DEAN HOLDING CO - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE YEAR ENDED DECEMBER 31, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 1-08262

DEAN HOLDING COMPANY
(Exact name of Registrant as specified in its charter)

(DEAN HOLDING COMPANY LOGO)

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DELAWARE 75-2932967
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

2515 MCKINNEY AVENUE
SUITE 1200
DALLAS, TEXAS 75201
(214) 303-3400
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent 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: [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [ ] No [X]

The registrant meets the conditions specified in General Instruction I(1)(a) and
(b) of Form 10-K and, therefore, is filing this form with the reduced disclosure
format permitted by General Instruction I(2).
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TABLE OF CONTENTS

1

PART I

ITEM 1. BUSINESS

Explanatory Note: As permitted by General Instruction I(2)(d) to Form
10-K, in lieu of the information required by Item 1 of Form 10-K, we are
providing only the information required by General Instruction I(2)(d). For more
information, this report should be read in conjunction with the 2002 Annual
Report on Form 10-K of our parent, Dean Foods Company, as filed with the
Securities and Exchange Commission on March 26, 2003.

GENERAL

We are a wholly-owned subsidiary of Dean Foods Company (formerly known as
Suiza Foods Corporation). Dean Foods Company is the leading processor and
distributor of milk and other dairy products in the United States and a leading
manufacturer of specialty food products. We have two reportable segments: Dairy
Group and Specialty Foods. Our Dairy Group is part of the Dairy Group segment of
Dean Foods Company and our Specialty Foods segment comprises the entirety of
Dean Foods Company's Specialty Foods segment.

DEVELOPMENTS SINCE JANUARY 1, 2002

INTEGRATION AND RATIONALIZATION ACTIVITIES

On December 21, 2001, we were acquired by Dean Foods Company (formerly
known as Suiza Foods Corporation). During 2002, our Dairy Group was integrated
into Dean Food Company's Dairy Group, our former National Refrigerated Products
("NRP") group was integrated into Dean Foods Company's Morningstar Foods
subsidiary and our former corporate headquarters were eliminated. As a result we
no longer have an NRP segment. As part of the integration activities, certain of
our facilities have been closed and our workforce accordingly reduced.
Facilities that have been closed include: our Cairo, Georgia Specialty Foods
plant, our Atkins, Arkansas Specialty Foods plant, our Escondido, California
Dairy Group plant, our Parker Ford, Pennsylvania Dairy Group plant and our Camp
Hill, Pennsylvania Dairy Group depot. We have also announced the closure of two
of our Specialty Foods tank yard facilities in Plymouth, Indiana and Green Bay,
Wisconsin.

DIVESTITURES

Part of Dean Foods Company's strategy is to analyze its portfolio of assets
and make divestitures where appropriate in order to ensure that its financial
and management resources are closely aligned with its strategic direction.
During 2002, we sold three small non-core businesses that were part of our
Specialty Foods segment, including a contract hauling business, a boiled peanut
business and a powdered food-coating business, for a combined net purchase price
of approximately $30 million.

BUSINESS SEGMENTS

DAIRY GROUP

Our Dairy Group, which is part of Dean Foods Company's Dairy Group,
manufactures and sells:

- fluid milk (including flavored milks and buttermilk),
- cream (including half-and-half and whipping cream),
- ice cream, ice cream novelties and ice cream mix,
- cultured products (including cottage cheese, sour cream and yogurt),
- juice, fruit flavored drinks and water,
- coffee creamers,
- dips, and
- condensed milk.

2

Dean Foods Company's Dairy Group is operated in a generally decentralized
manner and is organized into four geographic regions, including the Northeast
region, the Southeast region, the Southwest region and the Midwest region. Our
plants are located in all of Dean Foods Company's geographic regions. Our Dairy
Group currently manufactures its products in 35 plants in 17 states. For more
information about plants in our Dairy Group, see "-- Item 2. Properties"
beginning on page 6.

Primarily due to the perishable nature of its products, our Dairy Group
delivers the majority of its products directly from its plants or distribution
branches to its customers in trucks that we own or lease. This form of delivery
is called a "direct store delivery" or a "DSD" system. Using its DSD system, the
Dairy Group also acts as a distributor for certain other manufacturers of
refrigerated products in certain parts of the country.

The Dairy Group sells its products primarily on a local or regional basis
through its internal sales force to a wide variety of retail customers including
grocery stores, club stores, convenience stores and mass merchandisers. The
Dairy Group also sells its products to food service customers such as
restaurants and hotels, distributors, schools and other government
installations. The Dairy Group's sales are slightly seasonal, with sales tending
to be higher in the third and fourth quarters.

In 2002, our Dairy Group manufactured and marketed approximately two-thirds
of its dairy products under its proprietary or licensed local and regional brand
names. The remaining one-third of the Dairy Group's products were manufactured
and sold on a private-label (or "customer brand") basis for customers.
Proprietary or licensed brands used in the Dairy Group include the following:

The primary raw material used in our Dairy Group is raw milk. We purchase
our raw milk from independent farmers and farmers' cooperatives, typically
pursuant to contractual arrangements. Raw milk is generally readily available.
The price of raw milk is regulated in most parts of the country by the federal
government through federal market orders and price support programs. Several
states regulate raw milk pricing through their own programs. The price of raw
milk can fluctuate widely. Other raw materials used by the Dairy Group, such as
juice concentrates, sweeteners and packaging supplies are generally available
from numerous suppliers and we are not dependent on any single supplier for
these materials. Certain of our Dairy Group's raw materials are purchased under
long-term contracts in order to obtain lower costs. The prices of our raw
materials increase and decrease based on supply and demand.

The dairy industry is highly competitive. Our Dairy Group has many
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 and quality, while competition for consumer sales is based on a
variety of factors such as brand recognition, price, quality and taste
preference. Dairy products also compete with many other beverages and
nutritional products for consumer sales.

Net sales in the Dairy Group to unaffiliated customers totaled $3.2 billion
in 2002. For more financial information about our Dairy Group's recent
operations, see "Part II -- Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations" beginning on page 8 and Note 21
to our Consolidated Financial Statements.

3

SPECIALTY FOODS

Our Specialty Foods segment offers a diverse product mix that includes:

- pickles, relishes and peppers,
- powdered coffee creamers and other powdered products,
- aseptic sauces and puddings, and
- nutritional beverages.

Our Specialty Foods division is one of the largest pickle processors and
marketers in the United States. Its pickle, relish and pepper products are sold
nationally, primarily under various customer brands, but also under some of our
proprietary brands including Atkins(R), Cates(R), Heifetz(R), Nalley's(R),
Steinfeld(TM), Farmans(R), Paramount(R), Peter Piper(R), Roddenberry(R) and
Schwartz(R), and sold to foodservice customers, grocery store chains and club
stores and in bulk to other food processors. Approximately half of Specialty
Foods' 2002 net sales to unaffiliated customers consisted of sales of pickles,
relish and pepper products.

Specialty Foods also sells shortening powders and other high-fat powder
formulas used in baking, beverage mixes, gravies and sauces, and premium and
low-fat powdered products sold primarily under private labels to vending
operators, office beverage service companies and institutional foodservice
distributors with national distribution to restaurants, schools, health care
institutions, hotels and vending and fast-food operators. Powdered coffee
creamers are sold for private label distribution to all classes of the retail
trade and in bulk to a number of other food companies for use as an ingredient
in their food products. We believe that our Specialty Foods segment is the
largest manufacturer of powdered non-dairy coffee creamers in the United States.
Sales of powdered products represented approximately one-third of Specialty
Foods' 2002 net sales to unaffiliated customers.

Specialty Foods also manufactures aseptic cheese sauce and pudding. Aseptic
products are sterilized using a process which allows storage for prolonged
periods without refrigeration. Our cheese sauce and pudding products are sold
nationally, primarily under private labels to distributors that supply
restaurants, schools, hotels and other segments of the foodservice and grocery
industries. Specialty Foods also sells aseptic nutritional beverages in the meal
supplement, weight loss/gain and sports categories. Nutritional beverages are
primarily sold nationally, entirely under private labels, to retail grocery/drug
store channels and some food service distributors. We believe that we are the
only producer of nutritional beverages in the United States able to match
premium brand quality due to our aseptic capabilities coupled with our research
and development expertise. Sales of aseptic products represented approximately
18% of Specialty Foods' 2002 net sales to unaffiliated customers.

Finally, Specialty Foods produces a number of specialty sauces, including
shrimp, seafood, tarter, horseradish, chili and sweet and sour sauces, and sells
them to retail grocers in the Eastern, Midwestern and Southern United States.
These products are sold under the Bennett's(R) and Hoffman House(R) brand names.

Due to their relatively long shelf-lives, Specialty Foods' products are
delivered to our customers' stores and warehouses primarily by common carrier.

Specialty Foods purchases cucumbers under seasonal grower contracts with a
variety of growers. We supply seeds and advise growers regarding planting
techniques. We also monitor and arrange for the control of insects, direct the
harvest and, for some crops, provide automated harvesting services. Other raw
materials used by Specialty Foods, such as corn syrup, soy bean oil, casein and
packaging materials, are generally available from numerous suppliers and we are
not dependent on any single supplier for these materials. Certain of Specialty
Foods' raw materials are purchased under long-term contracts in order to
guarantee supply and to obtain lower costs.

