DEAN FOODS CO/ - 10-Q Quarterly Report

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

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FORM 10-Q

(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003

OR

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

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 001-12755

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

(DEAN FOODS COMPANY LOGO)

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

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

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

As of May 12, 2003 the number of shares outstanding of each class of common
stock was:

Common Stock, par value $.01 89,966,531

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TABLE OF CONTENTS

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PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DEAN FOODS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

See notes to Condensed Consolidated Financial Statements.

3

DEAN FOODS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)

See notes to Condensed Consolidated Financial Statements.

4

DEAN FOODS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

See notes to Condensed Consolidated Financial Statements.

5

DEAN FOODS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2003
(UNAUDITED)

1. GENERAL

Basis of Presentation -- The unaudited Condensed Consolidated Financial
Statements contained in this report have been prepared on the same basis as the
Consolidated Financial Statements in our Annual Report on Form 10-K for the year
ended December 31, 2002. In our opinion, we have made all necessary adjustments
(which include only normal recurring adjustments) in order to present fairly, in
all material respects, our consolidated financial position, results of
operations and cash flows as of the dates and for the periods presented. Certain
reclassifications have been made to conform the prior year's Consolidated
Financial Statements to the current year classifications. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted. Our
results of operations for the period ended March 31, 2003 may not be indicative
of our operating results for the full year. The Condensed Consolidated Financial
Statements contained in this report should be read in conjunction with our 2002
Consolidated Financial Statements contained in our Annual Report on Form 10-K as
filed with the Securities and Exchange Commission on March 27, 2003.

On April 23, 2002, we effected a two-for-one split of our common stock.
Pursuant to the split, all shareholders of record as of April 8, 2002 received
one additional share of common stock for each share held on that date. All share
numbers contained in our Condensed Consolidated Financial Statements, and in
these notes, have been adjusted for all periods to reflect the stock split.

This Quarterly Report, including these notes, have been written in
accordance with the Securities and Exchange Commission's "Plain English"
guidelines. Unless otherwise indicated, references in this report to "we," "us"
or "our" refer to Dean Foods Company and its subsidiaries, taken as a whole.

Recently Adopted Accounting Pronouncements -- In June 2001, Financial
Accounting Standards Board ("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 the associated legal obligation for the liability 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 and
amortized over the useful life of the asset. SFAS No. 143 became effective for
us in 2003. The adoption of this pronouncement did not 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. Adoption of this standard requires us to reclassify extraordinary
losses previously reported from the early extinguishment of debt as a component
of "other expense."

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 EITF Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a 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

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initiated after December 31, 2002. Our adoption of this standard will change the
timing of the recognition of certain charges associated with exit and disposal
activities.

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 adopted the
liability recognition requirements of FIN No. 45 effective January 1, 2003. The
adoption of this pronouncement did not 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 special
purpose limited liability entities to facilitate our receivable-backed loan and
our trust-issued preferred securities. Since their formations, these entities
have been consolidated in our financial statements for financial reporting
purposes. Therefore, FIN No. 46 will have no impact on our Consolidated
Financial Statements.

Employee Stock-Based Compensation -- We measure compensation expense for
our stock-based employee compensation plans using the intrinsic value method and
provide 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.

We have elected to follow Accounting Principles Board Opinion No. 25 and
related interpretations in accounting for our stock options. All options granted
to date have been to employees, officers or directors. Accordingly, no
compensation expense has been recognized since stock options granted were at
exercise prices which approximated or exceeded market value at the grant date.
Had compensation expense been determined for stock option grants using 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:

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(1) Calculated in accordance with the Black-Scholes option pricing model, using
the following assumptions: expected volatility of 38%, expected dividend
yield of 0%, expected option term of seven
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years and risk-free rates of return as of the date of grant of ranging from
3.56% to 3.64% based on the yield of seven-year U.S. Treasury securities.

(2) Calculated in accordance with the Black-Scholes option pricing model, using
the following assumptions: expected volatility of 38%, expected dividend
yield of 0%, expected option term of seven years and risk-free rates of
return as of the date of grant of 4.64% based on the yield of seven-year
U.S. Treasury securities.

2. DISCONTINUED OPERATIONS

On December 30, 2002, we sold our operations in Puerto Rico for a net price
of approximately $119.4 million. In accordance with generally accepted
accounting principles, our financial statements have been restated to reflect
our former Puerto Rico business as a discontinued operation.

