Dean Foods Q1 results bolstered by segment growth; debt up $36 million

By Lisa Kerner

Charlotte, N.C., May 9 - Dean Foods Co. reported strong first-quarter results due to stronger-than-forecasted growth across each of its three operating segments and declining interest expense, chairman and chief executive officer Gregg Engles said during the company's earnings call on Wednesday.

The company reported increased consolidated adjusted operating income of $152 million, a 42% increase above year-ago levels, and first-quarter adjusted diluted earnings per share of $0.31, more than double the previous year.

During the quarter, total debt outstanding, net of cash on hand, increased by $36 million to $3.7 billion, chief financial office Shaun Mara said on the call.

Mara attributed the increase mainly to litigation settlement payments and to a small increase in working capital.

The debt plus working capital spending of $45 million resulted in negative free cash flow of $41 million. Mara expects free cash flow to be positive for the remainder of the year.

Dean's funded debt-to-EBITDA ratio fell to 4.41 times from 5.5 times at year's end.

Mara said the company is "comfortable with the cushion" available under its covenants and will continue to focus on leverage reduction. Dean expects the ratio to be at 4.2 times by the end of the second quarter and 4.0 times by the end of the year.

Financial highlights

Net income attributable to Dean totaled $38 million, compared with net income of $25 million in the prior year's first quarter. Adjusted net income for the first quarter was $57 million, a 129% increase from $25 million in the first quarter of 2011.

The company reported net sales for the first quarter totaling $3.2 billion, compared with $3.0 billion of net sales in the first quarter of 2011.

Net cash provided by continuing operations for the quarter ended March 31 totaled $3 million, compared with $37 million in the first quarter of 2011.

Capital expenditures for the first quarter of 2012 totaled $45 million, compared with $40 million in the year-ago period.

Dean Foods is a Dallas-based food and beverage company.

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