<PAGE> 1
UNITED STATES
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 February 28, 1999
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 1-08262
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 39,417,353.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
DEAN FOODS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTERS AND NINE MONTHS ENDED
FEBRUARY 28, 1999 AND FEBRUARY 22, 1998
(In Thousands, Except for Per Share Amounts)
<TABLE>
<CAPTION>
Third Quarter Ended Nine Months Ended
February 28, February 22, February 28, February 22,
1999 1998 1999 1998
------------ ------------ ------------ -----------
(Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 995,169 $ 665,375 $ 2,754,650 $ 1,910,164
Costs of products sold 806,685 517,141 2,172,976 1,466,416
Delivery, selling and administrative expenses 172,397 113,944 473,235 329,152
------------ ------------ ------------ ------------
Operating earnings 16,087 34,290 108,439 114,596
Interest expense 10,898 4,925 27,947 13,103
Interest income 188 807 733 2,085
------------ ------------ ------------ ------------
Income from continuing operations
before income taxes 5,377 30,172 81,225 103,578
Provision for income taxes 2,097 11,660 31,678 40,233
------------ ------------ ------------ ------------
Income from continuing operations 3,280 18,512 49,547 63,345
------------ ------------ ------------ ------------
Discontinued operations, net of taxes:
Income (loss) from discontinued operations - 6,483 (2,929) 9,772
Gain on sale of discontinued operations - - 83,820 -
------------ ------------ ------------ ------------
Total discontinued operations - 6,483 80,891 9,772
------------ ------------ ------------ ------------
Net income $ 3,280 $ 24,995 $ 130,438 $ 73,117
============ ============ ============ ============
Basic income (loss) per share:
Income from continuing operations $ .08 $ .45 $ 1.23 $ 1.56
Income (loss) from discontinued operations - .16 (.07) .24
Gain on sale of discontinued operations - - 2.10 -
------------ ------------ ------------ ------------
Net income $ .08 $ .61 $ 3.26 $ 1.80
============ ============ ============ ============
Diluted income (loss) per share:
Income from continuing operations $ .08 $ .44 $ 1.22 $ 1.53
Income (loss) from discontinued operations - .16 (.07) .23
Gain on sale of discontinued operations - - 2.05 -
------------ ------------ ------------ ------------
Net income $ .08 $ .60 $ 3.20 $ 1.76
============ ============ ============ ============
Weighted average common shares:
Basic 40,245 40,643 39,998 40,556
============ ============ ============ ===========
Diluted 40,737 41,697 40,733 41,491
============ ============ ============ ===========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
2
<PAGE> 3
DEAN FOODS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
FEBRUARY 28, 1999 AND MAY 31, 1998
(In Thousands)
<TABLE>
<CAPTION>
February 28, May 31,
1999 1998
---- ----
(Unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and temporary cash investments $ 14,093 $ 11,932
Accounts and notes receivable, less allowance for
doubtful accounts of $10,531 and $4,212, respectively 295,146 225,970
Inventories 184,739 135,405
Other current assets 73,653 46,931
------------ ------------
Total Current Assets 567,631 420,238
------------ ------------
PROPERTIES:
Property, plant and equipment, at cost 1,177,532 966,226
Accumulated depreciation 468,957 415,162
------------ ------------
Total Properties, net 708,575 551,064
------------ ------------
NET ASSETS OF DISCONTINUED OPERATIONS - 288,037
------------ ------------
OTHER ASSETS:
Intangibles, net of amortization of
$20,125 and $11,537, respectively 467,727 334,597
Other assets 7,832 13,253
------------ ------------
Total Other Assets 475,559 347,850
------------ ------------
TOTAL ASSETS $ 1,751,765 $ 1,607,189
============ ============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Notes payable to banks $ 28,200 $ 12,000
Current installments of long-term obligations 8,966 9,014
Accounts payable and accrued expenses 379,337 311,303
Dividends payable 8,537 8,079
Federal and state income taxes payable 21,311 12,518
------------ ------------
Total Current Liabilities 446,351 352,914
LONG-TERM OBLIGATIONS 497,589 558,233
DEFERRED LIABILITIES 84,639 76,776
SHAREHOLDERS' EQUITY 723,186 619,266
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,751,765 $ 1,607,189
============ ============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 4
