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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 30, 1999
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.: 1-08262
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 N. RIVER ROAD, FRANKLIN PARK, ILLINOIS 60131
(Address of principal executive offices) (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:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS 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 (sec. 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 6, 1999 was 39,311,791. The aggregate market
value of such outstanding shares on August 6, 1999 was $1.70 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 30, 1999
(referred to herein as the "Company's Fiscal 1999 Annual Report"): Part I and
Part II
2. Registrant's Proxy Statement for its Annual Meeting of Stockholders to be
held on September 28, 1999 (referred to herein as the "Company's 1999 Proxy
Statement"): Part III
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PART I
ITEM 1. BUSINESS.
GENERAL
Dean Foods Company and its subsidiaries ("the Company") is engaged in the
processing, distribution and sales of dairy, pickle and specialty products. The
predecessor to Dean Foods Company was incorporated in Illinois in 1925.
The Company's principal products are Dairy (fluid milk and cultured
products, ice cream and extended shelf life products), Pickles (pickles,
relishes and specialty items) and Specialty (powdered products, refrigerated
salad dressings, dips, sauces and puddings). A significant portion of the
Company's products is 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.
STRATEGIC DIRECTION
The Company's primary objective is the maximization of shareholders value
through long-term stock appreciation and dividend growth. The Company's strategy
remains focused on profitable top-line growth, primarily through acquisitions
and new product introductions and continuous margin improvements through cost
compression initiatives. The Company continues to refine and execute its
previously announced long-term strategic plan, the underlying goal of which is
to improve profitability and enhance shareholder value.
On July 27, 1998, as part of the Company's on-going strategic review, the
Company announced the divestiture of the its Vegetables segment to Agrilink
Foods, Inc. ("Agrilink"). On September 23, 1998, the transaction closed for cash
consideration of $378.2 million, a $30.0 million Agrilink subordinated note and
Agrilink's aseptic foods business, which has been valued at $80.2 million.
Vegetables segment results of operations are presented as discontinued
operations in the financial statements and other financial information presented
in this Annual Report on Form 10-K.
BUSINESS ACQUISITIONS
Acquisitions have been and continue to be an important factor in the
Company's strategy and continued growth. The Company's acquisition strategy is
to focus on food companies having a well-established reputation for quality
products and services that meet selected financial criteria, including return on
invested capital and market value added. The Company continues to take advantage
of industry consolidation trends, specifically within the dairy segment, and to
focus on companies that can provide significant operating efficiencies. The
Company has completed 26 acquisitions in the last five years. These companies,
businesses and assets were acquired for cash, installment notes or a combination
thereof, except for the fiscal 1999 acquisitions of U.C. Milk Company and
Berkeley Farms, which were stock purchases. The listing below summarizes the
acquisitions completed by fiscal year:
FISCAL YEAR 1999
Alta Dena Certified Dairy, a dairy
processor........................... City of Industry, California
Berkeley Farms, a dairy processor...... Hayward, California
U.C. Milk Company, a dairy processor... Madisonville, Kentucky
Barber Dairy, a dairy processor........ Birmingham, Alabama
Hillside Dairy, a dairy processor...... Cleveland Heights, Ohio
R.G. Clark, a dairy distributor........ Paducah, Kentucky
Modern Dairy, a dairy distributor...... Ashland, Kentucky
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Ice Cream Products, an ice cream
distributor......................... Columbia, South Carolina
Custom Food Processors International, a
dry ingredients processor........... New Hampton, Iowa
FISCAL YEAR 1998
Purity Dairies, a dairy processor...... Nashville, Tennessee
Coburg Dairy, a dairy processor........ Charleston, South Carolina
Dairy business of American Stores Buena Park, Escondido, San Leandro and
Company (Lucky Stores).............. Sacramento, California
