10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

(Mark One)
þ	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 2007
or
o	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 001-12755

Dean Foods Company

(Exact name of the registrant as specified in its charter)

Delaware	75-2559681
(State or other jurisdiction of	(I.R.S. employer
incorporation or organization)	identification no.)

2515 McKinney Avenue, Suite 1200

Dallas, Texas 75201

(214) 303-3400

(Address, including zip code, and telephone number, including

area code, of the registrant’s principal executive offices)

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 þ  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer þ;     Accelerated filer o;     Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)  Yes o  No þ

As of November 5, 2007, the number of shares outstanding of each class of common stock was: 131,605,945

Common Stock, par value $.01

Table of Contents

	Page
Part I — Financial Information
Item 1 — Financial Statements (Unaudited)		3
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
Item 3 — Quantitative and Qualitative Disclosures About Market Risk		41
Item 4 — Controls and Procedures		42
Part II — Other Information
Item 1 — Legal Proceedings		43
Item 1A — Risk Factors		43
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds		46
Item 5 — Other Information		46
Item 6 — Exhibits		46
Signatures		47
Supplemental Indenture
Separation Agreement
Employment Offer Letter
Change in Control Agreement
Proprietary Information, Inventions and Non-Compete Agreement
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906
Supplemental Financial Information

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Part I — Financial Information

Item 1.   Financial Statements

DEAN FOODS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share data)

	September 30,			December 31,
	2007			2006
Assets
Current assets:
Cash and cash equivalents	$	45,006		$	31,140
Receivables, net		942,672			799,038
Income tax receivable		35,461			—
Inventories		418,734			360,754
Deferred income taxes		141,047			117,991
Prepaid expenses and other current assets		60,707			70,367
Total current assets		1,643,627			1,379,290
Property, plant and equipment, net		1,788,190			1,786,907
Goodwill		3,019,681			2,943,139
Identifiable intangible and other assets		689,476			640,857
Assets of discontinued operations		—			19,980
Total	$	7,140,974		$	6,770,173
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	962,598		$	822,122
Income taxes payable		—			30,776
Current portion of long-term debt		26,666			483,658
Total current liabilities		989,264			1,336,556
Long-term debt		5,339,440			2,872,193
Deferred income taxes		501,319			504,552
Other long-term liabilities		300,132			238,682
Liabilities of discontinued operations		—			8,791
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, none issued		—			—
Common stock, 130,876,452 and 128,371,104 shares issued and outstanding, with a par value of $0.01 per share		1,309			1,284
Additional paid-in capital		38,396			624,475
Retained earnings		34,898			1,229,427
Accumulated other comprehensive loss		(63,784	)		(45,787	)
Total stockholders’ equity		10,819			1,809,399
Total	$	7,140,974		$	6,770,173

See Notes to Condensed Consolidated Financial Statements.

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DEAN FOODS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except share data)

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2007			2006			2007		2006
Net sales	$	3,116,796		$	2,517,792		$	8,590,190	$	7,504,717
Cost of sales		2,457,473			1,823,786			6,555,543		5,475,518
Gross profit		659,323			694,006			2,034,647		2,029,199
Operating costs and expenses:
Selling and distribution		430,816			416,835			1,275,026		1,231,341
General and administrative		103,098			101,414			312,911		302,434
Amortization of intangibles		2,287			1,540			6,223		4,469
Facility closing and reorganization costs		19,469			5,471			27,702		12,823
Other operating loss		347			—			1,689		—
Total operating costs and expenses		556,017			525,260			1,623,551		1,551,067
Operating income		103,306			168,746			411,096		478,132
Other (income) expense:
Interest expense		89,657			48,031			244,384		144,335
Other (income) expense, net		612			(60	)		5,458		(46	)
Total other expense		90,269			47,971			249,842		144,289
Income from continuing operations before income taxes		13,037			120,775			161,254		333,843
Income taxes		6,520			46,277			63,357		129,856
Income from continuing operations		6,517			74,498			97,897		203,987
Income (loss) from discontinued operations, net of tax		(35	)		(3,705	)		821		(51,534	)
Net income	$	6,482		$	70,793		$	98,718	$	152,453
Average common shares:
Basic		130,671,408			133,739,115			129,866,142		134,643,557
Diluted		137,669,254			139,159,658			137,068,051		140,500,663
Basic earnings per common share:
Income from continuing operations	$	0.05		$	0.56		$	0.75	$	1.51
Income (loss) from discontinued operations		—			(0.03	)		0.01		(0.38	)
Net income	$	0.05		$	0.53		$	0.76	$	1.13
Diluted earnings per common share:
Income from continuing operations	$	0.05		$	0.54		$	0.71	$	1.45
Income (loss) from discontinued operations		—			(0.03	)		0.01		(0.36	)
Net income	$	0.05		$	0.51		$	0.72	$	1.09
Cash dividend paid	$	—		$	—		$	15.00	$	—

See Notes to Condensed Consolidated Financial Statements.

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DEAN FOODS COMPANY
CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share data)

											Accumulated
					Additional						Other			Total
	Common Stock				Paid-In			Retained			Comprehensive			Stockholders’			Comprehensive
	Shares		Amount		Capital			Earnings			Income (Loss)			Equity			Income
Balance, December 31, 2006		128,371,104	$	1,284	$	624,475		$	1,229,427		$	(45,787	)	$	1,809,399
Issuance of common stock		2,505,348		25		42,256			—			—			42,281
Share-based compensation expense		—		—		27,188			—			—			27,188
Special cash dividend						(655,218	)		(1,287,520	)					(1,942,738	)
Net income		—		—		—			98,718			—			98,718		$	98,718
Other comprehensive income (Note 8):
Change in fair value of derivative instruments, net of tax		—		—		—			—			(11,149	)		(11,149	)		(11,149	)
Amounts reclassified to income statement related to hedging activities, net of tax		—		—		—			—			(7,459	)		(7,459	)		(7,459	)
Cumulative translation adjustment												611			611			611
Adoption of FIN 48		—		—		(305	)		(5,727	)		—			(6,032	)
Comprehensive income																	$	80,721
Balance, September 30, 2007		130,876,452	$	1,309	$	38,396		$	34,898		$	(63,784	)	$	10,819

See Notes to Condensed Consolidated Financial Statements.

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DEAN FOODS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Nine Months Ended
	September 30
	2007			2006
Cash flows from operating activities:
Net income	$	98,718		$	152,453
(Income) loss from discontinued operations		(821	)		51,534
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		174,185			169,029
Share-based compensation expense		27,188			28,554
Loss on disposition of assets		1,343			1,904
Write-down of impaired assets		6,318			4,034
Loss on divestiture of operations		1,688			—
Write-off of financing costs		13,545			—
Deferred income taxes		4,897			61,802
Other		1,075			949
Changes in operating assets and liabilities, net of acquisitions:
Receivables		(136,329	)		65,095
Inventories		(55,828	)		(19,838	)
Prepaid expenses and other assets		13,349			9,356
Accounts payable and accrued expenses		121,168			(102,232	)
Income taxes payable		(49,807	)		4,312
Net cash provided by continuing operations		220,689			426,952
Net cash used in discontinued operations		—			(900	)
Net cash provided by operating activities		220,689			426,052
Cash flows from investing activities:
Payments for property, plant and equipment		(165,192	)		(174,913	)
Payments for acquisitions and investments, net of cash received		(131,689	)		(16,819	)
Net proceeds from divestitures		12,169			96,280
Proceeds from sale of fixed assets		11,831			5,619
Net cash used in continuing operations		(272,881	)		(89,833	)
Net cash used in discontinued operations		—			(14,696	)
Net cash used in investing activities		(272,881	)		(104,529	)
Cash flows from financing activities:
Proceeds from issuance of debt		2,337,700			498,020
Repayment of debt		(339,904	)		(729,381	)
Payment of financing costs		(31,281	)		(6,889	)
Issuance of common stock		27,752			28,049
Payment of special cash dividend		(1,942,738	)		—
Tax savings on share-based compensation		14,529			31,211
Redemption of common stock		—			(135,679	)
Net cash provided by (used in) continuing operations		66,058			(314,669	)
Net cash provided by discontinued operations		—			11,760
Net cash provided by (used in) financing activities		66,058			(302,909	)
Increase in cash and cash equivalents		13,866			18,614
Cash and cash equivalents, beginning of period		31,140			24,456
Cash and cash equivalents, end of period	$	45,006		$	43,070

See Notes to Condensed Consolidated Financial Statements.

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DEAN FOODS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Periods ended September 30, 2007 and 2006

(Unaudited)

1.   General

Basis of Presentation — The unaudited Condensed Consolidated Financial Statements contained in this Quarterly Report have been prepared on the same basis as the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2006. In our opinion, we have made all necessary adjustments (which include only normal recurring adjustments) in order to present fairly, in all material respects, our consolidated financial position, results of operations and cash flows as of the dates and for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. Our results of operations for the period ended September 30, 2007 may not be indicative of our operating results for the full year. The Condensed Consolidated Financial Statements contained in this Quarterly Report should be read in conjunction with our 2006 Consolidated Financial Statements contained in our Annual Report on Form 10-K (filed with the Securities and Exchange Commission on March 1, 2007).

Unless otherwise indicated, references in this report to “we,” “us” or “our” refer to Dean Foods Company and its subsidiaries, taken as a whole.

Recently Adopted Accounting Pronouncements — Effective January 1, 2007, we adopted Financial Interpretation No. (“FIN”) 48, “Accounting for Uncertainty in Income Taxes”. As a result of adopting the provisions of FIN 48, we recognized a $25.9 million increase in our liability for uncertain tax positions to $41.6 million, a $20.1 million increase in deferred income tax assets, a $0.3 million decrease to additional paid-in capital, a $0.2 million decrease to goodwill, and a $5.7 million decrease to retained earnings.

The amount of unrecognized tax benefits at September 30, 2007 recorded in other long-term liabilities is $45.5 million, of which $20.8 million would impact our effective tax rate and $3.4 million would reduce goodwill if recognized. We do not expect any material changes to our liability for uncertain tax positions during the next 12 months.

Consistent with periods prior to the adoption of FIN 48, we recognize accrued interest related to uncertain tax positions as a component of income tax expense. Penalties, if incurred, are recognized as a component of operating income. As of September 30, 2007, we have accrued $7.0 million for the payment of tax-related interest.

Our U.S. federal income tax returns for the years 2004 and 2005 are currently under examination by the Internal Revenue Service. We expect the examination of those years to be completed no earlier than the fourth quarter of 2008. State income tax returns are generally subject to examination for a period of 3 to 5 years after filing. We have various state income tax returns in the process of examination or appeals.

2.   Acquisitions and Discontinued Operations

Acquisitions

Friendship Dairies — On March 13, 2007, our Dairy Group completed the acquisition of Friendship Dairies, Inc., a manufacturer, marketer and distributor of cultured dairy products primarily in the northeastern United States. This transaction expanded our cultured dairy product capabilities and added a strong regional brand. We paid approximately $130 million, including transaction costs, for the purchase of Friendship Dairies and funded the purchase price with borrowings under our senior credit facility. We have not completed a final allocation of the purchase price to the fair values of Friendship Dairies’ assets and liabilities. The pro forma impact of this acquisition on consolidated net earnings would not have materially changed reported net earnings.

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Divestiture

On June 8, 2007, we completed the sale of our tofu business, including a dedicated facility in Boulder, Colorado, for cash proceeds of approximately $2.0 million. We recorded a pre-tax loss of $1.7 million on the sale. Such loss is included within other operating loss. The historical sales and contribution margin of these operations were not material. This sale allows us to continue to focus on our core brands.

Discontinued Operations

Iberian Operations — Our former Iberian operations included the manufacture and distribution of private label and branded milk across Spain and Portugal. On September 14, 2006, we completed the sale of our operations in Spain. In connection with the sale of our operations in Spain, we entered into an agreement to sell our Portuguese operations (that comprised the remainder of our Iberian operations) for $11.4 million subject to regulatory approvals and working capital settlements. We completed the sale of our Portuguese operations in January 2007, resulting in a gain of $617,000. Our financial statements have been reclassified to give effect to our Iberian operations as discontinued operations.

Major classes of assets and liabilities of our Iberian operations included in Assets and Liabilities of Discontinued Operations were as follows:

	December 31,
	2006
	(In thousands)
Current assets	$	14,255
Non-current assets		5,725
Current liabilities		8,791

3.   Inventories

Inventories at December 31, 2006 and September 30, 2007 consisted of the following:

	September 30,		December 31,
	2007		2006
	(In thousands)
Raw materials and supplies	$	185,758	$	173,208
Finished goods		232,976		187,546
Total	$	418,734	$	360,754

4.   Intangible Assets

Changes in the carrying amount of goodwill for the nine months ended September 30, 2007 are as follows:

				WhiteWave
				Foods
	Dairy Group			Company			Total
	(In thousands)
Balance at December 31, 2006	$	2,408,413		$	534,726		$	2,943,139
Acquisitions (divestitures)(1)(2)		77,250			(625	)		76,625
Purchase accounting adjustments		(83	)		—			(83	)
Balance at September 30, 2007	$	2,485,580		$	534,101		$	3,019,681

(1) As we continue to evaluate information related to the purchase of Friendship Dairies, we adjusted the fair value of assets and liabilities in the third quarter of 2007, resulting in an increase to trademarks and customer-related intangibles and a corresponding decrease to goodwill.

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(2) Goodwill adjustment of $0.6 million is related to the sale of the tofu business within the WhiteWave segment.

The gross carrying amount and accumulated amortization of our intangible assets other than goodwill as of September 30, 2007 and December 31, 2006 are as follows:

	September 30, 2007							December 31, 2006
	Gross					Net		Gross					Net
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	Amount		Amortization			Amount		Amount		Amortization			Amount
	(In thousands)
Intangible assets with indefinite lives:
Trademarks	$	523,962	$	(5,877	)	$	518,085	$	511,294	$	(5,877	)	$	505,417
Intangible assets with finite lives:
Customer-related and other		98,273		(25,695	)		72,578		72,789		(21,490	)		51,299
Total	$	622,235	$	(31,572	)	$	590,663	$	584,083	$	(27,367	)	$	556,716

Amortization expense on intangible assets for the three months ended September 30, 2007 and 2006 was $1.2 million and $1.9 million, respectively. Amortization expense on intangible assets for the nine months ended September 30, 2007 and 2006 was $4.4 million and $5.7 million, respectively.

Estimated aggregate intangible asset amortization expense for the next five years is as follows:

2007	$	7.0 million
2008		7.1 million
2009		7.0 million
2010		6.8 million
2011		5.0 million

5.   Long-Term Debt

	September 30, 2007						December 31, 2006
	Amount			Interest			Amount			Interest
	Outstanding			Rate			Outstanding			Rate
	(In thousands)
Dean Foods debt obligations:
Senior credit facility	$	3,930,100			6.72	%	$	1,757,250			5.99	%
Senior notes		498,221			7.00			498,112			7.00
		4,428,321						2,255,362
Subsidiary debt obligations:
Senior notes		324,936			6.625-6.90			572,037			6.625-8.15
Receivables-backed facility		600,000			6.37			512,500			5.68
Capital lease obligations and other		12,849						15,952
		937,785						1,100,489
		5,366,106						3,355,851
Less current portion		(26,666	)					(483,658	)
Total	$	5,339,440					$	2,872,193

Senior Credit Facility — On April 2, 2007, we recapitalized our balance sheet through the completion of a new $4.8 billion senior credit facility and the return of $1.94 billion to shareholders of record on March 27, 2007 through a $15.00 per share special cash dividend. We entered into an amended and restated credit agreement that consists of a combination of a $1.5 billion 5-year senior secured revolving credit facility, a

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$1.5 billion 5-year senior secured term loan A, and a $1.8 billion 7-year senior secured term loan B. At September 30, 2007, there were outstanding borrowings of $1.5 billion under the senior secured term loan A, $1.79 billion under the senior secured term loan B, and $639.1 million outstanding under the revolving credit facility. Letters of credit in the aggregate amount of $165.6 million were issued but undrawn. At September 30, 2007, approximately $695.3 million was available for future borrowings under the revolving credit facility, subject to satisfaction of certain ordinary course conditions contained in the senior credit facility.

The term loan A is payable in 12 consecutive quarterly installments of:

•  $56.25 million in each of the first eight installments, beginning on June 30, 2009 and ending on March 31, 2011; and

•  $262.5 million in each of the next four installments, beginning on June 30, 2011 and ending on April 2, 2012.

The term loan B will amortize 1% per year, or $4.5 million on a quarterly basis, with any remaining principal balance due at final maturity on April 2, 2014. The revolving credit facility will be available for the issuance of up to $350 million of letters of credit and up to $150 million for swing line loans. No principal payments are due on the $1.5 billion revolving credit facility until maturity on April 2, 2012. The senior credit facility also requires mandatory principal prepayments upon the occurrence of certain asset dispositions, recovery events, or as a result of exceeding certain leverage limits.

The senior credit facility contains various financial and other restrictive covenants and requires that we comply with certain financial ratios, including a maximum leverage ratio and a minimum interest coverage ratio.

Our senior credit facility permits us to complete acquisitions that meet all of the following conditions without obtaining prior approval: (1) the acquired company is involved in the manufacture, processing and distribution of food or packaging products or any other line of business in which we are currently engaged, (2) the net cash purchase price for any single acquisition is not greater than $500 million, (3) we acquire at least 51% of the acquired entity, (4) the transaction is approved by the board of directors or shareholders, as appropriate, of the target and (5) after giving effect to such acquisition on a pro forma basis, we would have been in compliance with all financial covenants. All other acquisitions must be approved in advance by the required lenders.

The senior credit facility contains limitations on liens, investments and the incurrence of additional indebtedness, and prohibits certain dispositions of property and conditionally restricts certain payments, including dividends. The senior credit facility is secured by liens on substantially all of our domestic assets including the assets of our subsidiaries, but excluding the capital stock of subsidiaries of the former Dean Foods Company (“Legacy Dean”), and the real property owned by Legacy Dean and its subsidiaries.

The senior credit facility contains standard default triggers, including without limitation: failure to maintain compliance with the financial and other covenants contained in the credit agreement, default on certain of our other debt, a change in control and certain other material adverse changes in our business. The credit agreement does not contain any default triggers based on our credit rating.

Interest on the outstanding balances under the senior credit facility is payable, at our election, at the Alternative Base Rate (as defined in our credit agreement) plus a margin depending on our Leverage Ratio (as defined in our senior credit facility) or LIBOR plus a margin depending on our Leverage Ratio. The Applicable Base Rate margin under our revolving credit and term loan A varies from zero to 75 basis points while the Applicable LIBOR Rate margin varies from 62.5 to 175 basis points. The Applicable Base Rate margin under our term loan B varies from 37.5 to 75 basis points while the Applicable LIBOR Rate margin varies from 137.5 to 175 basis points.

In consideration for the revolving commitment, we are required to pay a quarterly commitment fee on unused amounts of the revolving credit facility that ranges from 12.5 to 37.5 basis points, depending on our Leverage Ratio (as defined in our senior credit facility).

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The completion of the new senior credit facility resulted in the write-off of $13.5 million of financing costs in the second quarter of 2007.

Dean Foods Senior Notes — On May 17, 2006, we issued $500 million aggregate principal amount of 7.0% senior unsecured notes. The senior unsecured notes mature on June 1, 2016 and interest is payable on June 1 and December 1 of each year, beginning December 1, 2006. The indenture under which we issued the senior unsecured notes does not contain financial covenants but does contain covenants that, among other things, limit our ability to incur certain indebtedness, enter into sale-leaseback transactions and engage in mergers, consolidations and sales of all or substantially all of our assets. The outstanding balance at September 30, 2007 was $498.2 million.

Subsidiary Senior Notes — Legacy Dean had certain senior notes outstanding at the time of its acquisition, of which two remain outstanding. The outstanding notes carry the following interest rates and maturities:

•  $194.8 million ($200 million face value), at 6.625% interest, maturing May 15, 2009; and

•  $130.1 million ($150 million face value), at 6.9% interest, maturing October 15, 2017.

The related indentures do not contain financial covenants but they do contain certain restrictions, including a prohibition against Legacy Dean and its subsidiaries granting liens on certain of their real property interests and a prohibition against Legacy Dean granting liens on the stock of its subsidiaries. On August 1, 2007, our $250 million note matured and was paid according to its terms.

Receivables-Backed Facility — We have a $600 million receivables securitization facility pursuant to which certain of our subsidiaries sell their accounts receivable to three wholly-owned special purpose entities intended to be bankruptcy-remote. The special purpose entities then transfer the receivables to third party asset-backed commercial paper conduits sponsored by major financial institutions. The assets and liabilities of these three special purpose entities are fully reflected on our Condensed Consolidated Balance Sheet, and the securitization is treated as a borrowing for accounting purposes. This facility was amended and restated on April 2, 2007, which extended the facility termination date from November 15, 2009 to March 30, 2010. During the first nine months of 2007, we made net borrowings of $87.5 million on this facility. This facility was fully drawn at September 30, 2007. The receivables-backed facility bears interest at a variable rate based on the commercial paper yield as defined in the agreement. The average interest rate on this facility was 6.37% at September 30, 2007. Our ability to re-borrow under this facility is subject to a borrowing base formula.

Capital Lease Obligations and Other — Capital lease obligations and other subsidiary debt includes various promissory notes for financing current year property and casualty insurance premiums, as well as the purchase of property, plant and equipment and capital lease obligations. The various promissory notes payable provide for interest at varying rates and are payable in monthly installments of principal and interest until maturity, when the remaining principal balances are due. Capital lease obligations represent machinery and equipment financing obligations, which are payable in monthly installments of principal and interest and are collateralized by the related assets financed.

Interest Rate Agreements — We have interest rate swap agreements in place that have been designated as cash flow hedges against variable interest rate exposure on a portion of our debt, with the objective of minimizing the impact of interest rate fluctuations and stabilizing cash flows. These swap agreements provide hedges for loans under our senior credit facility by fixing the LIBOR interest rates specified in the senior credit facility at the interest rates noted below until the indicated expiration dates of these interest rate swap agreements.

The following table summarizes our various interest rate agreements at September 30, 2007:

Fixed Interest Rates	Expiration Date	Notional Amounts
		(In millions)
4.07% to 4.27%	December 2010	$	450
4.907%(1)	March 2008-March 2012		2,950

(1) The notional amount of the swap will decline to $1.25 billion over its term.

-11-

The following table summarizes our various interest rate agreements at December 31, 2006:

Fixed Interest Rates	Expiration Date	Notional Amounts
		(In millions)
4.81% to 4.84%	December 2007	$	500
4.07% to 4.27%	December 2010		450

During the nine months ended September 30, 2007, we settled the interest rate swaps expiring in 2007. Amounts included in accumulated other comprehensive income related to these swaps will be recognized over the originally forecasted period.