DEAN FOODS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
FEBRUARY 28, 1999 AND FEBRUARY 22, 1998
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
February 28, February 22,
1999 1998
------ ------
(Unaudited)
<S> <C> <C>
Net cash provided from continuing operations $ 20,816 $ 97,138
----------- -----------
Cash flows from investing activities:
Capital expenditures (96,141) (75,755)
Proceeds from disposition of property, plant and equipment 951 1,790
Acquisitions, net of cash acquired (127,773) (141,280)
----------- -----------
Net cash used in investing activities (222,963) (215,245)
----------- -----------
Cash flows from financing activities
Issuance of long-term obligations 330,000 147,574
Repayment of long-term obligations (436,398) (1,480)
Issuance (repayment) of notes payable to banks, net 16,200 4,004
Unexpended industrial revenue bond proceeds 5,965 4,741
Cash dividends paid (24,831) (23,879)
Issuance of common stock 9,224 11,805
Repurchase of treasury stock (48,178) -
----------- -----------
Net cash provided by (used in) financing activities (148,018) 142,765
----------- -----------
Cash flow from discontinued operations:
Net cash provided by (used by) discontinued operations (12,667) 3,911
Cash proceeds on sale of discontinued operations 364,993 -
----------- -----------
Total discontinued operations 352,326 3,911
----------- -----------
Increase in cash and temporary cash investments 2,161 28,569
Cash and temporary cash investments - beginning of period 11,932 4,386
----------- -----------
Cash and temporary cash investments - end of period $ 14,093 $ 32,955
=========== ===========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 5
DEAN FOODS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands unless otherwise noted.
1. BASIS OF PRESENTATION
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 1998 Annual Report
on Form 10-K. The results of operations for the nine-month period ended February
28, 1999 are not necessarily indicative of the operating results for the full
year.
2. ACQUISITIONS
During the first nine months of fiscal 1999, the Company acquired the assets of
Hillside Dairy in Cleveland Heights, Ohio on July 1, 1998, the assets of Barber
Dairies of Birmingham, Alabama on August 11, 1998, the stock of the U.C. Milk
Company in Madisonville, Kentucky on September 17, 1998 and the stock of
Berkeley Farms, Inc. of Hayward, California on November 4, 1998.
The acquisitions were all made for cash consideration except for the
Berkeley Farms acquisition which was for a combination of cash and Company
common stock. The total consideration for acquisitions completed during the
first nine months of fiscal 1999 was $127.8 million in cash and $37.4 million
in Company common stock. In addition, as discussed in Note 3, the Company
acquired the assets of the aseptic foods business of Agrilink Foods, Inc. in
Benton Harbor, Michigan as part of the consideration for the Company's
Vegetables business.
These acquisitions were accounted for as purchases and have been
recorded using preliminary valuations of the assets and liabilities acquired.
Goodwill arising from these acquisitions will be amortized using the
straight-line method over periods up to 40 years. The operating results of each
acquisition have been included in the Company's results of operations since the
date of acquisition.
On March 8, 1999 the Company acquired the assets of Custom Foods
Processor International, Inc., a dry ingredient processor located in New
Hampton, Iowa, for cash consideration. Subsequent to the end of the third
quarter, the Company also announced an agreement to acquire the assets of Alta
Dena Certified Dairy in City of Industry, California.
3. DISCONTINUED OPERATIONS
On September 23, 1998, the Company sold the stock of Dean Foods Vegetable
Company to Agrilink Foods, Inc. ("Agrilink") for $365.0 million in cash, a $30.0
million Agrilink subordinated note and Agrilink's aseptic foods business, which
has been valued at $80.0 million. Cash proceeds were utilized to repay debt
outstanding under the Company's revolving credit agreement. Due to the
uncertainty of realizability of the $30.0 million subordinated note, the note
has been valued at a nominal amount. The Company recorded an after-tax gain on
the sale of the Vegetables segment of $83.8 million ($2.05 per diluted share).
The gain is subject to final valuations and appraisals of assets.
