P O S I T I O N E D T O W I N
2 0 0 9 A N N U A L R E P O R T
®
®
Dean Foods is transforming the way consumers think about
dairy. Every day, we fuel healthy, growing families with
popular milk, dairy and soy products. We sell our fresh,
nutritious offerings under more than 50 local and regional
labels. Consumers enjoy our leading national brands like
Horizon Organic®, Silk® Soymilk and International Delight®.
We also make many of the country’s private label dairy
products. With a growing geographic presence, we deliver
nutritious food to families everywhere. We are a dairy
industry leader with 27,000 employees across the United
States and Europe, and we are positioned to win.
A L E T T E R F R O M O U R C H A I R M A N A N D C H I E F E X E C U T I V E O F F I C E R
D E A R F E L L O W S H A R E H O L D E R S :
Our marketplace continues to undergo a funda-
While we possess enviable advantages in market
mental shift. In the past year, the recession and
position, cost, product portfolio and talent,
tough economy put considerable pressure on
winning will require us to extend these advan-
consumers, customers and milk processors. We
tages further. To do so, we are committed to accel-
were not exempt. While some of these issues are
erating the company-wide transformation that
short term, I believe the lingering effects on
began in 2008.
consumers and customers represent a fundamen-
tal shift in value expectations that will present
both challenges and opportunities to our industry
and to Dean Foods.
Elevated consumer and customer value expecta-
tions will be a catalyst for our industry to become
more efficient in its operations, ultimately leading
to further consolidation. Experience
in other
industries has shown
that companies who
succeed are leaders in driving toward the leanest
possible operations. These leaders improve earn-
ings over the long run by delivering what consum-
ers and customers want to buy, at prices they are
willing to pay.
Dean will be that company in dairy.
1
D E S P I T E C H A L L E N G E S , S U C C E S S F U L Y E A R
Against this backdrop, 2009 was one of the most
successful years in Dean Foods history. We delivered
a 10% increase in consolidated adjusted operating
income on top of 7% growth in 2008.* The Company
posted record operating profits as a whole and in
each of our business segments. Also, we made
significant progress in our effort to drive out cost,
grow our business and build capability. Despite a
difficult fourth quarter, during which price pressure
and rising commodity costs hurt our earnings, I am
proud of our team’s accomplishments and confi-
dent we will deliver on our business goals.
P R O D U C T M I X
EXTENDED
SHELF LIFE DAIRY
NATIONAL DAIRY
BRANDS
ICE CREAM
CULTURED
MI LK
SOY BR ANDS
OTHER
OTHER BEV ER AG ES
Our $8.5 billion Fresh Dairy Direct platform is the
leader in private label and regionally branded
conventional milk. More than 80 Dean plants
anchor our unique national, refrigerated, direct
store delivery network. In 2009, Fresh Dairy Direct
operating income grew 9% on a 3% increase in fresh
fluid milk volume. We will win in this segment by
focusing on winning in fresh fluid milk. To accom-
plish this, we will leverage our unique scale advan-
tages to extend our position as the lowest cost,
highest customer service provider.
Our $1 billion Morningstar platform is the U.S.
leader in extended shelf life, private label and food-
service dairy products. It has nationwide capabili-
ties and a strong presence in both foodservice and
retail channels. Morningstar posted double-digit
growth in full-year 2009 operating profit. Like Fresh
Dairy Direct, Morningstar will focus on cost leader-
ship to extend its strong share position.
The $1.7 billion branded businesses at WhiteWave
and Alpro increased sales 9%. Our mid-year Alpro
acquisition was the key driver of strong sales
growth
in this business segment. With our
premium categories slowing due to the recession,
we held or grew share in all key segments: soy,
organic milk and coffee creamers. Alpro delivered
mid-single-digit sales growth and solid earnings in
the second half of the year. WhiteWave and Alpro
are highly capable packaged goods companies.
They will win by focusing on branded innovation
and marketing investment in strong growth, value-
added beverage and food segments.
*For a reconciliation of the adjusted financial results contained herein, see the
“Additional Information” at the end of this report.
2
A C C E L E R AT I N G O U R T R A N S F O R M AT I O N
A C A PA B L E A N D AG I L E O R G A N I Z AT I O N
Our team’s considerable progress in managing the
external environment underpins the success of our
businesses. Quick adjustment to a changing market-
place is critical to accelerating our transformation.
To strengthen the day-to-day management of our
transformation, I promoted Joe Scalzo from Presi-
dent and CEO of WhiteWave Foods to the newly
created position of Chief Operating Officer for Dean
Foods last fall. Joe’s track record of leading success-
ful corporate transformations, and his marketing
and operating expertise, make him the right person
to lead our transformation.
We also realigned our executive leadership to create
our Executive Operating Team. This C-suite man-
agement team includes some of the best consumer
packaged goods talent in the industry. They are
poised to take our transformation to the next level.
The key objective of this team is to put the right
people, in the right place, with the right skills to
drive our transformation. Their ultimate goal is to
lower overall costs, regardless of whether those
costs reside
in production, distribution, sales,
administration or corporate expenditures.
A C C E L E R AT I N G O U R T R A N S F O R M AT I O N
D R I V I N G C O S T S AV I N G S
Our leadership team is relentlessly focused on build-
ing the leanest and most efficient operation in the
industry. We have made great strides in this area.
We realized $75 million in savings in 2009 by
improving the way we procure materials, process
our products and deliver to our customers.
For example, we launched facility-based continuous
improvement efforts to drive efficiency. This reduced
C O S T
S A V I N G S
T A R G E T
$ 3 0 0 M +
2 0 1 0
P L A N
$ 9 0 M
2 0 0 9
D E L I V E R E D
$ 7 5 M
DEAN FOODS
COST SAVINGS GOALS
total costs of production by $24 million in 2009. We
further optimized our network by closing four facili-
ties in 2009 and realized $10 million in savings. We
also removed 220 routes from the road and saved
$15 million by implementing GPS technology in our
distribution system. We plan to leverage the invest-
ments we have made to drive out an additional $90
million of cost in 2010.
But even with the strides we have made, there
remain tremendous opportunities to reduce costs.
We enter 2010 more confident than ever that we
can continue to drive down the cost curve for an
extended period, particularly in our Fresh Dairy
Direct and Morningstar businesses.
A C C E L E R AT I N G O U R T R A N S F O R M AT I O N
C O N T I N U E D G R OW T H
Our Fresh Dairy Direct business continues to
deliver significant results. Volume grew 3% last
year and we continued to expand our share
position in a fluid milk category that was largely flat.
This was a particularly challenging year for our industry’s farmers. For many,
the cost of farming outstripped revenues, creating a difficult financial burden.
As the law of economics dictates, the low milk prices that hurt dairy farmers
in early 2009 began impacting processor margins as milk prices increased
later in the year. These volatile swings in milk prices demonstrate the need for
significant and meaningful reform of the government-mandated dairy
pricing system. Dean Foods welcomes the opportunity to work with farmers,
government officials, retailers and consumers to create a sustainable dairy
policy that ensures the availability of high quality, nutritious, and affordable
milk for consumers, while promoting overall industry growth.
3
In our branded businesses, we remain firmly com-
mitted to driving consumer demand through
continued innovation and new product introduc-
tions. In 2009, we experienced continued strong
growth in our Horizon Organic plus DHA products,
as well as in our single serve offerings. Our cream-
ers business posted solid 2009 results, and is
poised for a strong 2010, driven by our new Inter-
national Delight® CoffeeHouse InspirationsTM line.
These products tap consumers’ demand for an
in-home coffee shop experience at an affordable
price. We also leveraged our Silk brand to launch
Silk PureAlmondTM, and extend the Silk brand
equity beyond soy into other plant-based bever-
ages. Finally, we introduced our first fruit-based
platform, Fruit2Day®, as part of our Hero JV.
We expanded our branded business segment with
the acquisition of Alpro in June of 2009. Alpro is the
soy foods leader in Europe. With this acquisition,
Dean’s collective expertise, knowledge and tech-
nology in soy are unsurpassed. As a result, we have
created the leading global branded soy products
platform, adding to our exciting growth prospects.
In 2009’s
A C C E L E R AT I N G O U R T R A N S F O R M AT I O N
I M P R OV E D F I N A N C I A L F L E X I B I L I T Y
We remain focused on driving strong, consistent
cash flow across our business even as our transfor-
mation accelerates.
challenging
economic environment, we demonstrated once
again the resiliency of Dean’s financial model. We
ended the year with free cash flow over $390
million.* Going forward, we will balance attractive
business investments with continued debt pay
down to ensure long-term financial flexibility and
reduce risk.
With the strategic acquisition
of Alpro, Dean Foods is now a
global leader in soy, with over
$1 billion in annual retail sales
in soy beverages and related
products. The combination of
Alpro and Silk expands our
geographic reach to Europe and
gives us the opportunity to
increase overall consumption
and accelerate growth.
4
P O S I T I O N E D T O W I N
All in all, we made great progress in 2009. But the
urgency created by a very difficult marketplace has
caused us to accelerate our efforts to transform the
company and position ourselves for long-term success.
We enter 2010 facing very real challenges. Recov-
ery from the recession will be slow and value
expectations have been reset to a new, more
demanding level. Consumers expect more for less,
driving us to focus on value and find ways to
increasingly differentiate our products. I see a
future dairy industry with fewer, more efficient
players in which Dean extends its leadership position.
As we look into that future, I suspect the road will
be rocky for a while. But we are committed to deliv-
ering on our full potential. We have made great
advances in the face of our recent challenges. I am
convinced that we have the right strategies and
the right team in place to meet the challenges
ahead, and that we will emerge from this process
stronger, better and more successful than ever.
Thank you for your confidence
and support,
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
Í ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended December 31, 2009
OR
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from
to
Commission File Number 001-12755
Dean Foods Company
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
75-2559681
(I.R.S. Employer
Identification No.)
2515 McKinney Avenue
Suite 1200
Dallas, Texas 75201
(214) 303-3400
(Address, including zip code, and telephone number, including
area code, of Registrant’s principal executive offices)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $.01par value
Name of Each Exchange on Which Registered
New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if
Act. Yes Í No ‘
the registrant
is a well-known seasoned-issuer, as defined in Rule 405 of
the Securities
Indicate by check mark if the registrant
Act. Yes ‘ No Í
is not required to file reports pursuant
to Section 13 or Section 15(d) of the
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 Í No ‘
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ‘ No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K ‘
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of
the Exchange Act. (Check one):
Large accelerated filer Í
Non-accelerated filer ‘
Smaller reporting company ‘
Accelerated filer ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ‘ No Í
The aggregate market value of the registrant’s voting and non-voting common stock held by non-affiliates of the registrant at
June 30, 2009, based on the $19.19 per share closing price for the registrant’s common stock on the New York Stock Exchange on
June 30, 2009, was approximately $3.36 billion.
The number of shares of the registrant’s common stock outstanding as of February 19, 2010, was 181,300,615.
(Do not check if a smaller reporting company)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for its Annual Meeting of Stockholders to be held on or about May 19, 2010 (to
be filed) are incorporated by reference into Part III of this Form 10-K.
Item
TABLE OF CONTENTS
PART I
1
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Our Reportable Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current Business Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Developments Since January 1, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Government Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brief History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority Holdings and Other Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Where You Can Get More Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1A Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1B Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
PART II
5
6
7
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . .
Business Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Our Reportable Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Known Trends and Uncertainties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Critical Accounting Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recent Accounting Pronouncements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7A Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
9
Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure . . . . . . . .
9A Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9B Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III
10 Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11
12
13
14
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV
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Signatures
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
53
S-1
Forward-Looking Statements
This Annual Report on Form 10-K (the “Form 10-K”) contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks, uncertainties and
assumptions that are difficult to predict. Forward-looking statements are predictions based on our current
expectations and our projections about future events, and are not statements of historical fact. Forward-looking
statements include statements concerning our business strategy, among other things, including anticipated trends
and developments in and management plans for our business and the markets in which we operate. In some
cases, you can identify these statements by forward-looking words, such as “estimate,” “expect,” “anticipate,”
“project,” “plan,” “intend,” “believe,” “forecast,” “foresee,” “likely,” “may,” “should,” “goal,” “target,” “might,”
“will,” “could,” “predict,” and “continue,” the negative or plural of these words and other comparable
terminology. All forward-looking statements included in this Form 10-K are based upon information available to
us as of the filing date of this Form 10-K, and we undertake no obligation to update any of these forward-looking
statements for any reason. You should not place undue reliance on these forward-looking statements. These
forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our
actual results, levels of activity, performance, or achievements to differ materially from those expressed or
implied by these statements. These factors include the matters discussed in the section entitled “Part I — Item 1A
— Risk Factors” in this Form 10-K, and elsewhere in this Form 10-K. You should carefully consider the risks
and uncertainties described under these sections.
Item 1. Business
PART I
We are one of the leading food and beverage companies in the United States. Fresh Dairy Direct, previously
referred to as DSD Dairy, is the largest processor and distributor of milk and other dairy products in the country,
with products sold under more than 50 familiar local and regional brands and a wide array of private labels.
WhiteWave-Morningstar markets and sells a variety of nationally branded dairy and dairy-related products, such
as Silk® soymilk and cultured soy products, Horizon Organic® milk and other dairy products, The Organic
Cow®, International Delight® coffee creamers, LAND O LAKES® creamers and fluid dairy products and Rachel’s
Organic® dairy products. With the addition of our recently acquired Alpro business in Europe, WhiteWave-
Morningstar now offers branded soy-based beverages and food products in Europe, marketing its products under
the Alpro® and Provamel® brands. Additionally, WhiteWave-Morningstar markets and sells private label
cultured and extended shelf life dairy products.
Our principal executive offices are located at 2515 McKinney Avenue, Suite 1200, Dallas, Texas 75201.
Our telephone number is (214) 303-3400. We maintain a worldwide web site at www.deanfoods.com. We were
incorporated in Delaware in 1994.
Our Reportable Segments
We have two reportable segments, Fresh Dairy Direct and WhiteWave-Morningstar.
Fresh Dairy Direct
Fresh Dairy Direct manufactures, markets and distributes a wide variety of branded and private label dairy
juices and teas to retailers,
case products,
distributors, foodservice outlets, educational institutions and governmental entities across the United States.
ice cream, cultured dairy products,
including milk, creamers,
1
Fresh Dairy Direct’s net sales totaled $8.5 billion in 2009, or approximately 76% of our consolidated net
sales. The following charts graphically depict Fresh Dairy Direct’s 2009 net sales by product and customer and
the volume mix of company branded versus private label products.
Products
Other
1%
(5)
Other beverages
5%
(4)
Cultured
5%
(3)
Ice cream
10%
(2)
Other fluid dairy
8%
(1)
Customers
Brand Mix
Distributor
7%
Other
9%
Convenience stores
7%
Fresh Milk
71%
Foodservice
14%
(6)
Retailers
63%
Company brands
47%
Private Label
53%
(1) Includes half-and-half, whipping cream, dairy coffee creamers, and ice cream mix.
(2) Includes ice cream and ice cream novelties.
(3) Includes yogurt, cottage cheese, sour cream and dairy-based dips.
(4) Includes fruit juice, fruit-flavored drinks, iced tea and water.
(5) Includes items for resale such as butter, cheese, eggs and milk shakes.
(6) Includes restaurants, hotels and other foodservice outlets.
Fresh Dairy Direct sells the majority of its products under local and regional proprietary or licensed brands.
Products not sold under these brands are sold as private label. Fresh Dairy Direct 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 Fresh Dairy Direct’s corporate sales department. Fresh Dairy Direct’s largest customer is
Wal-Mart, which includes its subsidiaries such as Sam’s Club, accounting for approximately 21% of Fresh Dairy
Direct’s net sales in 2009.
As of December 31, 2009, Fresh Dairy Direct’s local and regional proprietary and licensed brands include
the following:
Alta Dena®
Arctic Splash®
Atlanta Dairies®
Barbers®
Barbe’s®
Berkeley Farms®
Broughton®
Borden® (licensed brand)
Brown Cow®
Brown’s Dairy®
Bud’s Ice Cream™
Chug®
Country Charm®
Country Churn®
Country Delite™
Country Fresh®
Country Love®
Creamland™
Dairy Fresh®
Dean’s®
Dipzz®
Fieldcrest®
Foremost® (licensed brand)
Friendship®
Gandy’s™
Garelick Farms®
Hershey’s® (licensed brand)
Hygeia®
Jilbert™
Knudsen® (licensed brand)
LAND O LAKES® (licensed brand)
Land-O-Sun & design®
Lehigh Valley Dairy Farms®
Liberty™
Louis Trauth®
Maplehurst®
Mayfield®
McArthur®
Meadow Brook™
Meadow Gold®
Mile High Ice Cream™
Model Dairy®
Mountain High®
Nature’s Pride®
Nurture®
NUTTYBUDDY®
2
Oak Farms®
Over the Moon®
Pet® (licensed brand)
Pog® (licensed brand)
Price’s™
Purity™
Reiter™
Robinson®
Saunders™
Schenkel’s All*Star™
Schepps®
Shenandoah’s Pride®
Stroh’s®
Swiss Dairy™
Swiss Premium™
Trumoo™
TG Lee®
Tuscan®
Turtle Tracks®
Verifine®
Viva®
Fresh Dairy Direct currently operates 82 manufacturing facilities in 33 states. For more information about
facilities in Fresh Dairy Direct, see “Item 2. Properties.” Due to the perishable nature of its products, Fresh Dairy
Direct delivers the majority of its products directly to its customers’ locations in refrigerated trucks or trailers
that we own or lease. This form of delivery is called a “direct store delivery” or “DSD” system. We believe that
Fresh Dairy Direct has one of the most extensive refrigerated DSD systems in the United States.
The primary raw material used in Fresh Dairy Direct products is conventional raw milk (which contains
both raw milk and butterfat) that we purchase primarily from farmers’ cooperatives, as well as from independent
farmers. The federal government and certain state governments set minimum prices for raw milk on a monthly
basis. Another significant raw material used by Fresh Dairy Direct is resin, which is a petroleum-based product
used to make plastic bottles. The price of resin is subject to fluctuations based on changes in crude oil and natural
gas prices. Other raw materials and commodities used extensively by Fresh Dairy Direct include diesel fuel, used
to operate our extensive DSD system, juice concentrates and sweeteners used in our products. Fresh Dairy Direct
generally increases or decreases the prices of its fluid dairy products on a monthly basis in correlation with
fluctuations in the costs of raw materials, packaging supplies and delivery costs. However, in some cases, we are
competitively or contractually constrained with respect to the means and/or timing of price increases, particularly
non-dairy input costs such as diesel and resin.
The dairy industry is a mature industry that has traditionally been characterized by slow to flat growth, low
profit margins, fragmentation and excess capacity. In this environment, price competition is particularly intense,
as smaller processors seek to retain enough volume to cover their fixed costs. In addition, current economic
including vertically integrated
conditions and historically low raw milk costs have led supermarkets,
supermarkets, and food retailers to utilize competitive pricing on dairy products to drive traffic volume and
influence customer loyalty. Such activity has significantly reduced the profit margins realized by supermarkets
and foods retailers on the sale of such products. Increasingly, this margin compression is being absorbed by dairy
processors.
In response to this dynamic and significant competitive pressure, many processors, including us, are now
placing an increased emphasis on cost reduction in an effort to increase margins. We made significant progress
against such initiatives in 2009 and will continue these efforts for the foreseeable future. Historically, Fresh
Dairy Direct’s volume growth has kept pace with or exceeded the industry, which we attribute largely to our
national DSD system, brand recognition, service and quality. In 2009, due in part to acquisitions, we were able to
increase our sales volume of fresh fluid milk and our market share in this product category.
Fresh Dairy Direct has several competitors in each of our major product and geographic markets.
Competition between dairy processors for shelf-space with retailers is based primarily on price, service, quality
and the expected or historical sales performance of the product compared to its competitors. In some cases Fresh
Dairy Direct pays fees to customers for shelf-space. Competition for consumer sales is based on a variety of
factors such as brand recognition, price, taste preference and quality. Dairy products also compete with many
other beverages and nutritional products for consumer sales.
For more information on factors that can impact Fresh Dairy Direct, see “— Government Regulation —
Milk Industry Regulation”, “Part II — Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations — Known Trends and Uncertainties — Prices of Raw Milk and Other Inputs,” as well
as Note 20 to our Consolidated Financial Statements.
WhiteWave-Morningstar
WhiteWave-Morningstar consists of three aggregated operations including WhiteWave, Morningstar and
Alpro, as well as a joint venture entered into in 2008 between WhiteWave and Hero Group (“Hero”). These
operations have a higher concentration of branded products and rely more extensively on warehouse distribution.
In 2008, we aligned these operations under a single leadership team to better leverage investments in people,
tools and processes in various areas including marketing, supply chain, distribution, information technology and
research and development.
3
Our WhiteWave operation (“WhiteWave”) 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
milk and other dairy products, The Organic Cow organic dairy products, International Delight coffee creamers,
LAND O LAKES creamer and fluid dairy products and Rachel’s Organic dairy products. With the recent
acquisition of Alpro, WhiteWave-Morningstar now offers branded soy-based beverages and food products in
the Alpro and Provamel brands. Our Morningstar operation
Europe, marketing its products under
(“Morningstar”) is one of the leading U.S. manufacturers of private label cultured and extended shelf life dairy
products such as ice cream mix, sour and whipped cream, yogurt and cottage cheese. Additionally, with our
Hero/WhiteWave joint venture we have expanded the WhiteWave product footprint beyond the dairy case to
capitalize on the chilled fruit-based beverage opportunity with the introduction of Fruit2Day®.
WhiteWave-Morningstar’s net sales totaled $2.7 billion in 2009, or approximately 24% of our consolidated
net sales. WhiteWave-Morningstar sells its products to a variety of customers, including grocery stores, club
stores, natural foods stores, mass merchandisers, convenience stores, drug stores and foodservice outlets.
WhiteWave-Morningstar sells its products through a combination of internal and external sales forces.
WhiteWave-Morningstar’s largest customer is Wal-Mart, which includes its subsidiaries such as Sam’s Club,
accounting for approximately 14% of WhiteWave-Morningstar’s net sales in 2009.
The following charts graphically depict WhiteWave-Morningstar’s 2009 net sales by the mix of our branded
versus private label products and customer:
Brand Mix
Customers
Fruit2Day*
Alpro
6% (3)
Silk
16%
Private Label
41% (2)
Horizon Organic
15% (1)
International Delight
12%
Rachel’s
2%
Land-O-Lakes
8%
Convenience stores
4%
Other
10%
Foodservice
28%
Retailers
58%
* Represents less than 1% of our total brand mix.
(1) Includes Horizon Organic and The Organic Cow organic dairy products.
(2) Includes cultured and extended shelf life dairy products such as ice cream mix, sour and whipped cream,
yogurt and cottage cheese, as well as organic and soy products.
(3) Includes both Alpro and Provamel brands in Europe since July 2, 2009.
WhiteWave-Morningstar currently operates 19 domestic and 5 international manufacturing facilities. For
more information about facilities in WhiteWave-Morningstar, see “Item 2. Properties.” The remaining products
are manufactured by third-party manufacturers under processing agreements. The majority of WhiteWave-
Morningstar’s products are delivered through warehouse delivery systems.
The primary raw materials used in our soy-based products include both organic soybeans and
non-genetically modified (“non-GMO”) soybeans. Both organic soybeans and non-GMO soybeans are generally
available from several suppliers and we are not dependent on any single supplier for these raw materials.
The primary raw material used in our organic milk-based products is organic raw milk. We currently
purchase approximately 85% of our organic raw milk from a network of over 500 dairy farmers across the United
States. The balance of our organic raw milk is sourced from two farms that we own and operate and a third farm
4
that we lease and have contracted with a third party to manage and operate. We generally enter into supply
agreements with organic dairy farmers with typical terms of two to three years, which obligate us to purchase
certain minimum quantities of organic raw milk.
The primary raw material used in our private label cultured and extended shelf life dairy products, as well as
LAND O LAKES and other non-organic dairy products, is conventional raw milk. WhiteWave-Morningstar also
uses significant quantities of butterfat which is acquired through the purchase of raw milk and bulk cream. Bulk
cream is typically purchased based on a multiple of the AA butter price on the Chicago Mercantile Exchange
(“CME”). Other raw materials used in WhiteWave-Morningstar’s products include palm oil, flavorings and
organic sugar. Certain of these raw materials are purchased under long-term contracts in order to better manage
the supply and costs of our inputs.
WhiteWave-Morningstar has several competitors in each of its product markets. Competition to obtain
shelf-space with retailers for a particular product
is based primarily on the expected or historical sales
performance of the product compared to its competitors. In some cases, WhiteWave-Morningstar pays fees to
retailers to obtain shelf-space for a particular product. Competition for consumer sales is based on many factors,
including brand recognition, price, taste preferences and quality. Consumer demand for soy and organic foods
has grown in recent years due to growing consumer confidence in the health benefits of soy and organic foods,
and we believe WhiteWave-Morningstar has a leading position in the soy and organic foods category.
For more information on factors that can impact the results of WhiteWave-Morningstar, see “Part II —
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Known
Trends and Uncertainties — Prices of Raw Milk and Other Inputs” as well as Note 20 to our Consolidated
Financial Statements.
Current Business Strategy
Our strategy historically has been centered on growth through acquisitions and aligning our operating
activities with a consolidating customer base. Since 1994, we have completed over 40 acquisitions, increasing
our net sales from $150 million to more than $11 billion. We believe our portfolio of manufacturing and
distribution assets enables us to offer regional and national branded and private label products across a variety of
product categories, ranging from short shelf life (less than 20 days) to extended shelf life (45 to 60 days) to shelf
stable products (6 to 12 months), to its customers in a cost effective manner. We believe that Fresh Dairy Direct
has one of the most extensive refrigerated DSD systems in the United States and WhiteWave-Morningstar’s
branded and private label products maintain significant market share positions in the soy-based beverage, organic
dairy, creamer, cultured products and extended shelf life product categories. With the acquisition of Alpro, we
are uniquely positioned to take advantage of the global demand for soy-based products.
Currently, the our strategy is to build on our scale advantaged position in the dairy industry by extending our
low cost position, driving sales and profit growth in our core businesses and investing for growth in the future.
Our strategy encompasses the following:
• Continuing to reduce costs across the business and extend our low cost position in the marketplace,
• Working to expand our core manufacturing and distribution processes and leveraging and building upon
the strong net sales growth of our branded portfolio to drive revenue and operating profit growth and
• Continuing to build stronger capabilities to drive sustainable long term growth.
Within this strategy, we have a strong commitment to sustainable business practices that are focused on
growing our business while promoting corporate social responsibility in the communities we serve. We have
taken steps to reduce our green house gas emissions, water consumption and waste sent to landfills. We are also
focused on engaging and developing talented individuals that will not only help grow our business but are also
committed to our social efforts and supporting our communities.
5
We have analyzed and evaluated the foreseeable risks and opportunities to the business of potential
legislative, regulatory and physical changes associated with climate change. While we consider our business to
be subject to both risks and opportunities, we do not believe that the foreseeable risks and opportunities are
material. We currently are included on the Carbon Disclosure Project’s S&P 500 Leadership Index, and
WhiteWave participates in the EPA’s Climate Leaders Program. We have submitted our 2007 & 2008 Scope 1
and Scope 2 emissions data to the California Climate Action Registry for our California operations and we will
submit similar 2009 emissions data for all of our facilities in the U.S. to The Climate Registry in 2010. We will
be subject to mandatory emission reporting laws in various jurisdictions in which we operate in the ordinary
course of our business and are prepared to comply with those obligations.
Fresh Dairy Direct
The Fresh Dairy Direct fluid and ice cream operation is focused on high velocity products where delivering
low cost and high levels of customer service are critical to success. While a portion of our ice cream products are
distributed through customer warehouse delivery channels, the ice cream supply chain remains highly integrated
within our DSD system.
The Fresh Dairy Direct strategy is to achieve cost leadership and gain share in the core dairy business. The
strategy encompasses the following:
• Driving to be the lowest cost, most effective manufacturer in every market in which we compete,
• Building our selling and delivery capability and
• Strengthening our capabilities through standardization and simplification of our underlying systems and
processes.
WhiteWave-Morningstar
The WhiteWave-Morningstar strategy is to lead in our categories and drive our customers’ businesses by
providing nutritious, wholesome high quality retail and food service private label, extended shelf life and
cultured products and be a top-tier consumer packaged goods company, consistently delivering superior results.
The strategy encompasses the following:
• Growing our national and private label brands through innovation and superior marketing,
• Accelerating growth in new businesses by segmenting consumers and innovating in value-added products,
• Achieving cost excellence by leveraging our assets, focusing our portfolio and optimizing our supply
chain,
• Investing in people, processes and systems to drive organizational capacity and capabilities and
• Incorporating sustainability initiatives at all levels to reduce green house gas emissions, water and waste.
In July 2009, we completed the acquisition of the Alpro division of Vandemoortele, N.V. (Alpro), a
privately held food company based in Belgium. Alpro manufactures and sells branded soy-based beverages and
food products in Europe. The acquisition of Alpro will provide opportunities to leverage the collective strengths
of our combined business across a global soy beverages and related products category.
Seasonality
Our business, particularly Fresh Dairy Direct, is affected by seasonal changes in the demand for dairy
products. The demand for dairy is typically lower in the second and third quarters of the year primarily due to the
reduction in dairy consumption associated with our school business; therefore, these quarters have historically
generated lower Fresh Dairy Direct volumes than the first and fourth quarters. Our WhiteWave-Morningstar
sales are typically higher in the fourth quarter associated with increased dairy consumption during seasonal
holidays. Because certain of our operating expenses are fixed, fluctuations in volumes and revenue from quarter
to quarter may have a material effect on operating income for the respective quarters.
6
Intellectual Property
We are continually developing new technology and enhancing existing proprietary technology related to our
dairy operations. As of December 31, 2009, 19 United States patents have been issued to us and 21 United States
patent applications are pending. We primarily rely on a combination of trademarks, copyrights, trade secrets,
confidentiality procedures and contractual provisions to protect our technology and other intellectual property
rights. Despite these protections, it may be possible for unauthorized parties to copy, obtain or use certain
portions of our proprietary technology or trademarks.
Research and Development
With our state-of-the-art research and development (“R&D”) facility, we are building our capabilities
through a team of top consumer packaged goods talent across many disciplines such as product development,
dairy and soy science, culinary and sensory science, nutrition, packaging design and engineering, and process
engineering. Our R&D activities primarily consist of generating and testing new product concepts, new flavors
and packaging for our fluid milk, soy and ice cream products. Our total R&D expense was $25.5 million, $14.0
million and $7.5 million for 2009, 2008 and 2007, respectively.
Developments Since January 1, 2009
Current Dairy Environment
Conventional milk prices were at historically low levels for most of 2009, with a fairly sharp increase in the
fourth quarter of the year. The lower conventional milk prices in 2009 were in sharp contrast to the historically
high conventional milk prices we experienced throughout 2007 and 2008. With the domestic economy still
struggling and little indication that export activity will have a meaningful impact to the U.S. dairy complex, we
expect the average Class I mover will be fairly stable through the first half of 2010 with potential modest
inflation in the back half of the year and we expect Class II butterfat prices to increase throughout 2010.
Organic Milk Environment
During 2009, we have continued experiencing a slowing of growth in the organic milk category from 2008,
declining to relatively flat year-over-year levels by the end of 2009. As a result of the continuing economic
downturn, we believe milk consumers have become price sensitive to organic milk and, as a result, we may
experience a continued softening in sales in this category. We continue to monitor our position in the organic
milk category, including taking proactive steps to manage our supply in the short-term, and we remain focused
on maintaining our leading branded position as we balance market share considerations against profitability.
With the more stabilized demand for organic milk we are anticipating modestly lower costs in 2010.
Appointment of Joe Scalzo as Dean Foods Chief Operating Officer (“COO”)
In October 2009, we announced the promotion of Joe Scalzo to COO, effective November 1, 2009. In his
new role, Mr. Scalzo will oversee all of our operations, including Fresh Dairy Direct, WhiteWave, Morningstar,
Alpro and the Hero/WhiteWave joint venture, as well as key strategic functions including worldwide supply
chain, R&D and innovation.
Public Offering of Equity Securities
In May 2009, we issued and sold 25.4 million shares of our common stock in a public offering. We received
net proceeds of $444.7 million from the offering. The net proceeds from the offering were used to repay the
$122.8 million aggregate principal amount of our subsidiary’s 6.625% senior notes due May 15, 2009, and
indebtedness under our receivables-backed facility.
Acquisitions
On July 2, 2009, we completed the acquisition of the Alpro division of Vandemoortele, N.V. (“Alpro”), a
privately held food company based in Belgium, for an aggregate purchase price of €314.6 million ($440.3
7
million), after working capital adjustments, excluding transaction costs which were expensed as incurred. Alpro
manufactures and sells branded soy-based beverages and food products in Europe. The acquisition of Alpro will
provide opportunities to leverage the collective strengths of our combined businesses across a global soy
beverages and related products category. During 2009, we completed four other acquisitions of businesses for an
aggregate purchase price of approximately $143.5 million. All of these acquisitions were funded with borrowings
under our senior revolving credit facility.
We recorded approximately $31.3 million in acquisition-related expenses during the year ended
including expenses related to due diligence,
December 31, 2009,
investment advisors and regulatory matters, as well as other non-material transactional activities.
in connection with these acquisitions,
Hero/WhiteWave Joint Venture
In January 2008, we entered into and formed a 50/50 strategic joint venture with Hero Group (“Hero”),
producer of international fruit and infant nutrition brands, to introduce a new innovative product line to North
America. The joint venture, Hero/WhiteWave, LLC, combines Hero’s expertise in fruit, innovation and process
engineering with WhiteWave’s deep understanding of the American consumer and manufacturing network, as
well as the go-to-market system of Dean Foods.
The joint venture, which is based in Broomfield, Colorado, serves as a strategic growth platform for both
companies to further extend their global reach by leveraging their established innovation,
technology,
manufacturing and distribution capabilities over time. During the first quarter of 2009, the joint venture began to
manufacture and distribute its primary product, Fruit2Day®, in limited test markets in the United States. During
the second quarter of 2009, the product was nationally launched in grocery and club store channels.
Facility Closing and Reorganization Activities
We closed four facilities within Fresh Dairy Direct during 2009. We recorded facility closing and
reorganization costs of $30.2 million including approximately $16.3 million in impairment charges and $13.9
million in employee termination and other costs associated with these and previously announced closures during
the year ended December 31, 2009.
Strategic Initiatives
Currently, our strategy is to build on our scale advantaged position in the dairy industry with an initial and key
strategic focus on cost reduction across the organization, but particularly within Fresh Dairy Direct. In 2009, we began
a three to five year company-wide cost savings initiative targeting company-wide cost reductions of approximately
$300 million over this timeframe. Our cost savings initiative efforts are primarily focused on three areas:
• Procurement, where we are leveraging our scale to drive our costs lower,
• Conversion, where continuous improvement and network optimization are coupled to reduce the cost of
production in and across our facilities and
• Distribution, where we are leveraging technology and process best practices to drive increased
productivity across our DSD network.
Employees
As of December 31, 2009, we had the following employees:
Fresh Dairy Direct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
WhiteWave-Morningstar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
No. of
Employees
% of
Total
21,918
4,414
825
27,157
81%
16
3
100%
8
Approximately 36% of Fresh Dairy Direct’s and 41% of WhiteWave-Morningstar’s employees participate
in collective bargaining agreements. We believe our relationship with our employees and these organizations is
satisfactory.
Government Regulation
Food Related Regulations
As a manufacturer and distributor of food products, we are subject to a number of food-related regulations,
including the Federal Food, Drug and Cosmetic Act and regulations promulgated thereunder by the U.S. Food
and Drug Administration (“FDA”). This comprehensive regulatory framework governs the manufacture
(including composition and ingredients), labeling, packaging and safety of food in the United States. The FDA:
• regulates manufacturing practices for foods through its current good manufacturing practices regulations,
• specifies the standards of identity for certain foods, including many of the products we sell and
• prescribes the format and content of certain information required to appear on food product labels.
In addition, the FDA enforces the Public Health Service Act and regulations issued thereunder, which
authorizes regulatory activity necessary to prevent the introduction, transmission or spread of communicable
diseases. These regulations require, for example, pasteurization of milk and milk products. We are subject to
numerous other federal, state and local regulations involving such matters as the licensing and registration of
manufacturing facilities, enforcement by government health agencies of standards for our products, inspection of
our facilities and regulation of our trade practices in connection with the sale of food products.