These swaps are required to be recorded as an asset or liability on our Condensed Consolidated Balance Sheet at fair value, with an offset to other comprehensive income to the extent the hedge is effective. Derivative gains and losses included in other comprehensive income are reclassified into earnings as the underlying transaction occurs. Any ineffectiveness in our hedges is recorded as an adjustment to interest expense.

As of September 30, 2007 and December 31, 2006, our derivative asset (liability) balances were:

	September 30,			December 31,
	2007			2006
	(In thousands)
Current derivative asset	$	2,278		$	6,525
Long-term derivative asset		3,341			8,322
Total derivative asset	$	5,619		$	14,847
Current derivative liability	$	(5,213	)	$	—
Long-term derivative liability		(15,200	)		—
Total derivative liability	$	(20,413	)	$	—

Hedge ineffectiveness for the three and nine months ended September 30, 2007 was not material. Interest income (net of taxes) of $3.0 million and $7.5 million was reclassified to interest expense from other comprehensive income during the three and nine months ended September 30, 2007, respectively. We estimate that $1.9 million of net derivative losses (net of taxes) included in other comprehensive income will be reclassified into earnings within the next 12 months. These losses will increase the interest expense recorded on our variable rate debt.

We are exposed to market risk under these arrangements due to the possibility of interest rates on the credit facilities falling below the rates on our interest rate swap agreements. Credit risk under these arrangements is believed to be remote as the counterparties to our interest rate swap agreements are major financial institutions.

Guarantor Information — On May 17, 2006, we issued $500 million aggregate principal amount of 7.0% senior notes. The senior notes are unsecured obligations and are fully and unconditionally guaranteed by substantially all of our wholly-owned U.S. subsidiaries other than our receivables securitization subsidiaries.

-12-

The following condensed consolidating financial statements present the financial position, results of operations and cash flows of Dean Foods Company (“Parent”), the subsidiary guarantors of the senior notes and separately the combined results of the subsidiaries that are not a party to the guarantees. The non-guarantor subsidiaries reflect our foreign subsidiary operations in addition to our three receivables securitization subsidiaries. We do not allocate interest expense from the receivables-backed facility to the three receivables securitization subsidiaries. Therefore, the interest costs related to this facility are reflected within the guarantor financial information presented.

	Condensed Consolidating Balance Sheet as of September 30, 2007
							Non-
				Guarantor			Guarantor					Consolidated
	Parent			Entities			Subsidiaries		Eliminations			Totals
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	7,435		$	34,259		$	3,312	$	—		$	45,006
Receivables, net		310			(6,935	)		949,297		—			942,672
Income tax receivable		31,683			3,778			—		—			35,461
Inventories		—			418,734			—		—			418,734
Intercompany receivables		1,016,927			3,779,140			300,639		(5,096,706	)		—
Other current assets		124,421			77,323			10		—			201,754
Total current assets		1,180,776			4,306,299			1,253,258		(5,096,706	)		1,643,627
Property, plant and equipment, net		212			1,770,285			17,693		—			1,788,190
Goodwill		—			3,019,681			—		—			3,019,681
Identifiable intangible and other assets		73,188			615,229			1,059		—			689,476
Investment in subsidiaries		6,953,912			—			—		(6,953,912	)		—
Total	$	8,208,088		$	9,711,494		$	1,272,010	$	(12,050,618	)	$	7,140,974
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	72,461		$	889,591		$	546	$	—		$	962,598
Other current liabilities		(372	)		321			51		—			—
Intercompany notes		3,184,496			1,319,176			593,034		(5,096,706	)		—
Current portion of long-term debt		18,000			8,666			—		—			26,666
Total current liabilities		3,274,585			2,217,754			593,631		(5,096,706	)		989,264
Long-term debt		4,410,321			329,119			600,000		—			5,339,440
Other long-term liabilities		512,363			289,088			—		—			801,451
Liabilities of discontinued operations		—			—			—		—			—
Total stockholders’ equity		10,819			6,875,533			78,379		(6,953,912	)		10,819
Total	$	8,208,088		$	9,711,494		$	1,272,010	$	(12,050,618	)	$	7,140,974

-13-

	Condensed Consolidating Balance Sheet as of December 31, 2006
					Non-
			Guarantor		Guarantor					Consolidated
	Parent		Entities		Subsidiaries		Eliminations			Totals
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	579	$	26,254	$	4,307	$	—		$	31,140
Receivables, net		301		32,720		766,017		—			799,038
Inventories		—		360,754		—		—			360,754
Intercompany receivables		126,707		2,702,858		309,747		(3,139,312	)		—
Other current assets		105,882		82,456		20		—			188,358
Total current assets		233,469		3,205,042		1,080,091		(3,139,312	)		1,379,290
Property, plant and equipment, net		608		1,767,734		18,565		—			1,786,907
Goodwill		—		2,943,048		91		—			2,943,139
Identifiable intangible and other assets		54,410		586,443		4		—			640,857
Investment in subsidiaries		6,507,028		—		—		(6,507,028	)		—
Assets of discontinued operations		—		—		19,980		—			19,980
Total	$	6,795,515	$	8,502,267	$	1,118,731	$	(9,646,340	)	$	6,770,173
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	39,077	$	782,507	$	538	$	—		$	822,122
Other current liabilities		28,347		2,295		134		—			30,776
Intercompany notes		2,194,952		437,725		506,635		(3,139,312	)		—
Current portion of long-term debt		225,000		258,658		—		—			483,658
Total current liabilities		2,487,376		1,481,185		507,307		(3,139,312	)		1,336,556
Long-term debt		2,030,362		329,331		512,500		—			2,872,193
Other long-term liabilities		468,378		274,856		—		—			743,234
Liabilities of discontinued operations		—		—		8,791		—			8,791
Total stockholders’ equity		1,809,399		6,416,895		90,133		(6,507,028	)		1,809,399
Total	$	6,795,515	$	8,502,267	$	1,118,731	$	(9,646,340	)	$	6,770,173

-14-

	Condensed Consolidating Statements of Income
	for the Three Months Ended September 30, 2007
						Non-
				Guarantor		Guarantor						Consolidated
	Parent			Entities		Subsidiaries			Eliminations			Totals
	(In thousands)
Net sales	$	—		$	3,113,479	$	3,317		$	—		$	3,116,796
Cost of sales		—			2,454,757		2,716			—			2,457,473
Gross profit		—			658,722		601			—			659,323
Selling and distribution		—			430,627		189			—			430,816
General, administrative and other		1,066			103,379		940			—			105,385
Facility closing, reorganization and other costs		346			19,470		—			—			19,816
Interest (income) expense		74,559			14,870		228			—			89,657
Other (income) expense, net		750			488		(626	)		—			612
Income from subsidiaries		(89,758	)		—		—			89,758			—
Income (loss) from continuing operations before income taxes		13,037			89,888		(130	)		(89,758	)		13,037
Income taxes		6,520			35,343		(55	)		(35,288	)		6,520
Income (loss) from continuing operations		6,517			54,545		(75	)		(54,470	)		6,517
Loss from discontinued operations, net of tax		—			—		(35	)		—			(35	)
Net income (loss)	$	6,517		$	54,545	$	(110	)	$	(54,470	)	$	6,482

-15-

	Condensed Consolidating Statements of Income
	for the Three Months Ended September 30, 2006
							Non-
				Guarantor			Guarantor						Consolidated
	Parent			Entities			Subsidiaries			Eliminations			Totals
	(In thousands)
Net sales	$	—		$	2,514,021		$	3,771		$	—		$	2,517,792
Cost of sales		—			1,820,548			3,238			—			1,823,786
Gross profit		—			693,473			533			—			694,006
Selling and distribution		—			416,649			186			—			416,835
General, administrative and other		1,359			100,658			937			—			102,954
Facility closing, reorganization and other costs		—			5,471			—			—			5,471
Interest (income) expense		29,367			18,353			311			—			48,031
Other (income) expense, net		—			393			(453	)		—			(60	)
Income from subsidiaries		(151,501	)		—			—			151,501			—
Income (loss) from continuing operations before income taxes		120,775			151,949			(448	)		(151,501	)		120,775
Income taxes		46,277			57,988			(175	)		(57,813	)		46,277
Income (loss) from continuing operations		74,498			93,961			(273	)		(93,688	)		74,498
Loss from discontinued operations, net of tax		—			(3,591	)		(114	)		—			(3,705	)
Net income (loss)	$	74,498		$	90,370		$	(387	)	$	(93,688	)	$	70,793

-16-

	Condensed Consolidating Statements of Income
	for the Nine Months Ended September 30, 2007
						Non-
				Guarantor		Guarantor						Consolidated
	Parent			Entities		Subsidiaries			Eliminations			Totals
	(In thousands)
Net sales	$	—		$	8,584,060	$	6,130		$	—		$	8,590,190
Cost of sales		—			6,550,700		4,843			—			6,555,543
Gross profit		—			2,033,360		1,287			—			2,034,647
Selling and distribution		—			1,274,558		468			—			1,275,026
General, administrative and other		3,926			312,462		2,746			—			319,134
Facility closing, reorganization and other costs		464			28,927		—			—			29,391
Interest (income) expense		192,341			51,612		431			—			244,384
Other (income) expense, net		5,645			774		(961	)		—			5,458
Income from subsidiaries		(363,630	)		—		—			363,630			—
Income (loss) from continuing operations before income taxes		161,254			365,027		(1,397	)		(363,630	)		161,254
Income taxes		63,357			139,771		(531	)		(139,240	)		63,357
Income (loss) from continuing operations		97,897			225,256		(866	)		(224,390	)		97,897
Income from discontinued operations, net of tax		—			—		821			—			821
Net income (loss)	$	97,897		$	225,256	$	(45	)	$	(224,390	)	$	98,718

-17-

	Condensed Consolidating Statements of Income
	for the Nine Months Ended September 30, 2006
							Non-
				Guarantor			Guarantor						Consolidated
	Parent			Entities			Subsidiaries			Eliminations			Totals
	(In thousands)
Net sales	$	—		$	7,497,904		$	6,813		$	—		$	7,504,717
Cost of sales		—			5,469,899			5,619			—			5,475,518
Gross profit		—			2,028,005			1,194			—			2,029,199
Selling and distribution		—			1,230,846			495			—			1,231,341
General, administrative and other		3,738			301,764			1,401			—			306,903
Facility closing, reorganization and other costs		—			12,823			—			—			12,823
Interest (income) expense		89,029			55,731			(425	)		—			144,335
Other (income) expense, net		(10	)		(321	)		285			—			(46	)
Income from subsidiaries		(426,600	)		—			—			426,600			—
Income (loss) from continuing operations before income taxes		333,843			427,162			(562	)		(426,600	)		333,843
Income taxes		129,856			164,486			(235	)		(164,251	)		129,856
Income (loss) from continuing operations		203,987			262,676			(327	)		(262,349	)		203,987
Loss from discontinued operations, net of tax		—			(3,817	)		(47,717	)		—			(51,534	)
Net income (loss)	$	203,987		$	258,859		$	(48,044	)	$	(262,349	)	$	152,453

	Condensed Consolidating Statement of Cash Flows
	for the Nine Months Ended September 30, 2007
							Non-
				Guarantor			Guarantor			Consolidated
	Parent			Entities			Subsidiaries			Totals
	(In thousands)
Net cash provided by (used in) operating activities	$	(136,388	)	$	540,190		$	(183,113	)	$	220,689
Additions to property, plant and equipment		(521	)		(164,410	)		(261	)		(165,192	)
Payments for acquisitions and investments, net of cash received		(131,689	)		—			—			(131,689	)
Net proceeds from divestitures		12,169			—			—			12,169
Proceeds from sale of fixed assets		—			11,831			—			11,831
Net cash used in investing activities		(120,041	)		(152,579	)		(261	)		(272,881	)
Proceeds from issuance of debt		2,238,100			—			99,600			2,337,700
Repayment of debt		(65,250	)		(262,554	)		(12,100	)		(339,904	)
Payment of financing costs		(31,281	)		—			—			(31,281	)
Issuance of common stock, net of expenses		27,752			—			—			27,752
Payment of special cash dividend		(1,942,738	)		—			—			(1,942,738	)
Tax savings on share-based compensation		14,529			—			—			14,529
Net cash provided by (used in) financing activities		241,112			(262,554	)		87,500			66,058
Net change in intercompany balances		22,173			(117,052	)		94,879			—
Increase (decrease) in cash and cash equivalents		6,856			8,005			(995	)		13,866
Cash and cash equivalents, beginning of period		579			26,254			4,307			31,140
Cash and cash equivalents, end of period	$	7,435		$	34,259		$	3,312		$	45,006

-18-

	Condensed Consolidating Statements of Cash Flows
	for the Nine Months Ended September 30, 2006
							Non-
				Guarantor			Guarantor			Consolidated
	Parent			Entities			Subsidiaries			Totals
	(In thousands)
Net cash provided by (used in) operating activities	$	(155,174	)	$	531,773		$	49,453		$	426,052
Additions to property, plant and equipment		(2,065	)		(168,768	)		(4,080	)		(174,913	)
Payments for acquisitions and investments, net of cash received		(16,819	)		—			—			(16,819	)
Net proceeds from divestitures		96,280			—			—			96,280
Proceeds from sale of fixed assets		—			5,619			—			5,619
Other		—			—			(14,696	)		(14,696	)
Net cash provided by (used in) investing activities		77,396			(163,149	)		(18,776	)		(104,529	)
Proceeds from issuance of debt		498,020			—			—			498,020
Repayment of debt		(645,900	)		(11,670	)		(71,811	)		(729,381	)
Payment of financing costs		(6,889	)		—			—			(6,889	)
Issuance of common stock, net of expenses		28,049			—			—			28,049
Tax savings on share-based compensation		31,211			—			—			31,211
Redemption of common stock		(135,679	)		—			—			(135,679	)
Other		—			—			11,760			11,760
Net cash used in financing activities		(231,188	)		(11,670	)		(60,051	)		(302,909	)
Net change in intercompany balances		309,228			(337,110	)		27,882			—
Increase (decrease) in cash and cash equivalents		262			19,844			(1,492	)		18,614
Cash and cash equivalents, beginning of period		249			18,677			5,530			24,456
Cash and cash equivalents, end of period	$	511		$	38,521		$	4,038		$	43,070

6.   Share-Based Compensation

Stock Options — The following table summarizes stock option activity during the first nine months of 2007:

						Weighted
				Weighted		Average		Aggregate
				Average		Contractual Life		Intrinsic
	Options			Exercise Price		(Years)		Value
Options outstanding at December 31, 2006		15,322,398		$	23.09
Options granted(1)		3,261,163			30.27
Adjustment to options granted prior to December 31, 2006 and outstanding at the time of the special cash dividend(1)		6,707,790			15.89
Options canceled or forfeited(2)		(243,180	)		25.92
Options exercised		(1,908,538	)		15.59
Options outstanding at September 30, 2007		23,139,633			17.98		5.75	$	191,389,322
Options exercisable at September 30, 2007		16,895,049			14.65		4.69		185,640,301

(1)	The number and exercise prices of options outstanding at the time of the special cash dividend were proportionately adjusted to maintain the aggregate fair value of the options before and after the special cash dividend.
(2)	Pursuant to the terms of our stock option plans, options that are canceled or forfeited become available for future grants.

-19-

During the three months ended September 30, 2007 and 2006, we recognized stock option expense of $5.8 million and $5.7 million, respectively. During the nine months ended September 30, 2007 and 2006, we recognized stock option expense of $17.3 million and $16.7 million, respectively.

Stock Units — The following table summarizes stock unit activity during the first nine months of 2007:

	Employees			Directors			Total
Stock units outstanding at December 31, 2006		774,261			69,676			843,937
Stock units issued		469,564			22,950			492,514
Adjustment to stock units outstanding at the time of the special cash dividend(1)		471,691			32,708			504,399
Shares issued upon vesting of stock units		(523,130	)		(46,471	)		(569,601	)
Stock units cancelled or forfeited(2)		(112,573	)		—			(112,573	)
Stock units outstanding at September 30, 2007		1,079,813			78,863			1,158,676
Weighted average outstanding grant date fair value	$	28.43		$	24.40		$	28.21

(1)	Stock units outstanding at the time of the special cash dividend were proportionately adjusted to maintain the aggregate fair value of the stock units before and after the special cash dividend.
(2)	Pursuant to the terms of our stock unit plans, stock units that are canceled or forfeited become available for future grants.

During the three months ended September 30, 2007 and 2006, we recognized stock unit expense of $2.3 million and $2.5 million, respectively. During the nine months ended September 30, 2007 and 2006, we recognized stock unit expense of $9.8 million and $11.7 million, respectively.

7.   Equity and Earnings Per Share

Special Cash Dividend — On April 2, 2007, we recapitalized our balance sheet through the completion of a new $4.8 billion senior credit facility and the return of $1.94 billion to shareholders of record on March 27, 2007 through a $15.00 per share special cash dividend. In connection with the dividend, we recorded a charge to retained earnings equal to the retained earnings balance at the date of the dividend with the excess charged to additional paid-in capital.

-20-

Earnings Per Share — Basic earnings per share is based on the weighted average number of common shares outstanding during each period. Diluted earnings per share is based on the weighted average number of common shares outstanding and the effect of all dilutive common stock equivalents outstanding during each period. The following table reconciles the numerators and denominators used in the computations of both basic and diluted earnings per share (“EPS”):

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2007		2006		2007		2006
	(In thousands, except share data)
Basic EPS computation:
Numerator:
Income from continuing operations	$	6,517	$	74,498	$	97,897	$	203,987
Denominator:
Average common shares		130,671,408		133,739,115		129,866,142		134,643,557
Basic EPS from continuing operations	$	0.05	$	0.56	$	0.75	$	1.51
Diluted EPS computation:
Numerator:
Income from continuing operations	$	6,517	$	74,498	$	97,897	$	203,987
Denominator:
Average common shares — basic		130,671,408		133,739,115		129,866,142		134,643,557
Stock option conversion(1)		6,817,287		5,219,835		6,769,919		5,503,163
Stock units		180,559		200,708		431,990		353,943
Average common shares — diluted		137,669,254		139,159,658		137,068,051		140,500,663
Diluted EPS from continuing operations	$	0.05	$	0.54	$	0.71	$	1.45

(1) Stock option conversion excludes anti-dilutive shares of 3,478,484 and 2,579,211 at September 30, 2007 and 2006, respectively.

8.   Comprehensive Income (Loss)

The components of comprehensive income (loss) are summarized below.

	Pre-Tax			Tax Benefit		Net
	Income (Loss)			(Expense)		Amount
	(In thousands)
Accumulated other comprehensive income (loss), December 31, 2006	$	(75,156	)	$	29,369	$	(45,787	)
Cumulative translation adjustment arising during period		611			—		611
Net change in fair value of derivative instruments		(17,509	)		6,360		(11,149	)
Amounts reclassified to income statement related to derivatives		(12,289	)		4,830		(7,459	)
Accumulated other comprehensive income (loss), September 30, 2007	$	(104,343	)	$	40,559	$	(63,784	)

-21-

9.   Employee Retirement and Postretirement Benefits

Defined Benefit Plans — The benefits under our defined benefit plans are based on years of service and employee compensation.

	Three Months						Nine Months
	Ended						Ended
	September 30						September 30
	2007			2006			2007			2006
	(In thousands)
Components of net period cost:
Service cost	$	675		$	633		$	2,026		$	1,898
Interest cost		4,246			4,143			12,738			12,428
Expected return on plan assets		(4,681	)		(3,946	)		(14,043	)		(11,837	)
Amortizations:
Unrecognized transition obligation		28			28			84			83
Prior service cost		211			213			632			638
Unrecognized net loss		719			861			2,157			2,583
Effect of settlement		—			88			—			263
Net periodic benefit cost	$	1,198		$	2,020		$	3,594		$	6,056

Postretirement Benefits — Certain of our subsidiaries provide healthcare benefits to certain retirees who are covered under specific group contracts.

	Three Months						Nine Months
	Ended						Ended
	September 30						September 30
	2007			2006			2007			2006
	(In thousands)
Components of net period cost:
Service cost	$	357		$	265		$	1,072		$	796
Interest cost		412			375			1,235			1,125
Amortizations:
Prior service cost		(17	)		(17	)		(51	)		(51	)
Unrecognized net loss		266			239			798			718
Net periodic benefit cost	$	1,018		$	862		$	3,054		$	2,588

10.   Facility Closing And Reorganization Costs

In late 2006, we began a multi-year initiative to streamline and leverage our Dairy Group operations. This initiative will have multiple phases as we evaluate and modify historical activities surrounding purchasing, support, and decision-making infrastructure, supply chain, selling organization, brand building, and product innovation. These initiatives will require investments in people, systems, tools, and facilities. As a direct result of these initiatives, over the next several years, we will incur facility closing and reorganization costs including:

•  One-time termination benefits to employees;

•  Write-down of operating assets prior to the end of their respective economic useful lives;

•  Shutdown costs, including those costs necessary to prepare abandoned facilities for closure; and

•  Costs incurred after shutdown, such as lease obligations or termination costs, utilities and property taxes.

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We recorded total net facility closing and reorganization costs of $19.5 million and $5.5 million during the three months ended September 30, 2007 and 2006, respectively, and $27.7 million and $12.8 million during the nine months ended September 30, 2007 and 2006, respectively. The charges, by initiative, are summarized as follows:

	Three Months				Nine Months
	Ended				Ended
	September 30,				September 30,
	2007		2006		2007		2006
	(In thousands)
Closure of facilities(1)	$	2,718	$	4,840	$	7,324	$	9,739
Workforce reductions within the Dairy Group segment resulting from:
Realignment of finance and transaction processing activities(2)		2,483		200		3,845		200
Management realignment(3)		8,268		—		10,533		—
Broad-based reduction of facility and distribution personnel(4)		6,000		—		6,000		—
Other(5)		—		431		—		2,884
Total	$	19,469	$	5,471	$	27,702	$	12,823

(1)	Charges primarily relate to the closure of the Dairy Group segment facilities in Akron, Ohio; Madison, Wisconsin; Detroit Michigan; and Union, New Jersey. We expect to incur additional charges related to these facility closures of $5.1 million, of which $45,000 is one-time severance benefits and the remainder is shutdown and other costs. As we continue the evaluation of our supply chain, it is likely that we will close additional facilities in the future. We consider several factors when evaluating a potential facility closure, including among other things, the impact of such a closure on our customers, the impact on production, distribution and overhead costs, the investment required to complete any such closure, and the impact on future investment decisions. Some facilities closures are pursued to improve our operating cost structure, while others enable us to avoid unnecessary capital expenditures, allowing us to more prudently invest our capital expenditures dollars in our production facilities and better serve our customers.
(2)	In 2006, we began the centralization of certain finance and transaction processing activities from local to regional facilities. We have incurred $4.4 million of workforce reduction costs since the inception of this initiative and anticipate incurring $5.6 million of additional costs through the end of 2008 related to activities currently being transitioned to the regional facilities. We will continue to evaluate additional opportunities for centralization of activities, which could result in additional charges in the future.
(3)	In 2007, we began realigning management positions within the Dairy Group to facilitate supply-chain focused platforms. This resulted in the elimination of certain regional and corporate office positions, including the former President of the Dairy Group. These positions will not be replaced. Since the inception of this initiative, we have incurred $10.5 million of workforce reduction costs, $3.4 million of which was a non-cash charge resulting from acceleration of vesting on shared-based compensation.
(4)	In 2007, we approved a plan to reduce the Dairy Group’s manufacturing and distribution workforce by approximately 600-700 positions. The decision to reduce employment is part of our multi-year productivity initiative to increase efficiency and capability of the Dairy Group operations. A charge of $6.0 million was recognized in the third quarter related to the elimination of these positions. We anticipate recognizing an additional charge of $2.3 million in the fourth quarter as we complete this reduction of workforce program.
(5)	Charges related primarily to the reorganization within the WhiteWave Foods Company segment and the consolidation of certain activities within the Dairy Group.

