<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 of 15(d) of the Securities
- -----
Exchange Act of 1934
For the quarterly period ended November 26, 1995 or
Transition report pursuant to Section 13 of 15(d) of the
- -----
Securities Exchange Act of 1934
For the transition period from to
------------------ ------------------
Commission file number 0-1118
DEAN FOODS COMPANY
- -------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-0984820
- ------------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3600 North River Road, Franklin Park, Illinois 60131
- -----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 678-1680
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
The number of shares of the Registrant's Common Stock, par value $1 per share,
outstanding as of the date of this report was 40,133,595.
Total number of pages 11.
1
<PAGE> 2
PART I - FINANCIAL INFORMATION
A. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On November 13, 1995, the Registrant acquired selected assets of Merico,
Inc. dairy and oil-based business. The acquisition includes the Rod's Food
Products operation in City of Industry, California and the Royal Food
Products operation in Indianapolis, Indiana. Merico, Inc. is a subsidiary
of Campbell-Taggart, Inc. Accordingly, the unaudited condensed
consolidated financial statements include the results of operations from
the date of acquisition. The acquisition did not materially impact the
Registrant's financial position or its results of operations.
In the opinion of the Registrant, all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the
unaudited condensed consolidated financial statements have been included
herein. Certain information and footnote disclosures normally included in
the financial statements have been omitted. These unaudited condensed
consolidated financial statements should be read in conjunction with the
Registrant's 1995 Annual Report on Form 10-K.
2
<PAGE> 3
ITEM 1.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTERS AND SIX MONTHS ENDED
NOVEMBER 26, 1995 AND NOVEMBER 27, 1994
(In Thousands Except for Per Share Amounts)
<TABLE>
<CAPTION>
Second Quarters Ended Six Months Ended
----------------------------------- ----------------------------------
November 26, November 27, November 26, November 27,
1995 1994 1995 1994
---------------- ---------------- ---------------- ----------------
(Unaudited)
<S> <C> <C> <C> <C>
Net sales $705,358 $662,848 $1,356,863 $1,277,131
-------- -------- ---------- ----------
Cost and expenses:
Costs of products sold 547,092 504,879 1,049,912 977,752
Delivery, selling and
administrative expenses 124,523 118,546 245,279 227,203
Interest expense 7,211 5,637 12,869 10,380
Other income, net (608) (157) (1,260) (893)
-------- -------- ---------- ----------
678,218 628,905 1,306,800 1,214,442
-------- -------- ---------- ----------
Income before income taxes 27,140 33,943 50,063 62,689
Provision for income taxes 11,128 13,917 20,390 25,703
-------- -------- ---------- ----------
Net income $ 16,012 $ 20,026 $ 29,673 $ 36,986
======== ======== ========== ==========
Earnings per common share $ .40 $ .50 $ .74 $ .93
======== ======== ========== ==========
Dividends per share
(Declared and paid) $ .18 $ .17 $ .36 $ .34
======== ======== ========== ==========
Weighted average common shares 40,111 39,850
========== ==========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 4
CONDENSED CONSOLIDATED BALANCE SHEETS
NOVEMBER 26, 1995 AND MAY 28, 1995
(In Thousands)
<TABLE>
<CAPTION>
November 26, May 28,
1995 1995
---------------- ---------
(Unaudited)
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 22,461 $ 4,826
Accounts and notes receivable,
less allowance for doubtful accounts
of $2,923 and $4,257, respectively 202,188 184,210
Inventories 393,741 273,114
Other current assets 59,131 56,722
------- -------
Total Current Assets 677,521 518,872
------- -------
PROPERTIES:
Property, plant and equipment, at cost 1,056,199 996,663
Accumulated depreciation 459,855 426,518
------- -------
596,344 570,145
------- -------
OTHER ASSETS 139,123 113,409
------- -------
Total Assets $1,412,988 $1,202,426
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable to banks $ 173,000 $ 29,000
Current installments of long-term obligations 12,063 11,995
Accounts payable and accrued expenses 291,813 248,721
Dividends payable 7,294 6,877
Federal and state income taxes 3,626 7,267
