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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE FISCAL YEAR ENDED MAY 25, 1997
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
Commission File No.: 0-1118
DEAN FOODS COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE
(State of other jurisdiction of
incorporation or organization)
3600 N. RIVER ROAD, FRANKLIN PARK, ILLINOIS
(Address of principal executive offices)
36-0984820
(I.R.S. Employer
Identification No.)
60131
(Zip Code)
(847) 678-1680
Registrant's telephone number, including area code
Securities registered pursuant to Sections 12(b) and 12(g) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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COMMON STOCK, PAR VALUE $1 PER SHARE NEW YORK STOCK EXCHANGE
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 [ ]
Indicate by check mark if disclosure of delinquent files pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
The number of shares of Common Stock, Par Value $1 Per Share, of the
Registrant outstanding as of August 8, 1997 was 40,565,649. The aggregate market
value of such outstanding shares on August 8, 1997 was $1.86 billion, based upon
the closing price for the Common Stock on the New York Stock Exchange on such
date.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated herein by reference in the
respective Parts hereof indicated:
1. Registrant's Annual Report to Shareholders for Fiscal Year Ended May 25, 1997
(referred to herein as the "Company's Fiscal 1997 Annual Report"): Part I and
Part II
2. Registrant's Proxy Statement for its Annual Meeting of Stockholders to be
held on September 30, 1997 (referred to herein as the "Company's 1997 Proxy
Statement"): Part III
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PART I
ITEM 1. BUSINESS.
Dean Foods Company and its subsidiaries ("the Company") is engaged in the
processing, distribution and sales of dairy, vegetable, pickle and specialty
food products.
The Company's principal products are Dairy (fluid milk and cultured
products, ice cream and extended shelf life products), Vegetables (frozen and
canned vegetables), Pickles (pickles, relishes and specialty items) and
Specialty (powdered products and sauces, puddings and dips). A significant
portion of the Company's products are sold under private labels. The Company
also operates a trucking business hauling less-than-truckload freight,
concentrating primarily on refrigerated and frozen cartage, the results of which
are reported in the Specialty segment.
The predecessor to Dean Foods Company was incorporated in Illinois in 1925.
Acquisitions have been an important factor in the Company's strategy. The
Company does not have specific acquisition criteria, but generally focuses on
food companies having a well-established reputation for quality products and
services.
In fiscal 1996, the Company conducted a strategic business review of all
operations, focusing on its markets, competitors and capabilities, and
identified a strategic plan design to enhance long-term shareholder value. As a
result, in May 1996 the Company recorded a pre-tax special charge of $150.0
million ($97.7 million after-tax, or $2.44 per share) related to the adoption of
a plan to reduce costs, rationalize production capacity and provide for
severance and environmental costs. Complete implementation of the plan will
result in the elimination of more than 800 manufacturing and administrative
positions and the disposition or closure of 13 manufacturing facilities. As of
May 25, 1997, the Company had disposed of or closed 11 manufacturing facilities
and eliminated 700 positions. Net benefits recognized from the plan and the
additional strategies in fiscal 1997 were approximately $13 million.
The Company has made 12 acquisitions in the last five years. During fiscal
1997, the Company acquired Tri-State Dairy, Inc., a dairy processor located in
Miami, Florida and Meadows Distributing Co., Inc.., an ice cream and frozen
foods distributor located in Batavia, Illinois. During fiscal 1996 the Company
acquired the business and assets of Norcal Crossetti Foods, Inc., a frozen
vegetable and fruit processor located in Watsonville, California; Paramount
Foods, a pickle processor located in Louisville, Kentucky; and Rod's Food
Products, a specialty foods processor of aerosol toppings and extended shelf
life products located in City of Industry, California. During fiscal 1995, the
Company acquired the business and assets of a dairy processor located in Clovis,
New Mexico and Rio Grande Foods, Inc., a frozen vegetable processor located in
McAllen, Texas. During fiscal 1994, the Company acquired Longlife Dairy Products
of Jacksonville, Florida, a processor of extended shelf life products, the Birds
Eye frozen vegetable business and the Bennett's premium sauce line. During
fiscal 1993, the Company acquired W. B. Roddenbery Co., Inc. of Cairo, Georgia,
a processor of pickles, peanut butter, boiled peanuts and syrups and acquired an
East Coast replacement sour cream product line. The results of operations of
these acquisitions, from their respective dates of acquisition, have been
included in the Company's results of operations.
With one exception, these companies, businesses and assets were acquired
for cash, installment notes or a combination thereof. In fiscal 1993, the
Company exchanged 535,000 shares of its common stock for all the outstanding
shares of W. B. Roddenbery Co., Inc.
Information regarding the Company's Dairy, Vegetables, Pickles and
Specialty business segments for the last three fiscal years is set forth in the
Company's Fiscal 1997 Annual Report (Exhibit 13a hereto) at page 35 in Note 14
to the consolidated financial statements. Such information, excluding the first
sentence of such note, is hereby incorporated herein by reference.
DAIRY BUSINESS SEGMENT
Fluid Milk and Cultured Products
The Company processes raw milk and other raw materials into fluid milk and
cultured products. The Company believes that it is the largest fluid milk
processor in the United States. Although industry data is not
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available, the Company estimates that it has an 8% market share in domestic
fluid milk. Included in the fluid products category is homogenized, low-fat and
skim milk plus buttermilk, chocolate milk and juice products. Cultured dairy
products include cottage cheese, yogurt and sour cream.
Fluid milk and fresh cultured products are sold to grocery store chains,
convenience stores, smaller retail grocery outlets, warehouse club stores,
grocery warehouses and institutional customers in the Midwest and mid-Southern
states, in parts of the Southeastern, Southwestern and Rocky Mountain states,
parts of Pennsylvania and New York, and Mexico.
