<PAGE> 1
EXHIBIT 99.1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Dean Foods Company:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Dean Foods
Company and its subsidiaries at May 28, 2000 and May 30, 1999, and the results
of their operations and their cash flows for each of the three years in the
period ended May 28, 2000, in conformity with accounting principles generally
accepted in the United States. 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 auditing standards generally accepted in the
United States, 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.
/S/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chicago, IL
June 27, 2000, except as to Note 16 which is as of July 10, 2000.
1
<PAGE> 2
CONSOLIDATED BALANCE SHEETS
May 28, 2000 and May 30, 1999 (In thousands)
<TABLE>
<CAPTION>
ASSETS 2000 1999
CURRENT ASSETS
<S> <C> <C>
Cash and temporary cash investments $ 26,649 $ 15,958
Accounts and notes receivable, less allowance for doubtful
accounts of $6,311 and $7,570, respectively 302,557 303,337
Inventories 178,438 168,836
Deferred tax assets 56,720 54,354
Other 36,020 39,653
-------------------------------------------------------------------------------------------------------
Total Current Assets 600,384 582,138
-------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land 58,420 57,860
Buildings and improvements 371,107 357,266
Machinery and equipment 790,929 672,345
Transportation equipment 90,321 72,729
Construction in progress 45,410 82,038
-------------------------------------------------------------------------------------------------------
Total Property, Plant and Equipment, gross 1,356,187 1,242,238
Less - Accumulated depreciation 540,923 477,292
-------------------------------------------------------------------------------------------------------
Total Property, Plant and Equipment, net 815,264 764,946
-------------------------------------------------------------------------------------------------------
OTHER ASSETS
Goodwill, net of amortization of $36,550 and $21,568, respectively 557,721 547,153
Other intangible assets, net of amortization of $5,560 and
$2,983, respectively 6,085 4,333
Other 24,088 13,306
-------------------------------------------------------------------------------------------------------
Total Other Assets 587,894 564,792
-------------------------------------------------------------------------------------------------------
TOTAL ASSETS $2,003,542 $1,911,876
=======================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
<TABLE>
<CAPTION>
(In thousands) 2000 1999
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C>
Current installments of long-term obligations $ 3,603 $ 2,651
Accounts payable and accrued expenses 396,400 398,174
Dividends payable 7,876 8,353
Federal and state income taxes 41,219 30,308
-----------------------------------------------------------------------------------------------------
Total Current Liabilities 449,098 439,486
-----------------------------------------------------------------------------------------------------
LONG-TERM OBLIGATIONS 758,725 631,286
-----------------------------------------------------------------------------------------------------
DEFERRED LIABILITIES
Deferred income taxes 99,410 79,345
Other 38,624 45,345
-----------------------------------------------------------------------------------------------------
Total Deferred Liabilities 138,034 124,690
-----------------------------------------------------------------------------------------------------
Total Liabilities 1,345,857 1,195,462
SHAREHOLDERS' EQUITY
Preferred stock, $1 par value, 10,000,000 shares authorized,
none issued -- --
Common stock, $1 par value, 150,000,000 shares authorized,
42,364,508 and 42,275,564 shares issued, respectively 42,365 42,276
Capital in excess of par value 65,172 62,120
Retained earnings 803,096 730,074
Cumulative translation adjustment (361) (21)
Less - Treasury stock, at cost, 6,879,155 and 2,999,246
shares, respectively 252,587 118,035
-----------------------------------------------------------------------------------------------------
Total Shareholders' Equity 657,685 716,414
-----------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENT LIABILITIES -- --
-----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,003,542 $ 1,911,876
=====================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
2000 1999 1998
For the Three Fiscal Years Ended May (In thousands)
<S> <C> <C> <C>
Net sales $ 4,065,636 $ 3,755,148 $ 2,735,834
Costs of products sold 3,104,218 2,941,170 2,105,849
Delivery, selling and administrative expenses 732,728 642,535 467,466
Plant closure charges 6,078 18,105 --
----------------------------------------------------------------------------------------------------------------
Operating earnings 222,612 153,338 162,519
Interest expense, net of interest income 49,338 38,041 18,789
----------------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes 173,274 115,297 143,730
Provision for income taxes 67,156 44,966 55,750
----------------------------------------------------------------------------------------------------------------
Income from continuing operations 106,118 70,331 87,980
----------------------------------------------------------------------------------------------------------------
Discontinued operations, net of taxes:
Income (loss) from discontinued operations -- (2,929) 18,322
Gain on sale of discontinued operations -- 83,820 --
----------------------------------------------------------------------------------------------------------------
Total discontinued operations, net of taxes -- 80,891 18,322
----------------------------------------------------------------------------------------------------------------
Net income $ 106,118 $ 151,222 $ 106,302
================================================================================================================
Basic earnings (loss) per share:
Income from continuing operations $ 2.79 $ 1.77 $ 2.17
Income (loss) from discontinued operations -- (.07) .46
Gain on sale of discontinued operations -- 2.10 --
----------------------------------------------------------------------------------------------------------------
Net income $ 2.79 $ 3.80 $ 2.63
================================================================================================================
Diluted earnings (loss) per share:
Income from continuing operations $ 2.77 $ 1.74 $ 2.13
Income (loss) from discontinued operations -- (.07) .44
Gain on sale of discontinued operations -- 2.07 --
----------------------------------------------------------------------------------------------------------------
Net income $ 2.77 $ 3.74 $ 2.57
================================================================================================================
Weighted average common shares:
Basic 37,965 39,842 40,469
Diluted 38,311 40,482 41,395
================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the Three Fiscal Years Ended May (In thousands)
------------------------------------------------------------------------------------------------------------------------------
COMMON COMMON CAPITAL IN CUMULATIVE
STOCK STOCK EXCESS OF RETAINED TRANSLATION TREASURY
