Fourth Quarter 2002 Pro Forma Diluted EPS Grew 19% to $0.74
Full Year 2002 Pro Forma Diluted EPS Increased 17% to $2.78
Company Announces Additional $150 Million Share Repurchase Authorization
Dean Foods Increases 2003 Pro Forma Diluted EPS Guidance to $3.11 to $3.16, Representing Growth of 12-14% for the Year
First Quarter 2003 Pro Forma Diluted EPS Target Raised to 62 to 64 Cents
DALLAS, Feb. 13 /PRNewswire-FirstCall/ -- Dean Foods Company (NYSE:DF) today announced its financial results for the quarter and year ended December 31, 2002. Fourth quarter net sales totaled $2.2 billion, an increase of 39% over the fourth quarter of 2001. Net income for the fourth quarter was $63.1 million, an increase of 166% versus $23.7 million in the fourth quarter of 2001. Diluted earnings per share grew 70% to $0.63, compared with $0.37 in the fourth quarter of 2001.
On a pro forma basis (as defined below), diluted earnings per share for the fourth quarter totaled $0.74, an increase of 19% compared with pro forma earnings of $0.62 per share in last year's fourth quarter. Pro forma net income for the fourth quarter grew 77% to $75.8 million compared with pro forma net income of $42.8 million in the fourth quarter of 2001.
"Our company accomplished a great deal in 2002," said Gregg Engles, chairman and chief executive officer. "We successfully integrated legacy Dean Foods -- a public company with approximately $4 billion in revenue, over 50 processing facilities and 14,000 employees -- making us one of the nation's largest food and beverage companies. We achieved in excess of $100 million in synergies in the first year following the merger. We executed against our plan by making strategic acquisitions, completing divestitures and entering into strategic alliances. During 2002 we invested approximately $130 million behind our strategic brands.
"Most importantly, we delivered pro forma earnings per share growth of 17% in our first full year as a combined company. I am extremely proud of our results this year and would like to thank our employees for their dedication and hard work," Engles said.
"In 2002, we invested behind our strategic brand platforms -- International Delight(R), Silk(R), Sun Soy(R), Hershey's(R), Folgers(R) Jakada(TM), Land O'Lakes(R), Dean's(R) and Marie's(R) dips and dressings. Volumes of these strategic brands grew 32% in the fourth quarter versus last year. Given our expectations for their continued vigorous growth, we plan to spend approximately $190 million in marketing, advertising, promotion and slotting in 2003 to support and grow these innovative brands," remarked Engles.
The company reported fourth quarter operating income of $172.2 million versus $107.6 million in the fourth quarter of 2001, an increase of 60%. Pro forma operating income totaled $179.8 million, an increase of 62% over pro forma operating income of $111.0 million in the fourth quarter of 2001. Pro forma fourth quarter 2002 operating income margins were 8.03%, an increase of 114 basis points versus the pro forma results from the fourth quarter of last year. Operating income margin improvement was due primarily to improvement in Dairy Group margins and the contribution of Specialty Foods, offset to some degree by increased marketing spending at Morningstar/White Wave.
Long-term debt at December 31, 2002 was approximately $2.7 billion, including $173.4 million in reported current liabilities. At the end of the year, approximately $728 million of the company's $2.7 billion bank facility was available for future investments.
During the fourth quarter, the company repurchased over 2.75 million shares of its common stock in the open market at an average price of $36.78 per share, for a total price of approximately $100 million. In early January, the company announced that its Board of Directors approved a $150 million increase to the company's share repurchase program.
To date in 2003, the company has repurchased an additional 3.24 million shares at an average price of $39.70 per share, totaling $129 million. The share repurchases completed in 2003 will positively impact the company's diluted earnings per share results by approximately seven cents during the year.
Dean Foods also announced today that its Board of Directors approved another $150 million increase to the company's share repurchase program. The program permits the company to purchase shares of its common stock or its trust issue preferred securities in open market or privately negotiated transactions.