Revenues and income before taxes generated by our Puerto Rico operations
were as follows:

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(1) Corporate interest expense of $1.4 million for the three months ended March
31, 2002 was allocated to our Puerto Rico operations based on the ratio of
our investment in them to total debt and equity.

All intercompany revenues and expenses have been appropriately eliminated
in the table above.

In the first quarter of 2002 we recognized an impairment charge of $37.7
million related to the goodwill of our Puerto Rico operations in accordance with
our implementation of SFAS No. 142 "Goodwill and Other Intangible Assets." This
loss is reflected as a cumulative change in accounting principle in our
Consolidated Financial Statements.

3. INVENTORIES

Approximately $72.2 million and $97.3 million of our inventory was
accounted for under the last-in, first-out (LIFO) method of accounting at March
31, 2003 and December 31, 2002, respectively. There was no material excess of
current cost over the stated value of LIFO inventories at either date.

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4. INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for the three months ended March
31, 2003 are as follows:

The gross carrying amount and accumulated amortization of our intangible
assets other than goodwill as of March 31, 2003 and December 31, 2002 are as
follows:

In accordance with SFAS No. 142, we completed an impairment assessment of
our intangibles with an indefinite useful life, other than goodwill, at January
1, 2002 during the first quarter of 2002. We determined that an impairment of
$47.3 million, net of income tax benefit of $29 million existed at January 1,
2002. The impairment related to certain trademarks in our Dairy Group and
Morningstar/ White Wave segments, and was recorded in the first quarter as the
cumulative effect of accounting change. The fair value of these trademarks was
determined using a present value technique.

Amortization expense on intangible assets for the three months ended March
31, 2003 and 2002 was $1.6 million and $1.9 million, respectively. Estimated
aggregate intangible asset amortization expense for the next five years is as
follows:

2004................................................... $4.0 million
2005................................................... 3.9 million
2006................................................... 3.7 million
2007................................................... 3.5 million
2008................................................... 3.5 million

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5. LONG-TERM DEBT

Senior Credit Facility -- On December 21, 2001, in connection with our
acquisition of Dean Foods Company ("Old Dean"), we entered into a $2.7 billion
senior credit agreement with a syndicate of lenders. The senior credit facility
provides an $800 million revolving line of credit, a Tranche A $900 million term
loan and a Tranche B $1 billion term loan. At March 31, 2003 there were
outstanding term loan borrowings of $1.79 billion under this facility, plus $9.7
million that was outstanding under the revolving line of credit. $75 million of
letters of credit were issued but undrawn. At March 31, 2003, approximately
$715.3 million was available for future borrowings under the revolving credit
facility, subject to satisfaction of certain conditions contained in the loan
agreement. We are currently in compliance with all covenants contained in our
credit agreement.

Credit Facility Terms -- Amounts outstanding under the revolver and the
Tranche A term loan bear interest at a rate per annum equal to one of the
following rates, at our 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 our leverage ratio (which is computed as the ratio
of indebtedness to EBITDA, as such terms are defined in the credit
agreement), or

- the London Interbank Offering Rate ("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 our leverage ratio.

Borrowings under the Tranche B term loan bear interest at a rate per annum
equal to one of the following rates, at our 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 3.54% at March 31,
2003. However, we had interest rate swap agreements in place that hedged $1.48
billion of our borrowings under this facility at an average rate of 4.34%, plus
the applicable interest rate margin. Interest is payable quarterly or at the end
of the applicable interest period.

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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 $800 million 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, and (2) upon
the occurrence of certain debt and equity issuances when our leverage ratio is
greater than 3.75 to 1.0. The credit agreement requires that we prepay 50% of
defined excess cash flow for any fiscal year (beginning in 2003) in which our
leverage ratio at year end is greater than 3.75 to 1.0. As of March 31, 2003,
our leverage ratio was 3.4 to 1.0.

In consideration for the revolving commitments, we pay a commitment fee on
unused amounts of the $800 million revolving credit facility that ranges from
37.5 to 50 basis points, based on our leverage ratio.

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

Our leverage ratio must be less than or equal to:

Our interest coverage ratio must be greater than or equal to 3.00 to 1.00.

Our 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 our consolidated net income for the quarter, plus 75%
of the amount by which stockholders' equity is increased by certain equity
issuances. As of March 31, 2003, the minimum net worth requirement was $1.3
billion.