SHARES VALUE PAR VALUE EARNINGS ADJUSTMENT STOCK
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT MAY 25, 1997 40,284 $ 41,545 $ 18,073 $ 538,450 $ (218) $ (30,169)
Net income -- -- -- 106,302 -- --
Issuance of common stock 358 358 2,397 -- -- --
Exercise of stock options 59 59 10,657 -- -- --
Purchase of treasury stock (731) -- -- -- -- (35,754)
Cash dividends declared, $.80 per share -- -- -- (32,362) -- --
Cumulative translation adjustment -- -- -- -- (72) --
-----------------------------------------------------------------------------------------------------------------------------
BALANCES AT MAY 31, 1998 39,970 41,962 31,127 612,390 (290) (65,923)
Net income -- -- -- 151,222 -- --
Issuance of common stock 250 250 2,765 -- -- --
Exercise of stock options 64 64 9,101 -- -- --
Purchase of treasury stock (1,783) -- -- -- -- (70,384)
Issuance of treasury stock 6 -- (155) -- -- 155
Issuance of treasury stock for acquisition 769 -- 19,282 -- -- 18,117
Cash dividends declared, $.84 per share -- -- -- (33,538) -- --
Cumulative translation adjustment -- -- -- -- 269 --
-----------------------------------------------------------------------------------------------------------------------------
BALANCES AT MAY 30, 1999 39,276 42,276 62,120 730,074 (21) (118,035)
Net income -- -- -- 106,118 -- --
Issuance of common stock 27 27 1,099 -- -- --
Exercise of stock options 62 62 2,300 -- -- --
Purchase of treasury stock (3,893) -- -- -- -- (134,899)
Issuance of treasury stock 13 -- (347) -- -- 347
Cash dividends declared, $.88 per share -- -- -- (33,096) -- --
Cumulative translation adjustment -- -- -- -- (340) --
-----------------------------------------------------------------------------------------------------------------------------
BALANCES AT MAY 28, 2000 35,485 $ 42,365 $ 65,172 $ 803,096 $ (361) $(252,587)
=============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three Fiscal Years Ended May (In thousands) 2000 1999 1998
CONTINUING OPERATIONS
<S> <C> <C> <C>
Income from continuing operations $ 106,118 $ 70,331 $ 87,980
Adjustments to reconcile income from continuing
operations to net cash provided from continuing operations:
Depreciation and amortization 107,571 87,942 60,418
Deferred income taxes 16,463 9,834 16,131
Other long-term deferred liabilities (4,762) (4,240) (5,409)
Plant closure charges 6,078 18,105 --
(Increase) decrease in working capital items, net of acquisitions:
Accounts and notes receivable 6,817 (15,108) (16,581)
Inventories and other current assets 1,363 (963) 19,857
Accounts payable and accrued expenses (14,580) (17,102) (10,294)
Federal and state income taxes 10,912 18,096 9,342
Other (1,560) (2,977) 1,266
---------------------------------------------------------------------------------------------------------------------
Net cash provided from continuing operations 234,420 163,918 162,710
---------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Capital expenditures (147,541) (139,346) (104,683)
Proceeds from dispositions of property, plant and equipment 6,898 4,693 1,943
Acquisitions and equity investment, net of cash acquired (38,204) (238,786) (369,560)
Capitalized information system costs and other (8,081) (7,284) --
---------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (186,928) (380,723) (472,300)
---------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of long-term obligations -- 201,627 147,575
Repayment of long-term obligations (3,217) (107,256) (35,509)
Issuance of commercial paper, net 131,401 136,410 --
Issuance (repayment) of revolving credit agreement, net -- (210,000) 210,000
Issuance (repayment) of notes payable to banks, net -- (12,000) 9,000
Unexpended industrial revenue bond proceeds -- 5,965 4,656
Cash dividends paid (33,574) (33,263) (32,021)
Issuance of common stock 3,488 12,180 11,020
Purchase of treasury stock (134,899) (70,384) (35,754)
---------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (36,801) (76,721) 278,967
---------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY DISCONTINUED OPERATIONS -- 297,552 38,169
---------------------------------------------------------------------------------------------------------------------
INCREASE IN CASH AND TEMPORARY CASH INVESTMENTS 10,691 4,026 7,546
Cash and temporary cash investments - beginning of year 15,958 11,932 4,386
---------------------------------------------------------------------------------------------------------------------
CASH AND TEMPORARY CASH INVESTMENTS - END OF YEAR $ 26,649 $ 15,958 $ 11,932
=====================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DOLLAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE NOTED.
1. NATURE OF THE BUSINESS AND SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS - Dean Foods Company and its subsidiaries ("the Company") are
engaged in the processing, distribution and sales of dairy, pickle and other
specialty food products. The Company operates in three business segments. The
Company's principal products in the Dairy segment are fluid milk and cultured
products, ice cream and extended shelf-life-products. Principal products in the
Pickles segment are pickles, relishes and related items. Specialty segment
products include powdered products, refrigerated salad dressings, sauces,
puddings and dips, as well as the operations of the Company's transportation
subsidiary.
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS - The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements as well as the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
DEFINITION OF FISCAL YEAR - The Company's fiscal year ends on the last Sunday in
May. There were 52 weeks in the fiscal years ended May 2000 and 1999 and 53
weeks in fiscal 1998.
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 have been
eliminated.
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 pickle inventories are valued on the last-in, first-out (LIFO)
method. Dairy and certain specialty inventories are valued on the first-in,
first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at cost
and depreciated using the straight-line method over the estimated useful lives
of the assets as follows:
Asset Useful Life
---------------------------------------------------------
Buildings and improvements 5 to 40 years
Machinery and equipment 2 to 25 years
Transportation equipment 5 to 12 years
7
<PAGE> 8
Major renewals and betterments are capitalized, while repairs and maintenance,
which do not improve or extend useful life, are expensed. 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 included
in income. For income tax purposes, certain assets are depreciated using
accelerated methods.
INTANGIBLE ASSETS - Excess of cost over market value of net identifiable assets
of acquired companies and other intangible assets are amortized on a
straight-line basis over periods up to forty years.
LONG-LIVED ASSETS - The Company continually reviews intangible assets and
property, plant and equipment for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. To determine whether impairment exists, an estimate of the
undiscounted future cash flows or, in the case of goodwill, undiscounted
operating earnings are compared to the carrying amount. The Company believes
that there is no impairment of long-lived assets at May 28, 2000.