"As a result of our share repurchase activity and the underlying strength in our business, we are raising our 2003 estimate of pro forma earnings per share to a range of $3.11 to $3.16, implying earnings per share growth of 12 to 14% for the year. As well, we are increasing our first quarter estimate to a range of 62 to 64 cents per share," said Engles.
FOURTH QUARTER RECONCILIATION OF PRO FORMA RESULTS WITH GAAP RESULTS
For the fourth quarter of 2002, the pro forma results reported above differ from the company's results under Generally Accepted Accounting Principles (GAAP) by excluding the following items:
-- Restructuring charges of $7.6 million ($4.7 million net of taxes)
related to closing a Dairy Group plant in Ohio, an ice cream
production line in Colorado and a regional administrative office in
-- $8.2 million net after-tax loss from discontinued operations related
to the sale of the Puerto Rico operations. The sale of the Puerto
Rico dairy operations was announced and completed in the fourth
quarter, reflecting Dean Foods' desire to more closely align assets
and management resources with the company's ongoing strategic
-- An income tax benefit of $6.6 million related to a favorable tax
settlement with the IRS.
-- A $10 million ($6.3 million net of taxes) charge to record the
company's share of operating losses generated by Consolidated
Container Corporation during the year. During the fourth quarter,
Consolidated Container, in which Dean Foods owns a minority interest,
restructured its credit facilities. As part of this restructuring,
Dean Foods replaced its previously established $10 million guarantee
with a $10 million cash investment in Consolidated Container. As a
result, Dean Foods recorded a portion of Consolidated Container's
2002 losses, equal to $10 million.
For the fourth quarter of 2001, the pro forma results reported above differ from the company's results under GAAP by excluding the following items:
-- $8.7 million ($4.5 million net of taxes and minority interest) for
plant closing costs in Texas and Michigan.
-- $12.5 million ($6.1 million net of taxes and minority interest) in
goodwill and other intangible amortization.
-- $17.3 million in other operating income ($11.4 million net of taxes
and minority interest) comprised of the gain on the divestiture of
11 plants as part of the Dean Foods merger, the payment to Dairy
Farmers of America as consideration for changes to the combined
company's milk supply arrangements, and the impairment of a plant in
-- A $21.1 million charge ($12.9 million net of taxes) resulting from
the write-off of the company's initial investment in Consolidated
-- $4.4 million ($2.7 million net of taxes) in other non-recurring costs
to write down of the company's investments in Dairy.com and Smilk.
-- A $4.3 million extraordinary loss, net of taxes, for the write-off of
deferred financing costs related to the early retirement of the
company's former credit facilities.
Pro forma results are provided in order to allow investors to make meaningful comparisons of the company's operating performance between periods. A reconciliation table between diluted earnings per share calculated according to GAAP and pro forma diluted earnings per share (as defined above) is attached.
Dairy Group net sales for the fourth quarter totaled $1.7 billion, an increase of 29% over $1.3 billion in the fourth quarter of 2001. Fourth quarter sales growth was due primarily to the addition of the legacy Dean dairies.
Dairy Group pro forma operating income in the fourth quarter improved 67% to $130.4 million, and pro forma operating margins increased 170 basis points to 7.57% of sales, due to synergies from the merger transaction and lower raw milk costs. The average Class I mover in the fourth quarter was $10.42 per hundred weight, as determined on a monthly basis by the USDA, representing a 28% decline versus last year.
Morningstar/White Wave net sales in the fourth quarter totaled $293.3 million, an increase of 35%. The increase was due primarily to the addition of legacy Dean's National Refrigerated Products segment and White Wave.
Pro forma operating income in the fourth quarter for Morningstar/White Wave was $37.9 million, flat in comparison to last year, and operating margins were down 457 basis points to 12.91%, due to incremental marketing spending against the company's branded and value-added growth platforms and the inclusion of White Wave.
Specialty Foods' net sales totaled $170.9 million and operating income was $24.4 million, or 14.28% of sales.