Specialty Foods produces its products in 11 plants located across the
United States. For more information about Specialty Foods' manufacturing plants,
see "-- Item 2. Properties" beginning on page 6.

Specialty Foods competes with several competitors in each of its product
markets. For most of Specialty Foods' products, competition to obtain
shelf-space with retailers is based on the expected or historical sales
performance of the product compared to its competitors. In some cases, Specialty
Foods pays fees to retailers

4

to obtain shelf-space for a particular product. Competition for consumer sales
is based on quality, regional taste preferences, price and brand awareness.
Specialty Foods also competes with other food and nutritional products for
consumer sales.

Specialty Foods' net sales to unaffiliated customers totaled approximately
$673.6 million in 2002. For more information about Specialty Foods' recent
operations, see "Part II -- Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations" beginning on page 8 and Note 21
to our Consolidated Financial Statements.

EMPLOYEES

As of December 31, 2002 we had the following employees:

WHERE YOU CAN GET MORE INFORMATION

Our fiscal year ends on December 31. We file annual, quarterly and current
reports with the Securities and Exchange Commission. Dean Foods Company, our
sole shareholder, also files annual, quarterly and current reports with the
Securities and Exchange Commission.

If you would like free hardcopies of our filings with the Securities and
Exchange Commission, write, call or email us at:

Dean Holding Company
2515 McKinney Avenue, Suite 1200
Dallas, Texas 75201
(214) 303-3400
Attention: Investor Relations
www.deanfoods.com

You may also 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 rooms in Washington D.C. 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 rooms.

Our Securities and Exchange Commission filings are also available to the
public on the Internet at http://www.sec.gov.

5

ITEM 2. PROPERTIES

Explanatory Note: As permitted by General Instruction I to Form 10-K, in
lieu of the information required by Item 2 of Form 10-K, we are providing only
the information required by General Instruction I.

Our Dairy Group currently conducts its manufacturing operations from the
following plants:

Each of the Dairy Group's manufacturing plants also serves as a
distribution facility. In addition, our Dairy Group has numerous distribution
branches across the country, some of which are owned, but most of which are
leased. The Dairy Group's headquarters are located in Dallas, Texas in leased
premises.

6

Specialty Foods currently conducts its manufacturing operations from plants
in the following locations:

- La Junta, Colorado
- New Hampton, Iowa
- Chicago, Illinois
- Dixon, Illinois
- Pecatonica, Illinois
- Plymouth, Indiana
- Benton Harbor, Michigan
- Wayland, Michigan
- Faison, North Carolina
- Portland, Oregon
- Green Bay, Wisconsin

Specialty Food's headquarters are located at its plant in Green Bay,
Wisconsin.

7

PART II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Explanatory Note: As permitted by General Instruction I(2)(a) to Form 10-K,
in lieu of the information required by Item 7, we are providing only the
information required by General Instruction I(2)(a).

RESULTS OF OPERATIONS

The table set forth below presents certain information concerning our
results of operations, including information presented as a percentage of net
sales. In the table:

- Financial information for all periods has been restated to reflect the
results of our former NRP segment as a discontinued operation.

- We have used a date of December 31, 2001 as a "date of convenience" for
recording the effects of our acquisition by Dean Foods Company.

- Our financial statements for all periods prior to December 31, 2001 have
been prepared using our historical basis of accounting and are indicated
in our consolidated financial statements as "Predecessor".

- In order to allow users of our financial statements to make a meaningful
comparative assessment of our financial performance, we have provided a
comparison of our 2002 full year results with our results for the
12-month period ended December 31, 2001. (We have also provided full year
comparative information in the textual analysis of our results of
operations set forth below). Prior to our acquisition by Dean Foods
Company, our fiscal year ended on the last Sunday in May. Immediately
upon being acquired, we changed our fiscal year end to December 31, in
order to conform to the fiscal year end of Dean Foods Company.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

Net Sales -- Net sales decreased 6.2% to $3.9 billion during 2002 from $4.1
billion in 2001. Dairy Group sales decreased 5.9% in 2002 to $3.2 billion from
$3.4 billion in 2001. The decrease is due primarily to a decrease in raw milk
costs compared to the prior year and also due to lower ice cream volumes. In
general, we change the prices that we charge our customers for our products on a
monthly basis as the costs of raw materials fluctuate. Therefore, sales
generally decrease as raw materials prices decrease. Our ice cream products are
sold under private labels and local brands and we lost sales during the year to
nationally branded

8

products, which were promoted more aggressively than our products. Dairy Group
volumes were essentially unchanged between the two periods. Specialty Foods'
sales decreased 7.6% in 2002 to $673.6 million from $729.1 million in 2001
primarily as a result of the divestitures of DFC Transportation, Inc. in
January, our boiled peanuts division in February and EBI Foods, Ltd. in October
2002. Absent the impact of those divestitures, Specialty Foods' net sales for
2002 would have decreased 2.9% from the prior year, primarily due to continued
softness in the food services industry as a result of the overall economic
downturn.

Cost of Sales -- Our cost of sales ratio was 75.1% for 2002 compared to
78.0% for 2001. The cost of sales ratio for the Dairy Group decreased to 75.2%
in 2002 from 78.1% in 2001, primarily due to lower raw milk costs. The cost of
sales ratio for Specialty Foods decreased to 73.9% in 2002 from 77.3% in 2001,
due primarily to lower commodity prices and production synergies as the result
of closing two plants and shifting production lines.

Operating Costs and Expenses -- Our operating expense ratio was 17.2% in
2002 compared to 19.0% in 2001. These ratios were affected by:

- the implementation of SFAS No. 142 on January 1, 2002, which eliminated
the amortization of goodwill and certain other intangible assets, and

- realized synergies from our acquisition by Dean Foods Company.

The operating expense ratio in the Dairy Group was 16.8% in 2002 compared
to 17.6% in 2001. The decrease is due primarily to realized synergies from our
acquisition by Dean Foods Company including a reduction of expense as a result
of streamlining operations under new regional management. The operating expense
ratio at Specialty Foods was 11.4% in 2002 compared to 13.2% in 2001. The
decrease is due primary to realized synergies as a result of the acquisition by
Dean Foods Company which included closing two plants and realigning certain
production facilities.

Operating Income -- Operating income in 2002 was $297.1 million, an
increase of 143.0% from 2001 operating income of $122.3 million. Operating
margins in the Dairy Group increased to 8.0% in 2002 from 4.3% in 2001. This
increase was primarily due to lower raw milk costs, lower amortization expense
during the 2002 period and realized synergies from our acquisition by Dean Foods
Company. Before plant closure charges of $0.4 million, operating margins in
Specialty Foods increased to 14.7% in 2002 from 9.5% in 2001. This improvement
was due primarily to realized merger synergies and to lower amortization
expense. Corporate expenses decreased $40.0 million in 2002 to $52.2 million
from $92.2 million in 2001. The decrease is primarily the result of $30.0
million of transaction related costs associated with our acquisition by Dean
Foods Company in 2001. Excluding the transaction related costs, corporate
expenses decreased slightly from 2001 due primarily to lower corporate overhead
as the result of closing our former corporate office and realized synergies from
our acquisition by Dean Foods Company.

Other (Income) Expense -- Total other expense in 2002 decreased by $16.2
million. In 2002 interest expense, net of interest income, decreased $10.9
million to $56.3 million primarily due to lower short-term interest rates and to
the pay-off of our former revolving line of credit upon completion of our
acquisition by Dean Foods Company.

Other (income) expense in 2002 contained no loss on the write-off or sale
of fixed assets as compared to a loss on the write-off of fixed assets of $6.4
million in 2001.

Income Taxes -- Our 2002 effective tax rate was 38.0%, which was flat
compared to 2001.

FISCAL YEAR ENDED MAY 2001 COMPARED TO FISCAL YEAR ENDED MAY 2000

Net Sales -- Net sales increased 6.1% to $3.98 billion during fiscal year
2001 from $3.75 billion in fiscal year 2000. Dairy Group sales increased 6.1% in
fiscal year 2001 to $3.25 billion from $3.06 billion in fiscal year 2000 and
volume increased 2.5% over fiscal year 2000. The increases in sales and volume
are primarily the result of the Land O' Lakes acquisition, which was completed
in July 2000. Absent the impact of the fiscal year 2001 acquisition, volume in
fiscal year 2001 declined slightly in comparison to fiscal year 2000, due to
declines in fluid milk volumes, primarily in California. Specialty Foods' sales
increased 6.1% in fiscal year

9

2001 to $736.2 million from $694.2 million in fiscal year 2000, primarily as the
result of the acquisition of the Nalley's pickle business in July 2000. Absent
the Nalley's acquisition, sales declined slightly from fiscal year 2000.

Cost of Sales -- Our cost of sales ratio was 77.2% in fiscal year 2001
compared to 77.4% in fiscal year 2000. The cost of sales ratio for the Dairy
Group decreased to 77.4% in fiscal year 2001 from 78.0% in fiscal year 2000. The
cost of sales ratio for Specialty Foods increased to 76.5% in fiscal year 2001
from 74.8% in fiscal year 2000. This ratio increased due to increased commodity
costs for powdered products and increased promotional spending related to
pickles.

