<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 August 25, 1996 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 (847) 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 40,162,877.
Total number of pages 10.
<PAGE> 2
PART I - FINANCIAL INFORMATION
A. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of the Company, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the following
unaudited condensed consolidated financial statements have been included
herein. Certain information and footnote disclosures normally included in the
financial statements have been omitted. These unaudited condensed consolidated
financial statements should be read in conjunction with the Company's 1996
Annual Report on Form 10-K.
2
<PAGE> 3
ITEM 1.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED
AUGUST 25, 1996 AND AUGUST 27, 1995
(In Thousands Except for Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
August 25, August 27,
1996 1995
---------- ----------
(Unaudited)
<S> <C> <C>
Net sales $710,052 $651,505
Costs of products sold 550,159 502,820
Delivery, selling and
administrative expenses 123,812 120,487
--------- ----------
Operating earnings 36,081 28,198
Interest expense (6,249) (5,658)
Interest income 270 383
--------- ----------
Income before income taxes 30,102 22,923
Provision for income taxes 12,192 9,262
--------- ----------
Net income $17,910 $13,661
========= ==========
Net income per common share $.45 $.34
========= ==========
Dividends per share (Declared and paid) $.19 $.18
========= ==========
Weighted average common shares 40,142 40,092
========= ==========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 4
CONDENSED CONSOLIDATED BALANCE SHEETS
AUGUST 25, 1996 AND MAY 26, 1996
(In Thousands)
<TABLE>
<CAPTION>
August 25, May 26,
1996 1996
---------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS: $6,890 $10,399
Cash and cash equivalents
Accounts and notes receivable,
less allowance for doubtful
accounts of $3,081 and $3,201, respectively 186,524 188,222
Inventories 329,007 278,731
Other current assets 98,723 107,047
---------- ----------
Total Current Assets 621,144 584,399
---------- ----------
PROPERTIES:
Property, plant and equipment, at cost 1,009,830 993,826
Accumulated depreciation 482,432 468,159
---------- ----------
527,398 525,667
---------- ----------
OTHER ASSETS 111,104 112,174
---------- ----------
Total Assets $1,259,646 $1,222,240
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to banks $82,000 $92,000
Current installments of long-term obligations 11,796 11,855
Accounts payable and accrued expenses 321,810 287,305
Dividends payable 7,708 7,297
Federal and state income taxes 4,988 -
---------- ----------
Total Current Liabilities 428,302 398,457
---------- ----------
LONG-TERM OBLIGATIONS (Less current
installments included above) 221,138 221,653
---------- ----------
DEFERRED CREDITS 91,384 94,438
---------- ----------
SHAREHOLDERS' EQUITY 518,822 507,692
---------- ----------
Total Liabilities and Shareholders' Equity $1,259,646 $1,222,240
========== ==========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
AUGUST 25, 1996 AND AUGUST 27, 1995
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
August 25, August 27,
1996 1995
---------- ----------
(Unaudited)
<S> <C> <C>
Net cash provided from operations $32,017 $12,505
---------- ----------
Cash flows from investing activities:
Capital expenditures (19,859) (28,208)
Proceeds from disposition of property,
plant and equipment 661 527
Acquisition of business, net of
cash acquired - (19,282)
---------- ----------
Net cash used in investing activities (19,198) (46,963)
---------- ----------
Cash flows from financing activities:
Issuance of long-term obligations - 3,799
Repayment of long-term obligations (574) (1,554)
Issuance (repayment) of notes payable to banks, net (10,000) 40,000
Unexpended industrial revenue bond proceeds 744 (3,414)
Cash dividends paid (7,221) (6,646)
Issuance of common stock 723 1,331
---------- ----------
Net cash provided by (used for) financing activities (16,328) 33,516
---------- ----------
Decrease in cash and cash equivalents (3,509) (942)
Cash and cash equivalents - beginning of period 10,399 4,826
---------- ----------
Cash and cash equivalents - end of period $6,890 $3,884
========== ==========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. INVENTORIES
The following is a tabulation of inventories by class at August 25, 1996,
August 27, 1995, and May 26, 1996 (In Thousands).
