Dairy volume drives Dean Foods' fiscal 2005 net income growth

by Keith Nunes
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DALLAS – Dean Foods Co. posted an adjusted net income, which does not include previously reported restructuring charges, for fiscal 2005 of $298,381,000, which compared with $271,494,000 for the previous fiscal year. Earnings per share from continuing operations for the year ended Dec. 31, 2005, totaled $2.03, compared with $1.86 in 2004. Net sales for the year were $10,505,560,000, up narrowly from $10,036,277,000 for fiscal 2004.

The fiscal 2005 sales growth was due to strong volume growth in the company’s Dairy Group, which was somewhat offset by the pass through of lower overall dairy commodity costs, and continued strong sales trends at Dean Foods’ WhiteWave Foods division.

For the fourth quarter of fiscal 2005, adjusted net income was $78,037,000, or 57c per share, which compared with $84,821,000, or 57c per share. Net sales for the quarter were $2,694,644,000 for fiscal 2005 compared to $2,589,202,000 for fiscal 2004.

"In light of the challenges caused by two major hurricanes and the resulting dislocation of energy and packaging costs, the Dairy Group and WhiteWave businesses both turned in solid performances in the fourth quarter and we are entering 2006 with positive momentum," said Gregg Engles, chairman and chief executive officer. "During the quarter, our Dairy Group grew fluid milk volumes by 1.4%. WhiteWave Foods posted strong sales growth of 10% and achieved significant milestones toward the consolidation and integration of its businesses."

Dairy Group net sales for the fourth quarter rose 3% to $2.3 billion, from $2.2 billion in the fourth quarter of 2004. The fourth-quarter average Class I mover, which is an indicator of the company’s raw milk costs, averaged $14.13 per cwt, a 3% decrease from the same period in 2004. Class II butterfat prices averaged $1.65 per lb in the fourth quarter, 18% lower than the fourth quarter of 2004.

WhiteWave Foods reported fourth quarter net sales of $317 million, a 10% increase compared with fourth quarter 2004 net sales of $287 million. The increase was driven by strong sales growth in the branded portfolio, particularly in the company’s Silk, Horizon Organic, and International Delight brands.

"Consistent with our previous guidance for 2006, we are expecting consolidated net sales of approximately $10.5 billion," Mr. Engles said. "Because the dilution from accelerated vesting of restricted stock offsets the accretion from our fourth-quarter stock buyback, we are reiterating our 2006 earnings guidance of $2.20 to $2.25 per share before stock option expense."

The company expects to report adjusted earnings per share between 39c and 41c in the first quarter of 2006, or 5% to 11% over the 37c reported in the first quarter of 2005 on a comparable basis. The company's earnings guidance excludes the impact of any facility closing and reorganization costs and non-recurring or one-time gains or losses that may occur in 2006.

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