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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended May 29, 1994
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
COMMISSION FILE NO.: 0-1118
DEAN FOODS COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-0984820
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
3600 N. RIVER ROAD, FRANKLIN PARK, 60131
ILLINOIS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (708) 678-1680
SECURITIES REGISTERED PURSUANT TO SECTIONS 12(B) AND 12(G) OF THE ACT:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, Par Value $1 Per Share New York Stock Exchange
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
The number of shares of Common Stock, Par Value $1 Per Share, of the
Registrant outstanding as of August 5, 1994 was 39,821,839. The aggregate
market value of such outstanding shares on August 5, 1994 was $1.19 billion,
based upon the closing price for the Common Stock on the New York Stock
Exchange on such date.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated herein by reference in the
respective Parts hereof indicated:
1. Registrant's Annual Report to Shareholders for Fiscal Year Ended May
29, 1994 (referred to herein as the "Company's Fiscal 1994 Annual
Report"): Part I and Part II
2. Registrant's Proxy Statement for its Annual Meeting of Stockholders to
be held on October 4, 1994 (referred to herein as the "Company's 1994
Proxy Statement"): Part III
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PART I
ITEM 1. BUSINESS.
Dean Foods Company and its subsidiaries ("the Company") is engaged in the
processing, purchase and distribution of dairy and specialty food products.
The Company's principal products are Dairy Products (fluid milk, specialty
dairy products and ice cream) and Specialty Food Products (canned and frozen
vegetables; pickles, relishes and specialty items; powdered products; and
sauces, puddings and dips). A significant portion of the Company's products are
sold under private labels. The Company also operates a trucking business
hauling less-than-truckload freight, concentrating primarily on refrigerated
and frozen cartage.
The predecessor to Dean Foods Company was incorporated in Illinois in 1925.
Acquisitions have been an important factor in the Company's strategy. The
Company does not have specific acquisition criteria, but generally focuses on
food companies having a well-established reputation for quality products and
service.
The Company has made 14 acquisitions in the last five years. During fiscal
1994, the Company acquired Longlife Dairy Products of Jacksonville, Florida, an
ultra-high temperature (UHT) processor of specialty dairy products, the Birds
Eye frozen vegetable business and the Bennett's premium sauce line. During
fiscal year 1993, the Company acquired W. B. Roddenbery Co., Inc. of Cairo,
Georgia, a processor of pickles, peanut butter, boiled peanuts and syrups and
acquired an East Coast replacement sour cream product line. In fiscal year
1992, the Company acquired Meadow Brook Dairy Company, a dairy processor with
plants in Pennsylvania and New York; and Frio Foods, Inc., a Texas frozen
vegetable processor. In fiscal year 1991, the Company acquired a fluid milk and
ice cream business located in Utah and Nevada operating as Cream o'Weber; Ready
Food Products, Inc., a UHT processor of specialty dairy products; and Pilgrim
Farms, Inc., an Indiana pickle processor. The Company, in fiscal year 1990,
acquired Chas. F. Cates & Sons, Inc., a North Carolina pickle processor;
Bellingham Frozen Foods, Inc., a Washington frozen vegetable processor;
Mayfield Dairy Farms, Inc., a fluid milk and ice cream processor located in
Tennessee; and the business and assets of Western Food Products, Inc., a pickle
processor in LaJunta, Colorado. The results of operations of these
acquisitions, from their respective dates of acquisition, have been included in
the Company's results of operations.
With two exceptions, these companies, businesses and assets were acquired for
cash, installment notes or a combination thereof. The Company in 1993 exchanged
535,000 shares of its common stock for all the outstanding shares of W. B.
Roddenbery Co., Inc. In 1990, the Company exchanged 865,000 shares of its
common stock for all the outstanding shares of Chas. F. Cates & Sons, Inc.
Information regarding the Company's Dairy Products and Specialty Food
Products business segments for the last three fiscal years is set forth in the
Company's Fiscal 1994 Annual Report (Exhibit 13a hereto) at page 29 in the note
to consolidated financial statements captioned "Business Segment Information".
Such information, excluding the first sentence of such note, is hereby
incorporated herein by reference.
DAIRY PRODUCTS BUSINESS SEGMENT
Fluid Milk and Specialty Dairy Products
The Company processes raw milk and other raw materials into fluid milk and
specialty dairy products. Included in the fluid products category is
homogenized, low-fat and skim milk plus buttermilk, chocolate milk and juice
products. Specialty dairy products include cottage cheese, yogurt, portion
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control cream cheese and sour cream, all cultured fresh dairy products, and an
assortment of UHT processed and aseptic packaged products. The specialty dairy
UHT products include whipping creams, half and half, aerosol toppings, coffee
creamers, flavored milks and lactose-reduced milks.
Fluid milk and fresh cultured specialty products are sold to grocery store
chains, convenience stores, smaller retail grocery outlets, warehouse club
stores, grocery warehouses and institutional customers in the Midwest and mid-
Southern states, in parts of the Southwestern, Southeastern and Rocky Mountain
states, parts of Pennsylvania and New York, and the Caribbean and Mexico.
In addition to the strong Dean brand in the Midwest and mid-South, fluid milk
and fresh cultured specialty dairy products are sold in various areas under
well-established labels such as Bell, Bowman, Creamland, Cream o'Weber,
Fairmont, Fieldcrest, Gandy's, T. G. Lee, Mayfield, McArthur, Meadow Brook,
Price's, Reiter, St. Thomas Dairies and Verifine. A substantial portion of the
Company's fluid milk and specialty dairy products volume is sold under private
labels.
Specialty UHT processed products produced and marketed by Ryan Milk Company,
Ready Food Products, Inc. and Longlife Dairy Products are distributed
nationwide under various branded and private labels.
The fluid milk and specialty dairy products business is extremely competitive
and productivity is therefore very important. The Company continues to reinvest
a substantial portion of its total capital budget in its dairy plants and
distribution systems to maintain and improve efficiencies. Capital expenditure
projects for 1994 included cooler expansions at its Evart, Michigan, Chemung,
Illinois and Louisville, Kentucky dairy plants, corrugated caser and palletizer
at its El Paso, Texas dairy plant, blowmold packaging equipment at its
Rochester, Indiana dairy plant and construction of a dairy distribution and
cooler facility in Greenville, North Carolina. Major capital projects during
fiscal 1993 included completion of a cooler expansion at its Orlando, Florida
dairy operations, additional processing capacity at its Sharpsville,
Pennsylvania dairy plant, and additional processing equipment at the Company's
Philadelphia, Pennsylvania UHT operation and at its Albuquerque, New Mexico
dairy plant.
Capital expenditure projects for fiscal 1992 included the expansion of cold
room capacity at the Company's Lubbock, Texas dairy operation; blowmold
packaging equipment at the Company's Huntley, Illinois location; expansion of
the cooler at its Orlando, Florida dairy operation; construction of a dairy
distribution and cooler facility at Atlanta, Georgia; and addition of
processing capacity at Murray, Kentucky and Philadelphia, Pennsylvania UHT
operations. Major capital projects in fiscal 1991 included the additional
processing and distribution equipment at the Company's Salt Lake City, Utah and
Akron, Ohio dairy operation and office expansion at the Orlando, Florida dairy
plant. Capital expenditures in fiscal 1990 included the addition of blowmold
packaging equipment at several dairy operations and completion of a UHT plant
renovation at Murray, Kentucky.
Sales of fluid milk to unaffiliated customers for the fiscal years 1994, 1993
and 1992 were $1,077 million, $1,070 million and $1,044 million, respectively.
Sales of specialty dairy products to unaffiliated customers for fiscal 1994,
1993 and 1992 were $184 million, $168 million and $184 million, respectively.
Ice Cream
The Company produces packaged and bulk ice cream products which are sold
through supermarkets, convenience stores, smaller retail grocery outlets,
restaurants and other foodservice users. The product line includes ice cream
(regular, light, reduced fat, lowfat and non-fat), fruit sherbets, frozen
yogurts, and novelties made with ice cream, sherbet and ices. These products
are sold under a variety of regional brands and numerous private labels in the
Midwest, Southwest, Florida, Georgia, South Carolina, Ohio, Tennessee,
Wisconsin, the Caribbean and parts of the Rocky Mountain states
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under numerous well-established brands. Such brands include Dean, Country
Charm, Gandy's, Creamland, Cream o'Weber, Bell, Price's, Fitzgerald, Mayfield,
Fieldcrest, McArthur/T. G. Lee, Reiter, Verifine, Carnival and Calypso. Sales
of ice cream products are substantially greater during the summer months than
during the rest of the year.
Additionally, the Company produces and supplies Baskin-Robbins ice cream
products in the midwest and southwest United States.
Major projects in 1994 included a stick novelty line, freezer expansion and
new distribution facilities in Athens, Tennessee and new processing equipment
in Akron, Ohio. Capital expenditure projects in fiscal 1992 included expansion
of ice cream production capacity at the Company's Akron, Ohio operation. In
fiscal 1991, additional processing equipment was installed at its Albuquerque,
New Mexico ice cream plant.
Sales to unaffiliated customers for the fiscal years 1994, 1993 and 1992 were
$208 million, $199 million, and $202 million, respectively.
SPECIALTY FOOD PRODUCTS BUSINESS SEGMENT
Canned and Frozen Vegetables
The Company processes and markets canned and frozen vegetables consisting of
corn, peas, green beans, carrots, beets, spinach, peas and carrots, green lima
beans and various mixed vegetable blends. Additional products in the frozen
vegetable line include asparagus, broccoli, Brussels sprouts, cauliflower,
fordhook lima beans, celery and vegetable blends with pasta and with rice. The
processing and canning of fresh vegetables is seasonal in nature, with most of
the canning activity in the Midwest occurring during and shortly after
harvesting periods. The Company believes the geographic diversity of its plants
and growing areas provides the ability to balance production. The packaging of
processed frozen vegetables occurs year-round. As a result of the seasonal
nature of the vegetable business, inventory levels vary significantly during
the year.
Frozen vegetables account for approximately 60% of the total vegetable sales.
Products are marketed under several brand names including Birds Eye, Veg-All,
Freshlike, Larsen, Rancho Fiesta, and Shaw, as well as under customer brand
names or in-house brands. The Company's Birds Eye vegetable brand is marketed
in all markets throughout the United States. The Company's canned mixed
vegetable, Veg-All, is marketed in all major and secondary markets throughout
the United States, while Veg-All frozen and canned single vegetable items are
marketed in the Southeast and the South. The Freshlike canned and frozen
vegetable line is marketed primarily in the Midwest, Pennsylvania, West
Virginia and Texas. Other vegetable products are marketed under private labels
or in-house brands throughout the United States and exported to the Far East,
Mid-East, Europe, Mexico, Canada and the Caribbean. Retail or consumer sizes
are distributed for ultimate sales to consumers through chain and independent
retail stores and include Company brands and buyers' brands of all products.
Institutional customers, including hotels, restaurants, in-plant feeding
programs, and schools are serviced through foodservice distributors with
products packaged in larger containers.
Major capital projects in 1994 included the installation of a carrot
processing line at Uvalde, Texas and an expansion of the office facilities in
Green Bay, Wisconsin. Fiscal 1993 and 1992 capital expenditures included the
construction of a waste water treatment facility at the Company's Bellingham,
Washington location. Major capital expenditures in fiscal 1991 included
expansion of the frozen vegetable processing capacity at the Company's
Hartford, Michigan plant. Capital expenditures in fiscal 1990 included
expansion of the Company's Darien, Wisconsin frozen vegetable processing
facility and installation of freezer equipment at its Oxnard, California
vegetable processing plant.
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Sales to unaffiliated customers for fiscal years 1994, 1993 and 1992 were
$415 million, $347 million and $364 million, respectively.
Pickles, Relishes and Specialty Items
The Company is one of the largest pickle processors and marketers in the
United States with sales nationwide. Pickles, relishes, pickled peppers and
other assorted specialty items are sold under several brand names, including
Roddenbery, Peter Piper, Heifetz, Pesta, Atkins, Whitfield, Aunt Jane's, Ma
Brown, Tree, Rainbo, Cates and Dailey. Products are also sold for private label
distribution to retail grocery store chains, wholesalers and the foodservice
industry and in bulk to other food processors. Late in fiscal 1993 the Company
acquired W. B. Roddenbery Co., Inc., located in Cairo, Georgia, a processor of
pickles, peanut butter, boiled peanuts and syrups. During fiscal 1992 the
Company's Green Bay Food Company became the exclusive U.S. marketer of green
olives for a leading Spanish olive packer.
Fiscal 1994 capital expenditures included the construction of a new
processing room at the Company's LaJunta, Colorado plant. Major capital
expenditures in fiscal 1993 included installation of processing equipment at
the Company's Plymouth, Indiana plant and construction of administrative office
facilities at its Atkins, Arkansas location. In fiscal 1992, additional
warehouse capacity was added at its Atkins, Arkansas location. Capital
expenditures in fiscal 1991 included tank yard additions and packaging
equipment at the Faison, North Carolina pickle processing plant.
The processing of pickle products is seasonal, dependent to a large extent
upon the growing season of cucumbers in the summer months. Inventories are
therefore higher in the fall and winter months than in the spring and early
summer.
The Company markets a number of specialty sauces, including shrimp, seafood,
tartar, horseradish, chili and sweet and sour sauces, in the Eastern,
Midwestern and Southern United States to retail grocers.
Sales to unaffiliated customers for the fiscal years 1994, 1993 and 1992 were
$353 million, $304 million, and $282 million, respectively.
Powdered Products
Non-dairy coffee creamers are the Company's principal powdered products.
Powdered premium and low-fat products are sold primarily under private labels
to vending operators, office beverage service companies and institutional
foodservice distributors with national distribution which supply restaurants,
schools, health care institutions, hotels and vending and fast-food operations.
Non-dairy creamers are also sold for private label distribution to all classes
of the retail trade and sold in bulk to a number of other food companies for
use as an ingredient in their food products. Powdered products are also sold to
international customers in Australia, Canada, the Far East, Mexico, South
America, Europe and the Middle East. The Company's non-dairy coffee creamers
are an economical and convenient substitute for milk and cream. They require no
refrigeration and have long shelf lives.