In addition to the strong Dean's brand in the Midwest and Mid-South, fluid
milk and cultured dairy products are sold in various areas under
well-established labels such as Bell, Cream o'Weber, Creamland, Gandy's, T.G.
Lee, Mayfield, McArthur, Meadow Brook, Price's, Reiter and Verifine. A
substantial portion of the Company's fluid milk and cultured products volume is
sold under private labels.
The fluid milk and cultured products business is extremely competitive and
productivity is therefore very important. The Company continues to reinvest a
substantial portion of its total capital budget in its dairy plants and
distribution systems to maintain and improve efficiencies. Major capital
expenditures in fiscal 1997 included the construction of a new fluid milk
processing plant in Braselton, Georgia that is expected to begin operations
during the first half of fiscal 1998, expansion of the filler room at the
Sharpsville, Pennsylvania facility and new labeling equipment at the Athens,
Tennessee plant. Capital expenditures during fiscal 1996 included new packaging
equipment for one-pint and ten-ounce, plastic, resealable bottles at its Athens,
Tennessee dairy plant, the expansion of the Erie, Pennsylvania milk cooler and
additional processing capacity at the Company's Rochester, Indiana and Huntley,
Illinois milk plants. Major capital projects during fiscal 1995 included
additional processing equipment and costs related to plant consolidation of the
Lubbock and San Angelo, Texas dairy processing plants, a cooler expansion at the
Rochester, Indiana dairy plant, a waste water treatment system at the
Belleville, Pennsylvania dairy plant and computer equipment at the Florida dairy
operations. Capital expenditure projects for 1994 included cooler expansions at
its Evart, Michigan; Chemung, Illinois; and Louisville, Kentucky dairy plants;
corrugated caser and palletizer at its El Paso, Texas dairy plant; blowmold
packaging equipment at its Rochester, Indiana dairy plant and construction of a
dairy distribution and cooler facility in Greenville, South Carolina. Major
capital projects during fiscal 1993 included completion of a cooler expansion at
its Orlando, Florida dairy operations; additional processing capacity at its
Sharpsville, Pennsylvania dairy plant; and additional processing equipment at
the Company's Albuquerque, New Mexico dairy plant.
Sales of fluid milk and cultured products to unaffiliated customers for the
fiscal years 1997, 1996 and 1995 were $1,386 million, $1,235 million and $1,190
million, respectively.
Ice Cream and Frozen Desserts
The Company produces packaged and bulk ice cream products which are sold
through supermarkets, convenience stores, smaller retail grocery outlets,
restaurants and other foodservice users. The product line includes ice cream
(regular, lowfat and non-fat), fruit sherbets, frozen yogurts, and novelties
made with ice cream, sherbet and ices. These products are sold under a variety
of regional brands and numerous private labels in the Midwest, Mid-South,
Southeast, Southwest, and parts of the Rocky Mountain states under numerous
well-established brands. Such brands include Dean's, Dean's Country Charm,
Gandy's, Creamland, Cream o'Weber, Bell, Price's, Fitzgerald, Fieldcrest,
Mayfield, McArthur/T.G.Lee, Reiter and Verifine. Sales of ice cream and frozen
dessert products are substantially greater during the summer months than during
the rest of the year. Additionally, the Company produces and supplies
Baskin-Robbins ice cream products in the Midwest and Southwest.
Capital expenditures during fiscal 1997 and fiscal 1996 included additional
processing equipment at the Company's Belvidere, Illinois and Athens, Tennessee
ice cream plants. During fiscal 1995 capital expenditures included plant
expansion and replacement of refrigeration equipment at the Belvidere, Illinois
ice cream plant. Major projects in 1994 included a stick novelty line, freezer
expansion and new distribution facilities in Athens, Tennessee and new
processing equipment in Akron, Ohio.
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Sales to unaffiliated customers for the fiscal years 1997, 1996 and 1995
were $261 million, $235 million and $219 million, respectively.
Extended Shelf Life
The Company processes extended shelf life fluid, aerosol and other dairy
products. Extended shelf life products include whipping creams, half and half,
aerosol toppings, coffee creamers, flavored milks and lactose-reduced milks.
Extended shelf life products produced and marketed by Ryan Milk Company and
Longlife Dairy Products are distributed nationwide under Dean brands such as
Dairy Pure, Dean Ultra and Easy 2%, as well as well-known licensed national
brands and private labels. In fiscal 1997 the Company consolidated Ryan Milk
Company and Longlife Dairy Products into Ryan Foods Company.
The extended shelf life products business is extremely competitive and
productivity is therefore very important. The Company continues to reinvest in
its extended shelf life plants and distribution systems to maintain and improve
efficiencies. In fiscal 1997, the Company divested its Ready Foods plant in
Philadelphia, Pennsylvania and consolidated production into its Murray, Kentucky
facility where the Company invested in a new aerosol filling line. During fiscal
1996, capital expenditures included the installation of new racking and
inventory systems and cooler expansion at its Murray, Kentucky plant. Major
capital projects during fiscal 1993 included additional processing capacity at
its Murray, Kentucky operation.
Sales of extended shelf life products to unaffiliated customers for fiscal
1997, fiscal 1996 and 1995 were $141 million, $141 million and $104 million,
respectively.
VEGETABLES BUSINESS SEGMENT
Frozen and Canned Vegetables
The Company processes and markets frozen and canned vegetables consisting
of corn, peas, green beans, carrots, beets, spinach, peas and carrots, green
lima beans and various mixed vegetable blends. Additional products in the frozen
vegetable line include asparagus, broccoli, Brussels sprouts, cauliflower,
fordhook lima beans, southern greens, okra, crowder and black-eyed peas, celery
and vegetable blends with pasta and with rice. The processing and canning of
fresh vegetables is seasonal in nature, with most of the canning activity in the
Midwest occurring during harvesting periods. The Company believes the geographic
diversity of its plants and growing areas provides the ability to balance
production. The packaging of processed frozen vegetables occurs year-round. As a
result of the seasonal nature of the vegetable business, inventory levels vary
significantly during the year.