<TABLE>
<CAPTION>
August 25, August 27, May 26,
1996 1995 1996
--------- --------- --------
(Unaudited)
<S> <C> <C> <C>
Raw materials and supplies $ 48,062 $ 47,580 $ 56,671
Materials in process 93,964 95,935 65,447
Finished goods 203,415 231,356 172,316
-------- -------- --------
345,441 374,871 294,434
Less: Excess of current cost
over stated value of
last-in, first-out
inventories 16,434 15,167 15,703
-------- -------- --------
Total inventories $329,007 $359,704 $278,731
======== ======== ========
</TABLE>
2. BUSINESS SEGMENT INFORMATION
The following is a tabulation of the Company's business segment
information for the quarters ended August 25, 1996 and August 27, 1995 (In
Thousands).
<TABLE>
<CAPTION>
Dairy Vegetables Pickles Specialty Corporate Consolidated
--------- ----------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
August 25, 1996
Net sales $432,281 $114,307 $95,848 $67,616 $ - $710,052
Operating earnings $ 26,120 $ 956 $ 7,934 $ 8,431 $ (7,360) $ 36,081
August 27, 1995
Net sales $390,264 $116,080 $93,782 $51,379 $ - $651,505
Operating earnings $ 20,341 $ 2,647 $ 4,752 $ 6,473 $ (6,015) $ 28,198
</TABLE>
3. 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 August 25, 1996 there have been no material changes in the Company's
liquidity or its capital resources from those described in the Management's
Discussion and Analysis contained in the Company's Annual Report on Form 10-K
for the fiscal year ended May 26, 1996. Cash and cash equivalents were $6.9
million at August 25, 1996, a decrease of $3.5 million from the balance at May
26, 1996.
The inventories at August 25, 1996 were $329.0 million, an increase of
$50.3 million over the balance at May 26, 1996, reflecting the typical seasonal
increase resulting from the vegetable and cucumber harvests. The August 25,
1996 inventories were $30.7 million lower than inventories a year ago
reflecting the planned reduction of inventories in the Vegetables segment.
In the fourth quarter of fiscal 1996 the Company recorded a pre-tax
provision of $150.0 million related to the adoption of a plan to reduce costs,
rationalize production capacity and provide for projected severance and
environmental costs. At May 26, 1996 the remaining accruals were $49.0
million. During the first quarter of fiscal 1997 the Company expended
$2.7 million, primarily for plant closure and severance activities. Plant
closure and severance activity will accelerate in the remaining quarters of
fiscal 1997 following the completion of processing of the 1996 harvest in the
plants scheduled for closure or disposition.
Short-term borrowings outstanding at August 25, 1996, were $82.0 million,
a decrease of $10.0 million from the balance outstanding at May 26, 1996.
Working capital at August 25, 1996 was $192.8 million compared to $185.9
million at May 26, 1996. The Company's debt-to-capital ratio was 37.8% at
August 25, 1996 compared with 39.1% at May 26, 1996.
B.) Results of Operations
Sales
Net sales for the first quarter of $710.1 million were 9% higher than
sales of $651.5 million in the prior year. The sales increase is primarily due
to increases in the Dairy and Specialty segments.
Dairy sales of $432.3 million were 10.8% higher than sales of $390.3
million in the prior year, primarily as a result of increased pricing which
reflected the pass-through of higher raw milk costs experienced during the
quarter. Raw milk supplies are tight and additional increases in raw milk
costs are expected in the next few months. Despite the lower supply of milk,
the Company has not experienced significant difficulties in obtaining raw
product. On an overall basis, dairy volume in the quarter was flat with fluid
milk up 4% and ice cream volume down 6%. The fluid volume increase is due to
increases in most of the fluid operations, which averaged approximately 3%, and
the effect of a 1995 acquisition. The ice cream volume decline is in line with
the overall national decline in the ice cream category.
7
<PAGE> 8
Sales in the Specialty segment of $67.6 million were 31.6% higher than
prior year sales of $51.4 million, primarily as the result of a 1995
acquisition and a 19% increase in volume in the Company's powdered products
operation due to increased international sales. Sales in the Vegetables
segment of $114.3 million were 1.5% lower than prior year sales of $116.1
million as a result of a 1.5% decline in volume. Sales in the Pickles segment
increased 2.2% to $95.8 million, primarily on net increased pricing as volume
was essentially flat.
