Posted By: Mark Thatcher
By Martinne GellerTue Nov 7, 12:22 PM ET
NEW YORK (Reuters) - Dean Foods Co. (NYSE:DF - news) on Tuesday
lowered the top end of its full-year earnings outlook, forecast
next year's profit growth below Wall Street estimates and said
it found administrative errors in stock options grants in 1997
and 2000, sending shares down 5 percent. ADVERTISEMENT
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The news came as the No. 1 U.S. dairy company reported
quarterly earnings in line with Wall Street expectations.
Dean, which last week said the U.S. Securities and Exchange
Commission was conducting an informal inquiry into its stock
options practices, took a noncash charge of about $500,000 in
the latest quarter related to the options, but said it will not
have to restate any historical results.
Dean is one of more than 150 companies that have launched
internal reviews or are subject to SEC probes to determine
whether the dates of stock options were manipulated.
The company, whose products include Silk Soymilk and
Horizon Organic milk, said it revised its 2006 forecast in part
due to costs associated with the options inquiry and
investments in its business.
The company said it now saw 2006 earnings of $2.10 to $2.12
per share, compared with its prior forecast of $2.10 to $2.15.
For 2007, it expects earnings per share growth before items
in the range of 11 percent to 13 percent.
J.P. Morgan analyst Pablo Zuanic said those forecasts
implied fourth-quarter earnings of 59 cents to 61 cents per
share, and 2007 earnings of $2.34 to $2.38 per share, which are
both shy of Wall Street's consensus estimates. Zuanic rates
Dean shares "overweight."
Analysts were looking for profit of 63 cents per share for
the fourth quarter and $2.40 for 2007, according to Reuters
Estimates.
The company said third-quarter income from continuing
operations had risen to $74.5 million, or 54 cents per share,
from $62.2 million, or 40 cents per share, a year earlier.
Excluding one-time items, the Dallas-based company earned
56 cents, meeting Wall Street expectations, according to
Reuters Estimates.
Net sales fell 2 percent to $2.5 billion, hurt by a planned
reduction in the range of products sold and lower dairy prices,
as the company passed on savings from lower costs for raw milk
and butter.
But the company's dairy unit sold 1.3 percent more milk by
volume, a measure that excludes currency and price
fluctuations, and saw its operating income and margins boosted
by the lower costs, operating efficiencies, and the favorable
settlement of a dispute with a supplier.
Operating margins in its WhiteWave organic food and soy
milk unit were hurt by higher costs for organic milk, sugar and
fuel and higher information technology investments.
Some analysts have been concerned about whether the supply
of organic milk can meet growing demand, since Dean limited
supplies to retailers earlier this year.
Chief Executive Gregg Engles told analysts the forecast of
20 percent growth in 2007 sales of Horizon brand organic milk
was based on the company's business plans and a pipeline of new
supply.
Dean shares, which had gained 12 percent this year, were
down $2.26 at $39.89, or 5.36 percent, in mid-day trade on theNew York Stock Exchange.
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