Dean Foods Company Reports Second Quarter Results

DALLAS, Aug. 7 /PRNewswire-FirstCall/ -- Dean Foods Company today announced that the Company earned $0.21 per diluted share from continuing operations for the quarter ended June 30, 2007, compared with $0.53 per diluted share from continuing operations in the second quarter of 2006. Net income from continuing operations for the second quarter totaled $28.2 million, compared with $74.8 million in the prior year's second quarter.

On an adjusted basis (as defined below), diluted earnings per share were $0.30, compared to $0.55 in the prior year's second quarter. Adjusted net income for the second quarter was $41.6 million, compared to adjusted net income of $76.6 million in the second quarter of 2006. The decrease in adjusted net income and earnings per share is primarily related to the increase in interest expense as a result of the recapitalization connected to the special cash dividend of $15 per share that was paid in early April and the decline in operating results in the quarter. Interest expense in the quarter totaled $88.9 million, compared to $48.8 million in the second quarter of 2006.

Summary of Dean Foods Second Quarter 2007 Segment and Operating Results % Growth Rate Dairy Group: Fluid Milk Volume 0.5% Operating Income -8.8% WhiteWave Foods: Net Sales 7.9% Operating Income 8.3% Consolidated Adjusted Operating Income -9.6%

"Our results are reflective of the unusually volatile and difficult environment we are operating in this year," said Gregg Engles, Chairman and Chief Executive Officer. "Raw milk prices have increased steadily through the first half of the year, and have recently hit all-time highs. At the same time, the ramp up of promotional pricing and additional investments behind the Horizon Organic brand during this time of significant raw organic milk oversupply has dampened WhiteWave Foods profit growth."

Net sales for the second quarter totaled $2.8 billion, an increase of 15% from net sales for the second quarter of 2006, due to the passthrough of higher commodity dairy costs and increased sales at WhiteWave Foods.

Consolidated operating income in the second quarter totaled $153.6 million, a decrease of 10.0% from $171.3 million in the second quarter of 2006. Operating margin for the second quarter was 5.4%, as compared to 6.9% in the second quarter of the prior year. Adjusted second quarter consolidated operating income totaled $157.4 million, a decrease of 9.6% from $174.2 million in the second quarter of 2006. The adjusted second quarter operating margin was 5.5%, down 149 basis points from the second quarter of the prior year.

DAIRY GROUP

Dairy Group net sales for the second quarter were $2.5 billion, a 16% increase from $2.2 billion in net sales for the second quarter of 2006. The sales increase was due primarily to the pass-through of higher overall dairy commodity costs to customers and increased volumes. The second quarter average Class I mover, which is an indicator of the Company's raw milk costs, averaged $16.25 per hundred-weight, a 48% increase from the same period in 2006. Class II butterfat prices averaged $1.57 per pound in the second quarter, 26% higher than the second quarter of 2006.

Dairy Group segment operating income in the second quarter was $165.3 million, compared to $181.2 million in the second quarter of 2006. Dairy Group operating margin decreased 177 basis points to 6.6% of sales, primarily due to increased costs related to higher dairy commodities and the passthrough of the higher raw dairy costs.

WHITEWAVE FOODS

WhiteWave Foods segment reported second quarter net sales of $325.6 million, compared to second quarter 2006 net sales of $301.8 million. Sales growth was strong across the branded portfolio with net sales of Horizon Organic milk, International Delight and Land O'Lakes brands increasing in the low double digits, while sales of Silk increased in the high single digits over the second quarter of 2006.

Segment operating income in the second quarter for WhiteWave Foods was $31.7 million, compared to $29.3 million in the second quarter of 2006. Segment operating margins were essentially flat with year ago results at 9.7% of sales reflecting increased volume leverage and efficiencies offset by lower contribution from Horizon Organic due to increased brand spending and lower overall gross profit margins.

CORPORATE EXPENSE

Corporate and other expenses totaled $39.5 million, compared to $36.2 million in the second quarter of 2006. The increase was largely driven by increased investments in support of the Company's strategic initiatives.

RECAPITALIZATION

During the quarter, the Company completed a recapitalization of its balance sheet through the placement of a new $4.8 billion senior credit facility and the return of $1.94 billion to shareholders through a $15 per share special cash dividend.

The new facility consists of a combination of a $1.5 billion 5-year senior secured revolving credit facility, a $1.5 billion 5-year senior secured term loan A, and a $1.8 billion 7-year senior secured term loan B. The Company also replaced its receivables facility with a new three year, $600 million receivables facility.

In connection with the recapitalization, the Company entered into approximately $3 billion of fixed rate interest hedges to take advantage of the inversion in the forward yield curve and mitigate interest rate risk for a significant portion of its debt going forward.

Total debt, net of cash on hand, at June 30, 2007, was approximately $5.3 billion.