The Company provides stabilizers for low-fat shake and frozen yogurt mixes
supplied to McDonald's restaurants throughout the United States and, through an
affiliate, the Company supplies the United Kingdom, Continental Europe and
other foreign markets with stabilizers and other dry ingredients.
The Company's powdered products are sold in a broad variety of product
formulations and package sizes. No major capital expenditures were required
during the past five years.
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Sales to unaffiliated customers for the fiscal years 1994, 1993 and 1992 were
$100 million, $88 million, and $82 million, respectively.
Sauces, Puddings and Dips
The Company's aseptic products primarily include ready-to-serve natural
cheese sauces, puddings and other specialty sauces which are sterilized under a
process which allows storage for prolonged periods without refrigeration.
Aseptic products are sold nationwide, primarily under private labels to
distributors which supply restaurants, schools, hotels and other segments of
the foodservice industry. Major capital expenditures in 1994 include the
beginning of a multi-phase project to significantly upgrade the Dixon, Illinois
facility with the completion of a new batch make-up room.
The Company manufactures vegetable-fat-based party dips, low-fat sour cream
and sour cream replacements at its Rockford, Illinois facility. These products
are sold nationally, but primarily east of the Rockies, under the Dean's, King
and private label brands in supermarkets and other retail outlets through
distributor or direct warehouse delivery.
Sales to unaffiliated customers for the fiscal years 1994, 1993 and 1992 were
$69 million, $67 million and $61 million, respectively.
Corporate and Other
DFC Transportation Company, a trucking subsidiary of the Company, operates
nationwide with a fleet of approximately 74 tractors and 167 trailers,
providing less-than-truckload refrigerated and frozen cartage service. The
majority of its revenues are derived from refrigerated freight. Its customers
include food and industrial companies. A significant portion of its revenues
are derived from the brokerage of various types of freight. During the fourth
quarter of 1992, the Company decided to terminate operation of the refrigerated
truckload transportation portion of its trucking business and an appropriate
charge to earnings was provided for the costs associated with such termination.
Revenues for the trucking division from unaffiliated customers in fiscal
years 1994, 1993 and 1992 were $20 million, $21 million and $45 million,
respectively. Revenues relating to hauling products for other divisions and
subsidiaries of the Company have been eliminated.
Also included in Corporate and Other are sales of canned meats processed
under bid contracts with the federal government. Such sales vary greatly from
year to year because of the nature of the federal government's procurement
practices. Margins are small since these contracts are taken primarily to
absorb overhead of the Company's canning operation during seasonally idle
periods of production. Sales in fiscal years 1994, 1993 and 1992 were $5
million, $10 million and $24 million, respectively.
RAW MATERIALS AND SUPPLIES
The Company's business is dependent upon obtaining adequate supplies of raw
and processed agricultural products. Historically, the Company has been able to
obtain adequate supplies of agricultural products.
Raw milk and other agricultural products are generally purchased directly
from farmers and farm cooperatives. The Company does not have long-term
purchase contracts for agricultural products. The price of raw milk is
extensively regulated. In fiscal 1994, raw milk costs exceeded last year's
levels during the first quarter, fell in the second quarter and then increased
significantly during the last half of
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the year, remaining higher than fiscal 1993 levels. Raw milk costs rose
slightly during the first part of fiscal 1993, declining somewhat during the
latter part of the year as costs were moderately higher than fiscal 1992 cost
levels. The cost of raw milk rose steadily during the first nine months of
fiscal 1992 declining slightly in the fourth quarter, but still remained higher
than the 1991 cost levels.
The Company produces most of its plastic gallon and half-gallon container
requirements for its fluid milk business. Can requirements for canned
vegetables are primarily furnished by three can manufacturers, and glass
containers for pickles and related products are purchased from two main
suppliers, as required, at competitive prices.
Certain commodities, such as corn syrups, vegetable oils, sugar and casein,
and various packaging supplies are purchased from numerous sources on a normal
purchase order basis, with vegetables and cucumbers purchased under seasonal
grower contracts. The Company is not dependent upon any single supplier and is
confident that any lost supplier requirements could be replaced in the ordinary
course of business.
In its vegetable and pickle operations, the Company supplies seed to and
advises growers regarding planting techniques, monitors and arranges for the
control of insects, directs the harvest, and, for some crops, provides
automated harvesting service. Vegetable supplies are largely dependent on
regional weather and growing conditions. Weather-related crop shortages and
harvest delays in the midwest growing region resulted in higher fiscal 1994
profit margins in the Company's vegetable businesses. Excessive industry-wide
inventories of certain vegetables during fiscal years 1993 and 1992 resulted in
decreased profit margins. Short supplies of certain vegetables during fiscal
1989 and 1990, the result of the 1988 Midwest drought, required purchases of
frozen vegetables from other domestic and foreign sources to minimize loss of
vegetable sales volume. The prices for raw cucumbers have been relatively
stable over the last three years.
DISTRIBUTION
Dairy Products are principally delivered to grocery chain stores or
warehouses directly from the Company's processing plants by the Company, in
trucks which it owns or leases, and by independent distributors. In certain
states, products are also delivered to the Company's distribution branches from
which distribution is then made to customers. The Company has continued its
efforts to streamline its distribution system for Dairy Products. Major
economies have been effected in recent years through consolidation of
distribution branches and routes, with emphasis on direct truck delivery to
retail stores and warehouses of grocery chains. The Company's Specialty Food
Products are delivered to warehouses and food distributors by the Company's
fleet of trucks and outside freight carriers. Inventories of canned and frozen
vegetables are maintained by the Company in warehouses throughout the country
in order to maintain a ready supply for rapid delivery to local retailers.
COMPETITION
The Company's business is highly price competitive with relatively low
operating margins. Quality and customer service are important factors in
securing and maintaining business. The Company's Dairy Products business
operates in a number of different geographical markets, competing in some
against national companies and in others against regional or local companies.
In certain markets, some supermarket chain stores have their own dairy products
processing plants. Generally, in each major market and product class there are
a number of competitors, some of which have greater sales and assets than the
Company. The Company's Specialty Food Products are marketed nationwide and
internationally. The degree of penetration and competitive conditions in each
market varies, but the Company does not consider that it has any material
competitive advantage in any of its major markets or product classes.
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EMPLOYEES
The Company has approximately 12,100 full-time employees, of whom
approximately 4,200 are represented by the International Brotherhood of
Teamsters and other unions under thirty-nine collective bargaining agreements.
Twelve of these agreements expire during fiscal 1995. These include agreements
with employees at Sheboygan, Wisconsin; El Paso, Texas; Sharpsville,
Pennsylvania; Huntley, Chemung, Franklin Park, Belvidere and Rockford, Illinois
dairy products plants and Pecatonica, Illinois; Green Bay, Wisconsin; Eaton
Rapids, Michigan and Watsonville, California specialty food products plants.
Generally, the Company considers its employee relations to be good.
The Company has approximately 8,400 seasonal positions at its vegetable
operations and its pickle processing plants, principally during the summer
months. The Company has been successful in meeting its seasonal employment
needs, as many such employees return annually to fill these positions.
ENVIRONMENT
The Company's compliance with Federal, State and local regulations relating
to the discharge of material into the environment or otherwise relating to the
protection of the environment has not had a material effect on the Company's
capital expenditures, earnings or competitive position. The Company continues
to give considerable attention to the impact or potential impact of its
operations on the environment.
ITEM 2. PROPERTIES.
The Company owns fifty-four of its processing plants (six of which are
subject to mortgage) and leases the other four under leases expiring from
fiscal 1995 through fiscal 2011. The Company has various distribution branches
and storage warehouses located throughout the country, some of which are owned
and some leased. The Company considers its properties suitable and adequate for
the conduct of its business. A number of the vegetable canning production
facilities are operated only during the vegetable intake season. All other
production facilities are principally operated at or near capacity levels, but
generally on the basis of fewer than three shifts per day.
Further information relating to the Company's leases is contained in the note
to consolidated financial statements captioned "Leases" appearing in the
Company's Fiscal 1994 Annual Report (Exhibit 13a hereto) on page 28. Such
information is hereby incorporated herein by reference.
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The locations of the Company's processing facilities, by product category
within business segments, are set forth below:
DAIRY PRODUCTS
Fluid Milk and Specialty Dairy
Jacksonville, Florida Barberton, Ohio
Miami, Florida Springfield, Ohio
Orange City, Florida Belleville, Pennsylvania
Orlando, Florida Erie, Pennsylvania
Chemung, Illinois Philadelphia, Pennsylvania
Huntley, Illinois Sharpsville, Pennsylvania
Rockford, Illinois Athens, Tennessee
Rochester, Indiana El Paso, Texas
Louisville, Kentucky Lubbock, Texas
Murray, Kentucky San Angelo, Texas
Evart, Michigan Salt Lake City, Utah
Albuquerque, New Mexico St. Thomas, Virgin Islands
Cuba, New York Sheboygan, Wisconsin
Ice Cream
Ft. Lauderdale, Florida Athens, Tennessee
Belvidere, Illinois Lubbock, Texas
Albuquerque, New Mexico St. Thomas, Virgin Islands
Barberton, Ohio
SPECIALTY FOOD PRODUCTS
Canned and Frozen Vegetables
Oxnard, California Brillion, Wisconsin
Watsonville, California Cambria, Wisconsin
Hartford, Michigan Cedar Grove, Wisconsin
Arlington, Minnesota Darien, Wisconsin
Waseca, Minnesota Fairwater, Wisconsin
Fulton, New York Fort Atkinson, Wisconsin
Uvalde, Texas Green Bay, Wisconsin
Bellingham, Washington Hortonville, Wisconsin
Bloomer, Wisconsin Celaya, Mexico
Pickles, Relishes and Specialty Items
Atkins, Arkansas Plymouth, Indiana
LaJunta, Colorado Croswell, Michigan
Sanford, Florida Faison, North Carolina
Cairo, Georgia Green Bay, Wisconsin
Powdered Products
Pecatonica, Illinois Wayland, Michigan
Rockford, Illinois
Sauces, Puddings and Dips
Dixon, Illinois Rockford, Illinois
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Distribution branches for Dairy Products are located in New Mexico, Texas,
Florida, Ohio, Tennessee, New York, Georgia, Pennsylvania, South Carolina,
Virginia, Illinois and Wisconsin.
Specialty Food Products distribution warehouses are maintained in Wisconsin
and Michigan with public warehouses utilized throughout the United States for
further distribution of vegetable products. The Company maintains powdered
product distribution branches in Illinois, Texas and Utah. One Company-owned
transportation terminal and maintenance facility is located in Illinois.
ITEM 3. LEGAL PROCEEDINGS.
Information on legal proceedings is contained in the Company's Fiscal 1994
Annual Report (Exhibit 13a hereto) on page 29 in the note to consolidated
financial statements captioned "Commitments and Contingent Liabilities". Such
information is hereby incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year ended May 29, 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding the Company's executive officers is set forth in Item
10 of Part III of this Report.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the New York Stock Exchange under the
ticker symbol DF. The range of Common Stock sales prices for each of the
quarters during the past two fiscal years (as reported by the New York Stock
Exchange) and the frequency and amount of Common Stock dividends declared the
past two fiscal years are set forth under the caption "Quarterly Financial
Data" at page 30 of the Company's Fiscal 1994 Annual Report (Exhibit 13a
hereto) in the rows captioned "Stock Price Range" and "Dividend Rate". Such
rows and the column and row captions related thereto are hereby incorporated
herein by reference.
The approximate number of holders of record of the Company's Common Stock on
August 5, 1994, was 8,988.
Restrictions on the Company's ability to pay dividends on its Common Stock
are described in the first paragraph of the "Borrowing Arrangements" note to
the consolidated financial statements at page 25 of the Company's Fiscal 1994
Annual Report (Exhibit 13a hereto), which paragraph is hereby incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data for each of the Company's last five fiscal years is
set forth at page 31 of the Company's Fiscal 1994 Annual Report (Exhibit 13a
hereto) under the caption "Summary of Operations". Such selected financial data
is hereby incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
A discussion of the Company's financial condition, cash flows and results of
operations, including information with respect to liquidity and capital
resources, is set forth at pages 16 through 20 of the Company's Fiscal 1994
Annual Report (Exhibit 13a hereto) under the caption "Financial Review", which
discussion is hereby incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company's consolidated balance sheets as of May 29, 1994 and May 30,
1993, and related consolidated statements of income, of shareholders' equity
and of cash flows for each of the three fiscal years in the period ended May
29, 1994, and the notes thereto, together with the report thereon of
independent accountants, are set forth on pages 21 through 30 of the Company's
Fiscal 1994 Annual Report (Exhibit 13a hereto).
Such financial statements and the report thereon of independent accountants
are hereby incorporated herein by reference.
Financial data for each quarter within the two most recent fiscal years is
set forth under the caption "Quarterly Financial Data" at page 30 of the
Company's Fiscal 1994 Annual Report (Exhibit 13a hereto) in the rows captioned
"Net Sales", "Gross Profit", "Net Income" and "Per Common Share Data: Net
Income". Such rows and row captions related thereto are hereby incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding the Company's directors (including nominees for
election at the Company's Annual Meeting of Stockholders to be held October 4,
1994) is set forth at pages 1 through 6 of the Company's 1994 Proxy Statement
under the captions "ELECTION OF DIRECTORS" and "CERTAIN INFORMATION REGARDING
THE BOARD OF DIRECTORS". Such information is hereby incorporated herein by
reference.