COMPUTER SOFTWARE - The Company expenses or capitalizes computer software
developed or obtained for internal use in accordance with AICPA Statement of
Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use". Capitalized costs are amortized over a period of
5 years, beginning when the capitalized software is ready for its intended use.
PENSIONS - 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
provisions 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. 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.
ADVERTISING EXPENSE - Advertising expense is comprised of media, agency and
production expenses. Advertising expenses are charged to income during the
period incurred, except for expenses related to the development of a major
commercial or media campaign, which are charged to income during the period in
which the advertisement or campaign is first presented by the media.
REVENUE RECOGNITION - Substantially all revenues are recognized when products
are shipped to the customers. Revenues are recorded net of all applicable
provisions for discounts, returns and allowances.
EARNINGS PER COMMON SHARE - Earnings per share is computed in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share." Basic earnings per common share is based upon net income divided by the
weighted average number of common shares outstanding during each year. Diluted
earnings per common share is calculated based upon net income divided by the
weighted average number of shares outstanding plus the weighted average number
of potential common shares outstanding. The potential common shares outstanding
of 346,000, 640,000 and 926,000 for fiscal 2000, 1999 and 1998, respectively,
consist solely of the outstanding options under the Company's stock option
plans.
8
<PAGE> 9
STOCK-BASED COMPENSATION - SFAS No. 123, "Accounting for Stock-Based
Compensation," encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has elected to continue to measure compensation cost using the intrinsic
value-based method of accounting as prescribed by Accounting Principles Board
Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees." Income tax
benefits attributable to stock options exercised are credited to capital in
excess of par value. The pro-forma disclosures required by SFAS No. 123, are
disclosed in Note 7 of the Consolidated Financial Statements.
COMPREHENSIVE INCOME - During fiscal 1999, SFAS No. 130, "Reporting
Comprehensive Income," which requires reporting comprehensive income and its
components to be disclosed in the financial statements for all periods
presented, became applicable. The only item of comprehensive income applicable
to the Company was a cumulative translation adjustment.
SEGMENT REPORTING - SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," requires disclosures of certain information about
operating segments on a basis consistent with the way in which the Company
manages and operates. The disclosures required by SFAS No. 131, are included in
Note 15 of the Consolidated Financial Statements.
RECLASSIFICATIONS - Certain previously reported amounts have been reclassified
to conform to current year-end presentations.
2. BUSINESS ACQUISITIONS
During fiscal 2000 the Company completed the following two acquisitions:
FISCAL 2000 ACQUISITION CLOSING DATE
-------------------------------------------------------------------------
DAIRY SEGMENT:
Dairy Express July 16, 1999
PICKLES SEGMENT:
Steinfeld's Products Company July 1, 1999
-------------------------------------------------------------------------
Each of the fiscal 2000 acquisitions were asset purchases for cash
consideration. The Company also assumed certain liabilities in addition to cash
consideration paid. On a pro forma basis, which assumes the above acquisitions
occurred at the beginning of each period presented, sales and net income are not
materially impacted. On August 23, 1999, the Company made an equity investment
in White Wave, Inc., a processor of soy-based products, the results of which are
included in the Specialty segment. The acquisitions and equity investment were
made for cash consideration totaling $38.2 million.
During fiscal 1999 the Company completed the following six acquisitions:
FISCAL 1999 ACQUISITION CLOSING DATE
--------------------------------------------------------------------------------
DAIRY SEGMENT:
Alta Dena Certified Dairy May 5, 1999
Berkeley Farms November 4, 1998
U.C. Milk Company September 17, 1998
Barber Dairies August 11, 1998
Hillside Dairy July 1, 1998
SPECIALTY SEGMENT:
Custom Food Processors, International March 8, 1999
--------------------------------------------------------------------------------
9
<PAGE> 10
The Company also acquired three dairy distributors and, in conjunction with the
sale of the Company's vegetable operations, an aseptic business, which is
included in the Specialty segment.
All of the fiscal 1999 acquisitions were asset purchases, except U.C. Milk
Company and Berkeley Farms, which were stock purchases. Cash consideration for
fiscal 1999 acquisitions totaled $238.8 million. In addition to the cash
consideration paid for these operations, the Company assumed certain
liabilities.
On a pro forma basis, the net sales (unaudited) of the Company would have been
$4,116.9 million in 1999 and $3,995.4 million in 1998. The pro forma sales
amounts assume that all of the fiscal 1999 acquisitions occurred at the
beginning of each period presented. On a pro forma basis, the results of
operations (unaudited) of the companies acquired would not have had a material
effect on the Company's net income or earnings per common share in 1999 or 1998.
During fiscal 1998, the Company completed the following ten acquisitions:
FISCAL 1998 ACQUISITION CLOSING DATE
--------------------------------------------------------------------------------
DAIRY SEGMENT:
Purity Dairies May 14, 1998
Coburg Dairy March 31, 1998
Dairy Business of American
Stores Company (Lucky Stores) March 2, 1998
Wengert's Dairy February 23, 1998
Sani-Dairy Division of the
Penn Traffic Company January 20, 1998
Maplehurst Dairy, Inc. January 6, 1998
H. Meyer Dairy Company November 24, 1997
Milk Products LLC November 21, 1997
PICKLES SEGMENT:
Schwartz Pickle May 18, 1998
SPECIALTY SEGMENT:
Marie's Salad Dressing May 27, 1997
--------------------------------------------------------------------------------
All of the fiscal 1998 acquisitions were asset purchases, with the exception of
the Coburg Dairy and Purity Dairies acquisitions, which were stock purchases.
Cash consideration for fiscal 1998 acquisitions totaled $369.6 million. In
addition to the cash consideration paid for these operations, the Company
assumed certain liabilities.
On a pro forma basis, the net sales (unaudited) of the Company would have been
$3,254.5 million in 1998. The pro forma sales amounts assume that all of the
above acquisitions occurred at the beginning of fiscal 1998. On a pro forma
basis, the results of operations (unaudited) of the companies acquired would not
have had a material effect on the Company's net income or earnings per common
share in 1998.