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Activity for the first nine months of 2007 for all initiatives is summarized below:

	Accrued							Accrued
	Charges at							Charges at
	December 31,							September 30,
	2006		Charges		Payments			2007
	(In thousands)
Cash charges:
Workforce reduction costs	$	4,322	$	17,543	$	(6,144	)	$	15,721
Shutdown costs		16		2,177		(2,182	)		11
Lease obligations after shutdown		1,313		348		(1,007	)		654
Other		216		1,903		(1,993	)		126
Subtotal	$	5,867		21,971	$	(11,326	)	$	16,512
Noncash charges:
Acceleration of non-vested share-based compensation				3,369
Write-down of assets(1)				2,362
Total charges			$	27,702

(1) The write-down of assets relates primarily to owned buildings, land and equipment of those facilities identified for closure. The assets are written down to their estimated fair value and held for sale. The effect of suspending depreciation on the buildings and equipment related to the closed facilities was not significant. The carrying value of closed facilities at September 30, 2007 was $11.2 million. We are marketing these properties for sale.

11.   Commitments and Contingencies

Contingent Obligations Related to Divested Operations — We have divested several businesses in recent years. In each case, we have retained certain known contingent obligations related to those businesses and/or assumed an obligation to indemnify the purchasers of the businesses for certain unknown contingent liabilities, including environmental liabilities. We believe that we have established adequate reserves for potential liabilities and indemnifications related to our divested businesses. Moreover, we do not expect any liability that we may have for these retained liabilities, or any indemnification liability, to materially exceed amounts accrued.

Contingent Obligations Related to Milk Supply Arrangements — On December 21, 2001, in connection with our acquisition of Legacy Dean, we purchased Dairy Farmers of America’s (“DFA”) 33.8% interest in our Dairy Group. In connection with that transaction, we entered into two agreements with DFA designed to ensure that DFA has the opportunity to continue to supply raw milk to certain of our facilities, or be paid for the loss of that business. One such agreement is a promissory note with a 20-year term that bears interest based on the consumer price index. Interest will not be paid in cash but will be added to the principal amount of the note annually, up to a maximum principal amount of $96 million. We may prepay the note in whole or in part at any time, without penalty. The note will only become payable if we materially breach or terminate one of our milk supply agreements with DFA without renewal or replacement. Otherwise, the note will expire in 2021, without any obligation to pay any portion of the principal or interest. Payments made under the note, if any, would be expensed as incurred. The other agreement would require us to pay damages to DFA if we fail to offer DFA the right to supply milk to certain facilities that we acquired as part of the former Dean Foods after the pre-existing agreements with certain other suppliers or producers expire. We have not breached or terminated any of our milk supply agreements with DFA.

Insurance — We retain selected levels of property and casualty risks, primarily related to employee health care, workers’ compensation claims and other casualty losses. Many of these potential losses are covered under conventional insurance programs with third party carriers with high deductible limits. In other areas, we are self-insured with stop-loss coverages. These deductibles range from $350,000 for medical claims to $2.0 million for casualty claims. We believe that we have established adequate reserves to cover these claims.

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Leases and Purchase Obligations — We lease certain property, plant and equipment used in our operations under both capital and operating lease agreements. Such leases, which are primarily for machinery, equipment and vehicles, have lease terms ranging from one to 20 years. Certain of the operating lease agreements require the payment of additional rentals for maintenance, along with additional rentals based on miles driven or units produced. Certain leases require us to guarantee a minimum value of the leased asset at the end of the lease. Our maximum exposure under those guarantees is not a material amount.

We have entered into various contracts obligating us to purchase minimum quantities of raw materials used in our production processes, including organic soybeans and organic raw milk. We enter into these contracts from time to time to ensure a sufficient supply of raw ingredients. In general, we expect to utilize all quantities under the purchase commitments in the normal course of business. In addition, we have contractual obligations to purchase various services that are part of our production process.

Litigation, Investigations and Audits — We are not party to, nor are our properties the subject of, any material pending legal proceedings, other than as set forth below. However, we are parties from time to time to certain claims, litigation, audits and investigations. We believe that we have established adequate reserves to satisfy any potential liability we may have under all such claims, litigations, audits and investigations that are currently pending. In our opinion, the settlement of any such currently pending or threatened matter is not expected to have a material adverse impact on our financial position, results of operations or cash flows.

We were named, among several defendants, in two purported class action antitrust complaints filed on July 5, 2007. The complaints were filed in the United States District Court for the Middle District of Tennessee, Columbia Division, and allege generally that we and others in the milk industry worked together to limit the price Southeastern dairy farmers are paid for their raw milk and to deny these farmers access to fluid Grade A milk processing facilities. A third purported class action was filed on August 9, 2007 in the United States District Court for the Eastern District of Tennessee, Greenville Division. The allegations contained in this third complaint are similar to those in the first and second complaints except that the new suit added a claim that defendants’ conduct also artificially inflated retail prices for direct milk purchasers. Two additional class actions were filed on August 27, 2007 and October 3, 2007 in United States District Court for the Eastern District of Tennessee, Greenville Division. The allegations in these complaints are similar to those in the first and second complaints.

We believe that the claims against us are without merit and we will vigorously defend the actions.

12.   Business and Geographic Information and Major Customers

We currently have two reportable segments: the Dairy Group and WhiteWave Foods Company.

Our Dairy Group segment is our largest segment. It manufactures, markets and distributes a wide variety of branded and private label dairy case products, such as milk, cream, ice cream, cultured dairy products and juices, to retailers, distributors, foodservice outlets, schools and governmental entities across the United States.

Our WhiteWave Foods Company segment manufactures, develops, markets and sells a variety of nationally branded soy, dairy and dairy-related products, such as Silk^® soymilk and cultured soy products, Horizon Organic^® dairy products, International Delight^® coffee creamers, LAND O’LAKES^® creamer and fluid dairy products and Rachel’s Organic^® dairy products. WhiteWave Foods Company sells its products to a variety of customers, including grocery stores, club stores, natural foods stores, mass merchandisers, convenience stores and foodservice outlets. A portion of our WhiteWave Foods Company’s products are sold through the Dairy Group’s distribution network. Those sales, together with their related costs, are included in WhiteWave Foods Company for segment reporting purposes.

We evaluate the performance of our segments based on sales and operating profit or loss before gains and losses on the sale of businesses, facility closing and reorganization costs and foreign exchange gains and losses. In addition, the expense related to share-based compensation has not been allocated to our segments and is reflected entirely within the caption “Corporate.” Therefore, the measure of segment profit or loss presented below is before such items. The accounting policies of our segments are the same as those described in the summary of significant accounting policies set forth in Note 1 to our Consolidated Financial Statements contained in our 2006 Annual Report on Form 10-K.

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Due to changes in the Company’s business strategy, primary responsibility for the Hershey relationship was moved into the Dairy Group in the first quarter of 2007. In addition, we aligned the results related to the sales of certain foodservice products between segments. In order to present results on a comparable basis, segment results for 2006 have been adjusted to reflect the way management evaluates performance related to the Hershey relationship, as well as certain foodservice relationships. These changes had no impact on consolidated operating income.

The amounts in the following tables are obtained from reports used by our executive management team and do not include any allocated income taxes or management fees. There are no significant non-cash items reported in segment profit or loss other than depreciation and amortization.

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2007			2006			2007			2006
	(In thousands)
Net sales to external customers:
Dairy Group	$	2,780,948		$	2,209,411		$	7,606,088		$	6,593,129
WhiteWave Foods Company		335,848			308,381			984,102			911,588
Total	$	3,116,796		$	2,517,792		$	8,590,190		$	7,504,717
Intersegment sales:
Dairy Group	$	9,926		$	3,168		$	19,629		$	9,841
WhiteWave Foods Company		26,467			23,627			74,874			69,658
Total	$	36,393		$	26,795		$	94,503		$	79,499
Operating income:
Dairy Group	$	137,317		$	173,748		$	473,625		$	511,547
WhiteWave Foods Company		22,288			35,389			81,786			86,891
Corporate		(36,483	)		(34,920	)		(114,924	)		(107,483	)
Segment operating income		123,122			174,217			440,487			490,955
Facility closing, reorganization and other costs		(19,816	)		(5,471	)		(29,391	)		(12,823	)
Total	$	103,306		$	168,746		$	411,096		$	478,132

	September 30,		December 31,
	2007		2006
	(In thousands)
Assets:
Dairy Group	$	5,459,188	$	5,141,662
WhiteWave Foods Company		1,362,878		1,372,946
Corporate		318,908		235,585
Discontinued operations		—		19,980
Total	$	7,140,974	$	6,770,173

Geographic Information — Less than 1% of our net sales and long-lived assets relate to operations outside of the United States.

Significant Customers — Our WhiteWave Foods Company and Dairy Group segments each had a single customer that represented greater than 10% of its net sales in the first nine months of 2007 and 2006. Approximately 17.8% and 17.6% of our consolidated net sales in the first nine months of 2007 and 2006, respectively, were to this same customer.

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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Business Overview

We are a leading food and beverage company. Our Dairy Group is the largest processor and distributor of milk and various other dairy products in the United States. The Dairy Group segment manufactures and sells its products under a variety of local and regional brand names and under private labels. Our WhiteWave Foods Company segment manufactures, markets and sells a variety of well known soy, dairy and dairy-related nationally branded products.

Dairy Group — Our Dairy Group segment is our largest segment, with approximately 89% of our consolidated sales in the nine months ended September 30, 2007. Our Dairy Group manufactures, markets and distributes a wide variety of branded and private label dairy case products, such as milk, cream, ice cream, cultured dairy products and juices to retailers, distributors, foodservice outlets, schools and governmental entities across the United States. Due to the perishable nature of the Dairy Group’s products, our Dairy Group delivers the majority of its products directly to its customers’ stores in refrigerated trucks or trailers that we own or lease. This form of delivery is called a “direct store delivery” or “DSD” system and we believe that we have one of the most extensive refrigerated DSD systems in the United States. The Dairy Group sells its products primarily on a local or regional basis through its local and regional sales forces, although some national customer relationships are coordinated by the Dairy Group’s corporate sales department. Most of the Dairy Group’s customers, including its largest customer, purchase products from the Dairy Group either by purchase order or pursuant to contracts that are generally terminable at will by the customer.

WhiteWave Foods Company — Our WhiteWave Foods Company segment manufactures, develops, markets and sells a variety of nationally-branded soy, dairy and dairy-related products, such as Silk^® soymilk and cultured soy products; Horizon Organic^® dairy and other products; International Delight^® coffee creamers; LAND O’LAKES^® creamers and fluid dairy products and Rachel’s Organic^® dairy products. We license the LAND O’LAKES name from a third party.

Recent Developments

Developments Since January 1, 2007

Current Dairy Environment — Rapidly increasing and record high dairy commodity costs have created a challenging operating environment during the first nine months of 2007. During the third quarter of 2007, dairy commodity costs rose sharply, hitting all time highs. As a result of this extreme commodity environment, we face unprecedented cost challenges in our Dairy Group operations. As a consequence of higher raw milk costs, we have seen a related increase in shrink costs and reduced profits from excess cream sales. At the same time, sales volumes in the Dairy Group have softened as consumers react to the higher retail prices. We are also seeing a shift from our branded fluid milk products to private label products resulting in reduced gross profit. In our White Wave segment, results continue to be negatively impacted by the oversupply of organic milk.

Credit Facility and Special Cash Dividend — On April 2, 2007, we recapitalized our balance sheet through the completion of a new $4.8 billion senior credit facility and the return of $1.94 billion to shareholders of record on March 27, 2007, through a $15.00 per share special cash dividend. We entered into an amended and restated credit agreement that consists of a combination of a $1.5 billion 5-year senior secured revolving credit facility, a $1.5 billion 5-year senior secured term loan A, and a $1.8 billion 7-year senior secured term loan B. The completion of the new senior credit facility resulted in the write-off of $13.5 million of financing costs in the second quarter of 2007. In addition, we entered into an amendment and restatement of our receivables facility that extended the facility termination date from November 15, 2009 to March 30, 2010. See Note 5 to our Condensed Consolidated Financial Statements for more information.

Dairy Group Settlement — In the first quarter of 2007, we entered into a settlement agreement with a customer to exit a supply agreement. In connection with the settlement, we evaluated the realization of certain customer-related intangible assets for potential impairment. The gain from the settlement of $7.2 million, net

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of an impairment charge, was recognized in the first quarter. As the exiting of the supply agreement impacts anticipated product volumes, the gain is being offset by reduced operating income in the balance of the year.

Friendship Dairies — On March 13, 2007, our Dairy Group completed the acquisition of Friendship Dairies, Inc., a manufacturer, marketer and distributor of cultured dairy products primarily in the northeastern United States. This transaction expanded our cultured dairy product capabilities and added a strong regional brand. We paid approximately $130 million, including transaction costs, for the purchase of Friendship Dairies and funded the purchase price with borrowings under our senior credit facility.

Divestiture

On June 8, 2007, we completed the sale of our tofu business, including a dedicated facility in Boulder, Colorado. The historical sales and contribution margin of these operations were not material. The sale allows us to continue to focus on our core brands.

Discontinued Operations

Iberian Operations — Our former Iberian operations included the manufacture and distribution of private label and branded milk across Spain and Portugal. On September 14, 2006, we completed the sale of our operations in Spain. In connection with the sale of our operations in Spain, we entered into an agreement to sell our Portuguese operations (that comprised the remainder of our Iberian operations) for approximately $11.4 million subject to regulatory approvals and working capital settlements. We completed the sale of our Portuguese operations in January 2007, resulting in a gain of $617,000. Our financial statements have been reclassified to give effect to our Iberian operations as discontinued operations.

Facility Closing and Reorganization Activities

In late 2006, we began a multi-year initiative to streamline and leverage our Dairy Group operations. This initiative will have multiple phases as we evaluate and modify historical activities surrounding purchasing, support and decision-making infrastructure, supply chain, selling organization, brand building, and product innovation. These initiatives will require investments in people, systems, tools, and facilities. As a direct result of these initiatives, over the next several years we will incur facility closing and reorganization costs including:

•  One-time termination benefits to employees;

•  Write-down of operating assets prior to the end of their respective economic useful lives;

•  Shutdown costs, including those costs necessary to prepare abandoned facilities for closure; and

•  Costs incurred after shutdown, such as lease obligations or termination costs, utilities and property taxes.

We recorded a total of $27.7 million in facility closing and reorganization costs during the first nine months of 2007.

See Note 10 to our Condensed Consolidated Financial Statements for more information regarding our facility closing and reorganization activities.

Management Changes

On November 5, 2007, Gregg A. Tanner joined Dean Foods as Executive Vice President and Chief Supply Chain Officer. Mr. Tanner will report directly to Gregg Engles, our Chairman and CEO.

On August 29, 2007, we announced that Alan Bernon will no longer serve as President of the Dairy Group. Mr. Bernon has served for ten years as a member of our management team and will continue in his role as a member of our Board of Directors. We do not plan to replace this position. Gregg Engles assumed direct responsibility for leadership of the Dairy Group.

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On June 18, 2007, Paul Moskowitz joined Dean Foods as Executive Vice President, Human Resources. Mr. Moskowitz is responsible for leading our Human Resources organization and will report directly to Gregg Engles.

Results of Operations

The following table presents certain information concerning our financial results, including information presented as a percentage of net sales.

	Three Months Ended September 30										Nine Months Ended September 30
	2007					2006					2007					2006
	Dollars		Percent			Dollars		Percent			Dollars		Percent			Dollars		Percent
	(Dollars in millions)
Net sales	$	3,116.8		100.0	%	$	2,517.8		100.0	%	$	8,590.2		100.0	%	$	7,504.7		100.0	%
Cost of sales		2,457.5		78.8			1,823.8		72.4			6,555.6		76.3			5,475.5		73.0
Gross profit		659.3		21.2			694.0		27.6			2,034.6		23.7			2,029.2		27.0
Operating costs and expenses:
Selling and distribution		430.8		13.9			416.8		16.6			1,275.0		14.9			1,231.4		16.4
General and administrative		103.1		3.3			101.4		4.0			312.9		3.6			302.4		4.0
Amortization of intangibles		2.3		0.1			1.6		0.1			6.2		0.1			4.5		—
Facility closing, reorganization and other costs		19.8		0.6			5.5		0.2			29.4		0.3			12.8		0.2
Total operating costs and expenses		556.0		17.9			525.3		20.9			1,623.5		18.9			1,551.1		20.6
Total operating income	$	103.3		3.3	%	$	168.7		6.7	%	$	411.1		4.8	%	$	478.1		6.4	%

Quarter Ended September 30, 2007 Compared to Quarter Ended September 30, 2006 — Consolidated Results

Net Sales — Consolidated net sales increased $599.0 million to $3.12 billion during the third quarter of 2007 from $2.52 billion in the third quarter of 2006. Net sales by segment are shown in the table below.

	Quarter Ended September 30
					$ Increase/		% Increase/
	2007		2006		(Decrease)		(Decrease)
	(Dollars in millions)
Dairy Group	$	2,781.0	$	2,209.4	$	571.6		25.9	%
WhiteWave Foods Company		335.8		308.4		27.4		8.9	%
Total	$	3,116.8	$	2,517.8	$	599.0		23.8	%

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The change in net sales was due to the following:

	Quarter Ended September 30, 2007
	vs Quarter Ended September 30, 2006
			Pricing, Volume
			And Product		Total Increase/
	Acquisitions		Mix Changes		(Decrease)
			(Dollars in millions)
Dairy Group	$	28.7	$	542.9	$	571.6
WhiteWave Foods Company		—		27.4		27.4
Total	$	28.7	$	570.3	$	599.0

The change in net sales resulted from the pass-through of higher overall dairy commodity costs in the Dairy Group, as well as continued sales growth at WhiteWave Foods, partly offset by lower volumes in the Dairy Group as consumers reacted to higher retail prices. In addition, Horizon Organic pricing was negatively impacted by the current oversupply of organic raw milk.

Cost of Sales — All expenses incurred to bring a product to completion are included in cost of sales, such as raw material, ingredient and packaging costs; labor costs; and plant and equipment costs, including costs to operate and maintain our coolers and freezers. In addition, our Dairy Group includes costs associated with transporting finished products from our manufacturing facilities to our own distribution facilities. Our cost of sales as a percentage of net sales increased to 78.8% in the third quarter of 2007 compared to 72.4% in the third quarter of 2006 primarily due to higher raw milk costs in our Dairy Group segment in the third quarter of 2007.

Operating Costs and Expenses — Our operating expenses increased $30.7 million during the third quarter of 2007 as compared to the same period in the prior year. Our operating expense as a percentage of net sales was 17.9% in the third quarter of 2007 compared to 20.9% during the third quarter of 2006. Operating expenses increased primarily due to an increase in facility closing, reorganization and other costs of $14.3 million. In addition, distribution costs increased by $13.1 million resulting from higher storage costs and supplies, as well as the acquisition of Friendship Dairies. General and administrative expenses increased $1.7 million as reductions in incentive compensation were more than offset by higher salaries and benefits and professional services. See “— Results by Segment” for more information.

Operating Income — Operating income during the third quarter of 2007 was $103.3 million, a decrease of $65.4 million from the third quarter of 2006 operating income of $168.7 million. Our operating margin in the third quarter of 2007 was 3.3% compared to 6.7% in the third quarter of 2006.

Other (Income) Expense — Total other expense increased to $90.3 million in the third quarter of 2007 compared to $48.0 million in the third quarter of 2006. Interest expense increased to $89.7 million in the third quarter of 2007 from $48.0 million in the third quarter of 2006 primarily due to higher average debt balances and higher interest rates.

Income Taxes — Income tax expense was recorded at an effective rate of 50% in the third quarter of 2007 compared to 38.3% in the third quarter of 2006. During the third quarter of 2007, the reduction in income before taxes increased the unfavorable effect that non-deductible, permanent items had on our estimated annual effective tax rate. We anticipate that our effective tax rate for the full year 2007 will be approximately 39.5%.

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Quarter Ended September 30, 2007 Compared to Quarter Ended September 30, 2006 — Results by Segment

Dairy Group —

The key performance indicators of our Dairy Group are sales volumes, gross profit and operating income.

	Quarter Ended September 30
	2007					2006
	Dollars		Percent			Dollars		Percent
	(Dollars in millions)
Net sales	$	2,781.0		100.0	%	$	2,209.4		100.0	%
Cost of sales		2,228.9		80.2			1,623.0		73.5
Gross profit		552.1		19.8			586.4		26.5
Operating costs and expenses		414.8		14.9			412.7		18.7
Total segment operating income	$	137.3		4.9	%	$	173.7		7.8	%

The Dairy Group’s net sales increased $571.6 million, or 25.9% in the third quarter of 2007 versus the third quarter of 2006. The change in net sales from the third quarter of 2006 to the third quarter of 2007 was due to the following:

	Dollars			Percent
	(Dollars in millions)
2006 Net sales	$	2,209.4
Acquisitions		28.7			1.3	%
Volume		(54.3	)		(2.5	)
Pricing and product mix		597.2			27.1
2007 Net sales	$	2,781.0			25.9	%

In general, our Dairy Group changes the prices that it charges for Class I dairy products on a monthly basis, as the costs of raw milk and other raw materials fluctuate. Prices for some Class II products are also changed monthly while others are changed from time to time as circumstances warrant. However, there can be a lag between the timing of a raw material cost increase or decrease and a corresponding price change to our customers, especially in the case of Class II butterfat-based products because Class II butterfat prices for each month are not announced by the government until after the end of that month. Also, in some cases we are competitively or contractually constrained with respect to the implementation of price changes. During the third quarter, we experienced a decline in volume that we believe can be attributed to the retail price of our products. We are also seeing a shift from our branded fluid milk products to private label products, resulting in reduced gross profit.