We use quality control laboratories in our manufacturing facilities to test raw ingredients. Product quality
and freshness are essential to the successful distribution of our products. To monitor product quality at our
facilities, we maintain quality control programs to test products during various processing stages. We believe our
facilities and manufacturing practices are in material compliance with all government regulations applicable to
our business.
Employee Safety Regulations
We are subject to certain safety regulations, including regulations issued pursuant to the U.S. Occupational
Safety and Health Act. These regulations require us to comply with certain manufacturing safety standards to
protect our employees from accidents. We believe that we are in material compliance with all employee safety
regulations applicable to our business.
Environmental Regulations
We are subject to various environmental regulations. Our plants use a number of chemicals that are
considered to be “extremely” hazardous substances pursuant to applicable environmental laws due to their
toxicity, including ammonia which is used extensively in our operations as a refrigerant. Such chemicals must be
handled in accordance with such environmental laws. Also, on occasion, certain of our facilities discharge
biodegradable wastewater into municipal waste treatment facilities in excess of levels allowed under local
regulations. As a result, certain of our facilities are required to pay wastewater surcharges or to construct
wastewater pretreatment facilities. To date, such wastewater surcharges have not had a material effect on our
financial condition or results of operations.
We maintain above-ground and under-ground petroleum storage tanks at many of our facilities. We
periodically inspect these tanks to determine whether they are in compliance with applicable regulations and, as a
result of such inspections are required to make expenditures from time to time in order to ensure that these tanks
remain in compliance. In addition, upon removal of the tanks, we are sometimes required to make expenditures
to restore the site in accordance with applicable environmental laws. To date, such expenditures have not had a
material effect on our financial condition or results of operations.
9
We believe that we are in material compliance with the environmental regulations applicable to our
business. We do not expect the cost of our continued compliance to have a material impact on our capital
expenditures, earnings, cash flows or competitive position in the foreseeable future. In addition, any asset
retirement obligations are not material.
Milk Industry Regulation
The federal government establishes minimum prices that we must pay to producers in federally regulated
areas for raw milk. Raw milk primarily contains raw skim milk, in addition to a small percentage of butterfat.
Raw milk delivered to our facilities is tested to determine the percentage of butterfat and other milk components,
and we pay our suppliers for the raw milk based on the results of these tests.
The federal government’s minimum prices vary depending on the processor’s geographic location or sales
area and the type of product manufactured. Federal minimum prices change monthly. Class I butterfat and raw
skim milk prices (which are the minimum prices we are required to pay for raw milk that is processed into
Class I products such as fluid milk) and Class II raw milk prices (which are the prices we are required to pay for
raw milk that is processed into Class II products such as cottage cheese, creams, creamers, ice cream and sour
cream) for each month are announced by the federal government the immediately preceding month.
Some states have established their own rules for determining minimum prices for raw milk. In addition to
the federal or state minimum prices, we also may pay producer premiums, procurement costs and other related
charges that vary by location and supplier.
Organic Regulations
Our organic products are required to meet the standards set forth in the Organic Foods Production Act and
the regulations adopted thereunder by the National Organic Standards Board. These regulations require strict
methods of production for organic food products and limit the ability of food processors to use non-organic or
synthetic materials in the production of organic foods or in the raising of organic livestock. We believe that we
are in material compliance with the organic regulations applicable to our business.
10
Brief History
We commenced operations in 1988 through a predecessor entity. Our original operations consisted solely of
a packaged ice business. Since then the following significant activity has occurred:
December 1993
Acquired Suiza Dairy Corporation, a regional dairy processor located in
Puerto Rico. We then began acquiring other local and regional U.S. dairy
processors, growing our dairy business rapidly primarily through acquisitions.
April 1996
Completed our initial public offering under our former name “Suiza Foods
Corporation” and began trading on NASDAQ National Market.
March 1997
Began trading on the New York Stock Exchange.
August 1997
Acquired Franklin Plastics, Inc., a company engaged in the business of
manufacturing and selling plastic containers. After the acquisition, we began
acquiring other companies in the plastic packaging industry.
November 1997
Acquired Morningstar Foods Inc., whose business was a predecessor to our
WhiteWave segment. This was our first acquisition of a company with
national brands.
April 1998
Sold our packaged ice operations.
May 1998
July 1999
Acquired Continental Can Company, making us one of the largest plastic packaging
companies in the United States.
Sold all of our U.S. plastic packaging operations to Consolidated Container
Company in exchange for cash and a minority interest in the purchaser.
January 2000
Acquired Southern Foods Group, L.P., the third largest dairy processor in the United
States, making us the largest dairy processor in the country.
February 2000
Acquired Leche Celta, one of the largest dairy processors in Spain.
March and May 2000
Sold our European packaging operations.
December 2001
Acquired the former Dean Foods Company (“Legacy Dean”) and changed our name
from Suiza Foods Corporation to Dean Foods Company. Legacy Dean changed its
name to Dean Holding Company.
May 2002
Acquired the portion of WhiteWave, Inc. that we did not already own.
January 2004
Acquired the portion of Horizon Organic that we did not already own.
January 2005
Consolidated our nationally branded business, including WhiteWave, Horizon
Organic and Dean National Brand Group into a single operating unit called
WhiteWave.
June 2005
Spun-off our Specialty Foods Group segment to our shareholders.
September 2006
Sold our Leche Celta operations in Spain.
January 2007
Sold our Leche Celta operations in Portugal.
March 2007
Acquired Friendship Dairies, one of the largest dairy products manufacturers,
marketers and distributors in the northeastern United States.
April 2007
Paid a special cash dividend of $15 per share to our shareholders.
January 2008
Entered into and formed a strategic joint venture with Hero Group.
July 2009
Acquired Alpro, a leading provider of soy-based food and beverage products in
Europe, providing us with the opportunity to leverage the collective strengths of our
combined businesses across a global soy beverages and related products category.
11
Minority Holdings and Other Interests
Consolidated Container Company
We own an approximately 25% non-controlling interest, on a fully diluted basis, in Consolidated Container
Company (“CCC”), one of the nation’s largest manufacturers of rigid plastic containers and our largest supplier
of plastic bottles and bottle components. We have owned a minority interest in CCC since July 1999 when we
sold our U.S. plastic packaging operations to CCC. Vestar Capital Partners, an unaffiliated entity, controls CCC
through a majority ownership interest. Pursuant to our agreements with Vestar, we control two of the eight seats
on CCC’s Management Committee. We also have entered into various supply agreements with CCC pursuant to
which we have agreed to purchase certain of our requirements for plastic bottles and bottle components from
CCC. We spent $268.2 million and $330.3 million on products purchased from CCC for the years ended
December 31, 2009 and 2008, respectively. See Note 3 to our Consolidated Financial Statements for more
information on our relationship with CCC.
Hero/WhiteWave Joint Venture
In January 2008, we entered into and formed a 50/50 strategic joint venture with Hero Group (“Hero”),
producer of international fruit and infant nutrition brands, to introduce a new innovative product line to North
America. The joint venture, Hero/WhiteWave, LLC, combines Hero’s expertise in fruit, innovation and process
engineering with WhiteWave’s deep understanding of the American consumer and manufacturing network, as
well as the go-to-market system of Dean Foods.
The joint venture, which is based in Broomfield, Colorado, serves as a strategic growth platform for both
companies to further extend their global reach by leveraging their established innovation,
technology,
manufacturing and distribution capabilities over time. During the first quarter of 2009, the joint venture began to
manufacture and distribute its primary product, Fruit2Day®, in limited test markets in the United States. During
the second quarter of 2009, the product was nationally launched in grocery and club store channels.
Beginning January 1, 2009, in conjunction with entering into several new agreements between WhiteWave
and the joint venture, we concluded that we are the primary beneficiary of the joint venture and the financial
position and the results of operations for the joint venture should be consolidated for financial reporting
purposes. Accordingly,
the joint venture has been consolidated as of January 1, 2009. The resulting
non-controlling interest’s share in the equity of the joint venture is presented as a separate component of
stockholders’ equity in the consolidated balance sheets and consolidated statement of stockholders’ equity and
the net loss attributable to the non-controlling interest is presented in the consolidated statements of income.
During 2009, our joint venture partner made cash and non-cash contributions of $12.7 million and $0.5
million, respectively, to the joint venture. During 2009, we made cash contributions of $10.5 million and
continued non-cash contributions in the form of the capital lease for the manufacturing facility constructed at one
of our existing WhiteWave plants. From the inception of the venture through December 31, 2009, we and our
joint venture partner have each invested $30.3 million in the Hero/WhiteWave joint venture.
Where You Can Get More Information
Our fiscal year ends on December 31. We file annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information that we file with the Securities and
Exchange Commission at the Securities and Exchange Commission’s Public Reference Room at 100 F Street,
N.E., Washington D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by
writing to the Securities and Exchange Commission. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for further information on the operation of the Public Reference Room.
12
We file our reports with the Securities and Exchange Commission electronically through the Securities and
Exchange Commission’s Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) system. The Securities
and Exchange Commission maintains an Internet site that contains reports, proxy and information statements and
other information regarding companies that file electronically with the Securities and Exchange Commission
through EDGAR. The address of this Internet site is http://www.sec.gov.
We also make available free of charge through our website at www.deanfoods.com our annual report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.
Our Code of Ethics is applicable to all of our employees and directors, with the exception of our Alpro
employees, who are subject to a comparable code of ethics. Our Code of Ethics is available on our corporate
website at www.deanfoods.com, together with the Corporate Governance Principles of our Board of Directors and
the charters of all of the Committees of our Board of Directors. Any waivers that we may grant to our executive
officers or directors under the Code of Ethics, and any amendments to our Code of Ethics, will be posted on our
corporate website. If you would like hard copies of any of these documents, or of any of our filings with the
Securities and Exchange Commission, write or call us at:
Dean Foods Company
2515 McKinney Avenue, Suite 1200
Dallas, Texas 75201
(214) 303-3400
Attention: Investor Relations
Item 1A. Risk Factors
Competitive Risks
Industry Consolidation Has Strengthened the Competitive Position of Our Retail Customers, Which Has
Put Pressures on Our Operating Margins and Profitability.
Many of our customers, such as supermarkets, warehouse clubs and food distributors, have experienced
industry consolidation in recent years and this consolidation is expected to continue. These consolidations have
produced large, sophisticated customers with increased buying power, and have increased the significance of
large-format retailers and discounters. As a result, we are increasingly dependent on key retailers, which have
significant bargaining power. In addition, some of these customers are vertically integrated and may re-dedicate
key shelf-space currently occupied by our products for their private label products. Higher levels of price
competition and higher resistance to price increases are becoming more widespread in our business. During 2009,
retailers began lowering their prices on milk to drive value for the end consumer and increase traffic flow,
resulting in lower margins for the retailers. Increasingly, this margin compression is being absorbed by dairy
processors. If we are unable to structure our business to appropriately respond to the pricing demands of our
customers, we may lose these customers to other processors that are willing to sell product at a lower cost.
Additionally, if we are not able to lower our cost structure adequately, our profitability could be adversely
affected by the decrease in margin.
Increased Competition With Our Branded Products and Economic Conditions Could Impede Our Growth
Rate and Profit Margin.
Our Silk soymilk and Horizon Organic food and beverage products have leading shares in their categories and
have benefited in many cases from being the first to introduce products in their categories. As soy and organic products
have gained in popularity with consumers, our products in these categories have attracted competitors, including
private label competitors who sell their products at a lower price. In addition, we may incur increased marketing costs
for our branded products, which can negatively impact our profitability. In periods of economic decline, consumers
tend to purchase lower-priced products, including private label products and such as conventional milk, which could
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reduce sales of our organic milk. The willingness of consumers to purchase our products will depend upon our ability
to offer products providing the right consumer benefits at the right price. Further trade down to lower priced products
could adversely affect our sales and profit margin for our branded products.
Many large food and beverage companies have substantially more resources than we do, and they may be
able to market their products more successfully than we can, which could cause our growth rate in certain
categories to be slower than our forecast and could cause us to lose sales. For example, Our International Delight
coffee creamer competes intensely with Nestlé CoffeeMate®. Our failure to successfully compete with Nestlé,
which has substantially more resources than we do, could have a material adverse effect on the sales and
profitability of our International Delight business.
The Loss of Any of Our Largest Customers Could Negatively Impact Our Sales and Profits.
Our largest customer, Wal-Mart Stores, Inc. and its subsidiaries, including Sam’s Club, accounted for
approximately 19.1% of consolidated net sales during 2009. During 2009, our top five customers, collectively,
accounted for approximately 31.0% of our consolidated net sales. We do not generally enter into sales
agreements with our customers, and where such agreements exist, they are generally terminable at will by the
customer. The loss of any large customer for an extended length of time could negatively impact our sales and
profits.
We are Subject to Competitive Bidding Situations, the Outcome of Which Could Negatively Impact Our
Sales and Profits.
Many of our retail customers have become increasingly price sensitive in the current economic climate,
which has intensified the competitive environment in which we operate. Over the past few years, we have been
subject to a number of competitive bidding situations, particularly within Fresh Dairy Direct, which reduced our
profitability on sales to several customers. We expect this trend of competitive bidding to continue. In bidding
situations, we are subject to the risk of losing certain customers which could negatively impact our sales and
profits.
Commodity Risks
Availability of and Changes in Raw Material and Other Input Costs Can Adversely Affect Us.
Our business is heavily dependent on raw materials such as conventional and organic raw milk, diesel fuel,
resin and soybeans and other commodities. In addition to our dependence on conventional and organic raw milk,
Fresh Dairy Direct is a large consumer of diesel fuel and WhiteWave-Morningstar is affected by the costs of
petroleum-based products through the use of common carriers and packaging. The prices of these materials
increase and decrease based on market conditions, and in some cases, governmental regulation. Weather,
including the heightened impact of weather events related to climate change, also affects the availability and
pricing of these inputs. Sometimes supplies of raw materials, such as resin, have been insufficient to meet
demand. Volatility in the cost of our raw materials, particularly diesel fuel and other non-dairy inputs, can
significantly adversely affect our performance as upward price changes often lag changes in costs we charge our
customers. In some cases the price increases of these non-dairy inputs may exceed the price increases we are able
to pass along to our customers due to contractual and other limitations. In periods of rapid movements in dairy
commodities, our ability to pass through costs is impaired due to the timing of passing through the price
increases. These lags and limitations may decrease our profit margins. In addition, raw material cost fluctuations
from year to year can cause our revenues to increase or decrease significantly compared to prior periods.
The organic dairy industry remains a relatively new category and continues to experience significant swings
in supply and demand. Industry regulation, and the costs of organic farming compared to prices paid for
conventional farming can impact the supply of organic raw milk in the market. An oversupply of organic raw
milk can cause significant discounting in the sale of organic packaged milk, which increases competitive pressure
on our branded products and could cause our profitability to suffer. An undersupply or higher input costs can
increase the costs of organic raw milk, which can cause retail price gaps between private label and branded
products to expand, potentially decreasing our volumes and adversely affecting our results. The impact of retail
price gaps may be compounded by the current economic environment as consumers become increasingly focused
on product pricing. In addition, consumers may choose to purchase conventional milk instead of organic milk
due to differences in cost, which could further decrease our volumes and results.
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Capital Markets and General Economic Risks
We Have Substantial Debt and Other Financial Obligations and We May Incur Even More Debt.
We have substantial debt and other financial obligations and significant unused borrowing capacity. At
December 31, 2009, we had outstanding borrowings of approximately $3.6 billion under our senior secured
credit facility, of which $3.1 billion were in term loan borrowings with an additional $515.2 million in
outstanding borrowings under our $1.5 billion senior secured revolving line of credit. In addition, we had $642.0
million of face value of senior unsecured notes outstanding and nothing outstanding under our receivables-
backed facility at December 31, 2009.
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 or
funding our strategic growth plan;
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.
•
•
•
In addition, in the current economic climate, investors are apprehensive about investing in companies such
as ours that carry a substantial amount of leverage on their balance sheets, and this apprehension may adversely
affect the price of our common stock.
Also, under our senior secured credit facility, we are required to maintain certain financial covenants,
including, but not limited to, maximum leverage and minimum interest coverage ratios. Failure to comply with
the financial covenants (as defined in our credit agreement), or any other non-financial or restrictive covenant,
could create a default under our senior secured credit facility and under our receivables-backed facility. Upon a
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. We may be required to
amend our credit facility, refinance all or part of our existing debt, sell assets, incur additional indebtedness or
raise equity. Further, based upon our actual performance levels, our Leverage Ratio requirements or other
financial covenants could limit our ability to incur additional debt under our senior secured credit facility, which
could hinder our ability to execute our current business strategy.
Our ability to maintain an adequate level of liquidity in the future is dependent on our ability to renew our
Receivables-backed facility annually and refinance our senior secured credit facility, of which a portion matures
in 2012 and the remainder in 2014. The timing, approach, and terms of any such refinancing would depend upon
market conditions and management’s judgment, among other factors. There are sizeable amounts of other
outstanding credit facilities in the market that are currently scheduled to mature during the same timeframe as our
senior secured credit facility. This future refinancing demand could potentially reduce liquidity and credit
availability in the capital markets and impact our ability to refinance our senior credit facility.
While certain conditions in the worldwide and domestic economies may be showing signs of improvement,
there continues to be volatility in the capital markets, diminished liquidity and credit availability and continued
counterparty risk. Given the current economic and capital market environment, we expect that the interest rates
on our debt will increase as a result of any such refinancing. In addition, the expenses associated with any such
refinancing could be material.
Recent Adverse Market Events Have Caused Costs of Providing Employee Benefits to Escalate, Which May
Adversely Affect Our Profitability and Liquidity.
We sponsor various defined benefit and defined contribution retirement plans, as well as contribute to
various multi-employer plans on behalf of our employees. Changes in interest rates or in the market value of plan
15
assets could affect the funded status of our pension plans. This could cause volatility in our benefits costs and
increase future funding requirements of our plans. Pension and post-retirement costs also 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 annual periodic pension costs. A
significant increase in future funding requirements could have a negative impact on our results of operations,
financial condition and cash flows.
Certain of our defined benefit retirement plans, as well as many of the multi-employer plans in which we
participate, are less than fully funded. Recent changes in federal laws require plan sponsors to eliminate, over
defined time periods, the underfunded status of plans that are subject to ERISA rules and regulations. In addition,
turmoil in the financial markets in 2008 brought significant declines in the fair market value of the equity and
debt instruments that we hold within our defined benefit master trust to settle future defined benefit plan
obligations. Although our funded status as of December 31, 2009 increased by approximately $24.1 million from
the prior year end, it is still approximately $51.1 million lower than our funded status at December 31, 2007. This
decline will continue to result in higher future funding requirements, as well as increased plan costs. In addition
to the impact from our defined benefit retirement plan, we expect the market events in 2008 to continue to result
in higher future funding requirements related to multi-employer plans in which we participate.
The Continued Recessionary Economy May Adversely Impact Our Business and Results of Operations.
The dairy industry is sensitive to changes in general economic conditions, both nationally and locally. The
continued recessionary economy may have an adverse effect on consumer spending patterns. Higher levels of
unemployment, higher consumer debt levels, or other unfavorable economic factors could adversely affect
consumer demand for products we sell or distribute, which could adversely affect our results of operations. There
can be no assurances that government responses to the economic downturn will restore consumer confidence.
Strategic Growth Plan Risks
We May Not Realize Anticipated Benefits from Our Strategic Growth Plan.
We are implementing a strategic growth plan, which includes a number of transformational initiatives, that
we believe are necessary in order to position our business for future success and growth. Our success depends in
part on our ability to achieve a lower cost structure and operate efficiently in the highly competitive food and
beverage industry, particularly in an environment of increased competitive activity. In addition, it is critical that
we have the appropriate personnel in place to continue to lead and execute our plan. We continue to implement
profit-enhancing initiatives that impact our supply chain and related functions. These initiatives are focused on
cost-saving opportunities in procurement, distribution, conversion and network optimization. Over the next
several years, these initiatives will require investments in people, systems, tools and facilities. Our future success
and earnings growth depends in part on our ability to reduce costs, improve efficiencies and better serve our
customers. If we are unable to successfully implement these initiatives or fail to implement them as timely as we
anticipate, we could become cost disadvantaged in the marketplace, and our competitiveness and our profitability
could decrease.
Product, Supply Chain and Systems Risks
We Must Identify Changing Consumer Preferences and Develop and Offer Products to Meet Their
Preferences.
Consumer preferences evolve over time and the success of our products depends on our ability to identify
the tastes, dietary preferences and purchasing habits of consumers and to offer products that appeal to their
preferences. Introduction of new products and product extensions requires significant development and
marketing investment, and we may fail to realize anticipated returns on such investments due to lack of consumer
acceptance of such products. Currently, we believe consumers are trending toward health and wellness
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beverages. Although we have increased our investment in innovation in order to capitalize on this trend, there are
currently several global companies with greater resources which compete with us in the health and wellness
space. In 2009, we augmented our current product line by offering customers and consumers soy-based products
manufactured with non-GMO soybeans. Our transition to non-GMO soybeans from organic soybeans may
impact consumer acceptance of our products. In addition, as consumers become increasingly aware of the
environmental and social impacts of the products they purchase their preferences and purchasing decisions may
change. If our products fail to meet changing consumer preferences, the return on our investment in those areas
will be less than anticipated and our product strategy may not succeed.
We May Experience Liabilities or Harm to Our Reputation as a Result of Product Issues, Such as
Product Recalls.
We sell products for human consumption, which involves a number of risks. Product contamination,
spoilage or other adulteration, product misbranding or product tampering could require us to recall products. We
also may be subject to liability if our products or operations violate applicable laws or regulations or in the event
our products cause injury, illness or death. In addition, we advertise our products and could be the target of
claims relating to false or deceptive advertising under U.S. federal and state laws, including consumer protection
statutes of some states. A significant product liability or other legal judgment against us or a widespread product
recall may negatively impact our profitability. Even if a product liability or consumer fraud claim is unsuccessful
or is not merited, the negative publicity surrounding such assertions regarding our products or processes could
materially and adversely affect our reputation and brand image, particularly in categories such as fluid milk that
have strong health and wellness credentials.
Disruption of Our Supply Chain or Transportation Systems Could Adversely Affect Our Business.
the financial and/or operational
Damage or disruption to our manufacturing or distribution capabilities due to weather, natural disaster, fire,
instability of key suppliers, distributors,
terrorism, pandemic, strikes,
warehousing and transportation providers, or other reasons could impair our ability to manufacture or distribute
our products. To the extent that we are unable, or it is not financially feasible, to mitigate the likelihood or
potential impact of such events, or to effectively manage such events if they occur, there could be an adverse
effect on our business and results of operations, and additional resources could be required to restore our supply
chain. In addition, we are subject to federal motor carrier regulations, such as the Federal Motor Carrier Safety
Act, with which our extensive DSD Delivery system must comply. Failure to comply with such regulations could
result in our inability to deliver product to our customers in a timely manner, which could adversely affect our
reputation and our results.
Our Business Operations Could be Disrupted if Our Information Technology Systems Fail to Perform
Adequately.
The efficient operation of our business depends on our information technology systems. We rely on our
information technology systems to effectively manage our business data, communications, supply chain,
logistics, accounting, and other business processes. If we do not allocate and effectively manage the resources
necessary to build and sustain an appropriate technology infrastructure, our business or financial results could be
negatively impacted. In addition, our information technology systems may be vulnerable to damage or
interruption from circumstances beyond our control, including systems failures, security breaches, and viruses.
Any such damage or interruption could have a material adverse effect on our business.
Acquisition Risks
The Failure to Successfully Integrate Acquisitions into Our Existing Operations Could Adversely Affect
Our Financial Results.
We have made several acquisitions in recent years including, most recently, our acquisition of the Alpro
division of Vandemoortele N.V., and we regularly review opportunities for strategic growth through future
acquisitions. Potential risks associated with these acquisitions include the diversion of management’s attention
17
from other business concerns, the inability to achieve anticipated benefits from these acquisitions in the
timeframe we anticipate, or at all, the inherent risks in entering geographic locations, markets or lines of business
in which we have limited prior experience, the inability to integrate the new operations, technologies and
products of the acquired companies successfully with our existing businesses, the potential loss of key employees
and customers of the acquired companies, and the possible assumption of unknown liabilities, and potential
disputes with the sellers. In addition, acquisitions outside the United States may present unique challenges and
increase our exposure to the risks associated with foreign operations, including foreign currency risks and
compliance with foreign rules and regulations. Any or all of these risks could adversely impact our financial
results.
Legal and Regulatory Risks
The Dairy Industry in Which We Operate Has Been Subject to Increased Government Scrutiny Which
Could Have an Adverse Impact on Our Business.
We are subject to antitrust and other competition laws in the United States and in the other countries in
which we operate. We cannot predict how these laws or their interpretation, administration and enforcement will
impact us. Throughout 2009 and continuing in 2010, the dairy industry has been the subject of increased
government scrutiny. Beginning in 2010, the current administration has initiated a review of existing dairy
policies in order to consider potential changes to those policies. This review process may result in changes to the
dairy industry that we cannot anticipate and that may have a material adverse impact on our business.
Pending Antitrust Lawsuits May have a Material Adverse Impact on Our Business.
We are the subject of several antitrust lawsuits, the outcome of which we are unable to predict. Increased
scrutiny of the dairy industry has resulted, and may continue to result, in an increase in litigation or regulatory
actions against us. Such lawsuits are expensive to defend and could cause a diversion of management’s attention.
In addition to increased litigation costs, these actions could expose us to negative publicity, which might
adversely affect our brands, reputation and/or customer preference for our products. In addition, acquisition
activities are regulated by these antitrust and competition laws and such scrutiny could impact our ability to
pursue strategic acquisitions in the future.
Litigation or Legal Proceedings Could Expose Us to Significant Liabilities and Have a Negative Impact on
Our Reputation.
We are party to various litigation claims and legal proceedings. We evaluate these litigation claims and legal
proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential
losses. Based on these assessments and estimates, we establish reserves and /or disclose the relevant litigation
claims or legal proceedings, as appropriate. These assessments and estimates are based on the information
available to management at the time and involve a significant amount of management judgment. Actual
outcomes or losses may differ materially from our current assessments and estimates.
Labor Disputes Could Adversely Affect Us.
As of December 31, 2009, approximately 36% of Fresh Dairy Direct’s and 41% of WhiteWave-
Morningstar’s employees participated in collective bargaining agreements. At any given time, we may face a
number of union organizing drives. When we face union organizing drives, we and the union may disagree on
important issues which, in turn, could possibly lead to a strike, work slowdown or other job actions at one or
more of our locations. A strike, work slowdown or other labor unrest could in some cases impair our ability to
supply our products to customers, which could result in reduced revenue and customer claims. In addition,
proposed legislation, known as The Employee Free Choice Act, could make it significantly easier for union
organizing drives to be successful and could give third-party arbitrators the ability to impose terms of collective
bargaining agreements upon us and a labor union if we and such union are unable to agree to the terms of a
collective bargaining agreement.
18
Our Business is Subject to Various Environmental Laws, Which May Increase Our Compliance Costs.
Our business operations are subject to numerous environmental and other air pollution control laws,
including the federal Clean Air Act, the federal Clean Water Act, and the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, as well as state and local statutes. These laws
and regulations cover the discharge of pollutants, wastewater, and hazardous materials into the environment. In
addition, various laws and regulations addressing climate change are being considered or implemented at the
federal and state levels. New legislation, as well as current federal and other state regulatory initiatives relating to
these environmental matters, could require us to replace equipment, install additional pollution controls, purchase
various emission allowances or curtail operations. These costs could adversely affect our results of operations
and financial condition.
Changes in Laws, Regulations and Accounting Standards Could Have an Adverse Effect on Our
Financial Results.
We are subject to federal, state, local and foreign governmental laws and regulations, including those
promulgated by the United States Food and Drug Administration, the United States Department of Agriculture,
the Sarbanes-Oxley Act of 2002 and numerous related regulations promulgated by the Securities and Exchange
Commission and the Financial Accounting Standards Board. Changes in federal, state or local laws, or the
interpretations of such laws and regulations, may negatively impact our financial results or our ability to market
our products.
Item 1B. Unresolved Staff Comments
None.
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Item 2.
Properties
Our corporate headquarters are located in leased premises at 2515 McKinney Avenue, Suite 1200, Dallas,
TX 75201. In June, 2009, we announced our intent to relocate our corporate headquarters to a leased facility
located in Dallas, Texas. The new facility is in close proximity to our existing headquarters. The relocation of
personnel began in the first quarter of 2010 and is expected to be completed in the second quarter of 2010.
In addition, we operate more than 100 manufacturing facilities. Management believes that Dean Food’s
facilities are well maintained and are generally suitable and of sufficient capacity to support our current business
operations and that the loss of any single facility would not have a material adverse effect on the operations or
financial results. The following tables set forth, by business segment, our principal manufacturing facilities.
Fresh Dairy Direct
Fresh Dairy Direct currently conducts its manufacturing operations within the following 82 facilities, most
of which are owned:
Birmingham, Alabama (2)
Buena Park, California (2)
City of Industry, California (2)
Hayward, California
Riverside, California
Delta, Colorado
Denver, Colorado
Englewood, Colorado
Greeley, Colorado
Miami, Florida
Orange City, Florida
Orlando, Florida
Baxley, Georgia
Braselton, Georgia
Hilo, Hawaii
Honolulu, Hawaii
Boise, Idaho
Belvidere, Illinois
Harvard, Illinois
Huntley, Illinois
O’Fallon, Illinois
Decatur, Indiana
Huntington, Indiana
Rochester, Indiana
LeMars, Iowa
Louisville, Kentucky
Newport, Kentucky
New Orleans, Louisiana
Shreveport, Louisiana
Bangor, Maine
Franklin, Massachusetts
Lynn, Massachusetts
Mendon, Massachusetts
Evart, Michigan
Grand Rapids, Michigan
Livonia, Michigan
Marquette, Michigan
Thief River Falls, Minnesota
Woodbury, Minnesota
Billings, Montana
Great Falls, Montana
Las Vegas, Nevada
Reno, Nevada
Burlington, New Jersey
Albuquerque, New Mexico
Rensselaer, New York
High Point, North Carolina
Winston-Salem, North Carolina
Bismarck, North Dakota
Tulsa, Oklahoma
Marietta, Ohio
Springfield, Ohio
Toledo, Ohio
Erie, Pennsylvania
Landsdale, Pennsylvania
Lebanon, Pennsylvania
Schuylkill Haven, Pennsylvania
Sharpsville, Pennsylvania
Florence, South Carolina
Spartanburg, South Carolina
Sioux Falls, South Dakota
Athens, Tennessee
Nashville, Tennessee (2)
Dallas, Texas (2)
El Paso, Texas
Houston, Texas
Lubbock, Texas
McKinney, Texas
San Antonio, Texas
Waco, Texas
Orem, Utah
Salt Lake City, Utah
Richmond, Virginia
Springfield, Virginia
DePere, Wisconsin
Sheboygan, Wisconsin
Waukesha, Wisconsin
Each of Fresh Dairy Direct’s manufacturing facilities also serves as a distribution facility. In addition, Fresh
Dairy Direct has numerous distribution branches located across the country, some of which are owned but most
of which are leased. Fresh Dairy Direct’s headquarters are located in Dallas, Texas in leased premises.
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WhiteWave-Morningstar
WhiteWave-Morningstar currently conducts its manufacturing operations from the following 24 facilities,
most of which are owned:
Decatur, Alabama
City of Industry, California
Fullerton, California
Gustine, California
Tulare, California
Newington, Connecticut
Jacksonville, Florida
Rockford, Illinois
Murray, Kentucky
Frederick, Maryland
White Bear Lake, Minnesota
Bridgeton, New Jersey
Delhi, New York
Friendship, New York
Cedar City, Utah
Sulphur Springs, Texas (2)
Mt. Crawford, Virginia
Richland Center, Wisconsin
Wevelgem, Belgium
Issenheim, France
Landgraaf, Netherlands
Aberystwyth, United Kingdom
Kettering, United Kingdom
WhiteWave also owns two organic dairy farms located in Paul, Idaho and Kennedyville, Maryland and
leases an organic dairy farm in Portales, New Mexico. WhiteWave’s headquarters and our research and
development facility are located in leased premises in Broomfield, Colorado. Morningstar’s headquarters are
located in leased premises in Dallas, Texas. Alpro’s headquarters are located in leased premises in Gent,
Belgium.
Item 3.
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.
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 (“dairy farmer actions”). A third purported class action antitrust complaint (“retailer action”)
was filed on August 9, 2007 in the United States District Court for the Eastern District of Tennessee, Greeneville
Division. The complaint in the retailer action was amended on March 28, 2008. The amended complaint alleges
generally that we, either acting alone or in conjunction with others in the milk industry, lessened competition in
the Southeastern United States for the sale of processed fluid Grade A milk to retail outlets and other customers
and that the defendants’ conduct also artificially inflated retail prices for direct milk purchasers. Four additional
purported class action complaints were filed on August 27, 2007, October 3, 2007, November 15, 2007 and
February 13, 2008 in the United States District Court for the Eastern District of Tennessee, Greeneville Division.
The allegations in these complaints are similar to those in the dairy farmer actions.
On January 7, 2008, a United States Judicial Panel on Multidistrict Litigation transferred all of the pending
cases to the Eastern District of Tennessee, Greeneville Division. On April 1, 2008, the Eastern District Court
ordered the consolidation of the six dairy farmer actions and ordered the retailer action to be administratively
consolidated with the coordinated dairy farmer actions. A motion to dismiss the dairy farmer actions was denied
on May 20, 2008, and an amended consolidated complaint was filed by the dairy farmer plaintiffs on June 20,
2008. A motion to dismiss the retailer action was denied on July 27, 2009. Motions for class certification were
filed in both actions on May 1, 2009, and are currently pending before the Court. A motion for summary
judgment in the retailer action was filed on September 18, 2009 and remains pending. We are nearing completion
of fact discovery in these matters. We intend to continue to vigorously defend against these lawsuits.
On June 29, 2009, another purported class action lawsuit was filed in the Eastern District of Tennessee,
Greeneville Division, on behalf of indirect purchasers of processed fluid Grade A milk (“indirect purchaser
action”). The allegations in this complaint are similar to those in the retailer action, but primarily involve state
law claims. Because the allegations in this complaint substantially overlap with the allegations in the retailer
action, on September 1, 2009, the Court granted the parties’ joint motion to stay all proceedings in the indirect
purchaser action pending the outcome of the summary judgment motion in the retailer action.
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On October 8, 2009, we were named, among several defendants, in a purported class action antitrust complaint
filed in the United States District Court for the District of Vermont. The complaint, which was amended on
January 21, 2010, contains allegations similar in nature to that of the dairy farmer actions (noted above), and alleges
generally that we and others in the milk industry worked together to limit the price dairy farmers in the Northeastern
United States are paid for their raw milk and to deny these farmers access to fluid Grade A milk processing
facilities. A motion to dismiss the amended complaint has recently been filed. A second complaint was filed by a
different plaintiff on January 14, 2010 but has not been served. The second complaint is similar to the original
complaint. These cases are at a very preliminary stage, and we intend to vigorously defend against these actions.
On January 22, 2010, the United States Department of Justice (“DOJ”) and the States of Wisconsin, Illinois
and Michigan (“Plaintiff States”) filed a civil action in the Eastern District of Wisconsin (“DOJ lawsuit”)
alleging that the Company violated Section 7 of the Clayton Act when it acquired the Consumer Products
Division of Foremost Farms USA on April 1, 2009 (the “acquisition”) for an aggregate purchase price of
approximately $35 million. The DOJ and the Plaintiff States seek a declaration that the acquisition violates
Section 7 of the Clayton Act, divestiture by the Company of all assets and interests it acquired as part of the
acquisition, an order permanently enjoining the Company from further ownership and operation of the assets that
were part of the acquisition, and to compel the Company to provide certain advance notification of future
acquisitions involving school milk or fluid milk processing operations. The Company intends to vigorously
defend against this action.
On April 28, 2009, a stockholder derivative complaint was filed purportedly on behalf of Dean Foods
Company (the “Company”) in the United States District Court for the Eastern District of Tennessee, Greeneville
division. The complaint names the Company’s then current directors, as well as Richard Fehr, an officer of the
Company, and former director Alan Bernon among the defendants. The complaint alleges that the officers and
directors breached their fiduciary duties to the Company under Delaware law by approving the 2001 merger
between the former Dean Foods Company and Suiza Foods Corporation and allegedly participating in, or failing
to prevent, a purported conspiracy to fix the price of Grade A milk. The complaint also names others in the milk
industry as defendants for allegedly aiding and abetting the officers’ and directors’ breach of their fiduciary
duties and names the Company as a nominal defendant. The plaintiffs are seeking, on behalf of the Company, an
undisclosed amount of damages and equitable relief. On August 7, 2009, the Company and other defendants filed
a motion to dismiss the complaint and a motion to transfer the case to the United States District Court for the
Northern District of Texas. Both motions are currently pending before the Court.
