-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JI9uQ30rpXTIL7oBhBCli0FvLyiO9h/ZpLZvxukMwshfD5z2667kTrDJMPgDmecV w8mFhcc6fNlM1Ha6hE01Vg== 0000950137-99-003636.txt : 19991018 0000950137-99-003636.hdr.sgml : 19991018 ACCESSION NUMBER: 0000950137-99-003636 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990829 FILED AS OF DATE: 19991012 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEAN FOODS CO CENTRAL INDEX KEY: 0000027500 STANDARD INDUSTRIAL CLASSIFICATION: DAIRY PRODUCTS [2020] IRS NUMBER: 360984820 STATE OF INCORPORATION: DE FISCAL YEAR END: 0527 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08262 FILM NUMBER: 99726807 BUSINESS ADDRESS: STREET 1: 3600 N RIVER RD CITY: FRANKLIN PARK STATE: IL ZIP: 60131 BUSINESS PHONE: 8476781680 MAIL ADDRESS: STREET 1: 3600 N RIVER RD CITY: FRANKLIN PARK STATE: IL ZIP: 60131 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X Quarterly report pursuant to Section 13 or 15(d) of the Securities - ------- Exchange Act of 1934 For the quarterly period ended August 29, 1999 ----------------------- or Transition report pursuant to Section 13 or 15(d) of the Securities - ------ Exchange Act of 1934 For the transition period from to ------------------ --------------------- Commission file number 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 North River Road, Franklin Park, Illinois 60131 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (847) 678-1680 ----------------------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares of the Registrant's Common Stock, par value $1 per share, outstanding as of the date of this report was 39,130,103. 1 2 PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS DEAN FOODS COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED AUGUST 29,1999 AND AUGUST 30, 1998 (In Thousands, Except for Per Share Amounts)
Three Months Ended ------------------ August 29, August 30, 1999 1998 ------------ ----------- (Unaudited) Net sales $ 1,001,360 $ 825,104 Costs of products sold 762,004 633,928 Delivery, selling and administrative expenses 182,529 144,867 ------------ ----------- Operating earnings 56,827 46,309 Interest expense 11,385 9,056 Interest income 189 309 ------------ ----------- Income from continuing operations before income taxes 45,631 37,562 Provision for income taxes 17,796 14,649 ------------ ----------- Income from continuing operations 27,835 22,913 Loss from discontinued operations, net of taxes - (1,741) ------------ ----------- Net income $ 27,835 $ 21,172 ============ =========== Basic income (loss) per share: Income from continuing operations $ .71 $ .57 Loss from discontinued operations - (.04) ------------ ----------- Net income $ .71 $ .53 ============ =========== Diluted income (loss) per share: Income from continuing operations $ .70 $ .56 Loss from discontinued operations - (.04) ------------ ----------- Net income $ .70 $ .52 ============ =========== Weighted average common shares: Basic 39,290 40,023 ============ =========== Diluted 39,911 40,983 ============ ===========
See accompanying Notes to Condensed Consolidated Financial Statements. 2 3 DEAN FOODS COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS AUGUST 29, 1999 AND MAY 30, 1999 (In Thousands)
August 29, May 30, 1999 1999 ------------ ------------ (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 20,798 $ 15,958 Accounts and notes receivable, less allowance for doubtful accounts of $7,407 and $7,570, respectively 295,414 303,337 Inventories 210,035 168,836 Other current assets 90,826 94,007 ------------ ------------ Total Current Assets 617,073 582,138 ------------ ------------ PROPERTIES Property, plant and equipment, at cost 1,302,280 1,242,238 Accumulated depreciation 528,433 477,292 ------------ ------------ Total Properties, net 773,847 764,946 ------------ ------------ OTHER ASSETS Intangibles, net of amortization of $28,799 and $24,551, respectively 572,970 551,486 Other assets 15,471 13,306 ------------ ------------ Total Other Assets 588,441 564,792 ------------ ------------ TOTAL ASSETS $ 1,979,361 $ 1,911,876 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current installments of long-term obligations $ 2,542 $ 2,651 Accounts payable and accrued expenses 397,696 398,174 Dividends payable 8,747 8,353 Federal and state income taxes payable 47,465 30,308 ------------ ------------ Total Current Liabilities 456,450 439,486 LONG-TERM OBLIGATIONS 657,758 631,286 DEFERRED LIABILITIES 128,185 124,690 SHAREHOLDERS' EQUITY 736,968 716,414 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,979,361 $ 1,911,876 ============ ============