A common industry measure for evaluating changes in fluid dairy raw material costs is the blended Class I price, assuming 3.5% butterfat, often referred to as the Class I “mover.” The following table sets forth the average monthly component prices of the Class I mover and average monthly Class II minimum prices for raw skim milk and butterfat for the third quarter of 2007 compared to the third quarter of 2006:

	Quarter Ended September 30*
	2007		2006		% Change
Class I mover(1)(3)	$	21.53	$	11.05		95	%
Class I raw skim milk mover(1)(3)		16.37		6.95		136
Class I butterfat mover(2)(3)		1.64		1.24		32
Class II raw skim milk minimum(1)(4)		17.07		6.86		149
Class II butterfat minimum(2)(4)		1.58		1.32		20

*  The prices noted in this table are not the prices that we actually pay. The federal order minimum prices at any given location for Class I raw skim milk or Class I butterfat are based on the Class I mover prices plus

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	a location differential. Class II prices noted in the table are federal minimum prices, applicable at all locations. Our actual cost also includes producer premiums, procurement costs and other related charges that vary by location and vendor. Please see “Part I — Item 1. Business — Government Regulation — Milk Industry Regulation” in our Annual Report on Form 10-K for 2006, and “— Known Trends and Uncertainties — Prices of Raw Milk and Other Inputs” in this Quarterly Report for a more complete description of raw milk pricing.
(1)	Prices are per hundredweight.
(2)	Prices are per pound.
(3)	We process Class I raw skim milk and butterfat into fluid milk products.
(4)	We process Class II raw skim milk and butterfat into products such as cottage cheese, creams and creamers, ice cream and sour cream.

The Dairy Group’s cost of sales as a percentage of net sales increased to 80.2% in the third quarter of 2007 compared to 73.5% in the third quarter of 2006, due to the increase in raw milk and other related costs, such as shrink costs and lower cream sales profitability. These increases were partially offset by lower salaries, benefits, utilities and supplies.

The Dairy Group’s operating expenses increased $2.1 million to $414.8 million during the third quarter of 2007 compared to $412.7 million in the third quarter of 2006, primarily due to a $6.6 million increase in distribution costs, as well as increases in bad debt expense and commissions partly offset by a decrease in advertising, incentive compensation and professional fees.

WhiteWave Foods Company —

The key performance indicators of WhiteWave Foods Company are sales dollars, gross profit and operating income.

	Quarter Ended September 30
	2007					2006
	Dollars		Percent			Dollars		Percent
	(Dollars in millions)
Net sales	$	335.8		100.0	%	$	308.4		100.0	%
Cost of sales		228.2		68.0			200.5		65.0
Gross profit		107.6		32.0			107.9		35.0
Operating costs and expenses		85.3		25.4			72.5		23.5
Total segment operating income	$	22.3		6.6	%	$	35.4		11.5	%

WhiteWave Foods Company’s net sales increased $27.4 million, or 8.9% in the third quarter of 2007 versus the third quarter of 2006. The change in net sales from the third quarter of 2006 to the third quarter of 2007 was due to the following:

	Dollars			Percent
	(Dollars in millions)
2006 Net sales	$	308.4
Volume		29.4			9.5	%
Pricing and product mix		(2.0	)		(0.6	)
2007 Net sales	$	335.8			8.9	%

The increase in net sales was principally driven by higher volumes. Higher pricing in the majority of our core brands was more than offset by declines in pricing in our Horizon Organic business.

In the Horizon Organic business, we are experiencing increasing competitive pressure from branded and private label participants as the industry is currently in an oversupply situation. This supply-demand imbalance in the organic milk market has resulted in discounting and aggressive distribution expansions as processors

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attempt to sell through their organic milk. We have responded similarly with increased investment in our Horizon brand resulting in lower price realization and lower profitability in the third quarter of 2007.

Cost of sales as a percentage of net sales for WhiteWave Foods Company increased to 68.0% in the third quarter of 2007 from 65.0% in the third quarter of 2006. Cost of sales dollars increased $27.7 million primarily due to higher sales volumes and higher commodity costs, principally organic and conventional milk.

Our operating expenses increased $12.8 million in the third quarter of 2007 compared to the same period in the prior year primarily driven by higher distribution and storage costs, increased marketing spending and higher general and administrative expenses, including higher amortization related to our SAP operating software installed in 2006.

Nine Months Ended September 30, 2007 Compared to Nine Months Ended September 30, 2006 — Consolidated Results

Net Sales — Consolidated net sales increased $1.09 billion to $8.59 billion during the first nine months of 2007 from $7.50 billion in the first nine months of 2006. Net sales by segment are shown in the table below.

	Nine Months Ended September 30
					$ Increase/		% Increase/
	2007		2006		(Decrease)		(Decrease)
	(Dollars in millions)
Dairy Group	$	7,606.1	$	6,593.1	$	1,013.0		15.4	%
WhiteWave Foods Company		984.1		911.6		72.5		8.0
Total	$	8,590.2	$	7,504.7	$	1,085.5		14.5

The change in net sales was due to the following:

	Nine Months Ended September 30, 2007
	vs Nine Months Ended September 30, 2006
			Pricing, Volume
			And Product		Total Increase/
	Acquisitions		Mix Changes		(Decrease)
	(Dollars in millions)
Dairy Group	$	68.5	$	944.5	$	1,013.0
WhiteWave Foods Company		—		72.5		72.5
Total	$	68.5	$	1,017.0	$	1,085.5

The change in net sales resulted from the pass-through of higher overall dairy commodity costs in the Dairy Group, as well as continued sales growth at WhiteWave Foods, partly offset by lower volumes in the Dairy Group as consumers reacted to higher retail prices. In addition, Horizon Organic pricing was negatively impacted by the current oversupply of organic raw milk.

Cost of Sales — All expenses incurred to bring a product to completion are included in cost of sales, such as raw material, ingredient and packaging costs; labor costs; and plant and equipment costs, including costs to operate and maintain our coolers and freezers. In addition, our Dairy Group includes costs associated with transporting finished products from our manufacturing facilities to our own distribution facilities. Our cost of sales as a percentage of net sales increased to 76.3% in the first nine months of 2007 compared to 73.0% in the first nine months of 2006 primarily due to higher raw milk costs in our Dairy Group segment in the first nine months of 2007.

Operating Costs and Expenses — Our operating expenses increased $72.4 million during the first nine months of 2007 as compared to the same period in the prior year. Our operating expense as a percentage of net sales was 18.9% in the first nine months of 2007 compared to 20.6% during the first nine months of 2006. Operating expenses increased primarily due to an increase in distribution costs of $44.5 million resulting from higher storage costs, labor and supplies. Facility closing, reorganization and other costs increased $16.6 million

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due to charges related to the Dairy Group reduction of workforce, the closing of certain Dairy Group facilities, the reorganization of our finance organization and a loss on the sale of our tofu business. See “— Results by Segment” for more information.

Operating Income — Operating income during the first nine months of 2007 was $411.1 million, a decrease of $67.0 million from $478.1 million in the first nine months of 2006. Our operating margin in the first nine months of 2007 was 4.8% compared to 6.4% in the first nine months of 2006.

Other (Income) Expense — Total other expense increased to $249.8 million in the first nine months of 2007 compared to $144.3 million in the first nine months of 2006. Interest expense increased to $244.4 million in the first nine months of 2007 from $144.3 million in the first nine months of 2006 primarily due to higher average debt balances, higher interest rates and the write-off of $13.5 million in financing costs related to the completion of our new senior credit facility. Other expense in 2007 includes $5.7 million of professional fees and other costs related to the special cash dividend.

Income Taxes — Income tax expense was recorded at an effective rate of 39.3% in the first nine months of 2007 compared to 38.9% in the first nine months of 2006. We anticipate that our effective tax rate for the full year 2007 will be approximately 39.5%.

Nine Months Ended September 30, 2007 Compared to Nine Months Ended September 30, 2006 — Results by Segment

Dairy Group —

The key performance indicators of our Dairy Group are sales volumes, gross profit and operating income.

	Nine Months Ended September 30
	2007					2006
	Dollars		Percent			Dollars		Percent
	(Dollars in millions)
Net sales	$	7,606.1		100.0	%	$	6,593.1		100.0	%
Cost of sales		5,901.1		77.6			4,879.8		74.0
Gross profit		1,705.0		22.4			1,713.3		26.0
Operating costs and expenses		1,231.4		16.2			1,201.8		18.2
Total segment operating income	$	473.6		6.2	%	$	511.5		7.8	%

The Dairy Group’s net sales increased $1.01 billion, or 15.4% in the first nine months of 2007 versus the first nine months of 2006. The change in net sales from the first nine months of 2006 to the first nine months of 2007 was due to the following:

	Dollars			Percent
	(Dollars in millions)
2006 Net sales	$	6,593.1
Acquisitions		68.5			1.0	%
Volume		(29.4	)		(0.4	)
Pricing and product mix		973.9			14.8
2007 Net sales	$	7,606.1			15.4	%

In general, our Dairy Group changes the prices that it charges for Class I dairy products on a monthly basis, as the costs of raw milk and other raw materials fluctuate. Prices for some Class II products are also changed monthly while others are changed from time to time as circumstances warrant. However, there can be a lag between the timing of a raw material cost increase or decrease and a corresponding price change to our customers, especially in the case of Class II butterfat-based products because Class II butterfat prices for each month are not announced by the government until after the end of that month. Also, in some cases we are competitively or contractually constrained with respect to the implementation of price changes. During the

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third quarter, we experienced a decline in volume that we believe can be attributed to the retail price of our products. We are also seeing a shift from our branded fluid milk products to private label products, resulting in reduced gross profit. The volume decline in the third quarter more than offset the volume gains through the first six months of 2007.

A common industry measure for evaluating changes in fluid dairy raw material costs is the blended Class I price, assuming 3.5% butterfat, often referred to as the Class I “mover.” The following table sets forth the average monthly component prices of the Class I mover and average monthly Class II minimum prices for raw skim milk and butterfat for the first nine months of 2007 compared to the first nine months of 2006:

	Nine Months Ended September 30*
	2007		2006		% Change
Class I mover(1)(3)	$	17.17	$	11.71		47	%
Class I raw skim milk mover(1)(3)		12.46		7.36		69
Class I butterfat mover(2)(3)		1.47		1.32		11
Class II raw skim milk minimum(1)(4)		12.49		7.30		71
Class II butterfat minimum(2)(4)		1.49		1.31		14

*	The prices noted in this table are not the prices that we actually pay. The federal order minimum prices at any given location for Class I raw skim milk or Class I butterfat are based on the Class I mover prices plus a location differential. Class II prices noted in the table are federal minimum prices, applicable at all locations. Our actual cost also includes producer premiums, procurement costs and other related charges that vary by location and vendor. Please see “Part I — Item 1. Business — Government Regulation — Milk Industry Regulation” in our Annual Report on Form 10-K for 2006, and “— Known Trends and Uncertainties — Prices of Raw Milk and Other Inputs” in this Quarterly Report for a more complete description of raw milk pricing.
(1)	Prices are per hundredweight.
(2)	Prices are per pound.
(3)	We process Class I raw skim milk and butterfat into fluid milk products.
(4)	We process Class II raw skim milk and butterfat into products such as cottage cheese, creams and creamers, ice cream and sour cream.

The Dairy Group’s cost of sales as a percentage of net sales increased to 77.6% in the first nine months of 2007 compared to 74.0% in the first nine months of 2006, due to the increase in raw milk and other related costs such as shrink costs and lower cream sales profitability. These increases were partially offset by lower salaries, benefits, utilities and supplies.

The Dairy Group’s operating expenses increased $29.6 million to $1.23 billion during the first nine months of 2007 compared to $1.20 billion in the first nine months of 2006, primarily due to a $32.5 million increase in distribution costs, including higher labor, storage and supplies. General and administrative expenses decreased $6.8 million primarily due to lower incentive compensation.

WhiteWave Foods Company —

The key performance indicators of WhiteWave Foods Company are sales dollars, gross profit and operating income.

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	Nine Months Ended September 30
	2007					2006
	Dollars		Percent			Dollars		Percent
	(Dollars in millions)
Net sales	$	984.1		100.0	%	$	911.6		100.0	%
Cost of sales		653.4		66.4			594.7		65.2
Gross profit		330.7		33.6			316.9		34.8
Operating costs and expenses		248.9		25.3			230.0		25.3
Total segment operating income	$	81.8		8.3	%	$	86.9		9.5	%

WhiteWave Foods Company’s net sales increased by $72.5 million, or 8.0% in the first nine months of 2007 versus the first nine months of 2006. The change in net sales from the first nine months of 2006 to the first nine months of 2007 was due to the following:

	Dollars		Percent
	(Dollars in millions)
2006 Net sales	$	911.6
Volume		50.7		5.6	%
Pricing and product mix		21.8		2.4
2007 Net sales	$	984.1		8.0	%

The increase in net sales was driven by a combination of higher volumes and higher pricing. Volumes increased 5.6% driven by growth in our core brands, while pricing increased in response to higher raw material costs and market conditions.

In the Horizon Organic business, we are experiencing increasing competitive pressure from branded and private label participants as the industry is currently in an oversupply situation. This supply-demand imbalance in the organic milk market has resulted in discounting and aggressive distribution expansion as processors attempt to sell through their organic milk. We have responded similarly with increased investment in our Horizon brand resulting in lower price realization and lower profitability in the first nine months of 2007.

Cost of sales as a percentage of net sales for WhiteWave Foods Company increased to 66.4% in the first nine months of 2007 from 65.2% in the first nine months of 2006. Cost of sales dollars increased $58.7 million primarily due to higher sales volumes and higher commodity costs, principally organic and conventional milk.

Our operating expenses increased $18.9 million in the first nine months of 2007 compared to the same period in the prior year primarily driven by higher distribution and storage costs, accompanied by higher general and administrative expenses, including higher amortization related to our SAP operating software installed in 2006.

Liquidity and Capital Resources

As a result of the recapitalization of our balance sheet on April 2, 2007, which is more fully described in Note 5 to our Condensed Consolidated Financial Statements, we entered into a new $4.8 billion senior secured credit facility. This transaction significantly increased our leverage profile and interest expense. Under the senior secured credit facility, we are required to maintain certain financial covenants, including, but not limited to, maximum leverage and minimum interest coverage ratios. Significant increases in raw material and other input costs, as well as the oversupply of raw organic milk, have increased our working capital requirements, decreased our operating profitability, and limited our ability in the near term to reduce the borrowings under the senior secured credit facility. Our actual performance levels under the financial covenants could result in an increase to the cost of borrowings outstanding under the senior secured credit facility or limit our ability to incur additional debt.

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We currently have a maximum permitted leverage ratio of 6.5 times consolidated funded indebtedness to average consolidated EBITDA for the prior four consecutive quarters, each as defined under and calculated in accordance with the terms of our senior secured credit facility and our receivables facility. As of September 30, 2007, this leverage ratio was 5.97. The maximum permitted leverage ratio under both the senior secured credit facility and the receivables facility will decline to 6.25 as of December 31, 2007. This reduced leverage ratio could increase our cost of borrowing and limit our ability to incur additional debt under our senior secured credit facility. Failure to comply with the leverage ratio could create a default under our senior secured credit facility and under our receivables facility.

Historical Cash Flow

During the first nine months of 2007, we met our working capital needs with cash flow from operations.

Net cash provided by operating activities from continuing operations was $220.7 million for the first nine months of 2007 compared to $426.9 million for the same period in 2006, a decrease of $206.2 million. Net cash provided by operating activities was primarily impacted by lower income from continuing operations of $106.1 million and by lower income taxes payable, which decreased $54.1 million in the first nine months of 2007 compared to the first nine months of the prior year. Higher raw milk prices in 2007 resulted in an increase in accounts receivable and inventory, which was largely offset by increases in related accounts payable and accruals.

Net cash used in investing activities from continuing operations was $272.9 million in the first nine months of 2007 compared to $89.8 million in the first nine months of 2006, an increase of $183.1 million, largely due to the acquisition of Friendship Dairies. In addition, we received net proceeds of $12.2 million for divestitures in the first nine months of 2007 compared to the $96.3 million in the first nine months of 2006, a decrease of $84.1 million.

We borrowed a net amount of $2.0 billion of debt in the first nine months of 2007, substantially all of which was utilized for payment of the special cash dividend on April 2, 2007.

Contractual Obligations as of September 30, 2007

The table below summarizes our obligations for indebtedness and purchase and lease obligations at September 30, 2007. See Note 5 to our Condensed Consolidated Financial Statements for additional information regarding our indebtedness.

	Payments Due by Period
Indebtedness, Purchase &			10/1/07-		10/1/08-		10/1/09-		10/1/10-		10/1/11-
Lease Obligations(1)	Total		9/30/08		9/30/09		9/30/10		9/30/11		9/30/12		Thereafter
	(In millions)
Senior credit facility	$	3,930.1	$	18.0	$	130.5	$	243.0	$	655.5	$	1,182.1	$	1,701.0
Dean Foods senior notes(2)		500.0		—		—		—		—		—		500.0
Subsidiary senior notes(2)		350.0		—		200.0		—		—		—		150.0
Receivables-backed facility		600.0		—		—		600.0		—		—		—
Capital lease obligations and other		12.8		8.7		0.6		0.6		0.6		0.6		1.7
Purchase obligations(3)		665.8		369.9		149.1		41.1		12.6		12.2		80.9
Operating leases		473.6		108.8		95.4		79.3		63.8		49.5		76.8
Interest payments(4)		1,656.0		297.2		297.2		268.5		249.3		187.3		356.5
Total	$	8,188.3	$	802.6	$	872.8	$	1,232.5	$	981.8	$	1,431.7	$	2,866.9

(1)	Excluded from this table are estimated obligations accrued under FIN 48 “Accounting for Uncertainty in Income Taxes” as the timing of such payments cannot be reasonably determined.
(2)	Represents face value.

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(3)

Primarily represents commitments to purchase minimum quantities of raw materials used in our production processes, including organic soybeans and organic raw milk. We enter into these contracts from time to time in an effort to ensure a sufficient supply of raw ingredients. In addition, we have contractual obligations to purchase various services that are part of our production process.

(4)

Includes fixed rate interest obligations, as well as interest on our variable rate debt based on the average rates for the three months ended September 30, 2007, and balances in effect at September 30, 2007. Interest that may be due in the future on the variable rate portion of our senior credit facility and receivables backed-facility will vary based on the interest rate in effect at the time and the borrowings outstanding at the time.

Other Long-Term Liabilities

We sponsor various defined benefit pension plans and also offer certain health care and life insurance benefits to eligible employees and their eligible dependents upon the retirement of such employees. Reported costs of providing non-contributory defined pension benefits and other postretirement benefits are dependent upon numerous factors, assumptions and estimates. For example, these costs are impacted by actual employee demographics (including age, compensation levels and employment periods), the level of contributions made to the plan and earnings on plan assets. Our pension plan assets are primarily made up of equity and fixed income investments. Changes made to the provisions of the plan may impact current and future pension costs. Fluctuations in actual equity market returns, as well as changes in general interest rates may result in increased or decreased pension costs in future periods. Pension costs may be significantly affected by changes in key actuarial assumptions, including anticipated rates of return on plan assets and the discount rates used in determining the projected benefit obligation and pension costs.

We expect to contribute approximately $23.2 million to the pension plans and approximately $2.4 million to the postretirement health plans in 2007.

Other Commitments and Contingencies

On December 21, 2001, in connection with our acquisition of Legacy Dean, we issued a contingent, subordinated promissory note to Dairy Farmers of America (“DFA”) in the original principal amount of $40 million. DFA is our primary supplier of raw milk, and the promissory note is designed to ensure that DFA has the opportunity to continue to supply raw milk to certain of our facilities until 2021, or be paid for the loss of that business. The promissory note has a 20-year term and bears interest based on the consumer price index. Interest will not be paid in cash, but will be added to the principal amount of the note annually, up to a maximum principal amount of $96 million. We may prepay the note in whole or in part at any time, without penalty. The note will only become payable if we materially breach or terminate one of our milk supply agreements with DFA without renewal or replacement. Otherwise, the note will expire at the end of 20 years, without any obligation to pay any portion of the principal or interest. Payments we make under this note, if any, will be expensed as incurred. We have not breached or terminated any of our milk supply agreements with DFA.

We also have the following commitments and contingent liabilities, in addition to contingent liabilities related to ordinary course litigation, investigations and audits:

•  Certain indemnification obligations related to businesses that we have divested;

•  Certain lease obligations, which require us to guarantee the minimum value of the leased asset at the end of the lease; and

•  Selected levels of property and casualty risks, primarily related to employee health care, workers’ compensation claims and other casualty losses.

See Note 11 to our Condensed Consolidated Financial Statements for more information about our commitments and contingent obligations.

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Future Capital Requirements

During 2007, we intend to invest a total of approximately $250 million in capital expenditures primarily for our existing manufacturing facilities and distribution capabilities. We expect cash interest to be approximately $313 million to $315 million based on current debt levels under our new senior credit facility. Cash interest excludes amortization of deferred financing fees and bond discounts. We expect cash taxes to be approximately $85 million in 2007.

The portion of our long-term debt due within the next 12 months totals $26.7 million. We expect that cash flow from operations together with availability under our senior credit facility will be sufficient to meet our anticipated future capital requirements. As of November 5, 2007, $835.4 million was available for future borrowings under our senior credit facility.

Known Trends and Uncertainties

Prices of Raw Milk and Other Inputs

Dairy Group — The primary raw material used in our Dairy Group is raw milk (which contains both raw milk and butterfat). The federal government and certain state governments set minimum prices for raw milk, and those prices are set on a monthly basis. The regulated minimum prices differ based on how the raw milk is utilized. Raw milk processed into fluid milk is priced at the Class I price, and raw milk processed into products such as cottage cheese, creams and creamers, ice cream and sour cream is priced at the Class II price. Generally, we pay the federal minimum prices for raw milk, plus certain producer premiums (or “over-order” premiums) and location differentials. We also incur other raw milk procurement costs in some locations (such as hauling, field personnel, etc.). A change in the federal minimum price does not necessarily mean an identical change in our total raw milk costs, as over-order premiums may increase or decrease. This relationship is different in every region of the country, and sometimes within a region based on supplier arrangements. However, in general, the overall change in our raw milk costs can be linked to the change in federal minimum prices.

Because our Class II products typically have a higher fat content than that contained in raw milk, we also purchase bulk cream for use in some of our Class II products. Bulk cream is typically purchased based on a multiple of the AA butter price on the Chicago Mercantile Exchange (“CME”).

In general, our Dairy Group changes the prices that it charges for Class I dairy products on a monthly basis, as the costs of raw milk and other raw materials fluctuate. Prices for some Class II products are also changed monthly while others are changed from time to time as circumstances warrant. However, there can be a lag between the timing of a raw material cost increase or decrease and a corresponding price change to our customers, especially in the case of Class II butterfat based products because Class II butterfat prices for each month are not announced by the government until after the end of that month. Also, in some cases we are competitively or contractually constrained with respect to the implementation of price changes. These factors can cause volatility in our earnings. Our sales and operating profit margin fluctuate with the price of our raw materials and other inputs.