Operating Costs and Expenses -- Our operating expense ratio was 18.7% in
fiscal year 2001 compared to 17.7% in fiscal year 2000. The operating expense
ratio in the Dairy Group was 17.9% in fiscal year 2001 compared to 17.4% in
fiscal year 2000. The operating expense ratio in Specialty Foods was 13.9% in
fiscal year 2001 compared to 13.7% in fiscal year 2000.

Operating Income -- Operating income in fiscal year 2001 was $164.5
million, a decrease of 9.9% from fiscal year 2000 operating income of $182.7
million. Included in fiscal year 2000 operating costs are plant closure charges
of $6.1 million. Before plant closure charges, operating margins in the Dairy
Group decreased to 4.7% in fiscal year 2001 from 4.8% in fiscal year 2000.
Before plant closure charges, operating margins in Specialty Foods decreased to
9.6% in fiscal year 2001 from 11.6% in fiscal year 2000. Corporate expenses
increased $21.5 million in fiscal year 2001 to $59.5 million from $38.0 million
in fiscal year 2000. The increase is primarily the result of $22.2 million of
transaction related costs associated with our acquisition by Dean Foods Company.
Excluding the transaction related costs, corporate expenses declined slightly
from fiscal year 2000 due primarily to lower incentive compensation expense.

Other (Income) Expense -- Total other expense increased in fiscal year 2001
by $7.1 million. Fiscal year 2001 interest expense, net of interest income,
increased $21.3 million to $70.7 million. The increase is the result of higher
debt balances used to fund acquisitions and fiscal year 2000 share repurchases
as well as higher short-term interest rates in fiscal 2001.

In December 2000, we sold for $10.0 million, a $30.0 million subordinated
note which was received as part of the proceeds from the sale of our vegetable
business to Agrilink Foods, Inc. in fiscal year 1999. Due to the uncertainty of
the realizability of the $30.0 million subordinated note, the note was
originally valued at a nominal amount. As a result of the sale, we reversed
$10.0 million of the original reserve against the note, resulting in the
recognition of a $10.0 million gain in the second quarter of fiscal year 2001.

Income Taxes -- Our fiscal year 2001 effective tax rate was 38.0% compared
with 38.8% in fiscal 2000.

10

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS

Our Consolidated Financial Statements are included in this report on the
following pages.

11

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Dean Holding Company
Dallas, Texas

We have audited the accompanying consolidated balance sheets of Dean
Holding Company and subsidiaries (the "Company") (formerly known as Dean Foods
Company) as of December 31, 2002 and 2001 (reflecting the new basis of
accounting as a result of the purchase business combination discussed in Note
2). We have also audited the consolidated statements of income, stockholders'
equity and cash flows for the year ended December 31, 2002 and the period from
May 28, 2001 to December 31, 2001. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of December 31, 2002 and 2001, and the results of operations and
cash flows of the Company for the year ended December 31, 2002 and the period
from May 28, 2001 to December 31, 2001 in conformity with accounting principles
generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for goodwill and other intangible
assets to conform to Statement of Financial Accounting Standards No. 142.

DELOITTE & TOUCHE LLP

Dallas, Texas
March 24, 2003

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Shareholder of Dean Holding Company

In our opinion, the consolidated balance sheet as of May 27, 2001 and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the two years in the period ended May 27, 2001 present fairly, in
all material respects, the financial position, results of operations and cash
flows of Dean Holding Company and its subsidiaries (formerly Dean Foods Company,
the "Predecessor Company") at May 27, 2001 and for each of the two years in the
period ended May 27, 2001, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of Dean Holding Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
June 26, 2001, except as to Notes 2 and 4, which
are as of December 21, 2001
Chicago, Illinois

F-2

DEAN HOLDING COMPANY

CONSOLIDATED BALANCE SHEETS

See Notes to Consolidated Financial Statements.

F-3

DEAN HOLDING COMPANY

CONSOLIDATED STATEMENTS OF INCOME

See Notes to Consolidated Financial Statements.

F-4

DEAN HOLDING COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

See Notes to Consolidated Financial Statements.

F-5

DEAN HOLDING COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

See Notes to Consolidated Financial Statements.

F-6

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2002, PERIOD FROM MAY 28, 2001 TO DECEMBER 31, 2001,
AND FISCAL YEARS ENDED MAY 2001 AND 2000

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Change in Fiscal Year -- Effective December 31, 2001, we changed our fiscal
year end to December 31, rather than on the last Sunday in May.

Basis of Presentation -- Our Consolidated Financial Statements include the
accounts of our wholly-owned and majority-owned subsidiaries. All significant
intercompany balances and transactions are eliminated in consolidation.

We have chosen December 31, 2001 as a "date of convenience" for recording
the effects of our acquisition by Dean Foods Company. Accordingly, for financial
statement purposes, we have treated the merger as if it occurred on December 31,
2001 rather than December 21, 2001.

Our financial statements for all periods prior to December 31, 2001 have
been prepared using our historical basis of accounting and are indicated in our
consolidated financial statements as "Predecessor." The December 31, 2001
balance sheet reflects the preliminary purchase price allocation related to the
acquisition by Dean Foods Company. The effects of this "push down" accounting
will affect the comparability of our balance sheets at December 31, 2002 and
2001 with our prior balance sheets.

Use of Estimates -- The preparation of our Consolidated Financial
Statements in conformity with generally accepted accounting principles 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 revenues and expenses during the reporting period. Actual
results could differ from these estimates under different assumptions or
conditions.

Cash Equivalents -- We consider temporary cash investments with a remaining
maturity of three months or less to be cash equivalents.

Inventories -- Inventories are stated at the lower of cost or market. Dairy
and certain specialty products inventories are valued on the first-in, first-out
("FIFO") method, while our pickle inventories are valued on the last-in,
first-out ("LIFO") method. The costs of finished goods inventories include raw
materials, direct labor and indirect production and overhead costs.

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. Depreciation and amortization are
calculated using the straight-line method over the estimated useful lives of the
assets as follows:

Impairment tests are performed when circumstances indicate the value may
not be recoverable. Predecessor depreciation and amortization were provided
using the straight-line method over the estimated useful lives of the assets, as
follows:

F-7

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Capitalized leases 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 -- Prior to January 1, 2002, we amortized the
excess of cost over fair value of net identifiable assets of acquired companies
and other intangible assets over periods of up to forty years.

Effective January 1, 2002, in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 142, goodwill and other intangible assets
determined to have indefinite lives are no longer amortized. Instead we will now
conduct annual impairment tests on our goodwill, trademarks and other intangible
assets with indefinite lives. Impairment tests are also performed when
circumstances indicate that the carrying value may not be recoverable. To
determine whether an impairment exists, we use a present value technique.

Computer Software -- We expense or capitalize computer software developed
or obtained for internal use in accordance with AICPA Statement of Position
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." Capitalized costs are amortized over a period of five years,
beginning when the capitalized software is ready for its intended use.

Foreign Currency Translation -- The financial statements of our foreign
subsidiaries are translated to U.S. dollars in accordance with the provisions of
SFAS No. 52, "Foreign Currency Translation." 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, which affect cash flows and the related receivables or payables are
recognized as transaction gains and losses in the determination of net income.
The cumulative translation adjustment in stockholder's equity reflects the
unrealized adjustments resulting from translating the financial statements of
our foreign subsidiaries.

Employee Stock Options -- Prior to our acquisition by Dean Foods Company,
we measured compensation expense for our stock-based employee compensation plans
using the intrinsic value method and provided the required pro forma disclosures
of the effect on net income and earnings per share as if the fair value-based
method had been applied in measuring compensation expense. As a result of our
acquisition by Dean Foods Company, unexercised stock options at the transaction
date that had been granted under our plans were automatically converted into
options to acquire Dean Foods Company shares. The estimated fair value assigned
to such options as of the transaction date was accounted for by Dean Foods
Company as part of the cost of the acquisition. We have no options outstanding
at December 31, 2002 and 2001.

We followed Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for our stock options. All options granted were to
employees, officers or directors. Stock options were granted under these plans
at exercise prices which approximated or exceeded market value at the grant
date. Compensation expense was recognized for certain option grants under plans
that were modified, thereby requiring variable plan accounting. Had compensation
expense been determined for stock option grants using

F-8

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

fair value methods provided for in SFAS No. 123, Accounting for Stock-Based
Compensation, our pro forma net income and net income per common share would
have been the amounts indicated below:

- ---------------

(a) Calculated in accordance with the Black-Scholes option pricing model, using
the following assumptions: expected volatility of 26.8%; expected dividend
yield of 2.0%; expected option term of eight years and risk-free rates of
return as of the date of grant of 6.4% based on the yield of seven-year
U.S. Treasury securities.

(b) Calculated in accordance with the Black-Scholes option pricing model, using
the following assumptions: expected volatility of 23.1%; expected dividend
yield of 2.5%; expected option term of eight years and risk-free rates of
return as of the date of grant of 6.0% based on the yield of ten-year U.S.
Treasury securities.

Revenue Recognition and Accounts Receivable -- Revenue is recognized when
persuasive evidence of an arrangement exists, the price is fixed or
determinable, the product has been shipped to the customer and there is
reasonable assurance of collection of the sale proceeds. Revenue is reduced by
sales incentives that 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 historical experience.