5
<PAGE> 6
Net sales of discontinued operations were $139.8 million and $256.6
million for the nine months ended February 28, 1999 and February 22, 1998,
respectively. The income tax provision (benefit) included in discontinued
operations was $(1.9) million and $2.2 million for the February 28, 1999 and
February 22, 1998 nine months ended periods, respectively. Income (loss) from
discontinued operations includes interest expense allocations (based on the
short-term interest expense incurred and changes in working capital levels) of
$2.5 million and $4.7 million for the nine months ended February 28, 1999 and
February 22, 1998, respectively.
4. INVENTORIES
The following is a tabulation of inventories by class at February 28, 1999,
February 22, 1998, and May 31, 1998.
<TABLE>
<CAPTION>
February 28, February 22, May 31,
1999 1998 1998
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Raw materials and supplies $ 48,695 $ 36,568 $ 45,266
Materials in process 17,678 20,279 12,432
Finished goods 128,049 92,165 87,390
---------- ---------- ---------
194,422 149,012 145,088
Less: Excess of current cost over stated
value of last-in, first-out inventories 9,683 11,292 9,683
---------- ---------- ---------
Total inventories $ 184,739 $137,720 $ 135,405
========== ========== =========
</TABLE>
5. DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization expense for the third quarters ended February 28,
1999 and February 22, 1998 was $23.7 million and $14.7 million, respectively.
For the nine months ended February 28, 1999 and February 22, 1999, depreciation
and amortization expense was $66.8 million and $41.7 million, respectively.
6. BUSINESS SEGMENT INFORMATION
The following is a tabulation of the Company's business segment information for
the quarters and nine months ended February 28, 1999 and February 22, 1998.
<TABLE>
<CAPTION>
(Unaudited)
Dairy Pickles Specialty Corporate Consolidated
----- ------- --------- --------- ------------
THIRD QUARTER ENDED
<S> <C> <C> <C> <C> <C>
February 28, 1999
Net sales $ 803,333 $ 82,418 $109,418 $ - $ 995,169
Operating earnings(1) $ 6,730 $ 1,336 $ 15,957 $ (7,936) $ 16,087
February 22, 1998
Net sales $ 503,840 $ 75,661 $ 85,874 $ - $ 665,375
Operating earnings $ 22,036 $ 8,263 $ 13,777 $ (9,786) $ 34,290
NINE MONTHS ENDED
February 28, 1999
Net sales $2,196,940 $ 261,712 $ 295,998 $ - $2,754,650
Operating earnings(1) $ 69,296 $ 21,322 $ 42,569 $(24,748) $ 108,439
February 22, 1998
Net sales $1,417,038 $ 245,458 $ 247,668 $ - $1,910,164
Operating earnings $ 82,010 $ 25,648 $ 37,766 $(30,828) $ 114,596
</TABLE>
(1) Pickles segment operating earnings for the fiscal 1999 third quarter and
nine-month periods include a pre-tax charge for a plant closure of $7.7
million.
7. 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
RESULTS OF OPERATIONS
THIRD QUARTER FISCAL 1999 VERSUS THIRD QUARTER FISCAL 1998
RESULTS OF CONTINUING OPERATIONS
Net sales for the third quarter of fiscal 1999 increased $329.8 million, or
49.6%, to $995.2 million over the third quarter of fiscal 1998. The increase is
primarily the result of acquisitions completed during the latter half of fiscal
1998 and the first nine months of fiscal 1999. Fiscal 1999 third quarter
operating earnings declined from $34.3 million to $16.1 million. The third
quarter fiscal 1999 earnings results include a $7.7 million pre-tax charge ($4.7
million after-tax or $.12 per share) related to a Pickles segment plant closure.
Operating earnings exclusive of the plant closure charge decreased 30.5%
compared to the prior year. The decrease is primarily due to lower earnings in
the Dairy segment. The Pickles (before the plant closure charge) and Specialty
segments each reported higher earnings results compared to the prior year's
quarter. Income from continuing operations was $3.3 million, or $.08 per diluted
share, compared to $18.5 million, or $.44 per diluted share, in the prior year.