On January 18, 2008, our subsidiary, Kohler Mix Specialties, LLC (“Kohler”), was named as defendant in a
civil complaint filed in the Superior Court, Judicial District of Hartford. The plaintiff in the case is the
Commissioner of Environmental Protection of the State of Connecticut. The complaint alleges generally that Kohler
improperly discharged wastewater into the waters of the State of Connecticut and bypassed certain wastewater
treatment equipment in violation of certain Connecticut environmental regulations and Kohler’s wastewater
discharge permit. The plaintiff is seeking injunctive relief and civil penalties with respect to the claims. On
December 14, 2009, Kohler filed its answer to the complaint. This matter is currently in the fact discovery stage.
At this time, it is not possible for us to predict the ultimate outcome of the matters set forth above.
On October 22, 2009, we received a notice from the United States Environmental Protection Agency (the
“EPA”) that it plans to file an administrative complaint for civil penalties against Country Fresh, LLC alleging
our failure to meet certain procedural requirements with respect to the risk management program at our former
facility in Flint, Michigan. In February 2010, we agreed to pay a civil penalty of $92,400 to the EPA pursuant to
a Consent Agreement and Final Order in settlement of the matter.
Other than the matters set forth above, we are party from time to time to certain claims, litigations, audits
and investigations. Potential liabilities associated with the other matters referred to in this paragraph are not
expected to have a material adverse impact on our financial position, results of operations or cash flows.
Item 4.
Submission of Matters to a Vote of Security Holders
We did not submit any matters to a vote of security holders during the fourth quarter of 2009 through the
solicitation of proxies or otherwise.
22
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
Our common stock trades on the New York Stock Exchange under the symbol “DF.” The following table
sets forth the high and low closing sales prices of our common stock as quoted on the New York Stock Exchange
for the last two fiscal years. At February 19, 2010, there were 4,412 record holders of our common stock.
2008:
First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009:
First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
High
Low
$28.90
23.65
25.65
24.42
21.13
20.70
21.92
19.65
$19.49
18.36
17.95
11.51
17.83
17.61
17.60
15.90
We have not historically declared or paid a regular cash dividend on our common stock. We have no current
plans to pay a cash dividend in the future.
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations —
Liquidity and Capital Resources — Current Debt Obligations” and Note 9 to our Consolidated Financial
Statements for further information regarding the terms of our senior secured credit facility, including terms
restricting the payment of dividends.
Stock Repurchases — Since 1998, our Board of Directors has from time to time authorized the repurchase
of our common stock up to an aggregate of $2.3 billion, excluding fees and expense. We made no share
repurchases in 2009 or 2008. As of December 31, 2009, $218.7 million was available for repurchases under this
program (excluding fees and commissions). Shares, when repurchased, are retired.
23
Item 6.
Selected Financial Data
The following selected financial data as of and for each of the five years in the period ended December 31,
2009 has been derived from our audited Consolidated Financial Statements. The selected financial data do not
purport to indicate results of operations as of any future date or for any future period. The selected financial data
should be read in conjunction with our Consolidated Financial Statements and related Notes.
Operating data:
2009
Year Ended December 31
2007
(Dollars in thousands except share data)
2006
2008
2005
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,158,388 $ 12,454,613 $ 11,821,903 $ 10,098,555 $ 10,174,718
7,591,548
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,509,359
7,358,676
9,084,318
8,042,401
Gross profit(1)
Operating costs and expenses:
. . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and distribution . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . .
Amortization of intangibles . . . . . . . . . . . . . .
Facility closing and reorganization costs . . . .
. . . . . . . . . . . . . .
Other operating expense(2)
3,115,987
2,945,254
2,737,585
2,739,879
2,583,170
1,826,935
627,132
9,637
30,162
—
1,817,690
486,280
9,836
22,758
—
1,721,617
419,518
6,744
34,421
1,688
1,648,860
409,225
5,983
25,116
—
1,581,028
380,490
6,106
35,451
—
Total operating costs and expenses . . . . . .
2,493,866
2,336,564
2,183,988
2,089,184
2,003,075
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (income) expense:
Interest expense(3)(7) . . . . . . . . . . . . . . . . . . . . .
Other (income) expense, net . . . . . . . . . . . . . . . .
Total other expense . . . . . . . . . . . . . . . . . . .
Income from continuing operations before income
taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations . . . . . . . . . . . .
Gain (loss) on sale of discontinued operations, net
of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from discontinued operations, net of
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before cumulative effect of accounting
622,121
608,690
553,597
650,695
580,095
246,494
(4,196)
242,298
379,823
152,065
227,758
89
—
308,080
933
309,013
299,677
114,837
184,840
(1,275)
205
333,202
5,926
339,128
214,469
84,007
130,462
608
283
194,547
435
194,982
455,713
175,450
280,263
160,230
(683)
159,547
420,548
163,898
256,650
(1,978)
38,763
(52,871)
14,793
change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
227,847
183,770
131,353
225,414
310,206
Cumulative effect of accounting change, net of
tax(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
(1,552)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
227,847
183,770
131,353
225,414
308,654
Net loss attributable to non-controlling
interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,461
—
—
—
—
Net income attributable to Dean Foods
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
240,308 $
183,770 $
131,353 $
225,414 $
308,654
Cash dividend paid per share . . . . . . . . . . . . . . . . . $
Basic earnings per common share:
Net income attributable to Dean Foods
— $
— $
15.00 $
— $
—
Company . . . . . . . . . . . . . . . . . . . . . . . . . $
1.41 $
1.23 $
1.01 $
1.68 $
2.10
Diluted earnings per common share:
Net income attributable to Dean Foods
Company . . . . . . . . . . . . . . . . . . . . . . . . . $
1.38 $
1.20 $
0.96 $
1.61 $
2.01
Average common shares:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
170,986,886
149,266,519
130,310,811
133,938,777
146,673,322
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
173,858,303
153,395,746
137,291,998
139,762,104
153,438,636
Other data:
Ratio of earnings to fixed charges(5) . . . . . . . . .
2.26x
1.82x
1.56x
2.87x
3.01x
24
2009
2008
2006
2005
Year Ended December 31
2007
(Dollars in thousands)
Balance sheet data (at end of period):
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt(6)(7) . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Non-controlling interest
. . .
Dean Foods Company stockholders’ equity(7)(8)
$7,843,941
4,228,979
393,575
15,286
1,351,946
$7,040,192
4,489,251
412,322
—
558,234
$7,033,356
5,272,351
320,256
—
51,267
$6,770,173
3,355,851
238,682
—
1,809,399
$7,050,884
3,386,848
225,479
—
1,902,213
(1) As disclosed in Note 1 to our Consolidated Financial Statements, we include certain shipping and handling
costs within selling and distribution expense. As a result, our gross profit may not be comparable to other
entities that present all shipping and handling costs as a component of cost of sales.
(2) Results for 2007 include a loss of $1.7 million relating to the sale of our tofu business.
(3) Results for 2007 include a charge of $13.5 million to write-off financing costs related to the refinancing of
our senior secured credit facility.
(4) In the fourth quarter of 2005, we adopted Financial Accounting Standards related to Accounting for
Conditional Asset Retirement Obligations. If this guidance had always been in effect, we would have
expensed this amount for depreciation in periods prior to January 1, 2005.
(5) For purposes of calculating the ratio of earnings to fixed charges, “earnings” represents income before
income taxes plus fixed charges. “Fixed charges” consist of interest on all debt, amortization of deferred
financing costs and the portion of rental expense that we believe is representative of the interest component
of rent expense.
(6) Includes the current portion of long-term debt.
(7) In May 2009, we issued and sold 25.4 million shares of our common stock in a public offering. We received
net proceeds of $444.7 million from the offering. The net proceeds from the offering were used to repay the
$122.8 million aggregate principal amount of our subsidiary’s 6.625% senior notes due May 15, 2009, and
indebtedness under our receivables-backed facility.
On March 5, 2008, we issued and sold 18.7 million shares of our common stock in a public offering. We
received net proceeds of approximately $400 million from the offering which were used to reduce debt
outstanding under the revolving portion of our senior secured credit facility.
On April 2, 2007, we recapitalized our balance sheet with the completion of a new $4.8 billion senior secured
credit facility and the return of $1.94 billion to shareholders of record as of March 27, 2007, through a
$15 per share special cash dividend.
(8) Effective January 1, 2007, we adopted Financial Accounting Standards related to Accounting for Uncertainty
in Income Taxes. As a result, we recognized a $25.9 million increase in our liability for uncertain tax
positions, 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 balance at December 31, 2006 reflects a $14.8 million reduction related to the adoption of Financial
Accounting Standards related to Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans — an Amendment of FASB Statements No. 87, 88, 106, and 132(R). The reduction had
no impact on net income.
25
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Business Overview
We are one of the leading food and beverage companies in the United States. Fresh Dairy Direct, previously
referred to as DSD Dairy, is the largest processor and distributor of milk and other dairy products in the country,
with products sold under more than 50 familiar local and regional brands and a wide array of private labels.
WhiteWave-Morningstar markets and sells a variety of nationally branded dairy and dairy-related products, such
as Silk® soymilk and cultured soy products, Horizon Organic® milk and other dairy products, The Organic
Cow®, International Delight® coffee creamers, LAND O LAKES® creamers and fluid dairy products and Rachel’s
Organic® dairy products. With the addition of our recently acquired Alpro business in Europe, WhiteWave-
Morningstar now offers branded soy-based beverages and food products in Europe, marketing its products under
the Alpro® and Provamel® brands. Additionally, WhiteWave-Morningstar markets and sells private label
cultured and extended shelf life dairy products.
Our Reportable Segments
We have two reportable segments, Fresh Dairy Direct and WhiteWave-Morningstar.
Fresh Dairy Direct — Fresh Dairy Direct
is our largest segment, with approximately 76% of our
consolidated net sales in 2009. Fresh Dairy Direct manufactures, markets and distributes a wide variety of
branded and private label dairy case products, including milk, creamers, ice cream, juices and teas, to retailers,
distributors, foodservice outlets, educational institutions and governmental entities across the United States. Due
to the perishable nature of its products, Fresh Dairy Direct delivers the majority of its products directly to its
customers’ locations in refrigerated trucks or trailers that we own or lease. This form of delivery is called a
“direct store delivery” or “DSD” system. We believe that Fresh Dairy Direct has one of the most extensive
refrigerated DSD systems in the United States. Fresh Dairy Direct 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 Fresh Dairy Direct’s corporate sales department.
The dairy industry is a mature industry that has traditionally been characterized by slow to flat growth, low
profit margins, fragmentation and excess capacity. Excess capacity resulted from the development of more
efficient manufacturing techniques and declining demand for fluid milk products. From 1990 through 2001, the
dairy industry experienced significant consolidation. Consolidation has resulted in lower operating costs, less
excess capacity and greater efficiency. According to the United States Department of Agriculture (“USDA”), per
capita consumption of fluid milk continues to decline while total consumption has remained relatively flat due to
population increases. Therefore, volume sales growth across the industry generally remains slow to flat, profit
margins generally remain low and excess manufacturing capacity continues to exist. In this environment, price
competition is particularly intense, as smaller processors seek to retain enough volume to cover their fixed costs.
In addition, current economic conditions and historically low raw milk costs have led supermarkets, including
vertically integrated supermarkets, and food retailers to utilize competitive pricing on dairy products to drive
traffic volume and influence customer loyalty. Such activity has significantly reduced the profit margins realized
by supermarkets and foods retailers on the sale of such products. Increasingly, this margin compression is being
absorbed by dairy processors.
In response to this dynamic and significant competitive pressure, many processors, including us, are now
placing an increased emphasis on cost reduction in an effort to increase margins. We made significant progress
against such initiatives in 2009 and will continue these efforts for the foreseeable future. Historically, Fresh
Dairy Direct’s volume growth has kept pace with or exceeded the industry, which we attribute largely to our
national DSD system, brand recognition, service and quality. In 2009, due in part to acquisitions, we were able to
increase our sales volume of fresh fluid milk and our market share in this product category.
Fresh Dairy Direct has several competitors in each of our major product and geographic markets.
Competition between dairy processors for shelf-space with retailers is based primarily on price, service, quality
and the expected or historical sales performance of the product compared to its competitors. In some cases Fresh
26
Dairy Direct pays fees to customers for shelf-space. Competition for consumer sales is based on a variety of
factors such as brand recognition, price, taste preference and quality. Dairy products also compete with many
other beverages and nutritional products for consumer sales.
sales were
WhiteWave-Morningstar — WhiteWave-Morningstar’s net
approximately 24% of our
consolidated net sales in 2009. WhiteWave-Morningstar 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, The Organic Cow organic dairy 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. With the addition of Alpro, it now offers branded soy-based
beverages and food products in Europe, marketing its products under the Alpro and Provamel brands.
WhiteWave-Morningstar also includes private label cultured and extended shelf life dairy products such as ice
cream mix, sour and whipped cream, yogurt and cottage cheese. WhiteWave-Morningstar sells its products to a
variety of customers, including grocery stores, club stores, natural food stores, mass merchandisers, convenience
stores, drug stores and foodservice outlets. WhiteWave-Morningstar sells its products primarily through its
internal sales force and through independent brokers. The majority of the WhiteWave-Morningstar products are
delivered through warehouse delivery systems.
WhiteWave-Morningstar has several competitors in each of its product markets. Competition to obtain
shelf-space with retailers for a particular product
is based primarily on the expected or historical sales
performance of the product compared to its competitors. In some cases, WhiteWave-Morningstar pays fees to
retailers to obtain shelf-space for a particular product. Competition for consumer sales is based on many factors,
including brand recognition, price, taste preferences and quality. Consumer demand for soy and organic foods
has grown in recent years due to growing consumer confidence in the health benefits of soy and organic foods,
and we believe WhiteWave-Morningstar has a leading position in the soy and organic foods category.
Recent Developments
Current Dairy Environment
Conventional milk prices were at historically low levels for most of 2009, with a fairly sharp increase in the
fourth quarter of the year. The lower conventional milk prices in 2009 were in sharp contrast to the historically
high conventional milk prices we experienced throughout 2007 and 2008. With the domestic economy still
struggling and little indication that export activity will have a meaningful impact to the U.S. dairy complex we
expect the average Class I mover will be fairly stable through the first half of 2010 with potential modest
inflation in the back half of the year and we expect Class II butterfat prices to increase throughout 2010.
Organic Milk Environment
During 2009, we have continued experiencing a slowing of growth in the organic milk category from 2008,
declining to relatively flat year-over-year levels by the end of 2009. As a result of the continuing economic
downturn, we believe milk consumers have become price sensitive to organic milk and, as a result, we may
experience a continued softening in sales in this category. We continue to monitor our position in the organic
milk category, including taking proactive steps to manage our supply in the short-term and we remain focused on
maintaining our leading branded position as we balance market share considerations against profitability. With
the more stabilized demand for organic milk we are anticipating modestly lower costs in 2010.
Appointment of Joe Scalzo as Dean Foods Chief Operating Officer (“COO”)
In October 2009, we announced the promotion of Joe Scalzo to COO, effective November 1, 2009. In his
new role, Mr. Scalzo will oversee all of our operations, including Fresh Dairy Direct, WhiteWave, Morningstar,
Alpro and the Hero/WhiteWave joint venture, as well as key strategic functions including worldwide supply
chain, R&D and innovation.
27
Public Offering of Equity Securities
In May 2009, we issued and sold 25.4 million shares of our common stock in a public offering. We received
net proceeds of $444.7 million from the offering. The net proceeds from the offering were used to repay the
$122.8 million aggregate principal amount of our subsidiary’s 6.625% senior notes due May 15, 2009, and
indebtedness under our receivables-backed facility.
Acquisitions
On July 2, 2009, we completed the acquisition of the Alpro division of Vandemoortele, N.V. (“Alpro”), a
privately held food company based in Belgium, for an aggregate purchase price of €314.6 million ($440.3
million) after working capital adjustments, excluding transaction costs which were expensed as incurred. Alpro
manufactures and sells branded soy-based beverages and food products in Europe. The acquisition of Alpro will
provide opportunities to leverage the collective strengths of our combined businesses across a global soy
beverages and related products category. During 2009, we completed four other acquisitions of businesses and
other identifiable intangible assets for an aggregate purchase price of approximately $143.5 million. All of these
acquisitions were funded with borrowings under our senior revolving credit facility.
We recorded approximately $31.3 million in acquisition-related expenses during the year ended
including expenses related to due diligence,
December 31, 2009,
investment advisors and regulatory matters, as well as other non-material transactional activities.
in connection with these acquisitions,
Hero/WhiteWave Joint Venture
In January 2008, we entered into and formed a 50/50 strategic joint venture with Hero Group (“Hero”),
producer of international fruit and infant nutrition brands, to introduce a new innovative product line to North
America. The joint venture, Hero/WhiteWave, LLC, combines Hero’s expertise in fruit, innovation and process
engineering with WhiteWave’s deep understanding of the American consumer and manufacturing network, as
well as the go-to-market system of Dean Foods.
The joint venture, which is based in Broomfield, Colorado, serves as a strategic growth platform for both
technology,
companies to further extend their global reach by leveraging their established innovation,
manufacturing and distribution capabilities over time. During the first quarter of 2009, the joint venture began to
manufacture and distribute its primary product, Fruit2Day®, in limited test markets in the United States. During
the second quarter of 2009, the product was nationally launched in grocery and club store channels.
Facility Closing and Reorganization Activities
We closed four facilities within Fresh Dairy Direct during 2009. We recorded facility closing and
reorganization costs of $30.2 million including approximately $16.3 million in impairment charges and $13.9
million in employee termination and other costs associated with these and previously announced closures during
the year ended December 31, 2009.
Strategic Initiatives
Currently, our strategy is to build on our scale advantaged position in the dairy industry with an initial and
key strategic focus on cost reduction across the organization, but particularly within Fresh Dairy Direct. In 2009,
we began a three to five year company-wide cost savings initiative targeting company-wide cost reductions of
approximately $300 million over this timeframe. Our cost savings initiative efforts are primarily focused on three
areas:
• Procurement, where we are leveraging our scale to drive our costs lower,
• Conversion, where continuous improvement and network optimization are coupled to reduce the cost of
production in and across our facilities and
• Distribution, where we are leveraging technology and process best practices to drive increased
productivity across our DSD network.
28
Results of Operations
The following table presents certain information concerning our financial results, including information
presented as a percentage of net sales.
2009
Dollars
Percent
Year Ended December 31
2008
Dollars
(Dollars in millions)
Percent
2007
Dollars
Percent
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,158.4
8,042.4
100.0% $12,454.6
9,509.3
72.1
100.0% $11,821.9
9,084.3
76.4
100.0%
76.8
Gross profit(1) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating costs and expenses:
Selling and distribution . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . .
Amortization of intangibles . . . . . . . . . . . . . . .
Facility closing and reorganization costs . . . . .
Other operating expense . . . . . . . . . . . . . . . . .
Total operating costs and expenses . . . . . . .
3,116.0
27.9
2,945.3
23.6
2,737.6
23.2
1,826.9
627.2
9.6
30.2
—
2,493.9
16.3
5.6
0.1
0.3
—
22.3
1,817.7
486.3
9.8
22.8
—
2,336.6
14.6
3.9
0.1
0.1
—
18.7
1,721.7
419.5
6.7
34.4
1.7
2,184.0
14.6
3.5
0.1
0.3
—
18.5
Operating income . . . . . . . . . . . . . . . . . . . . . . . . .
$
622.1
5.6% $
608.7
4.9% $
553.6
4.7%
(1) As disclosed in Note 1 to our Consolidated Financial Statements, we include certain shipping and handling
costs within selling and distribution expense. As a result, our gross profit may not be comparable to other
entities that present all shipping and handling costs as a component of cost of sales.
Year Ended December 31, 2009 Compared to Year Ended December 31, 2008 — Consolidated Results
Net Sales — Net sales by segment are shown in the table below.
2009
Net Sales
$
Increase/
(Decrease)
2008
(Dollars in millions)
%
Increase/
(Decrease)
Fresh Dairy Direct . . . . . . . . . . . . . . . . . . . . . . . . .
WhiteWave-Morningstar . . . . . . . . . . . . . . . . . . . .
$ 8,456.2
2,702.2
$ 9,804.6
2,650.0
$(1,348.4)
52.2
(13.8)%
2.0
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,158.4
$12,454.6
$(1,296.2)
(10.4)
The change in net sales was due to the following:
Change in Net Sales 2009 vs. 2008
Acquisitions
Volume
Pricing
and Product
Mix Changes
Total
Increase/
(Decrease)
(Dollars in millions)
Fresh Dairy Direct
. . . . . . . . . . . . . . . . . . . . . . . .
WhiteWave-Morningstar . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$159.0
176.4
$335.4
$ (41.5)
(93.1)
$(1,465.9)
(31.1)
$(1,348.4)
52.2
$(134.6)
$(1,497.0)
$(1,296.2)
Net sales decreased $1.3 billion during 2009 compared to 2008 primarily due to lower pricing in our Fresh
Dairy Direct segment, as significantly lower commodity costs were passed through to customers. Net sales in our
WhiteWave-Morningstar segment increased as the Alpro acquisition more than offset the impact of the pass
through of lower commodity costs to customers and slightly lower sales volume, coupled with the exit of several
business relationships.
29
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. Cost of sales decreased
$1.5 billion, or 15.4%, in 2009 as compared to the prior year, primarily due to continued favorable commodity
prices, particularly raw milk costs, as well as benefits from our strategic initiatives across our manufacturing
network. Although commodity prices remained low compared to 2008 levels, conventional milk prices were at
historically low levels for most of 2009, with a fairly sharp increase in the fourth quarter of the year. With the
domestic economy still struggling and little indication that export activity will have a meaningful impact to the
U.S. dairy complex, we expect that conventional milk costs will be fairly stable through the first half of 2010
with modest inflation towards the end of the year.
Operating Costs and Expenses — Our operating expenses increased $157.3 million, or 6.7%, during the
year compared to prior year. Significant changes to operating costs and expenses include the following:
• General and administrative costs increased $140.9 million primarily driven by the impact of acquisitions
and investments in the capability build-out of our supply chain, information technology and research and
development functions that are foundational to our strategies; higher personnel-related costs including
incentive-based compensation, share-based compensation expense and additional headcount; higher
professional fees and other outside services primarily related to our strategic initiatives, as well as higher
transaction-related costs.
• Selling and distribution costs increased $9.2 million driven by an increase in marketing spend, especially
in the fourth quarter, on our nationally branded products at WhiteWave, higher expenses attributable to
our Hero/WhiteWave joint venture and the impact of our recent Alpro acquisition, partially offset by
lower fuel costs and benefits from our strategic initiatives across our distribution network.
• Net facility closing and reorganization costs increased $7.4 million. See Note 16 to our Consolidated
Financial Statements for further information on our facility closing and reorganization activities.
Other (Income) Expense — Interest expense decreased to $246.5 million in 2009 from $308.1 million in
2008, primarily due to lower average debt balances and lower interest rates during 2009 compared to the prior
year. Additionally, in 2009, a $4.2 million gain was recognized related to a Euro-based forward currency contract
related to the Alpro acquisition.
Income Taxes — Income tax expense was recorded at an effective rate of 40.0% for 2009 compared to
38.3% in 2008. Our effective tax rate varies primarily based on the relative earnings of our business units. In
2009, our effective tax rate was negatively impacted by the exclusion of the tax benefit attributable to our
non-controlling interest in the Hero/WhiteWave joint venture. In 2008, our effective tax rate was positively
impacted by the settlement of taxing authority examinations and the effects of state tax law changes.
Year Ended December 31, 2009 Compared to Year Ended December 31, 2008 — Results by Segment
Fresh Dairy Direct
The key performance indicators of Fresh Dairy Direct are sales volumes, gross profit and operating income.
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating costs and expenses . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31
2009
Dollars
$8,456.2
6,160.5
2,295.7
1,653.3
2008
Dollars
Percent
(Dollars in millions)
100.0% $9,804.6
7,559.8
72.9
27.1
19.6
2,244.8
1,653.5
Percent
100.0%
77.1
22.9
16.9
Total operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 642.4
7.5% $ 591.3
6.0%
30
Net Sales — Fresh Dairy Direct’s net sales decreased 13.8% during 2009 compared to the prior year,
primarily due to lower pricing as significantly lower commodity costs were passed through to customers. Recent
acquisitions and solid execution drove higher fluid milk sales volumes of approximately 2.7%, which were more
than offset by lower sales volumes in other products for an overall volume decline of 0.4%.
Fresh Dairy Direct generally increases or decreases the prices of its fluid dairy products on a monthly basis
in correlation to fluctuations in the costs of raw materials, packaging supplies and delivery costs. However, in
some cases, we are competitively or contractually constrained with respect to the means and/or timing of price
increases. This can have a negative impact on our Fresh Dairy Direct segment’s profitability. The following table
sets forth the average monthly Class I “mover” and its components, as well as the average monthly Class II
minimum prices for raw skim milk and butterfat for 2009 compared to 2008:
Class I mover(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Class I raw skim milk mover(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Class I butterfat mover(2)(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Class II raw skim milk minimum(1)(4) . . . . . . . . . . . . . . . . . . . . . . . .
Class II butterfat minimum(3)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11.48
7.40
1.24
7.09
1.26
$18.00
12.94
1.57
11.13
1.57
(36.2)%
(42.8)
(21.0)
(36.3)
(19.7)
Year Ended December 31*
2009
2008
% Change
* The prices noted in this table are not the prices that we actually pay. The federal order minimum prices
applicable 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 supplier. Please see “Part I — Item 1. Business — Government Regulation — Milk
Industry Regulation” and “— Known Trends and Uncertainties — Prices of Raw Milk and Other Inputs”
below for a more complete description of raw milk pricing.
(1) Prices are per hundredweight.
(2) We process Class I raw skim milk and butterfat into fluid milk products.
(3) Prices are per pound.
(4) We process Class II raw skim milk and butterfat into products such as cottage cheese, creams and creamers,
ice cream and sour cream.
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. Fresh Dairy Direct’s
cost of sales decreased $1.4 billion, or 18.5%, in 2009 compared to 2008 primarily due to favorable commodity
prices experience throughout the year, particularly raw milk costs, as well as benefits from our strategic
initiatives across our manufacturing network, slightly offset by higher personnel-related costs.
Fresh Dairy Direct’s gross margin increased to 27.1% in 2009 from 22.9% in 2008. Despite an overall
increase on a year-over-year basis, the gross margin trended downward as 2009 progressed driven by the
increasing intense competitive environment we have experienced. Changing consumer behavior with increased
pricing sensitivity and focus on value in the challenging domestic economy is driving material shifts across the
retail grocery industry. Retailers began lowering their margins on milk to hit key price points and demonstrate
strong value to customers in an effort to keep or win market share in the challenging environment. Initially, this
margin compression was absorbed by retailers, but as the year progressed, we experienced an increasing demand
to absorb pricing concessions. In addition, we experienced a continued shift from branded to private-label
products, further impacting profitability. These margin pressures underscore the importance of our low cost
strategy. We continue to focus on cost control and supply chain efficiency through initiatives, improved
effectiveness in the pass through of costs to our customers and our continued focus to drive productivity and
efficiency within our operations.
31
Operating Costs and Expenses — Fresh Dairy Direct’s operating costs and expenses were relatively flat
during the year compared to prior year. Distribution costs declined due to relatively lower fuel costs and strategic
initiatives across our distribution network which was offset by higher professional fees primarily related to
strategic initiatives, particularly supply chain and information technology, increased advertising expenses as well
as higher personnel-related costs.
WhiteWave-Morningstar
The key performance indicators of WhiteWave-Morningstar are sales volumes, net sales dollars, gross profit
and operating income.
Year Ended December 31
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,702.2
1,892.9
2009
Dollars
2008
Percent
Dollars
(Dollars in millions)
100.0% $2,650.0
1,952.7
70.1
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating costs and expenses . . . . . . . . . . . . . . . . . . . . . . .
809.3
565.3
29.9
20.9
697.3
491.9
Percent
100.0%
73.7
26.3
18.6
Total operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 244.0
9.0% $ 205.4
7.7%
Net Sales — Net sales of the WhiteWave-Morningstar segment increased $52.2 million, or 2.0%, driven by
the impact of our Alpro acquisition and strong sales growth in our creamers business. These increases were offset
by lower net sales of extended shelf life dairy products primarily due to the pass through of lower commodity
costs, throughout most of 2009, to customers and slightly lower sales volumes across the business. In addition,
net sales declined slightly driven by the exit of certain foodservice and lactose-free business relationships, as well
as our private label milk business in the United Kingdom.
Throughout 2009, we experienced continued softness in the organic milk category. We believe milk
consumers have become price sensitive to premium priced categories, including organic products. We continue
to monitor our position in the organic milk category including taking proactive steps to manage our supply in the
short-term and we remain focused on maintaining our leading banded position as we balance market share
considerations against profitability.
Cost of Sales — WhiteWave-Morningstar’s cost of sales decreased $59.8 million in 2009, compared to the
prior year. This decrease was primarily driven by continued lower commodity costs, as well as productivity
initiatives partly offset by the impact of our Alpro acquisition.
Operating Costs and Expenses — WhiteWave-Morningstar’s operating costs and expenses increased $73.4
million, during 2009 compared to 2008, driven by increased marketing spend on branded products, the impact of
the acquisition of Alpro and higher research and development costs. This increase was largely offset by lower
distribution costs due to lower sales volumes and lower fuel costs.
Year Ended December 31, 2008 Compared to Year Ended December 31, 2007 — Consolidated Results
Net Sales — Net sales by segment are shown in the table below.
2008
Net Sales
$
Increase/
(Decrease)
2007
(Dollars in millions)
. . . . . . . . . . . . . . . . . . . . . . . . .
Fresh Dairy Direct
WhiteWave-Morningstar . . . . . . . . . . . . . . . . . . . .
$ 9,804.6
2,650.0
$ 9,411.1
2,410.8
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,454.6
$11,821.9
$393.5
239.2
$632.7
32
%
Increase/
(Decrease)
4.2%
9.9
5.4
The change in net sales was due to the following:
Change in Net Sales 2008 vs. 2007
Acquisitions
Volume
Pricing
and Product
Mix Changes
Total
Increase/
(Decrease)
Fresh Dairy Direct . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
WhiteWave-Morningstar
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$155.3
19.6
$174.9
(Dollars in millions)
$264.4
71.0
$ (26.2)
148.6
$122.4
$335.4
$393.5
239.2
$632.7
Net sales increased $632.7 million or 5.4% during 2008 compared to the prior year primarily due to the
higher pass through of overall dairy and commodity costs and acquisitions completed in 2008 in Fresh Dairy
Direct, as well as continued strong volume growth at WhiteWave-Morningstar in both our national brands and
cultured and extended shelf life dairy products.
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. Cost of sales increased $425.0 million during 2008 from 2007
primarily due to higher raw material and packaging costs, higher raw milk costs and increased employee-related
costs.
Operating Costs and Expenses — Our operating expenses increased $152.6 million during 2008 compared
to the prior year. Significant changes to operating costs and expenses include the following:
• Selling and distribution costs increased $96.0 million primarily due to higher fuel costs, third-party freight
and fleet expenses, increased personnel-related costs and higher advertising expenses;
• General and administrative costs increased $66.8 million primarily due to increased personnel-related
costs, which was significantly impacted by incentive-based compensation; higher professional fees and
other outside services, primarily related to strategic corporate-driven initiatives, as well as increased costs
related to contemplated strategic transactions;
• The increases above were partly offset by net facility closing, reorganization and other costs that were
lower than 2007. See Note 16 to our Consolidated Financial Statements for further information on our
facility closing and reorganization activities.
Other (Income) Expense — Interest expense decreased to $308.1 million in 2008 from $333.2 million in
2007 primarily due to a lower average debt balance during 2008 driven by the reduction in debt related to our
$400 million pay down of the revolving portion of our senior secured credit facility with proceeds from our
equity offering on March 5, 2008, as well as the pay down of debt with cash flow from operations. In addition,
we wrote off $13.5 million in financing costs in 2007 due to the completion of our senior secured credit facility
and incurred $5.0 million of professional fees and other costs related to the payment of a special cash dividend.
Income Taxes — Income tax expense was recorded at an effective rate of 38.3% in 2008 compared to 39.2%
in 2007. Our effective tax rate varies based on the relative earnings of our business units. In 2008, our effective
tax rate was positively impacted by the settlement of taxing authority examinations and the effects of state tax
law changes.
33
Year Ended December 31, 2008 Compared to Year Ended December 31, 2007 — Results by Segment
Fresh Dairy Direct
The key performance indicators of Fresh Dairy Direct are sales volumes, gross profit and operating income.
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating costs and expenses . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31
2008
Dollars
$9,804.6
7,559.8
2,244.8
1,653.5
2007
Percent
Dollars
(Dollars in millions)
100.0% $9,411.1
7,320.5
77.1
22.9
16.9
2,090.6
1,552.6
Percent
100.0%
77.8
22.2
16.5
Total operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 591.3
6.0% $ 538.0
5.7%
Net Sales — The increase in Fresh Dairy Direct’s net sales of 4.2% was due primarily to the higher pass
through of overall dairy and other commodity costs to customers, as well as acquisitions completed in 2008.
Fresh Dairy Direct generally increases or decreases the prices of its fluid dairy products on a monthly basis
in correlation to fluctuations in the costs of raw materials, packaging supplies and delivery costs. However, in
some cases, we are competitively or contractually constrained with respect to the means and/or timing of price
increases. This can have a negative impact on Fresh Dairy Direct’s profitability. The following table sets forth
the average monthly Class I “mover” and its components, as well as the average monthly Class II minimum
prices for raw skim milk and butterfat for 2008 compared to 2007:
Class I mover(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Class I raw skim milk mover(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Class I butterfat mover(2)(3)
Class II raw skim milk minimum(1)(4) . . . . . . . . . . . . . . . . . . . . . . . .
Class II butterfat minimum(3)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$18.00
12.94
1.57
11.13
1.57
$18.14
13.47
1.47
13.67
1.48
(0.8)%
(3.9)
6.8
(18.6)
6.1
Year Ended December 31*
2008
2007
% Change
*
The prices noted in this table are not the prices that we actually pay. The federal order minimum prices
applicable 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 supplier. Please see “Part I — Item 1. Business — Government Regulation —
Milk Industry Regulation” and “— Known Trends and Uncertainties — Prices of Raw Milk and Other
Inputs” below for a more complete description of raw milk pricing.
(1) Prices are per hundredweight.
(2) We process Class I raw skim milk and butterfat into fluid milk products.
(3) Prices are per pound.
(4) We process Class II raw skim milk and butterfat into products such as cottage cheese, creams and creamers,
ice cream and sour cream.
Throughout 2007, we experienced rapidly increasing and historically high conventional milk prices. In
2008, we continued to experience historically high conventional milk prices. Contributors to the high prices
included high feed and fuel costs, as well as global demand for dry powdered milk. This was compounded by
significant and sustained increases in diesel fuel and resin costs. In the fourth quarter of 2008, the industry
experienced a sharp decline for export demands and favorable movements in energy cost components resulting in
declines in conventional milk, diesel and resin prices. Despite the volatility of the average Class I mover
throughout 2007 and 2008, the average for the 12 months ended December 31, 2008 approximated that of 2007.
34
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. Fresh Dairy Direct’s cost of sales increased by $239.3 million
during 2008 driven by higher raw material and packaging costs, particularly resin and raw milk, increased
employee-related costs as well as higher utilities and equipment costs.
Operating Costs and Expenses — Fresh Dairy Direct’s operating costs and expenses increased by $100.9
million, during 2008. The increase was primarily due to higher distribution costs driven by higher fuel, third-
party freight and fleet costs slightly offset by lower outside services and higher personnel-related costs, due
primarily to increased salaries and wages and incentive-based compensation.
WhiteWave-Morningstar
The key performance indicators of WhiteWave-Morningstar are sales volumes, net sales dollars, gross profit
and operating income.
Year Ended December 31
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,650.0
1,952.7
2008
Dollars
2007
Percent
Dollars
(Dollars in millions)
100.0% $2,410.8
1,762.4
73.7
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating costs and expenses . . . . . . . . . . . . . . . . . . . . . . .
