Dean Foods Company (NYSE: DF) yesterday announced its second quarter and first half fiscal 2001 results.

Second quarter sales increased 3.4% to a record $1,103.5 million, compared to $1,067.0 million in the second quarter of fiscal 2000. Continued growth of nationally branded products in the National Refrigerated Products Group and acquisitions drove the sales increase. Income from continuing operations was $23.6 million, compared to $27.0 million in the second quarter of fiscal 2000. Diluted earnings per share from continuing operations were $0.66, compared to $0.68 last year. Operating earnings were slightly above last year's second quarter operating earnings, but net interest expense was approximately $6.5 million higher as a result of higher debt levels for acquisitions and share repurchases.

Year-to-date sales were $2,157.8 million, a 4.3% increase over fiscal 2000. Income from continuing operations for the first six months was $50.0 million compared to $54.8 million last year. Diluted earnings per share from continuing operations were $1.40 versus $1.38 in fiscal 2000.

The Dairy Group reported record second quarter sales and operating earnings. Sales increased to $811.9 million in the second quarter compared to $808.6 million last year, due to acquisitions and volume growth with key retailers as they continue to expand nationally. Operating earnings increased 40.8% to $43.8 million from $31.1 million in the prior year. Increased sales and improved margins in branded dairy products, more stable raw milk and butterfat costs, and ongoing supply chain cost reduction activities generated the improvement in second quarter earnings.

The Company continued to generate substantial revenue growth in its National Refrigerated Products Group. Sales increased 38.4% in the second quarter and 32.4% year-to-date in this business segment as a result of growth in intermediate and extended shelf life products and new products. New product introductions, including Dips-for-One and Marie's pourable salad dressings, continued to progress well in the second quarter. The Company supported these introductions by investing approximately $6 million in the second quarter and a total of $12 million in the first half of the year in marketing and promotional programs. As previously disclosed, however, costs associated with the significant ramp-up of complex, state-of-the-art technology to produce intermediate and extended shelf life products impacted second quarter earnings by approximately $4 million. The Company is focused on improving the production processes and continued progress is expected throughout the second half of the fiscal year, although inefficiencies are expected to impact the third and fourth quarters.

Second quarter results in the Specialty Foods Group were impacted by a softening in sales for powdered products, primarily in the international export business, and for branded pickles. In this business segment, the Company incurred higher packaging, distribution, and energy costs during the quarter. Pricing has been adjusted to offset these increased costs in the second half of the year. As a result of these factors, the Specialty Food Group's second quarter earnings were reduced by approximately $4 million compared to the prior year.

Dean Food's second quarter results also reflected the following:

  • The expansion of Mayfield brand ice cream into new Southeastern markets continued to exceed expectations.
  • The Land O'Lakes fluid milk business, acquired in July, exceeded earnings expectations due to strong operating performance.
  • Dips-for-One, the first individually packaged, single serve refrigerated dip, achieved sixty percent penetration of the grocery channel in the quarter.
  • Consumer response to Marie's pourable salad dressings, introduced in the Northeast earlier this year, has been very favorable, and the products will be expanded to a number of additional markets in the third quarter.
  • The Company's private label pickle business generated volume growth of approximately 4% in the second quarter. Dean is the largest private label pickle producer in the U.S.
  • The Company recorded an after-tax $6.2 million gain from discontinued operations, or $.18 per diluted share, on the sale of a note associated with the fiscal 1999 divestiture of the Company's vegetables segment.

Howard Dean, Chairman and Chief Executive Officer, commented, ``While we are disappointed with second quarter results, we are comfortable with an earnings per share estimate in the range of $3.05 for fiscal 2001. We are pleased with the solid performance of the Dairy Group and the strong sales growth and successful new product introductions in the National Refrigerated Products Group. We are focused on resolving the shorter-term technology issues affecting intermediate and extended shelf life products as quickly as possible. While these manufacturing inefficiencies will dampen third quarter results, we expect earnings will improve markedly in the fourth quarter.''

Dean Foods is one of the nation's leading dairy processors and distributors producing a full line of branded and private label products, including fluid milk, ice cream and extended shelf life products, which are sold under the Dean's and other strong regional brand names. Dean Foods is the industry leader in other food products including pickles, powdered non-dairy coffee creamers, aseptically packaged foodservice products, and refrigerated dips and salad dressings. More information about Dean Foods can be found on its Web site at http://www.deanfoods.com .

Certain statements in this press release are forward-looking as defined by the Private Securities Litigation Reform Act of 1995. These statements involve certain risks and uncertainties that may cause actual results to differ materially from expectations as of the date of this press release. These risks include, but are not limited to, the ability to integrate acquisitions, adverse weather conditions resulting in poor harvest conditions, raw milk and resin costs, interest rate fluctuations, competitive pricing pressures, the effectiveness of marketing and cost-management programs and shifts in the market demand.