10
<PAGE> 11
All of the acquisitions were accounted for using the purchase method of
accounting as of their respective acquisition dates and accordingly, the
operating results of the acquired companies, subsequent to their respective
acquisition dates, are included in the Company's consolidated financial
statements. Fiscal 2000 acquisitions have been recorded at their estimated fair
values using preliminary valuations of the opening balance sheets. These
estimates of fair value are subject to change when final information concerning
asset and liability valuations are obtained. Goodwill arising from the
acquisitions, totaling an estimated $22.2 million, $221.4 million and $284.4
million in 2000, 1999 and 1998, respectively, will be amortized using the
straight-line method over periods up to forty years.
3. PLANT CLOSURE CHARGES
During the fourth quarter of fiscal 2000, the Company announced two plant
closures in the Dairy segment, which resulted in a pre-tax charge of $6.1
million ($3.8 million after-tax, or $.10 per share). Cash charges related to the
plant closures, which include severance and exit costs, totaled $1.9 million.
Non-cash charges of $4.2 million are associated with the write-down to net
realizable value of certain assets. Cash charges are expected to be paid by the
end of fiscal year 2001. The closures, which will affect approximately 118
hourly and salaried employees, are expected to be completed by the end of the
second quarter of fiscal year 2001. Production will be relocated and
consolidated into existing facilities.
During fiscal 1999, the Company announced plant closures in the Dairy, Pickles
and Specialty segments, which resulted in a pre-tax charge of $18.1 million
($11.0 million after-tax or $.27 per share). Cash charges related to the plant
closures, which include primarily severance, lease termination and exit costs,
totaled $8.9 million. Non-cash charges of $9.2 million associated with the
write-down to net realizable value of certain assets comprise the remainder of
the provision. As of May 28, 2000, substantially all the cash charges related to
the plant closures have been paid. Fiscal 1999 plant closures were completed by
the end of the first quarter of fiscal 2000 resulting in the elimination of
approximately 400 hourly and salaried employees. Production from the Dairy and
Pickles operations was relocated and consolidated into existing facilities. The
Specialty segment warehouse was replaced by public warehousing.
4. DISCONTINUED OPERATIONS
On September 23, 1998, the Company sold the stock of Dean Foods Vegetable
Company to Agrilink Foods, Inc. ("Agrilink") for $378.2 million in cash, a $30.0
million Agrilink subordinated note and Agrilink's aseptic foods business, which
was valued at $80.2 million. Cash proceeds were utilized to repay debt
outstanding under the Company's Revolving Credit Agreement. Due to the
uncertainty of the realizability of the $30.0 million subordinated note, the
note was valued at a nominal amount. In fiscal year 1999, the Company recorded
an after-tax gain on the sale of the Vegetables segment of $83.8 million ($2.07
per diluted share). Accordingly, Vegetables segment results are presented as
discontinued operations.
Net sales of discontinued operations were $139.8 million and $533.3 million in
1999 and 1998, respectively. The income tax provision (benefit) included in
Income (Loss) from Discontinued Operations was $(1.9) million and $12.2 million
for 1999 and 1998, respectively. Income from operations of the discontinued
segment includes interest expense allocations (based on short-term interest
expense incurred and changes in working capital levels) of $2.5 million and $9.2
million in 1999 and 1998, respectively.
11
<PAGE> 12
5. BORROWING ARRANGEMENTS
Long-term obligations, less installments due within one year, are summarized
below:
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
$200 million senior note, 6.625%, maturing in 2009 $199,844 $199,826
$150 million senior note, 6.9%, maturing in 2017 147,893 147,772
$100 million senior note, 6.75%, maturing in 2005 99,495 99,394
Commercial paper, maturing in 2003
(weighted average 5.69%) 267,811 136,410
Industrial revenue bonds, maturing in
varying amounts through 2021:
Fixed rate, 4.75% to 6.63%,
(weighted average 5.96%) 3,675 4,235
Floating rate, 3.7% to 3.8%,
(weighted average 3.79%) 25,400 25,600
Capitalized lease obligations, 2.0% to
10.0%, maturing in various installments
through 2011 (weighted average 8.05%) 17,782 19,622
Other obligations, 4.8% to 10.0%,
maturing in varying amounts through
2004 (weighted average 7.79%) 428 1,078
-------------------------------------------------------------------------------------------------
762,328 633,937
Less: Installments due within one year 3,603 2,651
-------------------------------------------------------------------------------------------------
Total long-term obligations $758,725 $631,286
-------------------------------------------------------------------------------------------------
</TABLE>
In March 1999, the Company entered into a $500 million Commercial Paper program
backed entirely by the Company's $500 million Revolving Credit Agreement. As the
Company has the ability and intent to refinance such borrowings on a long-term
basis, the outstanding commercial paper balance has been classified as
long-term. During fiscal 2000, the maximum commercial paper outstanding was
$306.4 million; average commercial paper outstanding during the year was $223.1
million at a weighted average interest rate of 5.69%. At May 28, 2000, the
Company had $267.8 million of outstanding commercial paper. During fiscal 1999,
the maximum commercial paper outstanding was $377.5 million; average commercial
paper outstanding during the year was $50.1 million at a weighted average
interest rate of 4.88%. At May 30, 1999, the Company had $136.4 million of
outstanding commercial paper.
In fiscal 1998, the Company entered into an unsecured $500 million Revolving
Credit Agreement maturing in 2003 and with a facility fee of 0.07%. Borrowings
under the Credit Agreement bear interest, at the Company's option, at either
fixed or variable rates linked to the Company's public debt credit rating.
During fiscal 2000 there were no borrowings under the Credit Agreement. During
fiscal 1999, the maximum borrowings under the Credit Agreement were $350.0
million; average borrowings were $131.0 million at a weighted average interest
rate of 5.6%. At May 30, 1999, there were no borrowings outstanding under this
facility.
Prior to December 1999, the Company had various committed and uncommitted lines
of credit. During fiscal 2000, there were no borrowings under the committed and
uncommitted lines of credit. During fiscal 1999, maximum borrowings under the
Company's committed and uncommitted lines of credit were $198.0 million and
average borrowings for the year were $34.7 million at a weighted average
interest rate of 5.4%. At May 30, 1999, the Company did not have any debt
outstanding from uncommitted short-term lines of credit.
