DALLAS — Lower raw dairy input costs crimped third-quarter earnings at Dean Foods Co. Net income for the period ended Sept. 30 was $70,793,000, equal to 53c per share on the common stock, down 29% from $99,384,000, or 67c per share in the same period a year ago.
Net revenue for the quarter fell 2% to $2,517,792,000, compared with revenue of $2,569,405,000 in the third quarter of 2005.
During the quarter, Dean Foods said it identified stock option errors relating to certain grants in 1997 and 2000. As a result, the company posted a related pre-tax charge of $500,000 for the third quarter.
Operating income in the Dairy Group segment totaled $172,653,000, up 10% from $156,498,000 in the third quarter a year ago. Net revenue was $2,204,143,000, down 3% from the prior year’s third quarter. The sales decrease was due to the pass through of lower dairy input costs that were partially offset by a 1.3% increase in fluid milk volumes.
The third quarter Class I mover, which is an indicator of the company’s raw milk costs, averaged $11.05 per cwt, a 21% decrease from the same period in 2005. Class II butterfat prices averaged $1.32 per lb in the third quarter, 28% lower than the third quarter of 2005.
In the WhiteWave Foods division, operating income was $36,484,000, up narrowly from $36,188,000 in the same quarter a year ago. Third-quarter net sales in the segment were $313,649,000, a 5% increase compared with third quarter 2005 net sales of $299,095,000. The increase was driven by strong sales growth in the core branded portfolio, partly offset by the stock-keeping unit reduction activities undertaken late in 2005 and slower growth in non-core products. Net sales of Horizon Organic milk increased in the high teens in the quarter as the category continues to expand, Dean Foods said.
"I am very pleased with the operating profit and earnings per share growth in the third quarter," said Gregg Engles, chairman and chief executive officer. "Our portfolio of businesses continues to perform well, with especially robust results from the Dairy Group this quarter. WhiteWave Foods posted solid sales growth, while making considerable progress against its supply chain and information technology initiatives. As we look forward to 2007, we are confident that we are well positioned for sustained double-digit e.p.s. growth."
For the nine months ended Sept. 30, Dean Foods posted net income of $152,453,000, equal to $1.13 per share on the common stock, down from $242,479,000, or $1.62 per share, in the same period a year ago. Net sales totaled $7,504,717,000, down narrowly from $7,559,106,000.
The company said it expects to finish the year with e.p.s. growth of 15% to 16%, putting its full-year guidance at $2.10 to $2.12 per share.