SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X - - ------- Quarterly report pursuant to Section 13 of 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended August 28, 1994 or ------------------------- _______ Transition report pursuant to Section 13 of 15(d) of the Securities Exchange Act of 1934 For the transition period from __________________ to __________________ Commission file number 0-1118 -------------- DEAN FOODS COMPANY - - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 36-0984820 - - ------------------------------------- -------------------- (State or other jurisdiction of (I.R.S Employer incorporation or organization) Identification No.) 3600 North River Road, Franklin Park, Illinois 60131 - - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (708) 678-1680 --------------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- _____ The number of shares of the Registrant's Common Stock, par value $1 per share, outstanding as of the date of this report was 39,923,561. ---------- Total number of pages 47. --- 1 PART I - FINANCIAL INFORMATION - - ------------------------------ A. UNAUDITED CONDENSED CONSOLIDATION FINANCIAL STATEMENTS ------------------------------------------------------ Effective May 30, 1994, the name of Green Bay Food Company was changed to Dean Pickle and Specialty Products Company. In the opinion of the Registrant, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the following unaudited condensed consolidated financial statements have been included herein. Certain information and footnote disclosures normally included in the financial statements have been omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Registrant's 1994 Annual Report on Form 10-K. 2 ITEM 1. CONDENSED CONSOLIDATED STATEMENTS OF INCOME ------------------------------------------- FOR THE THREE MONTHS ENDED -------------------------- AUGUST 28, 1994 AND AUGUST 29, 1993 ----------------------------------- (In Thousands Except for Per Share Amounts) Three Months Ended -------------------------- August 28, August 29, 1994 1993 ------------ ------------ (Unaudited) Net sales $ 614,283 $ 559,651 ----------- ----------- Costs and expenses: Costs of products sold 472,873 442,726 Delivery, selling and administrative expenses 108,657 94,648 Interest expense 4,743 3,318 Other income, net (736) (610) ----------- ----------- 585,537 540,082 ----------- ----------- Income before taxes and cumulative effect of changes in accounting principles 28,746 19,569 Provision for income taxes 11,786 8,983 ----------- ----------- Income before cumulative effect of changes in accounting principles 16,960 10,586 Cumulative effect of changes in accounting principles, net of taxes - 1,179 ----------- ----------- Net income $ 16,960 $ 11,765 =========== =========== Earnings per share: Earnings per common share before cumulative effect of changes in accounting principles $ 0.43 $ 0.27 Cumulative effect per common share of changes in accounting principles - 0.03 ----------- ----------- Earnings per common share $ 0.43 $ 0.30 =========== =========== Dividends per share (Declared and paid) $ 0.17 $ 0.16 =========== =========== Weighted average common shares outstanding 39,802,598 39,698,480 =========== =========== See accompanying Notes to Condensed Consolidated Financial Statements 3 CONDENSED CONSOLIDATED BALANCE SHEETS ------------------------------------- AUGUST 28, 1994 AND MAY 29, 1994 -------------------------------- (In Thousands) August 28, May 29, 1994 1994 ---------- ---------- (Unaudited) ASSETS ------ CURRENT ASSETS: $ 2,695 $ 10,967 Cash and temporary cash investments Accounts and notes receivable, less allowance for doubtful accounts of $4,067 and $3,875, respectively 161,665 169,395 Inventories 309,340 233,324 Other current assets 41,591 46,496 ---------- ---------- Total Current Assets 515,291 460,182 ---------- ---------- PROPERTIES: Property, plant and equipment, at cost 925,967 906,411 Accumulated depreciation 375,966 363,200 ---------- ---------- 550,001 543,211 ---------- ---------- OTHER ASSETS 111,963 105,761 ---------- ---------- Total Assets $1,177,255 $1,109,154 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: $ 86,000 $ 122,000 Notes payable to banks Current installments of long-term obligations 6,921 6,960 Accounts payable and accrued expenses 257,072 227,348 Dividends payable 6,855 6,462 Federal and state income taxes 17,152 4,497 ---------- ---------- Total Current Liabilities 374,000 367,267 ---------- ---------- LONG-TERM OBLIGATIONS (Less current installments included above) 185,829 136,150 ---------- ---------- DEFERRED CREDITS 81,199 80,963 ---------- ---------- SHAREHOLDERS' EQUITY: Preferred stock - - Common stock 41,098 41,050 Capital in excess of par value 7,127 5,911 Retained earnings 518,170 507,981 Less - Treasury stock - at cost 30,168 30,168 ---------- ---------- Total Shareholders' Equity 536,227 524,774 ---------- ---------- Total Liabilities and Shareholders' Equity $1,177,255 $1,109,154 ========== ========== See accompanying Notes to Condensed Consolidated Financial Statements. 