See accompanying Notes to Condensed Consolidated Financial Statements. 3 4 DEAN FOODS COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED AUGUST 29, 1999 AND AUGUST 30, 1998 (In Thousands)
Three Months Ended ------------------ August 29, August 30, 1999 1998 -------------- ------------- (Unaudited) Net cash provided from continuing operations $ 52,096 $ 13,210 ----------- ----------- Investing activities Capital expenditures (31,835) (30,368) Proceeds from disposition of property, plant and equipment 129 282 Acquisitions, net of cash acquired (32,286) (85,768) Other (2,552) - ------------ ----------- Net cash used in investing activities (66,544) (115,854) ----------- ----------- Financing activities Repayment of long-term obligations (857) (11,324) Issuance of commercial paper, net 27,032 - Issuance of revolving credit agreement, net - 140,000 Repayment of notes payable to banks, net - (12,000) Unexpended industrial revenue bond proceeds - 5,965 Cash dividends paid (8,255) (7,983) Issuance of common stock 1,368 4,268 ----------- ----------- Net cash provided by financing activities 19,288 118,926 ----------- ----------- Net cash used by discontinued operations - (5,701) ----------- ----------- Increase in cash and temporary cash investments 4,840 10,581 Cash and temporary cash investments - beginning of period 15,958 11,932 ----------- ----------- Cash and temporary cash investments - end of period $ 20,798 $ 22,513 =========== ===========
See accompanying Notes to Condensed Consolidated Financial Statements. 4 5 DEAN FOODS COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Dollar amounts in thousands unless otherwise noted. 1. BASIS OF PRESENTATION In the opinion of the Company, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the following unaudited condensed consolidated financial statements have been included herein. Certain information and footnote disclosures normally included in the financial statements have been omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company's 1999 Annual Report on Form 10-K. The results of operations for the three-month period ended August 29, 1999 are not necessarily indicative of the operating results for the full year. 2. ACQUISITIONS During the first quarter of fiscal 2000, the Company acquired the assets of Steinfeld's Pickle Products, a pickle producer located in Portland, Oregon, on July 1, 1999 and Dairy Express, Inc., a dairy distributor based in the Philadelphia area, on July 16, 1999. Each of the acquisitions was made for cash, totaling $32.3 million. These acquisitions were accounted for as purchases and have been recorded using preliminary valuations of the assets and liabilities acquired. Goodwill arising from these acquisitions will be amortized over periods up to 40 years. The operating results of each acquisition have been included in the Company's results of operations since the date of acquisition. 3. DISCONTINUED OPERATIONS On September 23, 1998, the Company sold the stock of Dean Foods Vegetable Company to Agrilink Foods, Inc. Accordingly, fiscal 1999 Vegetables segment results are presented as discontinued operations. For the first quarter ended August 30, 1998, net sales of discontinued operations were $110.8 million. Loss from discontinued operations for the quarter ended August 30, 1998 included allocated interest expense (based on the short-term interest expense incurred and changes in working capital levels) of $2.0 million and is net of an income tax benefit of $1.2 million. 4. INVENTORIES The following is a tabulation of inventories by class at August 29, 1999, August 30, 1998, and May 30, 1999.
August 29, August 30, May 30, 1999 1998 1999 ---------- ----------- --------- (Unaudited) Raw materials and supplies $ 51,016 $ 40,444 $ 52,482 Materials in process 23,121 34,122 11,292 Finished goods 145,664 116,696 114,776 ---------- ----------- --------- 219,801 191,262 178,550 Less: Excess of current cost over stated value of last-in, first-out inventories 9,766 9,683 9,714 ---------- ----------- --------- Total inventories $ 210,035 $ 181,579 $ 168,836 ========== =========== =========
5 6 5. DEPRECIATION AND AMORTIZATION EXPENSE Depreciation and amortization expense for the first quarters ended August 29, 1999 and August 30, 1998 was $27.8 million and $21.5 million, respectively. 6. BUSINESS SEGMENT INFORMATION The following is a tabulation of the Company's business segment information for the first quarters ended August 29, 1999 and August 30, 1998.
