Debt

Our outstanding debt as of March 31, 2014 and December 31, 2013 consisted of the following:



	March 31, 2014					December 31, 2013
	Amount Outstanding			Interest Rate		Amount Outstanding			Interest Rate
	(In thousands, except percentages)
Dean Foods Company debt obligations:
Senior secured credit facility	$	328,940		1.67	%*	$	50,250		1.67	%*
Senior notes due 2016	475,637			7.00		475,579			7.00
Senior notes due 2018	23,812			9.75		23,812			9.75
	828,389					549,641
Subsidiary debt obligations:
Senior notes due 2017	133,317			6.90		132,808			6.90
Receivables-backed facility	—			—		213,000			1.19
Capital lease and other	1,649			—		1,813			—
	134,966					347,621
	963,355					897,262
Less current portion	(698		)			(698		)
Total long-term portion	$	962,657				$	896,564

* Represents a weighted average rate, including applicable interest rate margins, for the credit facility.

The scheduled maturities of long-term debt at March 31, 2014 were as follows (in thousands):



2014	$	534
2015	677
2016	476,627
2017	142,000
2018	352,752
Thereafter	—
Subtotal	972,590
Less discounts	(9,235		)
Total outstanding debt	$	963,355

Senior Secured Credit Facility — In July 2013, we executed a credit agreement pursuant to which the lenders provided us with a five-year senior secured revolving credit facility in the amount of up to $750 million. Under the agreement, we also have the right to request an increase of the aggregate commitment under the credit facility by, and to request incremental term loans or increased revolver commitments of, up to $500 million without the consent of any lenders not participating in such increase, subject to specified conditions. The senior secured credit facility is available for the issuance of up to $200 million of letters of credit and up to $150 million of swing line loans. The facility will terminate in July 2018.

Loans outstanding under the senior secured credit facility bear interest, at our election, at either the Adjusted LIBO Rate (as defined in the credit agreement) plus a margin of between 1.25% and 2.25% (1.75% as of March 31, 2014 ) based on the leverage ratio (as defined in the credit agreement), or the Alternate Base Rate (as defined in the credit agreement) plus a margin of between 0.25% and 1.25% (0.75% as of March 31, 2014 ) based on the leverage ratio. We are permitted to make optional prepayments of the loans, in whole or in part, without premium or penalty (other than applicable LIBOR breakage costs). Subject to certain exceptions and conditions described in the credit agreement, we are obligated to prepay the credit facility, but without a corresponding commitment reduction, with the net cash proceeds of certain asset sales and with casualty and insurance proceeds.

The senior secured credit facility is guaranteed by our existing and future domestic material restricted subsidiaries (as defined in the credit agreement), which are substantially all of our wholly-owned U.S. subsidiaries other than our receivables securitization subsidiaries. The facility is secured by a first priority perfected security interest in substantially all of the personal property of us and our guarantors, whether consisting of tangible or intangible property, including a pledge of, and a perfected security interest in, (i) all of the shares of capital stock of the guarantors and (ii) 65% of our or any guarantor’s first-tier foreign subsidiaries which are material restricted subsidiaries, in each case subject to certain exceptions as set forth in the credit agreement. The collateral does not include any real property, the capital stock and any assets of any unrestricted subsidiary, or any capital stock of any direct or indirect subsidiary of our wholly-owned indirect subsidiary Dean Holding Company ("Legacy Dean") which owns any real property.

The credit agreement governing the senior secured credit facility contains customary representations, warranties and covenants, including, but not limited to specified restrictions on indebtedness, liens, guarantee obligations, mergers, acquisitions, consolidations, liquidations and dissolutions, sales of assets, leases, payment of dividends and other restricted payments, investments, loans and advances, transactions with affiliates and sale and leaseback transactions. The credit agreement also contains customary events of default and related cure provisions.

At March 31, 2014, there were outstanding borrowings of $328.9 million under the senior secured revolving credit facility. Our average daily balance under the senior secured revolving credit facility during the three months ended March 31, 2014 was $54.3 million. There were no letters of credit issued under the senior secured revolving credit facility as of March 31, 2014.