During the first nine months of 2007, prices for raw milk increased significantly over the prior year. We expect raw milk, butterfat and cream prices to stabilize or decline modestly over the remainder of 2007. However, raw milk, butterfat and cream prices are difficult to predict, and we change our forecasts frequently based on current market activity. The Dairy Group generally has been effective at passing through the changes in the prices of the underlying commodities. However, the pass-through is not perfect when prices move up steadily over a period of several months. In addition, we generally change the prices we charge on products other than fluid milk on a less frequent basis.

Our Dairy Group purchases approximately 4 million gallons of diesel fuel per month to operate its extensive “direct store delivery” system. Another significant raw material used by our Dairy Group is resin, which is a petroleum-based product and used to make plastic bottles. We purchase approximately 27 million pounds of resin and bottles per month. The price of diesel and resin are subject to fluctuations based on changes in crude oil prices.

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During the first nine months of 2007, the prices of resin decreased while diesel prices were largely unchanged. As resin supplies have from time to time been insufficient to meet demand, we are undertaking all reasonable measures in an attempt to secure an adequate resin supply; however, there can be no assurance that we will always be successful in our attempts. We expect prices of both resin and diesel fuel to fluctuate throughout the remainder of 2007.

WhiteWave Foods Company — A significant raw material used to manufacture products sold by WhiteWave Foods Company is organic soybeans. We have entered into supply agreements for organic soybeans, which we believe will meet our needs through 2008. These agreements provide for pricing at fixed levels. However, should our need for organic soybeans exceed the quantity that we have under contract, or if the suppliers do not perform under the contracts, we may have difficulty obtaining sufficient supply, and the price we could be required to pay could be significantly higher.

Significant raw materials used in our products include organic raw milk and sugar. We obtain the majority of our supply of organic raw milk by entering into one to two year agreements with farmers pursuant to which the farmers agree to sell us specified quantities of organic raw milk for fixed prices for the duration of the agreement. We also source approximately 20% of our organic raw milk supply from our own farms. In the past, the industry-wide demand for organic raw milk has generally exceeded supply, resulting in our inability to fully meet customer demand. However, due to the recent industry efforts to grow the supply of organic raw milk, there currently is a significant oversupply of organic raw milk, which has increased and may continue to increase competitive pressure both from branded and private label participants. This has resulted in downward pricing pressure on the sale of our products, which has and may continue to negatively impact our profitability. We have entered into supply agreements for organic sugar, which we believe will meet our needs through 2008.

Competitive Environment

There has been significant consolidation in the retail grocery industry in recent years, and this trend is continuing. As our customer base consolidates, we expect competition to intensify as we compete for the business of fewer customers. There can be no assurance that we will be able to keep our existing customers, or gain new customers. There are several large regional grocery chains that have captive dairy operations. As the consolidation of the grocery industry continues, we could lose sales if any one or more of our existing customers were to be sold to a chain with captive dairy operations.

Many of our retail customers have become increasingly price sensitive in the current intensely competitive environment. Over the past few years, we have been subject to a number of competitive bidding situations in our Dairy Group, which reduced our profitability on sales to several customers. We expect this trend to continue. In bidding situations, we are subject to the risk of losing certain customers altogether. The loss of any of our largest customers could have a material adverse impact on our financial results. We do not have contracts with many of our largest customers, and most of the contracts that we do have are generally terminable at will by the customer.

The supply-demand imbalance in the organic milk market has increased competition in the marketplace as competitors attempt to stimulate demand through lower retail prices and aggressive distribution expansion. As a result, we have experienced and may continue to experience downward pricing pressure on the sale of our organic products.

Tax Rate

Income tax expense was recorded at an effective rate of 39.3% in the first nine months of 2007. Our tax rate during the first nine months of 2006 was 38.9%. We estimate that our effective tax rate will be approximately 39.5% for the full year 2007. Changes in the relative profitability of our operating segments, as well as changes to federal and state tax laws may cause the rate to change from historical rates.

See “Part II — Item 1A — Risk Factors” for a description of various other risks and uncertainties concerning our business.

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Item 3.   Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Fluctuations

In order to reduce the volatility of earnings that arises from changes in interest rates, we manage interest rate risk through the use of interest rate swap agreements. These swap agreements provide hedges for loans under our senior credit facility by limiting or fixing the LIBOR interest rates specified in the senior credit facility at the interest rates noted below until the indicated expiration dates.

The following table summarizes our various interest rate agreements at September 30, 2007:

Fixed Interest Rates	Expiration Date	Notional Amounts
		(In millions)
4.07% to 4.27%	December 2010	$	450
4.907%(1)	March 2008-March 2012		2,950

(1) The notional amount of the swap will decline to $1.25 billion over its term.

The following table summarizes our various interest rate agreements at December 31, 2006:

Fixed Interest Rates	Expiration Date	Notional Amounts
		(In millions)
4.81% to 4.84%	December 2007	$	500
4.07% to 4.27%	December 2010		450

During the nine months ended September 30, 2007, we settled the interest rate swaps expiring in 2007. Amounts included in other comprehensive income related to these swaps will be recognized over the originally forecasted period.

We are exposed to market risk under these arrangements due to the possibility of interest rates on our senior credit facility falling below the rates on our interest rate derivative agreements. Credit risk under these arrangements is remote since the counterparties to our interest rate derivative agreements are major financial institutions.

A majority of our debt obligations, excluding hedges, are currently at variable rates. We have performed a sensitivity analysis assuming a hypothetical 10% adverse movement in interest rates. As of September 30, 2007, the analysis indicated that such interest rate movement would not have a material effect on our financial position, results of operations or cash flows. However, actual gains and losses in the future may differ materially from that analysis based on changes in the timing and amount of interest rate movement and our actual exposure and hedges.

Other

We currently do not have material exposure to foreign currency risk as we do not have significant amounts of operating cash flows denominated in foreign currencies.

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Item 4.   Controls and Procedures

Controls Evaluation and Related Certifications

We conducted an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (“Disclosure Controls”) as of the end of the period covered by this quarterly report. The controls evaluation was done under the supervision and with the participation of management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO). Based upon our most recent controls evaluation, our CEO and CFO have concluded that as of the end of the period covered by this quarterly report, our Disclosure Controls were effective at the reasonable assurance level.

Attached as exhibits to this quarterly report are certifications of the CEO and the CFO, which are required in accordance with Rule 13a-14 of the Exchange Act. This Controls and Procedures section includes the information concerning the controls evaluation referred to in the certifications and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.

Changes in Internal Control over Financial Reporting

During the third quarter of 2006, WhiteWave Foods Company implemented SAP as its primary financial reporting and resource planning system. SAP was implemented at all locations of WhiteWave Foods Company in the United States except for the manufacturing facilities located in City of Industry, California, Jacksonville, Florida and Mt. Crawford, Virginia. WhiteWave Foods Company completed implementation of SAP at these facilities during the third quarter of 2007. In addition, we are currently in the process of reorganizing the Dairy Group financial reporting and certain transaction processing activities into regional centers.

Other than the implementation of SAP and the reorganization activities within our Dairy Group as discussed above, there was no change in our internal control over financial reporting in the quarter ended September 30, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part II — Other Information

Item 1.   Legal Proceedings

We are not party to, nor are our properties the subject of, any material pending legal proceedings, other than as set forth below. However, we are party from time to time to certain claims, litigation, audits and investigations. We believe that we have established adequate reserves to satisfy any potential liability we may have under all such claims, litigations, audits and investigations that are currently pending. In our opinion, the settlement of any such currently pending or threatened matter is not expected to have a material adverse impact on our financial position, results of operations or cash flows.

We were named, among several defendants, in two purported class action antitrust complaints filed on July 5, 2007. The complaints were filed in the United States District Court for the Middle District of Tennessee, Columbia Division, and allege generally that we and others in the milk industry worked together to limit the price Southeastern dairy farmers are paid for their raw milk and to deny these farmers access to fluid Grade A milk processing facilities. A third purported class action was filed on August 9, 2007 in the United States District Court for the Eastern District of Tennessee, Greenville Division. The allegations contained in this third complaint are similar to those in the first and second complaints except that the new suit added a claim that defendants’ conduct also artificially inflated retail prices for direct milk purchasers. Two additional class actions were filed on August 27, 2007 and October 3, 2007 in United States District Court for the Eastern District of Tennessee, Greenville Division. The allegations in these complaints are similar to those in the first and second complaints.

We believe that the claims against us are without merit and we will vigorously defend the actions.

Item 1A.   Risk Factors

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Statements that are not historical in nature are forward-looking statements about our future that are not statements of historical fact. Most of these statements are found in this report under the following subheadings: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures About Market Risk.” In some cases, you can identify these statements by terminology such as “may,” “should,” “could,” “expects,” “seek to,” “anticipates,” “plans,” “believes,” “estimates,” “intends,” “predicts,” “projects,” “potential” or “continue” or the negative of such terms and other comparable terminology. These statements are only predictions, and in evaluating these statements, you should carefully consider the information above, including in “— Known Trends and Uncertainties,” as well as the risks outlined below. Actual performance or results may differ materially and adversely. Except as discussed below, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2006.

Availability and Changes in Costs of Raw Materials and Other Inputs Can Adversely Affect Us

Raw milk is the most significant raw material that we use in our Dairy Group. Organic raw milk, organic soybeans and sugar are significant inputs utilized by WhiteWave Foods Company. The prices of these materials increase and decrease based on supply and demand, and in some cases, governmental regulation. Weather also affects the availability and pricing of these inputs. In many cases we are able to adjust our pricing to reflect changes in raw material costs. Volatility in the cost of our raw materials can adversely affect our performance as price changes often lag changes in costs. These lags tend to erode our profit margins. Furthermore, cost increases may exceed the price increases we are able to pass along to our customers. Extremely high raw material costs also have put downward pressure on our margins and our volumes. We have been experiencing rapidly increasing and record high dairy costs. We expect certain raw material prices, including raw milk prices, to stabilize or decline modestly over the remainder of 2007.

In the recent past, the industry-wide demand for organic raw milk has generally exceeded supply, resulting in our inability to fully meet customer demand. There currently is a significant oversupply of organic raw milk, which has increased competitive pressure both from branded and private label participants, resulting

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in downward pricing pressure on the sale of our products, which has and may continue to negatively impact our profitability.

Because our Dairy Group delivers the majority of its products directly to customers through its “direct store delivery” system, we are a large consumer of fuel. Similarly, our WhiteWave Foods business is impacted by the costs of petroleum-based products through the use of common carriers in delivering their products. The Dairy Group utilizes a significant amount of resin, which is the primary component used in our plastic bottles. Resin supplies have from time to time been insufficient to meet demand. Increases in fuel and resin prices can adversely affect our results of operations. In addition, a disruption in our ability to secure an adequate resin supply could adversely affect our operations.

We May Not Realize Anticipated Benefits from Our Multi-Year Productivity Initiatives

We have several multi-year productivity initiatives underway including the reduction in workforce that was approved on September 27, 2007. We are continuing to evaluate our supply chain and anticipate further realignment of our manufacturing capabilities and additional facility closures in the future. However, if we are unable to successfully implement these initiatives, we may not be able to fully recognize the estimated cost savings or other benefits. In addition, the impact of these cost reduction actions on our earnings growth and profitability may be influenced by factors including but not limited to: (1) our ability to retain and attract key employees and operating officers; (2) our ability to maintain satisfactory relationships with our customers; and (3) our ability to maintain satisfactory relationships with our suppliers.

We Have Substantial Debt and We May Incur Even More Debt

We have substantial debt and additional unused borrowing capacity. See “Liquidity and Capital Resources.”

We have pledged substantially all of our assets (including the assets of our subsidiaries) to secure our indebtedness. Our debt level and related debt service obligations:

•  Require us to dedicate significant cash flow to the payment of principal and interest on our debt which reduces the funds we have available for other purposes,

•  May limit our flexibility in planning for or reacting to changes in our business and market conditions,

•  Impose on us additional financial and operational restrictions,

•  Expose us to interest rate risk since a portion of our debt obligations are at variable rates, and

•  Restrict our ability to fund acquisitions.

Our ability to make scheduled payments on our debt and other financial obligations depends on our financial and operating performance. Our financial and operating performance is subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control. If we do not comply with the financial and other restrictive covenants under our credit facilities, we may default under them. Upon default, our lenders could accelerate the indebtedness under the facilities, foreclose against their collateral or seek other remedies, which would jeopardize our ability to continue our current operations.

As a result of the recapitalization of our balance sheet on April 2, 2007, which is more fully described in Note 5 to our Condensed Consolidated Financial Statements, we entered into a new $4.8 billion senior secured credit facility. This transaction significantly increased our leverage profile and interest expense. Under the senior secured credit facility, we are required to maintain certain financial covenants, including, but not limited to, maximum leverage and minimum interest coverage ratios. Significant increases in raw material and other input costs, as well as the oversupply of raw organic milk, has increased our working capital requirements, decreased our operating profitability, and limited our ability in the near term to reduce the borrowings under the senior secured credit facility. Our actual performance levels under the financial covenants could result in an increase to the cost of borrowings outstanding under the senior secured credit facility or limit our ability to incur additional debt.

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We currently have a maximum permitted leverage ratio of 6.5 times consolidated funded indebtedness to average consolidated EBITDA for the prior four consecutive quarters, each as defined under and calculated in accordance with the terms of our senior secured credit facility and our receivables facility. As of September 30, 2007, this leverage ratio was 5.97. The maximum permitted leverage ratio under both the senior secured credit facility and the receivables facility will decline to 6.25 as of December 31, 2007. This reduced leverage ratio could increase our cost of borrowing and limit our ability to incur additional debt under our senior secured credit facility. Failure to comply with the leverage ratio could create a default under our senior secured credit facility and under our receivables facility.

Changes in our Credit Ratings May Have a Negative Impact on Our Financing Costs or the Availability
of Capital

We have substantial debt and additional unused borrowing capacity. Some of our debt is rated by Standard & Poor’s and Moody’s, and there are a number of factors beyond our control with respect to these ratings. During 2007, in response to our increased leverage and the recent difficult dairy operating environment, both Standard & Poor’s and Moody’s downgraded our debt ratings. A further downgrade could increase our cost of capital and reduce our access to the financial markets.

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Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

As of September 30, 2007, $218.7 million remained available pursuant to the stock repurchase program approved by our Board of Directors. The amount can be increased by actions of our Board of Directors.

No stock has been repurchased during the period January 1, 2007 through November 5, 2007.

Item 5.   Other Information

Timing of Long-Term Equity Grants

On August 21, 2007, the Compensation Committee of our Board of Directors approved an amendment to our Stock Option/Restricted Stock Unit Grant Guidelines. Beginning in 2008, our policies now require that annual stock option and restricted stock unit grants to senior executives and other employees be made by the Compensation Committee at a meeting held on January 15 of each year, or the next succeeding business day if January 15 is not a business day. The Committee has the ability to postpone the annual grant date if circumstances warrant such postponement.

Our Chief Executive Officer and General Counsel have limited authority to grant stock options and restricted stock units in connection with the hiring of new employees or the promotion or special recognition of selected employees. These recruiting and recognition grants may not exceed 400,000 annually and may not be made to any executive officer of the Company. In addition, no individual grant may exceed 50,000 shares without the Compensation Committee’s approval. These recruiting and recognition grants are made on the first business day of each month for all employees selected for awards in the preceding month or whose employment began during the preceding month.

Facility Closing and Reorganization Costs

We recorded total net facility closing and reorganization costs of $19.5 million during the third quarter of 2007. For information with respect to these facility closing and reorganization costs, see Note 10 to the Condensed Consolidated Financial Statements, which is incorporated herein by reference.

Item 6.   Exhibits

(a) Exhibits

4	.1	Supplemental Indenture No. 2, dated as of July 31, 2007, between us, the subsidiary guarantors listed therein and The Bank of New York Trust Company, N.A., as trustee, which is filed herewith.
*10	.1	Separation and Release Agreement dated September 21, 2007 between us and Alan Bernon, which is filed herewith.
*10	.2	Employment Offer Letter dated November 1, 2007 between us and Gregg Tanner, which is filed herewith.
*10	.3	Change in Control Agreement dated November 5, 2007 between us and Gregg Tanner, which is filed herewith.
*10	.4	Proprietary Information, Inventions and Non-Compete Agreement dated November 5, 2007 between us and Gregg Tanner, which is filed herewith.
31	.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, which is filed herewith.
31	.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, which is filed herewith.
32	.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, which is filed herewith.
32	.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, which is filed herewith.
99		Supplemental Financial Information for Dean Holding Company, which is filed herewith.

* Management or compensatory contract

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SIGNATURES

Pursuant to the requirement 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

/s/  Ronald L. McCrummen

Ronald L. McCrummen

Senior Vice President and Chief Accounting Officer

November 9, 2007

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EX-4.1

EXHIBIT 4.1

SUPPLEMENTAL INDENTURE NO. 2

     THIS SUPPLEMENTAL INDENTURE NO. 2, dated as of July 31, 2007 (this “Supplemental Indenture No. 2”), between DEAN FOODS COMPANY, a corporation duly organized and existing under the laws of the State of Delaware (the “Company”), EACH OF THE GUARANTORS PARTY HERETO and THE BANK OF NEW YORK TRUST COMPANY, N.A., a national banking association, as trustee (the “Trustee”).

RECITALS:

     WHEREAS, the Company, the Guarantors and the Trustee are parties to an Indenture, dated as of May 15, 2006 (the “Base Indenture”), as supplemented by Supplemental Indenture No. 1, dated as of May 17, 2006, between the Company, the Guarantors and the Trustee (“Supplemental Indenture No. 1” and together with the Base Indenture, the “Indenture”), relating to the issuance from time to time by the Company of its Securities on terms to be specified at the time of issuance;

     WHEREAS, the following direct and indirect subsidiaries of the Company have become guarantors under the Senior Credit Agreement: SOUTHERN FOODS GROUP, LLC, a Delaware limited liability company, DAN MORTON, LLC, a Delaware limited liability company, DEAN SERVICES, LLC, a Delaware limited liability company, FRIENDSHIP DAIRIES, LLC, a Delaware limited liability company, HORIZON ORGANIC DAIRY, LLC, a Delaware limited liability company, and SAMPSON VENTURES, LLC, a Delaware limited liability company (collectively, the “Additional Subsidiaries”);

     WHEREAS, in connection herewith, each of the Additional Subsidiaries have executed and delivered a Subsidiary Guarantee pursuant to Section 13.03 of the Indenture;

     WHEREAS, Section 9.01 of the Indenture contemplates the execution of supplemental indentures without the consent of the Holders of the Securities for the purposes stated herein;

     WHEREAS, the Company and the Guarantors desire and have requested the Trustee to join in the execution and delivery of this Supplemental Indenture as permitted by Section 9.01 of the Indenture to allow any Guarantor to execute a supplemental indenture in respect of a Subsidiary Guarantee;

     WHEREAS, all conditions and requirements of the Indenture necessary to make this Supplemental Indenture No. 2 a valid, binding and legal instrument in accordance with its terms have been performed and fulfilled by the parties hereto.

     NOW, THEREFORE, for and in consideration of the premises and other good and valuable consideration, receipt of which is hereby acknowledged by the parties hereto, the parties hereto agree as follows:

1

ARTICLE I
ADDITIONAL SUBSIDIARY GUARANTEES

     Section 1.01 Additional Subsidiary Guarantees. Subject to the provisions of Article Thirteen of the Indenture, which provisions are incorporated herein by reference, each of the Additional Subsidiaries hereby agrees, jointly and severally, to unconditionally guarantee, to each Holder of a Security authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture or this Supplemental Indenture No. 2, the Securities or the obligations of the Company hereunder or thereunder, that: (a) the principal of, and interest, if any, on, the Securities will be promptly paid in full when due, whether at Stated Maturity, by acceleration, redemption, purchase or otherwise, and (b) all other obligations of the Company to the Holders or the Trustee under the Indenture, and the Securities will be fully and punctually performed within the grace period set forth in Section 6.01(c) of the Indenture, if applicable, all in accordance with the terms of Article Thirteen of the Indenture.

ARTICLE II
MISCELLANEOUS

     Section 2.01 Integral Part; Effect of Supplement on Indenture. This Supplemental Indenture No. 2 constitutes an integral part of the Indenture. Except for the amendments and supplements made by this Supplemental Indenture No. 2, the Indenture shall remain in full force and effect as executed.

     Section 2.02 General Definitions. For purposes of this Supplemental Indenture No. 2:

     (1) Capitalized terms used herein without definition shall have the meanings specified in the Indenture:

     (2) All references to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of this Supplemental Indenture No. 2; and

     (3) The terms “herein,” “hereof,” “hereunder” and other words of similar import refer to this Supplemental Indenture No. 2.

     Section 2.03 Adoption, Ratification and Confirmation. The Indenture, as supplemented by this Supplemental Indenture No. 2, is in all respects hereby adopted, ratified and confirmed.

     Section 2.04 Trustee Not Responsible for Recitals. The recitals in this Supplemental Indenture No. 2 are made by the Company and the Guarantors, and the Trustee assumes no responsibility for the correctness of such recitals. The Trustee makes no representations as to the validity or sufficiency of this Supplemental Indenture No. 2.

     Section 2.05 Counterparts. This Supplemental Indenture No. 2 may be executed in multiple counterparts, each of which shall be regarded for all purposes as an original and all of which shall constitute but one and the same instrument.

2

     Section 2.06 Governing Law. This Supplemental Indenture No. 2 shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made or instruments entered into, in each case, performed in said state.

IN WITNESS WHEREOF, the Company, the Guarantors and the Trustee have executed this Supplemental Indenture No. 2 as of the date first above written.

DEAN FOODS COMPANY
By:	/s/ Timothy Smith Name: Timothy A. Smith
	Title: Vice President and Treasurer

3

31 LOGISTICS, LLC
ALTA-DENA CERTIFIED DAIRY, LLC
BARBER ICE CREAM, LLC
BARBER MILK, LLC
BERKELEY FARMS, LLC
BROUGHTON FOODS, LLC
COUNTRY DELITE FARMS, LLC
COUNTRY FRESH, LLC
CREAMLAND DAIRIES, LLC
DAIRY FRESH, LLC
DAN MORTON, LLC
DEAN DAIRY HOLDINGS, LLC
DEAN DAIRY PRODUCTS COMPANY, LLC
DEAN EAST, LLC
DEAN EAST II, LLC
DEAN FOODS COMPANY OF CALIFORNIA, LLC
DEAN FOODS COMPANY OF INDIANA, LLC
DEAN FOODS NORTH CENTRAL, LLC
DEAN MILK COMPANY, LLC
DEAN SERVICES, LLC
DEAN SoCAL, LLC
DEAN WEST, LLC
DEAN WEST II, LLC
DIPS GP II, LLC
By:	/s/ Timothy Smith Timothy A. Smith
	Vice President and Treasurer

4

FAIRMONT DAIRY, LLC

FRIENDSHIP DAIRIES, LLC

GANDY’S DAIRIES, LLC

GARELICK FARMS, LLC

HORIZON ORGANIC DAIRY, LLC

KOHLER MIX SPECIALTIES OF MINNESOTA, LLC

KOHLER MIX SPECIALTIES, LLC

LAND-O-SUN DAIRIES, LLC

LOUIS TRAUTH DAIRY, LLC

MAYFIELD DAIRY FARMS, LLC

McARTHUR DAIRY, LLC

MELODY FARMS, L.L.C.