(Unaudited) Dairy Pickles Specialty Corporate Consolidated ----- ------- --------- --------- ------------ August 29, 1999 Net sales $ 806,213 $ 95,212 $ 99,935 $ - $ 1,001,360 Operating earnings $ 42,891 $ 10,244 $ 15,476 $ (11,784) $ 56,827 Identifiable assets $ 1,343,429 $ 232,768 $ 287,535 $ 115,629 $ 1,979,361 August 30, 1998 Net sales $ 651,665 $ 93,405 $ 80,034 $ - $ 825,104 Operating earnings $ 32,503 $ 11,104 $ 11,169 $ (8,467) $ 46,309 Identifiable assets $ 1,319,758 $ 208,559 $ 166,618 $ 64,975 $ 1,759,910
7. LEGAL PROCEEDINGS See PART II, Item 1 for a discussion of pending legal proceedings. 6 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS FIRST QUARTER FISCAL 2000 VERSUS FIRST QUARTER FISCAL 1999 RESULTS OF CONTINUING OPERATIONS Net sales for the first quarter of fiscal 2000 of $1.0 billion were $176.3 million, or 21.4%, higher than sales of $825.1 million in the prior year. While net sales increased in all business segments, the majority of the sales increase was due to fiscal 1999 Dairy segment acquisitions. Operating earnings increased $10.5 million, or 22.7%, over the prior year, reflecting strong improvements in the Dairy and Specialty segments. BUSINESS SEGMENTS DAIRY - Dairy segment sales of $806.2 million were 23.7%, or $154.5 million, higher than sales of $651.7 million in the prior year. Net sales increases were primarily the result of fiscal 1999 acquisitions. Operating earnings increased 32.0% to $42.9 million from $32.5 million in the first quarter of last year. The increase is primarily attributable to increased earnings in the ice cream and extended shelf life (ESL) operations, both of which benefited from improved margins and plant efficiencies during the quarter, as well as a more favorable commodity environment. ESL also benefited from strong volume growth. Although butterfat prices rose slightly during the quarter, the increase was significantly less than the increase in fiscal 1999, resulting in a negative impact on fluid operations and a benefit for both ice cream and ESL in comparison to the prior year. Overall, fluid operations were up slightly over the prior year despite the negative butterfat impact as improved plant efficiencies related to last year's plant consolidations began to be realized during the quarter. Higher raw milk costs were experienced during the first quarter, which resulted from reduced fluid available from dairy farmers due to the extremely hot, dry weather in many parts of the country. Current forecasts indicate that with increased production capacity, raw milk costs should experience less volatility throughout the remainder of the year than in fiscal 1999. PICKLES - Net sales in the Pickles segment for the first quarter of $95.2 million increased $1.8 million, or 1.9%, from $93.4 million in the prior year. The increase in net sales is due to the first quarter fiscal 2000 acquisition of Steinfeld's Pickle Company. Excluding the impact of the acquisition, base business sales were down approximately 3% from the prior year. Operating earnings of $10.2 million were 7.7% lower than the first quarter of the prior fiscal year. The earnings decline is primarily due to weather-related crop shortages that caused plant inefficiencies, as well as the sales decline mentioned above. SPECIALTY - The Specialty segment experienced increased sales of $19.9 million, or 24.9%, to $99.9 million. Operating earnings increased 38.6% to $15.5 million. Sales and earnings increases are primarily attributable to the fiscal 1999 acquisitions of the Benton Harbor aseptic business and Custom Food Processors International, a powdered product producer. Additionally, the Dean Dip and Dressing division experienced higher earnings in comparison to the prior fiscal year's first quarter. CORPORATE Corporate expenses increased $3.3 million in the first quarter of fiscal 2000 versus the same period in the prior year. The increase is due to higher stock-based and incentive compensation expenses, as well as costs associated with the Company's enterprise-wide information systems initiative. 7 8 INTEREST EXPENSE Interest expense increased $2.3 million, or 25.7%, during the first quarter compared to the prior year, primarily due to the interest expense associated with increased borrowings used to fund fiscal 1999 acquisitions. INCOME TAXES The effective income tax rate was 39.0% for the first quarters of fiscal 2000 and fiscal 1999. DISCONTINUED OPERATIONS Loss from discontinued operations, net of taxes, was $1.7 million for the first quarter of fiscal 1999. On September 23, 1998, the Company sold the stock of Dean Foods Vegetable Company to Agrilink Foods, Inc. LIQUIDITY AND CAPITAL RESOURCES As of August 29, 1999 there have been no material changes in the Company's liquidity or its capital resources from those described in the Management's Discussion and Analysis contained in the Company's Annual