Dean Foods Receivables-Backed Facility — We have a $550 million receivables securitization facility pursuant to which certain of our subsidiaries sell their accounts receivable to two wholly-owned entities intended to be bankruptcy-remote. The entities then transfer the receivables to third-party asset-backed commercial paper conduits sponsored by major financial institutions. The assets and liabilities of these two entities are fully reflected in our unaudited Condensed Consolidated Balance Sheets, and the securitization is treated as a borrowing for accounting purposes. The receivables-backed facility is available for the issuance of letters of credit of up to $300 million and has a liquidity termination date in March 2015.

Based on the monthly borrowing base formula, we had the ability to borrow up to $526 million of the total commitment amount under the receivables-backed facility as of March 31, 2014. The total amount of receivables sold to these entities as of March 31, 2014 was $699.8 million. During the first three months of 2014 we borrowed $501.0 million and repaid $714.0 million under the facility with no remaining drawn balance as of March 31, 2014. Excluding letters of credit in the aggregate amount of $235.5 million, the remaining available borrowing capacity was $290.5 million at March 31, 2014. Our average daily balance under this facility during the three months ended March 31, 2014 was $227.9 million. The receivables-backed facility bears interest at a variable rate based upon commercial paper and one-month LIBO rates plus an applicable margin.

Under the senior secured credit facility and the receivables-backed facility, we are required to comply with (a) a maximum consolidated net leverage ratio of 3.50 to 1.00; and (b) a minimum consolidated interest coverage ratio of 3.00 to 1.00, in each case, as defined under and calculated in accordance with the terms of the agreements governing our senior secured credit facility and our receivables-backed facility.

We are currently in compliance with all covenants under our credit agreements, and we expect to maintain such compliance for the foreseeable future.

Standby Letter of Credit — In February 2012, in connection with a litigation settlement agreement we entered into with the plaintiffs in the Tennessee dairy farmer actions, we issued a standby letter of credit in the amount of $80 million, representing the approximate subsequent payments due under the terms of the settlement agreement. The total amount of the letter of credit will decrease proportionately as we make each of the four installment payments. We made the first installment payment in June 2013 and expect to make the second installment payment in June 2014. The amount of the letter of credit was reduced in 2013 to $60.9 million, to reflect the first installment payment.

Dean Foods Company Senior Notes due 2018 — On December 16, 2010, we issued $400 million aggregate principal amount of 9.75% senior unsecured notes in a private placement to qualified institutional buyers and in offshore transactions, and in 2011, we exchanged $400 million of the senior notes for new notes that are registered under the Securities Act of 1933, as amended, and do not have restrictions on transfer, rights to special interest or registration rights. These notes are our senior unsecured obligations and mature in December 2018 with interest payable on June 15 and December 15 of each year. The indenture under which we issued the senior notes due 2018 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. During the fourth quarter of 2013, we retired $376.2 million principal amount of these notes pursuant to a cash tender offer. The carrying value of these notes on March 31, 2014 was $23.8 million.

Dean Foods Company Senior Notes due 2016 — In 2006, we issued $500 million aggregate principal amount of 7.0% senior unsecured notes. The senior unsecured notes mature in June 2016 and interest is payable on June 1 and December 1 of each year. The indenture under which we issued the senior notes due 2016 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. During the fourth quarter of 2013, we retired $23.8 million principal amount of these notes pursuant to a cash tender offer. The carrying value of these notes on March 31, 2014 was $475.6 million.

Subsidiary Senior Notes due 2017 — Legacy Dean had certain senior notes outstanding at the time of its acquisition, of which one series ($142 million aggregate principal amount) remains outstanding and matures in October 2017. The carrying value of these notes at March 31, 2014 was $133.3 million at 6.90% interest. The indenture governing the Legacy Dean senior notes does not contain financial covenants but does 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. The Legacy Dean senior notes are not guaranteed by Dean Foods Company or Legacy Dean’s wholly-owned subsidiaries.

See Note 6 for information regarding the fair value of the 2016 and 2018 senior notes and the subsidiary senior notes due 2017 as of March 31, 2014.

Capital Lease Obligations and Other — Capital lease obligations as of March 31, 2014 and December 31, 2013 were comprised of a lease for land and building related to one of our production facilities. See Note 12.