BUSINESS SEGMENTS
DAIRY - Dairy segment net sales for the third quarter of fiscal 1999 of
$803.3 million were $299.5 million, or 59.4%, higher than sales of $503.8
million in the prior year. Net sales increased in the Dairy segment primarily
due to acquisitions completed over the past year, but also reflect the
pass-through of higher raw milk costs. Volumes in the third quarter of fiscal
1999 were flat compared to the same quarter of the prior year. Despite the sales
increase, third quarter Dairy operating earnings decreased from $22.0 million in
fiscal 1998 to $6.7 million in fiscal 1999. The decline in earnings is due
to the combination of higher raw milk costs, adverse changes in butterfat prices
and costs associated with the integration and assimilation of recent
acquisitions into the Company's existing production and distribution structures.
The third quarter of fiscal 1999 experienced all-time record high raw milk
costs; costs dropped significantly in March and are expected to continue to
decrease during the remainder of the fourth quarter.
PICKLES - Net sales in the Pickles segment increased 8.9% to $82.4
million in fiscal 1999 from $75.7 million in fiscal 1998. Operating earnings of
$1.3 million declined from earnings of $8.3 million a year ago. The fiscal 1999
third quarter results include a $7.7 million pre-tax charge related to a
Michigan plant closure. Pickles segment third quarter earnings, excluding the
closure charge, increased 9.7% compared to the same quarter in fiscal 1998. The
sales and earnings increases are primarily attributable to the acquisition of
the Schwartz Pickle Company, a refrigerated food service pickle company
acquired at the end of fiscal 1998, partially offset by a decline in base
branded business.
The Michigan plant closure was announced in February 1999. In addition
to the $7.7 million pre-tax charge, the Company estimates that additional costs
of approximately $2 million (pre-tax) will be recorded over the next two
quarters related to moving equipment from the closed Michigan facility to other
existing plants.
SPECIALTY - Specialty segment net sales of $109.4 million in for the
third quarter were 27.4% higher than sales for the same period a year ago.
Operating earnings for the third quarter increased 15.8% to $16.0 million.
Increases are due primarily to the acquisition of the aseptic foods business
acquired in conjunction with the disposition of the Company's Vegetables
segment. In addition, the segment's Food Products unit, which produces non-dairy
coffee creamers, has increased both sales and earnings over the prior year as it
continues to benefit from improved efficiencies from a fiscal 1998 facility
expansion.
7
<PAGE> 8
CORPORATE
Corporate expenses decreased $1.9 million in the third quarter of fiscal 1999
versus the same period of the prior year primarily due to lower incentive and
stock-related compensation plan expenses.
INTEREST EXPENSE
Third quarter interest expense of $10.9 million was $6.0 million higher than the
same period of the prior year. The Company incurred additional expense due to
higher borrowings under the revolving credit agreement, which was utilized to
fund acquisitions and working capital requirements.
INCOME TAXES
The effective tax rate for the third quarter of fiscal 1999 was 39.0% compared
to a rate of 38.6% for the third quarter of fiscal 1998.
NINE MONTHS ENDED FISCAL 1999 VERSUS NINE MONTHS ENDED FISCAL 1998
RESULTS OF CONTINUING OPERATIONS
Net sales for the nine months ended fiscal 1999 were $2.8 billion versus net
sales of $1.9 billion in the prior year. Net sales increased in all business
segments, with the majority of the increase due to acquisitions. Operating
earnings decreased to $108.4 million in fiscal 1999 from $114.6 million in
fiscal 1998. Fiscal 1999 operating earnings include a $7.7 million pre-tax plant
closure charge. Income from continuing operations for the nine months ended
fiscal 1999 was $49.5 million, or $1.22 per diluted share, versus $63.3 million,
or $1.53 per diluted share, in fiscal 1998.
BUSINESS SEGMENTS
DAIRY - Net sales in the Dairy segment of $2.2 billion were $779.9
million, or 55.0%, higher than sales of $1.4 billion in the prior year. The
majority of the sales increase was related to fiscal 1999 and 1998 acquisitions.
Also contributing to the increase was improvement in base (i.e. non-acquisition)
fluid volume during the first and second quarters of fiscal 1999. Third quarter
fluid volume experienced a significant slowdown from the pace of the earlier
quarters and was flat compared to the prior year. The slowdown in the third
quarter was due to higher raw milk costs and the resultant higher retail prices
which led to lower consumption. Operating earnings declined $12.7 million versus
the prior year. First quarter earnings were relatively flat compared to the
prior year as rising butterfat costs which benefited the fluid milk business
were offset by negative impacts in the ice cream and extend shelf life
operations. Second quarter operating efficiency improvements were partially
offset by commodity volatility and acquisition integration costs. Record high
raw milk costs, butterfat volatility and continued integration costs resulted in
lower third quarter earnings.