4 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------------------------------------- FOR THE THREE MONTHS ENDED -------------------------- AUGUST 28, 1994 AND AUGUST 29, 1993 ----------------------------------- (In Thousands) Three Months Ended ------------------------ August 28, August 29, 1994 1993 ----------- ----------- (Unaudited) Net cash provided from operations $ 13,208 $ 13,388 -------- -------- Cash flows from investing activities: Capital expenditures (19,111) (21,673) Proceeds from disposition of property, plant and equipment 571 1,043 Acquisition of business, net of cash acquired (11,581) - -------- -------- Net cash used in investing activities (30,121) (20,630) -------- -------- Cash flows from financing activities: Issuance of long-term obligations 80 - Repayment of long-term obligations (553) (586) Issuance of notes payable to banks, 14,000 - net Unexpended industrial revenue 97 130 bond proceeds Cash dividends paid (6,247) (5,953) Issuance of common stock 1,264 1,044 -------- -------- Net cash provided by (used in) financing activities 8,641 (5,365) -------- -------- Decrease in cash and temporary cash investments (8,272) (12,607) Cash and temporary cash investments - beginning of period 10,967 41,572 -------- -------- Cash and temporary cash investments - end of period $ 2,695 $ 28,965 ======== ======== See accompanying Notes to Condensed Consolidated Financial Statements. 5 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - - ---------------------------------------------------- INVENTORIES - - ----------- The following is a tabulation of inventories by class at August 28, 1994, August 29, 1993, and May 29, 1994 (In Thousands). August 28, August 29, May 29, 1994 1993 1994 ----------- ----------- --------- (Unaudited) Raw materials and supplies $ 60,007 $ 64,152 $ 69,258 Materials in process 73,594 36,599 31,823 Finished goods 194,494 144,779 151,358 -------- -------- -------- 328,095 245,530 252,439 Less: Excess of current cost over stated value of last-in, first-out inventories (18,755) (17,318) (19,115) -------- -------- -------- Total inventories $309,340 $228,212 $233,324 ======== ======== ======== BORROWING ARRANGEMENTS - - ---------------------- The Registrant entered into a $150 million revolving credit agreement with the Bank of Montreal during the quarter. Borrowings under the agreement are on an unsecured basis at variable interest rates and mature December 31, 1995. The Registrant has classified $50 million of existing debt as long-term debt, since it is the Registrant's intention to continue that debt for more than one year. LEGAL PROCEEDINGS - - ----------------- See PART II, Item 1 for a discussion of pending legal proceedings. --------------- 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS A.) Liquidity and Capital Resources As of August 28, 1994, 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 29, 1994. Borrowings outstanding under bank lines of credit at the end of fiscal 1994 were used principally to fund 1994 business acquisitions. The Registrant entered into a $150 million bank revolving credit agreement during the quarter with $50 million of short-term borrowings classified as long-term debt at August 28, 1994, reflecting the commitment under said agreement. Cash and temporary cash investments were $2.7 million at August 28, 1994, a decrease of $8.3 million from the balance at May 29, 1994. The decrease in cash and temporary cash investments was principally the result of: 1.) Temporary seasonal cash requirements of the Registrant's crop-related vegetable and pickle processing operations, 2.) Cash outlays for capital expenditures, and 3.) Funds expended for a business acquired during the first quarter. Short-term borrowings outstanding at August 28, 1994, were $86 million, a decrease of $36 million from the balance outstanding at May 29, 1994. Working capital at August 28, 1994, was $141.3 million compared to $92.9 million at May 29, 1994. The Registrant's debt-to- capital ratio was 25.7% at August 28, 1994, compared with 20.6% at May 29, 1994. The decrease in short-term borrowings and the increases in working capital and the Registrant's debt-to-capital ratio principally reflect the bank revolving credit borrowing commitment. B.) Results of Operations Overall sales for the first quarter ended August 28, 1994, increased 9.8% over the same period a year ago, principally the result of sales of fiscal 1994 business acquisitions. Consolidated after-tax earnings for the quarter increased 44% over the earnings for the same period a year ago, principally the result of improved earnings of the Registrant's Specialty Food Products segment. Earnings for the first quarter last year included a charge of $1.5 million related to the tax provisions of the Revenue Reconciliation Act of 1993 and a net after- tax credit of $1.2 million related to the Registrant's adoption of new accounting principles. 