Wengert's Dairy, a dairy processor..... Lebanon, Pennsylvania
Sani-Dairy Division of Penn Traffic
Company, a dairy processor.......... Johnstown, Pennsylvania
Maplehurst Dairy, a dairy processor.... Indianapolis, Indiana
H. Meyer Dairy Company, a dairy
processor........................... Cincinnati, Ohio
Milk Products LLC, a dairy processor... Albuquerque, New Mexico and El Paso,
Texas
Schwartz Pickle Company, a refrigerated
pickles processor................... Chicago, Illinois
Marie's Salad Dressing, a processor of
salad dressings and vegetable
dips................................ Thornton, Illinois
FISCAL YEAR 1997
Tri-State Dairy, Inc., a dairy
processor........................... Miami, Florida
Meadows Distribution Co., Inc., an ice
cream and frozen foods
distributor......................... Batavia, Illinois
FISCAL YEAR 1996
Norcal Crossetti Foods, Inc., a frozen
vegetable and fruit processor....... Watsonville, California
Paramount Foods, Inc., a pickle
processor........................... Louisville, Kentucky
Rod's Food Products, a specialty foods
processor of aerosol toppings and
extended shelf life products........ City of Industry, California
FISCAL YEAR 1995
Gold Star Dairy, a dairy processor..... Clovis, New Mexico
Rio Grande Foods, Inc., a frozen
vegetable processor................. McAllen, Texas
Subsequent to end of fiscal 1999, the Company completed the acquisitions of
Steinfeld's Products Company, a pickle processor located in Portland, Oregon,
and Dairy Express, Inc., a dairy distributor located in the Philadelphia area,
for cash consideration.
BUSINESS SEGMENTS
Information regarding the Company's Dairy, Pickles and Specialty business
segments for the last three fiscal years is set forth in the Company's Fiscal
1999 Annual Report (Exhibit 13a hereto) at page 35 in Note 15 to the
consolidated financial statements. Such information, excluding the first
sentence of such note, is hereby incorporated herein by reference.
Dairy 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 one of the two largest fluid
milk processors in the United States. Although industry
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data is not available, the Company estimates that it has a 12% 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. The
Company also produces and distributes organic dairy products, which include a
wide variety of homogenized and pasteurized milk and cultured products.
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 Midsouth, in
parts of the Southeastern, Southwestern and Rocky Mountain states, parts of
Pennsylvania and New York, California and Mexico.
In addition to the strong Dean's brand in the Midwest and Midsouth, fluid
milk and cultured dairy products are sold in various areas under
well-established labels such as Alta Dena, Barber's, Berkeley Farms, Coburg,
Cream o'Weber, Creamland, Gandy's, Maplehurst, Mayfield, McArthur, Meadow Brook,
Price's, Purity, Reiter, T.G. Lee, Verifine and Wengert's. 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. Fiscal 1999 and 1998
major capital expenditures included the new and continued installation of small
plastic bottle (Milk Chugs) filling lines at plants located in Alabama,
California, Illinois, Pennsylvania and Utah. Fiscal 1999 expenditures also
included costs associated with new wrap-around labeling equipment at its Florida
dairy plants, cooler expansion at its Sharpsville, Pennsylvania facility, as
well as costs associated with production consolidation at its Southwest
facilities. Fiscal 1998 expenditures also included costs associated with the
completion of the new fluid milk plant in Braselton, Georgia, which began
production during the second quarter. Major capital expenditures in fiscal 1997
included the initial construction of the new Braselton, Georgia, fluid milk
processing plant, 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 installation of a small plastic bottle
filling line 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.
Sales of fluid milk and cultured products to unaffiliated customers for the
fiscal years 1999, 1998 and 1997 were $2,351 million, $1,574 million and $1,386
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, low-fat 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, California, parts of the Rocky Mountain states,
Pennsylvania, New York, California and Mexico. Such brands include Dean's,
Dean's Country Charm, Alta Dena, Bud's of San Francisco, Barber's, Berkeley
Farms, Creamland, Cream o'Weber, Gandy's, Price's, Purity, Fitzgerald,
Fieldcrest, Mayfield, 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.