697.3
491.9
26.3
18.6
648.4
443.4
Percent
100.0%
73.1
26.9
18.4
Total operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 205.4
7.7% $ 205.0
8.5%
Net Sales — The increase in WhiteWave-Morningstar’s net sales of 9.9% was driven by a mix of both
increased volumes and higher pricing, primarily in response to higher raw material and commodity costs. During
2008, total net sales for the WhiteWave brands increased 11.5%, with continued strong sales growth across all of
our key brands. Silk net sales increased approximately 10% in 2008 driven by volume growth from continued
distribution expansion and integrated marketing that featured both print and television advertising highlighting
the health benefits of our soymilk products, as well as higher pricing. Net sales of the Horizon Organic brand
increased approximately 18% in 2008 driven by continued distribution expansion and differentiated innovation
like our DHA-enhanced and single serve products, as well as higher realized pricing. International Delight grew
net sales approximately 9% in 2008 through improved price realization. LAND O LAKES creamer products grew
net sales approximately 6% over last year as a result of both higher volumes and commodity-related price
increases. Our Morningstar business also posted sales growth during the year, increasing net sales approximately
8%, primarily driven by higher yogurt, creamer and ice cream mix sales volumes, as well as the full year benefit
of an acquisition which was completed in March 2007.
In 2007, the organic dairy industry, including us, experienced a significant oversupply of organic raw milk
driven by earlier changes in the organic farm transition regulations, as well as economic incentives for
conventional farmers to begin the transition to organic farming. This oversupply led to significant discounting
and aggressive distribution expansion by processors within this product category, particularly in the second half
of 2007, in an effort to stimulate incremental demand and sell their supply in the organic milk market.
this market activity increased competitive pressure from both branded and private label
Consequently,
participants. In 2008, the balance of supply and demand improved resulting in a reduction of the aggressive
discounting. However, sharp increases in feed and fuel costs drove up the cost of organic raw milk at a greater
pace than the corresponding increases in retail prices.
Cost of Sales — WhiteWave-Morningstar’s cost of sales increased by $190.3 million, during 2008 driven by
higher volumes and increased raw milk costs as well as higher other raw material and packaging costs and higher
employee-related costs.
35
Operating Costs and Expenses — WhiteWave-Morningstar’s operating costs and expenses increased
$48.5 million, during 2008, primarily due to increased selling and marketing expense driven by higher
advertising spending on our brands, increased distribution costs driven by higher volumes, higher personnel-
related costs, including incentive-based compensation, as well as higher outside services and other costs.
Liquidity and Capital Resources
General
Credit market conditions deteriorated significantly during the later part of 2008 and then recovered materially
during the latter part of 2009. During this time, several major banks and financial institutions failed or were forced
to seek assistance through distressed sales or emergency government measures. While certain conditions in the
worldwide and domestic economies may be showing recent signs of improvement, there continues to be volatility in
the capital markets, diminished liquidity and credit availability and continued counterparty risk.
As of December 31, 2009, these market conditions have not had a material adverse impact on our liquidity
and we have maintained adequate liquidity to meet current working capital requirements, fund capital
expenditures and repay scheduled principal and interest payments on debt. Each of the member financial
institutions participating in our senior secured credit facility and receivables-backed facility has complied with
all prior funding commitments as of our filing date. However, there can be no assurance that each financial
institution will be able to continue to fulfill its funding obligations.
Absent severe deterioration of market conditions, we believe that our cash on hand, coupled with future cash
flows from operations and other available sources of liquidity, including our existing $1.5 billion 5-year senior
secured revolving credit facility and our $600 million receivables-backed facility, which we intend and expect to
renew under similar 364-day terms at the end of the current term, will provide sufficient liquidity to allow us to
meet our future cash requirements. Our anticipated uses of cash include capital expenditures, working capital
needs, pension contributions and financial obligations. On an ongoing basis, we will evaluate and consider
strategic acquisitions, divestitures, joint ventures, repurchasing shares of our common stock, as well as other
transactions to create shareholder value and enhance financial performance. Such transactions may require cash
expenditures or generate proceeds.
At December 31, 2009, we had $4.2 billion of outstanding debt obligations, cash-on-hand of $47.6 million and an
additional $1.3 billion of combined available future borrowing capacity under our existing senior secured revolving
credit facility and receivables-backed facility. Based on our current expectations, we believe our liquidity and capital
resources will be sufficient to operate our business. However, we may, from time to time, raise additional funds
through borrowings or public or private sales of debt or equity securities, which may be issued from time to time under
an effective registration statement, through the issuance of securities in a transaction exempt from registration under
the Securities Act of 1933 or a combination of one or more of the foregoing. The amount, nature and timing of any
borrowings or sales of debt or equity securities will depend on our operating performance and other circumstances, our
then-current commitments and obligations; the amount, nature and timing of our capital requirements; any limitations
imposed by our current credit arrangements; and overall market conditions.
Historical Cash Flow
The following table summarizes our cash flows from operating, investing and financing activities:
Net cash flows from:
Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash and cash
Year Ended December 31
2008
Change
2009
$ 658,911
(840,593)
192,765
(238)
$ 719,258
(341,487)
(373,043)
(1,304)
$ (60,347)
(499,106)
565,808
1,066
equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . .
808
$ 11,653
—
3,424
808
8,229
$
$
36
Operating Activities
Net cash provided by operating activities from continuing operations decreased in 2009 compared to 2008
due to the net impact of higher net earnings offset by an increase in our working capital requirements. The
increase in our working capital requirements was mainly due to the amount and timing of required estimated tax
payments versus the relative profitability of our operating segments throughout 2009.
Investing Activities
Net cash used in investing activities increased in 2009 primarily due to higher payments for acquisitions. In
2009, we funded approximately $268.2 million in capital expenditures and we completed several acquisitions,
including the acquisition of Alpro, requiring the use of cash of approximately $581.2 million. During 2008, we
funded approximately $257.0 million in capital expenditures and we completed several smaller acquisitions
requiring the use of cash of approximately $95.9 million.
Financing Activities
Net cash provided by financing activities increased in 2009 primarily due to the issuance of 25.4 million
shares of our common stock resulting in net proceeds of approximately $444.7 which was used to repay $122.8
million of the aggregate principal amount of our subsidiary’s 6.625% senior notes due May 15, 2009, and
indebtedness under our receivables-backed facility. Net borrowings under our senior secured revolver were
partially offset by principal repayments on the secured Term A and Term B loans and the receivables backed
facility, resulting in an increase of $300 million on our secured credit facility, primarily due to the 2009
acquisitions. Our continued focus on deleveraging the balance sheet resulted in overall debt reductions of $275.2
million from 2008 levels after funding the 2009 acquisitions. During 2008, we reduced our debt by
approximately $800.3 million, net of debt proceeds, with cash generated from operations and an equity offering
completed in March 2008. We issued and sold 18.7 million shares of our common stock resulting in net proceeds
of approximately $400 million from the offering in 2008.
Current Debt Obligations
Senior Secured Credit Facility — Our senior secured credit facility consists of an original 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 senior secured credit facility bears interest, 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 credit agreement) 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. The weighted average interest rate in effect on borrowings under the senior secured credit
facility, including the applicable interest rate margin, was 1.25% at December 31, 2009. Interest is payable
quarterly or after the end of the applicable interest period.
The remaining term loan A is payable in 9 installments of:
• $56.25 million in each of the next five installments due at the end of each quarter, beginning on March 30,
2010 and ending on March 31, 2011; and
• $262.5 million in each of the next four installments due at the end of each quarter, beginning on June 30,
2011 through December 31, 2011, with a final payment on April 2, 2012.
The term loan B amortizes 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 senior secured 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 senior secured revolving credit facility until maturity on April 2, 2012. The
credit agreement also requires mandatory principal prepayments upon the occurrence of certain asset
dispositions, recovery events, or as a result of exceeding certain leverage limits.
37
In consideration for the revolving commitment, we are required to pay a quarterly commitment fee on
unused amounts of the senior secured revolving credit facility that ranges from 12.5 to 37.5 basis points,
depending on our Leverage Ratio.
Our credit agreement 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 secured credit facility contains limitations on liens, investments and the incurrence of additional
indebtedness, prohibits certain dispositions of property and restricts certain payments, including dividends. There
are no restrictions on these certain payments, including dividends, when our Leverage Ratio is below 5.00 times.
The senior secured 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.
Under the senior secured credit facility, we are required to comply with certain financial covenants,
including, but not limited to, maximum leverage and minimum interest coverage ratios, each as defined under
and calculated in accordance with the terms of our senior secured credit facility and our receivables-backed
facility. We are currently in compliance with all financial covenants and based on our internal projections we
expect to maintain such compliance for the foreseeable future. The maximum permitted leverage ratio of
consolidated funded indebtedness to consolidated EBITDA for the prior four consecutive quarters allowed was
5.00 times as of December 31, 2009, with a final step down to 4.50 times as of December 31, 2010. As of
December 31, 2009, our leverage ratio was 4.16 times. We expect that our leverage ratio will be below 4.0 times
by December 31, 2010 and currently anticipate approaching our goal of approximately 3.5 times by mid-year
2011.
The credit agreement 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 requirements to maintain specific credit rating levels.
At December 31, 2009, there were outstanding borrowings of $3.6 billion under our senior secured credit
facility (compared to $3.3 billion at December 31, 2008), which consisted of $3.1 billion term loan borrowings
and $515.2 million under the revolver. The increase of $300 million in our senior secured credit facility
outstanding borrowings was primarily due to funding several acquisitions during the year. At December 31,
2009, there were $193.5 million of letters of credit under the revolving line that were issued but undrawn. As of
February 19, 2010, $504.5 million was borrowed under our senior secured revolving credit facility.
Receivables-backed Facility — In addition to our senior secured credit facility, we also have a $600 million
364-day receivables-backed facility in which current availability is subject to a monthly borrowing base formula.
This facility is scheduled to mature March 29, 2010 and we intend and expect to renew the facility under similar
terms currently established.
As of December 31, 2009, the receivables-backed facility had $504.7 million available, of which zero was
drawn. At February 19, 2010, $50.0 million was outstanding under this facility.
Senior Notes & Capital Leases — Other indebtedness outstanding at December 31, 2009 also included $500
million face value of outstanding indebtedness under Dean Foods Company’s senior notes, $142 million face
value of outstanding indebtedness under Legacy Dean’s senior notes and $7.4 million of capital lease and other
obligations.
38
Alpro Revolving Credit Facility — On July 2, 2009, our newly acquired subsidiary, Alpro N.V. entered into
a two year multi-currency revolving credit facility for borrowings in an amount not to exceed € 20 million (or its
currency equivalent). In December, 2009, we reduced the facility to an amount not to exceed € 10 million (or its
currency equivalent). The facility is unsecured and is guaranteed by Dean Foods Company and various Alpro
N.V. subsidiaries. Use of proceeds under the facility is for working capital and other general corporate purposes
of Alpro N.V. The subsidiary revolving credit facility will be available for the issuance of up to € 1 million of
letters of credit. No principal payments are due under the subsidiary revolving credit facility until maturity on
July 2, 2011. At December 31, 2009, there were no outstanding borrowings under the facility.
The table below summarizes our obligations for
indebtedness, purchase and lease obligations at
December 31, 2009. See Note 18 to our Consolidated Financial Statements for more detail about our lease
obligations.
Indebtedness, Purchase &
Lease Obligations(1)
Total
2010
2011
Payments Due by Period
2012
(In millions)
2013
2014
Thereafter
Senior secured credit facility . . . . . . . . . $3,597.0 $ 243.0 $ 861.8 $ 795.7 $ 18.0 $1,678.5
Dean Foods Company senior notes(2) . .
. . . . . . . . . . .
Subsidiary senior notes(2)
Capital lease obligations and other . . . . .
Purchase obligations(3)
. . . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . . . .
Interest payments(4) . . . . . . . . . . . . . . . .
—
—
5.4
488.1
113.8
195.5
500.0
142.0
7.4
683.8
528.2
794.0
—
—
0.3
16.9
61.0
133.8
—
—
0.6
70.7
94.1
183.1
—
—
0.7
29.2
78.4
135.8
$ —
— 500.0
— 142.0
0.3
0.1
14.2
64.7
133.5
47.4
77.3
68.5
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . $6,252.4 $1,045.8 $1,210.3 $1,039.8 $230.0 $1,808.7
$917.8
(1) Excluded from this table are estimated obligations of $72.6 million related to uncertain tax positions as the
timing of such payments cannot be reasonably determined. Also excluded are future contributions under our
company-sponsored defined benefit retirement and other post employment benefit plans. See Note 14 and 15
to our Consolidated Financial Statements for a summary of our employee retirement and profit sharing plans.
(2) Represents face value.
(3) Primarily represents commitments to purchase minimum quantities of raw materials used in our production
processes, including diesel fuel, soybeans and organic raw milk. We enter into these contracts from time to
time 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, expected cash payments on interest rate swaps, as well as interest on
our variable rate debt based on the rates and balances in effect at December 31, 2009. Interest that may be
due in the future on the variable rate portion of our senior secured 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 offer pension benefits through 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. Pension and postretirement costs also 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 annual periodic pension costs. In
2009 and 2008, we made contributions of $24.5 million and $25.8 million, respectively, to our defined benefit
pension plans.
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,
39
as well as changes in general interest rates may result in increased or decreased pension costs in future periods. In
accordance with Accounting Standards related to “Employers’ Accounting for Pensions,” changes in obligations
associated with these factors may not be immediately recognized as pension costs on the income statement, but
generally are recognized in future years over the remaining average service period of plan participants. As such,
significant portions of pension costs recorded in any period may not reflect the actual level of cash benefits
provided to plan participants. In 2009, we recorded non-cash pension expense of $21.1 million, of which $20.2
million was attributable to periodic expense and $0.9 million was attributable to settlements compared to a total
of $4.4 million in 2008, of which $2.7 million was attributable to periodic expense and $1.7 million was
attributable to settlements.
In excess of 80% of our defined benefit plan obligations are frozen as to future participants or increases in
accumulated benefits. Many of these obligations were acquired in prior strategic transactions. As an alternative to
defined benefit plans, we offer defined contribution plans for eligible employees.
The weighted average discount rate reflects the rate at which our defined benefit plan obligations could be
effectively settled. The rate, which is updated annually with the assistance of an independent actuary, uses a
model that reflects rates of a hypothetical portfolio of zero-coupon, high quality corporate bonds that mirror our
forecasted benefit plan payments in the future. The weighted average discount rate was decreased from 6.32% at
December 31, 2008 to 6.00% at December 31, 2009, which will increase the net periodic benefit cost in 2010.
Substantially all of our qualified pension plans are consolidated into one master trust. The investments held
in the master trust are managed by an established Investment Committee with assistance from independent
investment advisors. In July 2009, the Investment Committee adopted a new long-term investment policy for the
master trust that decreases the expected relative holdings of equity securities that targets investments in equity
securities at 59% of the portfolio, fixed income at 37%, cash equivalents at 3% and other investments of 1%. At
December 31, 2009, our master trust was invested as follows: investments in equity securities were at 59%,
investments in fixed income were at 35% , other investments were at 3% and cash equivalents were at 3%.
See Notes 14 and 15 to our Consolidated Financial Statements for information regarding retirement plans
and other postretirement benefits.
Other Commitments and Contingencies
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 operations. In connection with that transaction, we issued a contingent,
subordinated promissory note to DFA in the original principal amount of $40 million. DFA is a 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 related 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
materially breached or terminated any of our related 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.
40
See Note 18 to our Consolidated Financial Statements for more information about our commitments and
contingent obligations.
Future Capital Requirements
During 2010, we intend to invest a total of approximately $300 million in capital expenditures primarily for
our existing manufacturing facilities and distribution capabilities. We expect cash interest to be approximately
$210 million to $220 million based upon current debt levels and projected forward interest rates under our senior
secured credit facility. Cash interest excludes amortization of deferred financing fees and bond discounts of
approximately $10 million. The portion of our long-term debt due within the next 12 months totals $248.4
million. From time to time, we may repurchase our outstanding debt obligations in the open market or in
privately negotiated transactions. We expect that cash flow from operations and borrowings under our senior
secured credit facility will be sufficient to meet our future capital requirements for the foreseeable future.
We currently have a maximum permitted Leverage Ratio of 5.00 times consolidated funded indebtedness to
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-backed facility. As of December 31, 2009,
this Leverage Ratio was 4.16 times. The maximum permitted Leverage Ratio under both the senior secured credit
facility and the receivables-backed facility will decline to 4.50 times as of December 31, 2010. This reduced
Leverage Ratio could limit our ability to incur additional debt under our senior secured credit facility.
At December 31, 2009, $504.7 million was available under the receivables-backed facility, with $791.3
million also available under the senior secured revolving credit facility, subject to the limitations of our credit
agreements. Assuming additional borrowings were not utilized to acquire incremental EBITDA, of this combined
amount, approximately $841.3 million was then available to finance working capital and other general corporate
purposes. At February 19, 2010, approximately $802.0 million was available under the receivables-backed and
revolving credit facilities, subject to the limitations of our credit agreement.
During the next eighteen months, we expect to pursue refinancing of our senior credit facility in light of our
scheduled maturities in 2012 and 2014. Although we are currently targeting this timeframe, the actual timing,
approach, and terms of any such refinancing would depend upon market conditions and management’s judgment,
among other factors. Given the current environment of the capital markets, we expect that the interest rates on
our debt will increase as a result of any such refinancing. In addition, potential expenses associated with any such
refinancing may be material.
Known Trends and Uncertainties
Prices of Raw Milk and Other Inputs
Conventional Raw Milk and Butterfat — The primary raw material used in Fresh Dairy Direct and
Morningstar is conventional 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”).
41
In general, Fresh Dairy Direct and our Morningstar operations change the prices charged for Class I dairy
products on a monthly basis, as the costs of raw milk, packaging, fuel and other 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 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, primarily with respect to diesel fuel and other non-dairy inputs we are competitively or contractually
constrained with respect to the implementation of price changes. This can have a negative impact on our
profitability and can cause volatility in our earnings. Our sales and operating profit margin fluctuate with the
price of our raw materials and other inputs.
Conventional milk prices were at historically low levels for most of 2009, with a fairly sharp increase in the
fourth quarter of the year. The lower conventional milk prices in 2009 were in sharp contrast to the historically
high conventional milk prices we experienced throughout 2007 and 2008. We expect the average Class I mover
will be fairly stable through the first half of 2010 with potential modest inflation in the back half of the year and
we expect Class II butterfat prices to increase throughout 2010. With the domestic economy still struggling and
little indication that export activity will have a meaningful impact to the U.S. dairy complex, we expect 2010
conventional milk prices to remain in line with the with the prices realized in the fourth quarter of 2009; which
are well below the historically high levels experienced in 2007 and 2008.
Organic Raw Milk — The primary raw material used in our organic milk-based products is organic raw
milk. We currently purchase approximately 85% of our organic raw milk from a network of approximately 500
dairy farmers across the United States. The balance of our organic raw milk is sourced from two farms that we
own and operate and a third farm that we lease and have contracted with a third-party to manage and operate. We
generally enter into supply agreements with organic dairy farmers with typical terms of two to three years, which
obligate us to purchase certain minimum quantities of organic raw milk. The organic dairy industry remains a
relatively new category and continues to experience significant swings in supply and demand. Retail price
increases on private label products generally lag that of branded products, causing retail price gaps to expand
thereby creating pricing pressures and creating challenges where increasing costs of food and energy drive up the
cost of organic milk faster than retail prices can be increased.
Beginning in the fourth quarter of 2008, we started to experience a slowing of growth in the organic milk
category and this trend continued during 2009, stabilizing to relatively flat levels during the last half of 2009. As
a result of the continuing economic downturn, we believe milk consumers have become price sensitive to organic
milk and, as a result, we may experience a continued softening in sales in this category. We continue to monitor
our position in the organic milk category including taking proactive steps to manage our supply in the short-term
and we remain focused on maintaining our leading banded position as we balance market share considerations
against profitability. The more stabilized demand for organic milk we are anticipating modestly lower costs in
2010.
Soybeans — Historically,
in 2009, we began augmenting our current product
the primary raw material used in our soy-based products has been organic
soybeans. However,
line by offering customers and
consumers soy-based products manufactured with non –Genetically Modified Organism (“non-GMO”) soybeans.
The launch of these new products has shifted a substantial portion of our raw material requirements from organic
to non-GMO soybeans. Both organic soybeans and non-GMO soybeans are generally available from several
suppliers and we are not dependent on any single supplier for these raw materials.
Fuel and Resin Costs — Fresh Dairy Direct purchases approximately 3.7 million gallons of diesel fuel per
month to operate its extensive DSD system. WhiteWave-Morningstar primarily relies on third-party carriers for
product distribution and the transportation agreements typically adjust for movement in diesel prices. We have
entered into fixed price contracts for a portion of our fuel purchases for the period January 1, 2010 through
March 31, 2010, to mitigate volatility in diesel prices and we entered into a swap agreement intended to fix a
portion of our fuel charges which are a component of our hauling agreements with third-party distributors.
Although we may utilize forward purchase contracts and other instruments to mitigate the risks related to
42
commodity price fluctuations, such strategies do not fully mitigate commodity price risk. Adverse movements in
commodity prices over the terms of the contracts or instruments could decrease the economic benefits we derive
from these strategies.
Another significant raw material we use is resin, which is a petroleum-based product used to make plastic
bottles. Fresh Dairy Direct purchases approximately 28 million pounds of resin and bottles per month. The prices
of diesel and resin are subject to fluctuations based on changes in crude oil and natural gas prices. Diesel and
resin inflation escalated in 2007 and peaked in mid-2008 before significantly declining during the fourth quarter
of 2008. We believe the prices of both resin and diesel fuel will continue to fluctuate in to 2010.
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, competition has intensified as we compete for the business of
fewer customers. In addition, there are several large regional grocery chains that have captive dairy operations.
Over the past few years, we have been subject to a number of competitive bidding situations in Fresh Dairy
Direct, which reduced our profitability on sales to several customers. In bidding situations, we are subject to the
risk of losing certain customers altogether. In addition, current economic conditions and historically low raw
milk costs have led supermarkets, including vertically integrated supermarkets, and food retailers to utilize
competitive pricing on dairy products to drive traffic volume and influence customer loyalty. Such activity has
significantly reduced the profit margins realized by supermarkets and food retailers on the sale of such products.
Increasingly, this margin compression is being absorbed by dairy processors. We expect these trends to continue
and intensify.
The loss of any of our largest customers could have a material adverse impact on our financial results. We
do not generally enter into sales agreements with our customers, and where such agreements exist, they are
generally terminable at will by the customer.
43
Critical Accounting Estimates
In certain circumstances, the preparation of our Consolidated Financial Statements in conformity with
generally accepted accounting principles requires us to use our judgment
to make certain estimates and
assumptions. These estimates affect the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of net sales
and expenses during the reporting period. Our senior management has discussed the development and selection
of these critical accounting estimates, as well as our critical accounting policies (see Note 1 to our Consolidated
Financial Statements), with the Audit Committee of our Board of Directors. The following accounting estimates
are the most critical to aid in fully understanding and evaluating our reported financial results and they require
our most difficult, subjective or complex judgments.
Estimate Description
Judgment and/or Uncertainty
Potential Impact if Results Differ
We believe that the assumptions
used in valuing our intangible
assets and in our impairment
analysis are reasonable, but
variations in any of the
assumptions may result in different
calculations of fair values that
could result in a material
impairment charge.
The fair value of each of our
reporting units exceeds its related
carrying value by at least $250
million. Increasing our discount
rates assumed in these analyses by
1% would not have resulted in an
impairment charge.
Goodwill and Intangible Assets -
Our goodwill and intangible assets
result primarily from acquisitions
and primarily include trademarks
with finite lives and indefinite lives
and customer-related intangible
assets.
Perpetual trademarks and goodwill
are evaluated for impairment at
least annually to ensure that the
carrying value is recoverable.
A perpetual trademark is impaired
if its book value exceeds its
estimated fair value. Goodwill is
evaluated for impairment if the
book value of its reporting unit
exceeds its estimated fair value.
Amortizable intangible assets are
only evaluated for impairment
upon a significant change in the
operating environment. If an
evaluation of the undiscounted cash
flows indicates impairment, the
asset is written down to its
estimated fair value, which is
generally based on discounted
future cash flows.
In the fourth quarter of 2009, we
completed our annual impairment
testing using the methods described
above and recorded an immaterial
impairment charge related to an
indefinite lived trademark.
Our goodwill and intangible assets
with indefinite lives totaled $3.9
billion as of December 31, 2009.
Considerable management
judgment is necessary to initially
value intangible assets upon
acquisition and to evaluate those
assets and goodwill for impairment
going forward. We determine fair
value using widely acceptable
valuation techniques including
discounted cash flows, market
multiples analyses and relief from
royalty analyses. Assumptions used
in our valuations, such as
forecasted growth rates and our
cost of capital, are consistent with
our internal projections and
operating plans.
We believe that a trademark has an
indefinite life if it has a history of
strong sales and cash flow
performance that we expect to
continue for the foreseeable future.
If these perpetual trademark criteria
are not met, the trademarks are
amortized over their expected
useful lives. Determining the
expected life of a trademark
requires considerable management
judgment and is based on an
evaluation of a number of factors
including the competitive
environment, trademark history and
anticipated future trademark
support.
44
Property, Plant and Equipment
We perform impairment tests when
circumstances indicate that the
carrying value may not be
recoverable. Indicators of
impairment could include
significant changes in business
environment or planned closure of
a facility.
Our property, plant and equipment
totaled $2.1 billion as of
December 31, 2009.
Employee Benefit Plans
We provide a range of benefits
including pension and
postretirement benefits to our
eligible employees and retirees.
Stock Based Compensation Plans
We provide a number of stock
based compensation plans to our
eligible employees.
We determine the fair value of our
awards at the date of grant using
the Black-Scholes option pricing
model.
Considerable management
judgment is necessary to evaluate
the impact of operating changes
and to estimate future cash flows.
If actual results are not consistent
with our estimates and assumptions
used to calculate estimated future
cash flows, we may be exposed to
impairment losses that could be
material.
We record annual amounts relating
to these plans, which include
various actuarial assumptions, such
as discount rates, assumed
investment rates of return,
compensation increases, employee
turnover rates and health care cost
trend rates. We review our actuarial
assumptions on an annual basis and
make modifications to the
assumptions based on current rates
and trends when it is deemed
appropriate. The effect of the
modifications is generally recorded
and amortized over future periods.
Option-pricing models and
generally accepted valuation
techniques require management to
make assumptions and to apply
judgment to determine the fair
value of our awards. These
assumptions and judgments include
estimating the future volatility of
our stock price, expected dividend
yield, future employee turnover
rates and future employee stock
option exercise behaviors. Changes
in these assumptions can materially
affect the fair value estimate.
Different assumptions could result
in the recognition of different
amounts of expense over different
periods of time.
A 0.25% reduction in the assumed
rate of return on plan assets or a
0.25% reduction in the discount
rate would increase our annual
pension expense by $0.5 million
and $0.6 million, respectively.
A 1% increase in assumed
healthcare costs trends would
increase the aggregate post
retirement medical obligation by
approximately $1.2 million.
If actual results are not consistent
with our estimates or assumptions
we may be exposed to changes in
stock-based compensation expense
that could be material.
A 10% change in our stock-based
compensation expense for the year
ended December 31, 2009, would
have affected net earnings by
approximately $2.4 million.
45
Self Insurance Accruals
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.
At December 31, 2009 we recorded
accrued liabilities related to these
retained risks of $206.1 million,
including both current and long-
term liabilities.
Income Taxes
A liability for uncertain tax
positions is recorded to the extent a
tax position taken or expected to be
taken in a tax return does not meet
certain recognition or measurement
criteria. A valuation allowance is
recorded against a deferred tax
asset if it is not more likely than
not that the asset will be realized.
At December 31, 2009, our liability
for uncertain tax positions,
including accrued interest, was
$72.6 million and our valuation
allowance was $11.0 million.
Accrued liabilities related to these
retained risks are calculated based
upon loss development factors
which contemplate a number of
variables including claims history
and expected trends. These loss
development factors are developed
by us in consultation with external
insurance brokers and actuaries.
If actual results differ from our
assumptions we could be exposed
to material gains or losses.
A 10% change in our self-insured
liabilities could affect net earnings
by approximately $12.4 million.
Considerable management
judgment is necessary to assess the
inherent uncertainties related to the
interpretations of complex tax laws,
regulations, and taxing authority
rulings as well as to the expiration
of statutes of limitations in the
jurisdictions in which we operate.
Additionally, several factors are
considered in evaluating the
realizability of our deferred tax
assets, including the remaining
years available for carryforward,
the tax laws for the applicable
jurisdictions, the future profitability
of the specific business units, and
tax planning strategies.
Our judgments and estimates
concerning uncertain tax positions
may change as a result of
evaluation of new information,
such as the outcome of tax audits or
changes to or further interpretations
of tax laws and regulations. Our
judgments and estimates
concerning realizability of deferred
tax assets could change if any of
the evaluation factors change.
If such changes take place, there is
a risk that our effective tax rate
could increase or decrease in any
period, impacting our net earnings.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements — Effective December 31, 2009 we adopted the Accounting
Standards for “Employers’ Disclosures about Postretirement Benefit Plan Assets” which provides additional
guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement
plan. See Note 14 and 15 to our Consolidated Financial Statements.
Effective September 30, 2009, we adopted the Accounting Standards related to “The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting Principles”. The FASB Accounting
Standards Codification (Codification) became the source of authoritative U.S. generally accepted accounting
principles (GAAP) recognized by the Financial Accounting Standards Board (FASB) to be applied by
nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC)
under authority of federal securities laws also are sources of authoritative GAAP for SEC registrants. On the
effective date of this Statement, the Codification supersedes all then-existing non-SEC accounting and reporting
standards. All other non-grandfathered non-SEC accounting literature not included in the Codification became
nonauthoritative. The adoption of this statement did not have a material effect on our consolidated results of
operations and financial condition.
46
Effective January 1, 2009, we adopted the Accounting Standards related to “Business Combinations”
together with additional guidance issued by the FASB in April 2009. This standard contains a number of major
changes affecting the allocation of the value of acquired assets and liabilities including requiring an acquirer to
measure the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree at
their fair values on the acquisition date, with goodwill being excess value over the net identifiable assets
acquired. This standard also requires the fair value measurement of certain other assets and liabilities related to
the acquisition, such as research and development, and clarifies the initial recognition and measurement,
subsequent measurement, accounting and disclosure of assets and liabilities arising from contingencies in a
business combination. It also requires us to expense transaction costs as they are incurred. These provisions apply
only to acquisition transactions completed in fiscal years beginning after December 15, 2008. See Note 2 to our
Consolidated Financial Statements.
Effective January 1, 2009, we adopted the Accounting Standards related to “Fair Value Measurements” as it
applies to non-financial assets and liabilities that are not measured at fair value on a recurring basis. The adoption
of this Statement regarding the non-financial assets and liabilities did not have a material impact on our
Consolidated Financial Statements. See Note 19 to our Consolidated Financial Statements.
Effective January 1, 2009, we adopted the Accounting Standards related to “Non-controlling Interests in
Consolidated Financial Statements”. This statement clarifies that a non-controlling interest in a subsidiary should
be reported as equity in the Consolidated Financial Statements. Consolidated net income should include the net
income for both the parent and the non-controlling interest with disclosure of both amounts on the consolidated
statement of income. The calculation of earnings per share will continue to be based on income amounts
attributable to the parent. There were no non-controlling interests prior to the consolidation of the Hero/
WhiteWave joint venture in the first quarter of 2009. See Note 3 to our Consolidated Financial Statements.
Effective January 1, 2009, we adopted the Accounting Standards related to “Disclosure About Derivative
Instruments and Hedging Activities”. This amendment requires enhanced disclosures about an entity’s derivative
and hedging activities. See Note 10 to our Consolidated Financial Statements.
Effective June 30, 2009, we adopted the Accounting Standards related to “Interim Disclosures about Fair
Value of Financial Instruments,” which requires disclosures about fair value of financial instruments for interim
reporting periods as well as in annual financial statements. The adoption of these Accounting Standards did not
have a material impact on our Consolidated Financial Statements. See Note 19 to our Consolidated Financial
Statements.
Effective June 30, 2009, we adopted the Accounting Standards related to “Subsequent Events,” which
establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but
before financial statements are issued. These Accounting Standards set forth the period after the balance sheet
date during which management should evaluate events or transactions that may occur for potential recognition or
disclosure in the financial statements. The adoption of this Statement did not have a material impact on our
Consolidated Financial Statements.
Recently Issued Accounting Pronouncements — In June 2009, the FASB issued Accounting Standards
related to “Accounting for Transfer of Financial Assets” which will require more information about transfers of
financial assets, including securitization transactions, and where companies have continuing exposure to the risks
related to transferred financial assets. It eliminates the concept of a “qualifying special-purpose entity”, changes
the requirements for derecognizing financial assets and requires special disclosures. The Statement is effective
for us on March 31, 2010. We are currently evaluating the impact this statement may have on our consolidated
results of operations and financial condition.
In June 2009, the FASB issued Accounting Standards for “Amendments to FASB Interpretation No. 46(R)”.
This standard changes how a company determines when an entity that is insufficiently capitalized or is not
controlled through voting (or similar rights) should be consolidated. The determination of whether a company is
47
required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s
ability to direct the activities of the entity that most significantly impact the entity’s economic performance. The
statement is effective for us on March 31, 2010. We do not anticipate that this statement will change our current
accounting for our investment in our Hero/WhiteWave joint venture.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk due to commodity price, interest rate and foreign currency fluctuations. From
time to time we enter into arrangements with other parties to hedge our exposure to these fluctuations.
Commodity Price Fluctuations
We are exposed to commodity price fluctuations, including milk, organic and non-GMO soybeans, butterfat,
sweeteners and other commodity costs used in the manufacturing, packaging and distribution of our products;
including utilities, natural gas, resin and diesel fuel. In order to secure adequate supplies of materials and bring
greater stability to the cost of ingredients and their related manufacturing, packaging and distribution, we
routinely enter into forward purchase contracts and other purchase arrangements with suppliers. Under the
forward purchase contracts, we commit to purchasing agreed-upon quantities of ingredients and commodities at
agreed-upon prices at specified future dates. The outstanding purchase commitment for these commodities at any
point in time typically ranges from one month’s to one year’s anticipated requirements, depending on the
ingredient or commodity. These contracts are considered normal purchases and sales. In addition to entering into
forward purchase contracts, from time to time we may purchase exchange-traded commodity futures contracts
for raw materials that are ingredients of our products or components of such ingredients. We did not have any
outstanding commodity related financial instruments at December 31, 2009.
Although we may utilize forward purchase contracts and other instruments to mitigate the risks related to
commodity price fluctuation, such strategies do not fully mitigate commodity price risk. Adverse movements in
commodity prices over the terms of the contracts or instruments could decrease the economic benefits we derive
from these strategies.
Interest Rate Fluctuations
In order to reduce the volatility of earnings and cash flows that arise 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 secured credit facility by limiting or fixing the LIBOR interest rates specified
in the senior secured credit facility until the indicated expiration dates.
We are exposed to market risk under these arrangements due to the possibility of interest rates on our senior
secured credit facility falling below the rates on our interest rate derivative agreements. We believe the credit risk
under these arrangements is remote since the counterparties to our interest rate derivative agreements are major
financial institutions. However, recently a number of financial institutions similar to those that serve as counterparties
to our hedging arrangements have been adversely affected by the global credit crisis and in some cases have been
unable to fulfill their debt and other obligations. If any of the counterparties to our hedging arrangements become
unable to fulfill their obligation to us, we may lose the financial benefits of these arrangements.
A majority of our debt obligations are hedged at fixed rates and the remaining debt obligations are currently
at variable rates. We have performed a sensitivity analysis assuming a hypothetical 10% adverse movement in
interest rates. As of December 31, 2009, 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.
48
Foreign Currency Fluctuations
Historically, our international operations represented less than 1% of our sales and long-lived assets. With our
acquisition of Alpro in July 2009, the relative percentage of our international sales will increase slightly. Sales in
foreign countries, as well as certain expenses related to those sales, are transacted in currencies other than our reporting
currency, the U.S. dollar. Our foreign currency exchange rate risk is primarily limited to the British Pound and the
Euro. We may, from time to time, employ derivative financial instruments to manage our exposure to fluctuations in
foreign currency rates or enter into forward currency exchange contracts to hedge our net investment and intercompany
payable or receivable balances in foreign operations. During 2009, we did not enter into any foreign currency related
contracts other than the forward contract related to the Alpro acquisition for which we realized a gain of $4.2 million.