7 Sales of the Registrant's Dairy Products operations for the first quarter were $371 million compared with $363 million for the same period a year ago. The sales increase was principally the result of: 1.) Sales of businesses acquired in fiscal 1994 and the first quarter this year and 2.) Increased unit sales volumes in certain markets, offset by lower selling prices reflecting lower raw milk costs this year compared to the same period a year ago. Dairy Products operating earnings for the first quarter were higher than the earnings of the corresponding period a year ago principally due to: 1.) Improved margins in most market areas as a result of declining raw milk costs, 2.) Earnings of businesses acquired in fiscal 1994 and first quarter this year, and 3.) Increased unit sales volumes. Raw milk supplies are plentiful and unusual raw milk cost increases are not expected to occur over the balance of the year. Sales of the Registrant's Specialty Food Products operations for the first quarter were $236 million, an increase of 23.3% over sales of the corresponding period a year ago. The increased sales principally were the result of the sales of a vegetable operation acquired during the third quarter of fiscal 1994. The Registrant's other Specialty Food Products operations experienced sales increases, principally the result of increased unit sales volumes. Specialty Food Products' first quarter earnings improved significantly over the earnings for the comparable period a year ago, principally the result of improved operating earnings of the Registrant's canned and frozen vegetable operations. The increased earnings principally were the result of: 1.) Inclusion of the earnings of a vegetable operation acquired during the third quarter last year, 2.) Higher selling prices for canned and frozen vegetables reflecting market conditions, and 3.) Improved plant processing costs as a result of normal growing and harvest conditions. 8 Margins for the first quarter a year ago were unfavorably impacted by increased weather-related costs, crop shortages and competitive market conditions. This year's harvest of some types of vegetables exceeded normal levels and will result in lowering of selling prices over the balance of the year. Delivery, selling and administrative expenses for the quarter ended August 28, 1994, increased 15% from the same period a year ago principally the result of the inclusion of expenses of businesses acquired during fiscal year 1994, and a business acquired during the first quarter this year. Interest expense for the first quarter of $4.7 million increased 43% over interest expense for the same period a year ago. The increase reflects the interest on increased borrowings associated with business acquisitions and higher prevailing interest rates during the first quarter as compared with rates during the corresponding period a year ago. The effective income tax rate for the first quarter was 41.0% compared with a rate of 45.9% for the first quarter a year ago. The tax rate for the first quarter last year included the impact of the retroactive provisions of the Revenue Reconciliation Act of 1993 and the adoption of FAS 109, "Accounting for Income Taxes." 9 PART II - OTHER INFORMATION --------------------------- ITEM 1. Legal Proceedings ----------------- There has been no material change in the legal proceedings reported under Item 3 - Legal Proceedings, of the Registrant's Form 10-K Annual Report, for the fiscal year ended May 29, 1994. ITEM 5. Other Information ----------------- The Registrant issued a press release dated September 28, 1994, titled "Curtice-Burns Rejects Dean Foods Acquisition Offer" which appears as an Exhibit under Item 21 - Other Documents. ITEM 6. Exhibits and Reports on Form 8-K -------------------------------- a.) Exhibits Item 10 - Material Contracts $150 million Credit Agreement dated as of August 24, 1994 Item 21 - Other Documents Press release dated September 28, 1994, titled "Curtice-Burns Rejects Dean Foods Acquisition Offer" Item 27 - Financial Data Schedules b.) Reports on Form 8-K None were filed during the quarter for which this report is filed. 10 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DEAN FOODS COMPANY ------------------ (Registrant) DATE: October 12, 1994 _________________________ ---------------- TIMOTHY J. BONDY Vice President, Finance DATE: October 12, 1994 _________________________ ---------------- DALE I. HECOX Treasurer 11