Information supplied by the Company's executive officers who are not also
directors of the Company concerning their ages, business experiences, and
periods of service as executive officers is as follows:
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SERVED IN
POSITION WITH SUCH POSITION
THE COMPANY AGE SINCE
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Eric A. Blanchard.................... Vice President, 38 1993
Secretary and
General Counsel
Timothy J. Bondy..................... Vice President 44 1989
Finance
Gary A. Corbett...................... Vice President 46 1993
Governmental and
Dairy Industry Relations
Gary D. Flickinger................... Vice President 52 1993
Production
Daniel E. Green...................... Group Vice President 49 1992
Specialty Dairy Division
James R. Greisinger.................. Group Vice President 53 1992
and President of Dean
Pickle and Specialty
Products Company
Dale I. Hecox........................ Treasurer 62 1985
George A. Muck....................... Vice President 56 1970
Research & Development
Douglas A. Parr...................... Vice President 52 1993
Sales & Marketing--
Milk and Ice Cream
Dennis J. Purcell.................... Vice President 51 1993
Sales--National Accounts
Roger A. Ragland..................... Vice President 60 1993
Sales and Marketing
Food Products
Jeffrey P. Shaw...................... Group Vice President 37 1992
and President of Dean
Foods Vegetable Company
Terrence J. Smith.................... Vice President 62 1974
Industrial Relations
</TABLE>
12
<PAGE>
Each of the executive officers, including executive officers who are also
directors, was elected to serve as an executive officer until the next annual
meeting of directors, scheduled for October 4, 1994.
Messrs. Blanchard, Green, Greisinger, Purcell, Ragland and Shaw have been
employees of the Company for more than five years. Prior to assuming their
current positions, Mr. Blanchard was the Company's secretary and general
counsel; Mr. Green was the Company's Vice President, Corporate planning and
development and previously held positions of a marketing executive, divisional
general manager and the Company's Director of Research; Mr. Greisinger was a
Company Vice President and President of Green Bay Food Company; Mr. Purcell was
Senior Vice President of Sales and Marketing of Green Bay Food Company; and Mr.
Ragland was a divisional sales vice president. Mr. Corbett has been employed by
the Company since 1990. Prior to assuming his present duties, Mr. Corbett was
in the Company's sales administration management. Mr. Corbett prior to his
Company employment was an executive at Swiss Valley Farms Co., an Iowa
cooperative dairy processor. Mr. Parr has been employed by the Company since
1992. Prior to assuming his present duties he was a Company regional sales
manager. Mr. Parr, prior to his employment by the Company, was the Vice
President--Western Zone Dairy Group of Borden, Inc., a diversified food and
dairy company. Prior to assuming his present duties, Mr. Shaw was President of
the Company's Richard A. Shaw, Inc. subsidiary, which was subsequently merged
into Dean Foods Vegetable Company.
ITEM 11. EXECUTIVE COMPENSATION.
Information regarding the cash compensation of the Company's executive
officers, compensation pursuant to plans and compensation of the Company's
directors (including nominees for election at the Company's Annual Meeting of
stockholders to be held October 4, 1994) is set forth in the Company's 1994
Proxy Statement at pages 5 through 6 under the caption "CERTAIN INFORMATION
REGARDING THE BOARD OF DIRECTORS" and at pages 6 through 15 under the caption
"EXECUTIVE COMPENSATION." Such information is hereby incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information regarding security ownership of certain beneficial owners and
management is set forth in the Company's 1994 Proxy Statement at pages 16 and
17 under the caption "PRINCIPAL HOLDERS OF VOTING SECURITIES". Such information
is hereby incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information regarding certain transactions is set forth in the Company's 1994
Proxy Statement at page 15 under the caption "CERTAIN TRANSACTIONS." Such
information is hereby incorporated herein by reference.
13
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this Report. The page
number, if any, listed opposite a document indicates the page number in the
sequential numbering system in the manually signed original of this Report
where such document can be found.
<TABLE>
<CAPTION>
PAGE
NO.
-----
<C> <S> <C>
(1) Financial Statements
The consolidated balance sheets at May 29, 1994 and May 30,
1993, the related consolidated statements of income, of share-
holders' equity and of cash flows for each of the three fiscal
years in the period ended May 29, 1994, and the notes thereto,
together with the report thereon of Price Waterhouse dated June
29, 1994, as incorporated by reference in Part II, Item 8 of
this Report.
(2) Financial Statement Schedules
Report of independent accountants on financial statement sched- 16
ules
Schedule V--Property, plant and equipment 17
Schedule VI--Accumulated depreciation of property, plant and 18
equipment
Schedule VIII--Valuation and qualifying accounts 19
Schedule X--Supplemental income statement information 20
All other schedules have been omitted because they are not ap-
plicable, or not required, or because the required information
is shown in the consolidated financial statements or notes
thereto.
Separate financial statements of the Registrant have been omit-
ted since the Registrant is primarily an operating company and
all subsidiaries included in the consolidated financial state-
ments, in the aggregate, do not have minority equity interest
and/or indebtedness to any person other than the Registrant or
its consolidated subsidiaries in amounts which together exceed
5% of total consolidated assets at May 29,1994, except for in-
debtedness incurred in the ordinary course of business which is
not overdue and which matures within one year from the date of
its creation.
(3) Exhibits
See Exhibit Index.............................................. 21-22
</TABLE>
(b) Reports on Form 8-K.
Registrant filed a Current Report on Form 8-K, dated June 20, 1994, in
respect of Registrant's press release dated June 10, 1994, announcing
that the Board of Directors of Curtice-Burns Foods, Inc., Rochester,
New York (Curtice-Burns), voted to pursue a proposal whereby the
Registrant would acquire all of the outstanding stock of Curtice-Burns
for $20 per share, subject to the resolution of a number of specified
contingencies, (Item 5).
14
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Dean Foods Company
Thomas L. Rose
By: _________________________________
Thomas L. Rose
(President and Chief Operating
Officer)
Date: August 19, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Howard M. Dean Chairman of the Board and August 19, 1994
____________________________________ Director
Howard M. Dean
Lewis M. Collens Director August 19, 1994
____________________________________
Lewis M. Collens
Paula H. Crown Director August 19, 1994
____________________________________
Paula H. Crown
William D. Fischer Director August 19, 1994
____________________________________
William D. Fischer
John P. Frazee, Jr. Director August 19, 1994
____________________________________
John P. Frazee, Jr.
Bert A. Getz Director August 19, 1994
____________________________________
Bert A. Getz
Andrew J. McKenna Director August 19, 1994
____________________________________
Andrew J. McKenna
Thomas A. Ravencroft Senior Vice President and August 19, 1994
____________________________________ Director
Thomas A. Ravencroft
Thomas L. Rose President and Director August 19, 1994
____________________________________
Thomas L. Rose
Delbert C. Staley Director August 19, 1994
____________________________________
Delbert C. Staley
Alexander J. Vogl Director August 19, 1994
____________________________________
Alexander J. Vogl
Timothy J. Bondy Vice President, Finance-- August 19, 1994
____________________________________ Principal Financial
Timothy J. Bondy Officer
Dale I. Hecox Treasurer--Principal August 19, 1994
____________________________________ Accounting Officer
Dale I. Hecox
</TABLE>
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
Dean Foods Company
Our audits of the consolidated financial statements referred to in our report
dated June 29, 1994 appearing on page 30 of the Dean Foods Company Annual
Report to Shareholders for Fiscal Year Ended May 29, 1994 (which report and
consolidated financial statements are incorporated by reference in this Annual
Report on Form 10-K) also included an audit of the Financial Statement
Schedules listed in Item 14(a) of this Form 10-K. In our opinion, these
Financial Statement Schedules present fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
Price Waterhouse LLP
Chicago, Illinois
June 29, 1994
16
<PAGE>
DEAN FOODS COMPANY AND SUBSIDIARIES
----------------
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
BALANCE
AT ASSETS OF BALANCE
BEGINNING ACQUIRED ADDITIONS RETIREMENTS AT END
CLASSIFICATION OF PERIOD COMPANIES AT COST OR SALES OTHER OF PERIOD
- - -------------- --------- --------- --------- ----------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED MAY 29, 1994
Land.................... $ 27,917 $ 1,129 $ 3,280 $( 2,540) $ (107) $ 29,679
Buildings and
improvements........... 199,520 15,744 24,552 (4,547) (78) 235,191
Machinery and equipment. 448,973 41,312 46,960 (19,398) 21,345 539,192
Transportation equipment
....................... 57,644 782 3,507 (7,530) 49 54,452
Construction in
Progress............... 36,844 8,375 2,678 -- -- 47,897
-------- ------- -------- -------- ------- --------
$770,898 $67,342 $ 80,977 $(34,015) $21,209 $906,411
======== ======= ======== ======== ======= ========
FISCAL YEAR ENDED MAY 30, 1993
Land.................... $ 26,386 $ 551 $ 983 $ (3) -- $ 27,917
Buildings and
improvements........... 175,030 807 23,968 (285) -- 199,520
Machinery and equipment. 407,060 4,059 53,107 (15,253) -- 448,973
Transportation equipment
....................... 54,890 -- 7,532 (4,778) -- 57,644
Construction in
Progress............... 47,631 -- (10,787) -- -- 36,844
-------- ------- -------- -------- ------- --------
$710,997 $ 5,417 $ 74,803 $(20,319) -- $770,898
======== ======= ======== ======== ======= ========
FISCAL YEAR ENDED MAY 31, 1992
Land.................... $ 25,376 $ 1,020 $ 385 $ (395) -- $ 26,386
Buildings and
improvements........... 160,071 5,781 12,091 (2,913) -- 175,030
Machinery and equipment. 370,125 6,851 42,668 (12,584) -- 407,060
Transportation equipment
....................... 53,008 1,394 5,706 (5,218) -- 54,890
Construction in
Progress............... 30,614 -- 17,017 -- -- 47,631
-------- ------- -------- -------- ------- --------
$639,194 $15,046 $ 77,867 $(21,110) -- $710,997
======== ======= ======== ======== ======= ========
</TABLE>
DEPRECIATION AND AMORTIZATION (STRAIGHT-LINE METHOD)
<TABLE>
<S> <C>
Buildings and Improvements............................. 2 1/2% to 20%
Machinery and Equipment................................ 5% to 33 1/3%
Transportation Equipment............................... 10% to 33 1/3%
</TABLE>
17
<PAGE>
DEAN FOODS COMPANY AND SUBSIDIARIES
----------------
SCHEDULE VI--ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
AMOUNT
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND RETIREMENTS AT END
CLASSIFICATION OF PERIOD EXPENSES OR SALES OTHER OF PERIOD
- - -------------- ---------- ---------- ----------- ----- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED MAY 29,
1994
Buildings and improvements.. $ 61,148 $ 8,964 $ (1,921) -- $ 68,191
Machinery and equipment..... 231,730 43,489 (15,858) $915 260,276
Transportation equipment.... 34,256 6,096 (5,619) -- 34,733
-------- ------- -------- ---- --------
$327,134 $58,549 $(23,398) $915 $363,200
======== ======= ======== ==== ========
FISCAL YEAR ENDED MAY 30,
1993
Buildings and improvements.. $ 53,677 $ 7,929 $ (458) -- $ 61,148
Machinery and equipment..... 209,311 37,667 (15,248) -- 231,730
Transportation equipment.... 32,218 6,219 (4,181) -- 34,256
-------- ------- -------- ---- --------
$295,206 $51,815 $(19,887) -- $327,134
======== ======= ======== ==== ========
FISCAL YEAR ENDED MAY 31,
1992
Buildings and improvements $ 48,609 $ 7,317 $ (2,249) -- $ 53,677
Machinery and equipment..... 184,397 34,872 (9,958) -- 209,311
Transportation equipment.... 30,258 6,159 (4,199) -- 32,218
-------- ------- -------- ---- --------
$263,264 $48,348 $(16,406) -- $295,206
======== ======= ======== ==== ========
</TABLE>
18
<PAGE>
DEAN FOODS COMPANY AND SUBSIDIARIES
----------------
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
AMOUNT
CHARGED
BALANCE AT (CREDITED) ACCOUNTS BALANCE
BEGINNING TO COSTS WRITTEN AT END
CLASSIFICATION OF PERIOD AND EXPENSES OFF OF PERIOD
- - -------------- ---------- ------------ -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
FISCAL YEAR ENDED MAY 29, 1994
Allowance for doubtful accounts and
notes receivable................... $4,470 $ 326 $ 878 $3,918
Allowance for doubtful long-term
receivables........................ 4 (4) -- --
------ ------ ------ ------
Total reserves deducted in balance
sheet from assets to which they
apply.............................. $4,474 $ 322 $ 878 $3,918
====== ====== ====== ======
FISCAL YEAR ENDED MAY 30, 1993
Allowance for doubtful accounts and
notes receivable................... $5,331 $ 833 $1,694 $4,470
Allowance for doubtful long-term
receivables........................ 26 (22) -- 4
------ ------ ------ ------
Total reserves deducted in balance
sheet from assets to which they
apply.............................. $5,357 $ 811 $1,694 $4,474
====== ====== ====== ======
FISCAL YEAR ENDED MAY 31, 1992
Allowance for doubtful accounts and
notes receivable................... $4,284 $1,988 $ 941 $5,331
Allowance for doubtful long-term
receivables........................ 15 11 -- 26
------ ------ ------ ------
Total reserves deducted in balance
sheet from assets to which they
apply.............................. $4,299 $1,999 $ 941 $5,357
====== ====== ====== ======
</TABLE>
19
<PAGE>
DEAN FOODS COMPANY AND SUBSIDIARIES
----------------
SCHEDULE X--SUPPLEMENTAL INCOME STATEMENT INFORMATION
<TABLE>
<CAPTION>
CHARGED TO COST AND
EXPENSE
-----------------------
ITEM 1994 1993 1992
---- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Maintenance and Repairs................................ $43,620 $39,521 $47,133
</TABLE>
All other supplemental expense items have been excluded as they do not exceed
one percent of net sales.
20
<PAGE>
EXHIBIT INDEX
The following documents are the exhibits to this Report. For convenient
reference, each exhibit is listed according to the number assigned to it in the
Exhibit Table of Item 601 of Regulation S-K. The page number, if any, listed
opposite an exhibit indicates the page number in the sequential numbering
system in the manually signed original of this Report where such exhibit can be
found.