PICKLES - Pickles segment net sales of $261.7 million were $16.3
million, or 6.6%, higher than fiscal 1998. Fiscal 1999 operating earnings of
$21.3 million include a pre-tax charge of $7.7 million related to the Michigan
plant closure. Fiscal 1999 operating earnings, excluding the plant closure
charge, were $29.1 million versus $25.6 million in fiscal 1998, a $3.4 million
increase. The majority of the sales and earnings increases were the result of
the Schwartz Pickle Company acquisition completed in May 1998, which offset
slight volume decreases in the segment's base branded business.
SPECIALTY - Fiscal 1999 net sales increased 19.5% to $296.0 million in
the Specialty segment. Operating earnings of $42.6 million increased in fiscal
1999 by 12.7%, or $4.8 million, compared to the prior year. The sales and
earnings increases are primarily due to the aseptic foods business acquired in
conjunction with the Vegetables segment disposition and improved performance in
the powdered products business following a fiscal 1998 facility expansion.
8
<PAGE> 9
CORPORATE
Corporate expenses decreased $6.1 million, or 19.7%, for the nine months of
fiscal 1999 compared to the same period of the prior year, primarily due to
lower compensation expense related to incentive and stock-based compensation
plans.
INTEREST EXPENSE
Interest expense for the nine months of fiscal 1999 increased $14.8 million over
the same period in the prior fiscal year. The increase is the result of higher
average borrowings outstanding during fiscal 1999.
INCOME TAXES
The effective income tax rate for the first nine months of fiscal 1999 was 39.0%
compared to a rate of 38.8% for the same period in fiscal 1998.
DISCONTINUED OPERATIONS
On September 23, 1998, the Company sold the stock of Dean Foods Vegetable
Company to Agrilink Foods, Inc. (Agrilink) for $365.0 million in cash, a $30.0
million Agrilink subordinated note and Agrilink's aseptic foods business. Due to
the uncertainty of realizability of the $30.0 million subordinated note, the
note has been valued at a nominal amount. Sale of the discontinued operations
resulted in an after-tax gain of $83.8 million, or $2.05 per diluted share. The
gain is subject to final valuations and appraisals of assets.
The loss from discontinued operations, net of taxes, for the nine
months ended fiscal 1999 was $2.9 million versus income from discontinued
operations, net of taxes, of $9.8 million in fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of February 28, 1999 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 31, 1998. The Company's use of the cash proceeds
received from the Vegetables segment disposition and the financing of
acquisition activity is discussed below. Cash and temporary cash investments
were $14.1 million at February 28, 1999.
Working capital at February 28, 1999 was $121.3 million compared to
$67.3 million at May 31, 1998, and inventories at February 28, 1999 were $184.7
million, an increase of $49.3 million over the May 31, 1998 balance. The
increase in working capital, including inventories, is primarily the result of
Dairy and Specialty acquisitions completed during fiscal 1999. Inventories at
February 28, 1999 were $47.0 million higher than inventories at February 22,
1998, due to additional inventory associated with acquisitions completed during
fiscal 1999 and the fourth quarter of fiscal 1998.
Seasonal working capital requirements were funded using the Company's
Revolving Credit Agreement and bilateral lines of credit. On February 28, 1999
there were $28.2 million of short-term borrowings outstanding compared to $12.0
million at May 31, 1999.
On March 18, 1999, the Company initiated funding under a new $500
million commercial paper program. This program will be utilized to fund working
capital requirements, to facilitate acquisitions and to replace borrowings under
the Company's revolving credit agreement.
CASH FLOW - The net change in cash for the nine months ended fiscal
1999 was an increase of $2.2 million. Net cash provided from continuing
operations was $20.8 million for the nine months ended February 28, 1999 versus
$97.1 million in fiscal 1998. The decrease is due to the increased financing of
working capital in fiscal 1999, as discussed previously, and lower earnings from
continuing operations.
