS
WhiteWave Foods reported second quarter net sales of $307 million, a 7% increase compared to second quarter 2005 net sales of $288 million. The percentage increase was driven by strong sales growth in the continuing branded portfolio, partly offset by the SKU reduction activities undertaken late in 2005.
Segment operating income in the second quarter for WhiteWave Foods was $30.0 million, with operating margins of 9.8%, compared to $28.6 million, and operating margins of 10.0% in the prior year second quarter. WhiteWave operating income increased due to strong sales growth and increased operational efficiencies that were partially offset by investments in information technology and support infrastructure and higher organic milk, sugar and fuel costs.
CORPORATE AND OTHER
Corporate expense was $36.2 million in the second quarter of 2006, 4% lower than in the same period of the prior year. The decrease in corporate expense is primarily related to lower share-based compensation expenses.
The Company reclassified its Iberian operations as a discontinued operation as of June 30, 2006. The Company has made the strategic decision to sell the business. The sale of the Iberian operations will represent the last major piece in the Company's ongoing efforts to focus on its largest opportunities. The Iberian operations were previously reported as a part of the Corporate and Other segment. In conjunction with this reclassification, the Company took a $46.4 million impairment charge, net of an income tax benefit of $8.1 million, in the second quarter. The reclassification will increase 2005 adjusted earnings from continuing operations by one cent to $1.83 per share and is expected to be roughly neutral to 2006 adjusted earnings per share from continuing operations.
RECENT EVENTS
- In May 2006, Mr. Jack F. Callahan Jr. began his tenure as Executive Vice President and Chief Financial Officer of Dean Foods, reporting directly to Gregg Engles, Chairman and Chief Executive Officer. Previously, Mr. Callahan served as Senior Vice President of Corporate Strategy and Development at PepsiCo, and held a number of financial leadership positions.
- During the second quarter of 2006, the Company made open market purchases of its common stock totaling 3.3 million shares for a total cost of $120 million. The Company has a total of $183 million remaining under its repurchase authorizations.
- During the quarter, the Company issued $500 million of 7% senior unsecured bonds, due in 2016. Proceeds from the offering were used to pay down a commensurate amount of outstanding debt on the Company's revolving credit facility.
OUTLOOK FOR THE REMAINDER OF 2006
"We have strong momentum as we enter the second half of the year and 2006 is on track to be another strong year for Dean Foods," said Engles. "We are reiterating our full year guidance for earnings to be $2.10 to $2.15 per share compared to 2005 earnings of $1.83 per share. For the third quarter, we are expecting earnings of approximately $0.54 to $0.56 per share."
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2006
The Company's net sales from continuing operations decreased slightly to $5.0 billion for the six months ended June 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 half of the year totaled $129.5 million, compared with $124.7 million in the first six months of 2005. Diluted earnings per share from continuing operations for the six months ended June 30, 2006 totaled $0.92, compared to $0.80 for the first six months of 2005.
On an adjusted basis (as defined below), net income from continuing operations for the six months totaled $134.0 million, compared to $132.0 million in the same period of 2005. Adjusted diluted earnings per share from continuing operations for the first six months of 2006 totaled $0.95 compared with $0.84 in the first six 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 six month periods ended June 30, 2006 and June 30, 2005 calculated according to GAAP and on an adjusted basis is attached.
For the quarter ended June 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) $2.4 million charge ($1.4 million net of income tax) related to Dairy
Group facility closings and restructurings, including the closing of
our Union, NJ plant, and
b) $0.6 million charge ($0.4 million net of income tax) related to
reorganization and consolidation activities at WhiteWave Foods.
For the quarter ended June 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) $1.6 million charge ($1.0 million net of income tax) related to
reorganization and consolidation activities at WhiteWave Foods, and
b) $0.8 million ($0.5 million net of income tax) related to previously
announced Dairy Group facility closings and restructurings.
For the six months ended June 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) $5.1 million charge ($3.1 million net of income tax) related to Dairy
Group facility closings and restructurings, including the closing of
our Union, NJ plant, and
b) $2.3 million charge ($1.4 million net of income tax) related to
reorganization and consolidation activities at WhiteWave Foods.
