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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
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Exchange Act of 1934
For the quarterly period ended February 25, 1996 or
Transition report pursuant to Section 13 of 15(d) of the Securities
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Exchange Act of 1934
For the transition period from to
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Commission file number 0-1118
DEAN FOODS COMPANY
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(Exact name of registrant as specified in its charter)
DELAWARE 36-0984820
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3600 North River Road, Franklin Park, Illinois 60131
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 678-1680
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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The number of shares of the Registrant's Common Stock, par value $1 per share,
outstanding as of the date of this report was 40,133,043.
Total number of pages 11.
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PART I - FINANCIAL INFORMATION
A. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of the Registrant, all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of the
unaudited condensed consolidated financial statements have been included
herein. Certain information and footnote disclosures normally included
in the financial statements have been omitted. These unaudited condensed
consolidated financial statements should be read in conjunction with the
Registrant's 1995 Annual Report on Form 10-K.
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ITEM 1.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTERS AND NINE MONTHS ENDED
FEBRUARY 25, 1996 AND FEBRUARY 26, 1995
(In Thousands Except for Per Share Amounts)
Third Quarters Ended Nine Months Ended
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February 25, February 26, February 25, February 26,
1996 1995 1996 1995
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(Unaudited)
Net sales $ 717,976 $ 665,895 $ 2,074,839 $ 1,943,026
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Cost and expenses:
Costs of products sold 572,175 511,101 1,622,087 1,488,853
Delivery, selling and
administrative expenses 127,507 119,700 372,786 346,903
Interest expense 8,192 6,187 21,061 16,567
Other income, net (503) (673) (1,763) (1,566)
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707,371 636,315 2,014,171 1,850,757
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Income before income taxes 10,605 29,580 60,668 92,269
Provision for income taxes 3,878 12,404 24,268 38,107
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Net income $ 6,727 $ 17,176 $ 36,400 $ 54,162
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Earnings per common share $ .17 $ .43 $ .91 $ 1.36
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Dividends per share
(Declared and paid) $ .18 $ .17 $ .54 $ .51
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Weighted average common shares 40,119 39,875
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See accompanying Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED BALANCE SHEETS
FEBRUARY 25, 1996 AND MAY 28, 1995
(In Thousands)
February 25, May 28,
1996 1995
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(Unaudited)
ASSETS
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CURRENT ASSETS:
Cash and cash equivalents $ 13,126 $ 4,826
Accounts and notes receivable,
less allowance for doubtful accounts
of $2,739 and $4,257, respectively 197,393 184,210
Inventories 356,313 273,114
Other current assets 81,057 49,455
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Total Current Assets 647,889 511,605
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PROPERTIES:
Property, plant and equipment, at cost 1,065,939 996,663
Accumulated depreciation 468,972 426,518
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596,967 570,145
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OTHER ASSETS 131,331 113,409
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Total Assets $1,376,187 $1,195,159
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LIABILITIES AND SHAREHOLDERS' EQUITY
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CURRENT LIABILITIES:
Notes payable to banks $ 177,000 $ 29,000
Current installments of long-term obligations 12,004 11,995
Accounts payable and accrued expenses 255,864 248,721
Dividends payable 7,302 6,877
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Total Current Liabilities 452,170 296,593
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LONG-TERM OBLIGATIONS (Less current
installments included above) 231,767 224,679
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DEFERRED CREDITS 90,805 89,361
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SHAREHOLDERS' EQUITY 601,445 584,526
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Total Liabilities and Shareholders' Equity $1,376,187 $1,195,159
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See accompanying Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
FEBRUARY 25, 1996 AND FEBRUARY 26, 1995
(In Thousands)
Nine Months Ended
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February 25, February 26,
1996 1995
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(Unaudited)
Net cash used by operations $ 14,846 $52,807
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Cash flows from investing activities:
Capital expenditures (74,548) (57,814)
Proceeds from disposition of property,
plant and equipment 2,038 2,447
Acquisition of business, net of
cash acquired (66,070) (11,581)
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Net cash used in investing activities (138,580) (66,948)
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Cash flows from financing activities:
Issuance of notes payable to banks, net 148,000 45,000
Issuance of long-term obligations 9,799 310
Repayment of long-term obligations (2,624) (1,714)
Unexpended industrial revenue
bond proceeds (3,552) 207
Cash dividends paid (21,108) (19,778)
Issuance of common stock 1,519 2,923
Purchase of treasury stock - (3)
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Net cash provided by financing activities 132,034 26,945
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Increase in cash and cash equivalents 8,300 12,804
Cash and cash equivalents - beginning of period 4,826 10,967
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Cash and cash equivalents - end of period $ 13,126 $23,771
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See accompanying Notes to Condensed Consolidated Financial Statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INVENTORIES
The following is a tabulation of inventories by class at February 25,
1996, February 26, 1995 and May 28, 1995 (In Thousands).