Our credit agreement permits us to complete acquisitions that meet the
following conditions without obtaining prior approval: (1) the acquired company
is involved in the manufacture, processing and distribution of food or packaging
products or any other line of business in which we are currently engaged, (2)
the net cash consideration is not greater than $300 million, (3) we acquire at
least 51% of the acquired entity, and (4) the transaction is approved by the
Board of Directors or shareholders, as appropriate, of the target. All other
acquisitions must be approved in advance by the required lenders.

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Our credit agreement also permits us to repurchase stock under our share
repurchase program, provided that, if our leverage ratio is greater than 3.75 to
1.0, total Restricted Payments (as defined in the agreement, which definition
includes stock repurchases) cannot exceed $50 million per year, plus the amount
of payments required to be made on our outstanding convertible preferred
securities during that year.

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 the assets of our subsidiaries, but excluding the capital stock of
Old Dean's subsidiaries, and the real property owned by Old Dean and its
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 our other debt, a
change in control and certain other material adverse changes in our business.
The agreement does not contain any default triggers based on our debt rating.

Senior Notes -- Old Dean had certain senior notes outstanding at the time
of the acquisition which remain outstanding. The notes carry the following
interest rates and maturities:

- $97.1 million ($100 million face value), at 6.75% interest, maturing in
2005;

- $250.5 million ($250 million face value), at 8.15% interest, maturing in
2007;

- $184.7 million ($200 million face value), at 6.625% interest, maturing in
2009; and

- $125.6 million ($150 million face value), at 6.9% interest, maturing in
2017.

The related indentures do not contain financial covenants but they do
contain certain restrictions including a prohibition against Old Dean and its
subsidiaries granting liens on their respective real estate interests and a
prohibition against Old Dean granting liens on the stock of its subsidiaries.
The indentures also place certain restrictions on Old Dean's ability to divest
assets not in the ordinary course of business.

Receivables-Backed Loan -- We have entered into a $400 million receivables
securitization facility pursuant to which certain of our subsidiaries sell their
accounts receivable to three wholly-owned special purpose entities intended to
be bankruptcy-remote. The special purpose entities then transfer the receivables
to third party asset-backed commercial paper conduits sponsored by major
financial institutions. The assets and liabilities of these three special
purpose entities are fully reflected on our balance sheet, and the
securitization is treated as a borrowing for accounting purposes. During the
first quarter of 2003, we had net borrowings of $100 million under this facility
leaving an outstanding balance of $245 million at March 31, 2003. The
receivables-backed loan bears interest at a variable rate based on the
commercial paper yield as defined in the agreement. The average interest rate on
the receivables-backed loan was 1.92% at March 31, 2003. Our ability to
re-borrow under this facility is subject to a standard "borrowing base" formula.
At March 31, 2003, we could have re-borrowed an additional $85.1 million under
this facility.

Foreign Subsidiary Term Loan -- In connection with our acquisition of Leche
Celta in February 2000, our Spanish subsidiary obtained a 42.1 million euro (as
of March 31, 2003, approximately $45.9 million) non-recourse term loan from a
syndicate of lenders, all of which was borrowed at closing and used to finance a
portion of the purchase price. The loan, which is secured by the stock of Leche
Celta, will expire on February 21, 2007, bears interest at a variable rate based
on the ratio of Leche Celta's debt to EBITDA (as defined in the corresponding
loan agreement), and requires semi-annual principal payments. At March 31, 2003,
a total of $34.1 million was outstanding under this facility. The interest rate
in effect on this loan at March 31, 2003 was 4.44%.

Other Lines of Credit -- Leche Celta is our only subsidiary with its own
lines of credit separate from the credit facilities described above. Leche
Celta's primary line of credit, which is in the principal amount of 15 million
euros (as of March 31, 2003 approximately $16.4 million), was obtained on July
12, 2000,

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bears interest at a variable interest rate based on the ratio of Leche Celta's
debt to EBITDA (as defined in the corresponding loan agreement), is secured by
our stock in Leche Celta and will expire in June 2007. Leche Celta also utilizes
other local commercial lines of credit. At March 31, 2003, $6.5 million was
outstanding under these lines of credit at an average interest rate of 3.26%.

