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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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(MARK ONE)
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/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 28, 1995
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
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DEAN FOODS COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 36-0984820
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3600 N. RIVER ROAD, 60131
FRANKLIN PARK, ILLINOIS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (sec.229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. X
The number of shares of Common Stock, Par Value $1 Per Share, of the
Registrant outstanding as of August 11, 1995 was 40,125,448. The aggregate
market value of such outstanding shares on August 11, 1995 was $1.15 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
28, 1995 (referred to herein as the "Company's Fiscal 1995 Annual
Report"): Part I and Part II
2. Registrant's Proxy Statement for its Annual Meeting of Stockholders
to be held on October 3, 1995 (referred to herein as the "Company's
1995 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 (frozen and canned
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 12 acquisitions in the last five years. During fiscal
1995, the Company acquired the business and assets of a dairy processor located
in Clovis, New Mexico and Rio Grande Foods, Inc., a frozen vegetable processor
located in McAllen, Texas. 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 results of operations of these acquisitions, from their respective dates of
acquisition, have been included in the Company's results of operations.
With one exception, these companies, businesses and assets were acquired
for cash, installment notes or a combination thereof. In fiscal 1993, the
Company exchanged 535,000 shares of its common stock for all the outstanding
shares of W. B. Roddenbery Co., 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 1995 Annual Report (Exhibit 13a hereto) at page 33 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. The Company believes that it is the largest fluid milk
processor in the United States. Although industry data is not available, the
Company estimates that it has a 5% market share in domestic fluid milk. 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 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.
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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. Major
capital projects during fiscal 1995 included additional processing equipment and
costs related to plant consolidation of the Lubbock and San Angelo, Texas dairy
processing plants, a cooler expansion at the Rochester, Indiana dairy plant, a
waste water treatment system at the Belleville, Pennsylvania dairy plant and
computer equipment at the Florida dairy operations. 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, South 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.
Sales of fluid milk to unaffiliated customers for the fiscal years 1995,
1994 and 1993 were $1,081 million, $1,077 million and $1,070 million,
respectively. Sales of specialty dairy products to unaffiliated customers for
fiscal 1995, 1994 and 1993 were $213 million, $184 million and $168 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, Mid-South, Southeast, Southwest, the Caribbean and parts of the Rocky
Mountain states 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. During 1995, the Company introduced the Guilt Free brand of non-fat
and no sugar added ice cream products. Sales of ice cream products are
substantially greater during the summer months than during the rest of the year.
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Additionally, the Company produces and supplies Baskin-Robbins ice cream
products in the Midwest and Southwest.
Capital expenditures during fiscal 1995 included plant expansion and
replacement of refrigeration equipment at the Belvidere, Illinois ice cream
plant. 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.
Sales to unaffiliated customers for the fiscal years 1995, 1994 and 1993
were $220 million, $208 million and $199 million, respectively.
SPECIALTY FOOD PRODUCTS BUSINESS SEGMENT
Frozen and Canned Vegetables
The Company processes and markets frozen and canned 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, southern greens, okra, crowder and black-eyed peas, 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 76% of the total vegetable
sales. The Company is the largest frozen vegetable processor in the United
States and the third largest vegetable processor overall. 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 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.
During fiscal 1995, major capital expenditures included the completion of
the new carrot line in Uvalde, Texas and a waste water treatment plant in
Celaya, Mexico. 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.
Sales to unaffiliated customers for fiscal years 1995, 1994 and 1993 were
$534 million, $415 million and $347 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
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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, 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.
Major capital expenditure projects during fiscal 1995 included the
installation of processing equipment at the Company's Cairo, Georgia plant.
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.
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. Products are sold under
the Bennett's and Hoffman House brand names.
Sales to unaffiliated customers for the fiscal years 1995, 1994 and 1993
were $367 million, $353 million and $304 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. During fiscal 1995, the Company
developed and commenced marketing a full line of flavored non-dairy coffee
creamers. Powdered products are also sold to international customers in
Australia, Canada, the Far East, Mexico, South America, Europe and the Middle
East. The Company believes that it is the largest manufacturer of non-dairy
coffee creamers in the United States. 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.
Sales to unaffiliated customers for the fiscal years 1995, 1994 and 1993
were $110 million, $100 million and $88 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
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private labels to distributors which supply restaurants, schools, hotels and
other segments of the foodservice industry. Major capital expenditures in fiscal
1995 and 1994 include 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. Dean brand vegetable-fat-based dips,
available in regular, lowfat and non-fat varieties, have the leading market
position nationwide. In fiscal 1995, the Company introduced Birds Eye Veggie
Dip, sold in the produce section of grocery stores.
Sales to unaffiliated customers for the fiscal years 1995, 1994 and 1993
were $74 million, $69 million and $67 million, respectively.
Corporate and Other
DFC Transportation Company, a trucking subsidiary of the Company, operates
nationwide with a fleet of approximately 110 tractors and 214 trailers,
providing less-than-truckload refrigerated and frozen cartage service. 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 a
charge to earnings was provided for the costs associated with such termination.
Revenues for the trucking division from unaffiliated customers in fiscal
years 1995, 1994 and 1993 were $22 million, $20 million and $21 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 1995, 1994 and 1993 were $9 million, $5
million and $10 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. Raw milk costs fell substantially in the first quarter of fiscal 1995
remaining stable throughout the balance of the year. In fiscal 1994, raw milk
costs exceeded fiscal 1993 levels during the first quarter, fell in the second
quarter and then increased significantly during the last half of 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 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 one main supplier, as required,
at competitive prices.
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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. Although weather-related delays and crop conditions have
been encountered this year in certain growing areas, early indications are that
supplies will be adequate and fiscal 1996 raw crop costs should approximate
fiscal 1995 raw crop cost levels. Weather-related crop shortages and harvest
delays in the Midwest growing region resulted in higher fiscal 1994 profit
margins in the Company's vegetable business. Industry-wide inventories of
certain vegetables were high during fiscal years 1993 and 1992 which resulted in
decreased profit margins. The prices of raw cucumbers increased in fiscal 1995
as a result of weather-related costs after being relatively stable during the
two previous fiscal 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 frozen and canned
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. An important aspect of the Company's service
to customers is computer ordering, shipping and billing systems. Referred to in
the food industry as "Efficient Consumer Response", the Company has over the
last few years made a substantial commitment to these areas. 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's operations in that market. 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.
EMPLOYEES
The Company has approximately 11,800 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.
Thirteen of these agreements expire during fiscal 1996. These
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include agreements with employees at Central Illinois; Rochester, Indiana; Salt
Lake City, Utah; Albuquerque, New Mexico; Akron, Ohio; Las Vegas, Nevada; Erie,
Pennsylvania and Murray, Kentucky dairy plants; Atkins, Arkansas and Plymouth,
Indiana pickle product plants; Waseca, Minnesota; Fulton, New York and
Bellingham, Washington vegetable products plants. Generally, the Company
considers its employee relations to be good.
The Company has approximately 7,200 seasonal positions at its vegetable
operations and its pickle processing plants, principally during the summer
months. In recent years, the Company has experienced difficulties in meeting
seasonal employee needs. The Company estimates that three individuals are hired
for each seasonal position. A number of strategies have been employed to retain
seasonal employees including incentive programs and employee sharing programs.