12
<PAGE> 13
In May 1999, the Company issued $200 million of 6.625% Notes due 2009. The net
proceeds were used to repay existing commercial paper indebtedness.
The Company is subject to certain debt covenants. The most restrictive
provisions of the Company's borrowing arrangements were as follows: the
Company's fixed charge coverage ratio must exceed 3.0; and the Company's ratio
of Consolidated Debt to Consolidated Total Capital cannot exceed 65%.
Maturities of long-term obligations are as follows:
<TABLE>
<CAPTION>
<S> <C>
2001 $ 3,603
2002 5,169
2003 269,880
2004 2,199
2005 104,406
Thereafter 377,071
---------------------------------------------------------------
Total $762,328
===============================================================
</TABLE>
Certain land, buildings and machinery and equipment having a net carrying value
of approximately $21 million were mortgaged or otherwise encumbered against
long-term debt of $18 million at May 28, 2000.
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, 2000 and May 30, 1999 the fair value of long-term debt is estimated to be
$718.7 million and $633.7 million, respectively.
6. SHAREHOLDERS' EQUITY
The 1998 shareholders' 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 share
purchase right for each share of Dean Foods Company common stock. Each right is
attached to and traded with the Company's common stock, but will detach and
become exercisable ten days after a public announcement that a person or group
has acquired, or has announced a tender offer for, 15% or more of the Company's
common stock. The rights will initially be exercisable to purchase common stock
equivalents for $200 per share. Upon a person acquiring 15% or more of the
Company's common stock, the rights will entitle the holders (other than the
acquiring person) to purchase shares of common stock at a 50% discount. The
rights may be redeemed by the Company for $.01 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, 2008, unless previously
redeemed or exercised.
The Company, from time to time, may repurchase shares of its common stock in the
open market, in privately-negotiated transactions or otherwise at a price or
prices reasonably related to the then prevailing market price. During fiscal
2000, the Company repurchased a total of 3,893,341 shares of its common stock
for $134.9 million. Total shares classified on the May 28, 2000 and May 30, 1999
balance sheets as treasury stock are 6,879,155 and 2,999,246, respectively,
resulting in a decrease in shareholders' equity of $252.6 million and $118.0
million, respectively.
13
<PAGE> 14
7. STOCK PLANS
A summary of stock option activity for the Company's stock option plans follows:
<TABLE>
<CAPTION>
Number Average
of Shares Option Price
Under Option Per Share
<S> <C> <C>
Options outstanding
at May 25, 1997 1,892,794 $27.45
Changes during the year:
Granted 828,074 34.77
Terminated (92,771) 30.23
Exercised (416,924) 27.44
-----------------------------------------------------------------------
Options outstanding
at May 31, 1998 2,211,173 30.07
Changes during the year:
Granted 600,300 48.89
Terminated (21,689) 40.14
Exercised (300,075) 28.45
-----------------------------------------------------------------------
Options outstanding
at May 30, 1999 2,489,709 34.72
Changes during the year:
Granted 955,200 37.31
Terminated (146,222) 42.77
Exercised (81,960) 28.73
-----------------------------------------------------------------------
Options outstanding
at May 28, 2000 3,216,727 $35.28
=======================================================================
</TABLE>
Options exercisable and available for grants at the end of each respective year
are as follows:
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Exercisable 1,693,572 1,351,210 1,020,194
Average option
price per share $31.33 $30.53 $28.92
=============================================================================
Available for grants 2,837,647 1,691,193 2,330,613
=============================================================================
</TABLE>
Weighted
average Weighted
remaining average
contractural Exercise
Range of Exercise Prices Shares life(yrs) Price
--------------------------------------------------------------------------
$22.87 to $24.67 315,035 5.50 23.21
$26.87 to $27.50 449,187 4.84 27.18
$28.13 to $29.87 363,942 5.00 28.87
$32.00 to $32.87 314,285 5.34 32.22
$36.50 to $39.00 1,230,130 8.55 37.47
$49.43 to $55.38 544,148 7.96 50.05
--------------------------------------------------------------------------
3,216,727 6.92 35.28
--------------------------------------------------------------------------
Options vest in accordance with provisions as set forth in the applicable
option agreements.
14
<PAGE> 15
The Company adopted the disclosure-only provision under SFAS No. 123,
"Accounting for Stock-Based Compensation," while continuing to measure
compensation cost under APB Opinion No. 25, "Accounting for Stock Issued to
Employees." If the accounting provisions of SFAS No. 123 had been adopted over
the last three years, the Company's income from continuing operations and income
per share would have been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
2000 1999 1998
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income from continuing operations:
As reported $ 106,118 $ 70,331 $ 87,980
Pro forma $ 100,422 $ 65,195 $ 84,180
-----------------------------------------------------------------------------------------------------------
Basic earnings per share:
As reported $ 2.79 $ 1.77 $ 2.17
Pro forma $ 2.64 $ 1.64 $ 2.08
-----------------------------------------------------------------------------------------------------------
Diluted earnings per share:
As reported $ 2.77 $ 1.74 $ 2.13
Pro forma $ 2.62 $ 1.61 $ 2.03
-----------------------------------------------------------------------------------------------------------
</TABLE>
The weighted average fair value of options at date of grant was $11.25, $15.20
and $15.00 during 2000, 1999, and 1998, respectively. The fair value of each
option at date of grant was estimated using the Black-Scholes model with the
following weighted average assumptions:
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Expected life (years) 8.0 8.0 8.0
Risk-free rate of return 6.0% 5.6% 6.9%
Volatility 23.1% 22.2% 20.6%
Dividend yield 2.5% 2.0% 2.0%
</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 7,315,000 shares of the Company's common stock. Of these shares, a
maximum of 215,000 may be granted to non-employee directors. A total of 166,500
shares have been granted to non-employee directors. A total of 78,932
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 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 (Incentive Awards Program). In fiscal 2000 and 1999, key employees
elected to receive 27,068 and 43,788 shares, respectively, under the Incentive
Awards Program.