(3)Articles of Incorporation and by-laws
a. Dean Foods Company Restated Certificate of Incorporation dated February 8,
1988 (filed as Exhibit 3(a) to Registrant's Form 10-K Annual Report for
Fiscal Year Ended May 29, 1988 and incorporated herein by reference)
b. By-Laws of Registrant, as amended December 2, 1988 (filed as Exhibit 3(b)
to the Registrant's
Form 10-K Annual Report for Fiscal Year Ended May 28, 1989 and
incorporated herein by reference)
(4)Instruments defining the rights of security holders, including indentures
a. Rights Agreement dated July 28, 1988 (filed as Exhibit 4(a) to the
Registrant's Form 10-K Annual Report for Fiscal Year Ended May 28, 1989
and incorporated herein by reference)
b. Amendment dated December 1, 1989, to Rights Agreement dated July 28, 1988
(filed as exhibit 4(b) to Registrant's Form 10-K Annual Report for Fiscal
Year Ended May 27, 1990 and incorporated herein by reference)
(10)Material contracts
a. Amended and Restated Dean Foods Company Management Deferred Compensation
Plan, dated as of June 1, 1994
b. Dean Foods Company Retirement Plan for Certain Directors (filed as Exhibit
10(a) to Registrant's Form 10-K Annual Report for Fiscal Year Ended
December 28, 1985 and incorporated herein by reference)
c. Form of Agreement dated March 17, 1986, between Registrant and each of its
current executive officers (filed as Exhibit 10(b) to Registrant's Form
10-K Annual Report for Fiscal Year Ended December 28, 1985 and
incorporated herein by reference)
d. Form of Indemnification Agreement between Registrant and each of its
directors and officers serving at any time after October 5, 1987 (filed as
Exhibit 10(m) to Registrant's Form 10-K Annual Report for Fiscal Year
Ended May 29, 1988, and incorporated herein by reference)
e. Amended and Restated Dean Foods Company Directors Deferred Compensation
Plan, dated March 25, 1988 (filed as Exhibit 10(j) to Registrant's Form
10-K Annual Report for Fiscal Year Ended May 28, 1989 and incorporated
herein by reference)
f. Dean Foods Company Supplemental Benefit Plan for eligible officers, as
amended and restated on May 24, 1991 (filed as Exhibit 10(k) to
Registrant's Form 10-K Annual Report for Fiscal Year ended May 26, 1991
and incorporated herein by reference)
g. Dean Foods Company Supplemental Incentive Compensation Plan for certain
officers, as amended March 31, 1989 (filed as Exhibit 10(l) to
Registrant's Form 10-K Annual Report for Fiscal Year Ended May 28, 1989
and incorporated herein by reference)
21
<PAGE>
h. Dean Foods Company Director Stock Option Plan, dated September 30, 1992
(Filed as Exhibit 10(i) to Registrant's Form 10-K Annual Report for
Fiscal Year ended May 30, 1993 and incorporated herein by reference)
(11)Statement re computation of per share earnings
(13)Annual report to security holders, Form 10-Q or quarterly report to
security holders
a. Dean Foods Company Annual Report to Shareholders for Fiscal Year Ended
May 29, 1994
With the exception of the financial statements, report of independent
accountants thereon and certain other information expressly incorporated
herein by reference, the Registrant's Annual Report to Shareholders for
Fiscal Year Ended May 29, 1994 is not to be deemed filed as part of this
Report.
(22)Subsidiaries of the Registrant
a. Subsidiaries of the Registrant as of May 29, 1994
(24)Consents of Experts and Counsel
a. Consent of Independent Accountants dated August 19, 1994
22
<PAGE>
Exhibit 10(a)
AMENDED AND RESTATED
DEAN FOODS COMPANY MANAGEMENT
DEFERRED COMPENSATION PLAN
--------------------------
1. PLAN
----
This instrument sets forth the "Dean Foods Company Management
Deferred Compensation Plan", as amended and restated as of June 1,
1994.
2. DEFINITIONS
-----------
The following words have the respective meanings stated below, unless
a different meaning is plainly required by the context:
(a) "Beneficiary" means any person other than a Manager who is entitled
to receive distributions under this Plan pursuant to Section 7.
(b) "Board" means the Board of Directors of the Company.
(c) A "Change in Control of the Company" will be deemed to have occurred
if: (i) there is a change in control of the Company that would be
required to be reported in response to Item 5(f) of Schedule 14A of
Regulation 14A, promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"); or (ii) any person or entity
(which includes any "Group" as such term is used in Section 13(d)(3)
of the Exchange Act) is, directly or indirectly, the "beneficial
owner" (as such term is used in Rule 13d-3 under the Exchange Act) of
securities of the Company representing 20% or more of the combined
voting power of the Company's then outstanding securities (computed
as described in such Rule); or (iii) a majority of the members of any
class of directors of the Company are persons who were neither
nominated by the Board for election by the stockholders nor elected
by the Board to fill vacancy(ies) on the Board; or (iv) the Company
(or any substantial portion of its assets) is combined with or
acquired by another person or other entity; provided, however, that
(v) no "Change in Control of the Company" shall be deemed to have
occurred with respect to any transaction (or series of transactions)
which shall have been approved in advance by a majority of the Board,
exclusive of members who are employed by or otherwise affiliated with
the person or other entity seeking to effect the Change in Control of
the Company; (vi) a "Change in Control of the Company" shall not
include any acquisition of voting stock by any underwriting syndicate
or underwriter for so long as such syndicate or underwriter holds the
voting stock for distribution to the public pursuant to an
underwriting agreement between the Company and such syndicate or
underwriter; and (vii) a "Change in Control of the Company" shall not
include any acquisition by
1
<PAGE>
any defined contribution plan which is qualified pursuant to
the applicable provisions of the Internal Revenue Code of
1986, as amended, and is maintained for the benefit of the
employees of the Company and/or its subsidiaries.
(d) "Committee" means the Committee which administers this Plan, as
provided in Section 8.
(e) "Company" means Dean Foods Company, a Delaware corporation, and
its successors.
(f) "Defined Rate" means the interest rate of 6% per annum or such
higher rate as the Committee shall from time to time determine.
Until otherwise determined by the Board, such higher rate shall
be the prime rate of interest as charged by the Harris Trust and
Savings Bank, Chicago, IL.
(g) "Manager" means an individual who is an officer of the Company or
who is determined by the Committee to be eligible to participate
in this Plan.
(h) "Monthly Base Pay" means the gross monthly base salary payable to
the Manager by the Company.
(i) "Plan" means the plan set forth in this instrument and known as
the "Amended and Restated Dean Foods Company Management Deferred
Compensation Plan."
3. PARTICIPATION
-------------
A Manager may elect to defer the payment of all or a portion, in
increments of One Hundred Dollars ($100.00), of his or her Monthly Base
Pay by completing the attached form of Deferral Election and returning
it to the Company prior to July 1 of the year commencing on July 1
(the "Plan Year") for which the election is to be effective. All such
amounts deferred by a Manager shall be credited to his or her deferred
compensation account.
An election for a particular Plan Year may only be modified by a
Manager by submitting a new Deferral Election to the Company before the
beginning of such Plan Year, provided that any Manager may terminate
subsequent deferrals at any time during the Plan Year by so notifying
the Company.
All amounts credited to deferred compensation accounts or otherwise
payable under this Plan will be unsecured liabilities of the Company and
will not be funded with any specific assets of the Company.
2
<PAGE>
4. INTEREST
--------
Interest on the balance in a Manager's deferred compensation account
will be credited to such account semi-annually at the end of each July
and January, except that after installment payments to the Manager or a
Beneficiary have commenced under this Plan, interest will be paid
semi-annually in cash to the Manager or Beneficiary as the case may be.
For the purpose of crediting interest for any semi-annual period:
(1) interest will be computed at the weighted average Defined Rate during
such semi-annual period; and (2) the balance in a Manager's deferred
compensation account during such semi-annual period will be deemed to be
the average of the balances in such account at the beginning of the period
and at the end of each month during such semi-annual period, including
interest previously credited.
5. PAYMENTS
--------
(a) Following termination of employment by the Company, the balance in
the Manager's deferred compensation account at the time of
termination will be paid to the Manager (or, in the event of the
Manager's death prior to the commencement of payment of or full
receipt of the Manager's interest under this Plan, to the Beneficiary
or Beneficiaries entitled thereto) in cash in a lump sum and/or in
not more than ten (10) annual installments in accordance with the
irrevocable elections of the Manager reflected in the Manager's
Deferral Elections. Once a Manager has elected to be paid the
deferred amounts for a Plan Year in annual installments, any election
by such Manager to be paid the deferred amounts for a subsequent Plan
Year in annual installments will be limited to the same number of
installment payments. Each annual installment payment will be made
within 30 days after the end of the calendar year, beginning with
the 30-day period following the calendar year in which the Manager's
employment by the Company terminates.
(b) Notwithstanding any previous decision by the Committee or
any election by a Manager, the Committee, in its sole discretion,
may at any time accelerate payment of the amounts credited to a
Manager's deferred compensation account. Without limiting the
generality of the foregoing, the Committee may do so in the event
of a Change in Control of the Company. Any such permission may be
subject to such terms, including without limitation the
ineligibility of such Manager to defer payment of all or a portion
of his or her future compensation, as the Committee may deem
appropriate.
6. BENEFICIARIES
-------------
A Manager may, by giving notice to the Company during the Manager's
lifetime, designate: (1) a Beneficiary or Beneficiaries to whom
distribution of the amount credited to the Manager's deferred compensation
account will be made in the event of the Manager's death prior to the
commencement of payment of or full
3
<PAGE>
receipt of the Manager's interest under this Plan; and (2) the
proportions to be distributed to each such designated Beneficiary
if there be more than one. Any such designation may be revoked or
changed by the Manager at any time and from time to time by
similar notice. If any such designated Beneficiary dies prior to
the death of the Manager (or if any such designated Beneficiary or
any successor thereto as hereinafter provided thereafter dies prior
to the distribution of all of the Manager's interest under this
Plan), the proportion (or remaining proportion) to have been
distributed to such designated or successor Beneficiary shall
instead be distributed to his or her estate.
7. COMMITTEE
---------
This Plan will be administered by a Committee consisting of the
members of the Compensation Committee of the Board.
Except as otherwise expressly provided in this Plan, the Committee
shall have full power and authority within the limits provided by
this Plan:
(a) to construe this Plan and make equitable adjustments for any
mistakes or errors made in the administration of this Plan;
(b) to determine all questions arising in the administration of this
Plan, including questions as to the rights of Managers participating
in this Plan and their Beneficiaries and the amounts of their
respective interests;
(c) to adopt such rules and regulations as it may deem reasonably
necessary for the proper and efficient administration of this Plan
consistent with its purposes;
(d) to enforce this Plan in accordance with its terms and with the
rules and regulations adopted by the Committee; and
(e) to do all other acts which in its judgment are necessary or
desirable for the proper and advantageous administration of
this Plan.
The Committee shall act by the vote or concurrence of a majority of
its members and shall maintain a written record of its decisions and
actions. All decisions and actions of the Committee pursuant to the
provisions of this Plan shall be final and binding upon all persons
affected thereby. No member of the Committee shall have any personal
liability to anyone, either as such member or as an individual, for
anything done or omitted to be done in good faith in carrying out the
provisions of this Plan.
8. NON-ALIENATION
--------------
No right or benefit under this Plan shall be subject to anticipation,
alienation, sale, assignment, pledge, encumbrance or charge, and any
attempt to anticipate, alienate, sell, assign, pledge, encumber or charge
the same shall be void. No right or benefit under this Plan shall in any
manner be liable for or
4
<PAGE>
subject to the debts, contracts, liabilities or torts of the person
entitled to such benefits except such claims as may be made by the
Company or any of its subsidiaries.
9. NOTICE
------
Any notice authorized or required to be given to the Company under
this Plan shall be deemed given upon delivery in writing, signed by the
person giving the notice, to the Secretary of the Company or such other
officer as may be designated by the Chairman of the Board.
10. PLAN MODIFICATIONS
------------------
The Board may at any time terminate this Plan or may, from time to
time, amend any provision of this Plan in such manner and to such extent
as it may, in its discretion, deem to be advisable. In the event this Plan
is terminated, any amount remaining credited to any Manager's deferred
compensation account will be distributed to the Manager or, after the
Manager's death, to his or her Beneficiary.
11. APPLICABLE LAW
--------------
This Plan shall be governed by the laws of the State of Illinois.
DEAN FOODS COMPANY
By: /s/ Howard M. Dean
----------------------
Howard M. Dean
Chairman of the Board
5
<PAGE>
EXHIBIT 11
DEAN FOODS COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS EXCEPT PER SHARE DATE)
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Income before cumulative effect of changes in
accounting principles................................. $70,762 $68,409 $62,016
Cumulative effect of changes in accounting principles.. 1,179 -- --
------- ------- -------
Net Income............................................. $71,941 $68,409 $62,016
======= ======= =======
Weighted Average Number of common shares outstanding
during the period..................................... 39,737 39,613 40,613
======= ======= =======
Primary Earnings per share before cumulative effect of
changes in accounting principles...................... $ 1.78 $ 1.73 $ 1.53
Cumulative effect of changes in accounting principles.. .03 -- --
------- ------- -------
Primary Earnings Per Common Share...................... $ 1.81 $ 1.73 $ 1.53
======= ======= =======
</TABLE>
<PAGE>
FINANCIAL REVIEW
THE FINANCIAL REVIEW SHOULD BE READ IN CONJUNCTION WITH THE LETTER TO
SHAREHOLDERS, THE OPERATIONS REVIEW OF THE COMPANY'S BUSINESS SEGMENTS (DAIRY
PRODUCTS AND SPECIALTY FOOD PRODUCTS) AND THE CONSOLIDATED FINANCIAL STATEMENTS
AND NOTES RELATED THERETO CONTAINED IN THIS ANNUAL REPORT.