Also included in the Vegetables segment are sales of canned meats processed
under bid contracts with the federal government. Such sales vary greatly from
year to year because of the nature of the federal government's procurement
practices. Margins are small since these contracts are taken primarily to absorb
overhead of the Company's canning operation during seasonally idle periods of
production.
Frozen vegetables account for approximately 75% of the total vegetable
sales. The Company is the largest frozen vegetable processor in the United
States and the third largest vegetable processor overall. Products are marketed
under several brand names including Birds Eye, Freshlike and Veg-All, as well as
under customer brand names or in-house brands. The Company's Birds Eye and
Veg-All vegetable brands are marketed throughout the United States. The
Freshlike canned and frozen vegetable line is marketed primarily in the Midwest.
Other vegetable products are marketed under private labels or in-house brands
throughout the United States and exported to the Far East, Mid-East, Europe,
Mexico, Canada and the Caribbean. Consumer products are distributed through
traditional retail and mass merchandising outlets and include Company brands and
buyers' brands of all products. Institutional customers, including hotels,
restaurants, in-plant feeding programs, and schools are serviced through
foodservice distributors with products packaged in larger containers.
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During fiscal 1997, the Company closed six plants and consolidated
production capacity into its remaining processing facilities. Major capital
expenditures included new processing and freezing equipment and expanded quality
assurance and R&D facilities. During fiscal 1996, major capital expenditures
included new electronic sorting equipment, upgraded freezing capacity, improved
warehousing and new management information systems. Fiscal 1995 major capital
expenditures included the completion of the new carrot line in Uvalde, Texas and
a waste water treatment plant in Celaya, Mexico. Major capital projects in 1994
included the installation of a carrot processing line at Uvalde, Texas and an
expansion of the office facilities in Green Bay, Wisconsin. Fiscal 1993 capital
expenditures included the construction of a waste water treatment facility at
the Company's Bellingham, Washington location.
Sales to unaffiliated customers for fiscal years 1997, 1996 and 1995 were
$558 million, $574 million and $543 million, respectively.
PICKLES BUSINESS SEGMENT
Pickles, Relishes and Specialty Items
The Company is one of the largest pickle processors and marketers in the
United States with sales nationwide. Pickles, relishes, pickled peppers and
other assorted specialty items are sold under several brand names, including
Arnold's, Atkins, Aunt Jane's, Cates, Dailey, Heifetz, Paramount, Pesta, Peter
Piper, Rainbo and Roddenbery. Branded and private label product are marketed and
distributed to retail grocery store chains, wholesalers and the foodservice
industry and in bulk to other food processors.
During fiscal 1997 the Company closed its Eaton Rapids, Michigan plant and
consolidated production into existing facilities and continued to modernize its
remaining manufacturing facilities. During fiscal 1996 capital improvements were
made to upgrade and modernize the Company's manufacturing facilities and reduce
transportation costs. Major capital expenditure projects during fiscal 1995
included the installation of processing equipment at the Company's Cairo,
Georgia plant. Fiscal 1994 capital expenditures included the construction of a
new processing room at the Company's LaJunta, Colorado plant. Major capital
expenditures in fiscal 1993 included installation of processing equipment at the
Company's Plymouth, Indiana plant and construction of administrative office
facilities at its Atkins, Arkansas location.
The processing of pickle products is seasonal, dependent to a large extent
upon the growing season of cucumbers in the summer months. Inventories are
therefore higher in the fall and winter months than in the spring and early
summer.
The Company markets a number of specialty sauces, including shrimp,
seafood, tartar, horseradish, chili and sweet and sour sauces, in the Eastern,
Midwestern and Southern United States to retail grocers. Products are sold under
the Bennett's and Hoffman House brand names.
Sales to unaffiliated customers for the fiscal years 1997, 1996 and 1995
were $371 million, $373 million and $367 million, respectively.
SPECIALTY BUSINESS SEGMENT
Powdered Products
Non-dairy coffee creamers are the Company's principal powdered products.
Powdered premium and low-fat products are sold primarily under private labels to
vending operators, office beverage service companies and institutional
foodservice distributors with national distribution which supply restaurants,
schools, health care institutions, hotels and vending and fast-food operations.
Non-dairy creamers are also sold for private label distribution to all classes
of the retail trade and sold in bulk to a number of other food companies for use
as an ingredient in their food products. Powdered products are also sold to
international customers in Australia, Canada, the Far East, Mexico, South
America, Europe, Africa and the Middle East. The Company believes that it is the
largest manufacturer of powdered non-dairy coffee creamers in the United States.
The Company's non-dairy coffee creamers are an economical and convenient
substitute for milk and cream. These products require no refrigeration and have
long shelf lives.
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The Company, through an affiliate, provides stabilizers and other dry
ingredients to the United Kingdom, Continental Europe and other foreign markets.
Capital expenditures in fiscal 1997 included the construction of a new
dryer in Wayland, Michigan, which is expected to begin production during the
second quarter of fiscal 1998. Capital expenditures during fiscal 1996 included
the construction of a new production facility in the United Kingdom. There were
no major capital expenditures during fiscal years 1993 through 1995.
Sales to unaffiliated customers for the fiscal years 1997, 1996 and 1995
were $153 million, $129 million and $110 million, respectively.
Sauces, Puddings and Dips
The Company's aseptic products primarily include ready-to-serve natural
cheese sauces, puddings and other specialty sauces which are sterilized under a
process which allows storage for prolonged periods without refrigeration.