-------- -------
Total Current Liabilities 487,796 303,860
-------- -------
LONG-TERM OBLIGATIONS (Less current
installments included above) 232,507 224,679
-------- -------
DEFERRED CREDITS 91,317 89,361
-------- -------
SHAREHOLDERS' EQUITY:
Preferred stock - -
Common stock 41,395 41,339
Capital in excess of par value 14,160 12,705
Retained earnings 576,107 560,881
Cumulative translation adjustment (123) (228)
Less - Treasury stock - at cost 30,171 30,171
------- -------
Total Shareholders' Equity 601,368 584,526
------- -------
Total Liabilities and Shareholders' Equity $1,412,988 $1,202,426
========== ==========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
NOVEMBER 26, 1995 AND NOVEMBER 27, 1994
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
---------------------------------------------
November 26, November 27,
1995 1994
---------------- ----------------
(Unaudited)
<S> <C> <C>
Net cash used by operations $ (8,441) $ (3,340)
--------- -------
Cash flows from investing activities:
Capital expenditures (53,991) (37,782)
Proceeds from disposition of property,
plant and equipment 1,558 1,091
Acquisition of business, net of
cash acquired (57,569) (11,581)
--------- -------
Net cash used in investing activities (110,002) (48,272)
--------- -------
Cash flows from financing activities:
Issuance of notes payable to banks, net 144,000 66,000
Issuance of long-term obligations 9,799 310
Repayment of long-term obligations (1,937) (1,076)
Unexpended industrial revenue
bond proceeds (3,481) 202
Cash dividends paid (13,814) (13,007)
Issuance of common stock 1,511 2,831
--------- -------
Net cash provided by financing activities 136,078 55,260
--------- -------
Increase in cash and cash equivalents 17,635 3,648
Cash and cash equivalents - beginning of period 4,826 10,967
--------- -------
Cash and cash equivalents - end of period $ 22,461 $14,615
======== =======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INVENTORIES
The following is a tabulation of inventories by class at November 26,
1995, November 27, 1994 and May 28, 1995 (In Thousands).
<TABLE>
<CAPTION>
November 26, November 27, May 28,
1995 1994 1995
----------------- ----------------- ---------
(Unaudited)
<S> <C> <C> <C>
Raw materials and supplies $ 45,042 $ 45,095 $ 56,283
Materials in process 104,772 103,230 60,554
Finished goods 258,758 205,563 171,378
--------- --------- ---------
408,572 353,888 288,215
Less: Excess of current cost
over stated value of
last-in, first-out
inventories (14,831) (15,132) (15,101)
--------- --------- ---------
Total inventories $393,741 $338,756 $273,114
======== ======== ========
</TABLE>
Inventories at November 27, 1994 has been reclassified to conform with the
November 26, 1995 and May 28, 1995 presentations.
BUSINESS SEGMENT INFORMATION
The following is a tabulation of business segment information at
November 26, 1995, and November 27, 1994.
<TABLE>
<CAPTION>
Dairy Specialty Corporate
(Unaudited) Products Food Products and Other Consolidated
-------- ------------- --------- ------------
SECOND QUARTER ENDED
<S> <C> <C> <C> <C>
November 26, 1995
Net sales $397,220 $301,310 $ 6,828 $ 705,358
Operating earnings 19,162 19,506 (11,528) 27,140
November 27, 1994
Net sales $374,817 $282,032 $ 5,999 $ 662,848
Operating earnings 16,975 27,127 (10,159) 33,943
SIX MONTHS ENDED
November 26, 1995
Net sales $787,484 $556,074 $ 13,305 $1,356,863
Operating earnings 39,503 32,483 (21,923) 50,063
November 27, 1994
Net sales $745,973 $518,328 $12,830 $1,277,131
Operating earnings 36,552 45,543 (19,406) 62,689
</TABLE>
LEGAL PROCEEDINGS
See PART II, Item 1 for a discussion of pending legal proceedings.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
A.) Liquidity and Capital Resources
As of November 26, 1995, there has been no material overall
change in the Registrant's liquidity or its capital resources from
those described in the Management's Discussion and Analysis contained
in the Registrant's Annual Report on Form 10-K for the fiscal year
ended May 28, 1995. Cash and cash equivalents were $22.5 million at
November 26, 1995, a $17.6 million increase over the balance at May
28, 1995. Working capital at November 26, 1995, was $189.7 million
compared to $215.0 million at May 28, 1995. The decrease in working
capital was principally the result of increased short-term borrowings
associated with the acquisitions of businesses during the six months
ended November 26, 1995.