[WORKING CAPITAL IN MILLIONS OF DOLLARS]
(GRAPH APPEARS HERE)
<TABLE>
<CAPTION>
<S> <C>
1994 $ 93
1993 $198
1992 $184
1991 $198
1990 $183
1989 $156
1988 $130
1987 $115
1986 $108
1985 $ 97
1984 $ 79
</TABLE>
[DIVIDENDS PER SHARE IN DOLLARS]
(GRAPH APPEARS HERE)
<TABLE>
<CAPTION>
<S> <C>
1994 $0.64
1993 $0.60
1992 $0.56
1991 $0.49
1990 $0.44
1989 $0.40
1988 $0.36
1987 $0.32
1986 $0.27
1985 $0.22
1984 $0.18
</TABLE>
[CAPITAL EXPENDITURES IN MILLIONS OF DOLLARS]
(GRAPH APPEARS HERE)
<TABLE>
<CAPTION>
<S> <C>
1994 $81
1993 $75
1992 $78
1991 $73
1990 $68
1989 $56
1988 $39
1987 $42
1986 $37
1985 $33
1984 $20
</TABLE>
[SHAREHOLDERS' EQUITY IN MILLIONS OF DOLLARS]
(GRAPH APPEARS HERE)
<TABLE>
<CAPTION>
<S> <C>
1994 $525
1993 $476
1992 $430
1991 $417
1990 $363
1989 $293
1988 $266
1987 $236
1986 $207
1985 $176
1984 $147
</TABLE>
[LONG-TERM DEBT TO CAPITAL IN PERCENT]
(GRAPH APPEARS HERE)
<TABLE>
<CAPTION>
<S> <C>
1994 20.6%
1993 24.1%
1992 26.5%
1991 26.5%
1990 28.8%
1989 22.3%
1988 15.5%
1987 16.6%
1986 19.1%
1985 21.9%
1984 24.9%
</TABLE>
[RETURN ON AVERAGE EQUITY IN PERCENT]
(GRAPH APPEARS HERE)
<TABLE>
<CAPTION>
<S> <C>
1994 14.4%
1993 15.1%
1992 14.6%
1991 18.6%
1990 18.7%
1989 21.6%
1988 17.0%
1987 18.5%
1986 21.3%
1985 22.8%
1984 23.3%
</TABLE>
16
<PAGE>
FINANCIAL OBJECTIVES AND STRATEGIES
The Company's primary objective is to maximize shareholder value over time
through dividend growth and long-term stock appreciation. Among the financial
strategies employed by the Company toward accomplishing this objective are:
SOUND WORKING CAPITAL MANAGEMENT
The Company employs various procedures to monitor and control the quality and
levels of current assets using short-term borrowings primarily to meet seasonal
crop-related cash requirements. During fiscal 1994, the Company utilized short-
term borrowings under bank lines of credit to acquire businesses. The amounts
borrowed under such lines of credit are expected to be refinanced in fiscal
1995. The Company's working capital ratio (current assets divided by current
liabilities) at 1994 fiscal-year end was 1.25.
CAPITAL INVESTMENTS
The Company's primary goal is to maintain and improve the productivity of its
assets, making those capital investments which offer returns to the Company
greater than its cost of capital.
PRUDENT USE OF DEBT
The long-term debt market has been used primarily to fund acquisitions and
major capital expenditures. Based upon its long-term debt-to-capital ratio of
20.6% at the 1994 fiscal year-end, the Company believes it has sufficient debt
capacity to fund future growth.
DIVIDEND POLICY
On July 22, 1994, the Company increased its quarterly dividend 6-1/4% to $.17
per share, the twenty-second dividend increase since 1974. The total increase in
the dividend rate since 1974 is 2,160%.
STOCK REPURCHASE PLAN
The Company, in fiscal 1988, adopted a stock repurchase program which the
Company believes enhances shareholder value. During fiscal years 1993 and 1992,
the Company purchased 1,732,366 shares of its common stock. No shares were
purchased during fiscal 1994 as funds generated from operations were used in
connection with the acquisitions of businesses.
FINANCIAL CONDITION
CAPITAL RESOURCES AND LIQUIDITY
The Company's operating cash and capital expenditure requirements have
historically been met through funds generated internally from assets employed
(working capital and long-term assets).
Working capital at May 29, 1994 was $92.9 million, a decrease of $105.5
million from a year ago. Cash and temporary cash investments at May 29, 1994 was
$11.0 million, a decrease of $30.6 million from last year. The decreases in
working capital and cash and temporary cash investments were the result of funds
used to acquire businesses during fiscal 1994. Inventories increased $54.3
million from last year, principally due to the inventories of a business
acquired during fiscal 1994. Dairy Products inventory turnover is at a high
rate, whereas Specialty Food Products inventories generally have lower turnover
rates and crop-related inventory levels may vary from year to year. A large part
of the Specialty Food Products inventories are valued on the LIFO inventory
valuation method which enhances the Company's cash flow.
The Company had maintained short-term lines of credit of $29.5 million,
adjusted to a maximum of $87.5 million to meet seasonal crop-related
requirements. In the latter part of fiscal 1994 these lines were increased to a
maximum of $177.5 million in order to fund 1994 business acquisitions and
working capital requirements. The short-term borrowings used to fund the
acquisitions are expected to be refinanced to longer maturities in fiscal 1995
with new seasonally adjusted borrowing levels established. The borrowings
outstanding under bank lines of credit at the end of fiscal 1994 were $122
million, whereas there were no borrowings outstanding at fiscal 1993 year-end.
Net property, plant and equipment increased $99.4 million this year
principally due to capital expenditures and the assets of businesses acquired,
less depreciation. Major capital expenditures during fiscal 1994 were a plant
renovation and plant expansions required to handle increased production volumes.
The capital sources available to the Company are long-term obligations and
equity markets. The Company, on occasion, has used the long-term debt market to
fund acquisitions and major capital expenditures. Although the Company presently
has no plans to utilize the equity markets, the Company's long-term objective is
to provide a
17
<PAGE>
mix of debt and equity that will provide sufficient financial flexibility for
growth. Long-term obligations at May 29, 1994 were $136.2 million, a decrease of
$15.0 million from last year-end as a result of the prepayment of a fixed rate
obligation and normal maturities. The Company's debt-to-capital ratio at May 29,
1994 was 20.6% compared to 24.1% a year ago. The Company is in compliance with
the covenants and restrictions under its debt agreements, the most restrictive
of which are discussed in the "Borrowing Arrangements" note to the consolidated
financial statements.
Shareholders' Equity at May 29, 1994 was $524.8 million, an increase of $48.5
million, the result of earnings less dividends paid to shareholders. The
treasury stock held at May 29, 1994 is available for use in future acquisitions,
for stock options or for other general business purposes. The return on average
equity for fiscal 1994 was 14.4% compared to 15.1% last year.
CASH FLOWS
Net cash flow for fiscal 1994 was $30.6 million unfavorable, primarily the
result of outlays for acquisitions net of the short-term borrowings used to fund
such acquisitions. During fiscal 1993, strong cash provided from operations
resulted in a net positive cash flow of $7.6 million for the year. Particulars
of the Company's cash flow activities are as follows:
Operating Activities--Cash provided from operations for fiscal 1994 was $122.0
million compared to $122.7 million and $124.5 million, for fiscal years 1993 and
1992, respectively. The cash provided in 1994 was principally the result of the
increased earnings and greater non-cash charges to income less a net increase in
working capital items.
Investing Activities--Net cash used in the Company's investing activities in
fiscal 1994 was $242.7 million compared to $76.5 million and $80.5 million for
fiscal year 1993 and 1992, respectively. Capital expenditures and business
acquisitions are the Company's principal investing activities. During the year,
$171.5 million was used to acquire businesses, an important aspect of the
Company's growth. These acquisitions are discussed in the "Business
Acquisitions" note to the consolidated financial statements. Capital
expenditures for 1994 were $81.0 million compared with $74.8 million and $77.9
million in fiscal years 1993 and 1992, respectively. Capital expenditures for
fiscal 1995 are projected to approximate fiscal 1994 capital spending. Three
businesses, which the Company concluded were not consistent with its long range
goals, were sold during the three years ended May 29, 1994 providing cash of
$12.8 million.
Financing Activities--Net cash provided by financing activities during fiscal
1994 was $90.1 million. During fiscal years 1993 and 1992, net cash used in
financing activities was $38.7 million and $54.1 million, respectively. The
principal reason for the increase in cash provided in fiscal 1994 was the use of
short-term bank borrowings for acquisitions. No short-term borrowings were
outstanding at the end of fiscal years 1993 and 1992. Cash dividends paid, which
have increased in each of the last three years, were $25.0 million during fiscal
1994 compared to $23.4 million and $22.2 million during fiscal years 1993 and
1992, respectively. During fiscal years 1993 and 1992, the Company used $41.6
million to purchase treasury stock. No treasury stock purchases were made during
fiscal 1994.
RESULTS OF OPERATIONS
Earnings for fiscal 1994 increased 5% over fiscal 1993 with income of $71.9
million or $1.81 per share compared to $68.4 million or $1.73 per share last
year.
After a sharp drop in first quarter earnings, fiscal 1994 earnings finished
strong, principally due to improved vegetable earnings and the contribution of a
business acquired in the latter part of the year. The fiscal 1994 earnings were
impacted by the adoption of new accounting principles and the Revenue
Reconciliation Act of 1993. The Company on May 31, 1993, adopted the provisions
of Statement of Financial Accounting Standard No. 106 (FAS 106), "Employers'
Accounting for Postretirement Benefits Other than Pensions" and FAS No. 109,
"Accounting for Income Taxes." The implementation of FAS 106 resulted in a non-
cash charge of $1.0 million, net of taxes, or $.03 per share. The Company
elected to recognize the cumulative effect of the adoption of FAS 109 which
resulted in increasing fiscal 1994 earnings by $2.2 million or $.06 per share.
Further discussion of FAS 106 and FAS 109 are contained respectively in the
"Employee Benefit Plans" and "Income Taxes" notes to the consolidated financial
statements. Results for the first quarter this year included a charge of $1.5
million or $.04 per share as a result of the increase in the corporate tax rate
to 35% retroactive to January 1, 1993.
18
<PAGE>
Both 1993 and 1992 fiscal earnings were impacted principally by lower profits in
the Company's vegetable operations, the result of industry-wide excess
inventories and competitive conditions. Fiscal 1992 results included a special
charge to earnings of $9.1 million ($5.7 million after taxes) or $.14 per share
related to the termination of the Company's refrigerated truckload
transportation business.
Net sales for fiscal 1994 were $2.4 billion compared to $2.3 billion for
fiscal 1993, a 7% increase. Both Dairy Products and Specialty Food Products
recorded sales increases in fiscal 1994. The increased sales of Dairy Products
was the result of higher selling prices, reflecting increased raw milk costs,
and the sales contribution of a business acquired in fiscal 1994. The sales
contribution of a business acquired during the latter half of the year and the
full year's sales contribution of a business acquired in 1993 contributed to the
increased Specialty Food Products sales. Overall Dairy Products and Specialty
Food Products unit sales volumes for fiscal year 1994 remained strong, slightly
exceeding fiscal 1993 levels.
BUSINESS SEGMENTS
The Company is a diversified food processor and distributor engaged in two
business segments, Dairy Products and Specialty Food Products. The Company is a
major processor of fluid milk and related products, specialty dairy products and
ice cream serving various regional markets, with some products distributed
nationwide and to Mexico. Dairy Products is the Company's largest segment,
accounting for 60% of total fiscal 1994 sales. Included within the Specialty
Food Products segment are canned and frozen vegetables, pickles and related
products, powdered non-dairy products and other specialty food items. Products
within this segment are sold both in regional markets and nationally, with
certain products sold internationally. Segment operating earnings represent
total sales less operating expenses of the segment with the following items not
deducted: general corporate expenses, interest expense and federal and state
income taxes. Both business segments are large users of certain agricultural
related commodities, the prices for which can vary greatly. Wet 1993 spring
planting conditions and summer flooding in some midwest growing areas resulted
in reduced supplies of certain commodities. Overall availability of raw milk
supplies, however were adequate. The Company's sourcing of products from diverse
growing areas helped mitigate shortages of certain midwest vegetables. The
competitive conditions and relatively low profit margins in the food industry
necessitate timely adjustment of the Company's product pricing to reflect
changes in commodity pricing as well as changes in other production and
distribution related costs.
Dairy Products--Dairy Products sales for fiscal 1994 increased 2.2% over sales
of fiscal 1993 principally the result of higher selling prices reflecting
increased raw milk costs and the sales contribution of a business acquired this
year. Sales for fiscal 1993 (a 52 week period) were greater than fiscal 1992 (a
53 week period) on slightly higher selling prices with approximately the same
unit sales volume as fiscal 1992.
Raw milk costs, which exceeded last year's levels during the first quarter,
fell in the second quarter and then increased significantly during the last half
of the year, remaining higher than the fiscal 1993 levels. During the first half
of fiscal 1993, raw milk costs rose, slightly declining during the latter part
of the year as costs were moderately higher than fiscal 1992 cost levels. Early
indications are that fiscal 1995 raw milk costs will stabilize at lower levels
than experienced during fiscal 1994.
Dairy Products fiscal 1994 operating earnings declined 5.5% from fiscal 1993
earnings, principally the result of higher raw milk costs and competitive
conditions encountered in certain markets. Fiscal 1993 operating earnings
declined slightly (less than 1%) from fiscal 1992 earnings, principally the
result of competitive conditions encountered in certain markets.
Specialty Food Products--This business segment is a large user of raw
vegetables, corn syrups, vegetable oils, sugar and casein. Weather-related crop
shortages and harvest delays in the midwest growing region resulted in higher
fiscal 1994 costs in the Company's vegetable and pickle businesses. Prices for
vegetables and raw cucumbers were relatively stable during fiscal 1993 and 1992.
Early indications are for normal vegetable and raw cucumber harvests this year
with costs below fiscal 1994 levels. Prices for corn syrups and vegetable oils
increased during fiscal 1994 as a result of the weather-related midwest harvest
conditions. Sugar and casein prices were relatively stable throughout fiscal
1994 and 1993 and are expected to remain stable during fiscal 1995.
19
<PAGE>
Overall sales of Specialty Food Products for fiscal 1994 increased 16% over
fiscal 1993 sales, principally the result of the sales of a business acquired
during the latter part of the year and the full year's sales contribution of a
fiscal 1993 business acquisition. All of the Company's Specialty Food Products
operations recorded sales increases in fiscal 1994. Sales of Specialty Food
Products for fiscal 1993 (a 52 week year) increased 2% over sales of fiscal 1992
(a 53 week year), principally the result of the sales of a fiscal 1993 acquired
business.
Operating earnings for fiscal year 1994 increased 19%, principally due to
improved vegetable earnings and the contribution of a vegetable business
acquired during the latter part of the year. Pricing for certain vegetable
products, which had declined during fiscal 1993 and fiscal 1992, increased in
fiscal 1994 as a result of weather-related crop shortages and harvesting delays.