Aseptic products are sold nationwide, primarily under private labels to
distributors which supply restaurants, schools, hotels and other segments of the
foodservice industry. There were no major capital expenditures during fiscal
years 1997 and 1996. Major capital expenditures in fiscal 1995 and 1994 included
a multi-phase project to significantly upgrade the Dixon, Illinois facility with
the completion of a new batch make-up room. There were no major capital
expenditures during fiscal 1993.
The Company manufactures vegetable-fat-based party dips, low-fat sour cream
and sour cream replacements at its Rockford, Illinois facility. These products
are sold nationally, but primarily east of the Rockies, under the Dean's, King
and private label brands in supermarkets and other retail outlets through
distributor or direct warehouse delivery. Dean's brand vegetable-fat-based dips,
available in regular, lowfat and non-fat varieties, have the leading market
position nationwide and the Company's Birds Eye Veggie Dip is the second leading
produce dip.
At the beginning of fiscal 1998, the Company completed the acquisition of
the Marie's business. The Marie's product line includes refrigerated salad
dressings, vegetable dips, salsas and fruit glazes.
During fiscal 1996 the Company acquired Rod's Food Products which brought a
significant West Coast presence to several of Dean's product lines. Rod's
supplies a large and growing Western United States customer base with retail
snack dips and other oil-based products, as well as flavored salad dressings for
the foodservice trade. Retail products are sold under the Rod's, Imo, Slender
Choice, Chivo and Zesty brand names and a number of private labels.
Sales to unaffiliated customers for the fiscal years 1997, 1996 and 1995
were $122 million, $100 million and $74 million, respectively.
DFC Transportation
DFC Transportation Company, a transportation and logistics subsidiary of
the Company, operates nationwide with a fleet of approximately 134 tractors and
264 trailers, providing less-than-truckload refrigerated and frozen cartage
service. Its customers include food and industrial companies. A significant
portion of its revenues are derived from the brokerage of various types of
freight.
Revenues from unaffiliated customers in fiscal years 1997, 1996 and 1995
were $27 million, $27 million and $23 million, respectively. Revenues relating
to hauling products for other divisions and subsidiaries of the Company have
been eliminated.
RAW MATERIALS AND SUPPLIES
The Company's business is dependent upon obtaining adequate supplies of raw
and processed agricultural products. Historically, the Company has been able to
obtain adequate supplies of agricultural products.
Raw milk and other agricultural products are generally purchased directly
from farmers and farm cooperatives. The Company does not have long-term purchase
contracts for agricultural products. The price of
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raw milk is extensively regulated. Raw milk costs peaked at record levels in the
second quarter of fiscal 1997, then declined sharply during the third quarter
and rose during the last quarter of fiscal 1997 to a level comparable to last
year end. In fiscal 1996, raw milk costs were slightly below fiscal 1995 levels
during the first six months and then increased to higher levels than fiscal 1995
by year-end. Raw milk costs fell substantially in the first quarter of fiscal
1995 remaining stable throughout the balance of the year. Early indications are
that raw milk costs will be lower during the first quarter and rise during the
second quarter of fiscal 1998.
The Company produces most of its plastic gallon and half-gallon container
requirements for its fluid milk business. Can requirements for canned vegetables
are primarily furnished by three can manufacturers, and glass containers for
pickles and related products are purchased from one main supplier, as required,
at competitive prices.
Certain commodities, such as corn syrups, vegetable oils, sugar and casein,
and various packaging supplies are purchased from numerous sources on a normal
purchase order basis, with vegetables and cucumbers purchased under seasonal
grower contracts. The Company is not dependent upon any single supplier and is
confident that any lost supplier requirements could be replaced in the ordinary
course of business.
In its vegetable and pickle operations, the Company supplies seed to and
advises growers regarding planting techniques, monitors and arranges for the
control of insects, directs the harvest, and, for some crops, provides automated
harvesting service. Vegetable supplies are largely dependent on regional weather
and growing conditions. Although weather-related delays and crop conditions have
been encountered this year in certain growing areas, early indications are that
supplies will be normal with fiscal 1998 crop costs approximating fiscal 1997
crop cost levels. Fiscal 1997 raw product costs were relatively flat on average
compared to fiscal 1996 costs. Industry-wide excess inventory levels which led
to reduced pricing and the poor 1995 Midwest harvest which resulted in higher
costs caused Vegetables operating earnings in fiscal 1996 to decline
substantially compared with fiscal 1995.
Although Midwest crop plantings were late due to adverse planting
conditions, the spring 1997 cucumber harvest was good and fiscal 1998 cucumber
costs should approximate fiscal 1997 costs. Fiscal 1997 cucumber cost
approximated fiscal 1996 costs. Raw cucumber costs were higher in fiscal 1996
compared with fiscal 1995 due to the poor Southeast cucumber harvest and the
necessity to source cucumber requirements from higher cost growing areas. The
cost of raw cucumbers increased in fiscal 1995 as a result of weather-related
costs after being relatively stable during the previous fiscal year.
DISTRIBUTION
Dairy products are principally delivered to grocery chain stores or
warehouses directly from the Company's processing plants by the Company, in
trucks which it owns or leases, and by independent distributors. In certain
states, products are also delivered to the Company's distribution branches from
which distribution is then made to customers. The Company has continued its
efforts to streamline its distribution system for Dairy products. Major
economies have been effected in recent years through consolidation of
distribution branches and routes, with emphasis on direct truck delivery to
retail stores and warehouses of grocery chains. The Company's Vegetables,
Pickles and Specialty products are delivered to warehouses and food distributors
by the Company's fleet of trucks and outside freight carriers. Inventories of
frozen and canned vegetables are maintained by the Company in warehouses
throughout the country in order to maintain a ready supply for rapid delivery to
local retailers.