Item 8. Consolidated Financial Statements
Our Consolidated Financial Statements for 2009 are included in this report on the following pages.
Page
Consolidated Balance Sheets as of December 31, 2009 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
Consolidated Statements of Income for the years ended December 31, 2009, 2008 and 2007 . . . . . . . . . . . . F-2
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2009, 2008 and 2007 . . . F-3
Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007 . . . . . . . . . F-4
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
1.
Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
2. Acquisitions, Discontinued Operations and Divestitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9
Investment in Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10
3.
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11
4.
5.
Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12
6. Goodwill and Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12
7. Accounts Payable and Accrued Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-14
8.
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-14
9. Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-17
10. Derivative Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-25
Common Stock and Share-Based Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-27
11.
12.
Earnings per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-32
13. Other Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-32
Employee Retirement and Profit Sharing Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-33
14.
Postretirement Benefits Other Than Pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-38
15.
Facility Closing and Reorganization Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-40
16.
Supplemental Cash Flow Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-42
17.
Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-42
18.
Fair Value Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-45
19.
20.
Segment, Geographic and Customer Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-46
21. Quarterly Results of Operations (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-49
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-50
49
DEAN FOODS COMPANY
CONSOLIDATED BALANCE SHEETS
December 31
2008
2009
(Dollars in thousands,
except share data)
Current assets:
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables, net of allowance of $16,900 and $17,461 . . . . . . . . . . . . . . . . . . . . . . .
Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
47,632
878,837
19,228
438,129
154,847
90,296
$
35,979
854,992
—
393,111
127,211
69,900
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Identifiable intangible and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,628,969
2,108,879
3,282,664
823,429
1,481,193
1,821,892
3,073,502
663,605
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$7,843,941
$7,040,192
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,230,173
—
248,352
$1,084,037
27,704
315,526
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies (Note 18)
Stockholders’ equity:
Dean Foods Company stockholders’ equity:
Preferred stock, none issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock 180,854,163 and 154,036,798 shares issued and outstanding,
with a par value of $0.01 per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,478,525
3,980,627
623,982
393,575
1,427,267
4,173,725
468,644
412,322
—
—
1,809
1,025,502
491,611
(166,976)
1,540
532,420
251,303
(227,029)
558,234
—
558,234
Total Dean Foods Company stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-controlling Interest
1,351,946
15,286
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,367,232
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$7,843,941
$7,040,192
See Notes to Consolidated Financial Statements.
F-1
DEAN FOODS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating costs and expenses:
Selling and distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facility closing and reorganization costs . . . . . . . . . . . . . . . . .
Other operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating costs and expenses . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (income) expense:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (income) expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations before income taxes . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . .
Gain (loss) on sale of discontinued operations, net of tax . . . . . .
Income (loss) from discontinued operations, net of tax . . . . . . . .
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
Net loss attributable to non-controlling interest
Year Ended December 31
2007
2008
2009
(Dollars in thousands, except share data)
$ 12,454,613
9,509,359
$ 11,158,388
8,042,401
$ 11,821,903
9,084,318
3,115,987
2,945,254
2,737,585
1,826,935
627,132
9,637
30,162
—
2,493,866
622,121
246,494
(4,196)
242,298
379,823
152,065
227,758
89
—
227,847
12,461
1,817,690
486,280
9,836
22,758
—
2,336,564
608,690
308,080
933
309,013
299,677
114,837
184,840
(1,275)
205
183,770
—
1,721,617
419,518
6,744
34,421
1,688
2,183,988
553,597
333,202
5,926
339,128
214,469
84,007
130,462
608
283
131,353
—
Net income attributable to Dean Foods Company . . . . . . . . . . . .
$
240,308
$
183,770
$
131,353
Average common shares:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
170,986,886
173,858,303
149,266,519
153,395,746
130,310,811
137,291,998
Basic earnings per common share:
Income from continuing operations attributable to Dean Foods
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Income (loss) from discontinued operations attributable to
1.41
$
1.24
$
Dean Foods Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(0.01)
Net income attributable to Dean Foods Company . . . . . . . . . .
$
1.41
$
1.23
$
Diluted earnings per common share:
Income from continuing operations attributable to Dean Foods
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from discontinued operations attributable to
Dean Foods Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Dean Foods Company . . . . . . . . . .
Cash dividend paid per share . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
1.38
$
1.21
$
—
(0.01)
1.38
$
1.20
$
— $
— $
15.00
1.00
0.01
1.01
0.95
0.01
0.96
See Notes to Consolidated Financial Statements.
F-2
DEAN FOODS COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Dean Foods Company Stockholders
Common Stock
Shares
Amount
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Non-
controlling
Interest
(Dollars in thousands, except share data)
Retained
Earnings
Total
Stockholders’
Equity
Comprehensive
Income
Balance, January 1, 2007 . . . . . . . . . . . . . 128,371,104 $1,284 $ 624,475 $ 1,229,427
—
—
Issuance of common stock . . . . . . . . . . .
Share-based compensation expense . . . .
Special cash dividend ($15.00 per
3,865,113
—
66,445
34,817
38
—
$ (45,787)
—
—
$
— $ 1,809,399
66,483
—
34,817
—
—
—
— (655,218)
—
—
(1,287,520)
131,353
—
—
(1,942,738)
131,353
$ 131,353
share) . . . . . . . . . . . . . . . . . . . . . . . . .
Net Income . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (Note 13)
Change in fair value of derivative
instruments, net of tax benefit of
$29,490 . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified to income
statement related to hedging
activities, net of tax benefit of
$6,241 . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative translation adjustment . . . . .
Pension liability adjustment, net of tax
of $11,959 . . . . . . . . . . . . . . . . . . . . .
Comprehensive income . . . . . . . . . . . . .
Adoption of FIN 48 . . . . . . . . . . . . . . . .
—
—
—
—
—
—
—
—
—
—
Balance, December 31, 2007 . . . . . . . . . . 132,236,217 $1,322 $
Issuance of common stock . . . . . . . . . . .
Share-based compensation expense . . . .
Public offering of equity securities . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (Note 13)
Change in fair value of derivative
instruments, net of tax benefit of
$64,797 . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified to income
statement related to hedging
activities, net of tax of $15,984 . . . . .
Cumulative translation adjustment . . . . .
Pension liability adjustment, net of tax
benefit of $30,992 . . . . . . . . . . . . . . .
Comprehensive income . . . . . . . . . . . . .
3,100,254
—
18,700,327
—
—
—
—
—
31
—
187
—
—
—
—
—
—
—
—
—
—
(52,066)
—
—
—
(9,679)
534
19,196
(305)
(5,727)
—
70,214 $
27,736
35,180
399,290
—
67,533
—
—
—
183,770
$ (87,802)
—
—
—
—
—
—
—
—
—
—
—
—
(105,911)
26,640
(8,497)
(51,459)
—
—
—
—
—
—
—
— $
—
—
—
—
—
—
—
—
(52,066)
(52,066)
(9,679)
534
19,196
(6,032)
51,267
27,767
35,180
399,477
183,770
(9,679)
534
19,196
$ 89,338
$ 183,770
(105,911)
(105,911)
26,640
(8,497)
26,640
(8,497)
(51,459)
(51,459)
$ 44,543
$
$
Balance, December 31, 2008 . . . . . . . . . . 154,036,798 $1,540 $ 532,420 $
Issuance of common stock . . . . . . . . . . .
Share-based compensation expense . . . .
Public offering of equity securities . . . .
Fair value of non-controlling interest
acquired . . . . . . . . . . . . . . . . . . . . . . .
Capital contribution from
non-controlling interest
. . . . . . . . . . .
Net loss attributable to non-controlling
interest
. . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (Note 13)
Net income attributable to Dean Foods
Company . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of derivative
instruments, net of tax benefit of
$13,387 . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified to income
statement related to hedging
activities, net of tax of $42,466 . . . . .
Cumulative translation adjustment . . . . .
Pension liability adjustment, net of tax
of $3,260 . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income . . . . . . . . . . . . .
1,412,365
—
25,405,000
15
—
254
9,292
39,371
444,419
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
251,303
—
—
—
$(227,029)
—
—
—
—
—
—
240,308
—
—
—
—
—
—
—
—
(22,417)
70,772
2,509
9,189
— $
—
—
—
558,234
9,307
39,371
444,673
14,499
13,248
14,499
13,248
(12,461)
(12,461)
—
—
—
—
—
240,308
$ 240,308
(22,417)
(22,417)
70,772
2,509
9,189
70,772
2,509
9,189
$ 300,361
Balance, December 31, 2009 . . . . . . . . . . 180,854,163 $1,809 $1,025,502 $
491,611
$(166,976)
$ 15,286
$ 1,367,232
See Notes to Consolidated Financial Statements.
F-3
DEAN FOODS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on sale of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on disposition of assets and operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of impaired assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-off of financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities, net of acquisitions:
Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes receivable/payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by continuing operations . . . . . . . . . . . . . . . . . . . . . .
Net cash used in discontinued operations . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities:
Payments for property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for acquisitions, net of cash received . . . . . . . . . . . . . . . . . . . . . . . . . .
Net proceeds from divestitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by discontinued operations . . . . . . . . . . . . . . . . . . . . .
2009
Year Ended December 31
2008
(In thousands)
2007
$
$
227,847
—
(89)
$
183,770
(205)
1,275
131,353
(283)
(608)
254,952
39,371
12,638
16,815
—
40,493
(947)
61,475
(7,301)
5,509
54,203
(46,055)
658,911
(238)
658,673
(268,215)
(581,211)
—
8,833
(840,593)
—
238,006
35,180
2,968
20,740
—
68,601
(6,378)
63,214
(4,797)
11,930
59,922
45,032
719,258
(1,304)
717,954
(256,965)
(95,851)
—
11,329
(341,487)
—
231,898
34,817
4,208
7,969
13,545
10,578
254
(106,731)
(16,918)
18,870
53,319
(32,021)
350,250
—
350,250
(241,448)
(132,204)
1,536
20,192
(351,924)
10,705
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(840,593)
(341,487)
(341,219)
Cash flows from financing activities:
Proceeds from issuance of debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from senior secured revolver
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for senior secured revolver
Proceeds from receivables-backed facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for receivables-backed facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of special cash dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax savings on share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Capital contribution from non-controlling interest
Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash and cash equivalents . . . . . . . .
Increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(330,363)
3,689,000
(3,173,800)
1,784,728
(2,244,728)
—
454,326
—
894
12,708
192,765
808
11,653
35,979
(109,987)
3,298,200
(3,848,500)
1,852,320
(1,992,320)
—
419,663
— 1,912,500
(336,880)
4,706,100
(4,469,300)
238,300
(150,800)
(31,281)
48,114
— (1,942,738)
18,369
—
7,581
—
(373,043)
—
3,424
32,555
(7,616)
—
1,415
31,140
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
47,632
$
35,979
$
32,555
See Notes to Consolidated Financial Statements.
F-4
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009, 2008 and 2007
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Our Business — We are one of the leading food and beverage companies in the United States.
Fresh Dairy Direct, previously referred to as DSD Dairy, is the largest processor and distributor of milk and other
dairy products in the country, with products sold under more than 50 familiar local and regional brands and a
wide array of private labels. WhiteWave-Morningstar markets and sells a variety of nationally branded dairy and
dairy-related products, such as Silk® soymilk and cultured soy products, Horizon Organic® milk and other dairy
products, International Delight® coffee creamers, LAND O LAKES® creamers and fluid dairy products and
Rachel’s Organic® dairy products. With the addition of our recently acquired Alpro business in Europe,
WhiteWave-Morningstar now offers branded soy-based beverages and food products in Europe, marketing its
products under the Alpro® and Provamel® brands. Additionally, WhiteWave-Morningstar markets and sells
private label cultured and extended shelf life dairy products.
Basis of Presentation and Consolidation — Our Consolidated Financial Statements are prepared in
accordance with U.S. generally accepted accounting principles (“GAAP”), and include the accounts of our
wholly-owned subsidiaries as well as those of our 50% owned joint venture between WhiteWave and Hero
Group (“Hero”). The resulting non-controlling interest’s share in the equity of the joint venture is presented as a
separate component of stockholders’ equity in the consolidated balance sheets and consolidated statement of
stockholders’ equity and the net loss attributable to the non-controlling interest is presented in the consolidated
statement of income. All intercompany balances and transactions are eliminated in consolidation.
Unless otherwise indicated, references in the report to “we,” “us” or “our” refer to Dean Foods Company
and its subsidiaries, taken as a whole.
Effective January 1, 2009, we changed the name of one of our segments. Our reporting segments consist of
our Fresh Dairy Direct, previously referred to as DSD Dairy, and WhiteWave-Morningstar. This name change
had no impact on the composition of the segments or the presentation of our historical segment disclosures.
Use of Estimates — The preparation of our Consolidated Financial Statements in conformity with GAAP
requires us to use our judgment to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of the Consolidated Financial Statements
and the reported amounts of net sales and expenses during the reporting period. Actual results could differ from
these estimates under different assumptions or conditions.
Cash Equivalents — We consider temporary investments with an original maturity of three months or less
to be cash equivalents.
Inventories — Inventories are stated at the lower of cost or market. Our products are valued using the
first-in, first-out (“FIFO”) method. The costs of finished goods inventories include raw materials, direct labor and
indirect production and overhead costs. Reserves for obsolete or excess inventory are not material.
Property, Plant and Equipment — Property, plant and equipment are stated at acquisition cost, plus
capitalized interest on borrowings during the actual construction period of major capital projects. Also included
in property, plant and equipment are certain direct costs related to the implementation of computer software for
internal use. Depreciation is calculated using the straight-line method over the estimated useful lives of the
assets, as follows:
Asset
Buildings and improvements
Machinery and equipment
Useful Life
7 to 40 years
3 to 20 years
F-5
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
We perform impairment tests when circumstances indicate that the carrying value may not be recoverable.
Indicators of impairment could include significant changes in business environment or planned closure of a
facility. Considerable management judgment is necessary to evaluate the impact of operating changes and to
estimate future cash flows. Assumptions used in our impairment evaluations include product development,
volume growth and contribution margins. Leasehold improvements are amortized over the shorter of their lease
term or their estimated useful lives. Expenditures for repairs and maintenance, which do not improve or extend
the life of the assets, are expensed as incurred.
Intangible and Other Assets — Identifiable intangible assets, other than trademarks that have indefinite
lives, are amortized over their estimated useful lives as follows:
Asset
Useful Life
Customer relationships
Certain finite lived trademarks
Customer supply contracts
Noncompetition agreements
Deferred financing costs
5 to 15 years
5 to 15 years
Over the terms of the agreements
Over the terms of the agreements
Over the terms of the related debt
In accordance with Accounting Standards related to “Goodwill and Other Intangible Assets”, we do not
amortize goodwill and other intangible assets determined to have indefinite useful lives. Instead, we conduct
impairment tests on our goodwill, trademarks and other intangible assets with indefinite lives annually and when
circumstances indicate that the carrying value may not be recoverable. To determine whether impairment exists,
we primarily utilize a discounted future cash flow analysis.
Assets Held for Sale — We classify assets as held for sale when management approves and commits to a
formal plan of sale and our expectation is that the sale will be completed within one year. The carrying value of
the net assets of the business held for sale are then recorded at the fair market value, less costs to sell. As of
December 31, 2009 and 2008, assets of $24.9 million and $23.8 million, respectively, related to closed facilities
were classified as held for sale within our Fresh Dairy Direct segment and are no longer being depreciated. In
2009 and 2008, we recorded a charge of $16.3 million and $7.7 million, respectively, to write-down certain of
these assets to their estimated fair value. These charges were primarily recorded within facility closing and
reorganization costs. We are marketing these properties for sale.
Foreign Currency Translation — The financial statements of our foreign subsidiaries are translated to U.S.
dollars. The functional currency of our foreign subsidiaries is generally the local currency of the country.
Accordingly, assets and liabilities of the foreign subsidiaries are translated to U.S. dollars at year-end exchange
rates. Income and expense items are translated at the average rates prevailing during the year. Changes in
exchange rates that affect cash flows and the related receivables or payables are recognized as transaction gains
and losses and are recognized in the statement of income with their related operational activity. Currently, an
immaterial amount of transaction gains and losses are reflected in general and administrative expense in our
Consolidated Statements of Income. The cumulative translation adjustment in stockholders’ equity reflects the
unrealized adjustments resulting from translating the financial statements of our foreign subsidiaries.
Share-Based Compensation — Share-based compensation expense is recognized for equity awards over the
vesting period based on their grant date fair value. The fair value of option awards is estimated at the date of
grant using the Black-Scholes valuation model. The fair value of restricted stock unit awards is equal to the
closing price of our stock on the date of grant. Compensation expense is recognized only for equity awards
expected to vest. We estimate forfeitures at the date of grant based on our historical experience and future
expectations. Share-based compensation expense is included within the same financial statement caption where
the recipient’s cash compensation is reported and is classified as a corporate item for segment reporting.
F-6
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Sales Recognition and Accounts Receivable — Sales are recognized when persuasive evidence of an
arrangement exists, the price is fixed or determinable, the product has been delivered to the customer and there is
a reasonable assurance of collection of the sales proceeds. Sales are reduced by certain sales incentives, some of
which are recorded by estimating expense based on our historical experience. We provide credit terms to
customers generally ranging up to 30 days, perform ongoing credit evaluation of our customers and maintain
allowances for potential credit losses based on our historical experience. Estimated product returns have not
historically been material.
Income Taxes — All of our wholly-owned U.S. operating subsidiaries, as well as our proportional share of
the operations of our unconsolidated affiliates and our consolidated joint venture, are included in our U.S. federal
consolidated tax return. Our foreign subsidiaries are required to file local jurisdiction income tax returns with
respect to their operations, the earnings from which are expected to be reinvested indefinitely. Any distributions
from these subsidiaries would be subject
income taxes; however, available tax credits of these
subsidiaries may reduce or eliminate these U.S. income tax liabilities. At December 31, 2009, no provision had
been made for U.S. federal or state income tax on approximately $24.6 million of accumulated foreign earnings.
to U.S.
Deferred income taxes arise from temporary differences between amounts recorded in the Consolidated
Financial Statements and tax bases of assets and liabilities using enacted tax rates in effect for the years in which
the differences are expected to reverse. Deferred tax assets, including the benefit of net operating loss and tax
credit carryforwards, are evaluated based on the guidelines for realization and are reduced by a valuation
allowance if deemed necessary.
We recognize the income tax benefit from an uncertain tax position when it is more likely than not that,
based on technical merits, the position will be sustained upon examination, including resolutions of any related
appeals or litigation processes. We recognize accrued interest related to uncertain tax positions as a component of
income tax expense and penalties, if incurred, are recognized as a component of operating income.
including media, agency, coupon,
Sales Incentives and Advertising Expense — We market our products through advertising and other
promotional activities,
trade shows and other promotional activities.
Advertising expense is charged to income during the period incurred, except for expenses related to the
development of a major commercial or media campaign which are charged to income during the period in which
the advertisement or campaign is first presented by the media. Advertising expense totaled $174.3 million in
2009, $121.3 million in 2008 and $116.0 million in 2007. Additionally, prepaid advertising costs were $1.5
million and $1.7 million at December 31, 2009 and 2008, respectively. Certain customer and trade promotional
programs, such as coupons, are recorded as a reduction of sales.
Shipping and Handling Fees — Our shipping and handling costs are included in both cost of sales and
selling and distribution expense, depending on the nature of such costs. Shipping and handling costs included in
cost of sales reflect inventory warehouse costs and product loading and handling costs. Shipping and handling
costs included in selling and distribution expense consist primarily of those costs associated with moving
finished products from production facilities through our distribution network, including costs associated with its
distribution centers, route delivery costs and the cost of shipping products to customers through third party
carriers. Shipping and handling costs that were recorded as a component of selling and distribution expense were
$1.34 billion, $1.42 billion and $1.34 billion during 2009, 2008 and 2007, respectively.
Insurance Accruals — 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 coverage. Accrued liabilities for incurred but not reported losses related
to these retained risks are calculated based upon loss development factors which contemplate a number of factors
including claims history and expected trends.
F-7
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Research and Development — Our research and development activities primarily consist of generating and
testing new product concepts, new flavors and packaging for our fluid milk, soy and ice cream products. Our
total research and development expense related to continuing operations was $25.5 million, $14.0 million and
$7.5 million for 2009, 2008 and 2007, respectively. Research and development costs are primarily included in
general and administrative expenses in our Consolidated Statements of Income.
Recently Adopted Accounting Pronouncements — Effective December 31, 2009 we adopted the Accounting
Standards for “Employers’ Disclosures about Postretirement Benefit Plan Assets” which provides additional
guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement
plan. See Note 14 and 15.
Effective September 30, 2009, we adopted the Accounting Standards related to “The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting Principles”. The FASB Accounting
Standards Codification (Codification) became the source of authoritative U.S. generally accepted accounting
principles (GAAP) recognized by the Financial Accounting Standards Board (FASB) to be applied by
nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC)
under authority of federal securities laws also are sources of authoritative GAAP for SEC registrants. On the
effective date of this Statement, the Codification supersedes all then-existing non-SEC accounting and reporting
standards. All other non-grandfathered non-SEC accounting literature not included in the Codification became
nonauthoritative. The adoption of this statement did not have a material effect on our consolidated results of
operations and financial condition.
Effective January 1, 2009, we adopted the Accounting Standards related to “Business Combinations”
together with additional guidance issued by the FASB in April 2009. This standard contains a number of major
changes affecting the allocation of the value of acquired assets and liabilities including requiring an acquirer to
measure the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree at
their fair values on the acquisition date, with goodwill being excess value over the net identifiable assets
acquired. This standard also requires the fair value measurement of certain other assets and liabilities related to
the acquisition, such as research and development, and clarifies the initial recognition and measurement,
subsequent measurement, accounting and disclosure of assets and liabilities arising from contingencies in a
business combination. It also requires us to expense transaction costs as they are incurred. These provisions apply
only to acquisition transactions completed in fiscal years beginning after December 15, 2008. See Note 2.
Effective January 1, 2009, we adopted the Accounting Standards related to “Fair Value Measurements” as it
applies to non-financial assets and liabilities that are not measured at fair value on a recurring basis. The adoption
of this Statement regarding the non-financial assets and liabilities did not have a material impact on our
Consolidated Financial Statements. See Note 19.
Effective January 1, 2009, we adopted the Accounting Standards related to “Non-controlling Interests in
Consolidated Financial Statements”. This statement clarifies that a non-controlling interest in a subsidiary should
be reported as equity in the Consolidated Financial Statements. Consolidated net income should include the net
income for both the parent and the non-controlling interest with disclosure of both amounts on the consolidated
statement of income. The calculation of earnings per share will continue to be based on income amounts
attributable to the parent. There were no non-controlling interests prior to the consolidation of the Hero/
WhiteWave joint venture in the first quarter of 2009. See Note 3.
Effective January 1, 2009, we adopted the Accounting Standards related to “Disclosure about Derivative
Instruments and Hedging Activities”. This amendment requires enhanced disclosures about an entity’s derivative
and hedging activities. See Note 10.
F-8
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Effective June 30, 2009, we adopted the Accounting Standards related to “Interim Disclosures about Fair
Value of Financial Instruments,” which requires disclosures about fair value of financial instruments for interim
reporting periods as well as in annual financial statements. The adoption of these Accounting Standards did not
have a material impact on our Consolidated Financial Statements. See Note 19.
Effective June 30, 2009, we adopted the Accounting Standards related to “Subsequent Events,” which
establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but
before financial statements are issued. These Accounting Standards set forth the period after the balance sheet
date during which management should evaluate events or transactions that may occur for potential recognition or
disclosure in the financial statements. The adoption of this Statement did not have a material impact on our
Consolidated Financial Statements.
Recently Issued Accounting Pronouncements — In June 2009, the FASB issued Accounting Standards
related to “Accounting for Transfer of Financial Assets” which will require more information about transfers of
financial assets, including securitization transactions, and where companies have continuing exposure to the risks
related to transferred financial assets. It eliminates the concept of a “qualifying special-purpose entity”, changes
the requirements for derecognizing financial assets and requires special disclosures. The statement is effective for
us on March 31, 2010. We are currently evaluating the impact this statement may have on our consolidated
results of operations and financial condition.
In June 2009, the FASB issued Accounting Standards for “Amendments to FASB Interpretation No. 46(R)”.
This standard changes how a company determines when an entity that is insufficiently capitalized or is not
controlled through voting (or similar rights) should be consolidated. The determination of whether a company is
required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s
ability to direct the activities of the entity that most significantly impact the entity’s economic performance. The
statement is effective for us on March 31, 2010. We do not anticipate that this statement will change our current
accounting for our investment in our Hero/WhiteWave joint venture.
2. ACQUISITIONS, DISCONTINUED OPERATIONS AND DIVESTITURES
Acquisitions
Excluding the acquisition of the Alpro division of Vandemoortele, N.V. (“Alpro”), we completed the
acquisition of several businesses during 2009, 2008 and 2007, with an aggregate purchase price of approximately
$143.5 million, $95.9 million and $132.2 million, respectively. These acquisitions were not material individually
or in the aggregate, including the pro forma impact on earnings. All of these acquisitions were funded with cash
flows from operations and borrowings under our senior secured credit facility and our receivables-backed
facility. The results of operations of the acquired companies are included in our Consolidated Financial
Statements subsequent to their respective acquisition dates. At the acquisition date, the purchase price was
allocated to assets acquired, including identifiable intangibles and liabilities assumed based on their estimated
fair market values.
Alpro — On July 2, 2009, we completed the acquisition of Alpro, a privately held food company based in
Belgium, for an aggregate purchase price of €314.6 million ($440.3 million), after working capital adjustments,
excluding transaction costs which were expensed as incurred. Alpro manufactures and sells branded soy-based
beverages and food products in Europe. The acquisition of Alpro will provide opportunities to leverage the
collective strengths of our combined businesses across a global soy beverages and related products category.
Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their fair
values. The fair values were determined by management based in part on an independent valuation of the net
assets acquired, which includes intangible assets of $117.6 million. Intangible assets subject to amortization of
$21.0 million are being amortized over a weighted-average period of 15 years and relate primarily to customer
relationships.
F-9
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The excess of the net purchase price over the fair value of the net assets acquired of $175.1 million was
recorded as goodwill and represents a value attributable to an increased competitive position in the soy-based
beverages and foods in Europe. The goodwill is not deductible for tax purposes.
Identifiable assets acquired and liabilities assumed are as follows:
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Identifiable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July 2, 2009
(in thousands)
$ 103,050
195,477
175,100
117,627
34,079
(83,654)
(101,424)
Net identifiable assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 440,255
We have not completed the final fair value assignments and continue to analyze certain assets acquired and
liabilities assumed primarily related to tax matters. The proforma impact of the acquisition on consolidated net
earnings would not have materially changed reported net earnings. Alpro’s results of operations have been
included in our consolidated statements of income and the results of operations of our WhiteWave-Morningstar
segment from the date of acquisition.
We recorded approximately $31.3 million in acquisition-related expenses during the year ended
December 31, 2009,
including expenses related to due diligence,
investment advisors and regulatory matters, as well as other non-material transactional activities. These costs
were included in general and administrative expenses in our Consolidated Statements of Income.
in connection with these acquisitions,
Discontinued Operations
In 2009, 2008 and 2007, we recognized income of $89,000, expense of $1.1 million and income of $891,000
related to prior discontinued operations.
Divestitures
On June 8, 2007, we completed the sale of our tofu business, including a dedicated facility in Boulder,
Colorado for cash proceeds of approximately $1.5 million. We recorded a pre-tax loss of $1.7 million on the sale.
Such loss is included within other operating expense. The historical sales and contribution margin of these
operations were not material.
3.
INVESTMENT IN AFFILIATES
Unconsolidated Affiliate and Related Party
Consolidated Container Company — We own an approximately 25% non-controlling interest, on a fully
diluted basis, in Consolidated Container Company (“CCC”), one of the nation’s largest manufacturers of rigid
plastic containers and our largest supplier of plastic bottles and bottle components. We have owned our minority
interest since July 2, 1999, when we sold our U.S. plastic packaging operations to CCC. Vestar Capital Partners,
an unaffiliated entity, controls CCC through a majority ownership interest. Pursuant to our agreements with
Vestar, we control two of the eight seats on CCC’s Management Committee.
F-10
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Since July 2, 1999, our investment in CCC has been accounted for under the equity method of accounting.
During 2001, we concluded that our investment was permanently impaired so we wrote off our remaining
investment. Our investment in CCC has been recorded at zero value since then and is still generating no income
under the equity method of accounting. As the tax basis of our investment in CCC is calculated differently than
the carrying value of the investment recognized in our Consolidated Financial Statements, the sale or liquidation
of our investment, the timing of which may be beyond our control, could result in a significantly disproportionate
tax obligation.
We have supply agreements with CCC to purchase certain of our requirements for plastic bottles and bottle
components from CCC. We spent $268.2 million, $330.3 million and $264.0 million on products purchased from
CCC for the years ended December 31, 2009, 2008 and 2007, respectively.
Non-controlling Interest in Consolidated Affiliate
Hero/WhiteWave Joint Venture — In January 2008, we entered into and formed a 50/50 strategic joint
venture with Hero Group (“Hero”), producer of international fruit and infant nutrition brands, to introduce a new
innovative product line to North America. The joint venture, Hero/WhiteWave, LLC, combines Hero’s expertise
in fruit, innovation and process engineering with WhiteWave’s deep understanding of the American consumer
and manufacturing network, as well as the go-to-market system of Dean Foods.
The joint venture, which is based in Broomfield, Colorado, serves as a strategic growth platform for both
companies to further extend their global reach by leveraging their established innovation,
technology,
manufacturing and distribution capabilities over time. During the first quarter of 2009, the joint venture began to
manufacture and distribute its primary product, Fruit2Day®, in limited test markets in the United States. During
the second quarter of 2009, the product was nationally launched in grocery and club store channels.
Beginning January 1, 2009, in conjunction with entering into several new agreements between WhiteWave
and the joint venture, we concluded that we are the primary beneficiary of the joint venture and the financial
position and the results of operations for the joint venture should be consolidated for financial reporting
purposes. Accordingly,
the joint venture has been consolidated as of January 1, 2009. The resulting
non-controlling interest’s share in the equity of the joint venture is presented as a separate component of
stockholders’ equity in the consolidated balance sheets and consolidated statement of stockholders’ equity and
the net loss attributable to the non-controlling interest is presented in the consolidated statements of income.
During 2009, our joint venture partner made cash and non-cash contributions of $12.7 million and $0.5
million, respectively, to the joint venture. During 2009, we made cash contributions of $10.5 million and
continued non-cash contributions in the form of the capital lease for the manufacturing facility constructed at one
of our existing WhiteWave plants. From the inception of the venture through December 31, 2009, we and our
joint venture partner have each invested $30.3 million in the Hero/WhiteWave joint venture.
4.
INVENTORIES
Inventories at years ended December 31, 2009 and 2008 consisted of the following:
Raw materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$204,653
233,476
$178,439
214,672
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$438,129
$393,111
December 31
2009
2008
(In thousands)
F-11
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
5. PROPERTY, PLANT AND EQUIPMENT
December 31
2009
2008
(In thousands)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
231,617
990,905
2,295,822
79,980
$
186,095
842,474
2,076,953
109,944
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,598,324
(1,489,445)
3,215,466
(1,393,574)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,108,879
$ 1,821,892
For 2009 and 2008, we capitalized $1.7 million and $2.8 million in interest related to borrowings during the
actual construction period of major capital projects, which is included as part of the cost of the related asset.
Other non-cash additions to property, plant and equipment were not material.
6. GOODWILL AND INTANGIBLE ASSETS
The changes in the carrying amount of goodwill for the years ended December 31, 2009 and 2008 are as
follows:
Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . .
Purchase accounting adjustments . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . .
Acquisitions and purchase accounting adjustments . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . .
Fresh Dairy
Direct
$2,149,233
—
37,273
$2,186,506
37,059
—
WhiteWave-
Morningstar
(In thousands)
$ 868,513
1,468
17,015
Total
$3,017,746
1,468
54,288
$ 886,996
175,041
(2,938)
$3,073,502
212,100
(2,938)
Balance at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . .
$2,223,565
$1,059,099
$3,282,664
The gross carrying amount and accumulated amortization of our intangible assets other than goodwill as of
December 31, 2009 and 2008 are as follows:
2009
Gross
Carrying
Amount
Accumulated
Amortization
December 31
Net
Carrying
Amount
Gross
Carrying
Amount
(In thousands)
2008
Accumulated
Amortization
Net
Carrying
Amount
Intangible assets with indefinite lives:
Trademarks . . . . . . . . . . . . . . . . . . .
Intangible assets with finite lives:
. . . . . .
Customer-related and other
Trademarks . . . . . . . . . . . . . . . . . . .
$610,488
$
— $610,488
$514,708
$
— $514,708
135,993
10,146
(35,737)
(1,940)
100,256
8,206
91,127
2,786
(27,553)
(1,004)
63,574
1,782
Total
. . . . . . . . . . . . . . . . . . . . . . . . . .
$756,627
$(37,677)
$718,950
$608,621
$(28,557)
$580,064
F-12
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Amortization expense on intangible assets for the years ended December 31, 2009, 2008 and 2007 was $9.6
million, $9.8 million and $6.7 million, respectively. Estimated aggregate intangible asset amortization expense
for the next five years is as follows:
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10.3 million
10.2 million
10.0 million
9.9 million
9.2 million
Our goodwill and intangible assets have resulted from acquisitions. Upon acquisition, the purchase price is
first allocated to identifiable assets and liabilities, including trademarks and customer-related intangible assets,
with any remaining purchase price recorded as goodwill. Goodwill and trademarks with indefinite lives are not
amortized.
A trademark is recorded with an indefinite life if it has a history of strong sales and cash flow performance
that we expect to continue for the foreseeable future. If these perpetual trademark criteria are not met, the
trademarks are amortized over their expected useful lives. Determining the expected life of a trademark is based
trademark history and anticipated future
on a number of factors including the competitive environment,
trademark support.
We conduct impairment tests of goodwill and intangible assets with indefinite lives annually in the fourth
quarter or when circumstances arise that indicate a possible impairment might exist. If the fair value of an
evaluated asset is less than its book value, an impairment is recorded. Our reporting units are Fresh Dairy Direct,
WhiteWave, Morningstar and Alpro. We did not recognize any impairment charges related to goodwill during
2009, 2008 or 2007. Based on our analysis performed in the fourth quarter of 2009, each of our reporting units
tested had fair values in excess of book values by more than $250 million. The sum of the fair values of our
reporting units was in excess of our market capitalization. We believe that the difference between the fair value
and market capitalization is reasonable (in the context of assessing whether any asset impairment exists) when
market-based control premiums are taken into account and in light of the volatility in the equity markets
throughout 2009.
In 2009, we recognized an impairment charge of $0.5 million in Fresh Dairy Direct, related to a perpetual
trademark for a regional brand due to projected declining annualized sales volumes and profitability. This
trademark is no longer deemed to have a perpetual life and therefore will be amortized over its estimated
remaining life. In 2008, we recognized an impairment charge of $2.3 million related to three perpetual
trademarks for regional brands in Fresh Dairy Direct. The write-downs were the result of lower annualized sales
volumes from certain facilities partly related to movement of production between regional brands. These
trademarks were no longer deemed to have a perpetual life and are being amortized over their respective
estimated remaining lives. During 2007, we recognized immaterial
impairment charges related to certain
trademarks as a result of the decision to close facilities and shift customers from one regional brand to another.
Amortizable intangible assets are only evaluated for impairment upon a significant change in the operating
environment. If an evaluation of the undiscounted cash flows indicates impairment, the asset is written down to
its estimated fair value, which is generally based on discounted future cash flows.
F-13
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrual expenses for the years ended December 31, 2009 and 2008 consisted of the
following:
December 31
2009
2008
(In thousands)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payroll and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Health insurance, workers’ compensation and other insurance costs . . . . .
Current derivative liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 701,674
177,095
83,812
90,194
177,398
$ 599,282
149,050
87,581
103,278
144,846
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,230,173
$1,084,037
8.
INCOME TAXES
The following table presents the 2009, 2008 and 2007 provisions for income taxes:
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007(3)
2009(1)
Year Ended December 31
2008(2)
(In thousands)
$ 39,204
9,552
1,032
65,049
$ 92,364
14,932
4,905
39,864
$64,071
6,378
959
12,599
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$152,065
$114,837
$84,007
(1) Excludes $0.5 million in income tax benefit related to discontinued operations.