Industrial Development Revenue Bonds -- Certain of our subsidiaries have
revenue bonds outstanding, some of which require nominal 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 which, at March 31, 2003 ranged from
1.27% to 1.40%.

Other Subsidiary Debt -- Other subsidiary debt includes 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 March 31, 2003 there were $75 million of issued but
undrawn letters of credit secured by our senior credit facility. In addition to
the letters of credit secured by our credit facility, an additional $48.2
million of letters of credit were outstanding at March 31, 2003. The majority of
these letters of credit were required by various utilities and government
entities for performance and insurance guarantees.

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

The following table summarizes our various interest rate agreements in
effect as of March 31, 2003:

The following table summarizes our various interest rate agreements as of
December 31, 2002:

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We have also entered into interest rate swap agreements that provide hedges
for loans under Leche Celta's term loan. The following table summarizes these
agreements:

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

As of March 31, 2003, our derivative liability totaled $75.8 million on our
consolidated balance sheet including approximately $42.6 million recorded as a
component of accounts payable and accrued expenses and $33.2 million recorded as
a component of other long-term liabilities. There was no hedge ineffectiveness,
as determined in accordance with SFAS No. 133, for the quarter ended March 31,
2003. Approximately $7.1 million of losses (net of taxes) were reclassified to
interest expense from other comprehensive income during the quarter ended March
31, 2003. We estimate that approximately $27.1 million of net derivative losses
(net of taxes) included in other comprehensive income will be reclassified into
earnings within the next twelve months. These losses will partially offset the
lower interest payments recorded on our variable rate debt.

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

6. STOCKHOLDERS' EQUITY

Stock Award Plans -- The following table summarizes stock option activity
during the first quarter of 2003 under our stock-based compensation programs:

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(1) Options vest as follows: one-third on the first anniversary of the grant
date, one-third on the second anniversary of the grant date, and one-third
on the third anniversary of the grant date.

(2) Pursuant to the terms of our stock award plans, options that are canceled or
forfeited become available for future grants.

We issued 8,957 shares of restricted stock during the quarter to
independent directors as compensation for services rendered during the fourth
quarter of 2002 and first quarter of 2003. Shares of

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restricted stock vest one-third on grant, one-third on the first anniversary of
grant and one-third on the second anniversary of grant.

We also issued 512,500 deferred stock units ("DSU's") to certain key
employees during the first quarter of 2003. Each DSU represents the right to
receive one share of common stock in the future. DSU's have no exercise price.
Each employee's DSU grant vests ratably over 5 years, subject to certain
accelerated vesting provisions based primarily on our stock price.

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

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(1) Stock option conversion excludes 90,240 anti-dilutive shares at March 31,
2002.

Common Stock Repurchases -- On each of January 8, 2003 and February 12,
2003, our Board of Directors authorized additional increases to our stock
repurchase program of $150 million each. During the first quarter of 2003, we
spent approximately $129 million to repurchase approximately 3.24 million shares
of our common stock for an average price of $39.72 per share. At March 31, 2003,
approximately $171.6 remained available under our current stock repurchase
authorization.

TIPES Conversions -- On March 17, 2003, we announced that we would redeem
$100 million of our trust issued preferred securities ("TIPES") effective April
17, 2003. Holders of approximately 99% of TIPES that were called for redemption
elected to convert their TIPES into shares of our common stock, at a conversion
rate of 1.278 shares of common stock for each TIPES security, instead of being
redeemed for cash. Accordingly, we issued approximately 2.5 million shares of
common stock to holders of TIPES

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that were called for redemption, 7.4 thousand of which were issued during the
first quarter of 2003, and the balance of which were issued between April 1 and
April 16, 2003. See Note 12.

7. COMPREHENSIVE INCOME

Comprehensive income consists of net income plus all other changes in
equity from non-owner sources. Consolidated comprehensive income was $68.2
million for the three-month period ending March 31, 2003. The amounts of income
tax (expense) benefit allocated to each component of other comprehensive income
during the three months ended March 31, 2003 are included below.

8. PLANT CLOSING COSTS

Plant Closing Costs -- As part of an overall integration and cost reduction
program, we previously recorded plant closing costs related to the closing of
our Port Huron, Michigan plant with consolidation of production into other
plants. As part of this charge, we wrote down the value of the Port Huron plant.
In the first quarter of 2003, we sold this facility for more than expected,
resulting in a gain of $1.7 million. This gain was recorded as a reduction of
restructuring expense.