Guarantor Information — The 2016 and 2018 senior notes described above are our unsecured obligations and, except as described below, are fully and unconditionally, jointly and severally guaranteed by substantially all of our 100%-owned U.S. subsidiaries other than our receivables securitization subsidiaries. The following condensed consolidating financial statements present the financial position, results of operations and cash flows of Dean Foods Company (“Parent”), the 100%-owned subsidiary guarantors of the senior notes and, separately, the combined results of the 100%-owned subsidiaries that are not a party to the guarantees. The 100%-owned non-guarantor subsidiaries reflect certain foreign and other operations, in addition to our receivables securitization subsidiaries.

Upon completion of the WhiteWave IPO, WhiteWave and its wholly-owned domestic subsidiaries were released from their obligations as guarantors for the 2016 and 2018 senior notes. Therefore, the activity and balances allocated to discontinued operations related to WhiteWave have been recast in the tables below for all periods presented to include WhiteWave and its subsidiaries in the non-guarantor column as these parties are no longer guarantors of the 2016 or 2018 senior notes.



	Unaudited Condensed Consolidating Balance Sheet as of March 31, 2014
	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated Totals
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	39,591	$	7,208	$	10,952	$	—		$	57,751
Receivables, net	2,723		86,383		686,162		—			775,268
Income tax receivable	31,885		6,352		—		—			38,237
Inventories	—		286,091		—		—			286,091
Intercompany receivables	—		5,776,059		—		(5,776,059		)	—
Other current assets	2,650		82,391		317		—			85,358
Total current assets	76,849		6,244,484		697,431		(5,776,059		)	1,242,705
Property, plant and equipment, net	—		1,202,653		101		—			1,202,754
Goodwill	—		86,841		—		—			86,841
Identifiable intangible and other assets, net	77,523		253,561		58		—			331,142
Investment in subsidiaries	6,635,247		51,762		—		(6,687,009		)	—
Total	$	6,789,619	$	7,839,301	$	697,590	$	(12,463,068	)	$	2,863,442
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	50,738	$	751,632	$	194	$	(173	)	$	802,391
Intercompany payables	5,130,473		—		645,413		(5,775,886		)	—
Current portion of debt	—		698		—		—			698
Current portion of litigation settlements	18,605		—		—		—			18,605
Total current liabilities	5,199,816		752,330		645,607		(5,776,059		)	821,694
Long-term debt	828,389		134,268		—		—			962,657
Other long-term liabilities	50,602		317,456		221		—			368,279
Long-term litigation settlements	34,494		—		—		—			34,494
Total stockholders’ equity	676,318		6,635,247		51,762		(6,687,009		)	676,318
Total	$	6,789,619	$	7,839,301	$	697,590	$	(12,463,068	)	$	2,863,442



	Unaudited Condensed Consolidating Balance Sheet as of December 31, 2013
	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Consolidated Totals
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	(12,289	)	$	17,433	$	11,618		$	—		$	16,762
Receivables, net	1,932			72,660		677,642			—			752,234
Income tax receivable	10,374			5,541		—			—			15,915
Inventories	—			262,858		—			—			262,858
Intercompany receivables	—			5,728,284		(1		)	(5,728,283		)	—
Other current assets	6,944			95,927		58			—			102,929
Total current assets	6,961			6,182,703		689,317			(5,728,283		)	1,150,698
Property, plant and equipment, net	—			1,215,888		159			—			1,216,047
Goodwill	—			86,841		—			—			86,841
Identifiable intangible and other assets, net	90,269			258,109		81			—			348,459
Investment in subsidiaries	6,633,000			72,345		—			(6,705,345		)	—
Total	$	6,730,230		$	7,815,886	$	689,557		$	(12,433,628	)	$	2,802,045
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	47,284		$	713,625	$	554		$	(175	)	$	761,288
Intercompany payables	5,304,051			—		424,057			(5,728,108		)	—
Current portion of debt	—			698		—			—			698
Current portion of litigation settlements	19,101			—		—			—			19,101
Total current liabilities	5,370,436			714,323		424,611			(5,728,283		)	781,087
Long-term debt	549,641			133,923		213,000			—			896,564
Other long-term liabilities	59,764			314,149		92			—			374,005
Long-term litigation settlements	36,074			—		—			—			36,074
Total stockholders’ equity	714,315			6,653,491		51,854			(6,705,345		)	714,315
Total	$	6,730,230		$	7,815,886	$	689,557		$	(12,433,628	)	$	2,802,045