(2) Excludes $0.9 million in income tax benefit related to discontinued operations.
(3) Excludes $0.7 million in income tax benefit related to discontinued operations.
The following is a reconciliation of income taxes computed at the U.S. federal statutory tax rate to income
taxes reported in the Consolidated Statements of Income:
Year Ended December 31
2009
2008
2007
Amount Percentage Amount Percentage
Amount
Percentage
(In thousands)
35.0% $104,887
4,461
3.8
35.0%
1.5
$75,064
8,834
35.0%
4.1
Tax expense at statutory rate . . . . $132,938
14,511
State income taxes . . . . . . . . . . . .
Exclusion of non-controlling
interest tax benefit . . . . . . . . . .
4,876
Change in valuation
allowance . . . . . . . . . . . . . . . .
Nondeductible compensation . . .
Corporate owned life
insurance . . . . . . . . . . . . . . . . .
Audit settlements . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . .
1.3
0.3
0.9
—
950
4,796
—
0.3
1.6
1,329
3,434
(1,839)
(1,289)
(1,895)
(0.5)
(0.3)
(0.5)
4,025
(5,616)
1,334
1.3
(1.9)
0.5
—
—
(976)
2,010
(660)
—
(265)
(0.4)
0.9
(0.3)
—
(0.1)
Total
. . . . . . . . . . . . . . . . . . . . $152,065
40.0% $114,837
38.3%
$84,007
39.2%
F-14
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The tax effects of temporary differences giving rise to deferred income tax assets (liabilities) were:
Deferred income tax assets:
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement plans and postretirement benefits . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables and inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and foreign tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax liabilities:
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment
Investment in unconsolidated affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31
2009(1)
2008(2)
(In thousands)
$ 118,680
52,418
42,474
23,698
45,880
30,232
14,244
7,334
(10,974)
$ 112,812
60,908
34,547
20,034
74,965
17,412
13,311
9,983
(9,645)
323,986
334,327
(500,191)
(270,232)
(22,698)
(420,284)
(229,962)
(25,514)
(793,121)
(675,760)
Net deferred income tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(469,135)
$(341,433)
(1) Includes $20.6 million of deferred tax assets related to uncertain tax positions.
(2) Includes $20.0 million of deferred tax assets related to uncertain tax positions.
These net deferred income tax assets (liabilities) are classified in our Consolidated Balance Sheets as
follows:
December 31
2009
2008
(In thousands)
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 154,847
(623,982)
$ 127,211
(468,644)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(469,135)
$(341,433)
At December 31, 2009, we had $30.2 million of state and foreign net operating loss carryforwards and $14.2
million of state and foreign tax credits available for carryover to future years. These items are subject to certain
limitations and begin to expire in 2010. A valuation allowance of $11.0 million has been established because we
do not believe it is more likely than not that all of the deferred tax assets related to state and foreign net operating
loss carryforwards, state credit carryforwards and foreign tax credit carryforwards will be realized prior to
expiration. Our valuation allowance increased $1.3 million in 2009 for expected nonrealization of certain foreign
net operating losses partially offset by expected realization of certain state net operating loss and credit
carryforwards not previously recognized.
F-15
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following is a reconciliation of gross unrecognized tax benefits, including interest, recorded in other
long-term liabilities in our Consolidated Balance Sheets:
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases in tax positions for current year
. . . . . . . . . . . . . . . . . .
Increases in tax positions for prior years . . . . . . . . . . . . . . . . . . .
Acquired increases in tax positions for prior years . . . . . . . . . . . .
Decreases in tax positions for prior years . . . . . . . . . . . . . . . . . . .
Settlement of tax matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lapse of applicable statutes of limitations . . . . . . . . . . . . . . . . . .
2009
$41,731
5,204
5,641
31,019
(4,181)
(5,580)
(1,223)
December 31
2008
(in thousands)
$ 46,089
4,196
3,718
—
(10,834)
(400)
(1,038)
2007
$41,596
3,294
4,712
—
(1,422)
(1,697)
(394)
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$72,611
$ 41,731
$46,089
Of the balance at December 31, 2009, $24.9 million would impact our effective tax rate, $0.6 million would
be recorded in discontinued operations, and $26.6 million would offset tax benefits associated with potential
transfer pricing adjustments, if recognized. The remaining $20.6 million represents tax positions for which the
ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
Due to the impact of deferred income tax accounting, the disallowance of the shorter deductibility period would
not affect our effective tax rate but would accelerate payment of cash to the applicable taxing authority. We do
not expect any material changes to our liability for uncertain tax positions during the next 12 months.
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. Income tax expense for 2009, 2008 and
2007 included interest expense, net of tax of $1.1 million, $(0.6) million and $2.8 million, respectively. Our liability
for uncertain tax positions included accrued interest of $8.5 million and $8.2 million at December 31, 2009 and
2008, respectively.
As of December 31, 2009, our 2007 to 2009 tax years remain subject to examination in our major
jurisdictions. The statute on our 2006 U.S. federal income tax return remains open until the first quarter of 2011.
State income tax returns are generally subject to examination for a period of three to five years after filing. We
have various state income tax returns in the process of examination, appeals, or settlement.
F-16
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
9. DEBT
December 31
2009
2008
Amount
Outstanding
Interest Rate
Amount
Outstanding
Interest
Rate
(Dollars in thousands)
Dean Foods Company debt obligations:
Senior secured credit facility . . . . . . . . . . . . . . . . $3,596,950
498,584
Senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.25%* $3,268,500
498,416
7.00
2.84%*
7.00
4,095,534
3,766,916
Subsidiary debt obligations:
Senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables-backed facility . . . . . . . . . . . . . . . . .
Capital lease obligations and other . . . . . . . . . . . .
Alpro revolving credit facility . . . . . . . . . . . . . . .
Less current portion . . . . . . . . . . . . . . . . . . . . .
126,027
—
7,418
—
133,445
4,228,979
(248,352)
Total long-term portion . . . . . . . . . . . . . . . . $3,980,627
6.90
2.00
3.41
253,828 6.625-6.90
460,000
2.72
8,507
—
722,335
4,489,251
(315,526)
$4,173,725
* Represents a weighted average rate for the senior secured revolving credit facility, Term Loan A and Term
Loan B.
The scheduled maturities of long-term debt, at December 31, 2009, were as follows (in thousands):
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter
$ 248,352
862,407
796,372
18,274
1,678,650
642,313
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,246,368
(17,389)
Total outstanding debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,228,979
Senior Secured Credit Facility — Our senior secured credit facility consists of an original combination of a
$1.5 billion five-year senior secured revolving credit facility, a $1.5 billion five-year senior secured term loan A,
and a $1.8 billion seven-year senior secured term loan B. At December 31, 2009, there were outstanding
borrowings of $1.3 billion under the senior secured term loan A, $1.8 billion under the senior secured term loan
B and $515.2 million of borrowings that remained outstanding under the revolving credit facility. Letters of
credit in the aggregate amount of $193.5 million were issued but undrawn. At December 31, 2009, approximately
$791.3 million was available for future borrowings under the senior secured revolving credit facility, subject to
the maximum leverage and minimum interest coverage ratios and the satisfaction of certain ordinary course
conditions contained in the credit agreement.
The remaining term loan A is payable in 9 installments of:
• $56.25 million in each of the next five installments due at the end of each quarter, from March 30, 2010
and ending on March 31, 2011; and
• $262.5 million in each of the next four installments due at the end of each quarter, beginning on June 30,
2011 through December 31, 2011 with a final payment on April 2, 2012.
F-17
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The term loan B amortizes 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 senior secured 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 senior secured revolving credit facility until maturity on April 2, 2012. The
credit agreement also requires mandatory principal prepayments upon the occurrence of certain asset
dispositions, recovery events, or as a result of exceeding certain leverage limits.
Under the senior secured credit facility, we are required to comply with certain financial covenants,
including, but not limited to, maximum leverage and minimum interest coverage ratio. As of December 31, 2009,
we were in compliance with all covenants contained in their agreement. Our Leverage Ratio at December 31,
2009 was 4.16 times consolidated funded indebtedness to 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-backed facility. The maximum permitted Leverage Ratio as of December 31, 2009 is 5.00
times declining to a final step down to 4.50 times as of December 31, 2010.
Our credit agreement 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 secured credit facility contains limitations on liens, investments and the incurrence of additional
indebtedness, prohibits certain dispositions of property and conditionally restricts certain payments, including
dividends. There are no restrictions on these certain payments, including dividends, when our Leverage Ratio is
below 5.00 times. The senior secured 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 credit agreement 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 requirements to maintain specific credit rating levels.
Interest on the outstanding balances under the senior secured 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 credit agreement) 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 senior secured revolving credit facility that ranges from 12.5 to 37.5 basis points,
depending on our Leverage Ratio.
Dean Foods Company 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
F-18
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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
December 31, 2009 was $498.6 million.
Subsidiary Senior Notes — The former Dean Foods Company (“Legacy Dean”) had certain senior notes
outstanding at the time of its acquisition, of which one series ($150 million face value) remains outstanding with
a maturity date of October 15, 2017. During the third quarter of 2009, we repurchased in the open market $8.0
million of these subsidiary senior notes and recognized an immaterial book loss. The balance of these
outstanding notes is $126.0 million at December 31, 2009 at 6.9% interest. During the fourth quarter of 2008, we
repurchased in the open market, $77.0 million of Legacy Dean’s subsidiary senior notes that were to mature on
May 15, 2009. Additionally, the net proceeds of our equity offering in May 2009 were used in part to repay the
remaining balance of $122.8 million of these senior notes upon maturity.
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. The subsidiary senior notes are
not guaranteed by Dean Foods Company or Legacy Dean’s wholly owned subsidiaries.
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 consolidated balance sheet and the securitization is treated as a
borrowing for accounting purposes. On March 30, 2009, we amended the facility to reflect the reallocation of
commitments among the financial
institution to our
receivables – backed program and to change the facility date to be a 364-day facility terminating on March 29,
2010. During 2009, we made net payments of $460.0 million on this facility, which was primarily repaid using a
portion of the net proceeds from our equity offering in May 2009. There was no remaining drawn balance at
December 31, 2009. The receivables-backed facility bears interest at a variable rate based on the commercial
paper yield plus an applicable margin as defined in the agreement. Our ability to re-borrow under this facility is
subject to a monthly borrowing base formula. This facility had $504.7 million of availability at December 31,
2009, based on this formula.
institutions following the addition of one financial
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. See Note 18.
Alpro Revolving Credit Facility — On July 2, 2009, our newly acquired subsidiary, Alpro N.V. entered into
a two year multi-currency revolving credit facility for borrowings in an amount not to exceed € 20 million (or its
currency equivalent). In December, 2009, we reduced the facility to an amount not to exceed € 10 million (or its
currency equivalent). The facility is unsecured and is guaranteed by Dean Foods Company and various Alpro
N.V. subsidiaries. Use of proceeds under the facility is for working capital and other general corporate purposes
of Alpro N.V. The subsidiary revolving credit facility will be available for the issuance of up to € 1 million of
letters of credit. No principal payments are due under the subsidiary revolving credit facility until maturity on
July 2, 2011. At December 31, 2009, there were no outstanding borrowings under the facility.
F-19
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Interest Rate Agreements — See Note 10 for information related to interest rate swap arrangements
associated with our debt.
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, joint and
severally guaranteed by substantially all of our wholly-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 wholly-owned subsidiary guarantors of the
senior notes and separately the combined results of the wholly-owned subsidiaries that are not a party to the
guarantees. The wholly-owned non-guarantor subsidiaries reflect foreign and certain other 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 December 31, 2009
Non-
Guarantor
Subsidiaries
(In thousands)
Guarantor
Subsidiaries
Eliminations
Parent
Consolidated
Totals
ASSETS
Current assets:
$
Cash and cash equivalents . . . . . . . . .
Receivables, net . . . . . . . . . . . . . . . . .
Income tax receivable . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . .
Intercompany receivables . . . . . . . . .
Other current assets . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . .
. . . .
. . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net
Goodwill
Identifiable intangible and other
assets . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in subsidiaries . . . . . . . . . . .
9,665
469
19,123
—
2,252,463
155,187
2,436,907
500
—
50,796
9,012,571
$
— $
35,001
105
408,431
5,325,673
71,172
5,840,382
1,868,458
3,110,502
37,967
843,367
—
29,698
738,751
18,784
$
— $
—
—
—
(8,316,887)
—
47,632
878,837
19,228
438,129
—
245,143
1,668,567
239,921
172,162
(8,316,887)
1,628,969
— 2,108,879
— 3,282,664
616,616
—
156,017
—
—
(9,012,571)
823,429
—
Total . . . . . . . . . . . . . . . . . . . . . . . .
$11,500,774
$11,435,958
$2,236,667
$(17,329,458) $7,843,941
LIABILITIES AND
STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued
expenses . . . . . . . . . . . . . . . . . . . . .
Intercompany notes . . . . . . . . . . . . . .
Current portion of long-term debt . . .
$
Total current liabilities . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . .
Dean Foods stockholders’ equity . . . . . .
Non-controlling interest . . . . . . . . . . . . .
214,512
5,277,342
243,000
5,734,854
3,852,533
561,441
1,351,946
—
$
930,933
1,520,421
4,843
2,456,197
127,573
345,087
8,507,101
—
$
84,728
1,519,124
509
$
— $1,230,173
—
248,352
(8,316,887)
—
1,604,361
521
111,029
505,470
15,286
(8,316,887)
1,478,525
— 3,980,627
— 1,017,557
1,351,946
15,286
(9,012,571)
—
Total Stockholders’ equity . . . . . . .
1,351,946
8,507,101
520,756
(9,012,571)
1,367,232
Total . . . . . . . . . . . . . . . . . . . . . . . .
$11,500,774
$11,435,958
$2,236,667
$(17,329,458) $7,843,941
F-20
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Condensed Consolidating Balance Sheet as of December 31, 2008
Non-
Guarantor
Subsidiaries
(In thousands)
Guarantor
Subsidiaries
Eliminations
Consolidated
Totals
Parent
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . $
Receivables, net
. . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany receivables . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . .
9,391 $
401
—
1,718,910
109,544
21,198 $
22,361
393,111
5,229,896
82,403
5,390 $
832,230
—
135,961
5,164
— $
—
—
(7,084,767)
—
35,979
854,992
393,111
—
197,111
Total current assets . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Identifiable intangible and other assets . . . . . .
Investment in subsidiaries . . . . . . . . . . . . . . . .
1,838,246
1,807
50,481
8,014,706
5,748,969
1,791,561
— 3,073,502
613,118
—
(7,084,767) 1,481,193
978,745
— 1,821,892
28,524
— 3,073,502
—
663,605
6
—
—
— (8,014,706)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,905,240 $11,227,150 $1,007,275 $(15,099,473) $7,040,192
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable and accrued expenses . . . $ 189,615 $
Other current liabilities . . . . . . . . . . . . . . . . .
Intercompany notes . . . . . . . . . . . . . . . . . . . .
. . . . . . . .
Current portion of long-term debt
27,140
4,772,535
186,750
894,331 $
436
1,839,218
128,776
Total current liabilities . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . .
5,176,040
3,580,166
590,800
558,234
2,862,761
133,559
290,016
7,940,814
91 $
128
473,014
—
473,233
460,000
150
73,892
— $1,084,037
27,704
—
(7,084,767)
—
315,526
—
(7,084,767) 1,427,267
— 4,173,725
880,966
—
558,234
(8,014,706)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,905,240 $11,227,150 $1,007,275 $(15,099,473) $7,040,192
F-21
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Condensed Consolidating Statements of Income for
the Year Ended December 31, 2009
Non-
Guarantor
Subsidiaries Eliminations
(In thousands)
Guarantor
Subsidiaries
Consolidated
Totals
Parent
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $10,928,250 $230,138 $
— 7,896,766
145,635
— $11,158,388
— 8,042,401
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and distribution . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . .
Facility closing and reorganization costs . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . .
Other (income) expense, net . . . . . . . . . . . . . . .
Income from subsidiaries . . . . . . . . . . . . . . . . .
— 3,031,484
— 1,752,829
591,569
30,162
14,912
19,060
—
18,287
—
230,454
(22,468)
(606,096)
84,503
74,106
26,913
—
1,128
(788)
— 3,115,987
— 1,826,935
636,769
—
30,162
—
246,494
—
(4,196)
—
—
— 606,096
Income (loss) from continuing operations before
income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from continuing operations . . . . . .
Gain on sale of discontinued operations, net of
379,823
152,065
227,758
622,952
249,404
(16,856)
(442)
(606,096)
(248,962)
373,548
(16,414)
(357,134)
379,823
152,065
227,758
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
89
89
—
(89)
89
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss attributable to non-controlling
227,847
373,637
(16,414)
(357,223)
227,847
interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,461
— 12,461
(12,461)
12,461
Net income (loss) attributable to Dean Foods
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 240,308 $
373,637 $ (3,953) $(369,684) $
240,308
Condensed Consolidating Statements of Income for
the Year Ended December 31, 2008
Non-
Guarantor
Subsidiaries Eliminations
(In thousands)
Guarantor
Subsidiaries
Consolidated
Totals
Parent
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $12,439,329 $ 15,284 $
— 9,497,473
11,886
— $12,454,613
— 9,509,359
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and distribution . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . .
Facility closing and reorganization costs . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . .
Other (income) expense, net . . . . . . . . . . . . . . .
Income from subsidiaries . . . . . . . . . . . . . . . . .
— 2,941,856
— 1,816,831
489,391
22,758
38,614
(838)
—
1,575
—
269,423
571
(571,246)
3,398
859
5,150
—
43
1,200
— 2,945,254
— 1,817,690
496,116
—
22,758
—
308,080
—
933
—
—
— 571,246
Income (loss) from continuing operations before
income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from continuing operations . . . . . .
Loss from discontinued operations, net of tax . . .
299,677
114,837
184,840
(1,070)
575,100
218,250
356,850
(1,070)
(3,854)
(1,566)
(2,288)
—
(571,246)
(216,684)
(354,562)
1,070
299,677
114,837
184,840
(1,070)
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . $ 183,770 $
355,780 $ (2,288) $(353,492) $
183,770
F-22
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . .
$
Parent
Guarantor
Subsidiaries
Condensed Consolidating Statements of Income for
the Year Ended December 31, 2007
Non-
Guarantor
Subsidiaries Eliminations
(In thousands)
$10,512
7,910
— $11,811,391
9,076,408
—
$
Consolidated
Totals
— $11,821,903
9,084,318
—
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and distribution . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . .
Facility closing, reorganization, and
other costs . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . .
Other (income) expense, net . . . . . . . . . . .
Income from subsidiaries . . . . . . . . . . . . .
Income (loss) from continuing operations
before income taxes . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from continuing operations . .
Income from discontinued operations,
net of tax . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
4,756
2,734,983
1,720,761
419,471
464
267,442
6,232
(493,363)
214,469
84,007
130,462
35,645
65,727
401
—
492,978
188,445
304,533
891
—
2,602
856
2,035
—
33
(707)
—
385
114
271
891
2,737,585
1,721,617
426,262
—
—
—
—
—
493,363
(493,363)
(188,559)
(304,804)
36,109
333,202
5,926
—
214,469
84,007
130,462
(891)
891
Net income (loss) . . . . . . . . . . . . . . . . . . . . .
$ 131,353
$
304,533
$ 1,162
$(305,695) $
131,353
Condensed Consolidating Statement of Cash Flows for
the Year Ended December 31, 2009
Parent
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Consolidated
Totals
Net cash provided by continuing operations . . . . . . . . . .
Net cash used in discontinued operations . . . . . . . . . . . . .
$
194,778
—
$ 421,043
(238)
43,090
—
(In thousands)
$
Net cash provided by operating activities . . . . . . . . . . . .
Payments for property, plant and equipment . . . . . . . .
Payments for acquisitions, net of cash received . . . . . .
Proceeds from sale of fixed assets . . . . . . . . . . . . . . . .
194,778
(1,220)
(580,068)
—
420,805
(260,809)
—
8,833
43,090
(6,186)
(1,143)
—
$
658,911
(238)
658,673
(268,215)
(581,211)
8,833
Net cash used in investing activities . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of debt
Proceeds from senior secured revolver . . . . . . . . . . . . .
Payments for senior secured revolver . . . . . . . . . . . . . .
Proceeds from receivables-backed facility . . . . . . . . . .
Payments for receivables-backed facility . . . . . . . . . . .
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . .
Tax savings on share-based compensation . . . . . . . . . .
Capital contribution from non-controlling interest
. . .
Net change in intercompany balances . . . . . . . . . . . . .
Net cash provided by (used in) financing activities . . . . .
Effect of Exchange in cash and cash equivalents . . . . . . .
Increase (decrease) in cash and cash equivalents . . . . . . .
Cash and cash equivalents, beginning of period . . . . . . .
(581,288)
(186,751)
3,689,000
(3,173,800)
—
—
454,326
894
—
(396,885)
(251,976)
(143,612)
—
—
— 1,784,728
— (2,244,728)
—
—
—
—
12,708
—
443,300
(46,415)
(7,329)
(840,593)
(330,363)
—
— 3,689,000
— (3,173,800)
1,784,728
(2,244,728)
454,326
894
12,708
—
386,784
—
274
9,391
(190,027)
—
(21,198)
21,198
(3,992)
808
32,577
5,390
192,765
808
11,653
35,979
47,632
Cash and cash equivalents, end of period . . . . . . . . . . . . .
$
9,665
$
— $
37,967
$
F-23
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Condensed Consolidating Statement of Cash Flows for
the Year Ended December 31, 2008
Parent
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Consolidated
Totals
Net cash provided by continuing operations . . . . . . . . . .
Net cash used in discontinued operations . . . . . . . . . . . . .
$
317,002
—
$ 339,225
(1,304)
63,031
—
$
719,258
(1,304)
(In thousands)
$
Net cash provided by operating activities . . . . . . . . . . . .
Payments for property, plant and equipment . . . . . . . .
Payments for acquisitions, net of cash received . . . . . .
Proceeds from sale of fixed assets . . . . . . . . . . . . . . . .
317,002
(1,780)
(95,851)
—
337,921
(250,330)
—
11,329
63,031
(4,855)
—
—
717,954
(256,965)
(95,851)
11,329
Net cash provided by (used in) investing activities . . . . .
Repayment of debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from senior secured revolver . . . . . . . . . . . . .
Payments for senior secured revolver . . . . . . . . . . . . . .
Proceeds from receivables-backed facility . . . . . . . . . .
Payments for receivables-backed facility . . . . . . . . . . .
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . .
Tax savings on share-based compensation . . . . . . . . . .
Net change in intercompany balances . . . . . . . . . . . . .
(97,631)
(18,000)
3,298,200
(3,848,500)
—
—
419,663
7,581
(69,525)
(239,001)
(91,987)
—
—
— 1,852,320
— (1,992,320)
—
—
—
—
81,816
(12,291)
(341,487)
(4,855)
—
(109,987)
— 3,298,200
— (3,848,500)
1,852,320
(1,992,320)
419,663
7,581
—
Net cash provided by (used in) financing activities . . . . .
(210,581)
(104,278)
(58,184)
(373,043)
Increase (decrease) in cash and cash equivalents . . . . . . .
Cash and cash equivalents, beginning of period . . . . . . .
8,790
601
(5,358)
26,557
(8)
5,397
3,424
32,555
Cash and cash equivalents, end of period . . . . . . . . . . . . .
$
9,391
$ 21,199
$
5,389
$
35,979
F-24
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Condensed Consolidating Statement of Cash Flows for
the Year Ended December 31, 2007
Parent
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Consolidated
Totals
(In thousands)
Net cash provided by (used in) operating activities . . . . . .
. . . . . . . . .
Payments for property, plant and equipment
Payments for acquisitions, net of cash received . . . . . . .
Net proceeds from divestitures . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of fixed assets . . . . . . . . . . . . . . . . .
$ (187,500) $ 670,031
(240,288)
—
—
13,726
(820)
(132,204)
1,536
—
Net cash provided by (used in) continuing operations . . . .
Net cash provided by discontinued operations . . . . . . . . . .
(131,488)
10,705
(226,562)
—
$(132,281) $
(340)
—
—
6,466
6,126
—
350,250
(241,448)
(132,204)
1,536
20,192
(351,924)
10,705
Net cash provided by (used in) investing activities . . . . . .
Proceeds from issuance of debt . . . . . . . . . . . . . . . . . . . .
Repayment of debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from senior secured revolver . . . . . . . . . . . . . .
Payments for senior secured revolver . . . . . . . . . . . . . . .
Proceeds from receivable-backed facility . . . . . . . . . . . .
Payments for receivables-backed facility . . . . . . . . . . . .
Payments of financing costs . . . . . . . . . . . . . . . . . . . . . .
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . .
Payment of special cash dividend . . . . . . . . . . . . . . . . . .
Tax savings on share-based compensation . . . . . . . . . . .
Net change in intercompany balances . . . . . . . . . . . . . . .
(120,783)
1,912,500
(69,750)
4,706,100
(4,469,300)
—
—
(31,281)
48,114
(1,942,738)
18,369
136,291
6,126
(341,219)
(226,562)
— 1,912,500
—
—
(336,880)
(267,130)
— 4,706,100
—
— (4,469,300)
—
238,300
— 238,300
(150,800)
— (150,800)
(31,281)
—
—
—
—
48,114
— (1,942,738)
—
18,369
—
—
—
39,745
(176,036)
Net cash provided by (used in) financing activities . . . . . .
308,305
(443,166)
127,245
Increase in cash and cash equivalents . . . . . . . . . . . . . . . . .
Cash and cash equivalents, beginning of period . . . . . . . . .
Cash and cash equivalents, end of period . . . . . . . . . . . . . .
$
22
579
601
303
26,254
1,090
4,307
$ 26,557
$
5,397
$
32,555
(7,616)
1,415
31,140
10. DERIVATIVE FINANCIAL INSTRUMENTS
Interest Rates — 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 interest
on our senior secured credit facility by fixing the LIBOR interest rates specified in the senior secured credit
facility at
the indicated expiration dates of these interest rate swap
agreements.
the interest rates noted below until
The following table summarizes our various interest rate agreements in effect as of December 31, 2009:
Fixed Interest Rates
4.07% to 4.27% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.91%(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March 2010 — 2012
Expiration Date
December 2010
Notional Amounts
(In millions)
$ 450
$2,300
(1) The notional amounts of the swap agreements decrease by $800 million on March 31, 2010, $250 million on
March 31, 2011 and the balance on March 30, 2012.
F-25
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
These swaps are recorded as an asset or liability in our consolidated balance sheets at fair value, with an
offset to accumulated 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. There was no hedge
ineffectiveness during 2009, 2008 or 2007.
We are exposed to market risk under these arrangements due to the possibility of interest rates on our senior
secured credit facility falling below the rates on our interest rate derivative agreements. Credit risk under these
arrangements is believed to be remote as the counterparties to our interest rate swap agreements are major
financial institutions. However, beginning in the second half of 2008, a number of financial institutions similar to
those that serve as counterparties to our hedging arrangements were adversely affected by the global credit crisis
and in some cases were unable to fulfill their debt and other obligations. If any of the counterparties to our
hedging arrangements become unable to fulfill their obligation to us, we may lose the financial benefits of these
arrangements.
Commodities — We are exposed to commodity price fluctuations,
including milk, organic and
non-genetically modified (“non-GMO”) soybeans, butterfat, sweeteners and other commodity costs used in the
manufacturing, packaging and distribution of our products; including utilities, natural gas, resin and diesel fuel.
In order to secure adequate supplies of materials and bring greater stability to the cost of ingredients and their
related manufacturing, packaging and distribution, we routinely enter into forward purchase contracts and other
purchase arrangements with suppliers. Under the forward purchase contracts, we commit to purchasing agreed-
upon quantities of ingredients and commodities at agreed-upon prices at specified future dates. The outstanding
purchase commitment for these commodities at any point in time typically ranges from one month’s to one year’s
anticipated requirements, depending on the ingredient or commodity. These contracts are considered normal
purchases and sales. In addition to entering into forward purchase contracts, from time to time we may purchase
exchange-traded commodity futures contracts for raw materials that are ingredients of our products or
components of such ingredients. We did not have any outstanding commodity related financial instruments at
December 31, 2009.
Although we may utilize forward purchase contracts and other instruments to mitigate the risks related to
commodity price fluctuation, such strategies do not fully mitigate commodity price risk. Adverse movements in
commodity prices over the terms of the contracts or instruments could decrease the economic benefits we derive
from these strategies.
Foreign Currency — Historically, our international operations represented less than 1% of our sales and
long-lived assets. With our acquisition of Alpro in July 2009, the relative percentage of our international sales
will increase slightly. Sales in foreign countries, as well as certain expenses related to those sales, are transacted
in currencies other than our reporting currency, the U.S. dollar. Our foreign currency exchange rate risk is
primarily limited to the British Pound and the Euro. We may, from time to time, employ derivative financial
instruments to manage our exposure to fluctuations in foreign currency rates or enter into forward currency
exchange contracts to hedge our net investment and intercompany payable or receivable balances in foreign
operations.
In June 2009, in connection with our acquisition of Alpro, we entered into a forward contract to purchase
€325.0 million. The forward contract was entered into in order to hedge the impact on the purchase price
resulting from foreign currency exchange rate fluctuations. The forward contract was not designated as a hedging
instrument for accounting purposes. In July 2009, the acquisition closed and the foreign currency forward
contract was settled. A gain of $4.2 million was recorded for the year ended December 31, 2009, within other
income. No other foreign currency derivatives were entered into in 2009.
F-26
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of December 31, 2009 and 2008, our derivatives designated as hedging instruments recorded at fair value
in our consolidated balance sheets were:
Derivative Liabilities
December 31,
2009(3)
December 31,
2008(3)
(In thousands)
Derivatives designated as Hedging Instruments
Interest rate swap contracts — current(1) . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swap contracts — non current(2) . . . . . . . . . . . . . . . . . . . .
$ 90,194
42,262
Total Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$132,456
$103,278
106,731
$210,009
(1) Derivative liabilities that have settlement dates equal to or less than 12 months from the respective balance
sheet date were included in accounts payable and accrued expenses in our consolidated balance sheets.
(2) Derivative liabilities that have settlement dates greater than 12 months from the respective balance sheet date
were included in other long-term liabilities in our consolidated balance sheets.
(3) There were no derivatives designated as hedging instruments in an asset position.
Losses on derivatives designated as cash flow hedges reclassified from accumulated other comprehensive income
into income (net of tax) in our consolidated statements of income for the years ended December 31, 2009 and
2008 were:
Year Ended December 31
2008
2009
2007
Interest rate swap contracts(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$70,772
$26,640
$(9,679)
(1) Recorded in interest expense in our consolidated income statement.
Based on current interest rates, we estimate that $55.5 million, net of tax of hedging activity will be
reclassified as interest expense within the next 12 months.
11. COMMON STOCK AND SHARE-BASED COMPENSATION
Our authorized shares of capital stock include one million shares of preferred stock and 500 million shares
of common stock with a par value of $.01 per share.
Public Offerings of Equity Securities — In May 2009 and March 2008, we issued and sold 25.4 million and
18.7 million shares of our common stock in public offerings, respectively. Net proceeds from these offerings of
$444.7 million and $399.5 million, respectively were used to reduce our indebtedness under our credit
agreements.
Special Cash Dividend — On April 2, 2007, we recapitalized our balance sheet through the completion of a
new $4.8 billion senior secured credit facility and the return of $1.94 billion to shareholders of record on
March 27, 2007 through a $15 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.
Stock Award Plans — As of December 31, 2009, we had three award plans with shares remaining available
for issuance. These plans, which are our 1997 Stock Option and Restricted Stock Plan, the 1989 Dean Foods
Company Stock Awards Plan (which we adopted upon completion of our acquisition of Legacy Dean) and the
F-27
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Dean Foods Company 2007 Stock Incentive Plan (the “2007 Plan”) provide for grants of stock options, stock
units, restricted stock and other stock-based awards to employees, officers, directors and, in some cases,
consultants, up to a maximum of 37.5 million, 5.7 million and 10.0 million shares, respectively. As of
December 31, 2009, we have remaining availability of 4.3 million, 288,000 and 1.7 million shares, respectively.
Options and other stock-based awards vest in accordance with provisions set forth in the applicable award
agreements. The remaining shares available for grant under the historical plans are granted pursuant to the terms
and conditions of the 2007 Plan.
Under our stock award plans, we grant stock options and restricted stock units to certain employees and
directors. Non-employee directors also can elect to receive their director’s fees in the form of restricted stock in
lieu of cash.
Stock Options — Under the terms of our stock option plans, employees and non-employee directors may be
granted options to purchase our stock at a price equal to the market price on the date the option is granted. In
general, employee options vest one-third on the first anniversary of the grant date, one-third on the second
anniversary of the grant date and one-third on the third anniversary of the grant date. All unvested options vest
immediately upon a change of control or in certain cases upon death or qualified disability. Options granted to
non-employee directors generally vest immediately.
We recognize share-based compensation expense for stock options ratably over the vesting period. The fair
value of each option award is estimated on the date of grant using the Black-Scholes valuation model, using the
following assumptions:
2009
Year Ended December 31
2008
2007
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . .
Expected option term . . . . . . . . . . . . . . . . . . . . . . .
Risk-free rate of return . . . . . . . . . . . . . . . . . . . . . .
33%
0%
4.75 years
25%
0%
4.5 years
1.65 to 2.66% 1.71 to 3.34% 3.28 to 5.07%
25%
0%
4.5 years
The expected term of the options represents the estimated period of time until exercise and is based on
historical experience of similar awards, giving consideration to contractual terms (generally 10 years), vesting
schedules and expectations of future employee and director behavior. Expected stock price volatility is based on
a combination of historical volatility of our stock and expectations with regard to future volatility. The risk-free
rates are based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining
term. We have not historically declared or paid a regular cash dividend on our common stock. However, on
April 2, 2007, we declared a special cash dividend of $15 per share. We have no current plans to pay a cash
dividend in the future.
F-28
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes stock option activity during the years ended December 31, 2009, 2008 and
2007:
Options outstanding at January 1, 2007 . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment to options granted prior to
December 31, 2006 and outstanding at the time
of the special cash dividend(1) . . . . . . . . . . . . . .
Cancelled(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options outstanding at December 31, 2007 . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options outstanding at December 31, 2008 . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options
15,322,398
3,549,541
6,707,790
(309,178)
(3,253,888)
22,016,663
3,008,838
(1,120,308)
(3,558,606)
20,346,587
3,569,132
(694,993)
(1,002,345)
Weighted
Average
Exercise Price
Weighted
Average
Contractual Life
Aggregate
Intrinsic
Value
$23.09
29.97
15.89
25.83
14.33
18.40
24.98
22.67
12.06
20.24
19.95
24.23
10.38
Options outstanding at December 31, 2009 . . . . . . . .
22,218,381
$20.52
5.54
$34,619,211
Options exercisable at December 31, 2007 . . . . . . . . .
Options exercisable at December 31, 2008 . . . . . . . . .
Options exercisable at December 31, 2009 . . . . . . . . .
15,765,968
14,318,678
15,900,822
14.95
17.45
19.48
4.43
34,545,731
(1) The number and exercise prices of options outstanding at the time of the special cash dividend was
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 cancelled or forfeited may be available for
future grants.
The following table summarizes information about options outstanding and exercisable at December 31,
2009:
Range of
Exercise Prices
$7.17 to $11.69
12.36 to 14.25
14.87 to 18.30
18.69 to 19.98
20.07
20.19 to 25.34
25.37
25.39 to 25.44
25.68
25.81 to 31.90
Number
Outstanding
3,317,302
2,497,995
3,444,504
433,763
3,138,748
758,748
2,482,970
330,638
2,302,470
3,511,243
Options Outstanding
Weighted-Average
Remaining
Contractual Life
Weighted-Average
Exercise Price
Number
Exercisable
Weighted-Average
Exercise Price
Options Exercisable
$10.58
14.23
18.05
19.56
20.07
23.13
25.37
25.42
25.68
29.47
3,317,302
2,491,329
3,297,675
305,732
99,432
566,553
835,126
330,638
2,148,173
2,508,862
$10.58
14.23
18.07
19.67
20.07
23.46
25.37
25.42
25.68
29.30
1.63
2.92
4.54
6.95
9.10
6.56
7.72
6.26
5.61
6.86
F-29
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The weighted-average grant date fair value of options granted during the years ended December 31, 2009,
2008 and 2007 was $6.26 per share, $6.61 per share and $12.22 per share, respectively and the total intrinsic
value of options exercised during the same periods was $8.5 million, $45.8 million and $65.1 million,
respectively. The fair value of shares vested during the years ended December 31, 2009, 2008 and 2007 was
$24.1 million, $24.1 million and $20.8 million, respectively.