Vegetable margins are anticipated to further improve in fiscal 1995 with the
projected normal harvest. Pickle margins declined in fiscal 1994, the result of
increased weather-related costs and competitive market conditions.
CORPORATE AND OTHER
Corporate and Other sales and expenses include sales and expenses of the
Company's transportation subsidiary and canned meats under government bid
contracts, along with general corporate expenses, interest expense and interest
income. Sales for fiscal 1994 declined 21.3%, principally the result of
decreased fiscal 1994 government bid canned meat sales. Corporate and Other
expenses increased in fiscal 1994, principally the result of interest expense
associated with the increased short-term borrowings and less investment income.
Fiscal 1992 expenses included a special $9.1 million pretax charge related to
the decision to terminate the Company's refrigerated truckload business. The
restructured transportation operation has performed well and was profitable in
fiscal years 1994 and 1993.
Interest expense for fiscal 1994 increased 3.9%, the result of increased
short-term borrowing requirements and increased interest rates during the latter
part of the fiscal year, offsetting reductions in long-term obligations.
Interest expense for fiscal 1993 decreased 4%, the result of lower long-term
obligations outstanding, reduced short-term borrowings and lower prevailing
interest rates during the year. The decreased fiscal 1994 interest income was
the result of lower available funds for short-term investments.
Income Taxes--The Company's effective income tax rate for fiscal 1994 was
40.2%, reflecting the higher corporate tax rate and retroactive requirement of
the Revenue Reconciliation Act of 1993 offset by the impact of the adoption of
FAS 109. The effective income tax rates for fiscal years 1993 and 1992 were
40.4% and 41.2%, respectively. Explanations of the impact of FAS 109 and the
differences from statutory rates are explained in the "Income Taxes" note to the
consolidated financial statements.
ENVIRONMENTAL MATTERS
The Company's compliance with current federal, state and local regulations
relating to the discharge of materials into the environment or otherwise
relating to the protection of the environment has not had, nor is expected to
have, a material effect on the Company's capital expenditures, earnings or
competitive position. The Company continues to give attention to the impact of
its operations on the environment.
20
<PAGE>
CONSOLIDATED BALANCE SHEETS
MAY 29, 1994 AND MAY 30, 1993 In thousands
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
ASSETS 1994 1993
<S> <C> <C>
CURRENT ASSETS:
CASH AND TEMPORARY CASH INVESTMENTS $ 10,967 $ 41,572
ACCOUNTS AND NOTES RECEIVABLE, LESS ALLOWANCE FOR DOUBTFUL ACCOUNTS OF $3,875 AND $4,470, RESPECTIVELY 169,395 146,541
INVENTORIES 233,324 178,996
PREPAID DEFERRED INCOME TAXES 17,249 22,108
OTHER CURRENT ASSETS 29,247 16,885
TOTAL CURRENT ASSETS 460,182 406,102
PROPERTY, PLANT AND EQUIPMENT, AT COST:
LAND 29,679 27,917
BUILDINGS AND IMPROVEMENTS 235,191 199,520
MACHINERY AND EQUIPMENT 539,192 448,973
TRANSPORTATION EQUIPMENT 54,452 57,644
CONSTRUCTION IN PROGRESS 47,897 36,844
906,411 770,898
LESS--ACCUMULATED DEPRECIATION 363,200 327,134
TOTAL PROPERTIES, NET 543,211 443,764
OTHER ASSETS:
INTANGIBLE ASSETS, NET OF AMORTIZATION OF $8,474 AND $6,379, RESPECTIVELY 101,389 35,479
OTHER 4,372 7,491
TOTAL OTHER ASSETS 105,761 42,970
TOTAL ASSETS $1,109,154 $892,836
- - ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
NOTES PAYABLE TO BANKS $ 122,000 $ -
CURRENT INSTALLMENTS OF LONG-TERM OBLIGATIONS 6,960 2,351
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 227,348 193,571
DIVIDENDS PAYABLE 6,462 5,953
FEDERAL AND STATE INCOME TAXES 4,497 5,834
TOTAL CURRENT LIABILITIES 367,267 207,709
LONG-TERM OBLIGATIONS 136,150 151,127
DEFERRED LIABILITIES:
DEFERRED INCOME TAXES 63,410 46,342
OTHER 17,553 11,339
TOTAL DEFERRED LIABILITIES 80,963 57,681
SHAREHOLDERS' EQUITY:
PREFERRED STOCK, $1 PAR VALUE, 10,000,000 SHARES AUTHORIZED, NONE ISSUED - -
COMMON STOCK, $1 PAR VALUE, 80,000,000 SHARES AUTHORIZED, 41,050,503 AND 40,946,258
SHARES ISSUED, RESPECTIVELY 41,050 40,946
CAPITAL IN EXCESS OF PAR VALUE 5,911 3,955
RETAINED EARNINGS 507,981 461,479
LESS--TREASURY STOCK, AT COST, 1,261,890 AND 1,257,429 SHARES, RESPECTIVELY 30,168 30,061
TOTAL SHAREHOLDERS' EQUITY 524,774 476,319
COMMITMENTS AND CONTINGENT LIABILITIES - -
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,109,154 $892,836
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
21
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE THREE FISCAL YEARS ENDED MAY 29, 1994
- - -------------------------------------------------------------------------------------------------------------------------------
In thousands 1994 1993 1992
<S> <C> <C> <C>
NET SALES $2,431,203 $2,274,340 $2,289,441
COSTS AND EXPENSES:
COSTS OF PRODUCTS SOLD 1,885,012 1,757,324 1,773,167
DELIVERY, SELLING AND ADMINISTRATIVE EXPENSES 413,387 391,061 389,653
INTEREST EXPENSE 15,471 14,888 15,551
INTEREST INCOME (728) (994) (1,523)
OTHER INCOME, NET (252) (2,698) (2,034)
SPECIAL CHARGE - - 9,100
TOTAL COSTS AND EXPENSES 2,312,890 2,159,581 2,183,914
INCOME BEFORE TAXES AND CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES 118,313 114,759 105,527
PROVISION FOR INCOME TAXES 47,551 46,350 43,511
INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES 70,762 68,409 62,016
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES 1,179 - -
NET INCOME FOR THE YEAR $ 71,941 $ 68,409 $ 62,016
NET INCOME PER SHARE:
EARNINGS PER SHARE BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES $ 1.78 $ 1.73 $ 1.53
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES .03 - -
NET INCOME PER SHARE $ 1.81 $ 1.73 $ 1.53
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE THREE FISCAL YEARS ENDED MAY 29, 1994
- - -------------------------------------------------------------------------------------------------------------------------------
In thousands COMMON STOCK CAPITAL IN EXCESS RETAINED TREASURY
SHARES VALUE OF PAR VALUE EARNINGS STOCK
<S> <C> <C> <C> <C> <C>
BALANCE MAY 26, 1991 27,139 $27,179 $ 13,165 $377,541 $ (1,325)
NET INCOME - - - 62,016 -
EXERCISE OF STOCK OPTIONS 63 63 2,422 - -
THREE-FOR-TWO STOCK SPLIT 13,614 13,614 (13,614) - -
PURCHASE OF TREASURY STOCK (1,213) - - - (27,938)
CASH DIVIDENDS, $.56 PER SHARE - - - (22,680) -
BALANCE MAY 31, 1992 39,603 40,856 1,973 416,877 (29,263)
NET INCOME - - - 68,409 -
EXERCISE OF STOCK OPTIONS 90 90 1,982 - -
PURCHASE OF TREASURY STOCK (539) - - - (13,620)
ISSUANCE OF TREASURY STOCK 535 - - - 12,822
CASH DIVIDENDS, $.60 PER SHARE - - - (23,807) -
BALANCE MAY 30, 1993 39,689 40,946 3,955 461,479 (30,061)
NET INCOME - - - 71,941 -
EXERCISE OF STOCK OPTIONS 104 104 1,956 - -
RETURN OF TREASURY STOCK (4) - - - (107)
CASH DIVIDENDS, $.64 PER SHARE - - - (25,439) -
BALANCE MAY 29, 1994 39,789 $41,050 $ 5,911 $507,981 $(30,168)
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
22
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE FISCAL YEARS ENDED MAY 29, 1994
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
In thousands 1994 1993 1992
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS:
NET INCOME $ 71,941 $ 68,409 $ 62,016
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED FROM OPERATIONS:
DEPRECIATION AND AMORTIZATION 61,875 53,997 50,271
DEFERRED INCOME TAXES 3,307 3,724 7,753
OTHER LONG-TERM DEFERRED LIABILITIES 288 (6,477) (337)
GAIN ON DIVESTITURES - (107) (841)
CHANGES IN ACCOUNTING PRINCIPLES, NET (1,179) - -
(INCREASE) DECREASE IN WORKING CAPITAL ITEMS, NET OF ACQUISITIONS:
ACCOUNTS AND NOTES RECEIVABLE (5,687) 8,746 1,066
INVENTORIES AND OTHER CURRENT ASSETS (16,933) 4,484 (2,871)
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 12,863 (9,615) 14,756
FEDERAL AND STATE INCOME TAXES (1,361) 641 (6,676)
OTHER (3,126) (1,074) (681)
NET CASH PROVIDED FROM OPERATIONS 121,988 122,728 124,456
CASH FLOWS FROM INVESTING ACTIVITIES:
CAPITAL EXPENDITURES (80,977) (74,803) (77,867)
PROCEEDS FROM DISPOSITIONS OF PROPERTY, PLANT AND EQUIPMENT 3,640 566 2,252
ACQUISITIONS OF BUSINESSES, NET OF CASH ACQUIRED (171,479) (2,801) (10,945)
PROCEEDS FROM BUSINESSES DIVESTED 6,163 550 6,084
NET CASH USED IN INVESTING ACTIVITIES (242,653) (76,488) (80,476)
CASH FLOWS FROM FINANCING ACTIVITIES:
ISSUANCE OF LONG-TERM OBLIGATIONS 2,000 4,045 8,800
REPAYMENT OF LONG-TERM OBLIGATIONS (12,368) (10,585) (11,222)
ISSUANCE OF NOTES PAYABLE TO BANKS, NET 122,000 - -
UNEXPENDED INDUSTRIAL REVENUE BOND PROCEEDS 1,382 2,818 (4,035)
CASH DIVIDENDS PAID (25,014) (23,391) (22,164)
ISSUANCE OF COMMON STOCK 2,060 2,072 2,485
PURCHASE OF TREASURY STOCK - (13,620) (27,938)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 90,060 (38,661) (54,074)
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS (30,605) 7,579 (10,094)
CASH AND TEMPORARY CASH INVESTMENTS--BEGINNING OF YEAR 41,572 33,993 44,087
CASH AND TEMPORARY CASH INVESTMENTS--END OF YEAR $ 10,967 $ 41,572 $ 33,993
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Dollar amounts in thousands
unless otherwise noted
SUMMARY OF ACCOUNTING POLICIES
Definition of Fiscal Year--The Company's fiscal year ends on the last Sunday
in May. There were 52 weeks in the fiscal years ended May 1994 and 1993, whereas
there were 53 weeks in fiscal 1992.
Principles of Consolidation--The consolidated financial statements include
the accounts of the Company and all of its wholly-owned and majority-owned
subsidiaries. All significant intercompany transactions and balances are
excluded from the statements.
Cash and Temporary Cash Investments--The Company considers temporary cash
investments with an original maturity of three months or less to be cash
equivalents.
Inventories--Inventories are stated at the lower of cost or market. The
majority of inventories are valued on the last-in, first-out (LIFO) method. The
majority of Dairy and certain Specialty Food Products inventories are valued on
the first-in, first-out (FIFO) method.
Property, Plant and Equipment--Major renewals and betterments are capitalized
while repairs and maintenance which do not improve or extend useful life are
expensed currently. Upon sale, retirement, abandonment or other disposition of
property, the cost and related accumulated depreciation are eliminated from the
accounts and any gain or loss is reflected in income. For financial statement
purposes, depreciation is calculated by the straight-line method. For income tax
purposes, depreciation is calculated using accelerated methods for certain
assets.
Pensions--Substantially all of the Company's employees are covered by Company
or union-management-administered pension plans or profit sharing plans. The
policy with respect to Company-administered pension plans is to fund accrued
pension costs based on determinations made by independent actuaries which
include provision for service cost, interest cost, return on pension assets and
amortization of prior service cost and unrecognized initial net assets.
Intangible Assets--Excess of cost over fair market value of net assets of
acquired companies and other intangible assets are amortized on a straight-line
basis over various periods between three years and a maximum of forty years.
Income Taxes--Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Effective in the first quarter of fiscal year 1994 with
the adoption of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes," deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The
cumulative effect of the change in method of accounting has been reported in the
fiscal 1994 Consolidated Statement of Income.
Prior to 1994, deferred taxes were recognized to reflect the tax effects of
differences in the timing of reporting transactions for financial statement
and income tax purposes using the tax rate in the year of calculation.
Net Income per Common Share--Net income per common share is based upon
the weighted average number of common and common equivalent shares
outstanding during each year.
BUSINESS ACQUISITIONS
On December 27, 1993, the Company completed the acquisition of the Birds Eye
Frozen Vegetable business (Birds Eye) from the All-American Gourmet Company, a
wholly-owned subsidiary of Kraft General Foods, Inc., for approximately $140
million. The acquisition has been accounted for as a purchase and, accordingly,
the operating results of Birds Eye have been included in the consolidated
operating results since the date of acquisition. The funds used to acquire Birds
Eye were provided by the Company's bank short-term lines of credit. The
acquisition resulted in intangible assets of $47 million.
The following summary, prepared on a pro forma basis, combines the
consolidated results of operations as if Birds Eye had been acquired as of the
beginning of the 1993 fiscal year.
<TABLE>
<CAPTION>
UNAUDITED
- - ----------------------------------------------------
1994 1993
<S> <C> <C>
Net sales $2,549,452 $2,474,784
Net income $ 73,110 74,407
Net income per share $ 1.84 1.88
</TABLE>
The pro forma results are not necessarily indicative of the results which
would have occurred if the acquisition had taken place on the basis assumed. In
addition, the pro forma results are not intended to be a projection of future
results and do not reflect any synergies that might be achieved from combined
operations.