CASH FLOW

Cash flow from continuing operations through the first six months of 2007 totaled $170.5 million, compared to $264.6 million in the first half of 2006. The decline in cash flow from operations is due in part to the increase in working capital needs and higher year over year interest expense.

Capital expenditures through the first two quarters of 2007 totaled $103.1 million, compared to $113.6 million in capital expenditures in the first half of 2006.

OUTLOOK FOR THE REMAINDER OF 2007

"Looking ahead to the third quarter, we expect rapidly rising and record high raw milk prices to pressure results," said Jack Callahan, Chief Financial Officer. "The pass-through mechanisms are working reasonably well, but we are cautious about how consumers will react to these higher retail prices. We expect Dairy Group third quarter operating income to be below year ago levels, consistent with our experience in the second quarter. At WhiteWave, we expect the full quarter impact of the increased investment behind the Horizon brand to overshadow the solid performance across the balance of the portfolio, which will likely result in WhiteWave operating income below year ago results in the third quarter.

Given this outlook, we expect the third quarter to be even more difficult and volatile than the second. Adjusted earnings could range between $0.24 and $0.28 per share for the third quarter. Assuming decreases in the Class I mover in the fourth quarter and some moderation in investment required for Horizon Organic, we may be able to hit the low end of our current 2007 guidance of $1.52 to $1.58."

RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2007

Net sales for the six months ended June 30, 2007 totaled $5.5 billion, an increase of 10% from net sales for the same period of last year, due to the passthrough of higher dairy commodity costs and increased sales at WhiteWave Foods. Net income from continuing operations for the first half of the year totaled $91.4 million, compared with $129.5 million in the first six months of 2006. Diluted earnings per share from continuing operations for the six months ended June 30, 2007 totaled $0.67, compared to $0.92 for the first six months of 2006.

On an adjusted basis (as defined below), net income from continuing operations for the six months totaled $108.7 million, compared to $134.0 million in the same period of 2006. Adjusted diluted earnings per share from continuing operations for the first six months of 2007 totaled $0.80 compared to $0.95 in the first six months of 2006.

COMPARISON OF ADJUSTED INFORMATION TO GAAP INFORMATION

The adjusted financial results contained in this press release are from continuing operations and are adjusted to eliminate the net expense or net gain related to the items identified below. This information is provided in order to allow investors to make meaningful comparisons of the Company's operating performance between periods and to view the Company's business from the same perspective as company management. Because the Company cannot predict the timing and amount of charges associated with non-recurring items or facility closings and reorganizations, management does not consider these costs when evaluating the Company's performance, when making decisions regarding the allocation of resources, in determining incentive compensation for management, or in determining earnings estimates. These costs are not presented in any of the Company's operating segments. This non-GAAP financial information is provided as additional information for investors and is not in accordance with or an alternative to GAAP. These non-GAAP numbers may be different than similar measures used by other companies. A full reconciliation table between earnings per share for the three and six month periods ended June 30, 2007 calculated according to GAAP and on an adjusted basis is attached.

For the quarter ended June 30, 2007, the adjusted results reported above differ from the Company's results under GAAP by excluding the following facility closing, reorganization, and other nonrecurring charges:

-- a $2.5 million charge ($1.5 million net of income tax) related to the realignment of our Dairy Group's finance and accounting organization, as well as previously announced facility closings; -- a $1.3 million charge ($0.8 million net of income tax) resulting from the sale of our tofu business; -- a $13.5 million write-off ($8.3 million net of income tax) of financing costs resulting from the completion of our new senior credit facility; and -- a $4.5 million charge ($2.8 million net of income tax) related to non-recurring special dividend costs.

For the quarter ended June 30, 2006, the adjusted results reported above differ from the Company's results under GAAP by excluding the following facility closing and reorganization charges:

-- a $2.4 million charge ($1.4 million net of income tax) related to the Dairy Group's facility closings and reorganizations, including the closing of our Union, NJ plant; and -- a $0.6 million charge ($0.4 million net of income tax) related to reorganization and consolidation activities at WhiteWave Foods.

For the six months ended June 30, 2007, the adjusted results reported above differ from the Company's results under GAAP by excluding the following facility closing, reorganization, and other nonrecurring charges:

-- an $8.3 million charge ($5.1 million net of income tax) related to the realignment of our Dairy Group's finance and accounting organization as well as previously announced facility closings; -- a $1.3 million charge ($0.8 million net of income tax) resulting from the sale of our tofu business; -- a $13.5 million write-off ($8.4 million net of income tax) of financing costs resulting from the completion of our new senior credit facility; and -- a $4.9 million charge ($3.0 million net of income tax) related to non-recurring special dividend costs.