                              DEAN FOODS COMPANY
                 CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
                            FOR THE PERIODS ENDED
                   NOVEMBER 26, 2000 AND NOVEMBER 28, 1999
                                 (Unaudited)
                 (In millions, except for per share amounts)

                          Second Quarter Ended         Six Months Ended
                        November 26,  November 28, November 26,  November 28,
                            2000          1999         2000          1999

    Net sales             $1,103.5      $1,067.0     $2,157.8      $2,068.4

    Costs of products
     sold                    847.0         828.0      1,648.0       1,590.0

    Delivery, selling and
     administrative
     expenses                199.8         182.6        394.3         365.2

    Operating earnings        56.7          56.4        115.5         113.2

    Interest expense, net     18.6          12.1         34.7          23.3

    Income from continuing
     operations before
     income taxes             38.1          44.3         80.8          89.9

    Provision for income
     taxes                    14.5          17.3         30.8          35.1

    Income from continuing
     operations               23.6          27.0         50.0          54.8

    Gain from sale of
     discontinued operations,
     net of taxes *            6.2             -          6.2             -

    Net income               $29.8         $27.0        $56.2         $54.8

    Basic income per share:
     Income from continuing
      operations              $.66          $.69        $1.40         $1.40
     Income from discontinued
      operations *             .18             -          .18             -
     Net income               $.84          $.69        $1.58         $1.40

    Diluted income (loss)
     per share:
      Income before
       extraordinary item     $.66          $.68        $1.40         $1.38
      Income from
       discontinued
       operations *            .18             -          .18             -
      Net income              $.84          $.68        $1.58         $1.38

    Weighted average common
     shares:
      Basic                   35.5          39.1         35.5          39.2
      Diluted                 35.7          39.8         35.7          39.8

    * During the second quarter, the Company recorded a pre-tax gain of $10.0
      ($6.2 after-tax, or $.18 per diluted share)on the sale of a note
      associated with the divestiture of the Company's vegetables segment in
      fiscal 1999.

                              DEAN FOODS COMPANY
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (Unaudited)
                                (In millions)

                                                   November 26,  November 28,
                                                        2000          1999
                                ASSETS
    Current Asset:
     Cash and temporary cash investments               $46.3          $25.0
     Accounts and notes receivable, net of
      allowance for doubtful accounts                  365.0          334.5
     Inventories                                       239.5          217.6
     Other current assets                               73.4           86.4

       Total current assets                            724.2          663.5

    Property, Plant and Equipment, net                 913.2          779.3

    Other Assets                                       714.4          598.3

       Total Assets                                 $2,351.8       $2,041.1

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities:
     Current installments of long-term obligations      $5.1           $4.2
     Accounts payable and accrued expenses             423.8          422.3
     Dividends payable                                   8.1            8.7
     Federal and state income taxes                     36.6           39.3

       Total current liabilities                       473.6          474.5

    Long-Term Obligations                            1,045.5          708.4

    Deferred Liabilities                               133.2          125.2

    Shareholders' Equity                               699.5          733.0

       Total Liabilities and Shareholders' Equity   $2,351.8       $2,041.1

                              DEAN FOODS COMPANY
                         BUSINESS SEGMENT INFORMATION
                            FOR THE PERIODS ENDED
                   NOVEMBER 26, 2000 AND NOVEMBER 28, 1999
                                 (Unaudited)
                                (In Millions)

    For the Three Months Ended November 26, 2000 and November 28, 1999

National

Specialty Refrigerated

Dairy Foods Products Corporate Consolidated

Fiscal 2001

    Net sales      $811.9       $189.3       $102.3          $ -    $1,103.5

    Operating
     earnings       $43.8        $20.4         $0.1       $(7.6)       $56.7


    Fiscal 2000
    Net sales      $808.6       $184.5        $73.9          $ -    $1,067.0
    Operating
     earnings       $31.1        $25.0        $10.0       $(9.7)       $56.4


    For the Six Months Ended November 26, 2000 and November 28, 1999

                                            National
                              Specialty   Refrigerated
                   Dairy        Foods       Products   Corporate
Consolidated
    Fiscal 2001
    Net sales    $1,600.7       $370.5       $186.6          $ -    $2,157.8
    Operating
     earnings       $85.5        $43.4         $4.4      $(17.8)      $115.5


    Fiscal 2000
    Net sales    $1,572.4       $355.1       $140.9          $ -    $2,068.4
    Operating
     earnings       $71.0        $45.2        $18.3      $(21.3)      $113.2