COMPETITION
The Company's business is highly price competitive with relatively low
operating margins. Quality and customer service are important factors in
securing and maintaining business. An important aspect of the Company's service
to customers is computer ordering, shipping and billing systems. Referred to in
the food industry as "Efficient Consumer Response", the Company has over the
last few years made a substantial commitment to these areas. The Company's Dairy
business operates in a number of different geographical markets, competing in
some against national companies and in others against regional or local
companies. In
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certain markets, some supermarket chain stores have their own dairy products
processing plants. Generally, in each major market and product class there are a
number of competitors, some of which have greater sales and assets than the
Company's operations in that market. The Company's Vegetables, Pickles and
Specialty products are marketed nationwide and, in some cases, internationally.
The degree of penetration and competitive conditions in each market varies, but
the Company does not consider that it has any material competitive advantage in
any of its major markets or product classes.
EMPLOYEES
The Company has approximately 11,800 employees (10,000 full-time), of whom
approximately 4,500 are represented by the International Brotherhood of
Teamsters and other unions under forty collective bargaining agreements. Seven
of these agreements expire during fiscal 1998. Generally, the Company considers
its employee relations to be good.
The Company has approximately 5,000 seasonal positions at its vegetable
operations and its pickle processing plants, principally during the summer
months. At times, the Company has experienced difficulties in meeting seasonal
employee needs. The Company estimates that two individuals are hired for each
seasonal position. A number of strategies have been employed to retain seasonal
employees including incentive programs and employee sharing programs.
ENVIRONMENT
On July 10, 1996, a subsidiary of the Company was fined approximately $4.0
million in a lawsuit filed by the United States of America in the United States
District Court for the Middle District of Pennsylvania alleging violations of
the Federal Water Pollution Control Act relating to the discharge of
conventional, non-hazardous substances. The Company has appealed the lower court
ruling on the grounds that the fine should be substantially reduced. The Company
provided for this exposure in 1996 and in light of reserves existing, the
ultimate resolution of the imposed fine is not expected to have a material
effect on the financial position or results of operations of the Company.
The Company's compliance with Federal, State and local regulations relating
to the discharge of material into the environment or otherwise relating to the
protection of the environment has not had a material effect on the Company's
capital expenditures, earnings or competitive position. The Company's fiscal
1996 special charge to earnings included a provision covering the estimated
potential environmental cleanup costs associated with the closure of certain
manufacturing facilities. The Company continues to give considerable attention
to the impact or potential impact of its operations on the environment.
ITEM 2. PROPERTIES.
The Company owns forty-eight of its processing plants (four of which are
subject to mortgage) and leases the other three under leases expiring from
fiscal 1999 through fiscal 2011. The Company has various distribution branches
and storage warehouses located throughout the country, some of which are owned
and some leased. The Company considers its properties suitable and adequate for
the conduct of its business. A number of the Vegetables facilities are operated
only during the vegetable intake season. All other production facilities are
principally operated at or near capacity levels, but generally on the basis of
fewer than three shifts per day.
Further information relating to the Company's leases is contained in the
Note 10 to consolidated financial statements appearing in the Company's Fiscal
1997 Annual Report (Exhibit 13a hereto) on page 34. Such information is hereby
incorporated by reference.
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The locations of the Company's processing facilities, by product category
within business segment, are set forth below:
DAIRY
Fluid Milk and Cultured Products
Miami, Florida Barberton, Ohio
Orange City, Florida Springfield, Ohio
Orlando, Florida Erie, Pennsylvania
Chemung, Illinois Sharpsville, Pennsylvania
Huntley, Illinois Athens, Tennessee
Rockford, Illinois El Paso, Texas
Rochester, Indiana Lubbock, Texas
Louisville, Kentucky Salt Lake City, Utah
Evart, Michigan Sheyboygan, Wisconsin
Albuquerque, New Mexico
Ice Cream and Frozen Desserts
Belvidere, Illinois Athens, Tennessee
Albuquerque, New Mexico Barberton, Ohio
Extended Shelf Life
Jacksonville, Florida Murray, Kentucky
VEGETABLES
Frozen and Canned Vegetables
Oxnard, California Cambria, Wisconsin
Watsonville, California Darien, Wisconsin
Arlington, Minnesota Fairwater, Wisconsin
Waseca, Minnesota Fond du Lac, Wisconsin
Fulton, New York Green Bay, Wisconsin
McAllen, Texas Hortonville, Wisconsin
Uvalde, Texas Celaya, Mexico
PICKLES
Pickles, Relishes and Specialty Items
Atkins, Arkansas Plymouth, Indiana
LaJunta, Colorado Croswell, Michigan
Sanford, Florida Faison, North Carolina
Cairo, Georgia Green Bay, Wisconsin
SPECIALTY
Powdered Products
Pecatonica, Illinois Wayland, Michigan
Rockford, Illinois Abingdon, Oxon, United Kingdom
Sauces, Puddings and Dips
City of Industry, California Rockford, Illinois
Dixon, Illinois Thornton, Illinois
DFC Transportation Huntley, Illinois
Distribution branches for the Dairy segment are located in Alabama,
Florida, Georgia, Idaho, Illinois, Nevada, New Mexico, New York, Ohio,
Pennsylvania, South Carolina, Tennessee, Texas, and Virginia.
Distribution warehouses for the Vegetables, Pickles and Specialty segments
are maintained adjacent to many processing plants with public warehouses
utilized throughout the United States for further distribution of vegetable and
pickle products. The Company maintains powdered product warehouses utilized
throughout the United States. A Company-owned transportation terminal and
maintenance facility is located in Illinois.
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ITEM 3. LEGAL PROCEEDINGS.