For the six months ended June 30, 2006, the adjusted results reported above differ from the Company's results under GAAP by excluding the following facility closing and reorganization charges:

-- a $5.1 million charge ($3.1 million net of income tax) related to the Dairy Group's facility closings and reorganizations, including the closing of our Union, NJ plant; and -- a $2.3 million charge ($1.4 million net of income tax) related to reorganization and consolidation activities at WhiteWave Foods. CONFERENCE CALL WEBCAST

A webcast to discuss the Company's financial results and outlook will be held at 9:00 a.m. ET today and may be heard live by visiting the "Webcast" section of the Company site at http://www.deanfoods.com/.

ABOUT DEAN FOODS

Dean Foods Company is one of the leading food and beverage companies in the United States. Its Dairy Group division is the largest processor and distributor of milk and other dairy products in the country, with products sold under more than 50 familiar local and regional brands and a wide array of private labels. The Company's WhiteWave Foods subsidiary markets and sells a variety of well-known dairy and dairy-related products, such as Silk(R) soymilk, Horizon Organic(R) milk and other dairy products, International Delight(R) coffee creamers, and Land O'Lakes(R) creamers and other fluid dairy products. WhiteWave Foods' Rachel's Organic(R) brand is the largest organic milk brand and third largest organic yogurt brand in the United Kingdom.

FORWARD-LOOKING STATEMENTS

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, projected sales, operating income, net income and 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, including targeted sales, operating income, net income and earnings per share depends on a variety of economic, competitive and governmental factors, including raw material availability and costs, the demand for the company's products, 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 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.

DEAN FOODS COMPANY (Dollars in thousands, except per share data) GAAP ADJUSTED [A] Three Months Ended Three Months Ended June 30, June 30, 2007 2006 2007 2006 Net sales $2,843,645 $2,477,884 $2,843,645 $2,477,884 Cost of sales 2,155,595 1,794,037 2,155,595 1,794,037 Gross profit 688,050 683,847 688,050 683,847 Operating costs and expenses 530,613 509,608 530,613 509,608 Facility closings, reorganizations and other costs 3,800 2,950 -- -- Operating income 153,637 171,289 157,437 174,239 Interest expense 88,941 48,768 88,941 48,768 Debt refinancing and special dividend costs 18,068 -- -- -- Other (income) expense 23 (86) 23 (86) Income from continuing operations before income taxes 46,605 122,607 68,473 125,557 Income taxes 18,428 47,812 26,848 48,973 Income from continuing operations 28,177 74,795 41,625 76,584 Income (loss) from discontinued operations, net of tax 239 (45,927) -- -- Net income $28,416 $28,868 $41,625 $76,584 Basic earnings per share: Income from continuing operations $0.22 $0.55 $0.32 $0.57 Income (loss) from discontinued operations -- (0.34) -- -- Net income $0.22 $0.21 $0.32 $0.57 Basic average common shares (000's) 130,017 135,037 130,017 135,037 Diluted earnings per share: Income from continuing operations $0.21 $0.53 $0.30 $0.55 Income (loss) from discontinued operations -- (0.32) -- -- Net income $0.21 $0.21 $0.30 $0.55 Diluted average common shares (000's) 138,385 140,434 138,385 140,434

[A] Adjusted results differ from results reported under GAAP by excluding income and expense related to discontinued operations, facility closings, reorganizations, financing costs related to the recapitalization of the balance sheet, and other items. More information about these items is included in the earnings release under the heading "Comparison of Adjusted Information to GAAP Information."

DEAN FOODS COMPANY (Dollars in thousands, except per share data) GAAP ADJUSTED [B] Six Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006 Net sales $5,473,394 $4,986,925 $5,473,394 $4,986,925 Cost of sales 4,098,070 3,651,732 4,098,070 3,651,732 Gross profit 1,375,324 1,335,193 1,375,324 1,335,193 Operating costs and expenses 1,057,959 1,018,455 1,057,959 1,018,455 Facility closings, reorganizations and other costs 9,575 7,352 -- -- Operating income 307,790 309,386 317,365 316,738 Interest expense 141,183 96,304 141,183 96,304 Debt refinancing and special dividend costs 18,446 -- -- -- Other (income) expense (56) 14 (56) 14 Income from continuing operations before income taxes 148,217 213,068 176,238 220,420 Income taxes 56,837 83,579 67,583 86,463 Income from continuing operations 91,380 129,489 108,655 133,957 Income (loss) from discontinued operations, net of tax 856 (47,829) -- -- Net income $92,236 $81,660 $108,655 $133,957 Basic earnings per share: Income from continuing operations $0.70 $0.96 $0.84 $0.99 Income (loss) from discontinued operations 0.01 (0.36) -- -- Net income $0.71 $0.60 $0.84 $0.99 Basic average common shares (000's) 129,457 135,103 129,457 135,103 Diluted earnings per share: Income from continuing operations $0.67 $0.92 $0.80 $0.95 Income (loss) from discontinued operations 0.01 (0.34) -- -- Net income $0.68 $0.58 $0.80 $0.95 Diluted average common shares (000's) 136,562 141,105 136,562 141,105

[B] Adjusted results differ from results reported under GAAP by excluding income and expense related to discontinued operations, facility closings, reorganizations, financing costs related to the recapitalization of the balance sheet, and other items. More information about these items is included in the earnings release under the heading "Comparison of Adjusted Information to GAAP Information."