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-six of its processing plants (four of which are
subject to mortgage) and leases the other three under leases expiring from
fiscal 1997 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 1995 Annual Report (Exhibit 13a hereto) on page 32. 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:
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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 Salt Lake City, Utah
Evart, Michigan St. Thomas, Virgin Islands
Albuquerque, New Mexico Sheboygan, Wisconsin
Clovis, New Mexico
Ice Cream
Ft. Lauderdale, Florida Athens, Tennessee
Belvidere, Illinois Lubbock, Texas
Albuquerque, New Mexico St. Thomas, Virgin Islands
Barberton, Ohio
SPECIALTY FOOD PRODUCTS
Frozen and Canned 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
McAllen, Texas Green Bay, Wisconsin
Uvalde, Texas Hortonville, Wisconsin
Bellingham, Washington Celaya, Mexico
Bloomer, Wisconsin
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 Alabama, Florida,
Georgia, Idaho, Illinois, Nevada, New Mexico, New York, Ohio, Pennsylvania,
South Carolina, Tennessee, Texas, and Virginia.
Specialty Food Products distribution warehouses are maintained adjacent to
many processing plants with public warehouses utilized throughout the United
States for further distribution of vegetable and pickle products. The Company
maintains powdered product distribution branches in Arkansas, Illinois,
Kentucky, Michigan, Texas and Utah. A 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 1995
Annual Report (Exhibit 13a hereto) on page 32 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 28, 1995.
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 34 of the Company's Fiscal 1995 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 11, 1995, was 9,921.
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 28 of the Company's Fiscal 1995 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 35 of the Company's Fiscal 1995 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 18 through 21 of the Company's Fiscal 1995
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 28, 1995 and May 29,
1994 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 28,
1995, and the notes thereto, together with the report thereon of independent
accountants, are set forth on pages 22 through 34 of the Company's Fiscal 1995
Annual Report (Exhibit 13a hereto). Such financial statements, notes thereto,
and the report thereon of independent accountants are hereby incorporated herein
by reference.
Five-year summary of selected financial data is set forth on page 35 of the
Company's Fiscal 1995 Annual Report (Exhibit 13a hereto) and is 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 34 of the
Company's Fiscal 1995 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
11
<PAGE> 12
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 3,
1995) is set forth at pages 1 through 6 of the Company's 1995 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:
<TABLE>
<CAPTION>
SERVED IN
POSITION WITH SUCH POSITION
THE COMPANY AGE SINCE
--------------------------- ---- -------------
<S> <C> <C> <C>
Eric A. Blanchard.............................. Vice President, 39 1993
Secretary and
General Counsel
Jenny L. Carpenter............................. Vice President, 49 1995
Sales and Marketing
Specialty Food Products
Gary A. Corbett................................ Vice President 47 1993
Governmental and
Dairy Industry Relations
Gary D. Flickinger............................. Vice President 53 1993
Production
Daniel E. Green................................ Group Vice President 50 1992
Specialty Dairy Division
James R. Greisinger............................ Group Vice President 54 1992
and President of Dean
Pickle and Specialty
Products Company
Dale I. Hecox.................................. Treasurer 63 1985
Charles D. Kinser.............................. Vice President 63 1995
Engineering
George A. Muck................................. Vice President 57 1970
Research & Development
Douglas A. Parr................................ Vice President 53 1993
Sales & Marketing--
Milk and Ice Cream
Dennis J. Purcell.............................. Vice President 52 1993
Sales--National Accounts
Roger A. Ragland............................... Group Vice President 61 1995
International Sales
Jeffrey P. Shaw................................ Group Vice President 38 1992
and President of Dean Foods
Vegetable Company
</TABLE>
12
<PAGE> 13
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 3, 1995.
All of the Company's executive officers listed in Part III, Item 10 have
been employees of the Company for more than five years, with the exception of
Mr. Parr. Prior to assuming their current positions, Mr. Blanchard was the
Company's secretary and general counsel; Ms. Carpenter was the Company's
Director of Marketing and Sales--Specialty Foods Division; Mr. Corbett was in
the Company's sales administration management; Mr. Flickinger was the Director
of Production--Dairy and a divisional general manager; 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 Dean Pickle and Specialty Products Company; Mr. Kinser was the Company's
Director of Engineering; Mr. Purcell was Senior Vice President of Sales and
Marketing of Dean Pickle and Specialty Products Company; Mr. Ragland was a
divisional sales vice president; Mr. Shaw was President of the Company's Richard
A. Shaw, Inc. subsidiary, which was subsequently merged into Dean Foods
Vegetable Company.
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.
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 3, 1995) is set forth in the Company's 1995
Proxy Statement at pages 5 through 6 under the caption "CERTAIN INFORMATION
REGARDING THE BOARD OF DIRECTORS" and at pages 6 through 13 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 1995 Proxy Statement at pages 18 and 19
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
1995 Proxy Statement at page 17 under the caption "CERTAIN TRANSACTIONS." Such
information is hereby incorporated herein by reference.
13
<PAGE> 14
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.
-----
<S> <C> <C>
(1) Financial Statements
The consolidated balance sheets at May 28, 1995 and May 29, 1994, the
related consolidated statements of income, of shareholders' equity and
of cash flows for each of the three fiscal years in the period ended
May 28, 1995, and the notes thereto, together with the report thereon
of Price Waterhouse dated June 26, 1995, as incorporated by reference
in Part II, Item 8 of this Report.
(2) Financial Statement Schedules
Report of independent accountants on financial statement 15
Schedule VIII--Valuation and qualifying accounts 16
All other schedules have been omitted because they are not applicable,
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 omitted
since the Registrant is primarily an operating company and all
subsidiaries included in the consolidated financial statements, 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 28, 1995, except for
indebtedness 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 17-18
(b) Reports on Form 8-K.
(1) Registrant filed a Current Report on Form 8-K, dated April 20, 1995,
with respect to the Registrant's filing of a Prospectus Supplement to
Prospectus dated April 13, 1995, filed with the Securities and
Exchange Commission relating to the issuance of $200 Million Senior
Medium-Term Notes, Series A.
(2) Registrant filed a Current Report on Form 8-K, dated June 14, 1995.
Form 8-K, Item 7 exhibits (filed in connection with the Company's
Registration Statement on Form S-3, Reg. No. 33-57353, as amended,
originally filed with the Commission on January 19, 1995) included the
Underwriting Agreement dated June 14, 1995, between Dean Foods Company
and Morgan Stanley & Co., Incorporated and J.P. Morgan Securities,
Inc. relating to issuance of $100 Million aggregate principal amount
of 6 3/4% Senior Notes Due June 15, 2005 and the Form of 6 3/4% Senior
Notes Due June 15, 2005.
</TABLE>
14
<PAGE> 15
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
By: THOMAS L. ROSE
------------------------------------
Thomas L. Rose
(President and Chief Operating
Officer)
Date: August 25, 1995
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
---------------------------------------- ----------------------------- ----------------
<C> <S> <C>
HOWARD M. DEAN Chairman of the Board and August 25, 1995
---------------------------------------- Director
Howard M. Dean
LEWIS M. COLLENS Director August 25, 1995
----------------------------------------
Lewis M. Collens
PAULA H. CROWN Director August 25, 1995
----------------------------------------
Paula H. Crown
WILLIAM D. FISCHER Director August 25, 1995
----------------------------------------
William D. Fischer
JOHN P. FRAZEE, JR. Director August 25, 1995
----------------------------------------
John P. Frazee, Jr.