15
<PAGE> 16
8. INVENTORIES
At May 28, 2000 and May 30, 1999, inventories comprised the following:
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Raw materials and supplies $ 53,726 $ 52,482
Materials in process 9,593 11,292
Finished goods 124,381 114,776
-------------------------------------------------------------------------
187,700 178,550
Less: Excess of current cost over
stated value of last-in, first-out
inventories 9,262 9,714
-------------------------------------------------------------------------
Total inventories $178,438 $168,836
=========================================================================
</TABLE>
The percentage of costs of products sold determined on the basis of last-in,
first-out cost approximated 13.3% and 12.6% for 2000 and 1999, respectively.
9. INCOME TAXES
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.
Provision for income taxes was as follows:
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Current tax expense:
Federal $ 44,297 $ 28,013 $ 34,196
State and foreign 6,396 7,119 5,423
-------------------------------------------------------------------------
50,693 35,132 39,619
-------------------------------------------------------------------------
Deferred tax expense
(benefit):
Federal 14,067 10,070 12,852
State and foreign 2,396 (236) 3,279
-------------------------------------------------------------------------
16,463 9,834 16,131
-------------------------------------------------------------------------
Provision for
income taxes $ 67,156 $ 44,966 $ 55,750
=========================================================================
</TABLE>
The effective tax rates differ from the prevailing statutory federal rate as
follows:
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Statutory federal tax rate 35.0% 35.0% 35.0%
State and foreign,
net of federal benefit 3.3 4.0 4.0
Goodwill 0.9 1.5 0.3
Other, net (0.4) (1.5) (0.5)
-------------------------------------------------------------------------
Effective tax rate 38.8% 39.0% 38.8%
=========================================================================
</TABLE>
16
<PAGE> 17
The components of the deferred income tax assets and liabilities were as
follows:
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Deferred tax assets:
Accounts receivable $ 1,928 $ 2,136
Inventory (2,238) (3,036)
Self-insurance reserves 19,987 18,040
Plant shutdown, idle facilities
and environmental costs 8,504 10,145
Note receivable 13,523 12,400
Employee benefits and
compensation 8,002 7,749
Other 7,014 6,920
-------------------------------------------------------------------------
Total deferred tax assets $ 56,720 $ 54,354
=========================================================================
Deferred tax liabilities:
Fixed assets $ (77,310) $ (57,661)
Deferred compensation 14,559 13,127
Goodwill and other intangibles (41,272) (40,106)
Loss carryforwards 5,812 5,761
Other (1,199) (466)
-------------------------------------------------------------------------
Total deferred tax liabilities $ (99,410) $ (79,345)
=========================================================================
</TABLE>
10. LEASES
Net rental expense, including amounts for leases of one year or less, was $50.9
million, $42.2 million, and $32.6 million in 2000, 1999, and 1998, 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, 2000, 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>
2001 $ 3,133 $ 15,105
2002 2,938 13,029
2003 2,805 10,831
2004 2,804 8,223
2005 4,763 6,231
Thereafter 9,762 16,396
--------------------------------------------------------------------
Total minimum lease payments 26,205 $ 69,815
===========
Less: Imputed interest 8,423
--------------------------------------------------
Present value of minimum
lease payments $ 17,782
==================================================
</TABLE>
17
<PAGE> 18
11. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Consolidated accounts payable and accrued expenses at May 28, 2000 and May 30,
1999 comprised the following items:
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Trade payables $ 151,398 $ 156,993
Accrued expenses 109,111 124,227
Accrued insurance 58,669 53,089
Accrued payroll 53,738 48,025
Accrued taxes, other
than income 5,966 6,349
Accrued pension and
profit sharing 17,518 9,491
-------------------------------------------------------------------------
Total accounts payable
and accrued expenses $ 396,400 $ 398,174
=========================================================================
</TABLE>
12. CASH FLOW DATA
Interest and taxes paid included in the Company's cash flow from operations were
as follows:
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Interest paid $49,559 $39,125 $19,358
Taxes paid 39,400 83,313 33,573
=========================================================================
</TABLE>
Liabilities assumed in conjunction with business acquisitions were:
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Fair value of assets
acquired $ 42,197 $ 367,470 $ 460,650
Consideration paid (38,204) (238,786) (369,560)
-------------------------------------------------------------------------
Liabilities assumed $ 3,993 $ 128,684 $ 91,090
=========================================================================
</TABLE>
13. EMPLOYEE BENEFITS PLANS
The Company maintains or participates in defined benefit plans or
union-management-administered pension or profit sharing plans covering
substantially all of its employees. Benefits are based on years of service and
comprehensive or stated amounts for each year of service. Plan assets are
invested in equities and fixed income securities. The Company's funding policy
is to contribute annually not less than the ERISA minimum funding standards nor
more than the maximum funding standards nor more than the maximum amount which
can be deducted for federal income tax purposes.
The Company also 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 with May 30, 1999, the Company adopted SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits." SFAS No. 132 does
not change the measurement or recognition of those plans, but revises the
disclosure requirements for pension and other postretirement benefit plans for
all years presented.