Information on legal proceedings is contained in the Company's Fiscal 1997
Annual Report (Exhibit 13a hereto) on page 35 in Note 13 to the consolidated
financial statements. Such information is hereby incorporated herein by
reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year ended May 25, 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding the Company's executive officers is set forth in Item
10 of Part III of this Report.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the New York Stock Exchange under
the ticker symbol DF. The range of Common Stock sales prices for each of the
quarters during the past two fiscal years (as reported by the New York Stock
Exchange) and the frequency and amount of Common Stock dividends declared the
past two fiscal years are set forth under the caption "Quarterly Financial Data"
at page 36 of the Company's Fiscal 1997 Annual Report (Exhibit 13a hereto) in
the rows captioned "Stock Price Range" and "Dividend Rate". Such rows and the
column and row captions related thereto are hereby incorporated herein by
reference.
The approximate number of holders of record of the Company's Common Stock
on August 8, 1997, was 8,792.
Restrictions on the Company's ability to pay dividends on its Common Stock
are described in the fifth paragraph of Note 4 to the consolidated financial
statements at page 31 of the Company's Fiscal 1997 Annual Report (Exhibit 13a
hereto), which paragraph is hereby incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data for each of the Company's last five fiscal years is
set forth at page 37 of the Company's Fiscal 1997 Annual Report (Exhibit 13a
hereto) under the caption "Summary of Operations". Such selected financial data
is hereby incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
A discussion of the Company's financial condition, cash flows and results
of operations, including information with respect to liquidity and capital
resources, is set forth at pages 18 through 23 of the Company's Fiscal 1997
Annual Report (Exhibit 13a hereto) under the caption "Financial Review", which
discussion is hereby incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company's consolidated balance sheets as of May 25, 1997 and May 26,
1996 and related consolidated statements of income, of shareholders' equity and
of cash flows for each of the three fiscal years in the period ended May 25,
1997, and the notes thereto, together with the report thereon of independent
accountants, are set forth on pages 24 through 36 of the Company's Fiscal 1997
Annual Report (Exhibit 13a hereto). Such financial statements, notes thereto and
the report thereon of independent accountants are hereby incorporated herein by
reference.
Financial data for each quarter within the two most recent fiscal years is
set forth under the caption "Quarterly Financial Data" at page 36 of the
Company's Fiscal 1997 Annual Report (Exhibit 13a hereto) in the rows captioned
"Net Sales", "Gross Profit", "Net Income (Loss)" and "Per Common Share Data: Net
Income (Loss)". Such rows and row captions related thereto are hereby
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
11
12
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding the Company's directors (including nominees for
election at the Company's Annual Meeting of Stockholders to be held September
30, 1997) is set forth at pages 1 through 7 of the Company's 1997 Proxy
Statement under the captions "ELECTION OF DIRECTORS" and "CERTAIN INFORMATION
REGARDING THE BOARD OF DIRECTORS". Such information is hereby incorporated
herein by reference.
Information supplied by the Company's executive officers who are not also
directors of the Company concerning their ages, business experiences, and
periods of service as executive officers is as follows:
SERVED IN
SUCH POSITION
POSITION WITH THE COMPANY AGE SINCE
------------------------- --- -------------
Robert E. Baker...................... Vice President, 50 1997
Strategic Planning
Eric A. Blanchard.................... Vice President, 41 1993
Secretary and General Counsel
Jenny L. Carpenter................... Vice President, 51 1995
Sales and Marketing --
Specialty Food Products
Gary A. Corbett...................... Vice President, Governmental 49 1993
and Dairy Industry Relations
Neil J. Finerty...................... Vice President, 52 1997
Human Resources
Gary D. Flickinger................... Vice President, 55 1993
Production and Engineering
Daniel E. Green...................... Group Vice President, 52 1992
Specialty Dairy Division
James R. Greisinger.................. Group Vice President and 56 1992
President of Dean Pickle and
Specialty Products Company
Cameron C. Hitchcock................. Treasurer 35 1997
Dale E. Kleber....................... Vice President and 41 1997
Assistant General Counsel
William M. Luegers, Jr. ............. Corporate Controller 43 1996
William R. McManaman................. Vice President, Finance 50 1996
and Chief Financial Officer
George A. Muck....................... Vice President, 59 1970
Research and Development
Douglas A. Parr...................... Vice President, 55 1993
Dairy Sales and Marketing
Dennis J. Purcell.................... Corporate Group Vice President 54 1993
Roger A. Ragland..................... Group Vice President, 63 1995
International
Gary P. Rietz........................ Chief Information Officer 41 1997
12
13
SERVED IN
SUCH POSITION
POSITION WITH THE COMPANY AGE SINCE
------------------------- --- -------------
Jeffrey P. Shaw...................... Group Vice President and 40 1992
President of Dean Foods
Vegetable Company
Each of the executive officers, including executive officers who are also
directors, was elected to serve as an executive officer until the next annual
meeting of directors, scheduled for September 30, 1997.
All of the Company's executive officers listed in Part III, Item 10 have
been employees of the Company for more than five years, with the exception of
Mr. Baker, Mr. Finerty, Mr. Hitchcock, Mr. Luegers, Mr. McManaman and Mr. Reitz.
Prior to assuming their current positions,
- -- Mr. Blanchard was the Company's secretary and general counsel;
- -- Ms. Carpenter was the Company's Director of Marketing and Sales-Specialty
Foods Division;
- -- Mr. Corbett was in the Company's sales administration management;
- -- Mr. Flickinger was the Director of Production -- Dairy and a divisional
general manager;
- -- Mr. Green was the Company's Vice President, Corporate Planning and
Development;
- -- Mr. Greisinger was a Company Vice President and President of Dean Pickle and
Specialty Products Company;
- -- Mr. Kleber was a Corporate attorney;
- -- Mr. Parr was a Company regional sales manager;
- -- Mr. Purcell was Senior Vice President of Sales and Marketing of Dean Pickle
and Specialty Products Company;
- -- Mr. Ragland was a divisional sales vice president;
- -- Mr. Shaw was President of the Company's Richard A. Shaw, Inc. subsidiary,
which was subsequently merged into Dean Foods Vegetable Company.