Fiscal 1999 and 1998 capital expenditures included the purchase and
installation of frozen novelties vending machines in the Midsouth. Capital
expenditures during fiscal 1999 also included freezer expansion at its
Birmingham, Alabama facility and the purchase of freezer equipment at the
Company's Athens, Tennessee facility. Fiscal 1998 capital expenditures also
included the expansion of an ice cream storage facility. Capital
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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.
Sales to unaffiliated customers for the fiscal years 1999, 1998 and 1997
were $467 million, $332 million and $261 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
dairy creamers, aerosol whipped creams and non-dairy toppings, coffee creamers,
flavored milks and lactose-reduced milks.
Extended shelf life 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. Fiscal 1999 capital expenditures included a small bottle
production line and costs associated with a new cooler. Capital expenditures in
fiscal 1998 included investment in a new high-temperature processor and cooler
expansion at its Murray, Kentucky plant. In fiscal 1997, the Company divested
its Ready Foods plant in Philadelphia, Pennsylvania and consolidated production
into the 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.
Sales of extended shelf life products to unaffiliated customers for fiscal
1999, 1998 and 1997 were $167 million, $147 million and $141 million,
respectively.
Pickles 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, Peter Piper,
Rainbo, Roddenbery, Schwartz's and Steinfeld's. Branded and private label
products are marketed and distributed to retail grocery store chains,
wholesalers and the foodservice industry and in bulk to other food processors.
During fiscal 1999, the Company closed its Croswell, Michigan plant and
consolidated production into existing facilities and continued to modernize its
remaining manufacturing facilities. Fiscal 1999 capital expenditures include
costs to further automate pickle production at the Faison, North Carolina
facility. Capital expenditures in fiscal 1998 included the investment in
non-fermenting processing equipment, a new water treatment system and banana
pepper handling equipment. During fiscal 1997 the Company closed its Eaton
Rapids, Michigan plant and consolidated production, similar to the Croswell,
Michigan closure. 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
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.
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Sales to unaffiliated customers for the fiscal years 1999, 1998 and 1997
were $364 million, $349 million and $371 million, respectively.
Specialty Segment
Powdered Products
Non-dairy coffee creamers have been the Company's principal powdered
products. However, as a result of the fiscal 1999 acquisition of a New Hampton,
Iowa manufacturing facility, the Company's capabilities have been extended into
shortening powders and other high fat formulas used in baking, beverage mixes,
gravies and sauces. Core business remains premium and low-fat powdered products
sold primarily under private labels to vending operators, office beverage
service companies and institutional foodservice distributors with national
distribution to 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.
As the Company continues to grow its non-dairy creamer business, during
fiscal 1999 the Company entered into the nutritionally-based products market.
The nutritional beverage operations were acquired in conjunction with the
Vegetables segment disposition, which was sold to Agrilink Foods, Inc. on
September 23, 1998. In entering the nutritional beverage the Company will
leverage its private label expertise and launch beverages in the meal
supplement, weight loss and sports categories.
The Company, through an affiliate, provides stabilizers and other dry
ingredients to the United Kingdom, Continental Europe and other foreign markets.
There were no major capital expenditures during fiscal 1999. Fiscal 1998
and fiscal 1997 capital expenditures included the construction of a new dryer in
Wayland, Michigan, which began operation during the third 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 1995.
Sales to unaffiliated customers for the fiscal years 1999, 1998 and 1997
were $176 million, $161 million and $153 million, respectively.
Salad Dressings, Dips, Sauces and Puddings
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 that supply restaurants, schools, hotels and other segments of the
foodservice industry. In conjunction with the disposition of its Vegetables
segment, the Company also acquired an aseptic foods business from Agrilink. The
Agrilink acquisition both complements and supplements the Company's established
aseptic operation.
The Company manufactures vegetable-fat-based snack 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 direct
warehouse delivery. Dean's brand vegetable-fat-based dips, available in regular,
low-fat and non-fat varieties, have the leading market position nationwide. 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, which are marketed in the
produce section of supermarkets. Dean's dips and Marie's refrigerated salad
dressings are the leading brand names in their respective categories. Marie's
dips are the second leading produce dip. 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
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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 and Chivo brand
names and a number of private labels.
