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Net Income Drops at Dean Foods Co. in Third Quarter
"DALLAS -- Adjusted net income of $74.3 million for the third quarter at Dean Foods Co. represents a decline of 11% over the same quarter last year, officials reported earlier today.Dean Foods is the parent of Dean Dairy, Sharpsville, Pa.The results include a write-off of $32.6 million of deferred financing costs in conjunction with the refinancing of the company's bank facility in August, according to Gregg Engles, chairman and chief executive officer."As we indicated in September, our third quarter earnings were impacted by significant cost inflation and volatility as well as intense competition at the retail grocery level," Engles commented. "Our Specialty Foods Group continues to face significant cost pressures and competitive challenges. Returning this business to its historical profitability levels continues to be one of our top priorities. Dairy Group operating margins continue to be negatively impacted by inflationary and competitive pressures. Despite margin pressure in our dairy business, we continue to grow our milk market share, with volumes up 2.6%, our largest increase in five years. Our Branded Products Group delivered solid volume, sales and profit growth, as the segment generated operating margins of close to 11% during the third quarter." Net sales for the third quarter totaled $2.8 billion, an increase of 20% over the third quarter of 2003, due primarily to increased selling prices resulting from the pass through of increases in raw milk costs and strong volume growth in the Branded Products Group. The Class I mover, which is an indicator of the price the company pays for raw milk, increased 35% in the third quarter compared with last year's third quarter, and Class II butterfat prices increased 57% in the same period. The acquisitions of Horizon Organic and Ross Swiss Dairies in 2004 and Kohler Mix Specialties in October 2003 also contributed to sales growth, officials reported.The company's net sales increased 20% to $8 billion for the nine months ended Sept. 30 compared with $6.7 billion during the first nine months of 2003. The increase was due primarily to higher raw material costs that were passed on to customers in the form of higher selling prices, strong volume growth in the Branded Products Group and the acquisitions of Horizon Organic, Ross Swiss Dairies, Melody Farms and Kohler Mix Specialties. Net income totaled $186.5 million, compared with $269.2 million in 2003, officials said.Fourth quarter adjusted earnings per share is expected to be from 63 cents to 66 cents. "As we move forward into 2005, we anticipate lower volatility in dairy commodity prices in the United States and Spain, better results from our Specialty Foods Group segment as a result of exiting the nutritional drinks business, and continued strong sales and operating income growth from our Branded Products segment," Engles said. "Overall, although there are still significant inflationary headwinds for our businesses, I believe that we are well positioned to return to our historical growth rate in 2005 and anticipate adjusted earnings per share in the range of $2.20 to $2.30."Visit Dean Foods Co.: www.deanfoods.com"