<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended November 28, 1993 or
_____ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______________ to _______________
Commission file number 0-1118
DEAN FOODS COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 36-0984820
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
3600 North River Road, Franklin Park, Illinois 60131
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 678-1680
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 the Registrant's Common Stock, par value $1 per share,
outstanding as of the date of this report was 39,744,075.
Total number of pages 11.
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PART I - FINANCIAL INFORMATION
A. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On September 17, 1993, the Registrant incorporated LLD
Acquisition Co., which acquired the assets and business of Longlife
Dairy Products Company, Inc., and November 8, 1993 changed the name
from LLD Acquisition Co. to Longlife Dairy Products Company, Inc.
Accordingly, the unaudited condensed consolidated financial statements
include the results of operations from the date of acquisition. The
acquisition did not materially impact the Registrant's financial
position or its results of operations. Bellingham Frozen Foods, Inc.;
Frio Foods, Inc.; and Richard A. Shaw, Inc., have been merged into The
Larsen Company whose name was changed to Dean Foods Vegetable Company
on December 7, 1993.
In the opinion of the Registrant, all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation
of the following unaudited condensed consolidated financial statements
have been included herein. Certain information and footnote
disclosures normally included in the financial statements have been
omitted. These unaudited condensed consolidated financial statements
should be read in conjunction with the Registrant's 1993 Annual Report
on Form 10-K.
2
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ITEM 1.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTERS AND SIX MONTHS ENDED
NOVEMBER 28, 1993 AND NOVEMBER 29, 1992
(In Thousands Except for Per Share Amounts)
<TABLE>
<CAPTION>
Second Quarters Ended Six Months Ended
---------------------- -----------------------
Nov. 28, Nov. 29, Nov. 28, Nov. 29,
1993 1992 1993 1992
-------- -------- -------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
Net sales $577,113 $572,326 $1,136,764 $1,115,553
-------- -------- ---------- ----------
Costs and expenses:
Cost of products sold 449,284 444,163 892,010 866,208
Delivery, selling and
administrative expenses 96,642 96,816 191,290 189,146
Interest expense 3,373 3,810 6,691 7,342
Other (income), net (781) (1,417) (1,391) (2,111)
-------- -------- ---------- ----------
548,518 543,372 1,088,600 1,060,585
-------- -------- ---------- ----------
Income before income taxes
and cumulative effect of
changes in accounting
principles 28,595 28,954 48,164 54,968
Provision for income taxes 11,140 11,784 20,123 22,372
-------- -------- ---------- ----------
Income before cumulative
effect of changes in
accounting principles 17,455 17,170 28,041 32,596
Cumulative effect of changes
in accounting principles,
net of taxes - - 1,179 -
-------- -------- ---------- ----------
Net income $ 17,455 $ 17,170 $ 29,220 $ 32,596
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Earnings per share:*
Earnings per common share
before cumulative effect
of changes in accounting
principles $0.44 $0.43 $0.71 $0.82
Cumulative effect per common
share of changes in
accounting principles - - 0.03 -
-------- -------- ---------- ----------
Earnings per common share $0.44 $0.43 $0.74 $0.82
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Dividends per share
(Declared and paid) $0.16 $ - $0.32 $0.15
-------- -------- ---------- ----------
-------- -------- ---------- ----------
</TABLE>
* Based upon weighted average common shares outstanding.
See accompanying Notes to Condensed Consolidated Financial Statements.
