Dean Foods (DFODQ) 8-K Dean Foods Company Announces Record First Quarter Results

EXHIBIT 99.1

NEWS RELEASE
Contact:	Cory Olson
	Senior Vice President and Treasurer
	(214) 303-3645
	P.I. Aquino
	Assistant Treasurer
	(214) 303-3437

DEAN FOODS COMPANY ANNOUNCES RECORD FIRST QUARTER RESULTS

Pro Forma Diluted Earnings Per Share Up 14% to $0.64 Per Share

Operating Strength of Core Businesses Fuels Continued Strategic Brand Investment,
Resulting in 32% Volume Gains in Strategic Brand Portfolio

Company Reaffirms 2003 Guidance

     DALLAS, May 8, 2003 — Dean Foods Company (NYSE: DF) today announced its financial results for the quarter ended March 31, 2003. Net income for the first quarter was $63.2 million, compared with a loss of $29.6 million in the first quarter of 2002. Diluted earnings per share were $0.65, compared with a loss of $0.23 per share in the first quarter of 2002. First quarter net sales totaled $2.1 billion, a decline of 4% over the first quarter of 2002. The decline was due primarily to lower raw material costs that are passed on to customers in the form of lower selling prices.

     On a pro forma basis (as defined below), diluted earnings per share for the first quarter totaled $0.64, an increase of 14% compared with pro forma earnings of $0.56 per share in last year’s first quarter. Pro forma net income for the first quarter grew 12% to $62.2 million compared with pro forma net income of $55.4 million in the first quarter of 2002.

     “We again saw strong performance across all of our business units,” said Gregg Engles, chairman and chief executive officer. “Our branded product efforts continued to bear fruit, as Morningstar/White Wave showed exceptional 32% volume gains in our strategic brand portfolio. Our growth and investment behind those brands were driven by strong operating profits and margins in our Dairy Group, Specialty Foods and International operations.”

     The company reported first quarter operating income of $157.0 million versus $145.8 million in the first quarter of 2002. Pro forma operating income totaled $155.3 million, an increase of 6% over pro forma operating income of $147.0 million in the first quarter of 2002. Pro forma first quarter 2003 operating income margins were 7.24%, an increase of 63 basis points versus the pro forma results from the first quarter of last year. Operating income margin improvement was due primarily to improvement in Dairy Group and Specialty margins, offset by increased investment behind the strategic brand portfolio.

     Long-term debt at March 31, 2003 was approximately $2.8 billion, including $185.2 million due within one year that is reported as part of current liabilities. At the end of the quarter, approximately $715 million of the company’s $2.7 billion bank facility was available for future borrowings.

TIPES REDEMPTION, SHARE REPURCHASE AND STOCK SPLIT

     On April 17, Dean Capital Trust, a wholly-owned subsidiary of Dean Foods, successfully converted approximately 99% of a $100 million tranche of its 5 1/2 % Trust Issued Preferred Equity Securities (TIPES) into common stock. Shortly thereafter, Dean Foods announced the redemption of another $200 million tranche of TIPES to be completed on May 22, 2003 at a redemption price of $51.0315 per security. The company anticipates funding any cash redemptions of TIPES using cash flow from operations and borrowings under the company’s senior credit facility. Following the completion of the company’s second partial redemption, approximately $300 million of TIPES will remain outstanding.

     As previously announced, during the first quarter, the company announced that its Board of Directors approved a total increase of $300 million to the company’s share repurchase program, allowing the company to purchase shares of its common stock in open market or privately negotiated transactions. Pursuant to the share repurchase authorization, the company repurchased 3.24 million shares of common stock during the quarter at an average price of $39.72 per share, for an aggregate purchase price of $129 million. Approximately $172 million remains available for spending under the share repurchase program.

     In a separate press release today, the company announced a three-for-two split of its common stock. The stock split will be payable June 9, 2003 to stockholders of record as of May 23, 2003.

OUTLOOK

     “Given the strength of our underlying businesses, we are excited about our future as a leading food and beverage company,” Engles said. “We are confident about the balance of the year, and we are re-affirming our prior earnings per share goal for 2003.”

     The company also noted that it issued a separate press release today announcing organizational changes designed to enhance its branded foods strategy and enable the company to realize additional manufacturing efficiencies.

     “We continue to sharpen our focus, lower our cost structure and capitalize on our competitive advantages,” continued Engles. “We remain committed to driving increased shareholder value, and I am confident that these changes will enable us to become a stronger organization, capable of capturing the tremendous opportunities ahead.”

FIRST QUARTER RECONCILIATION OF PRO FORMA RESULTS WITH GAAP RESULTS

     For the first quarter of 2003, the pro forma results reported above differ from the company’s results under Generally Accepted Accounting Principles (GAAP) by excluding a $1.7 million gain related to the disposition of a Dairy Group plant in Michigan.