February 25, February 26, May 28,
1996 1995 1995
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(Unaudited)
Raw materials and supplies $ 50,231 $ 46,099 $ 56,283
Materials in process 96,642 80,724 60,554
Finished goods 224,591 177,257 171,378
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371,464 304,080 288,215
Less: Excess of current cost
over stated value of
last-in, first-out
inventories (15,151) (14,839) (15,101)
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Total inventories $356,313 $289,241 $273,114
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BUSINESS SEGMENT INFORMATION
The following is a tabulation of business segment information at February
25, 1996, and February 26, 1995.
Dairy Specialty Corporate
(Unaudited) Products Food Products and Other Consolidated
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THIRD QUARTER ENDED
February 25, 1996
Net sales $409,199 $301,326 $7,451 $717,976
Operating earnings 13,525 9,561 (12,481) 10,605
February 26, 1995
Net sales $378,139 $275,522 $12,234 $665,895
Operating earnings 15,433 26,212 (12,065) 29,580
NINE MONTHS ENDED
February 25, 1996
Net sales $1,196,683 $857,400 $20,756 $2,074,839
Operating earnings 53,028 42,044 (34,404) 60,668
February 26, 1995
Net sales $1,124,112 $793,850 $25,064 $1,943,026
Operating earnings 51,985 71,755 (31,471) 92,269
LEGAL PROCEEDINGS
See PART II, Item 1 for a discussion of pending legal proceedings.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
A.) Liquidity and Capital Resources
As of February 25, 1996, there has been no material overall
change in the Registrant's liquidity or its capital resources from
those described in the Management's Discussion and Analysis contained
in the Registrant's Annual Report on Form 10-K for the fiscal year
ended May 28, 1995. Cash and cash equivalents were $13.1 million at
February 25, 1996, a $8.3 million increase over the balance at May 28,
1995. Working capital at February 25, 1996, was $195.7 million
compared to $215.0 million at May 28, 1995. The decrease in working
capital was principally the result of increased short-term borrowings
associated with the acquisitions of businesses during the nine months
ended February 25, 1996.
The increased accounts and notes receivable at February 25, 1996,
compared to the balances at May 28, 1995, were principally the result
of acquired businesses and increased sales. The increased inventories
at February 25, 1996, compared to the balance at May 28, 1995, were
principally the result of the seasonality of vegetable crop and
processing and the inventories of business acquisitions. The February
25, 1996, inventories were $67.1 million greater than inventories a
year ago, reflecting inventories of business acquisitions.
Short-term borrowings outstanding at February 25, 1996, were
$177.0 million, an increase of $148.0 million from the balance
outstanding at May 28, 1995. The increase in short-term borrowings
was principally the result of:
1.) Cash outlays for business acquisitions, and
2.) Borrowings associated with the normal pack
of seasonally grown crops.
The increased accounts payables and accrued expenses at February 25,
1996, compared to the balance at May 28, 1995, was the result of
business acquisitions and increased sales.
The increase in other non-current assets largely was the result of
intangibles associated with business acquisitions during the nine
months ended February 25, 1996. The Registrant's total debt to total
capital ratio was 41.0% at February 25, 1996, compared with 31.2% at
May 28, 1995. The increased total debt to total capital ratio at
February 25, 1996 reflects the increased short-term borrowings the
reasons for which were previously discussed in the preceding
paragraph.
B.) Results of Operations
Overall sales for the quarter and the nine month period ended
February 25, 1996, increased 7.8% and 6.8%, respectively, over sales
of the comparable periods last year. The increased sales both for the
quarter and the nine months this year principally were the result of
increased unit sales volumes by both the Registrant's Dairy Products
and Specialty Food Products operations and sales of business
acquisitions in fiscal 1995 and during the nine month period ended
February 25, 1996. Consolidated after-tax earnings for the third
quarter and the nine months ended February 25, 1996, declined 60.8%
and 32.8%, respectively, from the earnings of the same periods a year
ago, principally the result of lower earnings of the Registrant's
Specialty Food Products segment.
Sales of the Dairy Products operations for the third quarter were
$409.2 million compared with $378.1 million for the same period a year
ago. Sales for the nine months ended February 25, 1996, were $1,196.7
million compared with $1,124.1 million for the same period
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last year. The sales increases this year principally were the
result of increased unit sales volumes in certain markets with overall
selling prices approximating last year's pricing.