The increased accounts and notes receivable at November 26,
1995, compared to the balances at May 28, 1995, were principally the
result of acquired businesses and increased sales. The increased
inventories at November 26, 1995, compared to the balance at May 28,
1995, were principally the result of the seasonality of vegetable crop
and processing and the inventories of business acquisitions. The
November 26, 1995, inventories were $55.0 million greater than
inventories a year ago reflecting inventories of business
acquisitions.
Short-term borrowings outstanding at November 26, 1995, were
$173.0 million, an increase of $144.0 million from the balance
outstanding at May 28, 1995. The increase in short-term borrowings
was principally the result of:
1.) Borrowings associated with the normal pack of seasonally
grown crops, and
2.) Cash outlays for business acquisitions.
The increased accounts payables and accrued expenses at November 26,
1995, compared to the balance at May 28, 1995, was the result of
business acquisitions and increased sales.
The increase in other non-current assets largely was the result
of intangibles associated with business acquisitions during the six
months ended November 26, 1995. The Registrant's debt-to-capital
ratio was 27.9% at November 26, 1995, compared with 27.8% at
May 28, 1995.
B.) Results of Operations
Overall sales for the quarter and the six month period ended
November 26, 1995, increased 6.4% and 6.2%, respectively, over sales
of the comparable periods last year. The increased sales both for the
quarter and the six months this year principally were the result of
increased unit sales volumes by both the Registrant's Dairy Products
and Specialty Food Products operations and sales of business
acquisitions in fiscal 1995 and during the six month period ended
November 26, 1995. Consolidated after-tax earnings for the second
quarter and the six months ended November 26, 1995, declined 20.0% and
19.8%, respectively, from the earnings of the same periods a year ago,
principally the result of lower earnings of the Registrant's Specialty
Food Products segment.
Sales of the Dairy Products operations for the second quarter
were $397.2 million compared with $374.8 million for the same period a
year ago. Sales for the six months ended November 26, 1995, were
$787.5 million compared with $746.0 million for the same period last
year. The sales increases this year principally were the result of
increased unit sales volumes in certain markets with overall selling
prices approximating last year's pricing.
7
<PAGE> 8
Dairy Products operating earnings for the second quarter were
$19.2 million compared with $17.0 million for the corresponding period
a year ago. Operating earnings for the six months ended November 26,
1995, were $39.5 million compared with $36.6 million for the same
period last year. The second quarter results a year ago included a
charge to earnings of $2.0 million relative to plant closings.
Competitive pricing conditions in a couple marketing areas limited an
overall increase in Dairy Products earnings for the second quarter and
six months this year.
Sales of the Specialty Food Products operations for the second
quarter were $301.3 million, an increase of 6.8% over sales of the
corresponding period a year ago. Sales for the six months ended
November 26, 1995, were 7.3% greater than sales of the same period
last year. The increased sales both for the second quarter and the
six months principally were the result of:
1.) Increased sales unit volumes by the vegetable and pickle
operations, and
2.) Sales of acquired vegetables operations.
Overall pricing for the second quarter and the six months ended
November 26, 1995, was below last year's level principally the result
of lower vegetable sell prices. Sales volumes for the balance of the
Specialty Food Products operations exceeded sales volumes for both the
second quarter and six months a year ago.
Specialty Food Products second quarter and six months earnings
were $19.5 million and $32.5 million, respectively, compared with
$27.1 million and $45.5 million for the comparable periods last year.