     For the first quarter of 2002, the pro forma results reported above differ from the company’s results under GAAP by excluding the following items:

• $1.2 million in restructuring charges related to a Dairy Group plant in Michigan,

• $0.7 million in income related to discontinued operations in Puerto Rico, and

• A one-time charge of $85.0 million, net of taxes, for the cumulative effect of an accounting change related to the write-down of certain trademarks and goodwill due to the implementation of FAS 142, “Goodwill and Other Intangible Assets.”

     Pro forma results are provided in order to allow investors to make meaningful comparisons of the company’s operating performance between periods. A reconciliation table between diluted earnings per share calculated according to GAAP and pro forma diluted earnings per share (as defined above) is attached.

SEGMENT RESULTS

     Dairy Group net sales for the first quarter totaled $1.7 billion, a decline of 5% over $1.8 billion in the first quarter of 2002. The first quarter sales decline was due primarily to lower raw material costs that are passed on to customers in the form of lower selling prices.

     Dairy Group pro forma operating income in the first quarter improved 7% to $136.7 million, and pro forma operating margins increased 95 basis points to 8.12% of sales, due to operating efficiencies and lower raw milk costs. The first quarter average Class I mover, which is an indicator of the company’s Class I raw milk prices, was $10.20 per hundred weight in the first quarter of 2003, a 14% decline versus last year.

     Morningstar/White Wave net sales in the first quarter totaled $239.2 million, virtually flat to last year, as the inclusion of White Wave results in 2003 offset the previously-announced termination of the Nestle and Lactaid co-packing business.

     Pro forma operating income in the first quarter for Morningstar/White Wave was $12.0 million, and pro forma operating margins were down 465 basis points to 5.04%, in line with the company’s previously-announced expectations given heavy spending against its strategic brands. Over half of the margin decline in the segment is attributable to increased year-over-year marketing spending at Morningstar, with the balance attributable to the inclusion of White Wave in the segment following its acquisition in May 2002.

     Specialty Foods’ net sales totaled $162.9 million, an increase of 1% over the prior year first quarter, and operating income was $23.8 million, an increase of 15%. First quarter operating income margin increased 173 basis points to 14.62%.

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 “Webcasts” section of the company site at www.deanfoods.com.

ABOUT DEAN FOODS

     Dean Foods Company is one of the nation’s leading food and beverage companies. The company produces a full line of company-branded and private label dairy and dairy-related products such as milk and milk-based beverages, ice cream, coffee creamers, half and half, whipping cream, whipped toppings, sour cream, cottage cheese, yogurt, dips, dressings and soy milk. The company is also a leading manufacturer of pickles and other specialty food products, juice, juice drinks and water. The company operates over 120 plants in 36 U.S. states and Spain, and employs approximately 28,000 people.

     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, the company’s projected 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 during 2003, including targeted sales, operating margins, earnings per share and cash flow depends on a variety of economic, competitive and governmental factors, 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 primarily 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.

(Tables to follow)
# # #

DEAN FOODS COMPANY
(Dollars in thousands, except per share data)

			GAAP						PRO FORMA [A]
			Three Months Ended						Three Months Ended
			March 31,						March 31,
			2003			2002			2003			2002
			(unaudited)						(unaudited)
Net sales			$	2,144,878		$	2,226,220		$	2,144,878		$	2,226,220
Cost of sales				1,573,645			1,681,388			1,573,645			1,681,388
	Gross profit			571,233			544,832			571,233			544,832
Operating costs and expenses				415,941			397,787			415,941			397,787
Plant closing (gain) loss				(1,690	)		1,234
	Operating income			156,982			145,811			155,292			147,045
Interest expense & financing charges on preferred securities				55,266			58,915			55,266			58,915
Earnings from unconsolidated affiliates				(196	)		(403	)		(196	)		(403	)
Other income				(467	)		(280	)		(467	)		(280	)
	Income from continuing operations before income taxes			102,379			87,579			100,689			88,813
Income taxes				39,170			32,916			38,512			33,391
	Income from continuing operations			63,209			54,663			62,177			55,422
Income from discontinued operations							696
		Net income before cumulative effect of accounting change		63,209			55,359			62,177			55,422
Cumulative effect of accounting change							(84,983	)
		Net income	$	63,209		$	(29,624	)	$	62,177		$	55,422
Basic earnings per share:
		Income from continuing operations	$	0.73		$	0.62
		Income from discontinued operations					0.01
		Cumulative effect of accounting change					(0.96	)
		Net income	$	0.73		$	(0.33	)	$	0.72		$	0.62
		Basic average common shares (000’s)		86,859			88,876			86,859			88,876
Diluted earnings per share:
		Income from continuing operations	$	0.65		$	0.55
		Income from discontinued operations					0.01
		Cumulative effect of accounting change					(0.79	)
		Net income	$	0.65		$	(0.23	)	$	0.64		$	0.56
		Diluted average common shares (000’s)		106,201			107,903			106,201			107,903

[A] Pro forma results differ from our results reported under GAAP by excluding the following items in order to report both periods on a comparable basis:

In the first quarter of 2003 pro forma results exclude a gain on the disposition of a closed plant. In the first quarter of 2002 pro forma results exclude plant closing costs, the results of discontinued operations, and the cumulative effect of accounting change related to the write-down of certain trademarks and goodwill due to the implementation of FAS 142, “Goodwill and Other Intangible Assets”.

