Dean Foods Co. Sr Nts Shelf Drawdown Rated 'A' by S&P.NEW YORK--(BUSINESS WIRE)--S & P's CreditWire 10/01/97--Standard & Poor's today assigned its single-'A' rating to Dean Foods Co.'s $150 million shelf drawdown Drawdown The peak to trough decline during a specific record period of an investment or fund. It is usually quoted as the percentage between the peak to the trough. Notes: of senior notes due 2017. The single-'A' corporate credit rating was affirmed. The outlook is stable. Total rated debt outstanding is $300 million. Dean Foods ratings are supported by the firm's consistent profitability measures and cash flow generation, and management's proven track record, despite the commodity aspects of many of its product lines. Illinois-based Dean Foods is the largest U.S. dairy producer and a leading player in specialty foods. Highly efficient operations have enabled Dean Foods to outperform its peers in the mature dairy industry, which has historically been beset by oversupply o·ver·sup·ply n. pl. o·ver·sup·plies A supply in excess of what is appropriate or required. tr.v. o·ver·sup·plied, o·ver·sup·ply·ing, o·ver·sup·plies and severe price competition. Diversification into higher-margin food lines (about 40% of operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. ) has reduced Dean's dependence on fluid milk earnings. Dairy margins have averaged about 5.5 % over the past several years, down from 6.5% in 1991, reflecting industry-wide pricing pressure from higher raw material prices. But margins remain strong for the industry and should improve modestly with further cost cutting and industry consolidation. Pretax interest coverage was a solid 7.0 times (x) and funds from operations Funds From Operations (FFO) Used by real estate and other investment trusts to define the cash flow from trust operations; earnings with depreciation and amortization added back. to total debt was about 70% at August 24, 1997. Because of the dairy industry's maturity, the company is expected to continue acquiring small-to-medium sized firms to spur earnings growth. In keeping with its moderate financial profile, Dean Foods has used a combination of stock, debt, and internal cash flow to finance its acquisitions. Standard & Poor's believes this acquisition strategy will continue and expects pretax interest coverage to remain in the 5.3x-6.0x range, and funds from operations to total debt in the 50%-55% area. Return on permanent capital has shown a downward trend, but still averaged a strong 17% over the past five years. Despite the company's capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. program, acquisitions of more than $300 million, stock repurchases Stock repurchase A firm's repurchase of outstanding shares of its common stock. of about $37 million in the prior six fiscal years, and peak working capital needs, lease-adjusted total debt as a percentage of capital was about 32% at Aug. 24, 1997. OUTLOOK: STABLE Dean's strong cash-generating ability should provide adequate resources to fund small-to-medium sized acquisitions and share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. within the current rating. Debt levels are likely to fluctuate depending on the timing of acquisitions. However, Standard & Poor's does not anticipate that the firm's strategy will impair creditor protection.---CreditWire. CONTACT: Jayne M Ross, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of (1) 212-208-8942 For more information on criteria or subscriptions: http://www.ratings.standardpoor.com |
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