BERT A. GETZ Director August 25, 1995
----------------------------------------
Bert A. Getz
ANDREW J. MCKENNA Director August 25, 1995
----------------------------------------
Andrew J. McKenna
THOMAS A. RAVENCROFT Senior Vice President and August 25, 1995
---------------------------------------- Director
Thomas A. Ravencroft
THOMAS L. ROSE President and Director August 25, 1995
----------------------------------------
Thomas L. Rose
JOHN S. LLEWELLYN, JR. Director August 25, 1995
----------------------------------------
John S. Llewellyn, Jr.
ALEXANDER J. VOGL Director August 25, 1995
----------------------------------------
Alexander J. Vogl
DALE I. HECOX Treasurer--Principal August 25, 1995
---------------------------------------- Accounting Officer
Dale I. Hecox
</TABLE>
15
<PAGE> 16
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 26, 1995 appearing on page 34 of the Dean Foods Company Annual
Report to Shareholders for Fiscal Year Ended May 28, 1995 (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 Schedule
listed in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement
Schedule presents 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 26, 1995
16
<PAGE> 17
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 28, 1995
Allowance for doubtful accounts and notes
receivable..................................... $3,918 $666 $ 327 $ 4,257
Allowance for doubtful long-term receivables..... -- -- -- --
------ ---- ------ -------
Total reserves deducted in balance sheet from
assets to which they apply..................... $3,918 $666 $ 327 $ 4,257
====== ==== ====== =======
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
====== ==== ====== =======
</TABLE>
17
<PAGE> 18
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.
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
(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 (filed as Exhibit 10(a) to Registrant's
Form 10-K Annual Report for Fiscal Ended May 29, 1994 and incorporated
herein by reference)
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)
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
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)
i. $100 Million Credit Agreement dated February 16, 1995 (filed as Exhibit
10(1) to Registrant's Form 10-Q Quarterly Report for Quarterly Period Ended
February 26, 1995 and incorporated herein by reference)
j. $200 Million Credit Agreement dated February 16, 1995 (filed as Exhibit
10(2) to Registrant's Form 10-Q Quarterly Report for Quarterly Period Ended
February 26, 1995 and incorporated herein by reference)
(11) Statement re computation of per share earnings 19
(12) Computation of Ratio of Earnings to Fixed Charges 20
(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 21-41
May 28, 1995
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 28, 1995 is not to be deemed filed as part of this
Report.
(21) Subsidiaries of the Registrant
a. Subsidiaries of the Registrant as of May 28, 1995 42
(23) Consents of Experts and Counsel
a. Consent of Independent Accountants dated August 25, 1995 43
(27) Financial Data Schedules 44
</TABLE>
19
<PAGE> 1
Exhibit 11
Dean Foods Company and Subsidiaries
Computation of Earnings Per Share
(In thousands except per share data)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income before cumulative
effect of changes in
accounting principles $80,059 $70,762 $68,409
Cumulative effect of
changes in accounting
principles -- 1,179 --
------- ------- -------
Net Income $80,059 $71,941 $68,409
======= ======= =======
Weighted Average Number of
common shares outstanding
during the period 39,890 39,737 39,613
======= ======= =======
Primary Earnings per share
before cumulative effect
of changes in accounting
principles $ 2.01 $ 1.78 $ 1.73
Cumulative effect of changes
in accounting principles -- .03 --
------- ------- -------
Primary Earnings Per
Common Share $ 2.01 $ 1.81 $ 1.73
======= ======= =======
</TABLE>
<PAGE> 1
Exhibit 12
Dean Foods Company and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Fiscal Years Ending May
1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Income before taxes $136,388 $118,313 $114,759 $105,527 $124,340 $102,066
-----------------------------------------------------------------------------------------
Fixed charges:
Interest expense 22,397 15,471 14,888 15,551 16,780 12,682
Debt issue costs 117 123 155 118 128 93
Portion of rentals (33%) 8,270 6,997 7,653 9,124 8,528 8,350
-----------------------------------------------------------------------------------------
Total fixed charges 30,784 22,591 22,696 24,793 25,436 21,125
-----------------------------------------------------------------------------------------
Earnings before taxes and
fixed charges $167,172 $140,904 $137,455 $130,320 $149,776 $123,191
==========================================================================================
Ratio of earnings to
fixed charges 5.4 6.2 6.1 5.3 5.9 5.8
==========================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 13(a)
FINANCIAL REVIEW
FINANCIAL OBJECTIVES AND STRATEGIES
The Company's primary objective is to maximize shareholders 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 1995 and 1994, the Company
utilized short-term borrowings under bank lines of credit to acquire
businesses. The amounts borrowed under such lines of credit were refinanced in
fiscal 1995.
CAPITAL INVESTMENTS
The Company's 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 Company maintains debt levels considered prudent based upon its cash flows
and financial ratios. The long-term debt market has been used primarily to
fund acquisitions and major capital expenditures. Based upon the Company's
debt ratio at fiscal 1995 year-end of 27.8%, the Company believes it has
sufficient debt capacity to fund future growth.
<TABLE>
<CAPTION>
Working Captial
<S> <C>
85 97
86 108
87 115
88 130
89 156
90 183
91 198
92 184
93 198
94 93
95 215
</TABLE>
FINANCIAL RISK MANAGEMENT
The Company's primary financial risk is interest rate exposure, which is
managed through the mix of fixed and floating rate debt. Foreign currency
risk, which is not significant, is currently managed through natural currency
offsets. The Company's policies and controls preclude leveraged or structured
derivatives and financial derivatives for trading purposes.
DIVIDEND POLICY
On July 28, 1995, the Company increased its quarterly dividend 6% to $.18 per
share, the twenty-third increase since 1974. The total increase in the
dividend rate since 1974 is 2300%.
STOCK REPURCHASE PLAN
The Company, in fiscal 1988, adopted a stock repurchase program which the
Company believes enhances shareholder value. No shares were purchased during
fiscal 1995 and 1994, as funds generated from operation were used in connection
with the acquisitions of businesses.
<PAGE> 2
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 28, 1995 was $215.0 million, an increase of $122.1
million from a year ago. The Company's current ratio was 1.71 compared to 1.25
at the end of fiscal 1994. The increased working capital principally resulted
from the issuance of $100 million notes in June 1995 which was classified as
long-term indebtedness at May 28, 1995. Cash and temporary cash investments at
May 28, 1995 was $4.8 million, a decrease of $6.1 million from last year.
Inventories increased $39.8 million due to a normal crop-related harvest this
year, increased sales volumes and inventories of businesses acquired during
fiscal 1995. Dairy Products inventory turnover is at a high rate, whereas
Specialty Food Products inventories generally have lower turnover rates and the
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 maintains short-term bank lines of credit which are
seasonally adjusted to meet 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 business acquisitions and working capital requirements. The short-term
borrowings used to fund fiscal 1994 and 1995 acquisitions were refinanced in
fiscal 1995 with a public debt offering having a ten-year maturity. The
borrowings outstanding under bank lines of credit at the end of fiscal 1995
were $29 million, whereas the borrowings outstanding at the end of fiscal 1994
were $122 million.