9
<PAGE> 10
Net cash used in investing activities was $223.0 million for the first
nine months of fiscal 1999 compared to $215.2 million for the same period in
fiscal 1998. Fiscal 1999 investing activities include $127.8 million of cash
paid for acquisitions versus $141.3 million paid during the first nine months of
fiscal 1998. Capital expenditures for the nine months of fiscal 1999 were $96.1
million versus $75.8 million for the same period of the prior year. The $20.3
million increase reflects the Company's commitment to focus on investing in
innovative product growth, including the continued rollout of the Dairy
segment's small bottle initiative.
Net cash used in financing activities was $148.0 million for the nine
months of fiscal 1999 versus net cash provided of $142.8 million for the same
period of fiscal 1998. Cash proceeds from the sale of discontinued operations
which were used to repay debt outstanding under the Company's Revolving Credit
Agreement account for the majority of this change. Fiscal 1999 financing
activities also include additional long-term borrowings under the Company's
Revolving Credit Agreement used to fund current fiscal year acquisitions. During
the first nine months of fiscal 1999, the Company repurchased 1.2 million shares
of Company common stock totaling $48.2 million.
Discontinued operations for the nine months of fiscal 1999 generated
net cash of $352.3 million, which included cash proceeds on the sale of the
Vegetables segment of $365.0 million.
YEAR 2000 COMPLIANCE
As discussed in the Company's Annual Report on Form 10-K, the Company is
currently assessing and modifying its computer, production and facility systems
and business processes to provide for their continued functionality. The Company
is also continuing to assess the readiness of external parties and coordinating
efforts to address the Year 2000 issue with those entities. The Company is
augmenting previously scheduled computer maintenance with procedures designed to
locate and correct Year 2000 problems and accelerating normal equipment and
software replacement schedules. The Company continues to expect that
substantially all new systems upgrades or reprogramming efforts will be
completed by June 30, 1999. The costs associated with these procedures have not
been and are not expected to be material to the Company's financial condition or
results of operations.
The Company believes that modification of existing software and
conversions to new software will result in Year 2000 compliance. However, given
the complexity of the Year 2000 issue, the impact on business operations due to
failure by the Company to achieve compliance or failure by external entities,
such as suppliers and vendors, to achieve compliance, which the Company cannot
control, could adversely affect the Company's consolidated results of
operations.
FORWARD LOOKING STATEMENTS
Certain statements in this Quarterly Report are "forward looking statements" as
defined by the Private Securities Litigation Reform Law of 1995. These
statements, which may be indicated by words such as "expects", "intends",
"believes", "forecasts", or other words of similar meaning, involve certain
risks and uncertainties that may cause actual results to differ materially from
expectations as of the date of this Report. These risks include, but are not
limited to, risks associated with the Company's acquisition strategy, adverse
weather conditions resulting in poor harvest conditions, raw milk costs and
butterfat prices, interest rate fluctuations, competitive pricing pressures,
marketing and cost-management programs, changes in government programs and
shifts in market demand. Additional information concerning these and other risks
is contained in the Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 1998.
10
<PAGE> 11
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 Annual Report on
Form 10-K for the fiscal year ended May 31, 1998.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Basic and Diluted Income per Share
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedules
.1 Nine Months Ended February 28, 1999
.2 Nine Months Ended February 22, 1998 (Restated)
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K, dated January
15,1999, with regards to the Company's press release dated
January 11, 1999, "Dean Foods Appoints Eric Blanchard President
of Dairy Business."
11
<PAGE> 12
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: April 13, 1999 William R. McManaman
-------------- ----------------------------
WILLIAM R. McMANAMAN
Vice President, Finance and
Chief Financial Officer
DATE: April 13, 1999 William M. Luegers, Jr.
-------------- ----------------------------
WILLIAM M. LUEGERS, JR.
