Dean Foods manufactures and distributes branded and private label dairy case products such milk, ice cream, cultured dairy products, and creamers, to retailers, distributors, and institutions across the U.S. Company's brands include Berkeley Farms, Country Fresh, DairyPure, Dean’s, Mayfield, McArthur, Meadow Gold, Oak Farms, T.G. Lee, and Tuscan.
|Most recent||Growth rate (CAGR)|
|1 year||5 years||10 years|
|Book value of equity per share||$2.67||-62.5%||-18.1%||-11%|
|BV including aggregate dividends||-59.6%||-10.8%||11.7%|
|1 year||5 years||10 years|
|Most recent||Growth rate (CAGR)|
|1 year||5 years||10 years|
|1 year||5 years||10 years|
A company creates wealth for its long-term shareholders in 2 main ways - through dividend payments and through the accumulation of retained earnings. This graph shows the accumulation of per-share equity of long-term shareholders (green bars), which consists of the retained earnings plus all capital invested in the company, and the cumulative dividends the company has paid over time per share of its stock (blue bars).
In the words of Warren Buffett: "We're looking for... businesses earning good returns on equity while employing little or no debt."
Return on equity is a key metric of financial performance, indicating a company's ability to generate earnings using shareholder capital. Over time, ROE is one of the major determinants of the rate at which a company creates shareholder wealth. The average ROE for large U.S. companies is 12%, and many investors use it as a threshold for attractive investments.
Companies can boost ROE by increasing leverage, which reduces the safety of the investment. Therefore, it is useful to look at the return on assets (ROA), which measures a company's earning power regardless of its capital structure. A widening gap between ROE and ROA may be a warning sign that should be thoroughly investigated.
Earnings per share is a popular metric used to value a company (using P/E ratio); growth in EPS is often used to judge company growth potential. However, many investors believe that EPS is an inferior metric to ROE, because it ignores the amount of capital the company used to generate earnings.
Free cash flow shows how much cash a company generates from operations, above and beyond what is required to maintain or expand its productive assets. This cash can be returned to investors, or spent by management on growing the company or paying back its debts.
Balance sheets of many companies contain intangible assets such as goodwill, trademarks, patents, etc. Many investors consider intangibles more difficult to value than physical assets. If intangible assets had been valued incorrectly, they must be impaired, resulting in a loss charged against shareholder equity. This chart demonstrates the potential loss to shareholder equity from such impairments.
Companies often use debt financing to increase their return on equity. However, as the amount of debt financing increases relative to the amount of equity financing, the company becomes more sensitive to down turns and other negative events. As a result, many investors use the ratio of debt to equity as a measure of a company's financial risk, and avoid companies that have this ratio above 1.
This chart shows shareholder equity as a percentage of total assets, allowing investors to judge the overall leverage. Companies with a higher proportion of equity can be viewed as safer investments. This metric is particularly important for highly leveraged institutions, such as banks, where it must be at least 4% according to government regulations.
The ratio of current assets to current liabilities is known as the current ratio. This metric is a quick measure of the company's ability to pay its short-term obligations. A current ratio below 1 is a warning sign that should be investigated, especially for companies that cannot count on adequate cash flow from operations.
This chart shows the cumulative dilution of investor ownership in a company over time. Dilution reduces an investor's participation in the future earnings. Dilution increases when a company issues new shares, and decreases when a company buys its shares back. Many investors avoid companies with large chronic dilution.
analysis provides insight into factors affecting the Return On Equity of a company.
The DuPont equation decomposes ROE as follows:
ROE = (Net margin) * (Asset turnover) * (Asset to equity ratio)
Net margin indicates operating efficiency, Asset turnover measures the total asset use efficiency, and the Asset to equity ratio is a measure of financial leverage.
The dividend payout ratio tells investors what percentage of earnings a company returns to shareholders, and what percentage it retains and reinvests. This ratio represents a major capital allocation decision by the company, and can be used to judge management rationality. Rational management should pay out all earnings that cannot be productively reinvested. Therefore, a low dividend payout ratio for a profitable company with a low growth potential may be a warning sign.
Many investors use the P/B ratio as a quick way of judging company valuation. Value investors - followers of Graham and Dodd - specifically seek out companies with low P/B ratios. However, investors should be careful not to make investment decisions on this metric alone, without considering a company's earning and growth potential, since a low P/B ratio can be a sign of a bleak future for the business.
P/E ratio is a popular way of making a quick judgment of a company valuation. Value investors - followers of Graham and Dodd - often seek solid companies with low P/E ratios as investment opportunities. However, P/E ratio represents an oversimplified approach to business valuation, and can often lead to incorrect investment decisions.
On January 28, 1997, the Company sold 4,270,000 shares of Common Stock, $.01 par value per share, in a public offering at a price to the public of $22.00 per share.
