SUIZA FOODS REPORTS RECORD THIRD QUARTER SALES AND EARNINGS; ALSO REPORTS
INITIATION OF PROXY SOLICITATION ON MORNINGSTAR AND COUNTRY FRESH MERGERS
07:35 a.m. Oct 29, 1997 Eastern
DALLAS--(BUSINESS WIRE)--October 29, 1997--Suiza Foods Corporation (NYSE:SZA)
today announced record sales and earnings for its third quarter ended September
30, 1997.
Net sales in the third quarter of 1997 were up 120.6% to $307.3 million from
$139.3 million in the comparable quarter of 1996. Operating income reached
$26.6 million, a 131.3% improvement over the $11.5 million reported in the
comparable 1996 third quarter. Net income was $10.9 million or $0.64 per
share compared with net income of $18.9 million or $1.68 per share in the
third quarter of 1996. The 1996 third quarter net income includes $13.3
million in income primarily related to the one-time sale and recognition of
tax credits. Excluding non-recurring items, net income increased 94.6%, while
earnings per share increased 28.0%, from $0.50 in 1996 to $0.64 in 1997.
There were 51.8% more weighted average shares outstanding in the 1997 third
quarter, primarily as a result of a private placement in August 1996 and an
equity offering in January 1997.
For the nine-month period ending September 30, 1997, net sales of $644.1
million were up 76.7% from $364.6 million in 1996. Operating income increased
88.3% to $49.7 million in the first nine months of 1997 compared with $26.4
million in the corresponding nine-month period of 1996. Net income for the
first nine months of 1997 was $35.3 million or $2.22 per share including a
non-recurring gain of $11.5 million net of tax or $0.72 per share from the
sale of tax credits and before an extraordinary loss of $3.3 million or $0.21
per share for the early extinguishment of debt repaid with the proceeds of
the Company's common stock offering in January 1997. This compares with
income in the corresponding 1996 period of $23.9 million or $2.55 per share
including income of $13.3 million or $1.42 per share primarily related to the
one-time sale and recognition of tax credits and before an extraordinary loss
of $2.2 million or $0.24 per share from the early extinguishment of debt.
Excluding non-recurring and extraordinary items, net income increased 124.5%
while earnings per share increased 32.7% from $1.13 in 1996 to $1.50 in 1997.
There were 70.2% more weighted average shares outstanding in the most recent
nine-month period.
The growth of Suiza's fluid dairy sales continues to outpace that of higher
margin packaged ice sales due to the larger size of dairy acquisitions. This
is reflected in the company's narrower gross margins of 25.7% in the third
quarter of 1997 versus 27.3% in the same period of 1996 and 25.4% in the
first nine months of 1997 versus 26.7% in 1996. In the third quarter of 1997,
operating margins improved to 8.7% from 8.2% in the 1996 third quarter and
1997 year-to-date improved to 7.7% versus 7.2% in the first nine months of
1996, primarily as a result of acquisitions.
Gregg L. Engles, Chairman and Chief Executive Officer of Suiza Foods, said,
"Our substantial growth in the 1997 third quarter reflects the successful
implementation of our acquisition strategy and a generally good operating
environment. We have added several packaged ice operations in the first nine
months of 1997 which should contribute approximately $19 million to
sales in 1998. During the third quarter, we completed two significant dairy
acquisitions, Dairy Fresh and Garelick Farms and associated companies, with
combined revenues of almost $500 million in their most recent fiscal years.
They have both been immediately accretive to earnings. During the quarter we
also announced two significant merger transactions with Country Fresh of
Grand Rapids, Michigan and with The Morningstar Group of Dallas, Texas. Both
of these transactions are expected to close during the fourth quarter. These
mergers will make Suiza Foods the largest dairy company in the United States
with annual sales well in excess of $2 billion. We expect that the combined
companies will be better equipped to realize their strategic plans as we
bring together our manufacturing and distribution capabilities and develop
even more efficient ways to service our distribution channels. Our combined
presence in both the fluid milk and value-added sections of the dairy case,
together with one of the most successful and innovative portfolios of dairy
case brands, should allow us to more efficiently service the needs of our
customers and provide the highest quality portfolio of products to the
consumer. The mergers will also substantially enhance our cash flow,
materially expand our borrowing capacity and increase the float and liquidity
of our common stock."
Suiza Foods also announced that it set October 27, 1997 as the record date
for the Morningstar merger. Proxy materials were distributed to both the
Morningstar and Suiza Foods shareholders on October 28, 1997 and the respective
shareholder meetings have both been set for November 26, 1997. Proxy
materials were distributed to Country Fresh's shareholders on October 27,
1997 and Country Fresh has scheduled a shareholder meeting to consider the
merger on November 25, 1997. The approval of Suiza's shareholders is not
required for the Country Fresh merger.
Suiza Foods is a Dallas-based consolidator of distribution oriented food
businesses. Its principal holdings are in the dairy processing, packaged ice
and plastic container industries and include Suiza Dairy and the Garrido
Coffee Company in Puerto Rico, Velda Farms Dairy in Florida, Swiss Dairy in
California, Model Dairy in Nevada, Dairy Fresh in North Carolina, Country
Delite Farms in Tennessee, Garelick Farms in New England, Franklin Plastics,
and Reddy Ice, the largest packaged ice company in the United States.
Statements in this press release other than statements of historical fact may
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements,
as well as Suiza's future financial condition and results, are subject to
inherent risks and uncertainties, and actual results may differ materially
from the results discussed in these forward looking statements. Factors that
might cause such a difference include, but are not limited to: (i) a lack of
suitable acquisition candidates at acceptable prices and other limitations on
Suiza's ability to pursue its acquisition strategy, (ii) significant
competition, (iii) fluctuating raw material costs, (iv) limitations arising
from Suiza's substantial indebtedness, (v) government regulation, and (vi)
various risks related to the proposed Morningstar and Country Fresh
acquisitions, including the risk that expected cost savings cannot be fully
realized, that revenues following the mergers are lower than expected, and
that costs or difficulties related to integrating the merged businesses are
greater than expected. Additional information concerning these and other risk
factors are contained in Suiza's latest Annual Report on Form 10-K and in
each of Suiza's other recent filings with the Securities and Exchange
Commission (SEC), copies of which are available from the SEC and can be
obtained from Suiza upon request.
SUIZA FOODS CORPORATION
(Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
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Net sales $307,280 $139,304 $644,099 $364,611
Cost of sales 228,235 101,214 480,282 267,131
Gross profit 79,045 38,090 163,817 97,480
Operating costs and expenses 52,474 26,629 114,097 71,076
Income from operations 26,571 11,461 49,720 26,404
Interest expense, net 10,789 4,356 17,369 12,844
Merger and other costs -- 571 -- 571
Other income, net (228) (3,137) (18,803) (3,389)
Income before income taxes and
extraordinary items 16,010 9,671 51,154 16,378
Income taxes (benefit) 5,062 (9,266) 15,807 (7,495)
Income before extraordinary loss 10,948 18,937 35,347 23,873
Extraordinary loss from early
extinguishment of debt -- -- (3,270) (2,215)
Net income $ 10,948 $ 18,937 $ 32,077 $ 21,658
Earnings (loss) per share:
Income before extraordinary loss $ 0.64 $ 1.68 $ 2.22 $ 2.55
Extraordinary loss -- -- (0.21) (0.24)
Net income $ 0.64 $ 1.68 $ 2.01 $ 2.31
Weighted average shares
outstanding (000's) 17,080 11,250 15,930 9,361