During the years ended December 31, 2009, 2008 and 2007, we recognized stock option expense of $22.3
million, $23.4 million and $22.9 million, respectively, and an income tax benefit related to stock option expense
of $8.2 million, $8.3 million and $7.2 million, respectively.
During the year ended December 31, 2009, cash received from stock option exercises was $10.4 million and
the total cash benefit for tax deductions to be realized for these option exercises was $3.0 million.
At December 31, 2009, there was $21.7 million of total unrecognized stock option expense, all of which is
related to nonvested awards. This compensation expense is expected to be recognized over the weighted-average
remaining vesting period of 1.0 years.
Restricted Stock Units — We issue restricted stock units to certain senior employees and non-employee
directors as part of our long-term incentive program. A restricted stock unit represents the right to receive one
share of common stock in the future. Restricted stock units have no exercise price. Through December 31, 2008,
restricted stock units granted to employees generally vest ratably over five years, subject to certain accelerated
vesting provisions based primarily on our stock price, a change of control, or in certain cases upon death or
qualified disability. Starting in January 2009, restricted stock units granted to employees generally vest ratably
over three years, subject to certain accelerated vesting provisions based primarily on a change of control, or in
certain cases upon death or qualified disability. Restricted stock units granted to non-employee directors vest
ratably over three years.
The following table summarizes stock unit activity during the years ended December 31, 2009, 2008 and
2007:
Stock units outstanding at January 1, 2007 . . . . . . . . . . . . . . .
Stock units issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment to stock units outstanding at the time of
special cash dividend(1) . . . . . . . . . . . . . . . . . . . . . . . . .
Stock units cancelled or forfeited(2) . . . . . . . . . . . . . . . . . .
Stock units outstanding at December 31, 2007 . . . . . . . . . . . .
Stock units issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock units cancelled or forfeited(2) . . . . . . . . . . . . . . . . . .
Stock units outstanding at December 31, 2008 . . . . . . . . . . . .
Stock units issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock units cancelled or forfeited(2) . . . . . . . . . . . . . . . . . . . .
Stock units outstanding at December 31, 2009 . . . . . . . . . . . .
Employees
774,261
536,370
(528,547)
Directors
69,676
22,950
(46,471)
471,691
(113,623)
1,140,152
938,021
(193,042)
(131,901)
1,753,230
1,173,542
(337,972)
(191,660)
2,397,140
32,708
—
78,863
22,950
(30,132)
—
71,681
36,926
(34,284)
(9,203)
65,120
Total
843,937
559,320
(575,018)
504,399
(113,623)
1,219,015
960,971
(223,174)
(131,901)
1,824,911
1,210,468
(372,256)
(200,863)
2,462,260
Weighted average grant date fair value . . . . . . . . . . . . . . . . .
$
23.29
$ 17.98
$
23.19
(1) The number of stock units outstanding at the time of the special cash dividend were proportionately adjusted
to maintain the aggregate fair value of the units before and after the special cash dividend.
(2) Pursuant to the terms of our stock unit plans, employees have the option of forfeiting stock units to cover
their minimum statutory tax withholding when shares are issued. Stock units that are cancelled or forfeited
may be available for future grants.
F-30
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
During the years ended December 31, 2009, 2008 and 2007, we recognized stock unit expense of $17.1
million, $11.8 million and $11.9 million, respectively, and an income tax benefit related to stock unit expense of
$5.2 million, $3.5 million and $3.0 million, respectively.
The weighted-average grant date fair value of stock units granted during the years ended December 31,
2009, 2008 and 2007 was $19.78 per share, $24.91 per share and $29.98 per share, respectively. At December 31,
2009, there was $41.3 million of total unrecognized stock unit expense, all of which is related to nonvested
awards. This compensation expense is expected to be recognized over the weighted-average remaining vesting
period of 2.4 years.
Restricted Stock — We offer our non-employee directors the option to receive their compensation for
services rendered in either cash or shares of restricted stock equal to 150% of the fee amount. Shares of restricted
stock vest one-third on grant, one-third on the first anniversary of grant and one-third on the second anniversary
of grant. The following table summarizes restricted stock activity during the years ended December 31, 2009,
2008 and 2007:
Nonvested at January 1, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted shares granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted shares vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonvested at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted shares granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted shares vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted shares forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonvested at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted shares granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted shares vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted shares forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares
27,585
36,518
(32,070)
32,033
53,469
(37,824)
(1,486)
46,192
38,405
(42,882)
(2,369)
Nonvested at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39,346
Weighted-
Average Grant
Date Fair Value
38.83
32.21
36.03
34.09
19.92
28.14
22.37
22.94
18.24
22.39
24.27
18.87
Cash Performance Units — On November 17, 2009, our Board of Directors approved the future granting of
awards of cash performance units (“CPUs”) a part of our long-term incentive compensation program to be
granted to the terms of our 2007 Stock Incentive Plan. The CPU awards are designed to link compensation of
certain executive officers and other key employees to our performance over a three-year period using
performance metrics set forth in the 2007 Stock Incentive Plan. As of December 31, 2009, there were no awards
issued under this plan.
Rights Plan — On February 27, 1998, our Board of Directors declared a dividend of the right to purchase
one half of one common share for each outstanding share of common stock to the stockholders of record on
March 18, 1998. The rights plan expired pursuant to its terms effective March 18, 2008.
Stock Repurchases — Since 1998, our Board of Directors has from time to time authorized the repurchase
of our common stock up to an aggregate of $2.3 billion, excluding fees and expense. We made no share
repurchases in 2009 or 2008. As of December 31, 2009, $218.7 million was available for repurchases under this
program (excluding fees and commissions). Shares, when repurchased, are retired.
F-31
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
12. 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”):
2009
Year Ended December 31,
2008
(In thousands, except share data)
2007
Basic EPS computation:
Numerator:
Income from continuing operations . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Net Loss attributable to non-controlling interest
Income from continuing operations attributable to Dean
$
227,758
12,461
$
184,840
—
$
130,462
—
Foods Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
240,219
$
184,840
$
130,462
Denominator:
Average common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .
170,986,886
149,266,519
130,310,811
Basic EPS from continuing operations attributable to Dean
Foods Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1.41
$
1.24
$
1.00
Diluted EPS computation:
Numerator:
Income from continuing operations . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Net Loss attributable to non-controlling interest
Income from continuing operations attributable to Dean
$
227,758
12,461
$
184,840
—
$
130,462
—
Foods Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
240,219
$
184,840
$
130,462
Denominator:
Average common shares — basic . . . . . . . . . . . . . . . . . . . . .
Stock option conversion(1) . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock units(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average common shares — diluted . . . . . . . . . . . . . . . . . . .
170,986,886
2,474,227
397,190
173,858,303
149,266,519
3,975,370
153,857
153,395,746
130,310,811
6,590,345
390,842
137,291,998
Diluted EPS from continuing operations attributable to Dean
Foods Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1.38
$
1.21
$
0.95
(1) Anti-dilutive shares excluded . . . . . . . . . . . . . . . . . . . . . . . . .
(2) Anti-dilutive stock units excluded . . . . . . . . . . . . . . . . . . . . . .
12,846,720
57,664
10,068,998
970,868
2,680,337
11,244
13. OTHER COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) comprises net income plus all other changes in equity from non-owner
sources. The components of accumulated other comprehensive income (loss), as reflected in the Consolidated
Statements of Stockholders’ Equity at December 31, 2009 and 2008, are as follows:
Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of derivative instruments, net of tax . . . . . . . . . . . . . . . . . . . . . . .
Pension and other postretirement liability adjustment, net of tax . . . . . . . . .
Total accumulated other comprehensive income (loss) . . . . . . . . . . . . . . .
$
(3,532)
(82,133)
(81,311)
$(166,976)
$
(6,041)
(130,488)
(90,500)
$(227,029)
December 31
2009
2008
(In thousands)
F-32
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
14. EMPLOYEE RETIREMENT AND PROFIT SHARING PLANS
We sponsor various defined benefit and defined contribution retirement plans, including various employee
savings and profit sharing plans, and contribute to various multi-employer pension plans on behalf of our
employees. Substantially all full-time union and non-union employees who have completed one or more years of
service and have met other requirements pursuant to the plans are eligible to participate in one or more of these
plans. On July 2, 2009, we acquired Alpro, including its defined benefit pension plans. During 2009, 2008 and
2007, our retirement and profit sharing plan expenses were as follows:
Defined benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Defined contribution plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multi-employer pension and certain union plans . . . . . . . . . . . . . . . .
2009
2007
Year Ended December 31
2008
(In thousands)
$ 4,398
23,331
28,295
$ 5,346
25,492
27,164
$21,053
28,300
29,604
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$78,957
$56,024
$58,002
Defined Benefit Plans — The benefits under our defined benefit plans are based on years of service and
employee compensation. Our funding policy is to contribute annually the minimum amount required under
ERISA regulations plus additional amounts as we deem appropriate.
Included in accumulated other comprehensive income at December 31, 2009 and 2008 are the following
amounts that have not yet been recognized in net periodic pension cost: unrecognized transition obligation of
$337,000 ($206,000 net of tax) and $450,000 ($278,000 net of tax), unrecognized prior service costs of
$7.1 million ($4.4 million net of tax) and $9.0 million ($5.6 million net of tax) and unrecognized actuarial losses
of $120.4 million ($73.7 million net of tax) and $143.1 million ($88.3 million net of tax). The transition
obligation, prior service costs, and actuarial losses included in accumulated other comprehensive income and
expected to be recognized in net periodic pension cost during the year ended December 31, 2010 are $112,000
($68,000 net of tax), $716,000 ($437,000 net of tax), and $9.1 million ($5.6 million net of tax), respectively.
F-33
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The reconciliation of the beginning and ending balances of the projected benefit obligation and the fair
value of plans assets for the years ended December 31, 2009 and 2008 and the funded status of the plans at
December 31, 2009 and 2008 is as follows:
Change in benefit obligation:
Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange rate changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in plan assets:
Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange rate changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31
2009
2008
(In thousands)
$276,355
3,147
16,947
48
10,330
(18,873)
—
(1,769)
8,605
(221)
$261,481
2,727
16,160
51
20,498
(22,265)
350
(2,647)
—
—
294,569
276,355
181,027
34,062
24,517
48
(18,873)
(1,769)
4,496
(139)
241,333
(61,218)
25,773
51
(22,265)
(2,647)
—
—
Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
223,369
181,027
Funded status at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (71,200)
$ (95,328)
The underfunded status of the plans of $71.2 million at December 31, 2009 is recognized in our
Consolidated Balance Sheet and includes $875,000 classified as a current accrued pension liability. No plan
assets are expected to be returned to us during the year ended December 31, 2010. We expect to contribute
approximately $12.0 million to the pension plans in 2010.
A summary of our key actuarial assumptions used to determine benefit obligations as of December 31, 2009
and 2008 follows:
Weighted average discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31
2008
2009
6.00% 6.32%
7.70% 7.70%
4.00% 4.00%
A summary of our key actuarial assumptions used to determine net periodic benefit cost for 2009, 2008 and
2007 follows:
Weighted average discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.32% 6.40% 5.85%
7.70% 8.00% 8.00%
4.00% 4.00% 4.00%
Year Ended December 31
2007
2008
2009
F-34
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2009
Year Ended December 31
2008
(In thousands)
2007
Components of net periodic benefit cost:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost
Interest cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,147
16,947
(14,017)
$ 2,727
16,160
(19,185)
$ 2,781
17,003
(18,724)
Amortizations:
Unrecognized transition obligation . . . . . . . . . . . . . . . . . . . . . .
Prior service cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of curtailment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of settlement
112
921
12,093
945
905
112
890
2,038
—
1,656
112
891
2,846
—
437
Net periodic benefit cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 21,053
$ 4,398
$ 5,346
The overall expected long-term rate of return on plan assets is a weighted-average expectation based on the
targeted and expected portfolio composition. We consider historical performance and current benchmarks to
arrive at expected long-term rates of return in each asset category.
The amortization of unrecognized net loss represents the amortization of investment losses incurred. The
increase in 2009 amortization is the result of declining asset performance during the volatility of the credit and
capital markets in 2008. In 2009, we closed a plant in Michigan. The effect of curtailment cost in 2009 represents
the recognition of net periodic pension service costs associated with the closure of the plant.
Pension plans with an accumulated benefit obligation in excess of plan assets follows:
December 31
2009
2008
(In millions)
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$286.0
283.2
217.0
$275.0
271.9
179.0
The accumulated benefit obligation for all defined benefit plans was $289.0 million and $273.3 million at
December 31, 2009 and 2008, respectively.
In excess of 80% of our defined benefit plan obligations are frozen as to future participants or increases in
accumulated benefits. Many of these obligations were acquired in prior strategic transactions. As an alternative to
defined benefit plans, we offer defined contribution plans for eligible employees.
The weighted average discount rate reflects the rate at which our defined benefit plan obligations could be
effectively settled. The rate, which is updated annually with the assistance of an independent actuary, uses a
model that reflects rates of a hypothetical portfolio of zero-coupon, high quality corporate bonds that mirror our
forecasted benefit plan payments in the future. The weighted average discount rate was decreased from 6.32% at
December 31, 2008 to 6.00% at December 31, 2009, which will increase the net periodic benefit cost in 2010.
Substantially all of our qualified pension plans are consolidated into one master trust. The investments held
in the master trust are managed by an established Investment Committee with assistance from independent
investment advisors. On July 1, 2009, the Investment Committee adopted a new long-term investment policy for
the master trust that decreases the expected relative holdings of equity securities that targets investments in
equity securities at 59% of the portfolio, fixed income at 37%, cash equivalents at 3% and other investments of
1%. Policy objectives include maximizing long-term return at acceptable risk levels, diversifying among asset
F-35
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
classes, if appropriate, and among investment managers, as well as establishing relevant risk parameters within
each asset class. The investment policies permit variances from the targets within certain parameters. The
investment policy prohibits investments in non-marketable or exotic securities, such as short-sale contracts; letter
stock; commodities and private placements, without
the Investment Committee’s prior approval. At
December 31, 2009, our master trust was invested as follows: investments in equity securities were at 59%;
investments in fixed income were at 35%; cash equivalents were at 3% and other investments were at 3%. Equity
securities of the plan did not include any investment in our common stock at December 31, 2009 or 2008.
Estimated pension plan benefit payments to participants for the next ten years are as follows:
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Next five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 19.7 million
18.9 million
19.4 million
19.8 million
20.4 million
103.3 million
In December 2008, the FASB issued an update to Accounting Standards related to Compensation —
Retirement Benefits. This update requires additional disclosures about assets held in an employer’s defined
benefit pension plans. This update requires us to disclose the fair value of each major asset category as of each
annual reporting date for which a financial statement is presented, except for earlier comparative periods upon
adoption. It also requires disclosure of the level within the fair value hierarchy in which each major category of
plan assets falls and a reconciliation of beginning and ending balances for Level 3 assets. This update is
applicable to employers that are subject to the disclosure requirements and is effective for fiscal years ending
after December 15, 2009. We are complying with the disclosure provisions of this update.
Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants. As such, fair value is a market-based
measurement that should be determined based on assumptions that market participants would use in pricing an
asset or liability. As a basis for considering assumptions, we follow a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value of our defined benefit plans’ consolidated assets as follows:
• Level 1 — Quoted prices for identical instruments in active markets.
• Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or similar
instruments in markets that are not active and model-derived valuations, in which all significant inputs are
observable in active market.
• Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting
entity to develop its own assumptions.
F-36
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The fair values by category of inputs as of December 31, 2009 were as follows (in thousands):
Equity Securities:
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Index Funds:
U.S. Equities(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International Equities(b) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity Funds(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed Income:
Bond Funds(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diversified Funds(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Fixed Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash Equivalents:
Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term Investment Funds(f) . . . . . . . . . . . . . . . . . . . . . . .
Total Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Investments:
Insurance Contracts(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Partnerships/Joint Ventures(h) . . . . . . . . . . . . . . . . . . . . . . . .
Insurance Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Other Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair Value as of
December 31, 2009
Level 1
Level 2
Level 3
$
28
$
28
$
— $ —
103,535
21,219
6,560
131,342
73,142
4,674
77,816
2,000
4,562
6,562
5,197
2,092
360
7,649
— 103,535
21,219
—
6,560
—
28
—
—
—
2,000
—
2,000
—
—
—
—
131,314
73,142
—
73,142
—
4,562
4,562
—
—
—
—
—
—
—
—
—
4,674
4,674
—
—
—
5,197
2,092
360
7,649
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$223,369
$2,028
$209,018
$12,323
(a) Represents a pooled/separate account that tracks the Dow Jones U.S. Total Stock Market Index.
(b) Represents a pooled/separate account that tracks the MSCI EAFE Index.
(c) Represents a pooled/separate account comprised of approximately 90% U.S. large-cap stocks and 10% in
international stocks.
(d) Approximately 60% of investment represents a pooled/separate account that tracks the overall performance
of the Barclays Capital U.S. Aggregate Bond Index. The remaining 40% represents a pooled/separate account
invested in government and investment grade corporate securities.
(e) Represents a pooled/separate account investment in the General Investment Accounts of two investment
managers. The accounts primarily invest in fixed income debt securities, such as high grade corporate bonds,
government bonds and asset-backed securities.
(f) Investment is comprised of high grade money market instruments with short-term maturities and high
liquidity.
(g) Approximately 90% of the insurance contracts are financed by employer premiums with the insurer
managing the reserves as calculated using an actuarial model. The remaining 10% of the insurance contracts
are financed by employer and employee contributions with the insurer managing the reserves collectively
with other pension plans.
(h) The majority of the total partnership balance is a partnership comprised of a portfolio of three limited
partnership funds that invest in public and private equity.
F-37
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A reconciliation of the change in the fair value measurement of the defined benefit plans’ consolidated
assets using significant unobservable inputs (Level 3) between December 31, 2008 and December 31, 2009 is as
follows (in thousands):
Balance at December 31, 2008 . . . . . . . . . . . . . .
Actual return on plan assets:
Relating to instruments still held at reporting
date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions(1) . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases, sales and settlements (net) . . . . . . . .
Transfers in and/or out of Level 3 . . . . . . . . . . .
Diversified Funds
Insurance
Contracts
Partnerships/
Joint Ventures
Insurance
Reserves
Total
$ 4,770
$ —
$2,937
$361
$ 8,068
58
—
(2,265)
2,111
—
5,197
—
—
(845)
—
—
—
(1)
—
—
—
(788)
5,197
(2,265)
2,111
Balance at December 31, 2009 . . . . . . . . . . . . . .
$ 4,674
$5,197
$2,092
$360
$12,323
(1) Represents the plan assets transferred in as part of the Alpro acquisition on July 2, 2009.
Defined Contribution Plans — Certain of our non-union personnel may elect to participate in savings and
profit sharing plans sponsored by us. These plans generally provide for salary reduction contributions to the plans
on behalf of the participants of between 1% and 20% of a participant’s annual compensation and provide for
employer matching and profit sharing contributions as determined by our Board of Directors. In addition, certain
union hourly employees are participants in company-sponsored defined contribution plans, which provide for
employer contributions in various amounts ranging from $24 to $91 per pay period per participant.
Multi-Employer Pension and Certain Union Plans — Certain of our subsidiaries contribute to various multi-
employer pension and certain union plans, which are administered jointly by management and union
representatives and cover substantially all full-time and certain part-time union employees who are not covered
by our other plans. The Multi-Employer Pension Plan Amendments Act of 1980 amended ERISA to establish
funding requirements and obligations for employers participating in multi-employer plans, principally related to
employer withdrawal from or termination of such plans. We could, under certain circumstances, be liable for
unfunded vested benefits or other expenses of jointly administered union/management plans. At this time, we
have not established any significant liabilities because withdrawal from these plans is not probable or reasonably
possible.
15. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Certain of our subsidiaries provide health care benefits to certain retirees who are covered under specific
group contracts. As defined by the specific group contract, qualified covered associates may be eligible to receive
major medical insurance with deductible and co-insurance provisions subject to certain lifetime maximums.
Included in accumulated other comprehensive income at December 31, 2009 and 2008 are the following
amounts that have not yet been recognized in net periodic benefit cost: negative unrecognized prior service costs
of $291,000 ($178,000 net of tax) and $69,000 ($43,000 net of tax) and unrecognized actuarial losses of $4.8
million ($2.9 million net of tax) and $623,000 ($384,000 net of tax) respectively. The negative prior service cost
and actuarial loss included in accumulated other comprehensive income and expected to be recognized in net
periodic benefit cost during the year ended December 31, 2010 is negative $66,000 ($40,000 net of tax) and
$524,000 ($320,000 net of tax), respectively.
F-38
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table sets forth the funded status of these plans:
Change in benefit obligation:
Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan curtailments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net transfers in . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit obligation at end of year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31
2009
2008
(In thousands)
$ 15,736
51
937
4,367
(2,197)
(266)
(8)
—
18,620
—
$(18,620)
$ 27,756
1,541
1,777
(13,550)
(2,940)
—
—
1,152
15,736
—
$(15,736)
The unfunded portion of the liability of $18.6 million at December 31, 2009 is recognized in our
Consolidated Balance Sheet and includes $2.1 million classified as a current accrued postretirement liability.
A summary of our key actuarial assumptions used to determine the benefit obligation as of December 31,
2009 and 2008 follows:
Healthcare inflation:
Initial rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ultimate rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year of ultimate rate achievement
Weighted average discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.00% 9.00%
4.50% 5.37%
2029
5.51% 6.32%
2014
A summary of our key actuarial assumptions used to determine net periodic benefit cost follows:
December 31
2008
2009
2009
Year Ended December 31
2008
(In thousands)
2007
Healthcare inflation:
Initial rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ultimate rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year of ultimate rate achievement . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.00% 10.01% 12.00%
5.05%
5.38%
5.40%
2011
2012
2014
5.85%
6.40%
6.32%
2009
Year Ended December 31
2008
(In thousands)
2007
Components of net periodic benefit cost:
Service and interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 988
$3,319
$3,077
Amortizations:
Prior service cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of curtailment
Net periodic benefit cost
(333)
1,061
(24)
$1,692
(69)
623
—
$3,873
(69)
1,064
—
$4,072
F-39
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care
plans. A one percent change in assumed health care cost trend rates would have the following effects:
Effect on total of service and interest cost components . . . . . . . . . . . . .
Effect on postretirement obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1-Percentage-
Point Increase
1-Percentage-
Point Decrease
$
(In thousands)
$
64
1,205
(60)
(1,075)
We expect
to contribute $2.1 million to the postretirement health care plans in 2010. Estimated
postretirement health care plan benefit payments for the next ten years are as follows:
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Next five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2.1 million
2.1 million
1.9 million
1.8 million
1.8 million
7.5 million
16. FACILITY CLOSING AND REORGANIZATION COSTS
We recorded net facility closing and reorganization costs of $30.2 million, $22.8 million, and $34.4 million
during 2009, 2008, and 2007, respectively. These costs included the following types of cash and non-cash
charges:
• Workforce reductions as a result of facility closings, facility reorganizations and consolidation of
administrative functions;
• Shutdown costs, including those costs necessary to prepare abandoned facilities for closure;
• Costs incurred after shutdown, such as lease obligations or termination costs, utilities and property taxes;
• Costs associated with the centralization of certain finance and transaction processing activities from local
to regional facilities; and
• Write-downs of property, plant and equipment and other assets, primarily for asset impairments as a result
of the decision to close a facility. The impairments relate primarily to owned buildings, land and
equipment at the facilities, which are written down to their estimated fair value.
Approved plans within our multi-year initiatives and related charges, are summarized as follows:
2009
Year Ended December 31,
2008
(In thousands)
2007
Closure of facilities:
Fresh Dairy Direct(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
WhiteWave-Morningstar(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$29,021
1,076
$18,019
4,510
$ 8,177
—
Workforce reductions within Fresh Dairy Direct resulting from:
Realignment of finance and transaction processing activities(3) . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management realignment(4)
Broad-based reduction of facility and distribution personnel(5) . . . . . . . . . . . . .
65
—
—
229
6,291
— 10,555
9,398
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$30,162
$22,758
$34,421
F-40
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(1) These charges in 2009 primarily relate to four facility closures in Flint, Michigan, Lincoln, Nebraska,
Portsmouth, Virginia and Kingsport, Tennessee, as well as previously announced closures. Charges in 2008
primarily relate to the closure of ice cream operations in Hickory, North Carolina; and the closure of facilities
in Kalispell, Montana and Denver, Colorado; as well as previously announced closures in Detroit, Michigan;
Union, New Jersey; Akron, Ohio; and South Gate, California. Charges in 2007 primarily relate to previously
announced closures of facilities in Detroit, Michigan; Union, New Jersey; Akron, Ohio; and South Gate,
California; as well as the closure of ice cream operations in Newport, Kentucky. We expect to incur
additional charges related to these facility closures of $7.4 million, related to 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.
(2) These charges in 2009 and 2008 relate to shut down and other costs associated with the previously
announced closure of a facility in Belleville, Pennsylvania.
(3) Charges relate to the centralization of certain finance and transaction processing activities from local to
regional facilities. We do not expect to incur additional costs related to this initiative; however, we will
continue to evaluate additional opportunities for centralization of activities, which could result in additional
chares in the future.
(4) In 2007, we realigned management positions within our former Dairy Group segment to facilitate supply-
chain focused platforms. This resulted in the elimination of certain regional and corporate office positions,
including the former President of the former Dairy Group segment. As part of this initiative, we incurred
$10.6 million of workforce reduction costs, $3.4 million of which was a non-cash charge resulting from
acceleration of vesting on share-based compensation. This initiative was completed as of the year ended
December 31, 2007.
(5) In 2007, we approved a plan to reduce the former 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 former Dairy Group operations. As part of
this initiative, we incurred $9.4 million of workforce reduction costs related to the elimination of these
positions. This initiative was completed as of the year ended December 31, 2007.
Activity for 2009 and 2008 with respect to facility closing and reorganization costs is summarized below
and includes items expensed as incurred:
Accrued
Charges at
December 31,
2007
Charges
Payments
Accrued
Charges at
December 31,
2008
(In thousands)
Charges
Payments
Accrued
Charges at
December 31,
2009
Cash charges:
Workforce reduction
costs . . . . . . . . . . . . .
Shutdown costs . . . . . . .
Lease obligations after
shutdown . . . . . . . . . .
Other . . . . . . . . . . . . . . .
$13,062
19
$ 3,653
3,587
$(14,976)
(3,593)
$1,739
13
$ 7,895
5,288
$ (7,315)
(5,278)
$2,319
23
43
88
253
999
(296)
(1,073)
—
14
268
396
(268)
(391)
—
19
Subtotal . . . . . . . . . . . . . . .
$13,212
8,492
$(19,938)
$1,766
13,847
$(13,252)
$2,361
Noncash charges:
Write-down of
assets(1)
. . . . . . . . . .
Total charges . . . . . . . . . . .
14,266
$22,758
F-41
16,315
$30,162
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(1) The write-down of assets relates primarily to owned buildings, land and equipment of those facilities
identified for closure. The assets were tested for recoverability at the time the decision was made to close the
facilities. Estimates of future cash flows used to test the recoverability of the assets included the net cash
flows directly associated with and that are expected to arise as a direct result of the use and eventual
disposition of the assets. The inputs for the fair value calculation were based on assessment of an individual
asset’s alternative use within other production facilities, evaluation of recent market data and historical
liquidation sales values for similar assets.
We are currently working through a multi-year initiative to optimize our manufacturing and distribution
capabilities. 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 additional 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 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 facility
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 expenditure dollars in our production facilities and
better serve our customers.
17. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and financing charges, net of capitalized
interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid (received) for taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
$242,691
159,840
$301,795
(3,425)
$329,902
80,817
2009
Year Ended December 31
2008
(In thousands)
2007
18. COMMITMENTS AND CONTINGENCIES
Contingent Obligations Related to Divested Operations — We have divested certain businesses in prior
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 which are immaterial
to the financial statements 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
operations. In connection with that transaction, we issued a contingent, subordinated promissory note to DFA in
F-42
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
the original principal amount of $40 million. The promissory note has 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 related
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. We have not terminated, and we have not materially breached, any of our related
milk supply agreements with DFA related to the promissory note.
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. These deductibles are $2.0 million for casualty claims but may vary higher or lower due to insurance
market conditions and risk. We believe that we have established adequate reserves to cover these claims. At
December 31, 2009 and 2008, we recorded accrued liabilities related to these retained risks of $206.1 million and
$197.5 million, respectively, including both current and long-term liabilities.
Lease 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. We did not have any material capital lease
obligations as of December 31, 2009 or 2008. 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. Rent expense was $158.4 million, $147.3 million and
$133.6 million for 2009, 2008 and 2007, respectively.
In June 2009, we announced our intention to relocate our corporate headquarters to a leased facility in
Dallas, Texas. The new facility is in close proximity to our existing headquarters. The relocation of personnel
began in the first quarter of 2010. The decision to relocate the headquarters is due in part to our growth and the
increased centralization of strategic, operational and functional personnel. The lease agreement for the existing
headquarters facility terminates at the end of 2010. In connection with the relocation, we will incur duplicate
lease expense, as well as move-related expenses in 2010. These costs are not expected to be material to our
consolidated results of operations.
Future minimum payments at December 31, 2009, under non-cancelable operating leases with terms in
excess of one year are summarized below (in thousands):
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating
Leases
(in thousands)
$113,739
94,112
78,443
61,036
47,374
133,529
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$528,233
We have entered into various contracts, in the normal course of business, obligating us to purchase
minimum quantities of raw materials used in our production and distribution processes, including diesel fuel,
F-43
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
soybeans and organic raw milk. We enter into these contracts from time to time 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.
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.
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 (“dairy farmer actions”). A third purported class action antitrust complaint (“retailer action”)
was filed on August 9, 2007 in the United States District Court for the Eastern District of Tennessee, Greeneville
Division. The complaint in the retailer action was amended on March 28, 2008. The amended complaint alleges
generally that we, either acting alone or in conjunction with others in the milk industry, lessened competition in
the Southeastern United States for the sale of processed fluid Grade A milk to retail outlets and other customers
and that the defendants’ conduct also artificially inflated retail prices for direct milk purchasers. Four additional
purported class action complaints were filed on August 27, 2007, October 3, 2007, November 15, 2007 and
February 13, 2008 in the United States District Court for the Eastern District of Tennessee, Greeneville Division.
The allegations in these complaints are similar to those in the dairy farmer actions.
On January 7, 2008, a United States Judicial Panel on Multidistrict Litigation transferred all of the pending
cases to the Eastern District of Tennessee, Greeneville Division. On April 1, 2008, the Eastern District Court
ordered the consolidation of the six dairy farmer actions and ordered the retailer action to be administratively
consolidated with the coordinated dairy farmer actions. A motion to dismiss the dairy farmer actions was denied
on May 20, 2008, and an amended consolidated complaint was filed by the dairy farmer plaintiffs on June 20,
2008. A motion to dismiss the retailer action was denied on July 27, 2009. Motions for class certification were
filed in both actions on May 1, 2009, and are currently pending before the Court. A motion for summary
judgment in the retailer action was filed on September 18, 2009 and remains pending. We are nearing completion
of fact discovery in these matters. We intend to continue to vigorously defend against these lawsuits.
On June 29, 2009, another purported class action lawsuit was filed in the Eastern District of Tennessee,
Greeneville Division, on behalf of indirect purchasers of processed fluid Grade A milk (“indirect purchaser
action”). The allegations in this complaint are similar to those in the retailer action, but primarily involve state
law claims. Because the allegations in this complaint substantially overlap with the allegations in the retailer
action, on September 1, 2009, the Court granted the parties’ joint motion to stay all proceedings in the indirect
purchaser action pending the outcome of the summary judgment motion in the retailer action.
On October 8, 2009, we were named, among several defendants, in a purported class action antitrust
complaint filed in the United States District Court for the District of Vermont. The complaint, which was
amended on January 21, 2010, contains allegations similar in nature to that of the dairy farmer actions (noted
above) and alleges generally that we and others in the milk industry worked together to limit the price dairy
farmers in the Northeastern United States are paid for their raw milk and to deny these farmers access to fluid
Grade A milk processing facilities. A motion to dismiss the amended complaint has recently been filed. A second
complaint was filed by a different plaintiff on January 14, 2010 but has not been served. The second complaint is
similar to the original complaint. These cases are at a very preliminary stage and we intend to vigorously defend
against these actions.
On January 22, 2010, the United States Department of Justice (“DOJ”) and the States of Wisconsin, Illinois
and Michigan (“Plaintiff States”) filed a civil action in the Eastern District of Wisconsin (“DOJ lawsuit”)
alleging that the Company violated Section 7 of the Clayton Act when it acquired the Consumer Products
Division of Foremost Farms USA on April 1, 2009 (the “acquisition”) for an aggregate purchase price of
approximately $35 million. The DOJ and the Plaintiff States seek a declaration that the acquisition violates
F-44
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Section 7 of the Clayton Act, divestiture by the Company of all assets and interests it acquired as part of the
acquisition, an order permanently enjoining the Company from further ownership and operation of the assets that
were part of the acquisition, and to compel the Company to provide certain advance notification of future
acquisitions involving school milk or fluid milk processing operations. The Company intends to vigorously
defend against this action.
On April 28, 2009, a stockholder derivative complaint was filed purportedly on behalf of Dean Foods
Company (the “Company”) in the United States District Court for the Eastern District of Tennessee, Greeneville
division. The complaint names the Company’s then current directors, as well as Richard Fehr, an officer of the
Company, and former director Alan Bernon among the defendants. The complaint alleges that the officers and
directors breached their fiduciary duties to the Company under Delaware law by approving the 2001 merger
between the former Dean Foods Company and Suiza Foods Corporation and allegedly participating in, or failing
to prevent, a purported conspiracy to fix the price of Grade A milk. The complaint also names others in the milk
industry as defendants for allegedly aiding and abetting the officers’ and directors’ breach of their fiduciary
duties and names the Company as a nominal defendant. The plaintiffs are seeking, on behalf of the Company, an
undisclosed amount of damages and equitable relief. On August 7, 2009, the Company and other defendants filed
a motion to dismiss the complaint and a motion to transfer the case to the United States District Court for the
Northern District of Texas. Both motions are currently pending before the Court.
On January 18, 2008, our subsidiary, Kohler Mix Specialties, LLC (“Kohler”), was named as defendant in a
civil complaint filed in the Superior Court, Judicial District of Hartford. The plaintiff in the case is the
Commissioner of Environmental Protection of the State of Connecticut. The complaint alleges generally that Kohler
improperly discharged wastewater into the waters of the State of Connecticut and bypassed certain wastewater
treatment equipment in violation of certain Connecticut environmental regulations and Kohler’s wastewater
discharge permit. The plaintiff is seeking injunctive relief and civil penalties with respect to the claims. On
December 14, 2009, Kohler filed its answer to the complaint. This matter is currently in the fact discovery stage.
At this time, it is not possible for us to predict the ultimate outcome of the matters set forth above.
On October 22, 2009, we received a notice from the United States Environmental Protection Agency (the
“EPA”) that it plans to file an administrative complaint for civil penalties against Country Fresh, LLC alleging
our failure to meet certain procedural requirements with respect to the risk management program at our former
facility in Flint, Michigan. In February 2010 we agreed to pay a civil penalty of $92,400 to the EPA pursuant to a
Consent Agreement and Final Order in settlement of the matter.
Other than the matters set forth above, we are party from time to time to certain claims, litigations, audits
and investigations. Potential liabilities associated with the other matters referred to in this paragraph are not
expected to have a material adverse impact on our financial position, results of operations or cash flows.
19. FAIR VALUE MEASUREMENT
Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants. As such, fair value is a market-based
measurement that should be determined based on assumptions that market participants would use in pricing an
asset or liability. As a basis for considering assumptions, we follow a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value as follows:
• Level 1 — Quoted prices for identical instruments in active markets.
• Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or similar
instruments in markets that are not active and model-derived valuations, in which all significant inputs are
observable in active market.
• Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting
entity to develop its own assumptions.
F-45
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A summary of our hedging derivative liabilities measured at fair value on a recurring basis as of
December 31, 2009 is as follows (in thousands):
Liability — Interest rate swap contracts . . . . . . .