Controller
12
<PAGE> 1
EXHIBIT 11
Dean Foods Company
Computation of Basic and Diluted Income Per Share
<TABLE>
<CAPTION>
(In thousands, except for per share amounts)
Third Quarter Ended Nine Months Ended
-------------------- -----------------
February 28, February 22, February 28, February 22,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income from Continuing Operations $ 3,280 $ 18,512 $ 49,547 $ 63,345
Income (Loss) from Discontinued Operations - 6,483 (2,929) 9,772
Gain on Sale of Discontinued Operations - - 83,820 -
------- -------- --------- ---------
Net Income $ 3,280 $ 24,995 $ 130,438 $ 73,117
======= ======== ========= =========
BASIC INCOME (LOSS) PER SHARE:
Income from Continuing Operations $ .08 $ .45 $ 1.23 $ 1.56
Income (Loss) from Discontinued Operations .16 (.07) .24
Gain on Sale of Discontinued Operations - - 2.10 -
------- -------- --------- ---------
Net Income $ .08 $ .61 $ 3.26 $ 1.80
======= ======== ========= =========
Weighted average common shares outstanding 40,245 40,643 39,998 40,556
======= ======== ========= =========
DILUTED INCOME (LOSS) PER SHARE:
Income from Continuing Operations $ .08 $ .44 $ 1.22 $ 1.53
Income (Loss) from Discontinued Operations .16 (.07) .23
Gain on Sale of Discontinued Operations - - 2.05 -
------- -------- --------- ---------
Net Income $ .08 $ .60 $ 3.20 $ 1.76
======= ======== ========= =========
Adjusted weighted average common shares* 40,737 41,697 40,733 41,491
======= ======== ========= =========
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes weighted average number of potential common shares outstanding.
Potential common shares consist solely of the outstanding options under the
Company's stock option plan.
<PAGE> 1
EXHIBIT 12
Dean Foods Company
Computation of Ratio of Earnings to Fixed Charges
(In thousands)
<TABLE>
<CAPTION>
39 Weeks Ended
February 28, 1999
-----------------
<S> <C>
Income before taxes $ 81,225
---------
Fixed charges:
Interest expense 27,947
Portion of rentals (33%) 8,070
---------
Total fixed charges 36,017
---------
Earnings before taxes and fixed charges $ 117,242
=========
Ratio of earnings to fixed charges 3.3
=========
</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
February 28, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-30-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> FEB-28-1999
<CASH> 14,093
<SECURITIES> 0
<RECEIVABLES> 305,677
<ALLOWANCES> 10,531
<INVENTORY> 184,739
<CURRENT-ASSETS> 567,631
<PP&E> 1,177,532
<DEPRECIATION> 468,957
<TOTAL-ASSETS> 1,751,765
<CURRENT-LIABILITIES> 446,351
<BONDS> 497,589
0
0
<COMMON> 42,273
<OTHER-SE> 680,913
<TOTAL-LIABILITY-AND-EQUITY> 1,751,765
<SALES> 2,754,650
<TOTAL-REVENUES> 2,754,650
<CGS> 2,172,976
<TOTAL-COSTS> 2,172,976
<OTHER-EXPENSES> 472,173
<LOSS-PROVISION> 1,062
<INTEREST-EXPENSE> 27,947
<INCOME-PRETAX> 81,225
<INCOME-TAX> 31,678
<INCOME-CONTINUING> 49,547
<DISCONTINUED> 80,891
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 130,438
<EPS-PRIMARY> 3.26
<EPS-DILUTED> 3.20
</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
February 22, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> MAY-26-1997
<PERIOD-END> FEB-22-1998
<CASH> 32,955
<SECURITIES> 0
<RECEIVABLES> 198,192
<ALLOWANCES> 4,991
<INVENTORY> 137,720
<CURRENT-ASSETS> 414,967
<PP&E> 858,155
<DEPRECIATION> 402,198
<TOTAL-ASSETS> 1,355,811
<CURRENT-LIABILITIES> 306,739
<BONDS> 357,206
0
0
<COMMON> 41,940
<OTHER-SE> 586,360
<TOTAL-LIABILITY-AND-EQUITY> 1,355,811
<SALES> 1,910,164
<TOTAL-REVENUES> 1,910,164
<CGS> 1,466,416
<TOTAL-COSTS> 1,466,416
<OTHER-EXPENSES> 327,419
<LOSS-PROVISION> 1,733
<INTEREST-EXPENSE> 13,103
<INCOME-PRETAX> 103,578
<INCOME-TAX> 40,233
<INCOME-CONTINUING> 63,345
<DISCONTINUED> 9,722
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,117
<EPS-PRIMARY> 1.80
<EPS-DILUTED> 1.76
</TABLE>