3
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CONDENSED CONSOLIDATED BALANCE SHEETS
NOVEMBER 28, 1993 AND MAY 30, 1993
(In Thousands)
<TABLE>
<CAPTION>
November 28, May 30,
1993 1993
----------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and temporary cash investments $ 18,686 $ 41,572
Accounts and notes receivable,
less allowance for doubtful
accounts of $3,952 and $4,470,
respectively 160,768 146,541
Inventories 269,816 178,996
Other current assets 25,959 38,993
---------- --------
Total Current Assets 475,229 406,102
---------- --------
PROPERTIES:
Property, plant and equipment, at cost 827,525 770,898
Accumulated depreciation 338,432 327,134
---------- --------
489,093 443,764
---------- --------
OTHER ASSETS 43,344 42,970
---------- --------
Total Assets $1,007,666 $892,836
---------- --------
---------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term notes payable $ 47,000 $ -
Current installments of long-term
obligations 3,166 2,351
Accounts payable and accrued expenses 230,310 193,571
Dividends payable 6,448 5,953
Federal and state income taxes 1,558 5,834
---------- --------
Total Current Liabilities 288,482 207,709
---------- --------
LONG-TERM OBLIGATIONS (Less current
installments included above) 149,468 151,127
---------- --------
DEFERRED LIABILITIES 75,894 57,681
---------- --------
SHAREHOLDERS' EQUITY:
Common stock 40,991 40,946
Capital in excess of par value 5,012 3,955
Retained earnings 477,987 461,479
Less - Treasury stock - at cost 30,168 30,061
---------- --------
Total Shareholders' Equity 493,822 476,319
---------- --------
Total Liabilities and
Shareholders' Equity $1,007,666 $892,836
---------- --------
---------- --------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
4
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR SIX MONTHS ENDED NOVEMBER 28, 1993 AND NOVEMBER 29, 1992
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
------------------------------
November 28, November 29,
1993 1992
------------ ------------
(Unaudited)
<S> <C> <C>
Net cash used by operations $ (2,249) $ (7,155)
-------- --------
Cash flows from investing activities:
Capital expenditures (43,867) (36,259)
Proceeds from disposition of property,
plant and equipment 5,092 2,046
Acquisition of a business, net of
cash acquired (17,301) -
-------- --------
Net cash used in investing activities (56,076) (34,213)
-------- --------
Cash flows from financing activities:
Increase in short-term obligations 47,000 45,200
Repayment of long-term obligations (844) (1,199)
Unexpended industrial revenue
bond proceeds 489 1,939
Cash dividends paid (12,308) (11,482)
Issuance of common stock 1,102 1,647
Purchase of treasury stock - (4,537)
-------- --------
Net cash provided from financing activities 35,439 31,568
-------- --------
Decrease in cash and temporary cash
investments (22,886) (9,800)
Cash and temporary cash investments -
beginning of period 41,572 33,993
-------- --------
Cash and temporary cash investments -
end of period $ 18,686 $ 24,193
-------- --------
-------- --------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
5
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INVENTORIES
The following is a tabulation of inventories by class at November 28,
1993, November 29, 1992 and May 30, 1993 (In Thousands).
<TABLE>
<CAPTION>
November 28, November 29, May 30,
1993 1992 1993
------------ ------------ ----------
(Unaudited)
<S> <C> <C>
Raw materials and supplies $ 76,745 $ 51,490 $ 46,666
Materials in process 44,573 54,194 28,473
Finished goods 162,565 174,140 121,400
-------- -------- --------
283,883 279,824 196,539
Less: Excess of current cost
over stated value of
last-in, first-out
inventories (14,067) (17,709) (17,543)
-------- -------- --------
Total inventories $269,816 $262,115 $178,996
-------- -------- --------
-------- -------- --------
</TABLE>
LEGAL PROCEEDINGS
See PART II, Item 1 for discussion of pending legal proceedings.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
A.) Liquidity and Capital Resources
As of November 28, 1993, there had been no material overall
change in either the Registrant's liquidity or its capital resources
from those described in the Management's Discussion and Analysis
contained in the Registrant's Annual Report on Form 10-K for the fiscal
year ended May 30, 1993. At November 28, 1993, cash and temporary cash
investments were $18.7 million, a decrease of $22.9 million from the
balance at May 30, 1993. The decrease in cash and temporary cash
investments was principally the result of:
1.) Temporary seasonal cash requirements of the
Registrant's crop-related vegetable and pickle
processing operations,
2.) cash outlays for capital expenditures,
3.) cash outlay for a business acquired, and
4.) payment of cash dividends.
Working capital at November 28, 1993 was $186.7 million compared
to $198.4 million at May 30, 1993. This reflects an increase in
inventories and accounts payable and accrued expenses at November 28,
1993 compared with May 30, 1993, that is principally due to the normal
seasonal aspect of the Registrant's vegetable and pickle operations, and
cash outlay for a business acquired.
Short-term borrowings at November 28, 1993 were $47.0 million;
whereas there were no short-term borrowings outstanding at May
30, 1993. The increase in short-term borrowings at November 28, 1993
compared to May 30,1993 principally was the result of the increased
seasonal inventories and short-term borrowings associated with a
business acquisition. The Registrant's debt-to-capital ratio was
23.2% at November 28, 1993 compared with 24.1% at May 30, 1993.