MODEL DAIRY, LLC

MORNINGSTAR FOODS, LLC

NEW ENGLAND DAIRIES, LLC

PET O’FALLON, LLC

PURITY DAIRIES, LLC

REITER DAIRY, LLC

ROBINSON DAIRY, LLC

SAMPSON VENTURES, LLC

SCHENKEL’S ALL-STAR DAIRY, LLC

SCHENKEL’S ALL-STAR DELIVERY, LLC

SFG MANAGEMENT LIMITED LIABILITY COMPANY

SHENANDOAH’S PRIDE, LLC

SOUTHERN FOODS GROUP, LLC

SUIZA DAIRY GROUP, LLC

SULPHUR SPRINGS CULTURED SPECIALTIES, LLC

SWISS II, LLC

SWISS PREMIUM DAIRY, LLC

TERRACE DAIRY, LLC

T.G. LEE FOODS, LLC

VERIFINE DAIRY PRODUCTS OF SHEBOYGAN, LLC

By:	/s/ Timothy Smith
Timothy A. Smith
Vice President and Treasurer

5

DEAN ILLINOIS DAIRIES, LLC MIDWEST ICE CREAM COMPANY, LLC
By:	/s/ Timothy Smith
Timothy A. Smith
Vice President
DEAN HOLDING COMPANY DEAN LEGACY BRANDS, INC. DEAN MANAGEMENT CORPORATION DEAN TRANSPORTATION, INC. DIPS GP, INC. HORIZON ORGANIC INTERNATIONAL, INC. LIBERTY DAIRY COMPANY MARATHON DAIRY INVESTMENT CORP. MEADOW BROOK DAIRY COMPANY TUSCAN/LEHIGH DAIRIES, INC. WHITEWAVE FOODS COMPANY WHITEWAVE SERVICES, INC.
By:	/s/ Timothy Smith
	Timothy A. Smith
	Vice President and Treasurer

6

DEAN INTELLECTUAL PROPERTY
SERVICES II, L.P.
BY: DIPS GP II, LLC, its General Partner
By:	/s/ Timothy Smith Timothy A. Smith
	Vice President and Treasurer
DEAN INTELLECTUAL PROPERTY
SERVICES, L.P.
BY: DIPS GP, INC., its General Partner
By:	/s/ Timothy Smith Timothy A. Smith
	Vice President and Treasurer
DIPS LIMITED PARTNER II
DIPS LIMITED PARTNER
SOUTHERN FOODS HOLDINGS
BY: CSC TRUST COMPANY OF DELAWARE, as Trustee
By:	/s/ CSC Trust Company of Delaware

THE BANK OF NEW YORK TRUST COMPANY, N.A.
By:	/s/ Bank of New York

7

EX-10.1

EXHIBIT 10.1

SEPARATION AND RELEASE AGREEMENT

     Dean Foods Company and each of its subsidiaries and affiliates (hereinafter collectively referred to as the “Company”) and Alan J. Bernon (“Executive”) agree and represent as follows:

     WHEREAS, Executive is entitled to certain separation benefits pursuant to a letter agreement dated September 1, 2005 (“Employment Letter”), and to the Dean Foods Company Executive Severance Pay Plan (the “Plan”);

     WHEREAS, the parties agree and wish to ensure that they have amicably resolved and settled all possible differences, claims, or matters pertaining to, arising from, or associated with Executive’s employment with the Company and subsequent termination from employment;

     THEREFORE, the parties mutually agree to enter into this Severance and Release Agreement (the “Agreement”) and agree as follows:

     1. Termination. The Parties acknowledge that Executive’s employment with the Company will be terminated effective September 1, 2007 (the “Termination Date”). As set forth more fully below and in consideration for the execution of this Agreement, including, but not limited to, the Release and Waiver of All Claims described more fully in section 6 below and Executive’s agreement to comply with the terms of this Agreement, Executive shall receive payments and consideration described in section 3.

     2. Final Paycheck and Vacation Pay. The Company and Executive agree that Executive shall receive all earned but unpaid salary through the Termination Date plus five (5) weeks of earned, accrued and unused vacation pay in the amount of $63,462, on or before September 15, 2007.

     3. Payments and Other Consideration.

          (a) Cash Payments. The Company shall pay and provide Executive the following amounts, less applicable taxes and withholdings, on the next regular payroll date after the revocation period specified in subsection 8(g) has lapsed:

          (1) 2007 Bonus. As provided in Section 4.1 of and Exhibit A to the Plan, the Company shall pay Executive a pro rata target bonus for 2007 in an amount equal to 8/12^ths of the 30% personal component of 80% of his annualized base salary, or $105,600. In addition, to the extent the Company meets certain predetermined financial targets set forth in the 2007 bonus plan, which would have allowed Executive to receive additional compensation under the 2007 bonus plan, the Company agrees to pay Executive in 2008 the difference, if any, between the pro-rated bonus he would have received less $105,600 at the same time as active employees receive 2007 bonuses.

          (2) Base Pay/Salary and Incentive Pay/Bonus. As provided in the Employment Letter, the Company shall pay Executive an amount equal to $2,496,000, representing two (2) years of base salary and target bonuses.

          (3) Cash Payment in Lieu of Company-Paid Healthcare Continuation. As provided in Section 4.1 of and Exhibit A to the Plan, and in lieu of any Company-paid healthcare continuation, the Company shall pay Executive an amount equal to $25,000.

          (4) Cash Payment in Lieu of Outplacement Benefits. As provided in Section 4.1 of and Exhibit A to the Plan, the Company shall pay Executive an amount equal to $25,000.

          (5) Cash Payment in Lieu of Relocation Benefit. In satisfaction of the Company’s obligations to provide relocation benefits to Executive as described in the Employment Letter, the Company shall pay Executive an amount equal to $700,000.

          (6) Legal Fees. The Company will pay the reasonable and customary legal fees incurred by Executive in connection with matters pertaining to his separation from service with the Company and the review of this Agreement. Such invoice shall be promptly submitted to the Company and paid by the Company prior to November 30, 2007.

          (b) Equity Awards. As provided in the Employment Letter, all unvested stock options and restricted stock units granted to Executive will automatically vest after the seven (7) days revocation period specified in subsection 8(g) has lapsed. In addition, all vested and unexercised options must be exercised on or before the earlier of September 2, 2008, or the applicable 10 year expiration date. Attached as Exhibit A is a listing of all options currently vested and all options scheduled to vest after the revocation period specified in subsection 8(g) has lapsed. Attached as Exhibit B is a listing of all restricted stock units currently vested and all restricted stock units scheduled to vest following the lapse of the revocation period specified in subsection 8(g).

          (c) Office Assistance. The Company agrees to provide Executive with his current cell phone and will continue to pay the cell phone charges through September 30, 2007. Effective October 1, 2007, all billing associated with the phone number/cell phone shall become Executive’s responsibility. The Company also agrees to provide Executive with an office phone including voicemail access and an email address for the remainder of 2007. In addition, because of Executive’s continued responsibility as a Director of the Company, the Company agrees to provide Executive with reasonable access to his current executive assistant (or if she leaves the Company, another executive assistant designated by the Company) to assist with answering and returning telephone calls, faxing materials, forwarding personal mail, and other customary personal matters for the remainder of 2007.

          (d) Employee Benefits.

          (1) Health, Vision and Dental Benefits. Executive’s current health, dental and vision coverage will terminate effective on the Termination Date. Executive may elect COBRA continuation coverage pursuant to the COBRA materials that have been or will be provided to Executive by the Company through a third-party service provider under separate cover.

2

          (2) Supplemental Executive Retirement Plan. The Company acknowledges that Executive will be entitled to benefits he has accrued and will accrue for compensation paid to him in 2007 prior to the Termination Date under the terms of the Dean Foods Company Supplemental Executive Retirement Plan as of the Termination Date, and that such benefits will be distributed pursuant to the terms thereof, with the terms of such plan incorporated into this Agreement by reference.

          (3) Other Welfare Benefits. Executive may elect, at Executive’s own expense, conversion of any other welfare benefits to the extent such conversion is available to similarly situated employees of the Company. Executive acknowledges that Executive has no right to continued participation as an employee of the Company in any Company-sponsored benefit plans, other than as set forth in this Agreement.

          (4) Retirement Plans. Executive understands and agrees that Executive may not make any additional contributions into any Company-sponsored retirement plan, including any 401(k) plan, nor will the Company contribute to any Company-sponsored retirement plan on Executive’s behalf with respect to any amounts paid to Executive other than for services performed on or before the Termination Date. Executive acknowledges that Executive’s right to distributions of funds held on Executive’s behalf in any Company-sponsored retirement plan will continue to be governed by such plan, with the terms of such plan or plans incorporated into this Agreement by reference.

          (5) Other Benefits. Executive acknowledges that he is waiving his rights, if any, to continued participation in any other Company-sponsored benefit plans, other than as stated in this Agreement.

          (e) Executive acknowledges that the cash payments to be paid by the Company and other consideration provided pursuant to section 3 will be reported to the Internal Revenue Service and other appropriate taxing authorities as income and will be subject to withholding to the extent required by law. Although the Company and Executive believe that the payments made and benefits provided pursuant to this Agreement will not be considered subject to Section 409A of the Internal Code of 1986, as amended (the “Code”), the parties agree to cooperate to revise and amend this Agreement in order to satisfy the Code and to prevent the imposition of any excise taxes. Executive acknowledges that he will be solely responsible for any excise taxes imposed on severance benefits provided by this Agreement.

          (f) Executive hereby acknowledges that the compensation provided by section 3 does not entitle Executive to, and Executive specifically waives any rights to, any and all Company vacation, paid-time off, and bonuses including, but not limited to, holiday, merit, or performance bonuses, except as otherwise provided herein.

          (g) Executive consents to and agrees that the Company may offset from the payments under section 3 any business expenses or other debts owed by Executive to the Company that have not been reconciled to the Company’s satisfaction, and the cost of any Company property that has not been returned by Executive to the Company, as of the date of Execution of this Agreement.

3

     4. Proprietary Information, Inventions and Non-Compete Agreement. Executive and the Company entered into a Proprietary Information, Inventions and Non-Compete Agreement (“Proprietary Information Agreement”) dated September 7, 2005. The parties agree that the Proprietary Information Agreement shall remain in effect according to its terms.

     5. Nondisparagement. Company and Executive agree that neither party will make or cause to be made any statements, observations or opinions, or communicate any information (whether oral or written) that disparages or is likely in any way to harm the reputation of the other party.

     6. Release and Waiver of All Claims. Executive, and for Executive’s heirs, executors, and assigns, does hereby discharge and release the Company, its predecessors and affiliates, including, but not limited to, Dean Foods Company, its shareholders, representatives, agents, associates, servants, employees, attorneys, officers, directors, trustees, successors and assigns, from any and all liability or responsibility for all grievances, disputes, actions, and claims at law or equity, sounding in contract or tort, whether under any state or federal statutory or common law, arising out of or related in any way to Executive’s employment with and termination from employment with the Company, including, but not limited to, claims for wrongful discharge, unlawful discrimination, retaliation, breach of contract (express or implied), intentional or negligent infliction of emotional distress, negligence, defamation, duress, fraud, or misrepresentation, any violation of the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of 1964, the Employee Retirement Income Security Act of 1974, the Equal Pay Act of 1963, the Family and Medical Leave Act of 1993, the Fair Labor Standards Act, the Americans with Disabilities Act, the National Labor Relations Act, Texas Labor Code, any claim based upon the Dean Foods 401(k) Plan or any deferred compensation plan maintained on behalf of the Company’s employees, the laws of any state, and all claims under related common law, statutes, and executive orders at the federal, state and local levels of government, and any claims to any benefits from employment with the Company, other than those benefits enumerated herein or those benefits to which Executive is entitled by law. For good and valuable consideration, the Company irrevocably and unconditionally releases and forever discharges Executive and his executors, heirs, administrators, assigns, legal and financial advisors, servants, agents, and anyone else claiming by, through, or under him (the “Executive Released Parties”) from, and with respect to, any and all debts, demands, actions, causes of action, suits, covenants, contracts, damages, and any and all claims, demands, liabilities, and expenses (including attorneys’ fees and costs) whatsoever both in law and in equity which the Company now has, ever had, or may in the future have against the Executive Released Parties by reason of any matter, cause, or thing which has happened, developed, or occurred in connection with his actions as an employee or officer of the Company and its affiliates (but, for avoidance of doubt, not in connection with his actions as a member of the Board of Directors of the Company) before the signing of this Agreement. The Company agrees and covenants not to sue or bring any claims or charges against, as applicable, the Executive Released Parties with respect to any matters which the Company has released under this Section 6, other than enforcement of the terms of this Agreement, or any claims that as a matter of law cannot be released.

     7. Effect of Release and Waiver. The effect of this Agreement is to waive and release any and all claims, demands, actions, or causes of action that Executive may now or

4

hereafter have for any liability, whether known or unknown, vicarious, derivative, or direct. Executive’s waivers and releases include but are not limited to any claims for damages (actual or punitive), back wages, future wages, commission payments, bonuses, reinstatement, accrued vacation leave benefits, past and future employee benefits (except to which there is vested entitlement or as provided for herein) including contributions to the Company’s employee benefit plans, compensatory damages, penalties, equitable relief, attorneys’ fees, costs of court, interest, and any and all other loss, expense, or detriment of whatever kind resulting from, growing out of, connected with, or related in any way to Executive’s employment by the Company or the termination of such employment. This release does not apply to any claims that may arise after the date on which Executive and the Company execute this Agreement.

     8. Notice. Executive understands and agrees that Executive:

          (a) Has had a full twenty-one (21) days within which to consider this Agreement before executing it.

          (b) Has carefully read and fully understands all of the provisions of this Agreement.

          (c) Is, through this Agreement, releasing the Company from any and all claims Executive may have against the Company, including claims under the Age Discrimination in Employment Act of 1967.

          (d) Knowingly and voluntarily agrees to all of the terms set forth in this Agreement.

          (e) Knowingly and voluntarily intends to be legally bound by the same.

          (f) Was advised and hereby is advised in writing to consider the terms of this Agreement and consult with an attorney of Executive’s choice prior to executing this Agreement.

          (g) Has a full seven (7) days following the execution of this Agreement to revoke this Agreement and has been and hereby is advised in writing that this Agreement shall not become effective or enforceable until the revocation period has expired.

          (h) Understands that rights or claims under the Age Discrimination in Employment Act of 1967 (29 U.S.C. § 621, et seq.) that may arise after the date this Agreement is executed are not waived.

     9. Miscellaneous.

          (a) This Agreement represents the entire agreement and understanding of the parties with respect to the subject matter hereof and, except as provided below, supersedes all prior agreements and understandings of the parties in connection therewith. This Agreement may not be altered or amended except by mutual agreement evidenced by a writing signed by both parties and specifically identified as an amendment to this Agreement. Specifically, this Agreement cancels and replaces Executive’s Change in Control Agreement dated September 7, 2005 (the “CIC Agreement”), and any prior severance agreements; provided, however, that to the

5

extent that any payments or benefits made by the Company under or pursuant to this Agreement are deemed to be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code due to a change in ownership or effective control of the Company, or a change in ownership of a substantial portion of the assets of the Company, the Company shall pay to Executive the Gross-Up Payment described in Section 3 of the CIC Agreement. Executive’s Director and Officer Indemnity Agreement shall remain in effect.

          (b) Executive also agrees to cooperate fully with the Company in connection with its investigation and/or defense of significant legal matters pertaining to the Company’s business in which he has been involved, or which involve facts or events that existed or arose during his period of employment by the Company, that may be within his actual knowledge. Such cooperation shall in each case be subject to Executive being given reasonable advance notice and Executive’s reasonable availability. The Company will reimburse Executive for all reasonable out-of-pocket expenses incurred by him in connection with fulfilling his obligations under this Section 9(b). Executive agrees to provide the Company with immediate notice of his receipt, if any, of an information request or a summons in connection with any investigation or proceeding initiated by a party other than the Company. In addition, Executive will not, without the Company’s prior written consent, settle, compromise, consent to the entry of any judgment or otherwise seek to terminate any investigation or legal proceeding of significant legal matters pertaining to the Company’s business.

          (c) Executive acknowledges, understands, and agrees that the remedies authorized in Paragraph 6 of the Proprietary Information Agreement, in addition to any other legal or equitable relief allowed by law, shall also be available to the Company in the event of a breach of this Agreement by Executive.

          (d) The Parties, by signing this Agreement, acknowledge that they each have been afforded an opportunity to review this Agreement with an attorney or other advisers of their choice, that they have read and understand this Agreement, and that they have signed this Agreement knowingly, voluntarily, and without any form of duress or coercion.

          (e) By signing below, the Parties acknowledge that they have the authority to do so, and such authority has not been delegated or assigned.

          (f) This Agreement is made pursuant to and shall be governed, construed, and enforced in all respects and for all purposes in accordance with the laws of the state of Texas without regard to the law of conflicts. Should any provision of this Agreement be declared or determined by any court to be illegal or invalid, the validity of the remaining parts, terms or provisions shall not be affected thereby, and said illegal or invalid part, term, or provision shall be deemed not to be a part of Agreement.

          (g) Executive will be eligible to participate in all non-employee director compensation plans, programs, and arrangements, including the payment of retainer fees and committee fees, for his periods of director service beginning on and after September 1, 2007.

     10. Signatures and Counterparts. To signify their agreement to the terms of this Agreement, the parties have executed this Agreement on the dates set forth opposite their

6

signatures. This Agreement may be executed in counterparts. A facsimile of this Agreement and signatures shall be as effective as an original.

/s/ Alan J. Bernon
Alan J. Bernon		Date: September 21, 2007
Company:
DEAN FOODS COMPANY
By:	/s/ Earl. M Jones	Date: September 21, 2007
Title: Vice President, Legal

7

ACKNOWLEDGMENT AND WAIVER

     I, Alan J. Bernon, as evidenced by my signature below, acknowledge and understand that by signing the Release Agreement (the “Agreement”) with the Company, sooner than twenty-one (21) days following my receipt of the Agreement, I am knowingly and voluntarily waiving my right to consider the Agreement for twenty-one (21) days and accept such lesser time as I utilized. I promise and guarantee that neither the Company, nor its parent corporation, nor any of its subsidiaries, affiliates, employees, agents or representatives, induced this waiver of the full twenty-one (21) day period by fraud, misrepresentation or a threat to withdraw or alter the Agreement before the expiration of the twenty-one (21) day period.

     I understand that I have until seven (7) days following the date of my signing of the Agreement to revoke the Agreement by delivering a signed, written revocation to a representative of the Company’s Human Resources Department.

/s/ Alan J. Bernon
Alan J. Bernon	Date: September 21, 2007

8

Exhibit A –Stock Options

Personnel Grant Status Dean Foods Company

2515 McKinney Avenue, LB 30, Suite 1200
Dallas, Texas 75201 Page: 1
File: Optstmt
Date: 9/7/2007
Time: 9:26:57AM

AS OF 9/6/2007  

Alan Bernon	ID:
2515 McKinney Avenue
Dallas, TX USA 75201

S T O C K   O P T I O N S  

	Grant
Number	Date		Plan		Type	Granted		Price		Exercised		Vested		Cancelled		Unvested		Outstanding		Exercisable
SI000769		1/2/1998		97	NQ		45,000	$	19.5000		45,000		45,000		0		0		0		0
SI000932		1/29/1999		97	ISO		25,200	$	11.7917		25,200		25,200		0		0		0		0
SI001254		1/29/1999		97	NQ		10,800	$	11.7917		10,800		10,800		0		0		0		0
SI001307		6/4/1999		97	NQ		72,000	$	11.4167		72,000		72,000		0		0		0		0
NE001681		1/4/2000		97	NQ		120,000	$	12.4792		120,000		120,000		0		0		0		0
NE001796		1/4/2000		97	NQ		60,000	$	12.4792		60,000		60,000		0		0		0		0
SF002307		1/22/2001		97	ISO		13,974	$	14.3750		13,974		13,974		0		0		0		0
SF002308		1/22/2001		97	NQ		72,981	$	14.3750		72,981		72,981		0		0		0		0
T0000489		1/22/2001		97	NQ		33,045	$	12.1383		33,045		33,045		0		0		0		0
T0000674		1/22/2001		97	NQ		6,089	$	12.1383		6,089		6,089		0		0		0		0
DF001312		1/14/2002		97	NQ		25,000	$	20.3500		25,000		25,000		0		0		0		0
DF001451		1/14/2002		97	NQ		40,002	$	20.3500		40,002		40,002		0		0		0		0
DF001452		1/14/2002		97	ISO		4,914	$	20.3500		4,914		4,914		0		0		0		0
DV000254		1/14/2002		97	NQ		35,252	$	11.6934		0		35,252		0		0		35,252		35,252
DV000257		1/14/2002		97	NQ		23,475	$	11.6934		0		23,475		0		0		23,475		23,475
DV000259		1/14/2002		97	NQ		6,496	$	11.6934		0		6,496		0		0		6,496		6,496
DV000264		1/14/2002		97	NQ		4,326	$	11.6934		0		4,326		0		0		4,326		4,326
T0000354		1/14/2002		97	NQ		75,084	$	11.6934		0		75,084		0		0		75,084		75,084
T0000355		1/14/2002		97	NQ		50,000	$	11.6934		0		50,000		0		0		50,000		50,000
T0000604		1/14/2002		97	NQ		9,213	$	11.6934		0		9,213		0		0		9,213		9,213
T0000616		1/14/2002		97	NQ		13,836	$	11.6934		0		13,836		0		0		13,836		13,836
DF002199		1/6/2003		97	ISO		4,032	$	20.9355		4,032		4,032		0		0		0		0
DF002200		1/6/2003		97	NQ		78,468	$	14.2466		0		78,468		0		0		78,468		78,468
DV000256		1/6/2003		97	NQ		36,841	$	14.2466		0		36,841		0		0		36,841		36,841
DV000260		1/6/2003		97	NQ		6,789	$	14.2466		0		6,789		0		0		6,789		6,789
T0000606		1/6/2003		97	NQ		14,459	$	14.2466		0		14,459		0		0		14,459		14,459
T0001042		1/6/2003		97	ISO		743	$	20.9355		743		743		0		0		0		0
DF003298		1/13/2004		97	NQ		1,070	$	31.1700		1,070		1,070		0		0		0		0
DF003299		1/13/2004		97	NQ		36,791	$	17.9107		0		36,791		0		0		36,791		36,791
DV000253		1/13/2004		97	NQ		17,273	$	17.9107		0		17,273		0		0		17,273		17,273
DV000258		1/13/2004		97	NQ		3,183	$	17.9107		0		3,183		0		0		3,183		3,183