Income Taxes -- We (including all of our wholly-owned U.S. operating
subsidiaries) are included in Dean Foods Company's consolidated tax return. Our
income taxes are determined as if we were filing a separate tax return. Our
foreign subsidiaries are required to file separate income tax returns in their
local jurisdictions. Certain distributions from those subsidiaries are subject
to United States income taxes; however, available tax credits of the
subsidiaries may reduce or eliminate these United States tax liabilities.

Deferred income taxes are provided for temporary differences between
amounts recorded in the consolidated financial statements and tax bases of
assets and liabilities using currently enacted tax rates. Deferred tax assets,
including the benefit of net operating loss carry-forwards, are evaluated based
on the guidelines for realization and may be reduced by a valuation allowance if
deemed necessary.

Advertising Expense -- Advertising expense is comprised of media, agency
and production expenses. Advertising expenses are 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
expenses charged to income totaled $25.4 million for the year ended December 31,
2002, $18.4 million for the period from May 28, 2001 to December 31, 2001, $39.4
million in 2001, and $33.9 million in 2000. Additionally, prepaid advertising
costs for media advertising not yet released were $1.7 million, $1.6 million and
$0 at December 31, 2002 and 2001 and May 27, 2001, respectively.

F-9

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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. Accrued
liabilities for incurred but not reported losses related to the retained risks
are calculated based upon loss development factors provided by external
insurance brokers and actuaries. Some of our self-insured programs are
administered by Dean Foods Company.

Comprehensive Income -- We consider all changes in equity from transactions
and other events and circumstances, except those resulting from investments by
owners and distributions to owners, to be comprehensive income.

Adoption of New Accounting Pronouncements -- In June 2001, Financial
Accounting Standard Board ("FASB") issued SFAS No. 141, "Business Combinations",
and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 addresses
financial accounting and reporting for business combinations. Under the new
standard, all business combinations entered into after June 30, 2001 are
required to be accounted for by the purchase method. In connection with our
acquisition by Dean Foods Company, our balance sheet reflects the new basis of
accounting effective December 31, 2001 at fair value in accordance with purchase
accounting requirements under SFAS No. 141. SFAS No. 142 addresses financial
accounting and reporting for acquired goodwill and other intangible assets. We
adopted SFAS No. 142 in the first quarter of 2002. See Note 8. SFAS No. 142 also
requires that recognized intangible assets with finite lives be amortized over
their respective estimated useful lives.

FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" in August 2001 and it became effective for us in the first
quarter of 2002. SFAS No. 144, which supercedes SFAS No. 121, provides a single,
comprehensive accounting model for impairment and disposal of long-lived assets
and discontinued operations. Our adoption of this standard did not have a
material impact on our Consolidated Financial Statements.

Recently Issued Accounting Pronouncements -- In June 2001, FASB issued SFAS
No. 143, "Accounting for Asset Retirement Obligations." This statement requires
that the fair value of a liability for an asset retirement obligation be
recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made. The associated asset retirement costs are capitalized as
part of the carrying amount of the long-lived asset. SFAS No. 143 became
effective for us January 1, 2003. We do not expect the adoption of this
pronouncement to have a material impact on our Consolidated Financial
Statements.

SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of
FASB Statement No. 13 and Technical Corrections", was issued in April 2002 and
is applicable to fiscal years beginning after May 15, 2002. One of the
provisions of this technical statement is the rescission of SFAS No. 4,
"Reporting Gains and Losses from Extinguishment of Debt", whereby any gain or
loss on the early extinguishment of debt that was classified as an extraordinary
item in prior periods in accordance with SFAS No. 4, which does not meet the
criteria of an extraordinary item as defined by APB Opinion 30, must be
reclassified. Our adoption of this standard will not have a material impact on
our Consolidated Financial Statements.

In June 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This statement addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in Restructuring)." The statement
requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred and is effective for exit
or disposal activities that are initiated after December 31, 2002. Adoption of
this standard will change the timing of the recognition of certain charges
associated with exit and disposal activities.

F-10

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On December 31, 2002 FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure," which amends SFAS No. 123,
"Accounting for Stock-Based Compensation." SFAS No. 148, which is effective for
years beginning after December 15, 2002, provides alternative methods of
transition for a voluntary change to the fair value based method and requires
more prominent and more frequent disclosure in the financial statements about
the effects of stock-based compensation. We do not grant stock options;
therefore, the adoption of this pronouncement will not affect us.

In November 2002, FASB issued FASB Interpretation ("FIN") No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN No. 45 clarifies the
requirements of SFAS No. 5 "Accounting for Contingencies," relating to the
guarantor's accounting for and disclosures of certain guarantees issued. FIN No.
45 requires disclosure of guarantees. It also requires liability recognition for
the fair value of guarantees made after December 31, 2002. We will adopt the
liability recognition requirements of FIN No. 45 effective January 1, 2003, and
we do not expect the adoption to have a material effect on our Consolidated
Financial Statements.

In January 2003, FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities." FIN No. 46 clarifies the application of Accounting Research
Bulletin No. 51, "Consolidated Financial Statements," to certain entities in
which equity investors do not have the characteristics of a controlling
financial interest or in which equity investors do not bear the residual
economic risks. The interpretation applies to variable interest entities
("VIEs") created after January 31, 2003 and to VIEs in which an enterprise
obtains an interest after that date. It applies in the fiscal or interim period
beginning after June 15, 2003, to VIEs in which an enterprise holds a variable
interest that was acquired before February 1, 2003. We currently utilize a
special purpose limited liability entity to facilitate our receivable-backed
loan. Since its formation, this entity has been consolidated in our financial
statements for financial reporting purposes. Therefore, FIN No. 46 will have no
impact on our Consolidated Financial Statements.

Reclassifications -- Certain reclassifications have been made to conform
the prior year's Consolidated Financial Statements to the current year
classifications.

2. ACQUISITION BY DEAN FOODS COMPANY

General -- On December 21, 2001, we were acquired by Dean Foods Company
(formerly known as Suiza Foods Corporation). Immediately upon completion of the
transaction, we changed our name to Dean Holding Company and the acquiror took
our former name. As a result of the transaction, we are now a wholly-owned
subsidiary of Dean Foods Company.

As a result of the transaction, each share of our common stock was
converted into 0.858 shares (on a split adjusted basis) of Dean Foods Company
common stock and the right to receive $21.00 in cash.

Dean Foods Company accounted for its acquisition of us as a purchase. The
aggregate purchase price recorded at Dean Foods Company was $1.6 billion,
including $756.8 million of cash and common stock valued at $739.4 million. The
value of the approximately 31 million common shares issued was determined based
on the average market price of Dean Foods Company common stock around the date
of the announcement. This purchase price and the related purchase accounting
adjustments, including goodwill, have been "pushed down" and are reflected in
our December 31, 2002 and 2001 balance sheets.

Dean Foods Company provides us with management support in return for a
management fee. The management fee, which first began to be charged in the
second quarter of 2002, is based on budgeted annual expenses for Dean Foods
Company corporate headquarters, which is then allocated among the segments of
Dean Foods Company. Management fees for the year ended December 31, 2002
amounted to $24.3 million. In addition, our cash is available for use and is
regularly "swept" by Dean Foods Company at its discretion. Cash that has been
"swept" is included on our balance sheet as "Receivable from Parent."

F-11

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Transaction related costs -- We recorded transaction related costs of $30.0
million and $22.2 million in the period from May 28, 2001 to December 31, 2001
and fiscal year 2001, respectively, related to our acquisition by Dean Foods
Company. These costs include $14.2 million and $15.0 million in the period from
May 28, 2001 to December 31, 2001 and fiscal year 2001, respectively, for a
lease commitment for new corporate headquarters on office space that we elected
not to take possession of after we agreed to be acquired by Dean Foods Company.
The charges related to the lease commitment reflect the rental payments over the
term of the lease and other termination costs reduced by estimated sublease
income. The incremental charge we recorded in the period from May 28, 2001 to
December 31, 2001 reflects a change in our estimate based on updated
assumptions. We also recorded other transaction related costs including
professional fees of $11.4 million and $4.5 million and severance and employee
"stay bonus" costs of $4.3 million and $2.7 million in the period from May 28,
2001 to December 31, 2001 and fiscal year 2001, respectively.

Divestiture of Plants -- In order to obtain regulatory approval for the
transaction, certain plants located in areas where our operations overlapped
with the operations of the acquiror were required to be divested. Four of the
divested dairies were owned by us, including Coburg Dairy based in North
Charleston, South Carolina; Cream O Weber based in Salt Lake City, Utah; H.
Meyer Dairy based in Cincinnati, Ohio; and U.C. Milk ("Goldenrod") based in
Madisonville, Kentucky. In order to accomplish the divestitures, on December 21,
2001, immediately after our acquisition by Dean Foods Company, we transferred
these dairies, via dividend, to Dean Foods Company, our sole shareholder. The
dividend was recorded at book value after applicable purchase accounting
adjustments, with no gain or loss recorded. Prior periods have not been restated
to reflect the divestitures.

