1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
--- EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended May 26, 1996
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
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COMMISSION FILE NO.: 0-1118
DEAN FOODS COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 36-0984820
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3600 N. RIVER ROAD, FRANKLIN PARK, ILLINOIS 60131
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (847) 678-1680
SECURITIES REGISTERED PURSUANT TO SECTIONS 12(b) AND 12(g) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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 9, 1996 was 41,424,621. The aggregate
market value of such outstanding shares on August 9, 1996 was $1.03 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 26, 1996 (referred to herein as the "Company's Fiscal 1996 Annual
Report"): Part I and Part II
2. Registrant's Proxy Statement for its Annual Meeting of
Stockholders to be held on October 1, 1996 (referred to herein as the
"Company's 1996 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.
Fiscal 1996 was a transitional year for Dean Foods Company. 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. 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. Such actions will allow the Company to focus
on its core business strengths.
The Company has made 12 acquisitions in the last five years. 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. In fiscal 1992, the Company acquired Meadow Brook
Dairy Company, a dairy processor with plants in Pennsylvania and New York; and
Frio Foods, Inc., a Texas frozen vegetable processor. 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 1996 Annual Report (Exhibit 13a hereto) at page 37 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 available, the
Company estimates that it has a 8% market share in domestic fluid milk.
Included in the fluid products category is
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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, Fairmont,
Fieldcrest, 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. 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. Capital expenditure projects for fiscal 1992 included the expansion of
cold room capacity at the Company's Lubbock, Texas dairy operation; blowmold
packaging equipment at the Company's Huntley, Illinois location; expansion of
the cooler at its Orlando, Florida dairy operation; and construction of a dairy
distribution and cooler facility at Atlanta, Georgia.
Sales of fluid milk and cultured products to unaffiliated customers for
the fiscal years 1996, 1995 and 1994 were $1,235 million, $1,190 million and
$1,156 million, respectively.
Ice Cream
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. During 1995, the Company
introduced the Guilt Free brand of non-fat and no sugar added ice cream
products. Sales of ice cream 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 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. Capital expenditure projects in fiscal 1992 included
expansion of ice cream production capacity at the Company's Akron, Ohio
operation.
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Sales to unaffiliated customers for the fiscal years 1996, 1995 and 1994
were $235 million, $219 million and $208 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,
Ready Food Products, Inc. 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.
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. 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 and fiscal
1992 included additional processing capacity at its Murray, Kentucky and
Philadelphia, Pennsylvania operations.
Sales of extended shelf life products to unaffiliated customers for fiscal
1996, fiscal 1995 and 1994 were $141 million, $104 million and $105 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 77% 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, Veg-All, Freshlike,
Larsen, Rancho Fiesta and Shaw, as well as under customer brand names or
in-house brands. The Company's Birds Eye vegetable brand is marketed
throughout the United States. The Company's canned mixed vegetable, Veg-All,
is marketed in all major and secondary markets throughout the United States,
while Veg-All frozen and canned single vegetable items are marketed in the
Southeast and the South. The Freshlike canned and frozen vegetable line is
marketed primarily in the Midwest, Pennsylvania, West Virginia and Texas.
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. Retail or consumer sizes are distributed for
ultimate sales to consumers through chain and independent retail stores 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.
During fiscal 1996, major capital expenditures included new electronic
sorting equipment, upgraded freezing capacity, improved warehousing and
implementing improved 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
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an expansion of the office facilities in Green Bay, Wisconsin. Fiscal 1993 and
1992 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 1996, 1995 and 1994 were
$574 million, $543 million and $420 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, Roddenbery, Tree and Warsaw Falcon. Products are also sold for
branded and private label distribution to retail grocery store chains,
wholesalers and the foodservice industry and in bulk to other food processors.
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. In fiscal 1992, additional warehouse capacity was
added 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 1996, 1995 and 1994
were $373 million, $367 million and $353 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 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.
The Company, through an affiliate, provides stabilizers and other dry
ingredients to the United Kingdom, Continental Europe and other foreign
markets.
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The Company's powdered products are sold in a broad variety of product
formulations and package sizes. 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 1992 through 1995.
Sales to unaffiliated customers for the fiscal years 1996, 1995 and 1994
were $129 million, $110 million and $100 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 1996. Major capital expenditures in fiscal 1995 and 1994 include 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 years 1992 and 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 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 after its first year of distribution.
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 1996, 1995 and 1994
were $100 million, $74 million and $69 million, respectively.
DFC Transportation
DFC Transportation Company, a transportation and logistics subsidiary of
the Company, operates nationwide with a fleet of approximately 110 tractors and
215 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. During the fourth quarter of 1992, the Company decided to terminate
operation of the refrigerated truckload transportation portion of its trucking
business and a charge to earnings was provided for the costs associated with
such termination.
Revenues from unaffiliated customers in fiscal years 1996, 1995 and 1994
were $27 million, $23 million and $20 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 raw milk is
extensively regulated. 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. In fiscal 1994, raw milk costs exceeded fiscal 1993 levels during the
first quarter, fell in the second quarter and then increased significantly
during the last half of the year, remaining higher than fiscal 1993 levels.