RESULTS FOR TWELVE MONTHS ENDED DECEMBER 31, 2002
The company recorded net sales growth of 51% to $9.0 billion for the twelve months ended December 31, 2002, compared with $6.0 billion during 2001. 2002 net income totaled $175.4 million, compared with $109.8 million in 2001, an increase of 60% over the prior year. Diluted earnings per share for the year ended December 31, 2002 totaled $1.81, compared with $1.78 in 2001.
Pro forma net income for the year (as defined below) totaled $281.1 million, an increase of 82% over $154.2 million last year. Pro forma diluted earnings per share for 2002 totaled $2.78, an increase of 17% compared with $2.38 in 2001.
The company reported 2002 operating income of $662.6 million versus $385.1 million in 2001, an increase of 72%. Pro forma operating income for 2002 totaled $681.7 million, an increase of 60% over pro forma operating income of $425.7 million last year. Pro forma operating income margins for the year were 7.58%, an increase of 46 basis points versus the pro forma results of the prior year.
FULL YEAR RECONCILIATION OF PRO FORMA RESULTS WITH GAAP RESULTS
For the year ended December 31, 2002 the pro forma results reported above differ from the company's 2002 results reported under GAAP by excluding the following items: restructuring charges of $19.1 million ($11.8 million net of tax) related to plant closings; a one-time total charge of $85.0 million, net of income tax, related to the write-down of certain trademarks and goodwill due to the implementation of Financial Accounting Standard (FAS) 142, "Goodwill and Other Intangible Assets"; a $10 million ($6.3 million net of taxes) loss related to the company's investment in Consolidated Container; an income tax benefit of $6.6 million related to a favorable tax settlement with the IRS; an $8.2 million net after tax loss on the sale of Puerto Rico; and $0.9 million net of taxes in plant closing charges in Puerto Rico.
For 2001, the pro forma results reported above differ from the company's 2001 results reported under GAAP by excluding the following: $9.6 million ($4.8 million net of taxes and minority interest) in plant closing charges; $53.1 million ($28.6 million net of taxes and minority interest) in goodwill and other intangible amortization; $17.3 million ($11.4 million net of taxes and minority interest) in other operating income related to the divestiture of 11 plants, a payment to Dairy Farmers of America as consideration for changes to the company's milk supply agreement, and an impairment charge related to a Dairy Group plant in Michigan; $4.4 million ($2.7 million net of taxes) for the write-down of investments; and $22.8 million ($13.9 million net of taxes) for write-down and restructuring costs associated with Consolidated Container. In addition, pro forma 2001 results reported above differ from the results reported under GAAP by excluding $1.4 million for the cumulative effect of the accounting change for the adoption of FAS 133 in the first quarter of 2001 and a $4.3 million extraordinary loss, net of taxes, for the write-off of deferred finance costs.
Pro forma results are provided in order to allow investors to make meaningful comparisons of the company's operating performance between periods. A reconciliation table between earnings per share calculated according to GAAP and pro forma earnings per share (as defined above) is attached.
CONFERENCE CALL WEBCAST
A webcast to discuss the company's financial results and outlook will be held at 9:00 a.m. EST today and may be heard live by visiting the "Webcasts" section of the company site at www.deanfoods.com .
ABOUT DEAN FOODS
Dean Foods Company is one of the nation's leading food and beverage companies. The company produces a full line of company-branded and private label dairy and dairy-related products such as milk and milk-based beverages, ice cream, coffee creamers, half and half, whipping cream, whipped toppings, sour cream, cottage cheese, yogurt, dips, dressings and soy milk. The company is also a leading supplier of pickles and other specialty food products, juice, juice drinks and water. The company operates over 120 plants in 38 U.S. states and Spain, and employs approximately 30,000 people.
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, the company's projected 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 during 2003, including targeted sales, operating margins, earnings per share and cash flow depends on a variety of economic, competitive and governmental factors, 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 primarily 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.