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 November 27, 1994 or
----- Transition report pursuant to Section 13 of 15(d) of the
Securities 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 39,923,912.
Total number of pages 20.
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PART I - FINANCIAL INFORMATION
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A. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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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 1994 Annual Report on Form 10-K.
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ITEM 1.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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FOR THE QUARTERS AND SIX MONTHS ENDED
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NOVEMBER 27, 1994 AND NOVEMBER 28, 1993
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(Unaudited)
(In Thousands Except for Per Share Amounts)
Second Quarters Ended Six Months Ended
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November 27, November 28, November 27, November 28,
1994 1993 1994 1993
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Net sales $662,848 $577,113 $1,277,131 $1,136,764
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Cost and expenses:
Costs of products sold 504,879 449,284 977,752 892,010
Delivery, selling and
administrative expenses 118,546 96,642 227,203 191,290
Interest expense 5,637 3,373 10,380 6,691
Other income, net (157) (781) (893) (1,391)
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628,905 548,518 1,214,442 1,088,600
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Income before income taxes and
cumulative effect of changes
in accounting principles 33,943 28,595 62,689 48,164
Provision for income taxes 13,917 11,140 25,703 20,123
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Income before cumulative
effect of changes in
accounting principles 20,026 17,455 36,986 28,041
Cumulative effect of changes
in accounting principles,
net of taxes -- -- -- 1,179
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Net income $ 20,026 $ 17,455 $ 36,986 $ 29,220
======== ======== ========== ==========
Earnings per common share:
Earnings before cumulative
effect of changes in
accounting principles $ .50 $ .44 $ .93 $ .71
Cumulative effect of changes
in accounting principles -- -- -- .03
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Earnings per common share $ .50 $ .44 $ .93 $ .74
======== ========= ========== ==========
Dividends per share
(Declared and paid) $ .17 $ .16 $ .34 $ .32
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Weighted average common
shares outstanding 39,850 39,713
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See accompanying Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED BALANCE SHEETS
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NOVEMBER 27, 1994 and MAY 29, 1994
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(In Thousands)
November 27, May 29,
1994 1994
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(Unaudited)
ASSETS
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CURRENT ASSETS:
Cash and temporary cash investments $ 14,615 $ 10,967
Accounts and notes receivable, less allowance
for doubtful accounts of $4,214 and $3,875,
respectively 188,203 169,395
Inventories 338,756 233,324
Other current assets 46,926 46,496
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Total Current Assets 588,500 460,182
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PROPERTIES:
Property, plant and equipment, at cost 942,433 906,411
Accumulated depreciation 390,247 363,200
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552,186 543,211
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OTHER ASSETS 112,011 105,761
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Total Assets $1,252,697 $1,109,154
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LIABILITIES AND SHAREHOLDERS' EQUITY
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CURRENT LIABILITIES:
Notes payable to banks $ 138,000 $ 122,000
Current installments of long-term obligations 6,712 6,960
Accounts payable and accrued expenses 276,443 227,348
Dividends payable 6,862 6,462
Federal and state income taxes 6,430 4,497
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Total Current Liabilities 434,447 367,267
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LONG-TERM OBLIGATIONS (Less current installments
included above) 185,632 136,150
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DEFERRED CREDITS 81,586 80,963
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SHAREHOLDERS' EQUITY:
Preferred stock - -
Common stock 41,185 41,050
Capital in excess of par value 8,607 5,911
Retained earnings 531,408 507,981
Less-Treasury stock-at cost 30,168 30,168
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Total Shareholders' Equity 551,032 524,774
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Total Liabilities and Shareholders' Equity $1,252,697 $1,109,154
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See accompanying Notes to Condensed Consolidated Financial Statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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FOR THE SIX MONTHS ENDED
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NOVEMBER 27, 1994 AND NOVEMBER 28, 1993
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(Unaudited)
(In Thousands)
Six Months Ended
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November 27, November 28,
1994 1993
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Net cash used by operations $ (3,340) $ (2,249)
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Cash flows from investing activities:
Capital expenditures (37,782) (43,867)
Proceeds from disposition of property,
plant and equipment 1,091 5,092
Acquisitions of business, net of
cash acquired (11,581) (17,301)
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Net cash used in investing activities (48,272) (56,076)
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Cash flows from financing activities:
Issuance of notes payable to banks, net 66,000 47,000
Issuance of long-term obligations 310 -
Repayment of long-term obligations (1,076) (844)
Unexpected industrial revenue
bond proceeds 202 489
Cash dividends paid (13,007) (12,308)
Issuance of common stock 2,831 1,102
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Net cash provided by financing
activities 55,260 35,439
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Increase (decrease) in cash and temporary
cash investments 3,648 (22,886)
Cash and temporary cash investments -
beginning of period 10,967 41,572
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Cash and temporary cash investments -
end of period $ 14,615 $ 18,686
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See accompanying Notes to Condensed Consolidated Financial Statements.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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INVENTORIES
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The following is a tabulation of inventories by class at November 27,
1994, November 28, 1993 and May 29, 1994 (In Thousands).
November 27, November 28, May 29,
1994 1993 1994
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(Unaudited)
Raw materials and supplies $ 45,095 $ 47,398 $ 45,356
Materials in process 103,230 73,920 55,725
Finished goods 208,696 165,749 151,358
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357,021 287,067 252,439
Less: Excess of current cost
over stated value of
last-in, first-out
inventories (18,265) (17,251) (19,115)
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Total inventories $338,756 $269,816 $233,324
======== ======== ========
Inventories at November 28, 1993 and May 29, 1994 have been reclassified to
conform with the November 27, 1994 presentation.