DEAN FOODS COMPANY

Earnings per Share Summary and Reconciliation

		Three Months Ended
		March 31,
		2003			2002
		(unaudited)
GAAP diluted earnings (loss) per share		$	0.65		$	(0.23	)
Pro forma adjustments:
	Plant closing (gain) loss		(0.01	)		0.01
	Income from discontinued operations					(0.01	)
	Cumulative effect of accounting change [B]					0.79
Pro forma diluted earnings per share		$	0.64		$	0.56

[B] Cumulative effect of accounting change in 2002 related to the write-down of certain trademarks and goodwill due to the implementation of FAS 142, “Goodwill and Other Intangible Assets”.

Segment Information
(Dollars in thousands)

		GAAP						Pro Forma
		Three Months Ended March 31,						Three Months Ended March 31,
		2003			2002				2003			2002
		(unaudited)						(unaudited)
Revenue
	Dairy Group	$	1,683,669		$	1,777,503			$	1,683,669		$	1,777,503
	Morningstar Foods/White Wave		239,248			238,580				239,248			238,580
	Specialty Foods		162,938			161,215				162,938			161,215
	Corporate / Other		59,023			48,922				59,023			48,922
	Consolidated	$	2,144,878		$	2,226,220			$	2,144,878		$	2,226,220
Operating Income
	Dairy Group	$	138,366		$	126,209			$	136,676		$	127,443
	Morningstar Foods/White Wave		12,049			23,105				12,049			23,105
	Specialty Foods		23,827			20,787				23,827			20,787
	Corporate / Other		(17,260	)		(24,290	)			(17,260	)		(24,290	)
	Consolidated	$	156,982		$	145,811			$	155,292		$	147,045

[C] Pro forma results differ from our results reported under GAAP by excluding the following items in order to report both periods on a comparable basis:

In the first quarter of 2003 pro forma results exclude a gain on the disposition of a closed plant. In the first quarter of 2002 pro forma results exclude plant closing costs.

DEAN FOODS COMPANY

Condensed Balance Sheet
(Dollars in Thousands)

				March 31,			December 31,
				2003			2002
				(unaudited)			(audited)
ASSETS
Cash and cash equivalents				$	26,780		$	45,896
Other current assets					1,253,827			1,265,250
	Total current assets				1,280,607			1,311,146
Property, plant & equipment					1,645,269			1,628,424
Intangibles & other assets					3,645,137			3,642,696
		Total Assets		$	6,571,013		$	6,582,266
LIABILITIES AND STOCKHOLDERS’ EQUITY
Total current liabilities				$	1,180,590		$	1,268,143
Long-term debt					2,618,113			2,554,482
Other long-term liabilities					547,494			531,171
Mandatorily redeemable TIPES					585,034			585,177
Stockholders’ equity:
	Common stock				873			886
	Additional paid-in capital				907,824			979,557
	Retained earnings				781,764			718,555
	Other comprehensive income				(50,679	)		(55,705	)
			Total stockholders’ equity		1,639,782			1,643,293
		Total Liabilities and Stockholders’ Equity		$	6,571,013		$	6,582,266

DEAN FOODS COMPANY

Condensed Statement of Cash Flows
(Dollars in Thousands)

			Three Months Ended March 31,
			2003			2002
			(unaudited)
Operating Activities
	Net income (loss)		$	63,209		$	(29,624	)
	Depreciation and amortization			46,666			45,922
	Income from unconsolidated affiliates			(196	)		(403	)
	Cumulative effect of accounting change						84,983
	Deferred income taxes			35,439			(2,947	)
	Changes in current assets and liabilities			(80,473	)		(16,826	)
	Other			(190	)		1,844
		Net cash provided by continuing operations		64,455			82,949
		Net cash provided by discontinued operations					111
		Net cash provided by operations		64,455			83,060
Investing Activities
	Net additions to property, plant and equipment			(53,713	)		(30,293	)
	Cash outflows for acquisitions			(476	)		(15,901	)
	Net proceeds from divestitures						2,561
	Proceeds from sale of fixed assets			4,496			1,013
		Net cash used in continuing operations		(49,693	)		(42,620	)
		Net cash used in discontinued operations					(728	)
		Net cash used in investing activities		(49,693	)		(43,348	)
Financing Activities
	Proceeds from the issuance of debt			350,094			33,755
	Repayment of debt			(286,581	)		(169,619	)
	Issuance of common stock, net of expenses			45,174			40,809
	Redemption of common stock			(142,565	)
		Net cash used in financing activities		(33,878	)		(95,055	)
Decrease in cash and cash equivalents				(19,116	)		(55,343	)
Beginning cash balance				45,896			74,731
Ending cash balance			$	26,780		$	19,388