Capital expenditure during fiscal 1999 included a small-pouch filler line
at the Company's subsidiary in Dixon, Illinois. Fiscal 1998 capital expenditures
included receiving room upgrades at the Company's City of Industry, California
facility. There were no major capital expenditures during fiscal years 1997 and
1996. Major capital expenditures in fiscal 1995 included a multi-phase project
to significantly upgrade the Dixon, Illinois facility with the completion of a
new batch make-up room.
Sales to unaffiliated customers for the fiscal years 1999, 1998 and 1997
were $199 million, $147 million and $122 million, respectively.
DFC Transportation
DFC Transportation Company, a transportation and logistics subsidiary of
the Company, operates nationwide with a fleet of approximately 130 tractors and
265 trailers, providing less-than-truckload refrigerated and frozen cartage
service. Its customers include food and industrial companies. A significant
portion of its revenues is derived from the brokerage of various types of
freight.
Revenues from unaffiliated customers were $32 million in fiscal year 1999
and $27 million in each of the fiscal years ended 1998 and 1997. 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 generally does not have
long-term purchase contracts for agricultural products. The price of raw milk is
extensively regulated. Early fiscal 1999 raw milk costs were higher in
comparison to the same period of the prior year and continued to increase to
record high levels by the end of the third quarter and beginning of the fourth
quarter. Costs fell sharply during the last two months of the fourth quarter of
fiscal 1999 to a level below fiscal 1998 year-end costs. Raw milk costs during
the first half of fiscal 1998 were significantly lower in comparison to the same
period in fiscal 1997; raw milk costs rose during the last half of fiscal 1998
to a level above the same period in the prior year. Raw milk costs peaked at
then 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. Early
indications are that raw milk costs will rise significantly during the second
quarter of fiscal 2000; however, average raw milk costs in fiscal 2000 are
expected to be comparable to or below fiscal 1999 costs.
The Company produces most of its plastic gallon and half-gallon container
requirements for its fluid milk business. Glass containers for pickles and
related products are purchased from one main supplier.
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 cucumbers purchased under seasonal grower contracts.
The Company is confident that any lost supplier requirements could be replaced
in the ordinary course of business.
In its Pickles 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.
Favorable volume from Midwest crops helped offset higher cost crops from
Mexico and the South during fiscal 1999. As a result fiscal 1999 cucumber costs
approximated fiscal 1998 costs. Although Southeast crops were late and short of
expectations due to adverse growing conditions, fiscal 1998 cucumber costs
approximated fiscal 1997 costs. Fiscal 1997 cucumber costs approximated fiscal
1996 costs. Due to drought conditions in some regions of the United States,
fiscal 2000 cucumber costs are expected to be slightly higher than fiscal 1999
costs.
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DISTRIBUTION
Dairy products are principally delivered to grocery chain stores or
warehouses directly from the Company's processing plants by the Company, in
trucks that 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 Pickles and
Specialty products are delivered to warehouses and food distributors by the
Company's fleet of trucks and outside freight carriers.
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 several 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 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 employs approximately 13,600 employees (12,300 full-time).
Approximately 5,600 employees are represented by the International Brotherhood
of Teamsters and other unions under sixty-three collective bargaining
agreements. Eight of these agreements expire during fiscal 2000. Generally, the
Company considers its employee relations to be good.
The Company has approximately 1,100 seasonal positions at its pickle
processing plants, principally during the summer months. At times, the Company
has experienced difficulties in meeting seasonal employee needs. A number of
strategies have been employed to retain seasonal employees including incentive
programs and employee sharing programs.
ENVIRONMENT
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 continues to
give considerable attention to the impact or potential impact of its operations
on the environment.
ITEM 2. PROPERTIES.