On July 31, 1997 the Company completed the purchase of all the outstanding stock of three affiliated dairy manufacturing and distribution companies, as well as an affiliated water bottling and distribution company, and 16 affiliated plastic manufacturing companies headquartered in Franklin, Massachusetts (collectively, the "Garelick Companies"). In connection with this acquisition the Company paid aggregate cash consideration of approximately $293.7 million (subject to adjustment and excluding transaction costs) and issued 446,100 shares of common stock to acquire the outstanding stock and repay existing indebtedness of the Garelick Companies. The combined businesses operated by the Garelick Companies reported net sales of approximately $363.0 million during the fiscal year ended September 30, 1996.
On November 25, 1997, the Company acquired Country Fresh through a merger transaction and on November 26, 1997, the Company acquired Morningstar through a merger transaction. Under the terms of the merger agreements, Suiza Foods issued 1.9 million and 12.6 million shares of common stock to the shareholders of Country Fresh and Morningstar, respectively, for all of the outstanding common stock of these companies, and assumed obligations to issue .2 million and 2.9 million shares, respectively, of Suiza Foods common stock in connection with outstanding stock options of these companies.
On September 15, 1998, our Board of Directors authorized an open market share repurchase program of up to $100 million of our common stock. On September 28, 1999 the Board increased the program by $100 million to $200 million and on November 17, 1999 authorized a further increase to $300 million.
On December 21, 2001, we completed our acquisition of Dean Foods Company ("Old Dean"). Prior to the acquisition, Old Dean was the nation's second largest dairy processor, with $4.6 billion in sales during the 12-month period ended November 25, 2001. As a result of the merger, each share of common stock of Old Dean was converted into 0.429 shares of our common stock and the right to receive $21.00 in cash. There were approximately 36.0 million shares of Old Dean common stock outstanding at the time of the merger. Consequently, we issued approximately 15.5 million shares, and paid approximately $756.8 million in cash, to Old Dean's shareholders as consideration for their shares.
TIPES - In three separate transactions during the second quarter of 2003, we called for redemption all of our trust-issued preferred securities ("TIPES"). We originally issued $600 million of TIPES in a private placement in 1998. The TIPES were convertible at the option of the holders, at any time, into shares of our common stock and were redeemable, at our option, at any time at specified premiums. In response to our three announced redemption transactions, holders of more than 99% of all of the TIPES elected to convert their TIPES into shares of our common stock rather than receive the $51.035 per security cash redemption price. Accordingly, during the second quarter of 2003, we issued an aggregate total of approximately 23 million shares of common stock to holders of TIPES in lieu of cash redemption payments, and we paid approximately $2.4 million in cash to holders who did not elect to convert. As of June 30, 2003, there were no remaining TIPES outstanding.
On June 27, 2005, we completed the spin-off ("Spin-off") of our indirect majority owned subsidiary TreeHouse Foods, Inc. ("TreeHouse"). In the distribution, our stockholders received one share of TreeHouse common stock for every five shares of our common stock held by them on the Record Date.
On March 5, 2008, we issued and sold 18.7 million shares of our common stock, $0.01 par value per share, in a public offering pursuant to a registration statement on Form S-3. We received net proceeds of approximately $400.0 million from the offering.
In May 2009, we issued and sold 25.4 million shares of our common stock in a public offering. We received net proceeds of $444.8 million from the offering. The net proceeds from the offering were used to repay the $122.8 million aggregate principal amount of our subsidiary's 6.625% senior notes due May 15, 2009, and indebtedness under our receivables-backed facility.
We recorded a $1.9 billion, non-cash charge ($1.6 billion, net of tax), during the third quarter of 2011, which represents our best estimate of the goodwill impairment present at September 30, 2011.
On December 2, 2012, we entered into an agreement to sell our Morningstar division to a third party. Morningstar is a leading manufacturer of dairy and non-dairy extended shelf-life and cultured products, including creams and creamers, ice cream mixes, whipping cream, aerosol whipped toppings, iced coffee, half and half, value-added milks, sour cream and cottage cheese. The sale of our Morningstar division closed on January 3, 2013 and we received net proceeds of approximately $1.45 billion, a portion of which was used to retire outstanding debt under our senior secured credit facility. We recorded a gain of $871.3 million ($492.2 million, net of tax) on the sale of Morningstar, which excludes $22.9 million of transaction costs recognized in discontinued operations during the year ended December 31, 2012.
On May 23, 2013, we completed our previously announced spin-off of WhiteWave through a tax-free distribution to our stockholders of an aggregate of 47,686,000 shares of WhiteWave Class A common stock and 67,914,000 shares of WhiteWave Class B common stock as a pro rata dividend on the shares of Dean Foods common stock outstanding at the close of business on the record date of May 17, 2013. Each share of Dean Foods common stock received 0.25544448 shares of WhiteWave Class A common stock and 0.36380189 shares of WhiteWave Class B common stock in the distribution.