The principal components of our overall integration and cost reduction
program include the following:

- Workforce reductions as a result of plant closings, plant
rationalizations and consolidation of administrative functions. The
program includes an overall reduction of 446 employees who were primarily
plant employees associated with the plant closings and rationalization.
The costs were charged to our earnings in the period that the plan was
established in detail and employee severance and benefits had been
appropriately communicated. All except 35 employees had been terminated
as of March 31, 2003;

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

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

- Write-downs of property, plant and equipment and other assets, primarily
for asset impairments as a result of facilities that are no longer used
in operations. The impairments relate primarily to owned buildings, land
and equipment at the facilities which are 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. The carrying value of closed facilities at March 31, 2003
was approximately $2.6 million. We are marketing these properties for
sale. Divestitures of the closed facilities has not resulted in
significant modification to the estimate of fair value.

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Activity with respect to plant closing costs during the first quarter of
2003 is summarized below:

There have not been significant adjustments to the plans and the majority
of future cash requirements to reduce the liability at March 31, 2003 are
expected to be funded within a year.

Acquired Facility Closing Costs -- As part of our purchase price
allocations, we accrue costs from time to time pursuant to plans to exit certain
activities and operations of acquired businesses in order to rationalize
production and reduce costs and inefficiencies. Several plants were closed in
connection with our acquisition of Old Dean and one plant was closed in
connection with our acquisition of Marie's.

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 844 plant and
administrative personnel. The costs incurred are charged against our
acquisition liabilities for these costs. As of March 31, 2003, 43
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 acquisition liabilities during the first
quarter of 2003 is summarized below:

9. SHIPPING AND HANDLING FEES

Our shipping and handling costs are included in both cost of sales and
selling and distribution expense, depending on the nature of such costs.
Shipping and handling costs included in cost of sales reflect the cost of
shipping products to customers through third party carriers, inventory warehouse
costs and product loading and handling costs. Shipping and handling costs
included in selling and distribution expense consist primarily of route delivery
costs for both company-owned delivery routes and independent distributor routes,
to the extent that such independent distributors are paid a delivery fee.
Shipping and

17

handling costs that were recorded as a component of selling and distribution
expense were approximately $241.5 million during the first quarter of 2003 and
$231.7 million during the first quarter of 2002.

10. COMMITMENTS AND CONTINGENCIES

Leases -- We lease certain property, plant and equipment used in our
operations under both capital and operating lease agreements. Such leases, which
are primarily for machinery, equipment and vehicles, have lease terms ranging
from 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.

Contingent Obligations Related to Milk Supply Arrangements -- On December
21, 2001, in connection with our acquisition of Old Dean, we purchased Dairy
Farmers of America's ("DFA") 33.8% stake in our Dairy Group. In connection with
that transaction, we issued a contingent, subordinated promissory note to DFA in
the original principal amount of $40 million. DFA is our primary supplier of raw
milk, and the promissory note is designed to ensure that DFA has the opportunity
to continue to supply raw milk to certain of our plants until 2021, or be paid
for the loss of that business. The promissory note has a 20-year term and bears
interest based on the consumer price index. Interest will not be paid in cash
but will be added to the principal amount of the note annually, up to a maximum
principal amount of $96 million. We may prepay the note in whole or in part at
any time, without penalty. The note will only become payable if we ever
materially breach or terminate one of our milk supply agreements with DFA
without renewal or replacement. Otherwise, the note will expire at the end of 20
years, without any obligation to pay any portion of the principal or interest.
Payments made under the note, if any, would be expensed as incurred.

Also as part of the same transaction, we amended a milk supply agreement
with DFA to provide that:

- If we have not offered DFA the right to supply all of our raw milk
requirements for certain of Old Dean's plants by either (i) June 2003, or
(ii) with respect to certain other plants, the end of the sixth full
calendar month following the expiration of milk supply agreements in
existence at those plants on December 21, 2001, or

- If DFA is prohibited from supplying those plants because of an
injunction, restraining order or otherwise as a result of or arising from
a milk supply contract to which we are party,

we must pay DFA liquidated damages determined and paid on a plant-by-plant
basis, based generally on the amount of raw milk used by that plant, up to an
aggregate maximum of $47 million. Liquidated damages would be payable in arrears
in equal, quarterly installments over a 5-year period, without interest. If we
are required to pay any such liquidated damages, the principal amount of the $40
million subordinated promissory note described above will be reduced by an
amount equal to 25% of the liquidated damages paid. We cannot currently estimate
the amount of damages that we may have to pay, if any.