Net property, plant and equipment increased $26.9 million this year due
to capital expenditures and the assets of businesses acquired, less
depreciation. Major capital expenditures during fiscal 1995 were primarily
plant expansions required to handle increased production volumes.
<TABLE>
<CAPTION>
Long-Term Debt to Capital
<S> <C>
85 21.9
86 19.1
87 16.6
88 15.5
89 22.3
90 28.8
91 26.5
92 26.5
93 24.1
94 20.6
95 27.6
</TABLE>
The Company's long-term objective is to provide a mix of debt and equity
that will provide sufficient flexibility for growth. During fiscal 1995, the
Company entered into two syndicated bank Credit Agreements, a $200 million
revolving credit facility maturing in 2000 and a $100 million revolving credit
facility (convertible to a term loan) which matures in 1997. No borrowings
were outstanding under these facilities at year-end. The Company during 1995
established a $300 million senior note facility and a $200 million medium-term
loan facility pursuant to a shelf registration with the Securities and Exchange
Commission. In June 1995, the Company issued $100 million senior notes which
carry "A3" (Moody's Investors Services, Inc.) and "A" (Standard & Poors
Corporation) ratings. The Company intends to maintain these ratings which will
allow access to financing at reasonable rates. Long-term obligations at May
28, 1995 were $224.7 million, an increase of $88.5 million from last year and
principally the result of the issuance of the new senior debt less normal
maturities. The Company's debt-to-capital ratio at May 28, 1995 was 27.8%
compared to 20.6% 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 28, 1995 was $584.5 million, an increase of
$59.8 million as a result of the addition of earnings less dividends paid to
shareholders. The treasury stock held at May 28, 1995 is available for use in
future acquisitions, for stock options or for other general business purposes.
The return on average equity for fiscal 1995 was 14.4%, the same as last year.
<PAGE> 3
CASH FLOWS
Net cash flow for fiscal 1995 was $6.1 million unfavorable, primarily the
result of outlays for acquisitions. Outlays for acquisitions net of short-term
borrowings used to fund such acquisitions resulted in a net $30.6 million
unfavorable cash flow for fiscal 1994. Particulars of the Company's cash flow
activities are as follows:
Operating Activities--Cash provided from operations for fiscal 1995 was
$128.1 million, compared to $122.0 million and $122.7 million for fiscal years
1994 and 1993, respectively. The cash provided in fiscal 1995 was principally
the result of 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 1995 was $115.4 million compared to $242.7 million and $76.5 million
for fiscal years 1994 and 1993, respectively. Capital expenditures and
business acquisitions are the Company's principal investing activities.
Capital expenditures for 1995 were $83.3 million compared with $81.0 million
and $74.8 million in fiscal year 1994 and 1993, respectively. Capital
expenditures for fiscal 1996 are projected to exceed the fiscal 1995 capital
spending. During fiscal 1995, $35.3 million was used to acquire businesses, an
important aspect of the Company's growth. During the three years ended May 28,
1995, $209.6 million was spent to acquire businesses which are discussed in the
"Business Acquisitions" note to the consolidated financial statements.
Financing Activities--Net cash used in financing activities during fiscal
1995 was $18.8 million compared to net cash provided in 1994 of $ 90.1 million
and a net cash used for fiscal 1993 of $38.7 million. During fiscal 1995, the
issuance of $100 million long-term debt was used to repay bank borrowings which
funded business acquisitions during fiscal 1994 and 1995. Short-term
borrowings outstanding at fiscal year-end 1995 and 1994 were $29.0 million and
$122.0 million, respectively. Cash dividends paid in each of the last three
years were $26.7 million during fiscal 1995, compared to $25.0 million and
$23.4 million during fiscal years 1994 and 1993, respectively.
<PAGE> 4
RESULTS OF OPERATIONS
Earnings for fiscal 1995 increased 11% over fiscal 1994 with income of $80.1
million or $2.01 per share compared to $71.9 million or $1.81 per share last
year. The increase in fiscal 1995 earnings was the result of improved
Specialty Food Products earnings as Dairy Products earnings approximated fiscal
1994 earnings. Fiscal 1994 earnings benefited from improved vegetable earnings
and the contribution of a business acquired in the latter part of fiscal 1994.
The fiscal 1994 earnings were impacted by the adoption of new accounting
principles and the Revenue Reconciliation Act of 1993. On May 31, 1993, the
Company 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." Further
discussion of FAS 106 and FAS 109 appears in the "Employee Benefit Plans" and
"Income Taxes" notes to the consolidated financial statements. Fiscal 1994
results 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.
Earnings for fiscal 1993 were impacted principally by lower profits in the
Company's vegetable operations, the result of industry-wide excess inventories
and competitive conditions.
Net sales for fiscal 1995 were $2.6 billion compared to $2.4 billion for
fiscal 1994, an 8% increase. Both Dairy Products and Specialty Food Products
recorded sales increase in fiscal 1995 as unit sales volumes exceeded fiscal
1994 levels.
<TABLE>
<CAPTION>
Dividends per Share
<S> <C>
85 0.22
86 0.27
87 0.32
88 0.36
89 0.40
90 0.44
91 0.49
92 0.56
93 0.60
94 0.64
95 0.68
</TABLE>
<PAGE> 5
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 58% of total fiscal 1995 sales. Included within the Specialty
Food Products segment are frozen and canned 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. Overall
availability of raw milk supplies have been adequate to meet the Company's
processing requirements. The Company's ability to source products from diverse
growing areas helps mitigate the impact of shortages of vegetables and
cucumbers due to weather-related adverse crop conditions. The competitive
conditions and relatively low profit margins in the food industry necessitate
timely adjustment of the Company's 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 1995 increased 3.0% over
sales of fiscal 1994. Increased unit sales volume and the inclusion of sales a
business acquired in 1995 offset lower selling prices reflecting lower raw milk
costs during the year. Sales for fiscal 1994 were 2.2% greater than fiscal
1993 on higher selling prices reflecting increased raw milk costs and the sales
contribution of a business acquired in fiscal 1994.
Raw milk costs fell substantially in the first quarter of fiscal 1995 and
then remained stable throughout the balance of the year. In fiscal 1994, raw
milk costs, which exceeded fiscal 1993 levels during the first quarter, fell in
the second quarter and then increased significantly during the last half of the
year, remaining higher than fiscal 1993 levels. Early indications are that raw
milk costs may rise slightly in the second quarter of fiscal 1996; however,
available milk supplies are expected to be adequate. Prices for resin used in
dairy containers rose in fiscal 1995 from 1994 levels. Indications are that
prices for resin in fiscal 1996 will approximate fiscal 1995 prices.
Dairy Products fiscal 1995 operating earnings declined slightly (1.1%)
principally as a result of competitive conditions in certain markets and costs
associated with introduction of new products and expansion into new markets.
Fiscal 1994 operating earnings declined 5.5% from fiscal 1993 basically the
result of higher raw milk costs and competitive conditions encountered in
certain markets.