Exchange of National Refrigerated Products for Dean SoCal -- Also in
connection with the transaction, on December 21, 2001, we entered into a
Securities Exchange Agreement with Morningstar Foods Inc., another wholly-owned
subsidiary of Dean Foods Company, pursuant to which, on December 21, 2001
immediately after consummation of the transaction, we exchanged the operations
of our former National Refrigerated Products (or "NRP") group for the operations
of Dean SoCal, a subsidiary of Dean Foods Company Dairy Group. Accordingly, we
no longer have our NRP segment, and we have presented this group as a
discontinued operation in the accompanying financial statements (see Note 4). We
have accounted for this exchange as a dividend in our Consolidated Financial
Statements. Dean SoCal operates in Southern California and produces a full line
of dairy and related products under the Swiss(R) and Adohr Farms(R) brands. Dean
SoCal is now operated as part of our Dairy Group and was accounted for as a
contribution in our Consolidated Financial Statements at December 31, 2002 and
2001. Dean SoCal's operating results are included in our Consolidated Financial
Statements for the year ended December 31, 2002. Our financial statements for
all periods prior to the transaction have been restated to reflect NRP as a
discontinued operation. As a result of the exchange, our balance sheets at
December 31, 2002 and 2001 are prepared on a different basis of accounting from
our prior balance sheets.

Divestitures of DFC Transportation, Boiled Peanuts Business and EBI Foods,
Limited -- During 2002 we completed the sale of three non-core businesses that
were part of our Specialty Foods segment. On January 4, 2002, we completed the
sale of DFC Transportation Company, a contract hauler. On February 7, 2002, we
completed the sale of a boiled peanuts business, and on October 11, 2002 we
completed the sale of our 94% interest in EBI Foods, Limited, a U.K. based
manufacturer of powdered food coatings. The combined proceeds from these sales
were approximately $30 million. Prior periods have not been restated to reflect
the divestitures.

Change in Fiscal Year -- Immediately after we were acquired by Dean Foods
Company, our Board of Directors voted to change our fiscal year to conform to
Dean Foods Company's fiscal year.

F-12

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table presents our comparative results of operations for
years ended December 31, 2002 and 2001:

- ---------------

Note: The comparability of the results in the table above is affected by the
implementation of SFAS No. 142 "Goodwill and Other Intangible Assets", the
exchange of NRP for Dean SoCal, the divestiture of four dairies and changes in
amortization and depreciation amounts as a result of our acquisition by Dean
Foods Company and the corresponding re-valuing of our assets and re-assessing
their remaining useful lives.

Allocation of Purchase Price -- The following table summarizes the
preliminary fair values of the assets acquired by Dean Foods Company and
liabilities assumed by Dean Foods Company as a result of the transaction, and
includes the effects of divesting four of our plants. The table does not include
the effects of the NRP/Dean SoCal exchange.

The purchase price disclosed above differs from that reported by Dean Foods
Company due to the timing effects of the sale of certain of our subsidiaries'
accounts receivable into Dean Foods Company asset securitization facility and a
distribution made to Dean Foods Company not reflected in its purchase price due
to our accounting for the acquisition as of December 31, 2001, the date of
convenience.

Of the $237.0 million of acquired intangible assets, approximately $206.5
million was assigned to trademarks and trade names that are not subject to
amortization and approximately $30.5 million was assigned to customer contracts
that have a weighted-average economic life of approximately 17 years.

F-13

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The approximately $1.5 billion of goodwill was assigned to our Dairy Group,
NRP and Specialty segments in the amounts of $1.01 billion, $215.0 million and
$290.0 million, respectively. None of the goodwill is expected to be deductible
for tax purposes.

The final allocation of the purchase price to the fair values of our assets
and liabilities and the related business integration plans were completed in the
fourth quarter of 2002. The final allocation process increased goodwill by
approximately $67.1 million, primarily as a result of the final determination of
the fair values of depreciable tangible assets and business integration plans.

The unaudited results of operations on a pro forma basis for the period
from May 28, 2001 to December 31, 2001 and the fiscal year ended May 27, 2001 as
if the acquisition by Dean Foods Company including the effects of the NRP/Dean
SoCal exchange had occurred as of the beginning of fiscal year 2001 are as
follows:

3. ACQUISITIONS

During fiscal year 2001, we completed the following two acquisitions:

Each of the fiscal year 2001 acquisitions was an asset purchase for cash
consideration. We also assumed certain liabilities in addition to cash
consideration paid. On a pro forma basis, which assumes the above acquisitions
occurred at the beginning of each period presented, sales and net income were
not materially impacted. During fiscal year 2001, we made an additional equity
investment in White Wave, Inc., a processor of soy based products. The
acquisitions and equity investments were made for cash consideration totaling
$220.3 million, net of cash acquired.

During fiscal year 2000, we completed the following two acquisitions:

Each of the fiscal year 2000 acquisitions was an asset purchase for cash
consideration. We also assumed certain liabilities in addition to cash
consideration paid. On a pro forma basis, which assumes the above acquisitions
occurred at the beginning of each period presented, sales and net income were
not materially impacted. On August 23, 1999, we made an initial equity
investment in White Wave, Inc. The acquisitions and equity investment were made
for cash consideration totaling $38.2 million, net of cash acquired.

F-14

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

All of the acquisitions were accounted for using the purchase method of
accounting as of their respective acquisition dates and, accordingly, the
operating results of the acquired companies subsequent to their respective
acquisition dates are included in our Consolidated Financial Statements.
Goodwill arising from the acquisitions was recorded at $124.5 million and $22.2
million for each of the fiscal years 2001 and 2000; however, the goodwill was
revalued as a purchase accounting adjustment as part of the acquisition by Dean
Foods Company.

4. DISCONTINUED OPERATIONS

In December 2001, in connection with our acquisition by Dean Foods Company,
we exchanged the operations of NRP for the operations of Dean SoCal.
Accordingly, NRP is presented as a discontinued operation.

The following table presents selected activity related to the discontinued
operations:

5. GAIN ON SALE OF NOTE

On December 1, 2000, we sold, for $10.0 million cash, a $30.0 million
subordinated note which we received as part of the proceeds from the sale of our
former Vegetables segment to Agrilink Foods, Inc. in fiscal year 1999. Due to
the uncertainty of the realizability of the $30.0 million subordinated note, the
note was originally valued at a nominal amount. When we sold the note, we
reversed $10.0 million of the original reserve against the note, resulting in
the recognition of a $10.0 million gain in the second quarter of fiscal year
2001.

6. INVENTORIES

The percentage of inventories determined on the basis of last-in, first-out
cost approximated 44.6%, 54.2% and 36.9% for December 31, 2002 and 2001 and May
27, 2001.

F-15

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. PROPERTY, PLANT AND EQUIPMENT

8. INTANGIBLE ASSETS

On January 1, 2002, we adopted SFAS No. 142, which requires, among other
things, that goodwill and other intangible assets with indefinite lives no
longer be amortized, and that recognized intangible assets with finite lives be
amortized over their respective useful lives. As required by SFAS No. 142, our
results for the period from May 28, 2001 to December 31, 2001 and fiscal years
2001 and 2000 have not been restated. The following sets forth a reconciliation
of net income for the year ended December 31, 2002 and the period from May 28,
2001 to December 31, 2001 and the fiscal years 2001 and 2000, eliminating
amortization on goodwill and intangible assets with indefinite lives.

F-16

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The changes in the carrying amount of goodwill for the year ended December
31, 2002 are as follows:

The gross carrying amount and accumulated amortization of our intangible
assets other than goodwill as of December 31, 2002 and 2001 and May 27, 2001 are
as follows:

Amortization expense on intangible assets, excluding goodwill, for year
ended December 31, 2002, the period from May 28, 2001 to December 31, 2001 and
the fiscal years ended May 2001 and 2000 was $5.4 million and $3.6 million and
$5.9 million and $5.3 million respectively. Estimated aggregate intangible asset
amortization expense for the next five years is as follows:

2003........................................................ $3.1 million
2004........................................................ $2.3 million
2005........................................................ $1.5 million
2006........................................................ $1.0 million
2007........................................................ $0.3 million

9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

F-17

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. INCOME TAXES

The following table presents the year ended December 31, 2002, the period
from May 28, 2001 to December 31, 2001 and fiscal years ended May 2001 and 2000
provisions for income taxes.

The following is a reconciliation of income taxes computed at the U.S.
federal statutory tax rate to the income taxes reported in the consolidated
statements of income:

The tax effects of temporary differences giving rise to deferred income tax
assets and liabilities were:

F-18

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

These net deferred income tax liabilities are classified in our
consolidated balance sheets as follows:

At December 31, 2002, we had no net operating losses and approximately $1.0
million of tax credits available for carry-over to future years. These losses
are subject to certain limitation and will expire beginning in 2007.

At December 31, 2002, a valuation allowance of $2.4 million has been
established because we believe it is "more likely than not" that all of the
deferred tax assets relating to state net operating losses and foreign credit
carry-overs will not be realized prior to the date they are scheduled to expire.