	Unaudited Condensed Consolidating Statement of Comprehensive Income for the Three Months Ended March 31, 2014
	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations		Consolidated Totals
	(In thousands)
Net sales	$	—		$	2,338,054		$	2,986		$	—	$	2,341,040
Cost of sales	—			1,922,473			2,392			—		1,924,865
Gross profit	—			415,581			594			—		416,175
Selling and distribution	—			339,079			300			—		339,379
General and administrative	(167		)	71,867			599			—		72,299
Amortization of intangibles	—			744			—			—		744
Facility closing and reorganization costs	—			977			—			—		977
Litigation settlements	(2,521		)	—			—			—		(2,521		)
Interest expense	10,605			2,982			1,436			—		15,023
Other (income) expense, net	300			169			(790		)	—		(321		)
Loss from continuing operations before income taxes and equity in loss of subsidiaries	(8,217		)	(237		)	(951		)	—		(9,405		)
Income tax expense (benefit)	(921		)	1,443			(135		)	—		387
Income before equity in earnings (loss) of subsidiaries	(7,296		)	(1,680		)	(816		)	—		(9,792		)
Equity in loss of consolidated subsidiaries	(2,496		)	(816		)	—			3,312		—
Loss from continuing operations	(9,792		)	(2,496		)	(816		)	3,312		(9,792		)
Gain on sale of discontinued operations, net of tax	836			—			—			—		836
Net loss attributable to Dean Foods Company	(8,956		)	(2,496		)	(816		)	3,312		(8,956		)
Other comprehensive income, net of tax, attributable to Dean Foods Company	422			47			555			—		1,024
Comprehensive loss attributable to Dean Foods Company	$	(8,534	)	$	(2,449	)	$	(261	)	$	3,312	$	(7,932	)



	Unaudited Condensed Consolidating Statement of Comprehensive Income for the Three Months Ended March 31, 2013
	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated Totals
	(In thousands)
Net sales	$	—		$	2,289,172		$	3,258		$	—		$	2,292,430
Cost of sales	—			1,794,893			2,305			—			1,797,198
Gross profit	—			494,279			953			—			495,232
Selling and distribution	—			339,734			263			—			339,997
General and administrative	(3		)	84,480			487			—			84,964
Amortization of intangibles	—			950			—			—			950
Facility closing and reorganization costs	—			5,610			—			—			5,610
Impairment of long-lived assets	—			30,501			3,414			—			33,915
Interest expense	55,692			2,885			1,072			—			59,649
Other (income) expense, net	—			362			(197		)	—			165
Income (loss) from continuing operations before income taxes and equity in earnings (loss) of subsidiaries	(55,689		)	29,757			(4,086		)	—			(30,018		)
Income tax expense (benefit)	(20,309		)	12,695			(1,664		)	—			(9,278		)
Income (loss) before equity in earnings (loss) of subsidiaries	(35,380		)	17,062			(2,422		)	—			(20,740		)
Equity in earnings (loss) of consolidated subsidiaries	527,985			(2,545		)	—			(525,440		)	—
Income (loss) from continuing operations	492,605			14,517			(2,422		)	(525,440		)	(20,740		)
Income from discontinued operations, net of tax	—			—			24,652			—			24,652
Gain (loss) on sale of discontinued operations, net of tax	—			491,888			(3		)	—			491,885
Net income	492,605			506,405			22,227			(525,440		)	495,797
Net loss attributable to non-controlling interest	—			—			(3,192		)	—			(3,192		)
Net income attributable to Dean Foods Company	492,605			506,405			19,035			(525,440		)	492,605
Other comprehensive income (loss), net of tax, attributable to Dean Foods Company	22,055			141			(11,889		)	—			10,307
Comprehensive income attributable to Dean Foods Company	$	514,660		$	506,546		$	7,146		$	(525,440	)	$	502,912