<PAGE> 6
Specialty Food Products--This business is a large user of raw vegetables,
cucumbers, corn syrups, vegetable oils, sugar and casein. Vegetable and
cucumber costs were relatively stable in fiscal 1995. Weather-related crop
shortages and harvest delays in the Midwest growing regions resulted in higher
fiscal 1994 costs in the Company's vegetable and pickle businesses. Prices for
vegetables and cucumbers were relatively stable during fiscal 1993. Although
weather-related delays and crop conditions have been encountered this year in
certain of the Company's growing areas, early indications are that supplies
will be adequate and costs should approximate fiscal 1995 cost levels. Prices
for corn syrups and vegetable oils were relatively stable through fiscal 1994
and fiscal 1995 and indications are that fiscal 1996 prices will approximate
fiscal 1995 levels. Sugar and casein prices during fiscal 1995 and fiscal 1994
were relatively stable with indications that sugar prices in fiscal 1996 will
approximate or decline slightly from fiscal 1995 levels, whereas casein prices
are likely to increase in fiscal 1996. Overall sales of Specialty Food
Products for fiscal 1995 increased 16% over fiscal 1994 sales, principally due
to the full year's inclusion of the sales of a 1994 business acquisition.
Specialty Food Products sales in fiscal 1994 increased 16% over fiscal 1993
principally the result of the sales of businesses acquired during fiscal years
1994 and 1993. Overall fiscal 1995 unit sales volumes were strong,
approximately 11% greater than fiscal 1994 levels.
Operating earnings for fiscal year 1995 increased 44% principally due to
improved earnings by the Company's vegetable and pickle operations. Both
operations had strong fiscal 1995 unit sales volume increases and favorable
processing costs as a result of a more normal harvest of fiscal 1995 crops.
The full year's inclusion of the fiscal 1994 Birds Eye acquisition positively
impacted fiscal 1995 vegetable operating results. The competitive pressures
which prevailed throughout the year on canned vegetables were more than offset
by the sales and margins of frozen vegetables. 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 is fiscal
1993, increased in fiscal 1994 as a result of weather-related crop shortages
and harvesting delays. Pickle margins declined in fiscal 1994, the result of
increased weather-related costs and competitive market conditions.
<TABLE>
<CAPTION>
Shareholders' Equity
<S> <C>
85 176
86 207
87 236
88 266
89 293
90 363
91 417
92 430
93 476
94 525
95 585
</TABLE>
<PAGE> 7
CORPORATE AND OTHER
Corporate and Other sales and expenses include sales and expenses of the
Company's transportation subsidiary and canned meats under government contract
bids, along with general corporate expenses, interest expenses and interest
income. Fiscal 1995 sales increased 27% as a result of the transportation
operation and canned meat sales. Corporate and Other expenses increased in
fiscal 1995 principally the result of interest expense. Interest expense for
fiscal 1995 increased 44.8%, the result of increased borrowing requirements
which arose out of cash outlays for 1994 and 1995 business acquisitions and
increased interest rates which prevailed throughout most of the year. Fiscal
1994 interest expense increased 3.9%, the result of increased short-term
borrowing requirements and increased interest rates during the latter part of
fiscal 1994, offsetting reductions in long-term obligations.
<TABLE>
<CAPTION>
Return on Equity
<S> <C>
85 22.8
86 21.3
87 18.5
88 17.0
89 21.6
90 18.7
91 18.6
92 14.6
93 15.1
94 14.4
95 14.4
</TABLE>
Income Taxes--The Company's effective tax rate for fiscal 1995 was 41.3%.
The effective income tax rates for fiscal years 1994 and fiscal 1993 were 40.2%
and 40.4%, respectively. Explanations of 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.
<PAGE> 8
Dean Foods Company and Subsidiaries
Consolidated Balance Sheets
May 28, 1995 and May 29, 1994
<TABLE>
<CAPTION>
Assets (In thousands) 1995 1994
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets:
Cash and temporary cash investments $ 4,826 $ 10,967
Accounts and notes receivable, less
allowance for doubtful accounts of $4,257
and $3,875, respectively 184,210 169,395
Inventories 273,114 233,324
Deferred tax assets 22,456 17,249
Other current assets 34,266 29,247
---------- ----------
Total current assets 518,872 460,182
---------- ----------
Property, Plant and Equipment, at cost:
Land 30,280 29,679
Buildings and improvements 262,552 235,191
Machinery and equipment 608,108 539,192
Transportation equipment 54,411 54,452
Construction in progress 41,312 47,897
---------- ----------
996,663 906,411
Less-Accumulated depreciation 426,518 363,200
---------- ----------
Total properties, net 570,145 543,211
---------- ----------
Other Assets:
Goodwill, net of amortization of
$7,012 and $5,026, respectively 69,640 67,128
Other intangible assets, net of amortization of
$3,157 and $1,750, respectively 28,380 28,303
Other 15,389 10,330
---------- ----------
Total other assets 113,409 105,761
---------- ----------
Total Assets $1,202,426 $1,109,154
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 9
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity (In thousands) 1995 1994
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities:
Notes payable to banks $ 29,000 $ 122,000
Current installments of
long-term obligations 11,995 6,960
Accounts payable and accrued expenses 248,721 227,348
Dividends payable 6,877 6,462
Federal and state income taxes 7,267 4,497
---------- ----------
Total current liabilities 303,860 367,267
---------- ----------
Long-Term Obligations 224,679 136,150
---------- ----------
Deferred Liabilities:
Deferred income taxes 70,051 63,410
Other 19,310 17,553
---------- ----------
Total deferred liabilities 89,361 80,963
---------- ----------
Shareholders' Equity:
Preferred stock, $1 par value,
10,000,000 shares authorized, none issued - -
Common stock, $1 par value,
80,000,000 shares authorized, 41,339,495
and 41,050,503 shares issued, respectively 41,339 41,050
Capital in excess of par value 12,705 5,911
Retained earnings 560,881 507,981
Cumulative translation adjustment (228) -
Less-Treasury stock, at cost, 1,261,990 and
1,261,890 shares, respectively 30,171 30,168
---------- ----------
Total shareholders' equity 584,526 524,774
---------- ----------
Commitments and Contingent Liabilities - -
---------- ----------
Total Liabilities and Shareholders' Equity $1,202,426 $1,109,154
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 10
Dean Foods Company and Subsidiaries
Consolidated Statements of Income
For the Three Fiscal Years Ended May 28, 1995
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $2,630,182 $2,431,203 $2,274,340
------------------------------------------------
Costs and expenses:
Costs of products sold 2,005,099 1,885,012 1,757,324
Delivery, selling and
administrative expenses 467,635 413,387 391,061
Interest expense 22,397 15,471 14,888
Interest income (1,682) (728) (994)
Other expense (income), net 345 (252) (2,698)
------------------------------------------------
Total costs and expenses 2,493,794 2,312,890 2,159,581
------------------------------------------------
Income before taxes and cumulative
effect of changes in accounting principles 136,388 118,313 114,759
Provision for income taxes 56,329 47,551 46,350
------------------------------------------------
Income before cumulative effect of
changes in accounting principles 80,059 70,762 68,409
Cumulative effect of changes in
accounting principles - 1,179 -
------------------------------------------------
Net income for the year $ 80,059 $ 71,941 $ 68,409
================================================
Net income per share:
Earnings per share before cumulative
effect of changes in accounting principles $ 2.01 1.78 1.73
Cumulative effect of changes
in accounting principles - .03 -
------------------------------------------------
Net income per share $ 2.01 $ 1.81 $ 1.73
================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 11
Dean Foods Company and Subsidiaries
Consolidated Statements of Shareholder's Equity