11. LONG-TERM DEBT

Senior Notes -- We had $700 million (face value) of senior notes
outstanding. The net proceeds were used to fund acquisitions and to repay
commercial paper. The related indentures do not contain financial covenants but
they do contain certain restrictions including a prohibition against us and our
subsidiaries granting liens on our material real estate interests and a
prohibition against granting liens on the stock of our subsidiaries. The
indentures also place certain restrictions on our ability to divest assets not
in the ordinary course of business. At the date of our acquisition by Dean Foods
Company, our long-term debt was re-valued

F-19

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

to its current market value. The adjustment to fair value is reflected as a
discount on senior notes in our consolidated financial statements.

Receivables-Backed Loan -- On December 21, 2001, immediately upon
completion of our acquisition by Dean Foods Company, certain of our subsidiaries
sold their accounts receivable into Dean Foods Company $400 million receivables
securitization facility. Certain of our subsidiaries sell their accounts
receivable to a wholly-owned special purpose entity intended to be
bankruptcy-remote. The special entity then transfers the receivables to
third-party asset-backed commercial paper conduits sponsored by major financial
institutions. The assets and liabilities of this entity are fully reflected on
our balance sheet, and the securitization is treated as a borrowing for
accounting purposes. The receivables-backed loan bears interest at a variable
rate based on the commercial paper yield, as defined in the agreement.

Terminated Revolving Credit Agreement -- Prior to our acquisition by Dean
Foods Company, we had an unsecured $500 million revolving credit facility
maturing in 2003. Borrowings under the credit facility bore interest, at our
option, at either fixed or variable rates linked to our public debt credit
rating. During fiscal year 2001, the maximum credit facility balance was $250
million and the average credit facility balance during the year was $38.4
million at a weighted average interest rate of 6.47%. When we were acquired by
Dean Foods Company, revolving credit borrowings of $201.2 million were paid off
with funds advanced by Dean Foods Company. At May 27, 2001, we had $209 million
outstanding under the credit facility.

Industrial Development Revenue Bonds -- We have certain revenue bonds
outstanding, one of which requires annual sinking fund redemptions. Typically,
these bonds are secured by irrevocable letters of credit issued by financial
institutions, along with first mortgages on the related real property and
equipment. Interest on these bonds is due semiannually at interest rates that
vary based on market conditions.

Other Obligations -- Other obligations include various promissory notes for
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.

Letters of Credit -- At December 31, 2002, $49.5 million of letters of
credit were outstanding. The majority of letters of credit were required by
various utilities and government entities for performance and insurance
guarantees.

Scheduled Maturities -- The scheduled maturities of long-term debt, at
December 31, 2002, were as follows (in thousands):

2003........................................................ $ 307
2004........................................................ 306
2005........................................................ 153,500
2006........................................................ 303
2007........................................................ 250,303
Thereafter.................................................. 366,510
--------
Subtotal............................................. 771,229
Less discount on senior notes........................ (43,049)
--------
Total outstanding debt............................... $728,180
========

Interest Rate Agreements -- SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (as amended) became effective for us as of
May 29, 2001. We do not currently have any derivative

F-20

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

instruments. Prior to our acquisition by Dean Foods Company, we entered into
interest rate swap agreements from time to time in order to hedge a portion of
our interest rate exposure. On December 19, 2001, we sold our interest rate swap
in anticipation of our acquisition by Dean Foods Company. During the period from
May 28, 2001 to December 31, 2001, we recorded derivatives as of the effective
date on our consolidated balance sheet at fair value, as required by SFAS No.
133. Any ineffectiveness in cash flow hedges or fair value hedges was recorded
as an adjustment to earnings.

Our adoption of this accounting standard as of May 28, 2001 resulted in the
recognition of an asset related to our cash flow hedges of $2.1 million.

12. STOCKHOLDERS' EQUITY

We have 1,000 shares of common stock with a par value of $0.01 per share
currently authorized and issued to Dean Foods Company.

Stock Option and Restricted Stock Plans -- Upon our acquisition by Dean
Foods Company, outstanding options to purchase our common stock were
automatically converted into options to purchase shares of Dean Foods Company.
Upon consummation of our acquisition by Dean Foods Company our stock option
holders had the right to surrender their options to Dean Foods Company, in lieu
of exercise, in exchange for cash, provided the options were surrendered prior
to March 21, 2002. At December 31, 2001 we had a liability recorded for these
stock option surrenders. Cash payments of approximately $44.2 million were made
related to the cash provisions of our stock option surrenders. At the conclusion
of the surrender period, the remaining liability of approximately $30.5 million
was transferred to stockholder's equity as the underlying stock options remained
outstanding.

Prior to our acquisition by Dean Foods Company, we had stock option plans
for certain key employees and directors. Options were typically granted at fair
market value at the date of grant. We no longer award options.

F-21

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes the status of our stock-based compensation
programs as of the dates shown:

13. OTHER COMPREHENSIVE INCOME

Comprehensive income comprises net income plus all other changes in equity
from non-owner sources. The amount of income tax (expense) benefit allocated to
each component of other comprehensive income for the year ended December 31,
2002, during the period from May 28, 2001 to December 31, 2001 and the fiscal
years ended May 2001 and 2000 are included below.

F-22

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. EMPLOYEE RETIREMENT AND PROFIT SHARING PLANS

We sponsor various defined benefit and defined contribution retirement
plans, and contribute to various multi-employer pension plans on behalf of our
employees. Benefits are based on years of service and comprehensive or stated
amounts for each year of service. The pension and post retirement liabilities at
December 31, 2002 and 2001 include the allocation of purchase price to record
these liabilities at fair value based on our acquisition by Dean Foods Company.
For the year ended December 31, 2002, the period from May 28, 2001 to December
31, 2001 and the fiscal year ended May 2001 and 2000, our retirement and profit
sharing plan expenses were as follows:

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 not less than the minimum amount required under ERISA
regulations and no more than the maximum amount that can be deducted for federal
income tax purposes.

The following table sets forth the funded status of our defined benefit
plans and the amounts recognized in our consolidated balance sheets:

F-23

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Included in the above pension benefits table is an unfunded supplemental
retirement plan with a liability of $7.3 million, $22.4 million and $7.1 million
at December 31, 2002 and 2001 and May 27, 2001, respectively.

F-24

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 between 1.0% and 17.0% of a participant's annual compensation
and provide for employer matching and profit sharing contributions as determined
by the Dean Foods Company Board of Directors.

Multi-Employer Pension Plans -- Certain of our subsidiaries contribute to
various multi-employer union pension 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 liabilities
because withdrawal from these plans is not probable or reasonably possible.

15. POST-RETIREMENT BENEFITS OTHER THAN PENSIONS

We provided health care and life insurance benefits to certain retired
employees and their eligible dependents. Employees are eligible for such
benefits subject to minimum age and service requirements. Eligible employees
that retire before normal retirement age, along with their dependents, are
entitled to benefits on a shared contribution basis. Substantially all benefits
terminate at age sixty-five. We retain the right to modify or eliminate these
benefits.

F-25

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth the funded status of these plans and the
amounts recognized in our consolidated balance sheets:

F-26

DEAN HOLDING 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:

We retained the earned pension and other post-retirement benefits
liabilities related to NRP for liabilities through the date of acquisition by
Dean Foods Company. Accordingly the information disclosed in the tables above
includes continuing and discontinued operations. The corresponding liabilities
for Dean SoCal are retained by the parent through the date of acquisition.

16. PLANT CLOSING COSTS

Facilities Closed in Connection with Acquisition by Dean Foods
Company -- We accrued costs in 2002 and 2001 pursuant to plans to exit certain
activities and operations of businesses in order to rationalize production and
reduce costs and inefficiencies. Several plants were closed in connection with
our acquisition by Dean Foods Company. Plants in Atkins, Arkansas and Cairo,
Georgia in the Specialty Foods segment and a plant in Escondido, California in
the Dairy Group were closed. We have also eliminated our administrative offices,
closed Dairy Group distribution depots in Parker Ford, Pennsylvania and Camp
Hill, Pennsylvania, shut down two pickle tank yards and relocated production
between plants as part of our overall integration and efficiency efforts.

The principal components of the plans include the following:

- Workforce reductions as a result of plant closings, plant
rationalizations and consolidation of administrative functions and
offices, resulting in an overall reduction of 717 plant and
administrative personnel. The costs incurred were charged against our
acquisition liabilities for these costs. As of December 31, 2002, 64
employees had not yet been terminated;

- Shutdown costs, including those costs that are necessary to clean and
prepare the plant facilities for closure; and

- Costs incurred after shutdown such as lease obligations or termination
costs, utilities and property taxes after shutdown of the plant or
administrative office.

Activity with respect to these liabilities for 2002 is summarized below:

These liabilities were established on December 31, 2001 in connection with
our acquisition by Dean Foods Company. No other significant charges were accrued
for transaction related closings.

The carrying value of closed facilities and other assets held for sale at
December 31, 2002 was approximately $10.4 million. We are marketing these
properties for sale. Divestitures of the closed facilities has not resulted in
significant modifications to the estimate of fair value.

F-27

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Plant Closing Costs -- In fiscal year 2001 and 2000 as part of an overall
integration and cost reduction strategy, we recorded plant closing and other
non-recurring costs of $6.1 million related to the closing of our Sacramento,
California and Mobile, Alabama fluid milk plants during fiscal year 2000.

The principal components of the plan included the following:

- Workforce reductions as a result of plant closings, plant
rationalizations and consolidation of administrative functions and
offices. The fiscal year 2000 plan included an overall reduction of 118
people, primarily plant employees associated with plant closing and
rationalization fiscal year 2000 plant closings were completed by the end
of the second quarter of fiscal year 2001.