During fiscal 1994, the Company also acquired a Dairy Products operation and
another Specialty Food Products operation for cash consideration. During fiscal
1993, the Company exchanged 535,000 shares of common stock for all of the
outstanding shares of a Specialty Food Products operation and acquired another
Specialty Food Products operation for cash consideration. In fiscal 1994, 4,100
shares of common stock were returned to the Company under the escrow provisions
of the 1993 acquisition agreement. These acquisitions were accounted for as
purchases and, accordingly, results subsequent to their respective dates of
acquisition are included in the Consolidated Financial Statements. The pro forma
impact as if these acquisitions had occurred at the beginning of the 1993 fiscal
year is not significant.
SUBSEQUENT EVENT
Subsequent to year-end, the Company was informed that the Board of Directors
of Curtice-Burns Foods, Inc., Rochester, New York (Curtice-Burns), voted to
pursue a proposal whereby the Company would acquire all of the outstanding stock
of Curtice-Burns for $20 per share, subject to the resolution of a number of
specified contingencies. The purchase price, including the refinancing of
existing indebtedness, is estimated to be approximately $460 million.
The more significant contingencies which must be resolved include the
satisfactory resolution of the arbitration of the agreement between Curtice-
Burns and Pro-Fac Cooperative (Pro-Fac) covering the supply of agricultural
crops to Curtice-Burns and the use of the various processing plants and
equipment owned by Pro-Fac but used
24
<PAGE>
in the conduct of the business, the negotiation of a definitive agreement for
the concurrent sale of the Nalley's Fine Foods Division, clearance of the
transaction by appropriate governmental agencies, negotiation of definitive
agreements and approval of any transaction by the Curtice-Burns shareholders.
Curtice-Burns' products include canned pie fillings, canned aseptic products,
canned and frozen traditional vegetables, frozen southern vegetables, and canned
bean products marketed under private labels and regional brands including
Comstock, Wilderness, Thank You, McKenzie's and Brooks. Curtice-Burns also
produces and markets canned meats, salad dressings and chili products in the
Northwestern United States and Canada (Nalley's Fine Foods Division), snack
foods in Pennsylvania, Ohio and the Northwestern United States and popcorn in
the midwest which the Company currently considers to be non-core businesses and
may be sold should the Company acquire Curtice-Burns. For the nine months ended
March 26, 1994, Curtice-Burns reported sales of $643 million, net income of $10
million and net income per share of $1.11 per share.
Management is confident that should the contingencies be resolved, the
Curtice-Burns transaction would be financed through a new bank revolving credit
and term loan facility. Although the Company has held discussions with its
existing banks regarding such a facility, no agreement exists concerning the
amounts or terms of any such facility. As a result of the substantial
contingencies involved in the Curtice-Burns acquisition, management is unable to
predict the timing of eventual resolution or the impact on the Company's
proposal to acquire Curtice-Burns.
BORROWING ARRANGEMENTS
Long-term obligations, less installments due within one year, are summarized
below:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------
1994 1993
<S> <C> <C>
Installment note, 9.64%, maturing in equal
amounts of $6,500 from 1996 through 2005 $ 65,000 $ 65,000
Installment note, 10.1%, maturing in equal
amounts of $3,500 from 1995 through 2004 35,000 35,000
Industrial revenue bonds maturing in varying
amounts through 2013:
Fixed rate, (7.5% to 10.75%; average 8.41%) 6,869 15,544
Floating rate, (1.75% to 7.00%; average 2.63%) 21,998 20,172
Capitalized lease obligations, 9.75%, maturing
in various installments through 2011 9,486 10,883
Other obligations, maturing in varying amounts
through 2025, (7.5% to 10%; average 8.8%) 4,757 6,879
143,110 153,478
Less: Installments due within one year 6,960 2,351
Total long-term obligations $136,150 $151,127
</TABLE>
At May 29, 1994, under the most restrictive provisions of the Company's
borrowing arrangements: tangible net worth of at least $175 million, working
capital of at least $60 million, and a current ratio of at least 1.25 were
required to be maintained; approximately $83 million of retained earnings was
unrestricted for the payment of cash dividends and repurchase of common stock;
and the Company could not incur total long-term debt in excess of 65% of total
capitalization.
Maturities of long-term obligations during each of the years 1996 through
1999 are $11,797, $11,670, $13,473 and $11,458, respectively.
Certain land, buildings and machinery and equipment having a net carrying
value of approximately $39 million were mortgaged or otherwise encumbered
against long-term debt of $15 million at May 29, 1994.
The Company has committed short-term lines of credit which are seasonally
adjusted to provide a maximum of $177.5 million available for borrowing needs.
The unused lines of credit at May 29, 1994 were $55.5 million. Lending banks are
compensated on a fee basis of 1/8 of 1% of the credit line. During 1994, maximum
borrowings under the Company's committed and uncommitted lines of credit were
$202 million; average borrowings for the year were $64.7 million at a weighted
average interest rate of 3.6%.
SPECIAL CHARGE
During the fourth quarter of 1992, the Company decided to terminate operation of
its refrigerated truckload transportation business. A charge to operations of
$9,100 ($5,685 after taxes, or $.14 per share) was provided relating primarily
to leased and owned assets as well as other transition costs.
INVENTORIES
At May 29, 1994 and May 30, 1993, inventories comprised the following:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------
1994 1993
<S> <C> <C>
Raw materials and supplies $ 69,258 $ 46,666
Materials in process 31,823 28,473
Finished goods 151,358 121,400
252,439 196,539
Less: Excess of current cost over stated
value of last-in, first-out
inventories (19,115) (17,543)
Total inventories $233,324 $178,996
</TABLE>
The percentage of costs of products sold determined on the basis of last-in,
first-out cost approximated 40.9% and 33.8% for 1994 and 1993, respectively.
25
<PAGE>
SHAREHOLDERS' EQUITY
The 1988 shareholder rights plan, as amended, protects shareholders in the event
the Company becomes the target of coercive and unfair takeover tactics. The
rights were distributed to shareholders on the basis of one preferred stock
purchase right for each share of Dean Foods Company common stock. Each right
entitles shareholders to purchase one one-hundredth of a share of preferred
stock and will become exercisable only if a person or group acquires 15% or more
of the Company's common stock. The rights may be redeemed by the Company for
$.05 per right at any time prior to a public announcement that a person or group
has acquired 15% or more of the Company's common stock. The rights expire on
August 10, 1998, unless previously redeemed or exercised.
The Company may repurchase shares of its common stock from time to time in
the open market, in privately-negotiated transactions or otherwise at a price or
prices reasonably related to the then prevailing market price.
A summary of stock option activity for the Company's stock option plans
follows:
<TABLE>
<CAPTION>
NUMBER AVERAGE
OF SHARES OPTION
UNDER PRICE
OPTION PER SHARE
- - -------------------------------------------------------------
<S> <C> <C>
Outstanding at May 26, 1991 574,833 $22.99
Changes during the year:
Granted 187,030 32.83
Terminated (8,762) 23.79
Exercised (24,386) 21.42
Options outstanding at May 31, 1992 728,715 25.56
Changes during the year:
Granted 282,235 26.95
Terminated (16,949) 27.29
Exercised (71,472) 21.67
Options outstanding at May 30, 1993 922,529 26.26
Changes during the year:
Granted 250,119 26.87
Terminated (14,032) 29.17
Exercised (118,586) 21.82
Options outstanding at May 29, 1994 1,040,030 $26.87
Exercisable at end of year 511,571 $26.22
Available for grants:
Beginning of year 897,766
End of year 624,819
</TABLE>
Under the stock option plans, key employees and directors may be granted stock
awards or options to purchase, at fair market value on the date of grant, a
maximum of 1,915,000 shares of the Company's common stock. Of these shares, a
maximum of 115,000 may be granted to non-employee directors. A total of 65,500
shares have been granted to non-employee directors. A total of 345,688 non-
qualified options are outstanding, which obligate the Company to make a cash
payment to the optionee, upon exercise, of an amount up to aggregate increase in
the market value of the common stock since the date of grant. Options terminate
five to ten years after date of grant.
The Company may, from time to time, offer key employees the opportunity to
elect to receive, in lieu of all or a portion of the cash bonuses otherwise
payable to them, stock awards of shares of the Company's common stock having a
fair market value on the date of the award equal to 115% of such cash bonuses or
portions thereof (Stock Bonus Awards Program). In fiscal 1994, key employees
elected to receive 36,860 shares under the Stock Bonus Awards Program which
related to bonuses.
INCOME TAXES
The Company adopted the provisions of the Statement of Financial Accounting
Standard No. 109, "Accounting for Income Taxes," as of May 31, 1993. Under this
method, deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
As permitted under the Statement, prior years' financial statements have not
been restated. The cumulative effect of the change in accounting principle on
prior fiscal periods increased current year net income by $2.2 million, net of
taxes, or $0.06 per share.
The Statement also requires that deferred taxes be recorded for the tax
effects of differences between the assigned values and the tax basis of assets
acquired and liabilities assumed in business acquisitions. This change in method
increased the values assigned to such net assets by $22.7 million with a
corresponding increase in deferred income taxes.
Taxes on income were as follows:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------
1994 1993 1992
<S> <C> <C> <C>
Current tax expense:
Federal $37,387 $30,447 $36,837
State and foreign 8,385 5,525 8,272
45,772 35,972 45,109
Deferred tax expense (credit):
Federal 708 8,435 (1,311)
State and foreign 150 1,943 (287)
Effect of tax rate change 921 - -
1,779 10,378 (1,598)
Provision for income taxes $47,551 $46,350 $43,511
</TABLE>
26
<PAGE>
The effective tax rates differ from the prevailing statutory federal
rate as follows:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------
1994 1993 1992
<S> <C> <C> <C>
Statutory federal tax rate 35.0% 34.0% 34.0%
State and local income taxes,
net of federal benefit 4.3 4.3 5.0
Other, net 0.9 2.1 2.2
Effective tax rate 40.2% 40.4% 41.2%
</TABLE>
Significant timing differences comprising the deferred tax provision
were as follows:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------
1993 1992
<S> <C> <C>
Depreciation $ 2,665 $ 2,748
Transportation business reserve 2,930 (3,415)
Compensation costs 3,333 (71)
Other, net 1,450 (860)
Deferred tax expense (credit) $ 10,378 $(1,598)
</TABLE>
The components of the deferred income taxes as of May 29, 1994 were as
follows:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------
<S> <C>
Prepaid deferred income taxes:
Accounts receivable $ 2,177
LIFO inventory (2,991)
Self-insurance reserves 10,096
Vacation pay 3,720
Other 4,247
Total prepaid deferred income taxes 17,249
Deferred income taxes:
Fixed assets (65,479)
Deferred compensation 3,772
Other (1,703)
Total deferred income taxes (63,410)
Net deferred income taxes $(46,161)
</TABLE>
EMPLOYEE BENEFIT PLANS
The Company has various profit sharing and retirement plans covering certain
salaried and hourly employees. Amounts charged to operations under all plans
were $15,502, $14,659 and $14,171 in 1994, 1993, 1992, respectively.
Defined Benefit Pension Plans--Costs for noncontributory defined benefit
plans were $2,750, $1,885 and $1,135 in 1994, 1993 and 1992, respectively. Plan
assets are primarily invested in bonds, stocks and real estate. Significant
weighted average assumptions used in determining net pension costs were:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
1994 1993
<S> <C> <C>
Discount rate 7.5% 8.0%
Expected long-term rate of return on assets 8.0% 8.3%
Rate of increase in compensation levels (range) 0 - 5.0% 0 - 5.0%
</TABLE>
The Company's defined benefit net pension costs included the
following components:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------
1994 1993
<S> <C> <C>
Current service costs $ 2,414 $ 2,235
Interest cost on projected benefit obligation 4,859 4,414
Actual return on plan assets (4,189) (3,808)
Net amortization and deferral (334) (956)
Net pension costs for the year $ 2,750 $ 1,885
</TABLE>
The following table sets forth the funded status of the Company's defined
benefit plans reconciled to accrued pension costs:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------
1994 1993
<S> <C> <C>
Present value of projected benefit obligation:
Vested employees $ 46,650 $ 47,660
Non-vested employees 3,730 1,869
Accumulated benefit obligation 50,380 49,529
Additional amounts due to
future salary increases 16,202 10,552
Total projected benefit obligation 66,582 60,081
Fair value of net assets available for benefits (54,882) (56,457)
Projected benefit obligation greater
than net assets available 11,700 3,624
Unrecognized prior service cost (211) (1,008)
Unamortized transition net assets 4,296 4,742
Unrecognized net gain (14,049) (5,871)
Net accrued pension costs $ 1,736 $ 1,487
</TABLE>
27
<PAGE>
The majority of retirement benefits are based upon the highest five year average
qualifying earnings (base compensation) for service prior to January 1, 1986
and, for service since then, based upon the participant's qualifying earnings
each year.
The Company participates in various multi-employer union-management-
administered defined contribution pension plans that principally cover
production workers. Pension expense under these plans was $4,810, $4,773 and
$4,884 in 1994, 1993 and 1992, respectively.
Profit Sharing Plans--The Company maintains noncontributory profit sharing
plans for certain employees. Company contributions under these plans are made at
the discretion of the Board of Directors. Expense for these plans was $5,299,
$4,626 and $4,692 in 1994, 1993 and 1992, respectively.
Postretirement Benefits--The Company provides health care and life insurance
benefits to certain of its retired employees and eligible dependents. Employees
are eligible for such benefits subject to minimum age and service requirements.
Eligible employees that retire before the normal retirement age, along with
their dependents, are entitled to benefits on a shared contribution basis.
Substantially all benefits terminate at age sixty-five. The Company retains the
right to modify or eliminate these benefits.