For the six months ended June 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) $7.4 million charge ($4.5 million net of income tax) related to
reorganization and consolidation activities at WhiteWave Foods and
severance payments made to a former employee, and
b) $4.5 million ($2.8 million net of income tax) related to previously
announced Dairy Group facility closings and restructurings.
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 second largest organic yogurt brand in the United Kingdom.
FORWARD-LOOKING STATEMENTS
Some of the statements in this press release are "forward-looking" and are made pursuant to the safe harbor provision of the Securities Litigation Reform Act of 1995. These "forward-looking" statements include statements relating to, among other things, projected sales, operating income, net income and earnings per share. These statements involve risks and uncertainties that may cause results to differ materially from the statements set forth in this press release. The Company's ability to meet targeted financial and operating results, including targeted sales, operating income, net income and earnings per share depends on a variety of economic, competitive and governmental factors, including raw material 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) 303-1273
(Tables to follow)
DEAN FOODS COMPANY
(Dollars in thousands, except per share data)
GAAP ADJUSTED [A]
Three Months Ended Three Months Ended
June 30, June 30,
2006 2005 2006 2005
Net sales $2,477,884 $2,515,130 $2,477,884 $2,515,130
Cost of sales 1,794,555 1,867,895 1,794,555 1,867,895
Gross profit 683,329 647,235 683,329 647,235
Operating costs and
expenses 509,090 485,065 509,090 485,065
Facility closings,
reorganization costs and
other 2,950 2,437 --- ---
Operating income 171,289 159,733 174,239 162,170
Interest expense 48,768 38,625 48,768 38,625
Other (income) expense (86) (205) (86) (205)
Income from continuing
operations before
income taxes 122,607 121,313 125,557 123,750
Income taxes 47,812 47,287 48,973 48,224
Income from continuing
operations 74,795 74,026 76,584 75,526
Income (loss) from
discontinued operations,
net of tax (45,927) 7,600 --- ---
Net income $28,868 $81,626 $76,584 $75,526
Basic earnings per share:
Income from continuing
operations $0.55 $0.49 $0.57 $0.50
Income (loss) from
discontinued operations (0.34) 0.05 --- ---
Net income $0.21 $0.54 $0.57 $0.50
Basic average common
shares (000's) 135,037 150,834 135,037 150,834
Diluted earnings per share:
Income from continuing
operations $0.53 $0.47 $0.55 $0.48
Income (loss) from
discontinued operations (0.32) 0.05 --- ---
Net income $0.21 $0.52 $0.55 $0.48
Diluted average common
shares (000's) 140,434 157,220 140,434 157,220
[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]
Six Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Net sales $4,986,925 $4,989,701 $4,986,925 $4,989,701
Cost of sales 3,652,628 3,731,243 3,652,628 3,731,243
Gross profit 1,334,297 1,258,458 1,334,297 1,258,458
Operating costs and
expenses 1,017,559 963,331 1,017,559 963,331
Facility closings,
reorganization costs and
other 7,352 11,901 --- ---
Operating income 309,386 283,226 316,738 295,127
Interest expense 96,304 77,844 96,304 77,844
Other (income) expense 14 (282) 14 (282)
Income from continuing
operations before
income taxes 213,068 205,664 220,420 217,565
Income taxes 83,579 80,946 86,463 85,575
Income from continuing
operations 129,489 124,718 133,957 131,990
Income (loss) from
discontinued operations,
net of tax (47,829) 18,377 --- ---
Net income $81,660 $143,095 $133,957 $131,990
Basic earnings per share:
Income from continuing
operations $0.96 $0.83 $0.99 $0.88
Income (loss) from
discontinued operations (0.36) 0.12 --- ---
Net income $0.60 $0.95 $0.99 $0.88
Basic average common
shares (000's) 135,103 150,331 135,103 150,331
Diluted earnings per
share:
Income from continuing
operations $0.92 $0.80 $0.95 $0.84
Income (loss) from