- Shutdown costs, including those costs that were necessary to clean and
prepare the plant facilities for resale or closure; and

- Costs incurred after shutdown such as lease obligations or termination
costs, utilities and property taxes after shutdown at the plant or
administrative office. Total charges related to work force reductions,
shut down costs, and costs incurred after shut down totaled $1.9 million.

- Write-downs of property, plant and equipment and other assets of $4.2
million, primarily for asset impairments as a result of facilities that
are no longer used in operation. The impairments related primarily to
owned buildings, land and equipment at the facilities which were being
sold and were written down to their estimated fair value. The effect of
suspending depreciation on the buildings and equipment related to the
closed facilities was not significant.

We recorded plant closing costs of $0.4 million during the period from May
28, 2001 to December 31, 2001 to close one Specialty Foods plant.

17. SUPPLEMENTAL CASH FLOW INFORMATION

18. SHIPPING AND HANDLING FEES

In September 2000, the EITF reached a consensus on Issue No. 00-10,
"Accounting for Shipping and Handling Fees and Costs," which became effective
for us in the fourth quarter of fiscal year 2001. This issue required the
disclosure of our accounting policies for shipping and handling costs and their
income statement classification. Previously, we classified shipping and handling
amounts billed to customers as revenue. However, certain costs incurred related
to shipping and handling were classified as a reduction of revenue. As

F-28

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

a result of our adoption of Issue No. 00-10 in the fourth quarter of fiscal
2001, our shipping and handling costs are now included either in cost of
products sold or delivery, selling and administrative expenses, depending on the
nature of such costs. Accordingly, prior years' shipping and handling costs were
reclassified from net sales to cost of products sold and delivery, selling and
administrative expenses. Those amounts totaled $30.2 million and $23.1 million
in fiscal years 2001 and 2000. Shipping and handling costs in costs of sales
include inventory warehouse costs and product loading and handling costs.
Shipping and handling costs in selling and distribution expense are related to
shipping products to customers and consist primarily of (i) delivery costs for
company-owned delivery routes, (ii) independent distributor routes (to the
extent that such independent distributors are paid a delivery fee) and (iii)
third party carrier expenses. These shipping and handling costs that were
recorded as a component of selling and distribution expense were approximately
$375.0 million, $252.0 million, $393.1 million and $352.6 million during the
year ended December 31, 2002, the period from May 28, 2001 to December 31, 2001
and fiscal years 2001 and 2000, respectively.

19. COMMITMENTS AND CONTINGENCIES

Leases -- We lease certain property, plant and equipment used in our
operations under operating lease agreements. Such leases, which are primarily
for machinery, equipment and vehicles, have lease terms ranging from 1 to 20
years. Certain of the operating lease agreements require the payment of
additional rentals for maintenance, along with additional rentals based on miles
driven or units produced. Rent expense, including additional rent, was $40.9
million, $33.6 million, $55.8 million and $50.9 million for the year ended
December 31, 2002 and the period from May 28, 2001 to December 31, 2001 and
fiscal years ended May 2001 and 2000, respectively.

We had no capital leases at December 31, 2002. Future minimum payments at
December 31, 2002, under operating leases with terms in excess of one year are
summarized below:

Guaranty of Dean Foods Company Obligations Under Its Senior Credit
Facility -- Certain of Dean Foods Company's subsidiaries, including us, are
required to guarantee Dean Foods Company's indebtedness under its $2.7 billion
credit facility. We have pledged substantially all of our assets (other than our
real property and our ownership interests in our subsidiaries) as security for
our guaranty. The senior credit facility provides Dean Foods Company with an
$800 million revolving line of credit, a Tranche A $900 million term loan and a
Tranche B $1 billion term loan. Upon completion of our acquisition, Dean Foods
Company borrowed $1.9 billion under this facility's term loans. At December 31,
2002 there were outstanding term loan borrowings of $1.83 billion under this
facility. Dean Foods Company's revolving line of credit was undrawn, except for
$71.8 million of issued but undrawn letters of credit. As of December 31, 2002
approximately $728.2 million was available for future borrowings under Dean
Foods Company's revolving credit facility.

F-29

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Amounts outstanding under Dean Foods Company's revolving line of credit and
Dean Foods Company's Tranche A term loan bear interest at a rate per annum equal
to one of the following rates, at Dean Foods Company's option:

- a base rate equal to the higher of the Federal Funds rate plus 50 basis
points or the prime rate, plus a margin that varies from 25 to 150 basis
points depending on Dean Foods Company's leverage ratio (which is the
ratio of defined indebtedness to EBITDA), or

- the London Interbank Offering Rate ("LIBOR") computed as LIBOR divided by
the product of one minus the Eurodollar Reserve Percentage, plus a margin
that varies from 150 to 275 basis points depending on Dean Foods
Company's leverage ratio.

On April 30, 2002, Dean Foods Company entered into an amendment to their
credit facility pursuant to which the interest rate for amounts outstanding
under the Tranche B term loan was lowered by 50 basis points, to the following,
at Dean Foods Company's option:

- a base rate equal to the higher of the Federal Funds rate plus 50 basis
points or the prime rate, plus a margin that varies from 75 to 150 basis
points, depending on our leverage ratio, or

- LIBOR divided by the product of one minus the Eurodollar Reserve
Percentage, plus a margin that varies from 200 to 275 basis points,
depending on our leverage ratio.

The blended interest rate in effect on borrowings under the senior credit
facility, including the applicable interest rate margin, was 3.65% at December
31, 2002. However, Dean Foods Company had interest rate swap agreements in place
that hedged $1.08 billion of their borrowings under this facility at December
31, 2002 at an average rate of 5.40%, plus the applicable interest rate margin.
Interest is payable quarterly or at the end of the applicable interest period.

The agreement requires principal payments on the Tranche A term loan as
follows:

- $16.87 million quarterly from March 31, 2002 through December 31, 2002;

- $33.75 million quarterly from March 31, 2003 through December 31, 2004;

- $39.38 million quarterly from March 31, 2005 through December 31, 2005;

- $45.0 million quarterly from March 31, 2006 through December 31, 2006;

- $56.25 million quarterly from March 31, 2007 through June 30, 2007; and

- A final payment of $112.5 million on July 15, 2007.

The agreement requires principal payments on the Tranche B term loan as
follows:

- $1.25 million quarterly from March 31, 2002 through December 31, 2002;

- $2.5 million quarterly from March 31, 2003 through December 31, 2007;

- A payment of $472.5 million on March 31, 2008; and

- A final payment of $472.5 million on July 15, 2008.

No principal payments are due on the revolving line of credit until
maturity on July 15, 2007.

The credit agreement also requires mandatory principal prepayments in
certain circumstances including without limitation: (1) upon the occurrence of
certain asset dispositions not in the ordinary course of business, (2) upon the
occurrence of certain debt and equity issuances when Dean Foods Company's
leverage ratio is greater than 3.75 to 1.0, and (3) beginning in 2003, annually
when Dean Foods Company's leverage ratio is greater than 3.0 to 1.0. The credit
agreement requires that Dean Foods Company prepay 50% of defined excess

F-30

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

cash flow for any fiscal year (beginning in 2003) in which their leverage ratio
at year end is greater than 3.75 to 1.0. As of December 31, 2002, Dean Foods
Company's leverage ratio was 3.3 to 1.0.

The senior credit facility contains various financial and other restrictive
covenants and requirements that Dean Foods Company maintain certain financial
ratios, including a leverage ratio (computed as the ratio of the aggregate
outstanding principal amount of defined indebtedness to EBITDA) and an interest
coverage ratio (computed as the ratio of EBITDA to interest expense). In
addition, this facility requires that Dean Foods Company maintain a minimum
level of net worth (as defined by the agreement).

Dean Foods Company's leverage ratio must be less than or equal to:

Dean Foods Company's interest coverage ratio must be greater than or equal
to 3.00 to 1.00.

Dean Foods Company's consolidated net worth must be greater than or equal
to $1.2 billion, as increased each quarter (beginning with the quarter ended
March 31, 2002) by an amount equal to 50% of their consolidated net income for
the quarter, plus 75% of the amount by which stockholders' equity is increased
by certain equity issuances. As of December 31, 2002, the minimum net worth
requirement was $1.28 billion.

The facility also contains limitations on liens, investments and the
incurrence of additional indebtedness, and prohibits certain dispositions of
property and restricts certain payments, including dividends. The credit
facility is secured by liens on substantially all of our domestic assets
(including us and our subsidiaries, but excluding the capital stock of our
subsidiaries and the real property owned by us and our subsidiaries).

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

Dean Foods Company is currently in compliance with all of the requirements
contained in its credit facility.

Litigation, Investigations and Audits -- We and our subsidiaries are
parties, in the ordinary course of business, to certain other claims,
litigation, audits and investigations. We believe we have created adequate
reserves for any liability we may incur in connection with any such currently
pending or threatened matter. In our opinion, the settlement of any such
currently pending or threatened matter is not expected to have a material
adverse impact on our financial position, results of operations or cash flows.