For the Three Fiscal Years Ended May 28, 1995
<TABLE>
<CAPTION>
Common Stock Capital in Cumulative
-------------- Excess of Retained Translation Treasury
Shares Value Par Value Earnings Adjustment Stock
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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)
Net Income.......................... --- --- --- 80,059 --- ---
Issuance of common stock............ 145 145 3,902 --- --- ---
Exercise of stock options........... 144 144 2,892 --- --- ---
Purchase of treasury stock.......... --- --- --- --- --- (3)
Cash dividends, $.68 per share...... --- --- --- (27,159) --- ---
Cumulative translation adjustment... --- --- --- --- ($228) ---
------------------------------------------------------------------------------------------------------------------------
Balance May 28, 1995.................. 40,078 $41,339 $12,705 $560,881 ($228) ($30,171)
========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 12
Dean Foods Company and Subsidiaries
Consolidated Statements of Cash Flows
For the Three Fiscal Years Ended May 28, 1995
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flow from operations:
Net income $ 80,059 $ 71,941 $ 68,409
Adjustments to reconcile net income
to net cash provided from operations:
Depreciation and amortization 70,027 61,875 53,997
Deferred income taxes 6,641 3,307 3,724
Other long-term deferred liabilities 1,757 288 (6,477)
Gain on divestitures - - (107)
Changes in accounting principles, net - (1,179) -
(Increase) decrease in working capital items,
net of acquisitions:
Accounts and notes receivable (11,591) (5,687) 8,746
Inventories and other current assets (35,217) (16,933) 4,484
Accounts payable and accrued expenses 20,635 12,863 (9,615)
Federal and state income taxes 2,770 (1,361) 641
Other (7,012) (3,126) (1,074)
-----------------------------------------
Net cash provided from operations 128,069 121,988 122,728
-----------------------------------------
Cash flows from investing activities:
Capital expenditures (83,280) (80,977) (74,803)
Proceeds from dispositions of property, plant and
equipment 3,153 3,640 566
Acquisitions of businesses, net of cash acquired (35,273) (171,479) (2,801)
Proceeds from businesses divested - 6,163 550
-----------------------------------------
Net cash used in investing activities (115,400) (242,653) (76,488)
-----------------------------------------
Cash flows from financing activities:
Issuance of long-term obligations 100,861 2,000 4,045
Repayment of long-term obligations (7,218) (12,368) (10,585)
Issuance (repayment) of notes payable to banks, net (93,000) 122,000 -
Unexpended industrial revenue bond proceeds 211 1,382 2,818
Cash dividends paid (26,744) (25,014) (23,391)
Issuance of common stock 7,083 2,060 2,072
Purchase of treasury stock (3) - (13,620)
-----------------------------------------
Net cash provided by (used in)
financing activities (18,810) 90,060 (38,661)
-----------------------------------------
Increase (decrease) in cash and temporary
cash investments (6,141) (30,605) 7,579
Cash and temporary cash investments -
beginning of year 10,967 41,572 33,993
-----------------------------------------
Cash and Temporary Cash Investments -
end of year $ 4,826 $ 10,967 $ 41,572
=========================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 13
Dean Foods Company and Subsidiaries
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 three fiscal years ended May 1995.
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 Products 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.
Intangible Assets - Excess of cost over fair market value of net
identifiable 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. The carrying value of intangible assets is
periodically reviewed by the Company based on the expected future undiscounted
operating cash flows of the related business unit. Based upon its most recent
analysis, the Company believes that no material impairment of intangible assets
exists at May 28, 1995.
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.
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.
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.
Revenue Recognition - Revenues are recognized when products are
shipped.
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.
<PAGE> 14
Business Acquisitions
During fiscal 1995, the Company acquired a Dairy Products operation and a
Specialty Foods Products operation for cash consideration. The pro forma
impact as if these acquisitions had occurred at the beginning of the 1994
fiscal year is not significant.
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. The pro
forma impact as if these acquisitions had occurred at the beginning of the 1993
fiscal year is not significant.
<PAGE> 15
Borrowing Arrangements
Long-term obligations, less installments due within one year, are summarized
below:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Senior note, 6.75%, maturing in 2005 $100,000 $ --
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............................................ 31,500 35,000
Industrial revenue bonds, maturing in varying amounts
through 2013:
Fixed rate, (7.5% to 9.09%; average 8.63%).................................. 4,775 6,869
Floating rate, (2.0% to 5.75%; average 3.70%)............................... 21,810 21,998
Capitalized lease obligations, 9.75%, maturing in
various installments through 2011........................................... 9,453 9,486
Other obligations, maturing in varying amounts
through 2025, (6.0% to 10%; average 8.67%).................................. 4,136 4,757
-------------------------
236,674 143,110
Less: Installments due within one year........................................ 11,995 6,960
-------------------------
Total long-term obligations................................................... $224,679 $136,150
=========================
</TABLE>
In fiscal 1995, the Company entered into two syndicated bank Credit
Agreements, a $200 million revolving credit facility maturing in year 2000 and
a $100 million revolving credit facility (convertible to a tern loan) maturing
in 1997. All of these borrowings are unsecured and the Company pays a
commitment fee of 0.10% and 0.07%, respectively, on the unused portions of the
revolving credit and term loan facilities. Borrowings under the Credit
Agreements bear interest at either fixed or variable rates linked to the
Company's overall public debt credit rating. The weighted average interest
rate on borrowings under the facilities in fiscal 1995 was 6.2%.
In fiscal 1995, the Company filed a $300 million Senior note facility
and a $200 million medium-term note facility pursuant to a shelf registration
with the Securities and Exchange Commission. In June 1995, the Company issued
$100 million of 6.75% Notes due 2005. The net proceeds were used to repay $50
million in long-term obligations and $50 million in short-term borrowings,
which were outstanding under the Credit Agreements at May 28, 1995.
Accordingly, at May 28, 1995, the Company classified $100 million as long-term
indebtedness.
At May 28, 1995, the most restrictive provisions of the Company's
borrowing arrangements were as follows: 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 $96 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.
<PAGE> 16
Maturities of long-term obligations during each of the years 1997
through 2000 are $11,859, $13,588, $11,438 and $15,044, respectively.
Certain land, buildings and machinery and equipment having a net
carrying value of approximately $25 million were mortgaged or otherwise
encumbered against long-term debt of $13 million at May 28, 1995.
The Company has committed short-term lines of credit which are
seasonally adjusted to provide a maximum of $80 million available for borrowing
needs. The unused lines of credit at May 28, 1995 were $51 million. Lending
banks are compensated on a fee basis of 1/8 of 1% of the credit line. During
1995, maximum borrowings under the Company's committed and uncommitted lines of
credit were $158 million; average borrowings for the year were $78.4 million at
a weighted average interest rate of 5.2%.