Contingent Obligations Related to White Wave Acquisition -- On May 9, 2002,
we completed the acquisition of White Wave, Inc. In connection with the
acquisition, we established a Performance Bonus Plan pursuant to which we have
agreed to pay performance bonuses to certain employees of White Wave if certain
performance targets are achieved. Specifically, we agreed that if the cumulative
net sales (as defined in the plan) of White Wave equal or exceed $382.5 million
during the period beginning April 1, 2002 and ending March 31, 2004 (the
"Incentive Period") and White Wave does not exceed the budgetary restrictions
set forth in the plan by more than $1 million during the Incentive Period, we
will pay employee bonuses as follows:

- If cumulative net sales during the Incentive Period are between $382.5
million and $450 million, the bonus paid will scale ratably (meaning
$129,630 for each $1 million of net sales) between $26.025 million and
$35.0 million; and

18

- If cumulative net sales exceed $450 million during the Incentive Period,
additional amounts will be paid as follows:

- First $50 million above $450 million net sales: 10% of amount in excess
of $450 million, plus

- Second $50 million above $450 million net sales: 15% of amount in excess
of $500 million, plus

- In excess of $550 million net sales: 20% of amount in excess of $550
million.

We currently expect the aggregate amount of bonuses payable under White Wave's
Performance Bonus Plan to be in the range of $35 million to $40 million, and we
have recorded quarterly accruals based on the aggregate amount that we expect to
pay. Key employees of White Wave are also entitled to receive certain payments
if they are terminated without cause (or as a result of death or incapacity)
during the Incentive Period.

Contingent Obligations Related to Divested Operations -- We have sold
several businesses in recent years. In each case, we have retained certain known
contingent liabilities related to those businesses and/or assumed an obligation
to indemnify the purchasers of the businesses for certain unknown contingent
liabilities. In the case of the sale of our Puerto Rico operations, we were
required to post collateral, including one surety bond and one letter of credit,
to secure our obligation to satisfy the retained liabilities and to fulfill our
indemnification obligation. We believe we have established adequate reserves for
any potential liability related to our divested businesses. Moreover, we do not
expect any liability that we may have for these retained liabilities, or any
indemnification liability, to be material.

Enron -- In 1999, we entered into an Energy Program Agreement with Enron
Energy Services pursuant to which we contracted to purchase electricity for
certain of our plants at a discounted rate for a ten-year period. Under the
agreement, Enron (i) supplied (or arranged for the supply of) utilities to our
facilities and paid the costs of such utilities directly to the utility
suppliers, and (ii) made certain capital improvements at certain of our
facilities in an effort to reduce our utility consumption, all in exchange for
one monthly payment from us. In November 2001, Enron stopped performing under
the agreement and in December 2001, Enron filed for bankruptcy protection.
Shortly thereafter, Enron rejected our contract. In order to compensate us for
our lost savings, the Energy Program Agreement provided for formula-based
liquidated damages. We have filed a claim in Enron's bankruptcy for our damages.
We have received correspondence from Enron demanding payment of certain amounts
that Enron alleges we owe under the agreement. We have disputed the validity of
Enron's claim and are in the process of attempting to negotiate an agreement
with Enron for the settlement of our claims against each other. We cannot
estimate the outcome of any settlement with Enron. However, we do not expect the
settlement to have a material adverse impact on our financial position, results
of operations or cash flows.

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 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.

11. BUSINESS AND GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS

Segment Data -- We currently have three reportable segments: Dairy Group,
Morningstar/White Wave and Specialty Foods. Our Dairy Group segment manufactures
and distributes milk, ice cream and ice cream novelties, half-and-half and
whipping cream, cultured dairy products, fruit juices, other flavored drinks,
bottled water, coffee creamers, dips and condensed milk. Morningstar/White Wave
manufactures and sells dairy and non-dairy liquid coffee creamers, extended
shelf-life milks, cultured dairy products, dips and dressings, aerosol whipped
topping, dairy and nondairy frozen whipped topping and frozen creamers, egg
substitute, soy milk and other soy products. Specialty Foods processes and sells
pickles, relishes and peppers; powdered products such as non-dairy coffee
creamers; aseptic sauces and puddings and nutritional beverages. Our Spanish
operations do not meet the definition of a segment and are reported in

19

"Corporate/Other." The 2002 period has been restated to remove the results of
our former Puerto Rico operations, which have been reclassified as a
discontinued operation.