18
<PAGE> 19
Net periodic benefit cost included the following components:
<TABLE>
<CAPTION>
PENSION BENEFITS
2000 1999 1998
<S> <C> <C> <C>
Service cost $ 14,189 $ 12,429 $ 3,919
Interest cost 9,343 7,429 4,068
Expected return on assets (9,150) (6,867) (3,403)
Amortization of unrecognized net
transition asset (488) (461) (281)
Amortization of prior service cost 215 203 93
Amortization of unrecognized net loss 432 722 279
-------------------------------------------------------------------------------------
Net benefit cost - company plans 14,541 13,455 4,675
Net benefit cost - multi-employer plans 10,911 9,891 6,606
-------------------------------------------------------------------------------------
Total net benefit cost $ 25,452 $ 23,346 $ 11,281
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
POSTRETIREMENT BENEFITS
2000 1999 1998
<S> <C> <C> <C>
Service cost $ 200 $ 98 $ 68
Interest cost 496 290 230
Amortization of prior service cost 38 - -
Amortization of unrecognized net loss (gain) 337 46 (16)
-----------------------------------------------------------------------------------------------------
Total net benefit cost $ 1,071 $ 434 $ 282
=====================================================================================================
</TABLE>
19
<PAGE> 20
The changes in benefit obligations and plan assets, as well as, the funded
status of the Company's pension and postretirement benefit plans are as follows:
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
2000 1999 2000 1999
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 138,581 $ 113,309 $ 7,698 $ 4,653
Service cost 14,189 13,139 200 102
Interest cost 9,343 7,854 496 302
Plan amendments 844 - 2,021 379
Liability from merged plans - 17,027 - -
Actuarial loss (gain) (6,869) 7,497 1,854 3,242
Curtailment - (10,188) - -
Benefits paid (21,199) (10,057) (1,230) (980)
------------------------------------------------------------------------------------------------------------------------------
Benefit obligation at end of year 134,889 138,581 11,039 7,698
------------------------------------------------------------------------------------------------------------------------------
CHANGE IN PLAN ASSETS
Fair value of plan assets at
beginning of year 114,187 103,134 - -
Actual return on plan assets 15,929 3,231 - -
Assets from merged plans - 17,082 - -
Company contributions 6,290 797 1,230 980
Benefits paid (21,199) (10,057) (1,230) (980)
------------------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at
end of year 115,207 114,187 - -
------------------------------------------------------------------------------------------------------------------------------
Funded status (19,682) (24,394) (11,039) (7,698)
Unrecognized net transition asset (1,785) (2,272) - -
Unrecognized prior service cost 2,966 2,337 2,362 379
Unrecognized net loss (4,044) 10,035 5,657 4,140
------------------------------------------------------------------------------------------------------------------------------
Accrued pension cost $ (22,545) $ (14,294) $ (3,020) $ (3,179)
------------------------------------------------------------------------------------------------------------------------------
Total amounts recognized in the consolidated
balance sheet $ (22,545) $ (14,294) $ (3,020) $ (3,179)
==============================================================================================================================
</TABLE>
Included in the above pension benefits table is an unfunded supplemental
retirement plan with a liability of $8.0 million and $7.0 million at May 28,
2000 and May 30, 1999, respectively.
The following weighted-average assumptions were used to determine the Company's
obligations under the plans:
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
2000 1999 1998 2000 1999 1998
<S> <C> <C> <C> <C> <C> <C>
Discount rate 7.50% 7.00% 7.25% 7.5% 7.00% 7.25%
Expected return on plan assets 9.00% 9.00% 9.00% - - -
Rate of compensation increase 0-5.0% 0-5.0% 0-5.0% - - -
-------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
The assumed health care cost trend was 6.0% in 2000, decreasing gradually to
5.0% over two years and remaining level thereafter. If the health care trend was
increased one percentage point, postretirement benefit costs for the year ended
May 28, 2000, would have been $64 thousand higher, and the accumulated
postretirement benefit obligation as of May 28, 2000, would have been $522
thousand higher. If the health care trend was decreased one percentage point,
postretirement benefit costs for the year ended May 28, 2000, would have been
$58 thousand lower, and the accumulated postretirement benefit obligation as of
May 28, 2000, would have been $496 thousand lower.
The Company retained the earned pension liability related to the Vegetables
operations for liabilities through the date of disposition. Accordingly, the
projected benefit obligation, change in plan assets, funded status and prepaid
benefit cost tables above include continuing and discontinued operations.
The Company sponsors contributory savings plans that allow employees to make
regular contributions of up to 16% of their salary, subject to certain
limitations prescribed by the Internal Revenue Service. The Company contributes
an additional amount equal to 50% of the first 6% of salary contributed by the
employee. Contributions by the Company to the savings plan were $6.5 million,
$5.5 million and $3.0 million for fiscal 2000, 1999 and 1998, respectively.
As of January 1, 1998, the Company discontinued the noncontributory profit
sharing plans for certain employees. Contributions under these plans were made
at the discretion of the Board of Directors. Several acquired companies
maintained profit sharing plans. Fiscal 2000 expense for these plans was zero,
whereas expense for these plans for fiscal 1999 and 1998 was $253 thousand and
$6.2 million, respectively.
14. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is a current defendant in assorted legal matters and has been the
subject of routine investigations by various state and federal agencies. The
ultimate resolution of these matters is not expected to have a material adverse
effect on the financial position or results of operations of the Company.
<PAGE> 22
15. BUSINESS SEGMENT INFORMATION
The nature of products classified in the business segments presented herein is
described in Note 1. Outside the United States, no single country is material
for separate disclosure. Intersegment sales are not material. The Company has
one retail grocery customer which represents approximately 10 percent of the
Company's consolidated net sales.
Operating earnings of segments do not include interest income or expense and
provision for income taxes. Identifiable assets are those used in the Company's
operations in each segment. Corporate assets consist primarily of cash and
temporary cash investments and deferred tax assets.
<TABLE>
<CAPTION>
DAIRY PICKLES SPECIALTY CORPORATE CONSOLIDATED
<S> <C> <C> <C> <C> <C>
2000
Net sales $ 3,255,017 $ 378,562 $432,057 $ -- $ 4,065,636
Operating earnings(a) 156,384 34,237 70,998 (39,007) 222,612
Identifiable assets 1,378,424 205,795 290,024 129,299 2,003,542
Depreciation and amortization 79,853 10,538 12,083 5,097 107,571
Capital expenditures 127,220 8,034 9,666 2,621 147,541
1999
Net sales $ 2,984,626 $ 363,681 $406,841 $ -- $ 3,755,148
Operating earnings(b) 95,577 34,229 59,234 (35,702) 153,338
Identifiable assets 1,329,629 185,572 287,515 109,160 1,911,876
Depreciation and amortization 65,989 8,566 9,922 3,465 87,942
Capital expenditures 118,993 10,349 5,510 4,494 139,346
1998
Net sales $ 2,052,532 $ 348,695 $ 334,607 $ -- $ 2,735,834
Operating earnings 114,084 37,054 52,187 (40,806) 162,519
Identifiable assets 919,116 182,463 164,956 52,617 1,319,152
Depreciation and amortization 43,568 6,880 6,958 3,012 60,418
Capital expenditures 68,142 12,095 18,829 5,617 104,683
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Fiscal 2000 segment operating earnings include plant closure charges of
$6,078 in the Dairy segment.