Raw milk costs in fiscal 1997 are expected to exceed fiscal 1996 costs.
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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 to below normal with fiscal 1997
crop costs approximating fiscal 1996 crop cost levels. 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. Weather-related crop
shortages and harvest delays in the Midwest growing region resulted in higher
fiscal 1994 profit margins in the Company's vegetable business. Industry-wide
inventories of certain vegetables were high during fiscal years 1993 and 1992
which resulted in decreased pricing and lower profit margins.
Although Midwest crop plantings were late due to adverse planting
conditions, the spring 1996 cucumber harvest was good and fiscal 1997 cucumber
costs should approximate 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 prices of raw cucumbers increased in fiscal 1995 as a
result of weather-related costs after being relatively stable during the two
previous fiscal years.
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 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.
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EMPLOYEES
The Company has approximately 11,500 employees (10,500 full-time), of whom
approximately 4,500 are represented by the International Brotherhood of
Teamsters and other unions under thirty-nine collective bargaining agreements.
Nine of these agreements expire during fiscal 1997. These include agreements
with employees at the Evart, Michigan; Olean, New York; and Belleville,
Pennsylvania dairy plants; La Junta, Colorado and Croswell, Michigan pickle
plants; the Dixon, Illinois specialty plant and the Wisconsin Dean Foods
Vegetable Company plants. Generally, the Company considers its employee
relations to be good.
The Company has approximately 6,600 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 filed various
post-trial motions seeking to reduce or eliminate the fine. The Company
provided for this exposure in 1996 and in light of reserves existing at May 26,
1996, 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 fifty-six of its processing plants (four of which are
subject to mortgage) and leases the other three under leases expiring from
fiscal 1997 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
1996 Annual Report (Exhibit 13a hereto) on page 36. 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 Belleville, Pennsylvania
Chemung, Illinois Erie, Pennsylvania
Huntley, Illinois Sharpsville, Pennsylvania
Rockford, Illinois Athens, Tennessee
Rochester, Indiana El Paso, Texas
Louisville, Kentucky Lubbock, Texas
Evart, Michigan Salt Lake City, Utah
Albuquerque, New Mexico Sheyboygan, Wisconsin
Ice Cream
Ft. Lauderdale, Florida Athens, Tennessee
Belvidere, Illinois Barberton, Ohio
Albuquerque, New Mexico
Extended Shelf Life
Jacksonville, Florida Philadelphia, Pennsylvania
Murray, Kentucky
VEGETABLES
Frozen and Canned Vegetables
Oxnard, California Cambria, Wisconsin
Watsonville, California Cedar Grove, Wisconsin
Hartford, Michigan Darien, Wisconsin
Arlington, Minnesota Fairwater, Wisconsin
Waseca, Minnesota Fond du Lac, Wisconsin
Fulton, New York Fort Atkinson, Wisconsin
McAllen, Texas Green Bay, Wisconsin
Uvalde, Texas Hortonville, Wisconsin
Bellingham, Washington Celaya, Mexico
Brillion, Wisconsin
PICKLES
Pickles, Relishes and Specialty Items
Atkins, Arkansas Croswell, Michigan
LaJunta, Colorado Eaton Rapids, Michigan
Sanford, Florida Faison, North Carolina
Cairo, Georgia Green Bay, Wisconsin
Plymouth, Indiana
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
DFC Transportation Huntley, Illinois
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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.
ITEM 3. LEGAL PROCEEDINGS.
Information on legal proceedings is contained in the Company's Fiscal 1996
Annual Report (Exhibit 13a hereto) on page 36 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 26, 1996.
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 38 of the Company's Fiscal 1996 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 9, 1996, was 9,340.
Restrictions on the Company's ability to pay dividends on its Common Stock
are described in the fourth paragraph of Note 4 to the consolidated financial
statements at page 33 of the Company's Fiscal 1996 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 39 of the Company's Fiscal 1996 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 20 through 25 of the Company's Fiscal 1996
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 26, 1996 and May 28,
1995 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 26,
1996, and the notes thereto, together with the report thereon of independent
accountants, are set forth on pages 26 through 38 of the Company's Fiscal 1996
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 38 of the
Company's Fiscal 1996 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 October 1,
1996) is set forth at pages 1 through 6 of the Company's 1996 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
Position with such position
the Company Age since
------------------------------ --- -------------
Eric A. Blanchard ..... Vice President, 40 1993
Secretary and General Counsel
Jenny L. Carpenter .... Vice President, 50 1995
Sales and Marketing -
Specialty Food Products
Gary A. Corbett ....... Vice President, Governmental 48 1993
and Dairy Industry Relations
Gary D. Flickinger .... Vice President, Production 54 1993
Daniel E. Green ....... Group Vice President, 51 1992
Specialty Dairy Division
James R. Greisinger ... Group Vice President and 55 1992
President of Dean Pickle and
Specialty Products Company
Dale I. Hecox ......... Treasurer 64 1985
Charles D. Kinser. .... Vice President, Engineering 64 1995
Rodney T. Liddle. ..... Vice President, 39 1996
Strategic Planning
William R. McManaman .. Vice President, Finance 49 1996
and Chief Financial Officer
George A. Muck ........ Vice President, 58 1970
Research & Development
Douglas A. Parr ....... Vice President, 54 1993
Dairy Sales and Marketing
12
13
Dennis J. Purcell ..... Corporate Group Vice President 53 1993
Roger A. Ragland ...... Group Vice President, 62 1995
International
Jeffrey P. Shaw ....... Group Vice President and 39 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 October 1, 1996.