Mr. Baker was employed by the Company during 1997. Mr. Baker, prior to his
employment by the Company, was the Vice President -- Marketing & Strategic
Planning of Specialty Foods Company, a diversified food company.
Mr. Finerty has been employed by the Company since 1995. Prior to assuming his
present duties, he was Director -- Industrial Relations. Mr. Finerty, prior to
his employment with the Company, was Assistant Director -- Labor Relations of
Borden Inc., a diversified food and dairy company.
Mr. Hitchcock was employed by the Company in 1997. Mr. Hitchcock, prior to his
employment with the Company, was Vice President -- Corporate Finance of Duetsche
Morgan Grenfell, Inc., the global investment banking arm of Duetsche Bank Group.
Mr. Luegers has been employed by the Company since 1996. Mr. Luegers, prior to
his employment with Company, was Director of Accounting of Brunswick
Corporation, a diversified marine and recreational products company.
Mr. McManaman has been employed by the Company since 1996. Mr. McManaman, prior
to this employment by the Company, was the Vice President -- Finance of
Brunswick Corporation, a diversified marine and recreational products company.
Mr. Rietz was employed by the Company in 1997. Mr. Reitz, prior to his
employment with the Company, was Business Systems Manager -- North American
Beverage Division of Quaker Oats Company, a diversified food and beverage
company.
13
14
ITEM 11. EXECUTIVE COMPENSATION.
Information regarding the cash compensation of the Company's executive
officers, compensation pursuant to plans and compensation of the Company's
directors (including nominees for election at the Company's Annual Meeting of
stockholders to be held September 30, 1997) is set forth in the Company's 1997
Proxy Statement at pages 6 through 7 under the caption "CERTAIN INFORMATION
REGARDING THE BOARD OF DIRECTORS" and at pages 8 through 15 under the caption
"EXECUTIVE COMPENSATION." Such information is hereby incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information regarding security ownership of certain beneficial owners and
management is set forth in the Company's 1997 Proxy Statement at page 20 under
the caption "PRINCIPAL HOLDERS OF VOTING SECURITIES". Such information is hereby
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
14
15
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this Report. The page
number, if any, listed opposite a document indicates the page number in
the sequential numbering system in the manually signed original of this
Report where such document can be found.
PAGE NO.
--------
(1) Financial Statements
The consolidated balance sheets at May 25, 1997 and May 26,
1996, the related consolidated statements of income, of
shareholders' equity and of cash flows for each of the three
fiscal years in the period ended May 25, 1997, and the notes
thereto, together with the report thereon of Price
Waterhouse LLP dated June 24, 1997, as incorporated by
reference in Part II, Item 8 of this Report.
(2) Financial Statement Schedules
Report of independent accountants on financial statement
schedule.................................................... 17
Schedule VIII -- Valuation and qualifying accounts.......... 18
All other schedules have been omitted because they are not
applicable, or not required, or because the required
information is shown in the consolidated financial
statements or notes thereto.
Separate financial statements of the Registrant have been
omitted since the Registrant is primarily an operating
company and all subsidiaries included in the consolidated
financial statements, in the aggregate, do not have minority
equity interest and/or indebtedness to any person other than
the Registrant or its consolidated subsidiaries in amounts
which together exceed 5% of total consolidated assets at May
25, 1997, except for indebtedness incurred in the ordinary
course of business which is not overdue and which matures
within one year from the date of its creation.
(3) Exhibits
See Exhibit Index........................................... 19-20
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of the fiscal
year ended May 25, 1997.
15
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By WILLIAM R. MCMANAMAN
------------------------------------
William R. McManaman
(Vice President, Finance and
Chief Financial Officer)
Date: August 22, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
HOWARD M. DEAN Chairman of the Board and Director August 22, 1997
- -----------------------
Howard M. Dean
EDWARD A. BRENNAN Director August 22, 1997
- -----------------------
Edward A. Brennan
LEWIS M. COLLENS Director August 22, 1997
- -----------------------
Lewis M. Collens
PAULA H. CROWN Director August 22, 1997
- -----------------------
Paula H. Crown
JOHN P. FRAZEE, JR. Director August 22, 1997
- -----------------------
John P. Frazee, Jr.
BERT A. GETZ Director August 22, 1997
- -----------------------
Bert A. Getz
JOHN S. LLEWELLYN, JR Director August 22, 1997
- -----------------------
John S. Llewellyn, Jr
PHILIP A. MARINEAU President and Director August 22, 1997
- -----------------------
Philip A. Marineau
RICHARD P. MAYER Director August 22, 1997
- -----------------------
Richard P. Mayer
ANDREW J. MCKENNA Director August 22, 1997
- -----------------------
Andrew J. McKenna
THOMAS A. RAVENCROFT Senior Vice President and Director August 22, 1997
- -----------------------
Thomas A. Ravencroft
THOMAS L. ROSE Vice Chairman and Director August 22, 1997
- -----------------------
Thomas L. Rose
16
17
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
Dean Foods Company
Our audits of the consolidated financial statements referred to in our
report dated June 24, 1997, appearing on page 36 of the Dean Foods Company
Annual Report to Shareholders for Fiscal Year Ended May 25, 1997 (which report
and consolidated financial statements are incorporated by reference in this
Annual Report on Form 10-K) also included an audit of the Financial Statement
Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this Financial
Statement Schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
PRICE WATERHOUSE LLP
Chicago, Illinois
June 24, 1997
17
18
DEAN FOODS COMPANY AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
AMOUNT CHARGED
BALANCE AT (CREDITED) BALANCE
BEGINNING TO COSTS AND ACCOUNTS AT END
CLASSIFICATION OF PERIOD EXPENSES WRITTEN OFF OF PERIOD
-------------- ---------- -------------- ----------- ---------
(IN THOUSANDS)
Fiscal Year Ended May 25, 1997
Allowance for doubtful accounts and notes
receivable...................................... $3,201 $ 930 $ 546 $3,585
====== ====== ====== ======
Fiscal Year Ended May 26, 1996
Allowance for doubtful accounts and notes
receivable...................................... $4,257 $2,000 $3,056 $3,201
====== ====== ====== ======
Fiscal Year Ended May 28, 1995
Allowance for doubtful accounts and notes
receivable...................................... $3,875 $ 666 $ 284 $4,257
====== ====== ====== ======
18
19
EXHIBIT INDEX
The following documents are the exhibits to this Report. For convenient
reference, each exhibit is listed according to the number assigned to it in the
Exhibit Table of Item 601 of Regulation S-K. The page number, if any, listed
opposite an exhibit indicates the page number in the sequential numbering system
in the manually signed original of this Report where such exhibit can be found.