DEAN FOODS COMPANY Earnings Per Share Summary and Reconciliation Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006 GAAP diluted earnings per share from continuing operations $0.21 $0.53 $0.67 $0.92 Adjustments: Facility closings, reorganizations and other costs 0.01 0.02 0.04 0.03 Debt refinancing and special dividend costs 0.08 - 0.09 - Adjusted diluted earnings per share $0.30 $0.55 $0.80 $0.95 Segment Information (Dollars in thousands) Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006 Net sales Dairy Group $2,518,078 $2,176,058 $4,825,140 $4,383,718 WhiteWave Foods Company 325,567 301,826 648,254 603,207 Total $2,843,645 $2,477,884 $5,473,394 $4,986,925 Segment operating income (loss) Dairy Group $165,255 $181,167 $336,308 $337,799 WhiteWave Foods Company 31,723 29,289 59,498 51,502 Corporate / Other (39,541) (36,217) (78,441) (72,563) Subtotal 157,437 174,239 317,365 316,738 Facility closings, reorganizations and other costs (3,800) (2,950) (9,575) (7,352) Total operating income $153,637 $171,289 $307,790 $309,386 DEAN FOODS COMPANY Condensed Balance Sheets (Dollars in thousands) June 30, December 31, ASSETS 2007 2006 Cash and cash equivalents $37,426 $31,140 Other current assets 1,504,132 1,348,150 Total current assets 1,541,558 1,379,290 Property, plant & equipment 1,778,843 1,786,907 Intangibles & other assets 3,751,572 3,583,996 Assets of discontinued operations -- 19,980 Total Assets $7,071,973 $6,770,173 LIABILITIES AND STOCKHOLDERS' EQUITY Total current liabilities, excluding debt $872,113 $852,898 Total long-term debt, including current portion 5,357,390 3,355,851 Other long-term liabilities 807,733 743,234 Liabilities of discontinued operations -- 8,791 Stockholders' equity: Common stock 1,303 1,284 Additional paid-in capital 24,608 624,475 Retained earnings 28,416 1,229,427 Other comprehensive income (loss) (19,590) (45,787) Total stockholders' equity 34,737 1,809,399 Total Liabilities and Stockholders' Equity $7,071,973 $6,770,173 DEAN FOODS COMPANY Condensed Statements of Cash Flows (Dollars in thousands) Six Months Ended June 30, Operating Activities 2007 2006 Net income $92,236 $81,660 (Income) loss from discontinued operations (856) 47,829 Depreciation and amortization 115,513 111,875 Deferred income taxes 10,212 55,145 Share-based compensation 19,088 20,262 Write-off of deferred financing costs 13,545 -- Changes in current assets and liabilities (87,606) (55,725) Other 8,351 3,526 Net cash provided by continuing operations 170,483 264,572 Net cash used in discontinued operations -- (1,693) Net cash provided by operating activities 170,483 262,879 Investing Activities Additions to property, plant and equipment (103,092) (113,569) Cash outflows for acquisitions (129,636) (10,960) Proceeds from divestitures 12,551 -- Proceeds from sale of fixed assets 3,228 3,404 Net cash used in continuing operations (216,949) (121,125) Net cash used in discontinued operations -- (9,505) Net cash used in investing activities (216,949) (130,630) Financing Activities Proceeds from the issuance of debt 2,003,450 498,020 Repayment of debt (13,266) (524,058) Payment of deferred financing costs (31,281) (6,561) Issuance of common stock, net 26,501 10,052 Payment of dividend (1,942,738) -- Repurchase of common stock -- (135,679) Tax savings on share-based compensation 10,086 24,044 Net cash provided (used) by continuing operations 52,752 (134,182) Net cash provided by discontinued operations -- 7,855 Net cash provided (used) by financing activities 52,752 (126,327) Increase in cash and cash equivalents 6,286 5,922 Beginning cash balance 31,140 24,456 Ending cash balance $37,426 $30,378 Free Cash Flow Summary and Reconciliation (Dollars in thousands) Six Months Ended June 30, 2007 2006 Net cash provided by continuing operations $170,483 $264,572 Additions to property, plant and equipment (103,092) (113,569) Free cash flow provided by operations $67,391 $151,003 Contact: Investors: Barry Sievert Investor Relations (214) 303-3437 (214) 303-3437 Media: Marguerite Copel Corporate Communications (214) 721-1273