Dean Foods declared on Friday a special dividend of $15 per share, or about $2 billion in total, and cut its 2007 earnings outlook because of the associated increased interest expense.
Dean said it would finance the special dividend through a new $4.8 billion senior secured credit facility, as it seeks to take advantage of strong cash flows and an attractive credit market.
The largest U.S. dairy company lowered its 2007 adjusted earnings outlook to between $1.72 per share and $1.78 per share because of the higher financing costs. The adjusted earnings would exclude the net impact of facility closing costs, reorganizations, nonrecurring charges and discontinuedoperations.
Wall Street analysts, on average, had expected earnings per share of $2.37, according to Thomson Financial.
"The appropriate finance decision for Dean Foods today is to increase our exposure to the debt markets and return equity capital to shareholders," said Chief Executive Gregg Engles in a statement.
The Dallas-based company's shares closed on Thursday at $45.39 on the New York Stock Exchange.
Due to the special dividend, which is payable April 2 to shareholders of record on March 27, the company said it does not expect to make any additional stock repurchases in the near term.
After building up its business over the past several years through acquisitions, Dean said it will now focus on improving productivity and efficiency.
The financing package is being arranged by JPMorgan Securities, Bank of America Securities, and Wachovia Capital Markets.
The new credit facility, which would replace Dean's current facility, would consist of a $1.5 billion 5-year senior secured revolving credit facility, a $1.5 billion 5-year senior secured term loan and a $1.8 billion 7-year senior secured term loan.
The company would also be replacing its existing receivables facility with a new secured $500 million facility.