The Company owns sixty of its processing plants (three of which are subject
to mortgage) and leases the other four under leases expiring from fiscal 2000
through fiscal 2007. 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. 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
1999 Annual Report (Exhibit 13a hereto) on page 32. 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
Birmingham, Alabama Evart, Michigan
Mobile, Alabama Albuquerque, New Mexico
Buena Park, California Barberton, Ohio
City of Industry, California Cincinnati, Ohio
Escondido, California Cleveland Heights, Ohio
Hayward, California Springfield, Ohio
San Leandro, California Belleville, Pennsylvania
Sacramento, California Erie, Pennsylvania
Miami, Florida Lebanon, Pennsylvania
Orange City, Florida Sharpsville, Pennsylvania
Orlando, Florida North Charleston, South
Carolina
Braselton, Georgia Athens, Tennessee
Chemung, Illinois Nashville, Tennessee
Huntley, Illinois El Paso, Texas
Rockford, Illinois Lubbock, Texas
Rochester, Indiana Salt Lake City, Utah
Louisville, Kentucky Sheyboygan, Wisconsin
Madisonville, Kentucky
Ice Cream and Frozen Desserts
Birmingham, Alabama Albuquerque, New Mexico
Buena Park, California Athens, Tennessee
City of Industry, California Nashville, Tennessee
Belvidere, Illinois Barberton, Ohio
Extended Shelf Life
Jacksonville, Florida Murray, Kentucky
PICKLES
Pickles, Relishes and Specialty Items
Atkins, Arkansas Plymouth, Indiana
LaJunta, Colorado Faison, North Carolina
Sanford, Florida Portland, Oregon
Cairo, Georgia Green Bay, Wisconsin
Chicago, Illinois
SPECIALTY
Powdered Products
Pecatonica, Illinois Wayland, Michigan
Rockford, Illinois Abingdon, Oxon, United Kingdom
New Hampton, Iowa
Salad Dressings, Dips, Sauces and Puddings
City of Industry, California Thornton, Illinois
Dixon, Illinois Benton Harbor, Michigan
Rockford, Illinois
Distribution branches for the Dairy segment are located in Alabama,
California, Florida, Georgia, Illinois, Indiana, Kentucky, Nevada, New Mexico,
New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas,
and West Virginia.
Distribution warehouses for the Pickles and Specialty segments are
maintained adjacent to many processing plants. The Company maintains powdered
product warehouses utilized throughout the United States.
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ITEM 3. LEGAL PROCEEDINGS.
Information on legal proceedings is contained in the Company's Fiscal 1999
Annual Report (Exhibit 13a hereto) on page 34 in Note 14 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 30, 1999.
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 1999 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 6, 1999 was 8,622.
Restrictions on the Company's ability to pay dividends on its Common Stock
are described in the seventh paragraph of Note 5 to the consolidated financial
statements at page 30 of the Company's Fiscal 1999 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 1999 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 17 through 21 of the Company's Fiscal 1999
Annual Report (Exhibit 13a hereto) under the caption "Financial Review", which
discussion is hereby incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information set forth at page 21 of the Company's Fiscal 1999 Annual
report (Exhibit 13a hereto) under the caption "Quantitative and Qualitative
Disclosures about Market Risk" is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company's consolidated balance sheets as of May 30, 1999 and May 31,
1998 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 30,
1999, and the notes thereto, together with the report thereon of independent
accountants, are set forth on pages 22 through 38 of the Company's Fiscal 1999
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 1999 Annual Report (Exhibit 13a hereto) in the rows captioned
"Net Sales", "Gross Profit", "Income from Continuing Operations", "Net Income"
and "Per Common Share Data: Basic Income (Loss) Per Share and Diluted Income
(Loss) Per Share". 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
28, 1999) is set forth at pages 2 through 7 of the Company's 1999 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
------------------------- --- -------------
Eric A. Blanchard............... Vice President and President, 43 1999
Dairy Division
Jenny L. Carpenter.............. Group Vice President, Specialty 53 1995
Business Unit
Gary A. Corbett................. Vice President, Governmental and 51 1993
Dairy Industry Relations
Daniel M. Dressel............... Vice President, Human Resources 56 1999
Neil J. Finerty................. Vice President, Industrial 54 1997