(b) Fiscal 1999 segment operating earnings include plant closure charges of
$8,882, $8,530 and $693 in the Dairy, Pickles, and Specialty segments,
respectively.
22
<PAGE> 23
16. SUBSEQUENT EVENTS
On June 23, 2000, the Company filed a shelf registration to issue from, time to
time, up to $650.0 million in various debt and equity securities. The Company
plans to use the net proceeds from any such issuances for general corporate
purposes, including working capital, repayment or refinancing of indebtedness,
acquisitions and capital expenditures.
On June 27, 2000, the Company purchased the Nalley's pickle business located in
Tacoma, Washington, from Agrilink Foods, Inc. for cash consideration.
On July 10, 2000, the Company purchased the assets of the Land O'Lakes Upper
Midwest fluid dairy operations for cash consideration. These operations include
a full line of fluid milk, yogurt, cream, sour cream and cottage cheese. In
conjunction with the Land O'Lakes purchase, Land O'Lakes and Dean Foods entered
into a joint venture agreement to develop, market and license cream,
half-and-half, sour cream and extended shelf life products to further expand the
Lands O'Lakes brand.
<PAGE> 24
QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
Unaudited (In thousands, except for share data) FIRST SECOND THIRD FOURTH FISCAL YEAR
<S> <C> <C> <C> <C> <C>
FISCAL 2000
Net sales $1,001,360 1,067,010 976,816 1,020,450 4,065,636
Gross profit $ 239,356 239,069 233,450 249,543 961,418
Net income $ 27,835 27,010 25,177 26,096 106,118
Per common share data:
Basic income per share $ .71 .69 .67 .72 2.79
Diluted income per share $ .70 .68 .67 .72 2.77
Stock price range
High $ 43 13/16 46 1/4 40 1/8 31 1/8 46 1/4
Low $ 37 5/16 38 1/4 28 11/16 23 15/16 23 15/16
Dividend rate $ .22 .22 .22 .22 .88
FISCAL 1999
Net sales $ 825,104 934,377 995,169 1,000,498 3,755,148
Gross profit $ 191,176 202,014 188,484 232,304 813,978
Income from continuing operations $ 22,913 23,354 3,280 20,784 70,331
Net income $ 21,172 105,986 3,280 20,784 151,222
Per common share data:
Basic income (loss) per share
Continuing operations $ .57 .59 .08 .53 1.77
Discontinued operations $ (.04) (.03) - - (.07)
Gain on sale of discontinued operations $ - 2.10 - - 2.10
Net income $ .53 2.66 .08 .53 3.80
Diluted income (loss) per share
Continuing operations $ .56 .58 .08 .52 1.74
Discontinued operations $ (.04) (.03) - - (.07)
Gain on sale of discontinued operations $ - 2.05 - - 2.07
Net income $ .52 2.60 .08 .52 3.74
Stock price range
High $ 57 7/16 50 46 5/16 39 3/4 57 7/16
Low $ 45 1/4 41 33 3/8 32 15/16 32 15/16
Dividend rate $ .21 .21 .21 .21 .84
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company's common stock is traded on the New York Stock Exchange under the
ticker symbol: DF.
24
<PAGE> 25
SUMMARY OF OPERATIONS
(In thousands, except for items marked with an *)
<TABLE>
<CAPTION>
Fiscal Year Ended May: 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Net sales $ 4,065,636 3,755,148 2,735,834 2,460,563 2,240,517
Operating earnings (loss) $ 222,612 (a) 153,338 (b) 162,519 138,671 (593)(c)
Interest expense $ 50,148 39,098 21,101 15,071 16,316
Income (loss) from continuing operations $ 106,118 (a) 70,331 (b) 87,980 73,988 (16,865)(c)
Income (loss) from discontinued operations $ - (2,929) 18,322 12,716 (32,823)
Net income (loss) $ 106,118 (a) 151,222 (b) 106,302 86,704 (49,688)(c)
Depreciation on properties $ 87,532 72,774 54,060 48,566 47,968
Capital expenditures $ 147,541 139,346 104,683 55,580 71,086
Number of employees* 13,300 13,600 11,200 8,300 8,600
BALANCE SHEET DATA
Working capital $ 151,286 142,652 67,324 64,988 24,649
Total assets $ 2,003,542 1,911,876 1,607,189 1,133,680 1,131,625
Net plant and equipment $ 815,264 764,946 551,064 381,800 375,072
Long-term obligations $ 758,725 631,286 558,233 208,931 217,984
Shareholders' equity $ 657,685 716,414 619,266 567,681 507,692
COMMON STOCK DATA*
Basic income (loss) per share
Continuing operations $ 2.79 (a) 1.77 (b) 2.17 1.84 (.42)(c)
Discontinued operations $ - (.07) .46 .32 (.82)
Gain on sale of discontinued operations $ - 2.10 - - -
Net income (loss) $ 2.79 (a) 3.80 (b) 2.63 2.16 (1.24)(c)
Diluted income (loss) per share
Continuing operations $ 2.77 (a) 1.74 (b) 2.13 1.83 (.42)(c)
Discontinued operations $ - (.07) .44 .32 (.82)
Gain on sale of discontinued operations $ - 2.07 - - -
Net income (loss) $ 2.77 (a) 3.74 (b) 2.57 2.15 (1.24)(c)
Cash dividends per share $ .88 .84 .80 .76 .72
Book value per share $ 18.53 18.24 15.49 14.09 12.65
Number of shareholders 8,311 8,469 8,690 8,838 9,481
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) 2000 continuing operations results include a pre-tax charge of $6,078
($3,768 after-tax, or $.10 per share) related to the plant closures.
(b) 1999 continuing operations results include a pre-tax charge of $18,105
($11,044 after-tax, or $.27 per share) related to the plant closures.
(c) 1996 continuing operations results include a pre-tax charge of $102,439
($64,906 after-tax, or $1.62 per share) related to the adoption of a
plan to reduce costs, rationalize production capacity and provide for
severance and environmental costs. The 1996 Net Loss includes a pre-tax
charge of $150,000 ($97,720 after-tax, or $2.44 per share) related to
the plan adoption.
25