The fair value of the Company's long-term debt was determined using
valuation techniques that considered cash flows discounted at current market
rates and management's best estimate for instruments without quoted market
prices. At May 28, 1995 and May 29, 1994 the fair value of long-term debt is
estimated to be $248.9 million and $152.9 million, respectively.
<PAGE> 17
Inventories
At May 28, 1995 and May 29, 1994, inventories comprised the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Raw materials and supplies................................ $ 56,283 $ 51,427
Materials in process...................................... 85,859 49,654
Finished goods............................................ 146,073 148,225
-------------------
288,215 249,306
Less: Excess of current cost over stated value of
last-in, first-out inventories.......................... (15,101) (15,982)
-------------------
Total inventories......................................... $273,114 $233,324
===================
</TABLE>
The percentage of costs of products sold determined on the basis of
last-in, first-out cost approximated 42.4% and 40.9% for 1995 and 1994,
respectively.
<PAGE> 18
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.
Stock Plans
A summary of stock option activity for the Company's stock option plans
follows:
<TABLE>
<CAPTION>
Number of Shares Average Option Price
Under Option Per Share
------------ ---------
<S> <C> <C>
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
Changes during the year:
Granted....................................................... 251,105 29.87
Terminated.................................................... (52,392) 28.74
Exercised..................................................... (165,941) 22.94
-----------------------------------
Options outstanding at May 28, 1995................................ 1,072,802 $28.09
===================================
Exercisable at end of year......................................... 523,574 $27.60
===================================
Available for grants:
Beginning of year............................................. 624,819
End of year................................................... 1,765,427
</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 3,315,000 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 67,500 shares have been granted to non-employee directors. A total of
244,823 non-qualified options are outstanding, which obligate the Company to
make a cash payment to the optionee, upon exercise, of an amount up to the
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.) Key
employees elected to receive 36,023 and 36,860 shares under the Stock Bonus
Awards Program which related to bonuses in fiscal 1995 and 1994, respectively.
<PAGE> 19
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 fiscal 1994 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>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current tax expense:
Federal $45,585 $37,387 $30,447
State and foreign 9,309 8,385 5,525
------- ------- -------
54,894 45,772 35,972
------- ------- -------
Deferred tax expense:
Federal 1,068 708 8,435
State and foreign 367 150 1,943
Effect of tax rate change -- 921 --
------- ------- -------
1,435 1,779 10,378
------- ------- -------
Provision for income taxes $56,329 $47,551 $46,350
======= ======= =======
</TABLE>
<PAGE> 20
The effective tax rates differ from the prevailing statutory federal rate as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory federal tax rate 35.0% 35.0% 34.0%
State and local income taxes,
net of federal benefit 4.4% 4.3% 4.3%
Other, net 1.9% 0.9% 2.1%
---- ---- ----
Effective tax rate 41.3% 40.2% 40.4%
==== ==== ====
</TABLE>
Significant timing differences comprising the deferred tax provision for 1993
were as follows:
<TABLE>
<CAPTION>
1993
----
<S> <C>
Depreciation $2,665
Transportation business reserve 2,930
Compensation costs 3,333
Other, net 1,450
-------
Deferred tax expense $10,378
=======
</TABLE>
The components of the deferred income taxes were as follows:
<TABLE>
<CAPTION>
Deferred tax assets: 1995 1994
---- ----
<S> <C> <C>
Accounts receivable $2,552 $2,177
LIFO inventory (3,721) (2,991)
Self-insurance reserves 12,652 10,096
Vacation pay 4,585 3,720
Marketing accruals 3,860 2,618
Other 2,528 1,629
-------- --------
Total deferred tax assets 22,456 17,249
-------- --------
Deferred income taxes:
Fixed assets (70,007) (65,479)
Deferred compensation 4,585 3,772
DISC deferral (2,420) (1,878)
Intangibles (4,450) (3,395)
Other 2,241 3,570
-------- --------
Total deferred income taxes (70,051) (63,410)
-------- --------
Net deferred income taxes ($47,595) ($46,161)
======== ========
</TABLE>
<PAGE> 21
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 $15,676, $15,502 and $14,659 in 1995, 1994, and 1993, respectively.
Defined Benefit Pension Plans -- Costs for noncontributory defined
benefit plans were $4,650, $4,265 and $3,315 in 1995, 1994 and 1993,
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>
1995 1994
---- ----
<S> <C> <C>
Discount rate...................................................... 8.0% 7.5%
Expected long-term rate of return on assets........................ 8.0% 8.0%
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>
1995 1994
---- ----
<S> <C> <C>
Current service costs.......................................... $3,013 $2,765
Interest cost on projected benefit obligation.................. 5,654 5,679
Actual return on plan assets................................... (4,339) (4,189)
Net amortization and deferral.................................. 322 10
------ ------
Net pension costs for the year................................. $4,650 $4,265
====== ======
</TABLE>
The following table sets forth the funded status of the Company's
defined benefit plans reconciled to accrued pension costs:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Present value of projected benefit obligation:
Vested employees.......................................... $56,781 $ 49,920
Non-vested employees...................................... 3,806 3,785
-------- --------
Accumulated benefit obligation..................................... 60,587 53,705
Additional amounts due to
future salary increases.......................................... 16,275 20,228
-------- --------
-------- --------
Total projected benefit obligation................................. 76,862 73,933
Fair value of net assets available
for benefits..................................................... (55,093) (54,882)
-------- --------
-------- --------
Projected benefit obligation greater
than net assets available........................................ 21,769 19,051
Unrecognized prior service cost.................................... (2,642) (1,639)
Unrecognized net obligation........................................ (908) (1,058)
Unrecognized net transition (obligation) assets.................... (2,785) 4,296
Unrecognized net loss.............................................. (9,993) (16,065)
-------- --------
Net accrued pension costs.......................................... $ 5,441 $ 4,585
======== ========
</TABLE>
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.
<PAGE> 22
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
$5,070, $4,810 and $4,773 in 1995, 1994 and 1993, 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 $4,965, $5,299 and $4,626 in 1995, 1994 and 1993, 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 the 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 year ended 1993, the Company recognized postretirement benefit
costs as incurred. The amounts recognized in expense in prior years was not
material.
Postretirement benefits expense was $1,140 and $508 in 1995 and 1994,
respectively. The components of expense follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Service cost of benefits earned $589 $237
Interest cost on liability 551 271
------ ----
Net postretirement benefit cost $1,140 $508
====== ====
</TABLE>
The following table summarizes the postretirement benefit liability:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Retirees $1,699 $1,731
Fully eligible active
participants 161 254
Other active participants 3,668 5,367
------ ------
Total 5,528 7,352
Unrecognized net gain (loss) 2,052 (908)
------ ------
Accrued postretirement
benefits $7,580 $6,444
====== ======
</TABLE>
The accumulated postretirement benefit obligation was determined using
a weighted average discount rate of 8.0% and 7.5% in fiscal 1995 and 1994,
respectively, and an assumed compensation increase of 5.0%. The health care
cost trend rates were assumed to be 10.5% in 1995 and 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 $819 at May 28,
1995, and the net periodic cost by $101.