9

 
Personnel Grant Status   Dean Foods Company

2515 McKinney Avenue, LB 30, Suite 1200
Dallas, Texas 75201 Page: 2
File: Optstmt
Date: 9/7/2007
Time: 9:26:57AM

AS OF 9/6/2007  

Alan Bernon	ID:
2515 McKinney Avenue
Dallas, TX USA 75201

S T O C K   O P T I O N S  

	Grant
Number	Date		Plan		Type	Granted		Price		Exercised		Vested		Cancelled		Unvested		Outstanding		Exercisable
DV000261		1/13/2004		97	NQ		502	$	17.9107		0		502		0		0		502		502
DV000262		1/13/2004		97	NQ		92	$	17.9107		0		92		0		0		92		92
T0000015		1/13/2004		97	ISO		1,070	$	26.3199		1,070		1,070		0		0		0		0
T0000769		1/13/2004		97	NQ		6,779	$	17.9107		0		6,779		0		0		6,779		6,779
T0001703		1/13/2004		97	ISO		197	$	26.3199		197		197		0		0		0		0
TU000143		1/13/2004		97	NQ		1,069	$	17.9107		0		1,069		0		0		1,069		1,069
TU000144		1/13/2004		97	NQ		197	$	17.9107		0		197		0		0		197		197
DF902106		1/7/2005		97	ISO		5,232	$	18.3014		2,093		2,093		0		3,139		3,139		0
DF902107		1/7/2005		97	NQ		23,368	$	18.3014		0		16,974		0		6,394		23,368		16,974
DV000249		1/7/2005		97	NQ		10,971	$	18.3014		0		7,970		0		3,001		10,971		7,970
DV000252		1/7/2005		97	NQ		151	$	18.3014		0		151		0		0		151		151
DV000255		1/7/2005		97	NQ		2,022	$	18.3014		0		1,348		0		674		2,022		1,348
DV004565		1/7/2005		97	ISO		1,473	$	18.3014		0		0		0		1,473		1,473		0
DV004566		1/7/2005		97	ISO		151	$	18.3014		0		0		0		151		151		0
T0000797		1/7/2005		97	NQ		4,306	$	18.3014		0		2,870		0		1,436		4,306		2,870
T0001361		1/7/2005		97	ISO		643	$	18.3014		321		321		0		322		322		0
TU000145		1/7/2005		97	NQ		321	$	18.3014		0		321		0		0		321		321
DF004887		1/13/2006		97A	ISO		2,878	$	25.6821		46		46		0		2,832		2,832		0
DF004888		1/13/2006		97A	NQ		273,122	$	25.6821		0		91,954		0		181,168		273,122		91,954
DV000251		1/13/2006		97A	NQ		128,231	$	25.6821		0		43,173		0		85,058		128,231		43,173
DV004462		1/13/2006		97A	ISO		1,329	$	25.6821		0		0		0		1,329		1,329		0
DF005340*		2/12/2007		97A	ISO		2,259	$	30.1121		0		0		0		2,259		2,259		0
DF005345*		2/12/2007		97A	NQ		47,741	$	30.1121		0		0		0		47,741		47,741		0
DV000250		2/12/2007		97A	NQ		22,414	$	30.1121		0		0		0		22,414		22,414		0
DV000263		2/12/2007		97A	ISO		1,061	$	30.1121		0		0		0		1,061		1,061		0
							1,483,915				538,577		1,123,463		0		360,452		945,338		584,886

10

Exhibit B – Restricted Stock Units

Personnel Grant Status Dean Foods Company
ID:
2515 McKinney Avenue, LB 30, Suite 1200
Dallas, Texas 75201 Page: 1
File: Optstmt
Date: 8/29/2007
Time: 9:50:55AM

AS OF 8/28/2007  

Alan Bernon	ID:
2515 McKinney Avenue
Dallas, TX USA 75201
A W A R D S

	Grant
Number	Date		Plan		Type	Granted		Price		Released		Vested		Cancelled		Unvested
DU000424		9/19/2005		89NQ	RSU		20,000	$	0.0000		6,667		6,667		0		13,333
DU003750		1/13/2006		89NQ	RSU		75,000	$	0.0000		25,000		25,000		0		50,000
DV005410		9/19/2005		89NQ	RSU		6,260	$	0.0000		0		0		0		6,260
DV005426		1/13/2006		89NQ	RSU		23,475	$	0.0000		0		0		0		23,475
							124,735				31,667		31,667		0		93,068

Information Currently on File

Tax	Rate %		Option Broker	Award Broker	Registration	Alternate Address
Federal		25.000
Medicare		1.450
Social Security		6.200

11

EX-10.2

EXHIBIT 10.2

Mr. Gregg Tanner
3080 South 99^th Avenue
Omaha, NE 68124

Dear Gregg:

I am pleased to offer you the position of Executive Vice President, Supply Chain for Dean Foods Company. This position will report to me. We look forward to having you join our team as soon as possible.

Here are the specifics of your offer:

Base Salary

You will be paid $21,875 on a semi-monthly basis, which equates to an annual salary of $525,000. Your salary will be reviewed annually by our Compensation Committee.

Signing Bonus

You will receive a one-time signing bonus of $400,000, less payroll taxes, within 30 days after January 1, 2008. If you voluntarily leave Dean Foods without good reason during your first year of employment, you will be responsible for reimbursing Dean Foods on a prorated basis (based on number of months worked) for this one-time signing bonus.

You will also receive an additional one-time signing bonus of $175,000, less payroll taxes, within 30 days of December 31, 2008. You must be employed on December 31, 2008 to be eligible for this bonus.

Annual Bonus Opportunity

As Executive Vice President, you will be eligible to earn an annual bonus with a target amount equal to 70% of your annualized base salary, subject to the achievement of certain operating targets for the group and certain individual targets. You can earn up to 200% of your targeted bonus if operating targets are exceeded. For 2007, your bonus payment will be prorated based on your actual start date and guaranteed to the greater of the actual calculated award or 100% of target amount.

Annual Long Term Incentive Compensation

Upon commencement of your employment, and subject to Compensation Committee approval, you will be granted options to purchase 60,000 shares of Dean Foods common stock. The exercise price of the options will be the closing price of a share of Dean Foods stock on your date of hire. The options will vest in equal installments over a period of three years, beginning on the first anniversary of the date of the grant. You will also be awarded 24,000 restricted shares. These restricted shares will vest in equal installments over a five-year period, beginning on the first anniversary of the date of grant, or earlier if certain financial performance targets are met. You will be eligible for future equity grants under the Dean Foods Long Term Incentive Program in the future, commencing in January 2009. The amount and nature of future long-term incentive awards will be determined by the Board of Directors.

Replacement Long Term Incentive Awards

Upon commencement of your employment, and subject to Compensation Committee approval, you will be granted an additional number of options to purchase shares of Dean Foods common stock having a Black Scholes value, as determined by Mercer Consulting, of $1,100,000 (representing approximately 110,000 options based on current valuation). These options will have the same terms and conditions as your annual stock option awards referenced above. In addition, you will be granted restricted shares having a value of $600,000 (representing approximately 24,000 restricted shares based on current valuation). These shares will vest in equal installments over a five year period beginning on the first anniversary of the date of grant.

Additional Long Term Incentives

In addition to your annual long term incentive eligibility, you will also receive 5 annual grants of 5,000 restricted shares per year until November 1, 2011 (for a total of 25,000 restricted shares). The first of these annual grants will be within 30 days of your employment date. The remaining 4 grants will be on the first of the month following the anniversary of your hire date (the first day of employment with Dean Foods). Each of these 5 grants will vest on November 1, 2012.

You will also receive 5 annual grants of 5,000 restricted shares each year from 2012 through 2016 (for a total of 25,000 restricted shares). You will receive these grants each year on the first of the month following the anniversary of your employment date. Each of these grants will vest one year after date of issue.

You must be employed by Dean Foods on the date of issue in order to receive these restricted stock grants.

Executive Deferred Compensation Plan

You will be eligible to participate in the Executive Deferred Compensation Plan. The plan provides eligible executives with the opportunity to save on a tax-deferred basis. You will receive general information and enrollment materials at your home address approximately 30 — 45 days after your start date.

Paid Time Off (PTO)

You will be granted five (5) weeks of PTO. Unused PTO is not carried forward from year to year.

COBRA Support

Should you elect COBRA (health insurance) coverage from your previous employer, Dean Foods will pay your COBRA premiums (minus your normal Dean Foods contribution) until you become eligible for Dean Foods benefits (approximately 60 days following hire).

Benefits Plan Reference

Attached to this letter is an overview of Dean Foods’ Health Benefits, savings and 401k programs, and all other benefits. Additionally, you are eligible for executive benefits that include a Supplemental Executive Retirement Plan (SERP), a supplemental executive LTD program, and company paid annual physical. If you have questions regarding these programs or eligibility, please call Fanny Sheumaker at 214-721-3657.

Home Office

Dean Foods will provide you with the equipment for a home office in Omaha until you and your family relocate to the Dallas area.

Relocation Benefits

Dean Foods wants your move to Dallas to be a positive one. The relocation benefits provided to you include: household goods move; temporary housing; home visits; in-transit expenses; home sale assistance; duplicate housing costs; and, new home closing assistance. The policy describing these benefits is enclosed. If you have questions regarding these programs or eligibility, please call Doug Johnson at 214-721-1258.

Insider Trading

As an executive officer, you will have access to sensitive business and financial information. Accordingly, you will be prohibited from trading Dean Foods securities (or, in some circumstances, the securities of companies doing business with Dean Foods) from time to time in accordance with the company’s Insider Trading Policy.

Severance

As a corporate officer, you will also be eligible for benefits under the Dean Foods Company Executive Severance Plan (“Severance Plan”). In summary, according to the Severance Plan, if your employment is terminated at any time as a result of a “qualifying termination,” meaning any termination as a result your voluntary termination for good reason, or your involuntary termination without cause, all as defined in the Severance Plan, you will receive payment of all base salary accrued through the date of termination, prior year’s bonus to the extent earned but not paid, target bonus through the date of termination and all unused vacation/PTO. In addition, you will be eligible to receive a severance payment equivalent to two years of your base salary and target bonuses, less lawful deductions. You will be required to execute a release of all claims and such other agreements as the company may deem necessary or appropriate in order to receive such severance pay. The actual terms of the Severance Plan will govern your rights to severance and not this letter.

Change-In-Control Provisions

You will be provided a Change in Control agreement comparable to that currently provided to other Dean Foods executive officers. In general, this agreement provides benefits of three times your annual salary and target bonus, plus vesting of all equity awards and continued health coverage for a two-year period in certain circumstances following a Change in Control. As stated in the Change in Control Agreement, in order to receive these benefits, your employment must be terminated, either by the company within two years after a Change in Control, or by you for good reason within such two-year period, or by you for any reason during the 13^th month after a Change in Control. The details of these provisions are set forth more fully in the enclosed Change of Control Agreement.

New Hire Processes

You are required to comply with the Dean Foods Code of Ethics, drug screen, and background check as a condition of employment. You are required to sign the Compliance Certificate contained within the Code of Ethics at the time your employment begins and periodically thereafter.

Your position also requires that you sign a Non-Compete Agreement (enclosed).

Conclusion

Gregg, I am very excited about the opportunities at Dean Foods and very excited to have you be a part of our team. I am confident that with your experience, skills, vision and standards, you will make significant contributions to our company in the years to come.

Best regards,

/s/ Gregg Engles

Gregg Engles
Chairman & CEO
 

Agreed and accepted:
/s/ Gregg Tanner
Gregg Tanner
Date
cc:	Paul Moskowitz
	Doug Johnson
	Fanny Sheumaker

EX-10.3

EXHIBIT 10.3

CHANGE IN CONTROL AGREEMENT

     THIS CHANGE IN CONTROL AGREEMENT (this “Agreement”) is entered into effective as of November 5, 2007, by and between DEAN FOODS COMPANY, a Delaware corporation (together with its subsidiaries, the “Company”), and GREGG TANNER (the “Executive”).

RECITALS

     A. The Board of Directors of the Company (the “Board”) has determined that the interests of the Company will be advanced by providing the key executives of the Company with certain benefits in the event of the termination of employment of any such executive in connection with or following a Change in Control (as hereinafter defined).

     B. The Board believes that such benefits will enable the Company to continue to attract and retain competent and qualified executives, will assure continuity and cooperation of management and will encourage such executives to diligently perform their duties without personal financial concerns, thereby enhancing shareholder value and ensuring a smooth transition.

     C. The Executive is a key executive of the Company.

AGREEMENTS

     NOW, THEREFORE, for good and valuable consideration, including the mutual covenants set forth herein, the parties hereto agree as follows:

     1. Definitions. The following terms shall have the following meanings for purposes of this Agreement.

     “Affiliate” means any entity controlled by, controlling or under common control with, a person or entity.

     “Annual Pay” means the sum of (i) an amount equal to the annual base salary rate payable to the Executive by the Company at the time of termination of his or her employment plus (ii) an amount equal to the target bonus established for the Executive for the Company’s fiscal year in which his or her termination of employment occurs.

     “Cause” means the Executive’s (i) willful and intentional material breach of this Agreement, (ii) willful and intentional misconduct or gross negligence in the performance of, or willful neglect of, the Executive’s duties, which has caused material injury (monetary or otherwise) to the Company, or (iii) conviction of, or plea of nolo contendere to, a felony; provided, however, that no act or omission shall constitute “Cause” for purposes of this Agreement unless the Board or the Chairman of the Board provides to the Executive (a) written notice clearly and fully describing the particular acts or omissions which the Board or the

Chairman of the Board reasonably believes in good faith constitutes “Cause” and (b) an opportunity, within thirty (30) days following his or her receipt of such notice, to meet in person with the Board or the Chairman of the Board to explain or defend the alleged acts or omissions relied upon by the Board and, to the extent practicable, to cure such acts or omissions. Further, no act or omission shall be considered as “willful” or “intentional” if the Executive reasonably believed such acts or omissions were in the best interests of the Company.

     “Change in Control” means (1) any “person” (as such term is used in Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), but specifically excluding the Company, any wholly-owned subsidiary of the Company and/or any employee benefit plan maintained by the Company or any wholly-owned subsidiary of the Company) becomes the “beneficial owner” (as determined pursuant to Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company’s then outstanding securities; or (2) individuals who currently serve on the Board, or whose election to the Board or nomination for election to the Board was approved by a vote of at least two-thirds (2/3) of the directors who either currently serve on the Board, or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board; or (3) the Company or any subsidiary of the Company shall merge with or consolidate into any other corporation, other than a merger or consolidation which would result in the holders of the voting securities of the Company outstanding immediately prior thereto holding immediately thereafter securities representing more than sixty percent (60%) of the combined voting power of the voting securities of the Company or such surviving entity (or its ultimate parent, if applicable) outstanding immediately after such merger or consolidation; or (4) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, or such a plan is commenced.

     “Code” means the Internal Revenue Code of 1986, as amended.

     “Confidential Information” means all information, whether oral or written, previously or hereafter developed, acquired or used by the Company or its subsidiaries and relating to the business of the Company and its subsidiaries that is not generally known to others in the Company’s area of business, including without limitation trade secrets, methods or practices developed by the Company or any of its subsidiaries, financial results or plans, customer or client lists, personnel information, information relating to negotiations with clients or prospective clients, proprietary software, databases, programming or data transmission methods, or copyrighted materials (including without limitation, brochures, layouts, letters, art work, copy, photographs or illustrations). It is expressly understood that the foregoing list shall be illustrative only and is not intended to be an exclusive or exhaustive list of “Confidential Information.”

     “Good Reason” means any of the following events occurring, without the Executive’s prior written consent specifically referring to this Agreement, within two (2) years following a Change in Control:

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     (1) (A) Any material reduction in the amount of the Executive’s Annual Pay, (B) any material reduction in the amount of Executive’s other incentive compensation opportunities, or (C) any material reduction in the aggregate value of the Executive’s benefits as in effect from time to time (unless in the case of either B or C, such reduction is pursuant to a general change in compensation or benefits applicable to all similarly situated employees of the Company and its Affiliates);

     (2) (A) the removal of the Executive from the Executive’s position as Executive Vice President of the ultimate parent of the business of the Company or (B) any other significant reduction in the nature or status of the Executive’s duties or responsibilities;

     (3) transfer of the Executive’s principal place of employment to a metropolitan area other than that of the Executive’s place of employment immediately prior to the Change in Control; or

     (4) failure by the Company to obtain the assumption agreement referred to in Section 7 of this Agreement prior to the effectiveness of any succession referred to therein, unless the purchaser, successor or assignee referred to therein is bound to perform this Agreement by operation of law.

     “Termination Pay” means a payment made by the Company to the Executive pursuant to Section 2(a)(ii) or Section 2(b)(ii) hereof.

     2. Benefits.

          (a) Involuntary or Constructive Termination. In the event that the Executive’s employment with the Company or its successor is terminated by the Company or its successor without Cause or by the Executive for Good Reason in connection with or within two years after a Change in Control, the Executive shall be entitled to the following payments and other benefits:

               (i) The Company shall pay to the Executive a cash payment in an amount equal to the sum of (A) the Executive’s accrued and unpaid salary as of his or her date of termination of employment, plus (B) his or her accrued and unpaid bonus, if any, for the Company’s prior fiscal year, plus (C) an amount equal to the greater of the following, paid on a pro rata basis for the portion of the year between January 1 and the date of the Executive’s termination of employment: (x) Executive’s target bonus for the year of termination, or (y) the actual bonus to which the Executive would be entitled in the year of termination, plus (D) reimbursement for all expenses reasonably and necessarily incurred by the Executive (in accordance with Company policy) prior to termination in connection with the business of the Company. This amount shall be paid on the date of the Executive’s termination of employment.

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               (ii) The Company shall pay to the Executive a cash payment in an amount equal to three (3) times the Executive’s Annual Pay. This amount shall be paid by the Company in accordance with Section 2(e) hereof.

               (iii) The Company shall pay to the Executive a cash payment in an amount equal to the sum of (A) the Executive’s unvested account balance under the Company’s 401(k) plan, and (B) three (3) times the amount of the most recent matching contribution that the Company paid into the Executive’s 401(k) account. This amount shall be paid as soon as administratively practicable after the date of the Executive’s termination of employment.

               (iv) The Executive and his or her eligible dependents shall be entitled for a period of two (2) years following his or her date of termination of employment to continued coverage, on the same basis as similarly situated active employees, under the Company’s group health, dental, long-term disability and life insurance plans as in effect from time to time (but not any other welfare benefit plans or any retirement plans); provided that coverage under any particular benefit plan shall expire with respect to the period after the Executive becomes covered under another employer’s plan providing for a similar type of benefit. In the event the Company is unable to provide such coverage on account of any limitations under the terms of any applicable contract with an insurance carrier or third party administrator, the Company shall pay the Executive an amount equal to the cost of such coverage.

               (v) The Company shall pay all costs and expenses, up to a maximum of $50,000, related to outplacement services for the Executive, the provider of which shall be selected by the Executive in his or her sole discretion. This amount shall be paid directly to the provider of such services.

          (b) Voluntary Termination. If, at any time during the 13^th month after a Change in Control, the Executive voluntarily terminates his or her employment with the Company for any reason, the Executive shall be entitled to receive the same payments and benefits as set forth in Sections 2(a)(i) through 2(a)(v) hereof.

          (c) Accelerated Vesting. All of the Executive’s unvested awards under the Company’s stock award plans shall automatically and immediately vest in full upon the occurrence of a Change in Control.

          (d) No Duplication; Other Severance Pay. There shall be no duplication of severance pay in any manner. In this regard, the Executive shall not be entitled to Termination Pay hereunder for more than one position with the Company and its Affiliates. If the Executive is entitled to any notice or payment in lieu of any notice of termination of employment required by Federal, state or local law, including but not limited to the Worker Adjustment and Retraining Notification Act, the severance compensation to which the Executive would otherwise be entitled under this Agreement shall be reduced by the amount of any such payment in lieu of notice. If Executive is entitled to any severance or termination payments under any employment or other agreement (other than stock award agreements) with the Company or any of its

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Affiliates, the severance compensation to which Executive would otherwise be entitled under this Agreement shall be reduced by the amount of such payment. Except as set forth above, the foregoing payments and benefits shall be in addition to and not in lieu of any payments or benefits to which the Executive and his or her dependents may otherwise be entitled to under the Company’s compensation and employee benefit plans. Nothing herein shall be deemed to restrict the right of the Company from amending or terminating any such plan in a manner generally applicable to similarly situated active employees of the Company and its Affiliates, in which event the Executive shall be entitled to participate on the same basis (including payment of applicable contributions) as similarly situated active executives of the Company and its Affiliates.

          (e) Mutual Release. Termination Pay shall be conditioned upon the execution by the Executive and the Company of a valid mutual release to be prepared by the Company pursuant to which the Executive and the Company shall each mutually release each other, to the maximum extent permitted by law, from any and all claims either party may have against the other that relate to or arise out of the employment or termination of employment of the Executive, except such claims arising under this Agreement, any employee benefit plan, or any other written plan or agreement (a “Mutual Release”). The full amount of Termination Pay shall be paid in a lump sum in cash to the Executive within ten (10) days following receipt by the Company of a Mutual Release which is properly executed by the Executive; provided, however, that in the event applicable law allows the Executive to revoke the Mutual Release for a period of time, and the Mutual Release is not revoked during such period, the full amount of Termination Pay shall be paid to the Executive following the expiration of such period.

     3. Excise Taxes.

          (a) Gross-Up Payment. Anything in this Agreement to the contrary notwithstanding and except as set forth below, if it is determined that any payment or distribution (a “Payment”) by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 3) including, without limitation, vesting of options, would be subject to the excise tax imposed by Section 4999 of the Code, or if any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, being hereinafter collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount sufficient to pay all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment.

          (b) Calculation of Gross-Up Payment. Subject to the provisions of paragraph (c) of this Section 3, all determinations required to be made under this Section 3, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be used in arriving at such determination, shall be made by a certified public accounting firm selected by the Company and reasonably acceptable to the Executive (the “Accounting Firm”), which shall be retained to provide detailed supporting calculations both to

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the Company and the Executive. If the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Executive shall have the right to appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be paid solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 3, shall be paid by the Company to the Executive within five (5) days of the receipt of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which should have been made will not have been made by the Company (“Underpayment”), consistent with the calculations required to be made hereunder. If the Company exhausts its remedies pursuant to paragraph (c) of this Section 3 and the Executive thereafter is required to pay an Excise Tax in an amount that exceeds the Gross-Up Payment received by the Executive the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.