The decline in earnings both for the second quarter and six months
principally were the result of lower earnings of the frozen and
canned vegetable operations and pickle operations. Lower vegetable
selling prices and higher promotional costs, encountered during the
first quarter this year compared to last year, continued in the
second quarter reflecting intense competitive activity as a result of
the increased industry-wide carryover inventory levels from the 1994
pack. Adverse weather conditions in the Midwest vegetable growing
areas resulted in increased processing costs due to the lower 1995
pack. The pickle operations earnings were adversely affected by
increased processing costs as a result of spring and early summer
weather related conditions in the Southeast growing areas. Selling
prices for certain canned vegetables have increased and frozen
vegetable selling price improvements have commenced. Vegetable and
pickle sales volumes both for the second quarter and the six months
were greater than volumes for the comparable periods last year.
Delivery, selling and administrative expenses for the second
quarter and the six months ended November 26, 1995, increased 5.0% and
8.0%, respectively, over the corresponding periods last year
principally the result of:
1.) Expenses of business acquired.
2.) Increased marketing expense associated with new product
introductions.
3.) Expenses associated with the increased sales volumes and entry
into new markets.
8
<PAGE> 9
Interest expense for the second quarter of $7.2 million and
$12.9 million for the six months ended November 26, 1995, increased
27.9% and 24.0%, respectively, over interest expense for the
corresponding periods a year ago. The increases both for the second
quarter and the six months reflected the interest on increased
borrowings associated with business acquisitions and higher prevailing
interest rates during the second quarter and the six months as
compared to rates during the corresponding periods a year ago.
The effective income tax rate for the second quarter was 41.0%
which was the same rate for the second quarter last year. The
effective rate for the six months ended November 26, 1995, was 40.7%
compared with 41.0% for the same period last year.
9
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
There has been no material change in the legal proceedings reported
under Item 3 - Legal Proceedings, of the Registrant's Form 10-K Annual Report,
for the fiscal year ended May 28, 1995.
ITEM 6. Exhibits and Reports on Form 8-K
a.) Exhibits
Item 12 - Computation of Ratio of Earnings to Fixed Charges
Item 27 - Financial Data Schedules
b.) Reports on Form 8-K
None were filed during the quarter for which this report is
filed.
10
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DEAN FOODS COMPANY
------------------
(Registrant)
DATE: January 10, 1996 WILLIAM R. McMANAMAN
---------------- --------------------
WILLIAM R. McMANAMAN
Vice President, Finance
DATE: January 10, 1996 DALE I. HECOX
---------------- --------------------
DALE I. HECOX
Treasurer
11
<PAGE> 1
Exhibit 12
Dean Foods Company
Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
26 Weeks Ended
November 26, 1995
-----------------
<S> <C>
Income before taxes $50,063
------
Fixed charges:
Interest expense 12,869
Debt issue costs 90
Portion of rentals (33%) 4,136
------
Total fixed charges 17,095
------
Earnings before taxes and
fixed charges $67,158
======
Ratio of earnings to
fixed charges 3.9
======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Registrants' Quarterly Report on Form 10-Q for the quarterly period ended
November 26, 1995
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-26-1996
<PERIOD-START> MAY-28-1995
<PERIOD-END> NOV-26-1995
<CASH> 22,461
<SECURITIES> 0
<RECEIVABLES> 202,188
<ALLOWANCES> 2,923
<INVENTORY> 393,741
<CURRENT-ASSETS> 677,521
<PP&E> 1,056,199
<DEPRECIATION> 459,855
<TOTAL-ASSETS> 1,412,988
<CURRENT-LIABILITIES> 487,796
<BONDS> 232,507
0
0
<COMMON> 41,395
<OTHER-SE> 559,973
<TOTAL-LIABILITY-AND-EQUITY> 1,412,988
<SALES> 1,356,863
<TOTAL-REVENUES> 1,356,863
<CGS> 1,049,912
<TOTAL-COSTS> 1,049,912
<OTHER-EXPENSES> 245,279
<LOSS-PROVISION> 645
<INTEREST-EXPENSE> 12,869
<INCOME-PRETAX> 50,063
<INCOME-TAX> 20,930
<INCOME-CONTINUING> 29,673
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,673
<EPS-PRIMARY> .74
<EPS-DILUTED> .74
</TABLE>