Fair Value
as of
December 31, 2009
$132,456
Level 1
$— $132,456
Level 2
Level 3
$—
Due to their near-term maturities, the carrying amounts of accounts receivable and accounts payable are
considered equivalent to fair value. In addition, because the interest rates on our senior secured credit facility and
certain other debt are variable, their fair values approximate their carrying values.
See Note 10 for additional disclosures regarding our derivative activity.
The fair value of our subsidiary senior notes was determined based on fair values for similar instruments
with similar terms and quoted market prices for our Dean Foods Company senior notes. The following table
presents the carrying value and fair value of our senior notes and interest rate agreements at December 31:
Subsidiary senior notes . . . . . . . . . . . . . . .
Dean Foods Company senior notes . . . . .
$126,027
498,584
$135,255
490,000
$253,828
498,416
$242,078
425,000
2009
2008
Carrying Value
Fair Value
Carrying Value
Fair Value
(In thousands)
20. SEGMENT, GEOGRAPHIC AND CUSTOMER INFORMATION
We currently have two reportable segments: Fresh Dairy Direct and WhiteWave-Morningstar.
During 2007, we began aligning our leadership teams and strategy around distinct supply chain and delivery
channels. Effective January 1, 2008, consistent with this direction, we disaggregated the former Dairy Group
segment into a Fresh Dairy Direct fluid and ice cream operation and a Morningstar operation. The Morningstar
operation is now a part of our WhiteWave-Morningstar segment. All segment results have been recast to present
results on a comparable basis. These changes had no impact on consolidated net sales or operating income.
Fresh Dairy Direct is our largest segment with over 80 manufacturing facilities geographically located
largely based on local and regional customer needs and other market factors. Fresh Dairy Direct manufactures,
markets and distributes a wide variety of branded and private label dairy case products, including milk, creamers,
ice cream, juices and teas, to retailers, distributors, foodservice outlets, educational institutions and governmental
entities across the United States. Our products are delivered through what we believe to be one of the most
extensive refrigerated direct store delivery “DSD” systems in the United States.
Our WhiteWave-Morningstar consists of three aggregated operations including WhiteWave, Morningstar and
Alpro. It also includes the results of our Hero/WhiteWave joint venture. WhiteWave 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® milk and other dairy products, The Organic Cow® dairy products,
International Delight® coffee creamers, LAND O LAKES® creamer and fluid dairy products, Rachel’s Organic®
dairy products. Morningstar is one of the leading U.S. manufacturers of private label cultured and extended shelf
life dairy products such as ice cream mix, sour and whipped cream, yogurt and cottage cheese. Alpro is a leading
provider of branded soy-based beverages and food products in Europe, marketing its products under the Alpro® and
Provamel® brands. Additionally, with our Hero/WhiteWave joint venture we have expanded the WhiteWave
product footprint beyond the dairy case to capitalize on the chilled fruit-based beverage opportunity with the
introduction of Fruit2Day®. WhiteWave-Morningstar sells its products to a variety of customers, including grocery
stores, club stores, natural foods stores, mass merchandisers, convenience stores, drug stores and foodservice
outlets. The majority of the WhiteWave-Morningstar products are delivered through warehouse delivery systems.
F-46
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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. Our Chief Executive Officer is our chief operating decision maker.
Due to changes in our reportable segments as discussed above, segment results for 2007 have been recast to
present results on a comparable basis, including the transfer of $334.4 million of goodwill from Fresh Dairy
Direct to WhiteWave-Morningstar. These changes had no impact on consolidated net sales or operating income.
In previous quarters during 2009, the results of our WhiteWave/Hero joint venture were included in Corporate
and Other. Those results are now presented with our WhiteWave-Morningstar operations.
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.
2009
Year Ended December 31
2008
(In thousands)
2007
Net sales to external customers:
Fresh Dairy Direct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
WhiteWave-Morningstar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 8,456,219
2,702,169
$ 9,804,622
2,649,991
$ 9,411,103
2,410,800
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,158,388
$12,454,613
$11,821,903
Intersegment sales:
Fresh Dairy Direct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
WhiteWave-Morningstar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income:
Fresh Dairy Direct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
WhiteWave-Morningstar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total reportable segment operating income . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facility closing and reorganization costs . . . . . . . . . . . . . . . . . . . .
Other operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
$
$
53,161
281,366
334,527
642,405
243,903
886,308
(234,025)
(30,162)
—
$
$
$
51,869
282,384
334,253
591,314
205,382
796,696
(165,248)
(22,758)
—
59,144
238,699
297,843
537,963
204,951
742,914
(153,208)
(34,421)
(1,688)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
622,121
608,690
553,597
Other (income) expense:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (income) expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated income from continuing operations before tax . . . . .
Depreciation and amortization:
Fresh Dairy Direct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
WhiteWave-Morningstar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
246,494
(4,196)
379,823
146,730
89,482
18,740
$
$
308,080
933
299,677
150,310
77,550
10,146
$
$
333,202
5,926
214,469
143,595
74,236
14,067
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
254,952
$
238,006
$
231,898
F-47
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2009
December 31
2008
(In thousands)
2007
Assets:
Fresh Dairy Direct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
WhiteWave-Morningstar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,847,151
2,689,656
307,134
$4,732,074
2,063,717
244,401
$4,750,747
2,010,487
272,122
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$7,843,941
$7,040,192
$7,033,356
Capital expenditures:
Fresh Dairy Direct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
WhiteWave-Morningstar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 180,541
66,835
20,839
$ 142,960
108,607
5,398
$ 156,970
77,031
7,447
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 268,215
$ 256,965
$ 241,448
Geographic Information — Net sales and long-lived assets for domestic and foreign operations are shown in
the table below.
2009
December 31
2008
(In thousands)
2007
Net sales to external customers:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,934,271
224,117
$12,346,028
108,585
$11,721,358
100,545
Long-lived assets:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,682,379
532,593
$ 5,550,561
8,438
$ 5,489,296
12,075
During the second half of 2009, net sales from our foreign operations increased due to the acquisition of
Alpro, which was completed in July 2009, offset by the exit of certain business relationships within our
previously existing foreign operations.
Significant Customers — Our Fresh Dairy Direct and WhiteWave-Morningstar segments each had a single
customer that represented greater than 10% of their net sales. Approximately 19.1%, 18.7% and 17.9% of our
consolidated net sales in 2009, 2008 and 2007, were to that same customer.
F-48
DEAN FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
21. QUARTERLY RESULTS OF OPERATIONS (unaudited)
The following is a summary of our unaudited quarterly results of operations for 2009 and 2008.
2009
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations . . . . . . . . . . . . . . . . . .
Net income(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Dean Foods Company(1) . . . . .
Earnings per common share(2):
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations . . . . . . . . . . . . . . . . . .
Net income(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per common share(2):
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quarter
First
Second
Third
Fourth
(In thousands, except share data)
$2,702,938
758,687
75,342
75,200
76,246
$2,681,286
764,273
62,412
62,316
64,143
$2,773,507
787,968
47,104
47,104
49,653
$3,000,657
805,059
42,900
43,227
50,266
0.49
0.48
0.38
0.38
0.28
0.27
0.28
0.27
$3,076,960
688,574
30,772
30,772
$3,102,559
739,320
48,885
48,885
$3,194,669
731,720
37,803
37,752
$3,080,425
785,640
67,380
66,361
0.22
0.21
0.32
0.31
0.25
0.24
0.44
0.43
(1) The results for the first, second, third and fourth quarters of 2009 include facility closing and reorganization
costs, net of tax, of $5.1 million, $7.0 million, $3.9 million and $2.6 million, respectively.
(2) Earnings per common share calculations for each of the quarters were based on the basic and diluted
weighted average number of shares outstanding for each quarter. The sum of the quarters may not necessarily
be equal to the full year earnings per common share amount.
(3) The results for the first, second, third and fourth quarters of 2008 include facility closing and reorganization
costs, net of tax, of $1.3 million, $3.1 million, $5.7 million and $3.9 million, respectively.
F-49
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Dean Foods Company
Dallas, Texas
We have audited the accompanying consolidated balance sheets of Dean Foods Company and subsidiaries
(the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of income,
stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2009. Our
audits also included the financial statement schedule listed in the Index at Item 15. These financial statements
and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such Consolidated Financial Statements present fairly, in all material respects, the financial
position of Dean Foods Company and subsidiaries as of December 31, 2009 and 2008 and the results of their
operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity
with accounting principles generally accepted in the United States of America. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic Consolidated Financial Statements taken as
a whole, presents fairly, in all material respects, the information set forth therein.
In 2009, as discussed in Note 1 to the Consolidated Financial Statements, the Company adopted the
provisions of new Accounting Standards relating to “Business Combinations”. In 2007 the Company adopted the
provisions of Accounting Standards relating to “Accounting for Uncertainty in Income Taxes”.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Company’s internal control over financial reporting as of December 31, 2009, based on the
criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 25, 2010 expressed an unqualified
opinion on the Company’s internal control over financial reporting.
/S/ DELOITTE & TOUCHE LLP
Dallas, Texas
February 25, 2010
F-50
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
During our three most recent fiscal years, no independent accountant who was engaged as the principal
accountant to audit our financial statements, nor any independent accountant who was engaged to audit a
significant subsidiary and on whom our principal accountant expressed reliance in its report, has resigned or been
dismissed.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, referred to herein as “Disclosure
Controls”) as of the end of the period covered by this annual 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
our Disclosure Controls were effective as of December 31, 2009.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in rules 13a-15(f)
and 15d-15(f) under the Exchange Act) in the quarter ended December 31, 2009 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.
MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting. Our internal control system was designed to provide reasonable assurance to our management and
Board of Directors regarding the preparation and fair presentation of published financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with respect to financial statement
preparation and presentation.
We have assessed the effectiveness of our internal control over financial reporting as of December 31, 2009.
In making this assessment, we used the criteria established in Internal Control — Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment
we believe that, as of December 31, 2009, our internal control over financial reporting is effective based on those
criteria.
During the quarter ended September 30, 2009, we completed our acquisition of the Alpro Division of
Vandemoortele, N.V. (“Alpro”) and began the process of integrating Alpro into our operations. We have
excluded Alpro from our assessment of our internal control over financial reporting as of December 31, 2009, as
we concluded there was insufficient time between the acquisition date and the end of 2009 to properly plan,
document, test and remediate, if necessary, the controls of Alpro. We will include Alpro in our assessment of our
internal control over financial reporting as of December 31, 2010. Because Alpro is not considered to be
significant to our operations, we do not believe it is likely to have a material affect on our internal control over
financial reporting. Alpro’s financial statements constitute approximately 8.0% of total consolidated assets, 1.6%
of consolidated net sales and 2.7% of consolidated net income attributable to Dean Foods Company as of and for
the year ended December 31, 2009.
Our independent registered public accounting firm has issued an audit report on our internal control over
financial reporting. This report appears on page 51.
February 25, 2010
50
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Dean Foods Company
Dallas, Texas
We have audited the internal control over financial reporting of Dean Foods Company and subsidiaries (the
“Company”) as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in
Management Report on Internal Control Over financial Reporting, management excluded from its assessment the
internal control over financial reporting at the Alpro Division of Vandemoortele, N.V. (“Alpro”), which was
acquired on July 2, 2009, and whose financial statements constitute 8.0% of total consolidated assets, 1.6% of
consolidated net sales and 2.7% of consolidated net income attributable to Dean Foods Company as of and for
the year ended December 31, 2009. Accordingly, our audit did not include the internal control over financial
reporting at Alpro. The Company’s management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our
audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of,
the company’s principal executive and principal financial officers, or persons performing similar functions, and
effected by the company’s board of directors, management, and other personnel 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. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of
collusion or improper management override of controls, material misstatements due to error or fraud may not be
prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal
control over financial reporting to future periods are subject to the risk that the controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2009, based on the criteria established in Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Consolidated Financial Statements and financial statement schedule as of and for the year
ended December 31, 2009 of the Company and our report dated February 25, 2010 expressed an unqualified
opinion on those financial statements and financial statement schedules, and included an explanatory paragraph
regarding the adoption of the provisions of new Accounting Standards relating to “Business Combinations” in
2009 and the adoption of the provisions of Accounting Standards relating to “Accounting for Uncertainty in
Income Taxes” in 2007.
/s/ DELOITTE & TOUCHE LLP
Dallas, Texas
February 25, 2010
51
Item 9B. Other Information
On February 23, 2010, the Compensation Committee (the “Committee”) of the Board of Directors of the
Company established objectives for 2010 short-term incentive payments payable in 2011 to the executive officers
of the Company under the Company’s 2010 Short-Term Incentive Compensation Plan.
Short-term incentive payments for 2010 will consist of a combination of Company financial objectives,
business unit objectives, where appropriate, and individual objectives for each executive officer. The Committee
determines the appropriate relative weight for each factor each year. Short-term incentive payments for 2010 will
be based on the achievement of Company and business unit objectives for that portion of the target payment tied
to financial objectives, and the Committee’s assessment of each executive officer’s performance in 2010 against
their individual objectives for that portion of the target payment tied to individual objectives. The payout factor
for the financial component of short-term incentive compensation for each executive officer ranges from zero to
200 percent of that officer’s target payment, depending on actual performance in 2010 against the financial
objectives established by the Committee. The payout factor for the individual objective component of short-term
incentive compensation for each executive officer ranges from zero to 150 percent of that officer’s target
payment, depending on the officer’s performance in 2010 against the individual objectives established by the
Committee. If the Company or business unit exceeds 100 percent of its respective financial objectives, then each
executive officer’s individual objective payout factor is multiplied by the relevant financial payout factor,
resulting in a maximum payout of 300 percent of the individual objective component of the officer’s short-term
incentive compensation. The maximum total payout for any executive officer under the formulas above is 240%
of the executive officer’s target incentive opportunity.
The key Company financial objectives for 2010 include growth in consolidated adjusted operating income
and adjusted earnings per share. The key financial objectives for the Company’s business units include growth in
operating income and net sales where appropriate. The individual objectives include the achievement of strategic
goals based on each executive officer’s business unit or area of responsibility. The Short-Term Incentive
Compensation Plan is attached to this Form 10-K as Exhibit 10.18, and this description is qualified entirely by
reference thereto.
Item 10. Directors, Executive Officers and Corporate Governance
Incorporated herein by reference to our proxy statement (to be filed) for our May 19, 2010 Annual Meeting
PART III
of Stockholders.
Item 11. Executive Compensation
Incorporated herein by reference to our proxy statement (to be filed) for our May 19, 2010 Annual Meeting
of Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Incorporated herein by reference to our proxy statement (to be filed) for our May 19, 2010 Annual Meeting
of Stockholders.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Incorporated herein by reference to our proxy statement (to be filed) for our May 19, 2010 Annual Meeting
of Stockholders.
Item 14. Principal Accountant Fees and Services
Incorporated herein by reference to our proxy statement (to be filed) for our May 19, 2010 Annual Meeting
of Stockholders.
52
Item 15. Exhibits and Financial Statement Schedules
Financial Statements
PART IV
The following Consolidated Financial Statements are filed as part of this report or are incorporated herein as
indicated:
Consolidated Balance Sheets as of December 31, 2009 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income for the years ended December 31, 2009, 2008 and 2007 . . . . . . . . . . .
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2009, 2008 and
Page
F-1
F-2
F-3
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007 . . . . . . . .
F-5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-5
1. Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-9
2. Acquisitions, Discontinued Operations and Divestitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10
3.
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11
4.
5. Property, Plant and Equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12
6. Goodwill and Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12
7. Accounts Payable and Accrued Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-14
8.
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-14
9. Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-17
10. Derivative Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-25
11. Common Stock and Share-Based Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-27
12. Earnings per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-32
13. Other Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-32
14. Employee Retirement and Profit Sharing Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-33
15. Postretirement Benefits Other Than Pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-38
16. Facility Closing and Reorganization Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-40
17. Supplemental Cash Flow Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-42
18. Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-42
19. Fair Value Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-45
20. Segment, Geographic and Customer Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-46
21. Quarterly Results of Operations (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-49
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-50
Financial Statement Schedules
Schedule II — Valuation and Qualifying Accounts
Exhibits
See Index to Exhibits.
53
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
By:
/S/ RONALD L. MCCRUMMEN
Ronald L. McCrummen
Senior Vice President and
Chief Accounting Officer
Dated February 25, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by
the following persons on behalf of the registrant and in the capacity and on the dates indicated.
Name
Title
Date
/S/ GREGG L. ENGLES
Gregg L. Engles
Chief Executive Officer and
Chairman of the Board
February 25, 2010
/S/
JACK F. CALLAHAN, JR.
Jack F. Callahan, Jr.
Executive Vice President and Chief
Financial Officer
February 25, 2010
/S/ RONALD L. MCCRUMMEN
Ronald L. McCrummen
Senior Vice President and Chief
Accounting Officer
February 25, 2010
/S/ TOM C. DAVIS
Tom C. Davis
/S/ STEPHEN L. GREEN
Stephen L. Green
/S/
JOSEPH S. HARDIN, JR.
Joseph S. Hardin, Jr.
/S/
JANET HILL
Janet Hill
/S/ WAYNE MAILLOUX
Wayne Mailloux
/S/
JOHN R. MUSE
John R. Muse
/S/ HECTOR M. NEVARES
Hector M. Nevares
Jim L. Turner
/S/ DOREEN WRIGHT
Doreen Wright
Director
February 25, 2010
Director
February 25, 2010
Director
February 25, 2010
Director
February 25, 2010
Director
February 25, 2010
Director
February 25, 2010
Director
February 25, 2010
Director
February 25, 2010
Director
February 25, 2010
S-1
DEAN FOODS COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2009, 2008 and 2007
SCHEDULE II
Description
Year ended December 31, 2009
Allowance for doubtful accounts . . . . . . . . . . . .
Deferred tax asset valuation allowances . . . . . . .
Year ended December 31, 2008
Allowance for doubtful accounts . . . . . . . . . . . .
Deferred tax asset valuation allowances . . . . . . .
Year ended December 31, 2007
Allowance for doubtful accounts . . . . . . . . . . . .
Deferred tax asset valuation allowances . . . . . . .
Balance at
Beginning of
Period
Charged to
(Reduction in)
Costs and
Expenses
Other
Deductions
Balance at
End of Period
(In thousands)
$17,461
9,645
$2,515
1,329
$1,179
—
$4,255
—
$16,900
10,974
19,830
8,695
17,070
9,671
2,312
950
5,788
(976)
187
—
100
—
4,868
—
3,128
—
17,461
9,645
19,830
8,695
Exhibit No.
Description
Previously Filed as an Exhibit to and
Incorporated by Reference From
INDEX TO EXHIBITS
Amended and Restated Certificate of
Incorporation
Annual Report on Form 10-K for the
year ended December 31, 2001
Amended and Restated Bylaws
Current Report on Form 8-K
Specimen
Certificate
of
Common
Stock
Annual Report on Form 10-K for the
year ended December 31, 2001
Date Filed
April 1, 2002
March 9, 2009
April 1, 2002
Indenture, dated as of May 15, 2006,
between us, the subsidiary guarantors
listed therein and The Bank of New
York Trust Company, N.A., as trustee
Supplemental Indenture No. 1, dated
as of May 17, 2006, between us, the
subsidiary guarantors listed therein
and The Bank of New York Trust
Company, N.A., as trustee
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
Eighth Amended and Restated 1997
Stock Option and Restricted Stock
Plan
Third Amended and Restated 1989
Dean Foods Company Stock Awards
Plan
Current Report on Form 8-K
May 19, 2006
Current Report on Form 8-K
May 19, 2006
Quarterly Report on Form 10-Q for
the quarter ended September 30, 2007
November 9, 2007
Annual Report on Form 10-K for the
year ended December 31, 2006
March 1, 2007
Annual Report on Form 10-K for the
year ended December 31, 2004
March 16, 2005
Amended and Restated Executive
Deferred Compensation Plan
Annual Report on Form 10-K for the
year ended December 31, 2006
March 1, 2007
Post-2004
Compensation Plan
Executive
Deferred
Annual Report on Form 10-K for the
year ended December 31, 2006
March 1, 2007
Revised and Restated Supplemental
Executive Retirement Plan
Annual Report on Form 10-K for the
year ended December 31, 2006
March 1, 2007
Amendment No. 1 to the Dean Foods
Company Supplemental Executive
Retirement Plan
Amendment No. 2 to the Dean Foods
Company Supplemental Executive
Retirement Plan
Dean Foods Company Amended and
Restated Executive Severance Pay
Plan
Form of Amended and Restated
Change in Control Agreement for our
executive officers
Forms of Amended and Restated
Change in Control Agreements for
certain other officers
Annual Report on Form 10-K for the
year ended December 31, 2006
March 1, 2007
Annual Report on Form 10-K for the
year ended December 31, 2006
March 1, 2007
Quarterly Report on Form 10-Q for
the quarter ended September 30, 2008
November 5, 2008
Quarterly Report on Form 10-Q for
the quarter ended September 30, 2008
November 5, 2008
Quarterly Report on Form 10-Q for
the quarter ended September 30, 2008
November 5, 2008
3.1
3.2
4.1
4.2
4.3
4.4
*10.1
*10.2
*10.3
*10.4
*10.5
*10.6
*10.7
*10.8
*10.9
*10.10
Exhibit No.
*10.11
*10.12
*10.13
*10.14
*10.15
*10.16
*10.17
*10.18
*10.19
*10.20
*10.21
*10.22
*10.23
*10.24
*10.25
Description
Previously Filed as an Exhibit to and
Incorporated by Reference From
Dean Foods Company 2007 Stock
Incentive Plan
Quarterly Report on Form 10-Q for
the quarter ended June 30, 2007
Date Filed
August 9, 2007
Form of Non-Qualified Stock Option
Agreement under
the Dean Foods
Company 2007 Stock Incentive Plan
Form of Restricted Stock Unit Award
the Dean Foods
Agreement under
Company 2007 Stock Incentive Plan
Form of Cash Performance Unit
Agreement under
the Dean Foods
Company 2007 Stock Incentive Plan
Form of Director’s Non-Qualified
Stock Option Agreement under the
Dean Foods Company 2007 Stock
Incentive Plan
Form of Director’s Restricted Stock
Unit Award Agreement under
the
Dean Foods Company 2007 Stock
Incentive Plan
Form of Director’s Master Restricted
Stock Agreement under
the Dean
Foods Company 2007 Stock Incentive
Plan
Dean Foods Company 2010 Short
Term Incentive Compensation Plans
Employment Agreement between us
and Joseph Scalzo dated November 3,
2009
Non-Compete
Inventions
Proprietary Information,
Agreement
and
between us and Joseph Scalzo dated
October 7, 2005
Independent Contractor
and Non-
Competition Agreement between us
and Pete Schenkel dated December 1,
2005
Amended
and
First
Contractor
Agreement between us
Schenkel dated April 4, 2008
Independent
Noncompetition
and Pete
Employment Agreement between us
and Jack F. Callahan dated April 27,
2006
Non-Compete
Inventions
Proprietary Information,
and
Agreement
between us and Jack F. Callahan dated
May 9, 2006
Employment Agreement between us
and Paul Moskowitz dated May 3,
2007
Filed herewith
Filed herewith
Filed herewith
Annual Report on Form 10-K for the
fiscal year ended December 31, 2008
February 28, 2009
Annual Report on Form 10-K for the
fiscal year ended December 31, 2008
February 28, 2009
Quarterly Report on Form 10-Q for
the quarter ended June 30, 2008
August 8, 2008
Filed herewith
Quarterly Report on Form 10-Q for
the quarter ended September 30, 2009
November 4, 2009
Quarterly Report on Form 10-Q for
the quarter ended September 30, 2005
November 8, 2005
Annual Report on Form 10-K for the
year ended December 31, 2005
March 10, 2006
Quarterly Report on Form 10-Q for
the quarter ended June 30, 2008
August 8, 2008
Quarterly Report on Form 10-Q for
the quarter ended March 31, 2006
March 1, 2007
Quarterly Report on Form 10-Q for
the quarter ended June 30, 2006
August 9, 2006
Quarterly Report on Form 10-Q for
the quarter ended June 30, 2007
August 9, 2007
Exhibit No.
Description
Previously Filed as an Exhibit to and
Incorporated by Reference From
Date Filed
*10.26
*10.27
*10.28
*10.29
*10.30
*10.31
*10.32
*10.33
*10.34
*10.35
*10.36
*10.37
*10.38
10.39
10.40
Employment Agreement between us
and Gregg Tanner dated November 1,
2007
Non-Compete
Inventions
Proprietary Information,
and
Agreement
between us and Gregg Tanner dated
November 1, 2007
Employment Agreement between us
and Harrald Kroeker dated January 14,
2008
Employment Agreement between us
and Greg McKelvey dated January 15,
2008
Employment Agreement between us
and Debbie Carosella dated March 14,
2007
Employment Agreement between us
and Steven J. Kemps dated July 8,
2008
Employment Agreement between us
dated
and Kelly Duffin-Maxwell
April 9, 2008
Employment Agreement between us
and
dated
November 1, 2008
McKelvey
Greg
Employment Agreement between us
and Chris Sliva dated November 16,
2007
Employment Agreement between us
and Blaine McPeak dated October 14,
2009
Summary of Terms of Employment
Agreement
(translated from Dutch)
between us and Bernard Deryckere
dated April 13, 2001
Amendment
Employment
to
Agreement between us and Joe Scalzo
dated November 18, 2008
Employment
to
Amendment
Agreement between us and Jack F.
Callahan dated November 21, 2008
Distribution Agreement between us
and TreeHouse Foods dated June 27,
2005
Tax Sharing Agreement dated
June 27, 2005 between us and
TreeHouse Foods
Quarterly Report on Form 10-Q for
the quarter ended September 30, 2007
November 9, 2007
Quarterly Report on Form 10-Q for
the quarter ended September 30, 2007
November 9, 2007
Annual Report on Form 10-K for the
year ended December 31, 2007
February 28, 2008
Annual Report on Form 10-K for the
year ended December 31, 2007
February 28, 2008
Annual Report on Form 10-K for the
year ended December 31, 2007
February 28, 2008
Quarterly Report on Form 10-Q for
the quarter ended June 30, 2008
August 8, 2008
Quarterly Report on From 10-Q for
the quarter ended March 31, 2008
May 12, 2008
Annual Report on Form 10-K for the
year ended December 31, 2008
February 28, 2008
Quarterly Report on Form 10-Q for
the quarter ended June 30, 2009
August 6, 2009
Filed herewith
Filed herewith
Annual Report on Form 10-K for the
year ended December 31, 2008
February 28, 2008
Annual Report on Form 10-K for the
year ended December 31, 2008
February 28, 2008
Current Report on Form 8-K
June 27, 2005
Current Report on Form 8-K
June 27, 2005
Exhibit No.
Description
Previously Filed as an Exhibit to and
Incorporated by Reference From
Date Filed
10.41
10.42
10.43
10.44
10.45
10.46
10.47
Current Report on Form 8-K
November 21, 2006
Current Report on Form 8-K
November 21, 2006
Current Report on Form 8-K
April 4, 2007
Current Report on Form 8-K
April 4, 2007
and Restated
Fourth Amended
Receivables
Purchase Agreement
among certain subsidiaries of Dean
the
Foods Company,
Servicers,
the
Financial Institutions (each as defined
in the agreement) and Bank One NA,
as Agent
sellers,
Companies,
the
as
to
11
Amendment No.
Fourth
Amended and Restated Receivables
Purchase Agreement among certain
subsidiaries of Dean Foods Company,
as
the
Companies, the Financial Institutions
(each as defined in the agreement)
and Bank One NA, as Agent
Servicers,
sellers,
the
and
Restated
Amended
Credit
Agreement, dated as of April 2, 2007
among Dean Foods Company; J.P.
Morgan Securities,
Inc., Banc of
America Securities LLC, Wachovia
Capital Markets, LLC,
as Lead
Arrangers; JPMorgan Chase Bank,
as
National
Administrative Agent; Bank
of
America, N.A., as Syndication Agent;
National
Bank,
Wachovia
Association,
Documentation
as
Agent; and certain other lenders that
are parties thereto
Association,
and
Amended
Restated
Fifth
Receivables Purchase Agreement,
dated as of April 2, 2007 among
Dairy Group Receivables L.P., Dairy
L.P.,
Receivables
Group
WhiteWave Receivables, L.P.,
as
Sellers; the Servicers, Companies and
Financial Institutions listed therein;
and JPMorgan Chase Bank, N.A., as
Agent
II,
Amendment No. 3 to Fifth Amended
and Restated Receivables Purchase
Agreement and Limited Waiver dated
March 31, 2008
Amendment No. 4 to fifth Amended
and Restated Receivables Purchase
Agreement dated April 4, 2008
Amendment No. 5 to Fifth Amended
and Restated Receivables Purchase
Agreement and Limited Waiver dated
April 30, 2008
Current Report on Form 8-K
April 4, 2008
Current Report on Form 8-K
April 4, 2008
Current Report on Form 8-K
May 1, 2008
Exhibit No.
Description
Previously Filed as an Exhibit to and
Incorporated by Reference From
Date Filed
10.48
12
21
23
31.1
31.2
32.1
32.2
99
Amendment No. 7 to Fifth Amended
and Restated Receivables Purchase
of
Agreement
Performance
dated
March 30, 2009
Reaffirmation
Undertaking
and
Current Report on Form 8-K
April 13, 2009
Computation of Ratio of Earnings to
Fixed Charges
Filed herewith
List of Subsidiaries
Filed herewith
Consent of Deloitte & Touche LLP
Filed herewith
Certification of Chief Executive Officer
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
Certification of Chief Financial Officer
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
Certification of Chief Executive Officer
pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
Certification of Chief Financial Officer
pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Supplemental Financial Information for
Dean Holding Company
Filed herewith
* This exhibit is a management or compensatory contract.
EXHIBIT 31.1
CERTIFICATION
I, Gregg L. Engles, certify that:
1. I have reviewed this annual report on Form 10-K 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 the registrant
as of, and for, the periods presented in this report;
4. The registrant’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 the registrant 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 the
registrant, 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 the registrant’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 the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions):
(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 the registrant’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 the registrant’s internal control over financial reporting.
February 25, 2010
/s/ Gregg L. Engles
Chairman of the Board and
Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION
I, Jack F. Callahan, Jr., certify that:
1. I have reviewed this annual report on Form 10-K 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 the registrant
as of, and for, the periods presented in this report;
4. The registrant’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 the registrant 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 the
registrant, 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 the registrant’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 the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions):
(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 the registrant’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 the registrant’s internal control over financial reporting.
February 25, 2010
/s/ Jack F. Callahan, Jr.
Executive Vice President and
Chief Financial Officer
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
EXHIBIT 32.1
In connection with the Annual Report on Form 10-K of Dean Foods Company (the “Company”) for the
fiscal year ended December 31, 2009, 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
to my knowledge 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
February 25, 2010
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
EXHIBIT 32.2
In connection with the Annual Report on Form 10-K of Dean Foods Company (the “Company”) for the
fiscal year ended December 31, 2009, 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 to my knowledge 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
February 25, 2010
ADDITIONAL INFORMATION
Reconciliations
The adjusted financial results contained herein are from continuing operations and are adjusted to eliminate the
net expense or net gain related to the items identified below. This information is provided in order to allow
investors to make meaningful comparisons of the Company’s operating performance between periods and to
view the Company’s business from the same perspective as Company management. Because the Company
cannot predict the timing and amount of charges associated with non-recurring items, closed or anticipated to
close transaction-related costs, gains or losses on foreign exchange forward contracts or facility closings and
reorganizations, management does not consider these costs when evaluating the Company’s performance, when
making decisions regarding the allocation of resources, in determining incentive compensation for management,
or in determining earnings estimates. The adjusted financial results contained herein reflect the following
adjustments for the items described above: an adjustment of $71 million to consolidated operating income of
$622 million for 2009; an adjustment of $23 million to consolidated operating income of $609 million for 2008;
and an adjustment of $268 million to net cash provided by continuing operations of $659 million for 2009. A full
reconciliation of these measures calculated according to GAAP and on an adjusted basis is contained in our press
releases, which are publicly available at www.deanfoods.com.
How Has Our Stock Performed?
The following graph compares the cumulative total return of our common stock from December 31, 2004
through December 31, 2009, compared to the Standard & Poor’s 500 Composite Index, of which we are a
component, and a peer group index of United States consumer packaged goods companies. The graph assumes a
$100 investment on January 1, 2005, with dividends reinvested. Points plotted are as of December 31 of each
year. The stock price performance shown on this graph may not be indicative of future performance.
The peer group that we have selected includes 19 manufacturers of food, beverages and other consumer packaged
goods. This group includes the following companies: Campbell Soup Company, The Clorox Company, Coca-
Cola Enterprises Inc., Colgate-Palmolive Company, ConAgra Foods, Inc., Dr. Pepper Snapple Group Inc. (for
2008 and 2009 only following its spinoff from Cadbury Schweppes plc in 2008), General Mills, Inc., H.J. Heinz
Company, The Hershey Company, Hormel Foods Corporation, The J.M. Smucker Company, Kellogg Company,
Kimberly-Clark Corporation, Kraft Foods Inc., Molson-Coors Brewing Company, Ralcorp Holdings, Inc., Sara
Lee Corporation, Smithfield Foods, Inc., and Tyson Foods, Inc. This is the same peer group that
the
Compensation Committee of our Board of Directors has selected to compare us with for purposes of determining
our executive compensation.
160
140
120
100
80
60
40
20
S
R
A
L
L
O
D
0
2004
2005
2006
2007
2008
2009
DEAN FOODS COMPANY
PEER GROUP
S&P 500
B O A R D O F D I R E C T O R S A N D E X E C U T I V E O F F I C E R S
T R A N S F E R A G E N T
BNY Mellon Shareowner Services
480 Washington Boulevard
Jersey City, New Jersey 07310-1900
Telephone: 866.557.8698
www.bnymellon.com/shareowner/isd
A U D I T O R
Deloitte & Touche LLP
2200 Ross Avenue
Suite 1600
Dallas, Texas 75201
Telephone: 214.840.7000
M A R K E T I N F O R M A T I O N
NYSE: DF
A N N U A L M E E T I N G
May 19, 2010, 10:00 a.m.
Dallas Museum of Art
1717 North Harwood
Dallas, Texas 75201
C O R P O R A T E H E A D Q U A R T E R S
Dean Foods Company
2515 McKinney Avenue, Suite 1200
Dallas, TX 75201
Telephone: 214.303.3400
Fax: 214.303.3499
www.deanfoods.com
In mid-2010, we are moving
our headquarters to:
2711 North Haskell Avenue, Suite 3400
Dallas, TX 75204
B O A R D O F D I R E C T O R S
EXECUTIVE MANAGEMENT TEAM
G R E G G L . E N G L E S
Chairman of the Board
and Chief Executive Officer
Dean Foods Company
T O M C . D A V I S
Chief Executive Officer
The Concorde Group
S T E P H E N L . G R E E N
Partner
Canaan Partners
J O S E P H S . H A R D I N , J R .
Former Chief Executive Officer
Kinko’s, Inc.
J A N E T H I L L
Vice President
Alexander & Associates
J . W A Y N E M A I L L O U X
Former Senior Vice President
PepsiCo, Inc.
J O H N R . M U S E
Chairman
HM Capital Partners LLC
H E C T O R M . N E V A R E S
Managing Partner
Suiza Realty SE
J I M L . T U R N E R
Principal
JLT Beverages L.P.
D O R E E N A . W R I G H T
Former Senior Vice President
and Chief Information Officer
Campbell Soup Company
G R E G G L . E N G L E S
Chairman of the Board
and Chief Executive Officer
J O S E P H E . S C A L Z O
Chief Operating Officer
J A C K F. C A L L A H A N , J R .
Executive Vice President
and Chief Financial Officer
D E B O R A H B . C A R O S E L L A
Senior Vice President,
Innovation
B E R N A R D P. J . D E R Y C K E R E
Chief Executive Officer, Alpro
K E L LY D U F F I N - M A X W E L L
Executive Vice President,
Research and Development
S T E V E N J . K E M P S
Executive Vice President,
General Counsel
and Corporate Secretary
H A R R A L D F. K R O E K E R
President, Fresh Dairy Direct
G R E G O R Y A . M C K E LV E Y
Executive Vice President and
Chief Strategy and
Transformation Officer
B L A I N E E . M C P E A K
President, WhiteWave Foods Company
P A U L T. M O S K O W I T Z
Executive Vice President,
Human Resources
C H R I S T O P H E R S L I V A
President, Morningstar
G R E G G A . T A N N E R
Executive Vice President
and Chief Supply Chain Officer
®
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