B.) Results of Operations
Overall sales for the quarter and six month period ended
November 28, 1993 were relatively flat compared to the same periods a
year ago as overall lower selling prices offset unit volume increases.
Consolidated after-tax earnings for the quarter ended November 28, 1993
increased 2% over the same period a year ago. Earnings for the six
months ended November 28, 1993 were 10% below earnings for the same
period a year ago. Earnings for the six months included the following
first quarter items:
7
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1.) A charge of $1.5 million related to the Revenue
Reconciliation Act of 1993 including the retroactive
application thereof to January 1, 1993 and the impact
of the change in income tax rate on deferred taxes, and
2.) A net after-tax credit of $1.2 million related to
the Registrant's implementation of changes in
accounting principles for income taxes and
post-retirement benefits other than pensions.
Sales of the Registrant's Dairy Products operations for both the
second quarter ($358.6 million) and the six months ($721.1 million) were
slightly lower than sales of the same periods last year. Increased unit
sales volumes were offset by lower overall average selling prices
reflecting lower raw milk costs this year.
Dairy Product's operating earnings for the second quarter
improved over this year's first quarter results, exceeding last year's
second quarter results. Operating results for the six months were
slightly below last year because of lower first quarter earnings this
year. Raw milk costs are projected to increase in the third quarter
reflecting the seasonal tightening of milk supplies.
Net sales of the Registrant's Specialty Food Products operations
for the six months this year were $404.3 million, an increase of 9% over
sales of the same period a year ago. Sales of $212.7 million for the
second quarter increased 7% over the comparable period a year ago. The
increased sales principally were the result of:
1.) The inclusion of the sales of a business
acquired in the third quarter last fiscal year, and
2.) increased sales of the Registrant's
pickle operations.
Specialty Food Products earnings both for the second quarter and
the six months were lower than the earnings of the corresponding periods
a year ago, principally the result of increased product and processing
costs encountered by both the vegetable and pickle operations due to
weather-related harvest delays and reduced yields in the Registrant's
Midwest growing areas. Second quarter margins of the Registrant's
canned and frozen vegetable operations improved substantially over this
year's first quarter depressed levels, slightly exceeding a year ago
second quarter results. The margin improvement principally was the
result of price increases and reduced promotional activity reflecting
the impact of the lower Midwest harvest levels.
8
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Further margin improvement is anticipated over the balance of
the year as industry-wide vegetable supply levels are down from last
year's levels.
Margins in Registrant's pickle operations improved in the second
quarter from the first quarter levels but were below last year's second
quarter results as the weather-related cost increases offset increased
unit sales volumes. Margins in the pickle operations should improve
with continued volume gains and improved pricing over the balance of the
year.
Delivery, selling and administrative expenses for the quarter
ended November 28, 1993 approximated last year's expenses; whereas
expenses for the six months slightly exceeded last year's levels.
The effective income tax rate for the second quarter was 39.0%
compared with a rate of 40.7% for the second quarter last year. The
decreased effective tax rate reflects the adoption of SFAS 109,
"Accounting for Income Taxes" offset by the increased statutory
corporate income tax rate under the Revenue Reconciliation Act of 1993.
The effective income tax rate for the six months was 41.8% compared with
40.7% last year. The increased effective tax rate for the six months
this year reflects the adoption of SFAS 109, the increased statutory
corporate income tax rate and the retroactive provisions of the Revenue
Reconciliation Act of 1993. The effective income tax rate for the
balance of the year should be lower than last year's effective tax rate.
9
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PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
There has been no material change in the legal proceedings
reported on under Item 3 - Legal Proceedings, of the Registrant's Annual
Form 10-K, for the fiscal year ended May 30, 1993.
ITEM 6. Exhibits and Reports on Form 8-K
a.) Exhibits
None
b.) Reports on Form 8-K
Item 5 - Other Events
News release - Dean Foods to Acquire Birds Eye
Frozen Vegetable Business,
filed November 24, 1993.
10
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SIGNATURES
Pursuant to the requirements 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
(Registrant)
DATE: January 11, 1994 _______________________
TIMOTHY J. BONDY
Vice President, Finance
DATE: January 11, 1994 _______________________
DALE I. HECOX
Treasurer
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