Report on Form 10-K for the fiscal year ended May 30, 1999. Cash and temporary cash investments were $20.8 million at August 29, 1999. Working capital at August 29, 1999 was $160.6 million compared to $142.7 million at May 30, 1999, and inventories at August 29, 1999 were $210.0 million, an increase of $41.2 million over the balance at May 30, 1999. The increase in working capital and inventories were primarily the result of the Pickles segment's typical seasonal inventory increase from the cucumber harvest as well as the Pickles acquisition completed during the first quarter of fiscal 2000. The August 29, 1999 inventories were $28.5 million higher than inventories a year ago due to the inventory of acquisitions completed during fiscal 2000 and the latter half of fiscal 1999. Seasonal working capital requirements are funded using the Company's Commercial Paper Program, which was entered into during the fourth quarter of fiscal 1999, and bilateral lines of credit. During fiscal 1999, prior to the Commercial Paper program, seasonal working capital requirements were funded utilizing the Company's Revolving Credit Agreement, which matures in 2003. The Company classifies Commercial Paper and Revolving Credit Agreement borrowings as long-term. At August 29, 1999 and May 30, 1999 there were no short-term borrowings outstanding. CASH FLOWS - Cash and temporary cash investments increased $4.8 million during the first quarter of fiscal 2000. Net cash provided from continuing operations was $52.1 million for the first quarter of fiscal 2000 compared to $13.2 million in the prior year. The first quarter fiscal 2000 increase in net cash provided from continuing operations is primarily due to higher operating earnings before depreciation and amortization and a decrease in the fiscal 2000 accounts receivable balance. Net cash used in investing activities was $66.5 million for first quarter fiscal 2000 versus $115.9 million in fiscal 1999. First quarter fiscal 2000 investing activities include $32.3 million of cash paid for acquisitions compared to $85.8 million paid during the first quarter of fiscal 1999. Capital expenditures during the first quarter of fiscal 2000 were slightly ahead of last year's spending. Fiscal 2000 investing activities also includes $2.6 million related to investment in the Company's enterprise-wide information systems initiative. Net cash provided by financing activities was $19.3 million and $118.9 million for the first quarters of fiscal 2000 and fiscal 1999, respectively. Fiscal 2000 financing activities include $27.0 million of net borrowings under the Company's Commercial Paper program. Fiscal 1999 financing activities included $140.0 million of additional Revolving Credit Agreement borrowings. First quarter fiscal 1999 financing activities also reflects the repayment of $12.0 million of short-term notes payable. 8 9 On August 23, 1999 the Company announced an equity investment in White Wave, Inc., a processor of soy based products; the results of which will be included in the Specialty segment. The Company continues to assess acquisition candidates in each of its business segments. YEAR 2000 COMPLIANCE As discussed in the Company's Annual Report on Form 10-K, the Company has developed and is executing a plan that includes assessing the computer functionality of its information systems, plant systems and equipment, personal computers and related application, networks and communications, and laboratory and facility equipment and systems. The plan also includes the Company's assessment as to the readiness of external parties, including suppliers, vendors and banking and insurance companies, and to coordinate efforts in addressing the Year 2000 issue with these entities. The Company is both augmenting previously scheduled computer maintenance with procedures designed to locate and correct Year 2000 problems and by slightly accelerating normal equipment and software replacement schedules. The Company has completed 97% of new systems upgrades, reprogramming efforts and related testing necessary for Year 2000 compliance. The Company expects to incur and expense a total of approximately $4 million associated with its Year 2000 efforts, of which approximately $3.8 million has been incurred since the project's inception in fiscal 1997 through the end of the first quarter of fiscal 2000. In addition to costs expensed, the Company estimates to capitalize a total of approximately $3 million of capital expenditures for the replacement and upgrade of system software and hardware, of which approximately $2.5 million has been capitalized to date. The estimated aggregate costs do not include any costs associated with contingency plans, which are in the process of being finalized. The costs associated with these procedures have not been and are not expected to be material to the Company's financial condition or results of