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. McManaman and Mr. Parr. 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. Kinser was the Company's Director of Engineering;
- - Mr. Liddle was the Company's Controller, Corporate and Specialty Foods
Operations;
- - 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. McManaman was employed by the Company during 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. Parr has been employed by the Company since 1992. Prior to assuming his
present duties he was a Company regional sales manager. Mr. Parr, prior to his
employment by the Company, was the Vice President - Western Zone Dairy Group of
Borden, Inc., a diversified food and dairy company.
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 October 1, 1996) is set forth in the Company's 1996
Proxy Statement at pages 5 through 6 under the caption "CERTAIN INFORMATION
REGARDING THE BOARD OF DIRECTORS" and at pages 7 through 13 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 1996 Proxy Statement at pages 18 and
19 under the caption "PRINCIPAL HOLDERS OF VOTING SECURITIES". Such
information is hereby incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
13
14
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 26, 1996 and
May 28, 1995, 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 26, 1996, and the
notes thereto, together with the report thereon of Price
Waterhouse LLP dated June 25, 1996, except as to the second
sentence of Note 13, which is as of July 10, 1996, as
incorporated by reference in Part II, Item 8 of this Report.
(2) Financial Statement Schedules
Report of independent accountants on financial statement schedule 16
Schedule VIII - Valuation and qualifying accounts 17
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 26, 1996, 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 18 - 19
(b) Reports on Form 8-K.
(1) Registrant filed a Current Report on Form 8-K, dated July 15,
1996, with regards to the Registrant's Press Release, dated
the same, "Dean Foods Names Thomas L. Rose Vice Chairman".
14
15
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 23, 1996
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 August 23, 1996
- ---------------------- and Director
Howard M. Dean
EDWARD A. BRENNAN Director August 23, 1996
- ----------------------
Edward A. Brennan
LEWIS M. COLLENS Director August 23, 1996
- ----------------------
Lewis M. Collens
PAULA H. CROWN Director August 23, 1996
- ----------------------
Paula H. Crown
JOHN P. FRAZEE, JR. Director August 23, 1996
- ----------------------
John P. Frazee, Jr.
BERT A. GETZ Director August 23, 1996
- ----------------------
Bert A. Getz
JOHN S. LLEWELLYN, JR. Director August 23, 1996
- ----------------------
John S. Llewellyn, Jr.
RICHARD P. MAYER Director August 23, 1996
- ----------------------
Richard P. Mayer
ANDREW J. MCKENNA Director August 23, 1996
- ----------------------
Andrew J. McKenna
THOMAS A. RAVENCROFT Senior Vice President August 23, 1996
- ---------------------- and Director
Thomas A. Ravencroft
THOMAS L. ROSE President August 23, 1996
- ---------------------- and Director
Thomas L. Rose
ALEXANDER J. VOGL Director August 23, 1996
- ----------------------
Alexander J. Vogl
15
16
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 25, 1996, except as to the second sentence of Note 13, which is as
of July 10, 1996, appearing on page 38 of the Dean Foods Company Annual Report
to Shareholders for Fiscal Year Ended May 26, 1996 (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 25, 1996
16
17
DEAN FOODS COMPANY AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
Amount
charged
Balance at (credited) Accounts Balance
beginning to costs and written at end
Classification of period expenses off of period
- -------------- ---------- ------------ -------- ---------
(In thousands)
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
====== ==== ==== ======
Fiscal Year Ended May 29, 1994
- ------------------------------
Allowance for doubtful
accounts and notes
receivable......................... $4,470 $326 $921 $3,875
====== ==== ==== ======
17
18
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 20-36
(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 the 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)
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19
Page No.
--------
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. $200 Million Credit Agreement dated February 16, 1995; and
Amendment #1 dated February 13, 1996 (filed as Exhibit 10(1)
to Registrant's Form 10-Q Quarterly Report for Quarterly
Period Ended February 25, 1996 and incorporated herein by
reference)
(11) Statement re computation of per share earnings 37
(12) Computation of Ratio of Earnings to Fixed Charges 38
(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 26, 1996 39-80
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 26, 1996 is not to be deemed filed as part of this
Report.
(21) Subsidiaries of the Registrant
a. Subsidiaries of the Registrant as of May 26, 1996 81
(23) Consents of Experts and Counsel
a. Consent of Independent Accountants dated August 23, 1996 82
(27) Financial Data Schedules 83
19