Relations
Gary D. Flickinger.............. Vice President, Manufacturing 57 1993
and Engineering
Daniel E. Green................. Vice President, Special Projects 54 1999
and Acquisition Integration
James R. Greisinger............. Group Vice President and 58 1992
President, Dean Pickle and
Specialty Products Company
Cameron C. Hitchcock............ Treasurer 37 1997
Alan W. Hooper.................. Vice President, Special 50 1997
Operation Projects
Dale E. Kleber.................. Vice President, Secretary and 43 1999
General Counsel
William M. Luegers, Jr. ........ Corporate Controller 45 1997
William R. McManaman............ Vice President, Finance and 52 1996
Chief Financial Officer
George A. Muck.................. Vice President, Research and 61 1970
Development
Kevin M. Nemetz................. Group Vice President, Specialty 43 1999
Business Unit
Luis P. Nieto................... Vice President, Business 44 1999
Strategy
Douglas A. Parr................. Vice President, Dairy Sales and 57 1993
Marketing
Dennis J. Purcell............... Group Vice President and 56 1993
President, Specialty Business
Unit
Gary P. Rietz................... Chief Information Officer 43 1997
12
13
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 28, 1999.
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. Dressel, Mr. Finerty, Mr. Hitchcock, Mr. Luegers, Mr. Nemetz, Mr. Nieto, Mr.
McManaman and Mr. Rietz. Prior to assuming their current positions,
- Mr. Blanchard was a Company Vice President and 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 Group Vice President and President-Ryan Foods Company;
- Mr. Greisinger was a Company Vice President and President of Dean Pickle
and Specialty Products Company;
- Mr. Hooper was the Company's Director of Strategic Projects;
- 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. Dressel was employed by the Company during fiscal 1999. Mr. Dressel,
prior to his employment with the Company, was Vice President -- Human Resources
at Kraft Foods, Inc., 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 the 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 his employment by the Company, was the Vice President -- Finance of
Brunswick Corporation, a diversified marine and recreational products company.
Mr. Nemetz has been employed by the Company since 1998. Mr. Nemetz, prior
to his employment with the Company, was Manager -- Sales and Marketing Strategy
in the Strategic Consulting Division of PricewaterhouseCoopers, a professional
services firm.
Mr. Nieto was employed by the Company during fiscal 1999. Prior to assuming
his present duties, he was Vice President-Marketing of the Specialty business
unit. Mr. Nieto, prior to his employment with the Company, was
Director -- Ethnic Marketing of Kraft Foods, Inc., a diversified food company.
Mr. Rietz was employed by the Company in 1997. Mr. Rietz, 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 28, 1999) is set forth in the Company's 1999
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 1999 Proxy Statement at page 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.
14
15
PART IV
ITEM 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
PAGE NO.
--------
(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.
(1) Financial Statements
The consolidated balance sheets at May 30,
1999 and May 31, 1998, and 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 30, 1999, and the notes thereto, together
with the report thereon of
PricewaterhouseCoopers LLP dated June 28, 1999,
as incorporated by reference in Part II, Item 8
of this Report.
(2) Financial Statement Schedules
Report of independent accountants on
financial statement schedules 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 30, 1999, 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.
None were filed.
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 27, 1999
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 27, 1999
- --------------------------------------------------- and Director
Howard M. Dean
RICHARD E. BAILEY President and Director August 27, 1999
- ---------------------------------------------------
Richard E. Bailey
EDWARD A. BRENNAN Director August 27, 1999
- ---------------------------------------------------
Edward A. Brennan
LEWIS M. COLLENS Director August 27, 1999
- ---------------------------------------------------
Lewis M. Collens
PAULA H. CROWN Director August 27, 1999
- ---------------------------------------------------
Paula H. Crown
JOHN P. FRAZEE, JR. Director August 27, 1999
- ---------------------------------------------------
John P. Frazee, Jr.