20. FAIR VALUE OF FINANCIAL INSTRUMENTS

Pursuant to SFAS No. 107, "Disclosure About Fair Value of Financial
Instruments," we are required to disclose an estimate of the fair value of our
financial instruments as of December 31, 2002 and 2001 and for the fiscal years
ended May 2001. SFAS No. 107 defines the fair value of financial instruments as
the amount at which the instrument could be exchanged in a current transaction
between willing parties.

Due to their near-term maturities, the carrying amounts of accounts
receivable and accounts payable are considered equivalent to fair value.

F-31

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The fair value of our long-term debt was determined using valuation
techniques that considered cash flows discounted at current market rates and our
best estimate for instruments without quoted market prices. At May 27, 2001 the
fair value of long-term debt was estimated to be $873.4 million. At the date of
our acquisition by Dean Foods Company our long-term debt was revalued to its
current market value. At December 31, 2001 this value approximated the fair
value of long-term debt. At December 31, 2002 the fair value of senior notes was
estimated at $702.8 million. All other long term debt was reported at fair value
in our Consolidated Financial Statements.

21. SEGMENT AND GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS

Segment Information -- We currently have two reportable segments: Dairy
Group and Specialty Foods. Our Dairy Group segment manufactures and distributes
fluid milk, ice cream and novelties, half-and-half and whipping cream, sour
cream, cottage cheese and yogurt, as well as fruit juices and other flavored
drinks and bottled water. Specialty Foods processes and markets pickles,
powdered products such as non-dairy coffee creamers, and aseptic sauces,
puddings and nutritional beverages.

Prior to our acquisition by Dean Foods Company, we had an NRP segment. As a
result of the acquisition by Dean Foods Company, as discussed in Note 2, we no
longer have an NRP segment. Prior periods have been restated to reflect NRP as a
discontinued operation.

The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. We evaluate performance based on
operating profit not including non-recurring gains and losses and foreign
exchange gains and losses.

We do not allocate income taxes, management fees or unusual items to
segments. In addition, there are no significant non-cash items reported in
segments profit or loss other than depreciation and amortization. The amounts in
the following tables are the amounts obtained from reports used by our executive
management

F-32

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

team for the year ended December 31, 2002, the period from May 28, 2001 through
December 31, 2001 and fiscal years ended May 2001 and 2000:

F-33

DEAN HOLDING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Substantially all of our business is within the United States. Intersegment
sales are not material.

Major Customers -- The largest customer of our Dairy Group and Specialty
Foods segments represented $404.8 million or 11.1% of Dairy Group sales and
10.3% of consolidated sales. Our second-largest customer represented $365.6
million or 11.0% of Dairy Group sales and 9.3% of consolidated sales.

22. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the unaudited quarterly results of operations
for the year ended December 31, 2002, the period from May 28, 2001 to December
31, 2001 and fiscal year 2001 (in thousands). Financial information for all
periods has been restated to reflect NRP as a discontinued operation.

- ---------------

(1) The results of operations for the month of December 2001 are as follows: net
sales $393,545, gross profit $89,385 and net loss $4,169.

(2) Net sales and gross profit have been restated to reflect the results of NRP
as discontinued operations. The effect on this restatement was to decrease
net sales by $102,259 and $109,007 in the first and second quarter of the
period from May 28 to December 31, 2001, and to decrease net sales by
$85,963, $103,898, $103,007 and $106,706 in the first, second, third and
fourth quarter of fiscal year 2001. In addition, the effect of the
restatement decreased gross profit by $21,461 and $28,500 in the first and
second quarters of the period from May 28, 2001 to December 31, 2001, and
decreased gross profit by $22,839, $19,863, $22,065 and $21,735 in the
first, second, third and fourth quarter of fiscal year 2001.

(3) Includes charges of $3,718, $9,821, and $16,461 for transaction related
costs for the first quarter, second quarter and month of December of the
period from May 28, 2001 to December 31, 2001, respectively. The month of
December also includes a charge of $366 for a plant closure.

(4) Includes a gain of $10,000 related to sale of a note associated with the
divestiture of our vegetables business in fiscal 1999.

(5) Includes a charge of $22,151 for transaction related costs.

F-34

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Dean Holding Company
Dallas, Texas

We have audited the consolidated financial statements of Dean Holding
Company and subsidiaries (the "Company") (formerly known as Dean Foods Company)
as of December 31, 2002 and 2001 and for the year ended December 31, 2002 and
for the period from May 28, 2001 to December 31, 2001, and have issued our
report thereon dated March 24, 2003; such report is included elsewhere in this
Form 10-K. Our audits also included the consolidated financial statement
schedule of the Company listed in Item 15. This consolidated financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, such consolidated
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

DELOITTE & TOUCHE LLP

Dallas, Texas
March 24, 2003

F-35

REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and
Shareholder of Dean Holding Company:

Our audits of the consolidated financial statements referred to in our
report dated June 26, 2001, except as to Notes 2 and 4, which are as of December
21, 2001, appearing in this Annual Report on Form 10-K for year ended December
31, 2002 also included an audit of the financial statement schedule for each of
the two years in the period ended May 27, 2001 listed in Item 15 of this Form
10-K. In our opinion, the financial statement schedule for each of the two years
in the period ended May 27, 2001 presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.

PricewaterhouseCoopers LLP
June 26, 2001, except as to Notes 2 and 4, which
are as of December 21, 2001
Chicago, Illinois

F-36

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

As a result of our acquisition by Dean Foods Company on December 21, 2001,
we notified PricewaterhouseCoopers, LLP on January 3, 2002, of our decision to
replace PricewaterhouseCoopers, LLP as independent auditor with Dean Foods
Company's auditor, Deloitte & Touche, LLP, effective immediately.
PricewaterhouseCoopers, LLP's reports on our Consolidated Financial Statements
for the two fiscal years ended May 28, 2000 and May 27, 2001, respectively, did
not contain an adverse opinion or disclaimer of opinion, nor were such reports
qualified or modified as to uncertainty, audit scope or accounting principles.
During our two fiscal years ended May 27, 2001 and through the dismissal date,
(i) there were no disagreements with PricewaterhouseCoopers, LLP on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreement(s), if not resolved to the
satisfaction of PricewaterhouseCoopers, LLP, would have caused it to make
reference to the subject matter of the disagreement(s) in connection with its
reports covering such periods, and (ii) there were no "Reportable Events"
(meaning any of the items listed in paragraphs (a)(1)(v)(A)-(D) of Item 304
Regulation S-K) requiring disclosure. Other than that, during our two most
recent fiscal years, no independent accountant who was engaged as the principal
accountant to audit our financial statements, nor any independent who was
engaged to audit a significant subsidiary and on whom our principal accountant
expressed reliance in its report, has resigned or been dismissed.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

Omitted as permitted by General Instruction I(2)(c) to Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

Omitted as permitted by General Instruction I(2)(c) to Form 10-K.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Omitted as permitted by General Instruction I(2)(c) to Form 10-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Omitted as permitted by General Instruction I(2)(c) to Form 10-K.

ITEM 14. CONTROLS AND PROCEDURES

Based on their evaluation, as of a date within 90 days of the filing of
this Form 10-K, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures (as defined in Rules 13a-
and 15d-14 under the Securities Exchange Act of 1934) are effective. There have
been no significant changes in internal controls or in other factors that could
significantly affect these controls subsequent to the date of their evaluation
including any corrective actions with regard to significant deficiencies and
material weaknesses.

12

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

Financial Statements

The following consolidated financial statements are filed as part of this
report or are incorporated herein as indicated:

Financial Statement Schedules

Independent Auditors' Report

Report of Independent Accountants on Financial Statement Schedule

Schedule II -- Valuation and Qualifying Accounts

Exhibits

See Index to Exhibits.

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.

By: /s/ BARRY A. FROMBERG
--------------------------------------
Barry A. Fromberg
Executive Vice President and
Chief Financial Officer

Dated March 26, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

13

CERTIFICATION

I, Gregg Engles, certify that:

1. I have reviewed this annual report on Form 10-K of Dean Holding Company;

2. Based on my knowledge, this annual 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 annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

(a) Designed such disclosure controls and procedures 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 annual report is being
prepared;

(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and

(c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

(a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weakness in internal controls;
and

(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

/s/ GREGG ENGLES
--------------------------------------
Gregg Engles
Chief Executive Officer

Date: March 26, 2003

C-1

CERTIFICATION

I, Barry A. Fromberg, certify that:

1. I have reviewed this annual report on Form 10-K of Dean Holding Company;

2. Based on my knowledge, this annual 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 annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

(a) Designed such disclosure controls and procedures 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 annual report is being
prepared;

(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and

(c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

(a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weakness in internal controls;
and

(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

/s/ BARRY A. FROMBERG
--------------------------------------
Barry A. Fromberg
Chief Financial Officer

Date: March 26, 2003

C-2

SCHEDULE II

DEAN HOLDING COMPANY

VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31, 2002, THE PERIOD FROM MAY 28, 2001 TO DECEMBER 31, 2001
AND
FISCAL YEARS ENDED MAY 2001 AND 2000

Allowance for doubtful accounts deducted from accounts receivable:

INDEX TO EXHIBITS

Explanatory Note: References in this Index to "Old Dean" are references to
the registrant, Dean Holding Company.