	Unaudited Condensed Consolidating Statement of Cash Flows for the Three Months Ended March 31, 2014
	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidated Totals
	(In thousands)
Cash flows from operating activities:
Net cash provided by (used in) operating activities	$	(19,373	)	$	61,972		$	(9,800	)	$	32,799
Cash flows from investing activities:
Payments for property, plant and equipment	—			(28,035		)	—			(28,035		)
Proceeds from sale of fixed assets	—			1,372			—			1,372
Net cash used in investing activities	—			(26,663		)	—			(26,663		)
Cash flows from financing activities:
Repayments of debt	—			(164		)	—			(164		)
Proceeds from senior secured revolver	701,795			—			—			701,795
Payments for senior secured revolver	(423,105		)	—			—			(423,105		)
Proceeds from receivables-backed facility	—			—			501,000			501,000
Payments for receivables-backed facility	—			—			(714,000		)	(714,000		)
Common stock repurchase	(25,000		)	—			—			(25,000		)
Cash dividend paid	(6,543		)	—			—			(6,543		)
Issuance of common stock, net of share repurchases	869			—			—			869
Tax savings on share-based compensation	259			—			—			259
Intercompany	(177,022		)	(45,370		)	222,392			—
Net cash provided by (used in) financing activities	71,253			(45,534		)	9,392			35,111
Effect of exchange rate changes on cash and cash equivalents	—			—			(258		)	(258		)
Increase (decrease) in cash and cash equivalents	51,880			(10,225		)	(666		)	40,989
Cash and cash equivalents, beginning of period	(12,289		)	17,433			11,618			16,762
Cash and cash equivalents, end of period	$	39,591		$	7,208		$	10,952		$	57,751



	Unaudited Condensed Consolidating Statement of Cash Flows for the Three Months Ended March 31, 2013
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidated Totals
							(In thousands)
Cash flows from operating activities:
Net cash provided by (used in) operating activities — continuing operations	$	(12,739	)	$	(92,563	)	$	13,843		$	(91,459	)
Net cash provided by operating activities — discontinued operations	—			—			(14,046		)	(14,046		)
Net cash provided by operating activities	(12,739		)	(92,563		)	(203		)	(105,505		)
Cash flows from investing activities:
Payments for property, plant and equipment	(40		)	(15,761		)	—			(15,801		)
Proceeds from sale of fixed assets	—			1,397			—			1,397
Net cash provided by (used in) investing activities — continuing operations	(40		)	(14,364		)	—			(14,404		)
Net cash used in investing activities — discontinued operations	1,441,323			—			(20,480		)	1,420,843
Net cash provided by (used in) investing activities	1,441,283			(14,364		)	(20,480		)	1,406,439
Cash flows from financing activities:
Repayments of Dean Foods Company senior secured term loan debt	(1,027,197		)	—			—			(1,027,197		)
Proceeds from senior secured revolver	154,250			—			—			154,250
Payments for senior secured revolver	(396,350		)	—			—			(396,350		)
Proceeds from receivables-backed facility	—			—			220,000			220,000
Payments for receivables-backed facility	—			—			(220,000		)	(220,000		)
Payment of financing costs	(575		)	—			—			(575		)
Issuance of common stock, net of share repurchases for withholding taxes	(753		)	—			—			(753		)
Tax savings on share-based compensation	232			—			—			232
Net change in intercompany balances	(169,985		)	113,616			56,369			—
Net cash provided by (used in) financing activities — continuing operations	(1,440,378		)	113,616			56,369			(1,270,393		)
Net cash used in financing activities — discontinued operations	—			—			(36,500		)	(36,500		)
Net cash provided by (used in) financing activities	(1,440,378		)	113,616			19,869			(1,306,893		)
Effect of exchange rate changes on cash and cash equivalents	—			—			371			371
Increase (decrease) in cash and cash equivalents	(11,834		)	6,689			(443		)	(5,588		)
Cash and cash equivalents, beginning of period	15,242			—			9,415			24,657
Cash and cash equivalents, end of period	$	3,408		$	6,689		$	8,972		$	19,069