Dairy Products operating earnings for the third quarter were
$13.5 million compared with $15.4 million for the corresponding period
a year ago. Operating earnings for the nine months ended February 25,
1996, were $53.0 million compared with $52.0 million for the same
period last year. Increased raw milk costs contributed to the decline
in Dairy Products earnings as a result of tight milk supplies and a
greater demand for raw milk by the cheese and butter makers. Raw milk
costs are expected to stabilize sometime during the fourth quarter
with sell prices eventually covering these cost increases.
Additionally, competitive pricing conditions in the third quarter
negatively impacted our ice cream and extended shelf life operations.
Dairy Products sales volumes remain strong recording an 8.2% increase
over the third quarter volumes a year ago.
Sales of the Specialty Food Products operations for the third
quarter were $301.3 million, an increase of 9.4% over sales of the
corresponding period a year ago. Sales for the nine months ended
February 25, 1996, were 8.0% greater than sales of the same period
last year. The increased sales both for the third quarter and the
nine months principally were the result of:
1.) Sales of acquired vegetables operations,
and
2.) Increased sales unit volumes by the
vegetable and pickle operations.
Overall pricing for the third quarter and the nine months ended
February 25, 1996, was below last year's level principally the result
of lower vegetable sell prices. Sales volumes for the balance of the
Specialty Food Products operations exceeded sales volumes for both the
third quarter and nine months a year ago.
Specialty Food Products third quarter and nine months earnings
were $9.6 million and $42.0 million, respectively, compared with $26.2
million and $71.8 million for the comparable periods last year. The
decline in earnings both for the third quarter and nine months
principally were the result of lower earnings of the frozen and canned
vegetable operations and pickle operations. Lower vegetable selling
prices and higher promotional costs, encountered during the first six
months this year compared to last year, continued in the third quarter
reflecting intense competitive activity, principally in frozen
vegetables as a result of increased inventory levels in the Northwest
production areas. Adverse weather conditions in the Midwest vegetable
growing areas resulted in increased processing costs due to the lower
1995 pack. The pickle operations earnings were adversely affected by
increased processing costs as a result of spring and early summer
weather related conditions in the Southeast growing areas and
increased promotional activity. Selling prices for certain canned
vegetables have increased, however, frozen vegetable pricing is not
expected to improve through the remainder of the year. Vegetable and
pickle sales volumes both for the third quarter and the nine months
were greater than volumes for the comparable periods last year.
Delivery, selling and administrative expenses for the third quarter
and the nine months ended February 25, 1996, increased 6.5% and 7.5%,
respectively, over the corresponding periods last year principally
the result of:
1.) Expenses of business acquired.
2.) Increased marketing expense associated with
new product introductions.
3.) Expenses associated with the increased
sales volumes and entry into new markets.
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Interest expense for the third quarter of $8.2 million and $21.1
million for the nine months ended February 25, 1996, increased 32.4%
and 27.2%, respectively, over interest expense for the corresponding
periods a year ago. The increases both for the third quarter and the
nine months reflected the interest on increased borrowings associated
with business acquisitions, higher inventory levels and higher
prevailing interest rates during the third quarter as compared to
rates during the corresponding periods a year ago.
The effective income tax rate for the third quarter was 36.6%
compared to 41.9% for the third quarter last year. The effective rate
for the nine months ended February 25, 1996, was 40.0% compared with
41.3% for the same period last year. The effective tax rate was
reduced in the third quarter to reflect the effect of lower taxable
income in high tax rate states.
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PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
There has been no material change in the legal proceedings reported
under Item 3 - Legal Proceedings, of the Registrant's Form 10-K Annual
Report, for the fiscal year ended May 28, 1995.
ITEM 6. Exhibits and Reports on Form 8-K
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a.) Exhibits
Item 10 - Material Contracts:
$200 Million Credit Agreement dated February 16, 1995 and
Amendment #1 dated February 13, 1996.
Item 12 - Computation of Ratio of Earnings to Fixed Charges
Item 27 - Financial Data Schedules
b.) Reports on Form 8-K
"Election of Two New Directors" press release dated March 18,
1996 filed on Form 8-K on April 10, 1996.
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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
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(Registrant)
DATE: April 10, 1996 WILLIAM R. McMANAMAN
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WILLIAM R. McMANAMAN
Vice President, Finance and
Chief Financial Officer
DATE: April 10, 1996 DALE I. HECOX
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DALE I. HECOX
Treasurer - Principal Accounting Officer
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