BERT A. GETZ Director August 27, 1999
- ---------------------------------------------------
Bert A. Getz
JANET HILL Director August 27, 1999
- ---------------------------------------------------
Janet Hill
JOHN S. LLEWELLYN, JR. Director August 27, 1999
- ---------------------------------------------------
John S. Llewellyn, Jr.
RICHARD P. MAYER Director August 27, 1999
- ---------------------------------------------------
Richard P. Mayer
ANDREW J. MCKENNA Director August 27, 1999
- ---------------------------------------------------
Andrew J. McKenna
THOMAS A. RAVENCROFT Senior Vice President August 27, 1999
- --------------------------------------------------- and Director
Thomas A. Ravencroft
16
17
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
of Dean Foods Company:
Our audits of the consolidated financial statements referred to in our
report dated June 28, 1999 appearing in the Annual Report to Shareholders of
Dean Foods Company (which report and consolidated financial statements are
incorporated by reference in the Annual Report on Form 10-K) also included an
audit of the financial statement schedules listed in Item 14(a)(2) of this Form
10-K. In our opinion, these financial statement schedules present fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Chicago, Illinois
June 28, 1999
17
18
DEAN FOODS COMPANY AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
AMOUNT
CHARGED
BALANCE AT (CREDITED) ACCOUNTS ADDITIONS BALANCE AT
BEGINNING OF TO COSTS AND WRITTEN DUE TO END
CLASSIFICATION PERIOD EXPENSES OFF ACQUISITIONS OF PERIOD
-------------- ------------ ------------ -------- ------------ ----------
(IN THOUSANDS)
Fiscal Year Ended May 30, 1999
Allowance for doubtful
accounts and notes
receivable........................... $4,212 $1,410 $1,302 $3,250 $7,570
====== ====== ====== ====== ======
Fiscal Year Ended May 31, 1998
Allowance for doubtful
accounts and notes
receivable........................... $3,085 $2,790 $2,822 $1,159 $4,212
====== ====== ====== ====== ======
Fiscal Year Ended May 25, 1997
Allowance for doubtful
accounts and notes
receivable........................... $2,691 $ 846 $ 452 $ -- $3,085
====== ====== ====== ====== ======
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.
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- ------- ----------- --------
(3) Articles of Incorporation and By-Laws
a. Dean Foods Company Restated Certificate of
Incorporation dated February 8, 1988 as amended
September 29, 1998 (filed as Exhibit 3(a) to
Registrant's Form 10-Q Quarterly Report for
quarterly period ended August 30, 1998 and
incorporated herein by reference)
b. By-Laws of Registrant, as amended May 22, 1998 (filed
as Exhibit 4(a) to the Registrant's Form 10-K Annual
Report for the Fiscal Year Ended May 31, 1998 and
incorporated herein by reference)
(4) Instruments defining the rights of security holders, including
indentures
c. Rights Agreement dated May 22, 1998 (filed as Exhibit
4(a) to the Registrant's Form 10-K Annual Report for
the Fiscal Year Ended May 31, 1998 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
Annua 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)
20
PAGE NO.
--------
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. $500 million Credit Agreement dated as of March 31,
1998 (filed as Exhibit 10(i) to Registrant's Form 10-K
Annual Report for Fiscal Year Ended May 31, 1998 and
incorporated herein by reference)
(11) Computation of Basic and Diluted Income Per Share 21
(12) Computation of Ratio of Earnings to Fixed Charges 22
(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 30, 1999 23-62
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 30, 1999 is
not to be deemed filed as part of this Report.
(21) Subsidiaries of the Registrant
a. Subsidiaries of the Registrant as of May 30, 1999 63
(23) Consents of Experts and Counsel
a. Consent of Independent Accountants dated August 27,
1999 64
(27) Financial Data Schedules
a. Fiscal Year Ended May 30, 1999 65