PAGE NO.
--------
(3) Articles of Incorporation and By-Laws
a. Dean Foods Company Restated Certificate of Incorporation
dated February 8, 1988 (filed as Exhibit 3(a) to
Registrant's Form 10-K Annual Report for Fiscal Year
Ended May 29, 1988 and incorporated herein by reference)
b. By-Laws of Registrant, as amended January 26, 1996 (filed
as Exhibit 3(b) to the Registrant's Form 10-K Annual Report
for Fiscal Year Ended May 26, 1996 and incorporated
herein by reference)
(4) Instruments defining the rights of security holders, including indentures
a. Rights Agreement dated July 28, 1988 (filed as Exhibit
4(a) to the Registrant's Form 10-K Annual Report for Fiscal
Year Ended May 28, 1989 and incorporated herein by
reference)
b. Amendment dated December 1, 1989, to Rights Agreement
dated July 28, 1988 (filed as exhibit 4(b) to Registrant's
Form 10-K Annual Report for Fiscal Year Ended May 27,
1990 and incorporated herein by reference)
(10) Material contracts
a. Amended and Restated Dean Foods Company Management
Deferred Compensation Plan, dated as of June 1, 1994 (filed
as Exhibit 10(a) to Registrant's Form 10-K Annual Report
for Fiscal Year Ended May 29, 1994 and incorporated
herein by reference)
b. Dean Foods Company Retirement Plan for Certain Directors
(filed as Exhibit 10(a) to Registrant's Form 10-K Annual
Report for Fiscal Year Ended December 28, 1985 and
incorporated herein by reference)
c. Form of Agreement dated March 17, 1986, between
Registrant and each of its current executive officers (filed
as Exhibit 10(b) to Registrant's Form 10-K Annual Report
for Fiscal Year Ended December 28, 1985 and incorporated
herein by reference)
d. Form of Indemnification Agreement between Registrant and
each of its directors and officers serving at any time after
October 5, 1987 (filed as Exhibit 10(m) to Registrant's
Form 10-K Annual Report for Fiscal Year Ended May 29,
1988, and incorporated herein by reference)
e. Amended and Restated Dean Foods Company Directors
Deferred Compensation Plan, dated March 25, 1988 (filed as
Exhibit 10(j) to Registrant's Form 10-K Annual Report for
Fiscal Year Ended May 28, 1989 and incorporated herein by
reference)
f. Dean Foods Company Supplemental Benefit Plan for eligible
officers, as amended and restated on May 24, 1991 (filed as
Exhibit 10(k) to Registrant's Form 10-K Annual Report for
Fiscal Year ended May 26, 1991 and incorporated herein by
reference)
g. Dean Foods Company Supplemental Incentive Compensation
Plan for certain officers, as amended March 31, 1989 (filed
as Exhibit 10(l) to Registrant's Form 10-K Annual Report
for Fiscal Year Ended May 28, 1989 and incorporated
herein by reference)
h. Dean Foods Company Director Stock Option Plan, dated
September 30, 1992 (filed as Exhibit 10(i) to Registrant's
Form 10-K Annual Report for Fiscal Year ended May 30,
1993 and incorporated herein by reference)
i. Employment Agreement dated December 2, 1996 between the
Company and Philip A. Marineau (filed as Exhibit 10(a) to
Registrant's Form 10-Q Quarterly Report for Quarterly
Period Ended February 23, 1997 and incorporated herein by
reference)
19
20
PAGE NO.
----------
j. Severance, Consulting and Non-Compete Agreement dated
December 5, 1996 between the Company and Thomas L. Rose
(filed as Exhibit 10(b) to Registrant's Form 10-Q
Quarterly Report for Quarterly Period Ended February 23,
1997 and incorporated herein by reference)
k. $200 million Credit Agreement dated February 16, 1995;
Amendment #1 dated February 13, 1996; Amendment #2 dated
June 24, 1996; and Amendment and Restatement of Credit
Agreement dated February 4, 1997.......................... 21-120
(11) Statement re computation of per share earnings............... 121
(12) Computation of Ratio of Earnings to Fixed Charges............ 122
(13) Annual report to security holders, Form 10-Q or quarterly
report to security holders
a. Dean Foods Company Annual Report to Shareholders for
Fiscal Year Ended May 25, 1997............................ 123-164
With the exception of the financial statements, report of
independent accountants thereon and certain other
information expressly incorporated herein by reference, the
Registrant's Annual Report to Shareholders for Fiscal Year
Ended May 25, 1997 is not to be deemed filed as part of
this Report.
(21) Subsidiaries of the Registrant
a. Subsidiaries of the Registrant as of May 25, 1997......... 165
(23) Consents of Experts and Counsel
a. Consent of Independent Accountants dated August 22,
1997......................................................... 166
(27) Financial Data Schedules..................................... 167
20