Operating Earnings
Operating earnings for the first quarter of fiscal 1997 were $36.1
million, or 28% higher than operating earnings of $28.2 million in the prior
year. Increases in operating earnings in the Dairy, Pickles and Specialty
segments were responsible for the improvement.
Dairy segment operating earnings of $26.1 million were 28.4% higher than
the operating earnings of $20.3 million in the prior year. The quarter
benefited from the impact of a higher butterfat differential in the quarter
which effectively reduced the costs of the Company's skim and low fat dairy
products, as well as from improved margins and operating efficiencies in
certain operations. Operating earnings in the Pickles segment improved $3.2
million or 67.0% to $7.9 million in the quarter, as a result of the net pricing
improvements discussed above and improved operating efficiencies attributable
to an improved Spring crop of cucumbers in 1996. Specialty segment operating
earnings of $8.4 million were 30.2% higher than the operating earnings of $6.5
million in the prior year, primarily as the result of increased profits
resulting from the higher sales in the powdered products operation and the
earnings of a fiscal 1996 acquisition. Vegetables segment operating earnings
declined from $2.6 million in fiscal 1996 to $1.0 million in the current year.
The Vegetables' results reflect the third consecutive quarter in which the
year-to-year comparisons are down. The down quarters are attributable to the
poor Midwest harvest in the summer of 1995 and the resultant higher costs
caused by volume related inefficiencies that have not been recovered through
higher pricing as industry-wide inventory remained at high levels. The 1996
harvest is not complete and costs and pricing in future quarters could still be
affected by weather conditions over the remainder of the 1996 growing season.
Interest Expense
Interest expense in the first quarter of $6.2 million was 10% higher than
the interest expense in the same period of the prior year. The increase
reflects slightly higher average borrowings resulting from fiscal 1996
acquisitions and higher interest rates than in the corresponding period of the
prior year.
Income Taxes
The effective income tax rate for the first quarter was 40.5% compared
with a rate of 40.4% in the first quarter a year ago.
8
<PAGE> 9
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 Company's Form 10-K Annual
Report, for the fiscal year ended May 26, 1996.
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.
9
<PAGE> 10
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: October 8, 1996 William R. McManaman
--------------- ---------------------------
WILLIAM R. McMANAMAN
Vice President, Finance and
Chief Financial Officer
DATE: October 8, 1996 Dale I. Hecox
--------------- ---------------------------
DALE I. HECOX
Treasurer
10
<PAGE> 1
Exhibit 12
Dean Foods Company
Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
13 Weeks Ended
August 25, 1996
---------------
<S> <C>
Income before taxes $30,102
---------
Fixed charges:
Interest expense 6,249
Portion of rentals (33%) 2,535
---------
Total fixed charges 8,784
Earnings before taxes and
fixed charges $38,886
=========
Ratio of earnings to
fixed charges 4.4
=========
</TABLE>
11
<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 AUGUST
25, 1996
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-25-1997
<PERIOD-START> MAY-26-1996
<PERIOD-END> AUG-25-1996
<CASH> 6,890
<SECURITIES> 0
<RECEIVABLES> 189,605
<ALLOWANCES> 3,081
<INVENTORY> 329,007
<CURRENT-ASSETS> 621,144
<PP&E> 1,009,830
<DEPRECIATION> 482,432
<TOTAL-ASSETS> 1,259,646
<CURRENT-LIABILITIES> 428,302
<BONDS> 221,138
<COMMON> 41,425
0
0
<OTHER-SE> 477,397
<TOTAL-LIABILITY-AND-EQUITY> 1,259,646
<SALES> 710,052
<TOTAL-REVENUES> 710,052
<CGS> 550,159
<TOTAL-COSTS> 550,159
<OTHER-EXPENSES> 123,285
<LOSS-PROVISION> 257
<INTEREST-EXPENSE> 6,249
<INCOME-PRETAX> 30,102
<INCOME-TAX> 12,192
<INCOME-CONTINUING> 17,910
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,910
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
</TABLE>
