Feb. 12--Dean Foods Co. said Wednesday that it posted its strongest quarter in the company's history as a drop in costs helped double fourth-quarter profit.

Net income for the Dallas-based dairy giant jumped to $66.4 million, or 42 cents a share, in the quarter ended Dec. 31, from $32.6 million, or 24 cents a share, a year ago.

The jump was fueled largely by a drop in costs for items such as raw milk, fuel, energy and resin for bottles. The company also cut 250 delivery routes, reducing diesel fuel costs by 5 percent.

U.S. dairy prices have fallen in recent months as demand, especially in Asia, has been scalded by the faltering global economy.

The drop in milk prices may force some dairy farmers out of business, said a spokesman for the National Milk Producers Federation.

But figures from the U.S. Agriculture Department show that lower prices are a boon to consumers, especially in Dallas. For five of the last six months, Dallas has had the lowest or second-lowest price for 2 percent milk among 30 major metropolitan areas.

The January price in Dallas was $2.73 a gallon, down from $3.66 in January 2008. The 30-city average for January 2009 was $3.57.

It wasn't clear why Dallas prices are lower in the survey, which is based on spot checks at local markets. But Dallas is a notoriously competitive grocery market, where retailers often use low prices on staples to draw in consumers.

Dean's earnings jump came despite a nearly 5 percent dip in fourth-quarter sales -- to $3.1 billion from $3.2 billion a year ago.

"By many measures, the fourth quarter of 2008 was the strongest in our history," said Gregg Engles, chairman and chief executive of the nation's largest dairy producer. "We're pleased with the results for the quarter and the full year."

Operating income for the quarter, adjusted to exclude one-time items, was $190 million, the highest in company history and a gain of 27 percent over the year-ago period.

The company also posted free cash flow for the year of $462 million, another record.

Engles called 2008 "a year of tremendous progress."

For 2009, the company predicts first-quarter earnings of at least 38 cents a share and $1.50 for the year. The company earned $1.20 a share last year.

Dean's stock gained 7 percent Wednesday to close at $19.59.

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