LEGAL PROCEEDINGS
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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 November 27, 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 in the first quarter 1995 with $50 million of short-term
borrowings classified as long-term debt reflecting the commitment under
said agreement. Cash and temporary cash investments were $14.6 million
at November 27, 1994, a $3.6 million increase over the balance at May
29, 1994.
Working capital at November 27, 1994, was $154.1 million
compared to $92.9 million at May 29, 1994. The increase in working
capital reflects:
1.)Increases in inventories and accounts payable and accrued
expenses, largely due to the normal seasonal pack in the
Registrant's vegetable and pickle operations and
2.)Increased accounts and notes receivable principally the result
of increased sales.
The increase in inventories at November 27, 1994 compared to November
28, 1993 principally was the result of the acquisition of a vegetable
business in the latter half of fiscal 1994.
The change in short-term borrowing levels at November 27, 1994 compared
to May 29, 1994 affected working capital. Under the bank revolving
credit agreement described above, $50 million of short-term borrowings
at May 29, 1994 was classified as long-term obligations at November 27,
1994. Higher short-term borrowings at November 27, 1994 were the result
of higher inventories associated with the normal pack of seasonally
grown crops.
The Registrant's debt-to-capital ratio was 25.2% at November 27,
1994, compared with 20.6% at May 29, 1994. Long-term obligations at
November 27, 1994 totaled $185.6 million compared to $136.2 million at
May 29, 1994. The increased long-term obligations resulted from the
classification of the long-term portion of the bank revolving credit
borrowing commitment ($50 million) less normal maturities.
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B.) Results of Operations
Overall sales for the second quarter and for the six month period ended
November 27, 1994 increased 14.9% and 12.3% respectively over the same periods a
year ago. Consolidated after-tax earnings for the second quarter and for the six
month period ended November 27, 1994 increased 15% and 27% respectively over the
earnings of the comparable periods a year ago. Earnings for the six months ended
November 28, 1993 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 for income taxes and postretirement benefits other than pensions.
Sales of the Registrant's Dairy Products operations for the second quarter
($374.8 million) and for the six months ($746.0 million) increased 5% and 3%
respectively over sales of the comparable periods a year ago. The increased
sales principally were the result of the sales contribution of businesses
acquired in fiscal year 1994 and the first quarter of the current fiscal year.
Increases in unit sales volumes were offset by lower average selling prices
during the current fiscal year reflecting lower raw milk costs this year.
Dairy Product's operating earnings declined in the second quarter
principally due to the seasonal aspect and margin pressures on the Registrant's
ice cream operations and a $1.7 million charge in the second quarter related to
costs associated with the closure of two small fluid milk plants to align
production capacities with the sales levels in the associated market areas.
Operating earnings for the six months were slightly below last year because of
lower second quarter earnings this year. Raw milk supplies are plentiful and raw
milk costs are expected to remain below year ago levels.
Sales of the Registrant's Specialty Food Products operations for the second
quarter ($282.0 million) and for the six month period ($518.3 million) ended
November 27, 1994 increased 33% and 28% respectively over sales of the
comparable periods a year ago. The increased sales principally were the result
of:
1.) The sales of a vegetable operation acquired during the third quarter
of fiscal 1994,
2.) Higher selling prices for frozen vegetables reflecting market
conditions, and
3.) Increased sales of the Registrant's pickle operations.
8
Specialty Foods Products earnings both for the second quarter and the six
months improved significantly over the earnings for the comparable periods a
year ago, principally the result of improved earnings of the Registrant's
vegetable operations. The increased earnings principally were the result of:
1.) The earnings of a vegetable operation acquired during the third quarter
of fiscal 1994,
2.) Higher selling prices for frozen vegetables reflecting market conditions,
and
3.) Improved plant processing costs as a result of normal growing and harvest
conditions.
Margins a year ago were unfavorably impacted by weather-related costs, crop
shortages and competitive market conditions. Margins on the Registrant's pickle
operations improved this year, the result of improved pricing and more
favorable crop related costs as compared to last year.
Delivery, selling and administrative expenses for the second quarter and the
six months ended November 27, 1994, increased 23% and 45% respectively over
comparable periods a year ago. The principal reasons for the increased expenses
this year are:
1.) Marketing and promotional expenses associated with a vegetable business
acquired in fiscal year 1994,
2.) Expenses associated with businesses acquired in fiscal year 1994 and
first quarter fiscal 1995, and
3.) Increased expenses associated with the increased unit sales volumes this
year.
Interest expense for the second quarter ($5.6 million) and six month period
($10.4 million) ended November 27, 1994 increased 67% and 55% respectively over
interest expense of the comparable periods a year ago. The increased interest
expense was the result of:
1.) The interest on borrowings associated with business acquisitions during
fiscal year 1994 and first quarter this year,
2.) Increased level of borrowings to meet seasonal crop requirements
associated with the increased sales of the Registrant's vegetable and
pickle operations, and
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3.) Higher prevailing interest rates this year as compared with rates during
the corresponding periods a year ago.
The effective income tax rate for the second quarter was 41.0% compared with a
rate of 39.0% for the same period last year. The increased effective tax rate
this year is principally the result of a reduction in certain non-taxable
benefits which existed last year and new IRS deduction guidelines. The effective
tax rate for the six month period ended November 27, 1994 was 41.0% compared to
41.8% for the same period a year ago.
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PART II - OTHER INFORMATION
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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 6. Exhibits and Reports on Form 8-K
a.) Exhibits
Item 10 - Material Contracts
Dean Foods Company 1989 Stock Awards Plan (As Amended Effective
October 4, 1994)
Item 27 - Financial Data Schedules
b.) Reports on Form 8-K
None were filed during the quarter for which this report is filed.
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SIGNATURES
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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: January 11, 1995
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TIMOTHY J. BONDY
Vice President, Finance
DATE: January 11, 1995
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DALE I. HECOX
Treasurer
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