<PAGE> 23
Leases
Net rental expense, including amounts for leases of one year or less, was
$25,062, $21,203 and $23,192 in 1995, 1994 and 1993, 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 28, 1995, 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>
1996......................................... $ 1,131 $ 9,805
1997......................................... 1,131 8,677
1998......................................... 1,100 7,228
1999......................................... 1,000 5,669
2000......................................... 1,007 2,990
Thereafter................................... 15,182 2,000
------- ------
Total minimum lease payments................. 20,551 $36,369
=======
Less: imputed interest...................... 11,031
-------
Present value of minimum lease payments...... $ 9,520
=======
</TABLE>
<PAGE> 24
Accounts Payable and Accrued Expenses
Consolidated accounts payable and accrued expenses at May 28, 1995 and May 29,
1994 comprised the following items:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Trade payables.................................... $102,074 $ 96,213
Accrued expenses.................................. 61,388 58,157
Accrued insurance................................. 37,945 31,020
Accrued payroll................................... 33,939 30,271
Accrued taxes, other than income.................. 4,656 3,948
Accrued pension and profit sharing................ 8,719 7,739
-------- --------
Total accounts payable and accrued expenses....... $248,721 $227,348
======== ========
</TABLE>
<PAGE> 25
Cash Flow Data
Interest and taxes paid included in the Company's cash flow from operations
were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Interest paid.......................... $22,579 $15,591 $14,917
Taxes paid............................. 54,752 46,753 38,400
</TABLE>
Liabilities assumed in conjunction with business acquisitions were:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Fair value of assets acquired.......... $35,908 $197,090 $22,752
Consideration paid..................... (35,273) (171,479) (15,784)
-------- --------- --------
Liabilities assumed............ $ 635 $ 25,611 $ 6,968
======== ========= ========
</TABLE>
<PAGE> 26
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 in not expected to have a material effect
on the financial position or results of operations of the Company.
<PAGE> 27
Business Segment Information
The nature of products classified in the business segments presented herein is
described on pages 4 through 17. 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>
1995
Net sales................... $1,513,560 $1,085,132 $ 31,490 $2,630,182
Operating earnings.......... 77,242 97,756 (38,610) 136,388
Identifiable assets......... 491,638 635,191 75,597 1,202,426
Depreciation and
amortization.............. 36,418 31,980 1,629 70,027
Capital expenditures........ 49,150 32,352 1,778 83,280
-------------------------------------------------------------------
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
-------------------------------------------------------------------
</TABLE>
<PAGE> 28
Dean Foods Company and Subsidiaries
Quarterly Financial Data
Unaudited:
<TABLE>
<CAPTION>
(In thousands except for per share data) First Second Third Fourth
---------------------------------------- ----- ------ ----- ------
<S> <C> <C> <C> <C>
Fiscal 1995
Net sales $614,283 $662,848 $665,895 $687,156
Gross profit $141,410 157,969 154,794 170,910
Net income $ 16,960 20,026 17,176 25,897
Per common share data:
Net income $ .43 .50 .43 .65
Stock price range -
High $ 31-7/8 32-3/4 30-3/4 31-5/8
Low $ 25-1/4 27-1/4 28-1/8 27-1/4
Dividend rate (cents) 17.0 17.0 17.0 17.0
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
</TABLE>
The Company's common stock is traded on the New York Stock Exchange under the
ticker symbol: DF.
<PAGE> 29
REPORT OF INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
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 shareholder's equity and of cash flows
present fairly, in all material respects, the financial position of Dean Foods
Company and subsidiaries at May 28, 1995 and May 29, 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended May 28, 1995, 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.
PRICE WATERHOUSE LLP
June 26, 1995
<PAGE> 30
SUMMARY OF OPERATIONS DEAN FOODS COMPANY AND SUBSIDIARIES
FISCAL YEAR ENDED MAY, (In thousands except for items marked with an *)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Data:
Net sales $2,630,182 2,431,203 2,274,340 2,289,441 2,157,997
Costs of products sold and all operating expenses $2,472,734 2,298,399 2,148,385 2,162,820 2,022,092
Interest expense $ 22,397 15,471 14,888 15,551 16,780
Income before taxes $ 136,388 118,313 114,759 105,527(b) 124,340
Provision for income taxes $ 56,329 47,551 46,350 43,511 51,807
Net income $ 80,059 71,941(a) 68,409 62,016(b) 72,533
Net income as a % of sales* 3.0% 3.0% 3.0% 2.7% 3.4%
Depreciation on properties $ 65,056 58,549 51,815 48,348 44,465
Capital expenditures $ 83,280 80,977 74,803 77,867 72,844
Number of employees* 11,800 12,100 10,500 10,100 9,600
Balance Sheet Data:
Working capital $ 215,012 92,915 198,393 183,577 198,429
Total assets $1,202,426 1,109,154 892,836 857,152 816,999
Net plant and equipment $ 570,145 543,211 443,764 415,791 375,930
Long-term obligations $ 224,679 136,150 151,127 155,478 149,980
Shareholders' equity $ 584,526 524,774 476,319 430,443 416,560
Return on average equity* 14.4% 14.4% 15.1% 14.6% 18.6%
Common Stock Data:
Net income per share* $ 2.01 1.81(a) 1.73 1.53(b) 1.79
Cash dividends per share* $ .68 .64 .60 .56 .49
Book value per share* $ 14.58 13.19 12.00 10.87 10.23
Number of shareholders* 9,989 8,936 8,654 8,929 8,380
</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, as $.14 per share).
<PAGE> 1
Exhibit 21(a)
SUBSIDIARIES OF THE REGISTRANT AS OF MAY 28, 1995
<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
Dean Pickle and Specialty Products 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 material subsidiary.
<PAGE> 1
Exhibit 23(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) and Form S-3 (No. 33-57353) of Dean Foods
Company of our report dated June 26, 1995 appearing on page 34 of the Dean
Foods Company Annual Report to Shareholders for Fiscal year Ended May 28, 1995,
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 Statements
Schedule, which appears on page 15 of this Form 10-K.
Price Waterhouse LLP
August 25, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the Registrants' Annual Report on Form 10-K for the annual report ended May 28,
1995 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-28-1995
<PERIOD-START> MAY-30-1994
<PERIOD-END> MAY-28-1995
<CASH> 4,826
<SECURITIES> 0
<RECEIVABLES> 188,467
<ALLOWANCES> 4,257
<INVENTORY> 273,114
<CURRENT-ASSETS> 518,872
<PP&E> 996,663
<DEPRECIATION> 426,518
<TOTAL-ASSETS> 1,202,426
<CURRENT-LIABILITIES> 303,860
<BONDS> 224,679
<COMMON> 41,339
0
0
<OTHER-SE> 543,187
<TOTAL-LIABILITY-AND-EQUITY> 1,202,426
<SALES> 2,630,182
<TOTAL-REVENUES> 2,630,182
<CGS> 2,005,099
<TOTAL-COSTS> 2,005,099
<OTHER-EXPENSES> 467,635
<LOSS-PROVISION> 639
<INTEREST-EXPENSE> 22,397
<INCOME-PRETAX> 136,388
<INCOME-TAX> 56,329
<INCOME-CONTINUING> 80,059
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 80,059
<EPS-PRIMARY> 2.01
<EPS-DILUTED> 2.01
</TABLE>