discontinued operations (0.34) 0.11 --- ---
Net income $0.58 $0.91 $0.95 $0.84
Diluted average common
shares (000's) 141,105 156,442 141,105 156,442
[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 Six Months Ended
June 30, June 30,
2006 2005 2006 2005
GAAP diluted earnings per
share from continuing
operations $0.53 $0.47 $0.92 $0.80
Adjustments:
Facility closings,
reorganization costs
and other 0.02 0.01 0.03 0.04
Adjusted diluted earnings
per share $0.55 $0.48 $0.95 $0.84
Segment Information
(Dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Net sales
Dairy Group $2,170,691 $2,227,602 $4,372,758 $4,420,676
WhiteWave Foods Company 307,193 287,528 614,167 569,025
Total $2,477,884 $2,515,130 $4,986,925 $4,989,701
Segment operating income
(loss)
Dairy Group $ 180,478 $ 171,441 $ 333,225 $ 320,392
WhiteWave Foods Company 29,978 28,626 56,076 41,206
Corporate / Other (36,217) (37,897) (72,563) (66,471)
Subtotal 174,239 162,170 316,738 295,127
Facility closings,
reorganization costs
and other (2,950) (2,437) (7,352) (11,901)
Total operating income $ 171,289 $ 159,733 $ 309,386 $ 283,226
DEAN FOODS COMPANY
Condensed Balance Sheets
(Dollars in thousands)
June 30, December 31,
ASSETS 2006 2005
Cash and cash equivalents $30,378 $24,456
Other current assets 1,254,188 1,376,737
Total current assets 1,284,566 1,401,193
Property, plant & equipment 1,780,350 1,776,801
Intangibles & other assets 3,600,724 3,571,163
Assets of discontinued operations 266,527 301,727
Total Assets $6,932,167 $7,050,884
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities, excluding debt $787,092 $960,608
Total long-term debt, including
current portion 3,376,189 3,386,848
Other long-term liabilities 715,639 675,186
Liabilities of discontinued operations 124,530 126,029
Stockholders' equity:
Common stock 1,332 1,342
Additional paid-in capital 841,480 922,791
Retained earnings 1,085,673 1,004,013
Other comprehensive income (loss) 232 (25,933)
Total stockholders' equity 1,928,717 1,902,213
Total Liabilities and
Stockholders' Equity $6,932,167 $7,050,884
DEAN FOODS COMPANY
Condensed Statements of Cash Flows
(Dollars in thousands)
Six Months Ended June 30,
Operating Activities 2006 2005
Net income $81,660 $143,095
Loss (income) from discontinued
operations 47,829 (18,377)
Depreciation and amortization 111,875 105,719
Deferred income taxes 55,145 20,071
Share-based compensation 20,262 21,214
Changes in current assets and
liabilities (55,725) 62,099
Other 3,526 (861)
Net cash provided by continuing
operations 264,572 332,960
Net cash (used in) provided by
discontinued operations (1,693) 28,452
Net cash provided by operating
activities 262,879 361,412
Investing Activities
Additions to property, plant and
equipment (113,569) (130,596)
Cash outflows for acquisitions (10,960) (1,296)
Proceeds from sale of fixed assets 3,404 5,281
Net cash used in continuing
operations (121,125) (126,611)
Net cash used in discontinued
operations (9,505) (21,709)
Net cash used in investing
activities (130,630) (148,320)
Financing Activities
Proceeds from the issuance of debt 498,020 1,400
Repayment of debt (524,058) (288,281)
Issuance of common stock, net 10,052 38,873
Redemption of common stock (135,679) ---
Tax savings on share-based compensation 24,044 12,697
Other (6,561) (3,281)
Net cash used in continuing
operations (134,182) (238,592)
Net cash provided by discontinued
operations 7,855 29,167
Net cash used in financing activities (126,327) (209,425)
Increase in cash and cash equivalents 5,922 3,667
Beginning cash balance 24,456 25,357
Ending cash balance $30,378 $29,024
SOURCE Dean Foods Company
CONTACT: Barry Sievert, Senior Director, Investor Relations,
+1-214-303-3437, or Marguerite Copel, Vice President, Corporate
Communications, +1-214-303-1273, both of Dean Foods Company
Contact:
Investors:
Barry Sievert
Investor Relations
(214) 303-3437
Media:
Marguerite Copel
Corporate Communications
(214) 721-1273
SOURCE Dean Foods Company