          (c) Contested Taxes. The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would result in an Underpayment. Such notification shall be given as soon as practicable but no later than ten (10) business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid or appealed. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:

               (i) give the Company any information reasonably requested by the Company relating to such claim,

               (ii) take such action in connection with contesting such claims as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,

               (iii) cooperate with the Company in good faith in order to effectively contest such claim, and

               (iv) permit the Company to participate in any proceedings relating to such claim;

     provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income

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tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this paragraph (c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or to contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect to the amount of the Gross-Up Payment, and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

          (d) Refunds. If, after the receipt by the Executive of an amount advanced by the Company pursuant to this Section 3, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto).

     4. Certain Covenants by the Executive.

          (a) Covenant Not to Compete or Solicit. In consideration of the payments made to the Executive pursuant to this Agreement, the Executive hereby agrees that, during the term of his or her employment with the Company or any of its Affiliates and for a period of two years thereafter, he or she will not, directly or indirectly, individually or on behalf of any person or entity other than the Company or any of its Affiliates:

               (i) Become associated with (as defined below) any company or business (other than the Company or any Affiliate of the Company) engaged primarily in the manufacture, distribution, sale or marketing of any of the Relevant Products (as defined below) in any geographical area in which the Company or any of its Affiliates operates;

               (ii) Approach, consult, solicit business from, or contact or otherwise communicate, directly or indirectly, in any way with any Customer (as defined below) in an attempt to (1) divert business from, or interfere with any business relationship of the Company or any of its Affiliates, or (2) convince any Customer to change or alter any of such Customer’s existing or prospective contractual terms and conditions with the Company or any of its Affiliates; or

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               (iii) Solicit, induce, recruit or encourage, either directly or indirectly, any employee of the Company or any of its Affiliates to leave his or her employment with the Company or any of its Affiliates, or employ or offer to employ any employee of the Company or any Subsidiary. For the purposes of this section, an employee of the Company or any Subsidiary shall be deemed to be an employee of the Company or any Subsidiary while employed by the Company and for a period of 60 days thereafter.

          (b) Protection of Confidential Information. The Executive agrees that he or she will not at any time during or following his or her employment by the Company, without the Company’s prior written consent, divulge any Confidential Information to any other person or entity or use any Confidential Information for his or her own benefit. Upon termination of employment, for any reason whatsoever, regardless of whether either party may be at fault, the Executive will return to the Company all physical Confidential Information in the Executive’s possession.

          (c) Nondisclosure of Agreement. The Executive agrees, at all times during his or her employment by the Company, not to disclose or discuss in any manner (whether to individuals inside or outside the Company), the existence or terms of, this Agreement without the prior written consent of the Company, except to the extent required by law.

          (d) Nondisparagement. The Executive and the Company agree that, for so long as the Executive remains employed by the Company, and for a period of two years following the termination of the Executive’s employment, neither the Executive nor the Company will make or authorize any public statement, whether orally or in writing, that disparages the other party hereto with respect to such other party’s business interests or practices; provided, that neither party shall be restricted in connection with statements made in context of any litigation, arbitration or similar proceeding involving the other party hereto.

          (e) Extent of Restrictions. The Executive acknowledges that the restrictions contained in this Section 4 correctly set forth the understanding of the parties at the time this Agreement is entered into, are reasonable and necessary to protect the legitimate interests of the Company, and that any violation will cause substantial injury to the Company. In the event of any such violation, the Company shall be entitled, in addition to any other remedy, to preliminary or permanent injunctive relief. If any court having jurisdiction shall find that any part of the restrictions set forth in this Agreement are unreasonable in any respect, it is the intent of the parties that the restrictions set forth herein shall not be terminated, but that this Agreement shall remain in full force and effect to the extent (as to time periods and other relevant factors) that the court shall find reasonable.

     5. Tax Withholding. All payments to the Executive under this Agreement will be subject to the withholding of all applicable employment and income taxes.

     6. Severability. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect.

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     7. Successors. This Agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company. The Company will require any successor to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no succession had taken place.

     8. Entire Agreement. By executing this Agreement, the Executive agrees that any and all agreements executed between the Company (or any subsidiary of the Company or any predecessor of the Company or any subsidiary of the Company) and the Executive prior to the date hereof regarding benefits resulting from a Change in Control are hereby nullified and cancelled in their entirety, and this Agreement shall substitute for and fully replace any such prior agreements. This Agreement shall constitute the entire agreement between the parties hereto with respect to the subject matter hereof. This Agreement may not be modified in any manner except by a written instrument signed by both the Company and the Executive.

     9. Notices. Any notice required under this Agreement shall be in writing and shall be delivered by certified mail return receipt requested to each of the parties as follows:

To the Executive:

GREGG TANNER
3080 South 99^th Avenue
Omaha, Nebraska 68124

To the Company:

DEAN FOODS COMPANY
2515 McKinney Avenue, Suite 1200, LB 30
Dallas, Texas 75201
Attn.: General Counsel
Tel.: 214-303-3400
Fax: 214-303-3499

     10. Governing Law. The provisions of this Agreement shall be construed in accordance of the laws of the State of Delaware, except to the extent preempted by ERISA or other federal laws, as applicable, without reference to the conflicts of laws provisions thereof.

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     IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement as of the date and year first above written.

DEAN FOODS COMPANY

/s/ Paul Moskowitz Name: Paul Moskowitz
Title: Executive Vice President – Human Resources

/s/ Gregg Tanner

GREGG TANNER

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EX-10.4

Exhibit 10.4

PROPRIETARY INFORMATION, INVENTIONS
AND NON-COMPETE AGREEMENT

     THIS PROPRIETARY INFORMATION, INVENTIONS AND NON-COMPETE AGREEMENT (this “Agreement”), dated as of the 1st day of November, 2007, between Dean Foods Company, a Delaware corporation (“the Company”), having its principal place of business at 2515 McKinney Avenue, Suite 1200, Dallas, Texas 75201, and Gregg Tanner (“Employee”).

     WHEREAS, the Company has offered Employee employment as Executive Vice President, Supply Chain of the Company; a position which will result in Employee acquiring substantial knowledge of the operations and practices of the business of the Company;

     WHEREAS, the Company desires to prevent any competitive business from securing or utilizing the services of Employee, to the extent and for the period of Employee’s employment and for a reasonable period thereafter; and

     WHEREAS, as a condition to the employment of Employee, the Company has required that Employee enter into this Agreement.

     NOW, THEREFORE, it is agreed as follows:

     1. Acknowledgments. Employee acknowledges that (i) the Company is engaged in a continuous program of research, development, and production respecting its business throughout the United States and Canada (the foregoing, together with any other businesses in which the Company engages, from the date hereof to the date of the termination of Employee’s employment with the Company, is hereinafter referred to as the “Company Business”); (ii) Employee’s services to the Company will be unique and have significant value to the Company, and Employee may make new contributions and inventions of value to the Company; (iii) Employee’s work for the Company allows Employee access to trade secrets of, and confidential information concerning, Company; (iv) the Company Business is national and international in scope; (v) the Company would not have agreed to employ Employee but for the agreements and covenants contained in this Agreement; and (vi) the agreements and covenants contained in this Agreement are necessary and essential to protect the business, goodwill, and customer relationships that the Company has expended significant resources to develop.

     2. Ownership of Works. The Company shall own all rights, including all trade secrets and copyrights, in and to all discoveries, developments, designs, improvements, inventions, formulas, processes, techniques, know-how and data, whether patentable under patent or registerable under copyright or similar statutes or reduced to practice and all documentation thereof created by Employee, during the time Employee is employed by the Company, whether created during or outside normal business hours or on the Company premises or at some other location and that: (i) directly relate to or are derived from the Company Business; and (ii) result from or are derived from any task or work assigned to Employee or work performed by Employee for the Company (collectively, “Works”). To the extent that any Works do not qualify as works made for hire under U.S. copyright law, this

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Agreement shall constitute an irrevocable assignment by Employee to the Company of the ownership of, and rights of copyright in, Works. Employee agrees to give the Company or its designees all assistance reasonably required to protect such rights.

     3. Inventions. If Employee individually or jointly makes, conceives of, or reduces to practice any invention, technique, recipe, process, improvement, modification, development, documentation, data, design, idea, discovery, trademark, trade secret, formula, process, or other know-how, whether patentable or not, in the course of performing services for the Company, that directly relates to the Company Business (collectively, “Inventions”), Employee will and hereby does assign to the Company Employee’s entire right, title and interest in and to such Inventions. Employee agrees that all Inventions shall be the sole property of the Company and its assigns, and the Company and its assigns shall be the sole owner of all patents, copyrights, and other rights in connection therewith. Employee will disclose any such Inventions (to the extent Employee knows such inventions are “Inventions” as defined herein) to an officer of the Company and will, upon request, promptly sign a specific assignment of title to the Company and do anything else reasonably necessary without additional compensation to enable the Company to secure patent, trade secret, or any other proprietary rights in the United States or foreign countries. Employee agrees to execute any documents deemed necessary or advisable by the Company to effect the terms of this paragraph. Employee agrees that after termination of employment with the Company Employee shall not use any Inventions, except in furtherance of the Company Business and except to the extent such Inventions are in the public domain through no fault of Employee.

     4. Non-Disclosure. Employee recognizes that the Company competes in a highly competitive field and that the Company possesses and will continue to possess information of commercial value that relates to the Company Business, including but not limited to trade secrets, technical and scientific information, financial business information, processes, recipes, formulas, data, know-how, improvements, inventions, product concepts, discoveries, developments, designs, inventions, techniques, marketing plans, strategies, forecasts, new products, blueprints, specifications, programs, ideas, customer lists, vendor lists, pricing and other structures, marketing and business strategies, budgets, projections, licenses, costs, financial data, and plans, proposals and information about the Company’s employees and/or consultants (collectively, “Proprietary Information”). Notwithstanding the foregoing, Proprietary Information shall not include information that is publicly available when received, or thereafter becomes publicly available through no fault of Employee or is otherwise disclosed by the Company to another party without obligation of confidentiality. Employee agrees that the Proprietary Information constitutes a unique and valuable asset which is essential to the Company’s business success, and that any release of Proprietary Information would be harmful to the Company and/or its customers. To protect the Company’s Proprietary Information, Employee agrees that at all times, including during and after the term of Employee’s employment, Employee will not disclose to any person, firm, company, or corporation or use for Employee’s own benefit or for the benefit of any third party (except in furtherance of Company Business or affairs of the Company) any and all Proprietary Information that Employee may have acquired in the course of or as an incident to Employee’s employment with the Company. Employee further agrees to take all reasonable precautions to protect against the intentional, negligent, or inadvertent disclosure by Employee of the Company’s Proprietary

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Information to any other person or business entity, except in furtherance of the Company Business.

     5. Non-Competition. Employee understands and agrees that during Employee’s employment with the Company, Employee will be provided access to specialized information related to Company Business and trade secrets, as well as the Company’s customers and their confidential information. Employee further agrees that if this information were used in competition against the Company, the Company would experience serious harm and the competitor would have a unique advantage against the Company. Employee hereby covenants and agrees that (A) at no time during Employee’s employment with the Company and (B) at no time until the two years from the date of Employee’s termination (the “Non-Compete Period”), will Employee (i) develop, own, manage, operate, or otherwise engage in, participate in, represent in any way or be connected with, as officer, director, partner, owner, employee, agent, independent contractor, consultant, proprietor, stockholder or otherwise, any Competing Business in any geographic territory (within or outside the United States) in which the Company does business; or (ii) act in any way, directly or indirectly, on behalf of any Competing Business, with the purpose or effect of soliciting, diverting or taking away any business, customer, client, supplier, or good will of the Company.

The foregoing provisions shall not restrict Employee from (i) owning up to a 2% interest in a publicly traded company which is or engages in a Competing Business or (ii) acting as an officer, employee, agent, independent contractor or consultant to any company or business which engages in multiple lines of business, one or more of which may be a Competing Business, if Employee has no direct or indirect involvement, oversight or responsibility with respect to the unit, division, group or other area of operations which cause such company or business to be a Competing Business.

A “Competing Business” shall mean a company or business which is engaged, or intends to engage in, the manufacture, distribution, sale or marketing of any products which compete directly with the Company’s products or the Company Business.

Employee acknowledges that this covenant has a unique, substantial, and immeasurable value to the Company.

Notwithstanding the foregoing, the restrictions of this Section 5 shall terminate immediately if your employment with the Company is involuntarily terminated by the Company without “Cause.” “Cause” shall mean: (a) conviction of Employee of any crime deemed by the Company to make continued employment untenable; (b) any act of gross negligence or willful misconduct in the conduct of your employment; (c) any act of dishonesty on the part of Employee whether relating to the Company or any of its subsidiaries, its affiliates, employees, agents or otherwise; (d) failure by Employee to comply with the Dean Foods Code of Ethics, or any conduct of Employee which brings the Company or any of its affiliates into disrepute, in each case as determined by the Board of Directors.

     6. Non-Solicitation. Employee hereby covenants and agrees that at no time during Employee’s employment with the Company and during the Non-Compete Period, will

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Employee (i) recruit, hire, assist or solicit, directly or indirectly, any of the Company’s employees to leave the employ of the Company or (ii) solicit any customer or prospective customer of the Company for the purpose of (1) inducing or otherwise intending to cause such customer or prospective customer to alter or end its business relationship with the Company or (2) interfering with the Company’s business relationship with such customer or prospective customer. For the purposes of this Agreement, “customer” shall mean any company that was a customer of the Company at any time during the term of Employee’s employment with the Company, and “prospective customer” shall mean any company that, to Employee’s knowledge, was actively solicited by the Company at any time during the term of Employee’s employment with the Company.

     7. Remedies. Employee acknowledges, understands, and agrees that the restrictions contained in Paragraphs 2, 3, 4, 5, and 6 of this Agreement are reasonable, fair, and equitable in scope, terms, geographic area and duration, are necessary to protect the legitimate business interests and good will of the Company, and are a material inducement to the Company to employ Employee and to enter into this Agreement, and that any breach or threatened breach of such restrictions would cause the Company substantial and irreparable harm for which there is no adequate remedy at law. Therefore, Employee agrees that in the event of any such breach, any unvested stock options, restricted stock awards or other equity grants shall be immediately canceled and all of Employee’s rights thereunder shall be immediately terminated. In addition, if the Company deems such action warranted by the particular circumstances, the Company shall be entitled to equitable relief including, but not limited to, temporary, preliminary, and permanent injunctive relief, including the issuance of a temporary restraining order, in order to secure the specific performance of this Agreement without the necessity of posting bond or security, which Employee expressly waives. Employee agrees that the rights of the Company to obtain injunctive relief shall not be considered a waiver of the Company’s rights to seek any other remedies it may have at law or in equity.

     The restrictions set forth herein shall be construed as a series of separate and severable covenants. Employee agrees that if in any proceeding, the tribunal refuses to enforce fully any covenants contained herein because such covenants cover too extensive a geographic area or too long a period of time or for any other reason whatsoever, any such covenant shall be considered divisible both as to duration and geographic area so that each month of a specified period shall be deemed a separate period of time and each county in each particular state (or such other geographic subdivision as the tribunal determines is reasonable) a separate geographic area, resulting in an intended requirement that the longest lesser period of time or the largest lesser geographic area found by such tribunal to be a reasonable restriction shall remain an effective restrictive covenant specifically enforceable against Employee. Further, the covenants contained in Paragraphs 2, 3, 4, 5, and 6 shall be construed as agreements independent of any other provision of this Agreement, and the existence of any claim or cause of action of Employee against the Company or any of its employees, agents, shareholders, directors, or officers, whether predicated on this Agreement or otherwise, shall not constitute a defense to enforcement by the Company of any of these covenants.

     8. Return of Records. Upon termination of employment, Employee agrees to return to the Company all documents (whether electronic or written), notes, drawings, data,

4

records, materials and other property of whatever nature received from or created for the Company, and any and all copies thereof including, but not limited to, those documents, records, and materials containing or relating to Proprietary Information. Employee agrees that all such documents that are currently in Employee’s possession or control or which may come into Employee’s possession or control in the future shall be the property of the Company.

     9. Miscellaneous.

               (a) Severability. Nothing in this Agreement shall be construed so as to require the commission of any act contrary to law and wherever there is any conflict between any provision of this Agreement and any law, statute, ordinance, order or regulation, the latter shall prevail, but in the event of any conflict, any provision of this Agreement shall be curtailed and limited only to the extent necessary to bring it within applicable legal requirements. If any provision of this Agreement should be held invalid or unenforceable, the remaining provisions shall be unaffected by the holding.

               (b) Complete Agreement. This Agreement contains the entire agreement and understanding between the parties relating to the subject matter hereof, and supersedes any prior understandings, agreements, or representations by or between the parties, written or oral, relating to the subject matter hereof. It may not be modified, except in a written document executed by both parties to this Agreement.

               (c) Other Agreements. Employee represents and warrants that Employee is not a party to or bound by the provisions of any other agreement which would prevent or impair Employee’s ability to render services to the Company and that Employee’s entering into this Agreement. The parties hereto each represent and warrant to the other party that the performance of any obligations hereunder by such party will not violate the provisions of, or cause such party to be in default under, any other agreement or contract to which such party is a party or by which such party is bound.

               (d) Paragraph Headings. The paragraph headings used in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement.

               (e) Governing Law. This Agreement shall be governed by and this Agreement and any disputes or controversies related hereto shall be construed in accordance with the laws of the State of Texas, excluding any choice of law provisions that would apply the laws of any other jurisdiction.

               (f) Waiver. No delay on the part of either party in exercising any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of either party of any right, power, or privilege hereunder, preclude any other or further exercise thereof or the exercise of any other right, power, or privilege hereunder.

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               (g) Assignment. This Agreement and Employee’s rights and obligations hereunder may not be assigned by Employee. The Company may, without Employee’s consent, assign its rights, together with its obligations, under this Agreement.

               (h) Period of Employment. As used herein, the period of employment includes any time in which Employee is retained by the Company as an employee, director, or consultant.

               (i) Counterparts. This Agreement may be entered into in two or more counterparts, each of which shall be deemed an original, and together shall be deemed to be one and the same instrument.

     IN WITNESS WHEREOF, the parties have executed and delivered this Proprietary Information, Inventions and Non-Compete Agreement as of the date first set forth above.

EMPLOYEE	DEAN FOODS COMPANY
/s/ Gregg Tanner	By:	/s/ Paul Moskowitz
GREGG TANNER		PAUL MOSKOWITZ Executive Vice President Human Resources

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EX-31.1

Exhibit 31.1

Certification

I, Gregg L. Engles, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Dean Foods Company;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Dean Foods Company as of, and for, the periods presented in this quarterly report;

     4. Dean Foods Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Dean Foods Company and have:

     a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Dean Foods Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     c. Evaluated the effectiveness of Dean Foods Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d. Disclosed in this report any change in Dean Foods Company’s internal control over financial reporting that occurred during Dean Foods Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Dean Foods Company’s internal control over financial reporting; and

     5. Dean Foods Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Dean Foods Company’s auditors and the audit committee of Dean Foods Company’s board of directors:

     a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Dean Foods Company’s ability to record, process, summarize and report financial information; and

     b. Any fraud, whether or not material, that involves management or other employees who have a significant role in Dean Foods Company’s internal control over financial reporting.

/s/ Gregg L. Engles  

Chairman of the Board and 

Chief Executive Officer 

November 9, 2007

EX-31.2

Exhibit 31.2

Certification

I, Jack F. Callahan, Jr., certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Dean Foods Company;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Dean Foods Company as of, and for, the periods presented in this quarterly report;

     4. Dean Foods Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Dean Foods Company and have:

     a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Dean Foods Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     c. Evaluated the effectiveness of Dean Foods Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d. Disclosed in this report any change in Dean Foods Company’s internal control over financial reporting that occurred during Dean Foods Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Dean Foods Company’s internal control over financial reporting; and

     5. Dean Foods Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Dean Foods Company’s auditors and the audit committee of Dean Foods Company’s board of directors:

     a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Dean Foods Company’s ability to record, process, summarize and report financial information; and

     b. Any fraud, whether or not material, that involves management or other employees who have a significant role in Dean Foods Company’s internal control over financial reporting.

/s/ Jack F. Callahan, Jr.  

Executive Vice President and 

Chief Financial Officer 

November 9, 2007

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

     In connection with the Form 10-Q of Dean Foods Company (the “Company”) for the quarter ended September 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregg L. Engles, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, and the information contained in the Report fairly presents in all material respects, the financial condition and results of operations of the Company.

/s/ Gregg L. Engles  

Gregg L. Engles 

Chairman of the Board and Chief Executive Officer 

November 9, 2007

Note: This certification accompanies the Report pursuant to Section 902 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed, except to the extent required by the Sarbanes-Oxley Act of 2002, by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

     In connection with the Form 10-Q of Dean Foods Company (the “Company”) for the quarter ended September 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jack F. Callahan, Jr., Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, and the information contained in the Report fairly presents in all material respects, the financial condition and results of operations of the Company.

/s/ Jack F. Callahan, Jr.  

Jack F. Callahan, Jr. 

Executive Vice President and Chief Financial Officer 

November 9, 2007

Note: This certification accompanies the Report pursuant to Section 902 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed, except to the extent required by the Sarbanes-Oxley Act of 2002, by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

EX-99

EXHIBIT 99

DEAN HOLDING COMPANY
CONSOLIDATED BALANCE SHEET INFORMATION
(Unaudited)
(In thousands)

	September 30, 2007
Assets
Current assets:
Cash and cash equivalents	$	18,032
Receivables, net		334,681
Income taxes receivable		3,778
Inventories		124,929
Deferred income taxes		19,006
Prepaid expenses and other current assets		9,318
Total current asset		509,744
Property, plant and equipment, net		490,548
Goodwill		1,076,868
Identifiable intangible and other assets		193,661
Total	$	2,270,821
Liabilities and Parent’s Net Investment
Current liabilities:
Accounts payable and accrued expenses	$	302,420
Current portion of long-term debt		165
Total current liabilities		302,585
Long-term debt		537,298
Deferred income taxes		149,706
Other long-term liabilities		88,689
Parent’s net investment:
Parent’s net investment		1,199,459
Accumulated other comprehensive loss		(6,916	)
Total parent’s net investment		1,192,543
Total	$	2,270,821

DEAN HOLDING COMPANY
CONSOLIDATED OPERATING INFORMATION
(Unaudited)
(In thousands)

	Nine Months Ended
	September 30, 2007
Net sales	$	3,097,389
Cost of sales		2,389,997
Gross profit		707,392
Operating costs and expenses:
Selling and distribution		454,224
General and administrative		54,483
Amortization of intangibles		1,486
Facility closing and reorganization costs		1,738
Total operating costs and expenses		511,931
Operating income		195,461
Other (income) expense:
Interest expense		32,386
Other (income) expense, net		111
Income from subsidiaries		—
Total other expense		32,497
Income from continuing operations before income taxes		162,964
Income taxes		61,174
Net income	$	101,790