Effective May 31, 1993, the Company implemented Statement of Financial
Accounting Standard No. 106, "Employers' Accounting for Postretirement Benefits
Other than Pensions," which requires recognition of the cost of postretirement
benefits on an accrual basis rather than the cash basis, which was the Company's
previous accounting policy. The cumulative effect of the accounting change
resulted in a non-cash charge of $1,027 (net of $657 of taxes) or $.03 per share
which represents the accumulated postretirement benefit obligation (APBO)
existing at May 31, 1993. Additionally, in connection with the Birds Eye
acquisition, the Company assumed a postretirement obligation of $4,252 which was
recorded as part of the acquisition accounting.
For the years ended 1993 and 1992, the Company recognized postretirement
benefit costs as incurred. The amounts recognized in expense in prior years was
not material.
Postretirement benefits expense was $508 in 1994. The components of expense
in 1994 follows:
<TABLE>
<CAPTION>
- - ------------------------------------------
<S> <C>
Service cost of benefits earned $237
Interest cost on liability 271
Net postretirement benefit cost $508
</TABLE>
The following table summarizes the postretirement benefit liability as of
May 29, 1994:
<TABLE>
<CAPTION>
- - ------------------------------------------
<S> <C>
Retirees $1,731
Fully eligible active participants 254
Other active participants 5,367
Total 7,352
Unrecognized net loss (908)
Accrued postretirement benefits $6,444
</TABLE>
The accumulated postretirement benefit obligation was determined using 7.5%
weighted average discount rate and an assumed compensation increase of 5.0%. The
health care cost trend rates were assumed to be 11% in 1994, gradually declining
to 5.5% over ten years and remaining at that level thereafter. The health care
cost trend rate assumption has a significant effect on the amounts reported. For
example, a 1% increase in the health care cost trend rate would increase the
accumulated postretirement benefit obligation by $1,305 at May 29, 1994, and the
net periodic cost by $239.
LEASES
Net rental expense, including amounts for leases of one year or less, was
$21,203, $23,192 and $27,648 in 1994, 1993 and 1992, respectively. Sublease
rental income is not significant. A majority of the Company's leases provide
that the Company pay taxes, maintenance, insurance and certain other operating
expenses.
At May 29, 1994, annual minimum rental payments under capital and operating
leases that have initial noncancelable terms in excess of one year were as
follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
- - ------------------------------------------------------------
<S> <C> <C>
1995 $ 1,271 $10,751
1996 1,000 6,787
1997 1,000 5,698
1998 1,000 4,382
1999 1,000 3,066
Thereafter 16,190 2,912
Total minimum lease payments 21,461 $33,596
Less: Imputed interest 11,975
Present value of minimum lease payments $ 9,486
</TABLE>
28
<PAGE>
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Consolidated accounts payable and accrued expenses at May 29, 1994 and May 30,
1993, comprised the following items:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------
1994 1993
<S> <C> <C>
Trade payables $ 96,704 $101,703
Accrued expenses 56,817 24,289
Accrued insurance 31,020 30,396
Accrued payroll 29,302 24,855
Accrued taxes, other than income 6,287 6,048
Accrued pension and profit sharing 7,218 6,280
Total accounts payable and accrued expenses $227,348 $193,571
</TABLE>
CASH FLOW DATA
Interest and taxes paid included in the Company's cash flow from operations
were as follows:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
1994 1993 1992
<S> <C> <C> <C>
Interest paid $15,591 $14,917 $15,615
Taxes paid 46,753 38,400 50,737
</TABLE>
Liabilities assumed in conjunction with business acquisitions were:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
1994 1993 1992
<S> <C> <C> <C>
Fair value of assets acquired $ 197,090 $ 22,752 $ 23,042
Consideration paid (171,479) (15,784) (10,945)
Liabilities assumed $ 25,611 $ 6,968 $ 12,097
</TABLE>
COMMITMENTS AND CONTINGENT LIABILITIES
The Company is a defendant in various legal matters and is currently the subject
of investigations by various state and federal authorities relating to the
pricing of contracts to supply milk and certain environmental matters. The
ultimate resolution of these matters is not expected to have a material effect
on the financial position or results of operations of the Company.
BUSINESS SEGMENT INFORMATION
The nature of products classified in the business segments presented herein
is described on pages 4 through 13. Intersegment sales are not material.
"Corporate and Other" includes revenues and expenses of the Company's
transportation subsidiary and canned meats processed under government bid
contracts. General corporate expenses, interest expense, and interest income are
classified as "Corporate and Other." Identifiable assets are those used in the
Company's operations in each segment.
<TABLE>
<CAPTION>
SPECIALTY
DAIRY FOOD CORPORATE
PRODUCTS PRODUCTS AND OTHER CONSOLIDATED
<S> <C> <C> <C> <C>
- - -----------------------------------------------------------------------
1994
Net sales $1,469,198 $937,183 $ 24,822 $2,431,203
Operating earnings 77,987 68,168 (27,842) 118,313
Identifiable assets 459,986 576,868 72,300 1,109,154
Depreciation and
amortization 35,424 24,782 1,669 61,875
Capital expenditures 51,466 28,128 1,383 80,977
- - -----------------------------------------------------------------------
1993
Net sales $1,437,004 $805,791 $ 31,545 $2,274,340
Operating earnings 82,568 57,181 (24,990) 114,759
Identifiable assets 429,766 376,046 87,024 892,836
Depreciation and
amortization 32,417 19,534 2,046 53,997
Capital expenditures 54,181 19,633 989 74,803
- - -----------------------------------------------------------------------
1992
Net sales $1,430,160 $789,663 $ 69,618 $2,289,441
Operating earnings 83,258 60,184 (37,915) 105,527
Identifiable assets 414,158 359,043 83,951 857,152
Depreciation and
amortization 30,704 17,719 1,848 50,271
Capital expenditures 53,334 23,904 629 77,867
</TABLE>
Operating earnings for fiscal 1992 of Corporate and Other includes a special
charge of $9,100 related to the Company's transportation subsidiary. This item
is further described in the Special Charge note.
29
<PAGE>
QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
UNAUDITED: (IN THOUSANDS EXCEPT FOR PER SHARE DATA)
- - ----------------------------------------------------------------
FIRST SECOND THIRD FOURTH
<S> <C> <C> <C> <C>
FISCAL 1994
Net sales $559,651 $577,113 $622,890 $671,549
Gross profit $116,925 127,829 139,878 161,559
Net income $ 11,765 17,455 18,442 24,279
Per common share data:
Net income $ .30 .44 .46 .61
Stock price range -
High $ 28 1/4 29 33 1/2 33
Low $ 25 1/4 24 1/2 26 7/8 25 3/4
Dividend rate (cents) 16.0 16.0 16.0 16.0
Fiscal 1993
Net sales $543,227 572,326 566,565 592,222
Gross profit $121,182 128,163 127,426 140,245
Net income $ 15,426 17,170 15,965 19,848
Per common share data:
Net income $ .39 .43 .41 .50
Stock price range -
High $ 28 7/8 29 29 7/8 28 7/8
Low $ 24 1/8 25 26 3/4 23 1/8
Dividend rate (cents) 15.0 - 30.0 15.0
</TABLE>
The Company's common stock is traded on the New York Stock Exchange
under the ticker symbol: DF.
REPORT OF INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE [LOGO APPEARS HERE]
200 East Randolph Drive
Chicago, IL 60601
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
DEAN FOODS COMPANY
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Dean Foods
Company and subsidiaries at May 29, 1994 and May 30, 1993, and the results of
their operations and their cash flows for each of the three years in the period
ended May 29, 1994, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
[SIGNATURE OF PRICE WATERHOUSE]
June 29, 1994
30
<PAGE>
SUMMARY OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY, (IN THOUSANDS EXCEPT FOR ITEMS MARKED WITH AN *)
- - ----------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales $2,431,203 2,274,340 2,289,441 2,157,997 1,987,517
Costs of products sold and
all operating expenses $2,298,399 2,148,385 2,162,820 2,022,092 1,876,176
Interest expense $ 15,471 14,888 15,551 16,780 12,682
Income before taxes $ 118,313 114,759 105,527(B) 124,340 102,066
Provision for income taxes $ 47,551 46,350 43,511 51,807 40,834
Net income $ 71,941(A) 68,409 62,016(B) 72,533 61,232
Net income as a % of sales* 3.0% 3.0% 2.7% 3.4% 3.1%
Depreciation on properties $ 58,549 51,815 48,348 44,465 37,338
Capital expenditures $ 80,977 74,803 77,867 72,844 68,196
Number of employees* 12,100 10,500 10,100 9,600 8,900
BALANCE SHEET DATA:
Working capital $ 92,915 198,393 183,577 198,429 182,852
Total assets $1,109,154 892,836 857,152 816,999 744,759
Net plant and equipment $ 543,211 443,764 415,791 375,930 337,068
Long-term obligations $ 136,150 151,127 155,478 149,980 146,622
Shareholders' equity $ 524,774 476,319 430,443 416,560 362,760
Return on average equity* 14.4% 15.1% 14.6% 18.6% 18.7%
COMMON STOCK DATA:
Net income per share* $ 1.81(A) 1.73 1.53(B) 1.79 1.53
Cash dividends per share* $ .64 .60 .56 .49 .44
Book value per share* $ 13.19 12.00 10.87 10.23 8.93
Number of shareholders* 8,936 8,654 8,929 8,380 8,005
- - ----------------------------------------------------------------------------------------------------------------------
1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales $1,683,578 1,551,832 1,434,600 1,268,580 1,154,872
Costs of products sold and
all operating expenses $1,577,047 1,471,719 1,348,785 1,188,214 1,084,086
Interest expense $ 7,646 6,149 5,814 6,497 6,210
Income before taxes $ 101,793(C) 76,542(D) 82,794 77,656 68,366
Provision for income taxes $ 41,360 33,787 41,727 36,933 31,602
Net income $ 60,433(C) 42,755(D) 41,067 40,723 36,764
Net income as a % of sales* 3.6% 2.8% 2.9% 3.2% 3.2%
Depreciation on properties $ 31,046 29,028 25,559 22,325 19,799
Capital expenditures $ 55,917 39,258 41,618 36,581 32,582
Number of employees* 7,500 7,100 6,900 6,100 5,450
BALANCE SHEET DATA:
Working capital $ 156,469 130,355 114,819 107,718 96,572
Total assets $ 586,702 499,150 450,116 407,926 367,497
Net plant and equipment $ 253,972 211,711 194,878 168,424 147,150
Long-term obligations $ 84,162 48,884 47,024 48,997 49,275
Shareholders' equity $ 293,249 265,739 236,417 207,220 175,921
Return on average equity* 21.6% 17.0% 18.5% 21.3% 22.8%
COMMON STOCK DATA:
Net income per share* $ 1.52(C) 1.07(D) 1.03 1.02 .93
Cash dividends per share* $ .40 .36 .32 .27 .22
Book value per share* $ 7.43 6.60 5.89 5.17 4.41
Number of shareholders* 8,290 8,671 8,357 7,682 4,918
</TABLE>
(A) 1994 includes an after-tax net gain of $1,179 ($.03 per share) related to
changes in accounting principles.
(B) 1992 includes a charge against operations of $9,100 related to the
termination of the Company's refrigerated truckload transportation business
($5,685 after taxes, or $.14 per share).
(C) 1989 includes a net gain of $10,132 for unusual items ($5,442 after taxes,
or $.14 per share).
(D) 1988 includes a net charge against operations of $11,606 for unusual items
($9,686 after taxes,or $.24 per share).
31
<PAGE>
FINANCIAL REVIEW
<TABLE>
<CAPTION>
PAGE WHERE
GRAPHIC APPEARS DESCRIPTION OF GRAPHIC OR CROSS-REFERENCE
- - ---------------------------------------------------------------------------
<S> <C>
16 Graph showing Working Capital from 1994-1984.
Graph showing Dividends per share from 1994-1984.
Graph showing Capital Expenditures from 1994-1984.
Graph showing Shareholders' Equity from 1994-1984.
Graph showing Long Term Debt to Capital from 1994-1984.
Graph showing Return on Average Equity from 1994 to 1984.
</TABLE>
<PAGE>
EXHIBIT 22(A)
SUBSIDIARIES OF THE REGISTRANT AS OF MAY 29, 1994
<TABLE>
<CAPTION>
JURISDICTION IN
WHICH ORGANIZED
-------------------
<S> <C>
Bell Dairy Products, Inc.................................... Texas
Birds Eye de Mexico, S.A. de C.V............................ Mexico
Bowman Dairy Company, Inc................................... Delaware
Cream o'Weber Dairy, Inc.................................... Utah
Creamland Dairies, Inc...................................... New Mexico
Dean Dairy Products Company................................. Pennsylvania
Dean Foods Vegetable Company................................ Wisconsin
Dean Milk Company, Inc...................................... Kentucky
DFC Transportation Company.................................. Delaware
E.B.I. Foods, Ltd........................................... United Kingdom
Elgin Blenders, Inc......................................... Illinois
Gandy's Dairies, Inc........................................ Texas
Green Bay Food Company...................................... Wisconsin
Liberty Dairy Company....................................... Michigan
LongLife Dairy Products Company, Inc........................ Florida
McArthur Dairy, Inc......................................... Florida
Mayfield Dairy Farms, Inc................................... Tennessee
Meadow Brook Dairy Company.................................. New York
Ready Foods Products, Inc................................... Pennsylvania
Reiter Dairy, Inc........................................... Ohio
Ryan Milk Company, Inc...................................... Kentucky
St. Thomas Dairies, Inc..................................... U.S. Virgin Islands
T.G. Lee Foods, Inc......................................... Florida
Verifine Dairy Products Corporation......................... Wisconsin
W.B. Roddenbery Co., Inc.................................... Georgia
</TABLE>
The names of all other subsidiaries have been omitted from the above list
because, when considered in the aggregate as a single subsidiary, they would
not constitute a significant subsidiary.
<PAGE>
EXHIBIT 24(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Forms S-8 (Nos. 2-58884, 2-
94753, 33-33775 and 33-33776) of Dean Foods Company of our report dated June
29, 1994 appearing on page 30 of the Dean Foods Company Annual Report to
Shareholders for Fiscal Year Ended May 29, 1994, which is incorporated in this
Annual Report on Form 10-K. We also consent to the incorporation by reference
of our report on the Financial Statement Schedules, which appears on page 16 of
this Form 10-K.
Price Waterhouse LLP
Chicago, Illinois
August 19, 1994