operations. The Company believes completed modification of existing software and conversions to new software will result in Year 2000 compliance. However, given the complexity of the Year 2000 issue, the impact on business operations due to failure by the Company to achieve compliance or failure by external entities, such as suppliers and vendors, to achieve compliance, which the Company cannot control, could adversely affect the Company's consolidated results of operations. Although the Company does not anticipate any major non-compliance issues, it currently believes that the greatest risk of disruption in its business exists in the event of non-compliance by its material external parties. FORWARD LOOKING STATEMENTS Certain statements in this Quarterly Report are "forward looking statements" as defined by the Private Securities Litigation Reform Law of 1995. These statements, which may be indicated by words such as "expects", "intends", "believes", "forecasts", or other words of similar meaning, involve certain risks and uncertainties that may cause actual results to differ materially from expectations as of the date of this Report. These risks include, but are not limited to, risks associated with the Company's acquisition strategy, adverse weather conditions resulting in poor harvests, raw milk costs, interest rate fluctuations, competitive pricing pressures, marketing and cost-management programs, changes in government programs and shifts in market demand. Additional information concerning these and other risks is contained in the Company's Annual Report on Form 10-K for the fiscal year ended May 30, 1999. Item 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As of August 29, 1999 there have been no material changes in the Company's market risk exposure as described in the Management's Discussion and Analysis contained in the Company's Annual Report on Form 10-K for the fiscal year ended May 30, 1999. 9 10 PART II - OTHER INFORMATION Item 1. Legal Proceedings There has been no material change in the legal proceedings reported under Item 3 - Legal Proceedings, of the Company's Annual Report on Form 10-K for the fiscal year ended May 30, 1999. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 11 Basic and Diluted Income per Share 12 Computation of Ratio of Earnings to Fixed Charges 27 Financial Data Schedule (b) Reports on Form 8-K None were filed. 10 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DEAN FOODS COMPANY ---------------------------- (Registrant) DATE: October 12, 1999 William R. McManaman ---------------- ------------------------------ WILLIAM R. McMANAMAN Vice President, Finance and Chief Financial Officer DATE: October 12, 1999 William M. Luegers, Jr. ---------------- ------------------------------ WILLIAM M. LUEGERS, JR. Controller 11 EX-11 2 BASIC AND DILUTED INCOME PER SHARE 1 Exhibit 11 Dean Foods Company Computation of Basic and Diluted Income Per Share (In thousands, except for per share amounts)
Three Months Ended ------------------ August 29, August 30, 1999 1998 ----------- ----------- Income from Continuing Operations $ 27,835 $ 22,913 Loss from Discontinued Operations - (1,741) ----------- ----------- Net Income $ 27,835 $ 21,172 =========== =========== BASIC INCOME (LOSS) PER SHARE: Income from Continuing Operations $ .71 $ .57 Loss from Discontinued Operations - (.04) ----------- ----------- Net Income $ .71 $ .53 =========== =========== Weighted average common shares outstanding 39,290 40,023 =========== =========== DILUTED INCOME (LOSS) PER SHARE: Income from Continuing Operations $ .70 $ .56 Loss from Discontinued Operations - (.04) ----------- ----------- Net Income $ .70 $ .52 =========== =========== Adjusted weighted average common shares* 39,911 40,983 =========== ===========
* Includes weighted average number of potential common shares outstanding. Potential common shares consist solely of outstanding options under the Company's stock option plan. EX-12 3 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 1 Exhibit 12 Dean Foods Company Computation of Ratio of Earnings to Fixed Charges (In thousands)
13 Weeks Ended August 29, 1999 --------------- Income before taxes $ 45,631 --------------- Fixed charges: Interest expense 11,385 Portion of rentals (33%) 3,479 --------------- Total fixed charges 14,864 --------------- Earnings before taxes and fixed charges $ 60,495 =============== Ratio of earnings to fixed charges 4.1 ===============
EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANTS' QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED AUGUST 29, 1999. 1,000 3-MOS MAY-28-2000 MAY-31-1999 AUG-29-1999 20,798 0 302,821 7,407 210,035 90,826 1,302,280 528,433 1,979,361 456,450 657,758 0 0 42,314 694,654 1,979,361 1,001,360 1,001,360 762,004 762,004 181,914 615 11,385 45,631 17,796 27,835 0 0 0 27,835 .71 .70
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