The accounting policies of the segments are the same as those described in
the summary of significant accounting policies set forth in Note 1 to our 2002
Consolidated Financial Statements contained in our 2002 Annual Report on Form
10-K. We evaluate performance based on operating profit not including non-
recurring gains and losses and foreign exchange gains and losses.

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

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

(1) Operating income includes a gain of $1.7 million on the disposition of a
plant in the first three months of 2003 and plant closing costs of $1.2
million in the first three months of 2002.

20

Geographic Information

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

(1) Revenues have been restated to remove revenues related to our Puerto Rico
operations, which have been reclassified as discontinued operations.

Significant Customers -- Our Dairy Group had one customer that represented
greater than 10% of its sales in the first quarter of 2003. Approximately 11% of
our consolidated sales in the first quarter of 2003 were to that same customer.

12. SUBSEQUENT EVENTS

TIPES Redemption -- On March 17, 2003, we announced that on April 17, 2003,
we would redeem TIPES with an aggregate liquidation value of $100 million at a
redemption price of $51.035 per security. Holders of approximately 99% of the
TIPES called for redemption elected to convert their TIPES into shares of our
common stock rather than receive the cash redemption price. Each TIPES security
is convertible into 1.278 shares of our common stock. Accordingly, we issued a
total of approximately 2.5 million shares of common stock to holders of TIPES
that were called for redemption, approximately 7.4 thousand of which were issued
during the first quarter of 2003 and the balance of which were issued between
April 1 and April 16, 2003.

On April 22, 2003, we announced that we will redeem a second tranche of
TIPES. On May 22, 2003, we will redeem another $200 million (aggregate
liquidation value) of TIPES at a redemption price of $51.035 per security.
Holders of TIPES selected for redemption will have until 4:00 p.m. (EDT) on May
21, 2003, to elect to convert their TIPES into shares of our common stock rather
than receive the cash redemption price.

Approximately $300 million (aggregate liquidation value) of TIPES will
remain outstanding following completion of the second partial redemption.

Stock Split -- On May 7, 2003, our Board of Directors declared a
three-for-two split of our common stock. The split will be payable on June 9,
2003 to shareholders of record on May 23, 2003.

21

On a pro forma basis as if the stock split had already occurred at each of
March 31, 2003 and 2002, common shares outstanding would have been 131 million
and 133 million shares, respectively, and earnings per share would have been:

Organizational Changes -- On May 8, 2003, we announced certain
organizational changes designed to sharpen our focus on our strategic brand
portfolio and enable us to realize additional manufacturing efficiencies. These
changes will include (i) shifting responsibility for manufacturing, selling and
distributing Morningstar Foods' private label dairy products out of Morningstar
Foods and into our Dairy Group, and (ii) shifting responsibility for the
manufacture and distribution of all of Morningstar Foods' remaining products
(which are its nationally branded products) into the Dairy Group, with
Morningstar Foods remaining responsible for the development, marketing and sales
of those products. Approximately half of Morningstar Foods' 2002 sales consisted
of sales of private label dairy products. As a result of these changes, which
will be implemented over the remainder of 2003, Morningstar Foods will be
re-named the Dean Branded Products Group.

When the realignment of our operations is complete, which we expect to be
by January 2004, a new segment reporting structure will begin pursuant to which
(i) Morningstar Foods' existing private label business will be reported in the
Dairy Group segment, (ii) the results of the Dean Branded Products Group and
White Wave will be aggregated and reported as a segment, and (iii) Specialty
Foods will remain unchanged. Until that time, segment results will be reported
consistently with prior years.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

We are the leading processor and distributor of milk and other dairy
products in the United States and a leading manufacturer of specialty foods. We
have five operating divisions including Dairy Group, Morningstar Foods, White
Wave, Specialty Foods and International. In accordance with applicable
accounting rules, we currently have three reportable business segments: Dairy
Group, Morningstar/White Wave and Specialty Foods. Our Dairy Group manufactures
and sells milk, ice cream and novelties, cream (including half-and-half and
whipping cream), cultured products, juice, flavored drinks, water, coffee
creamers, dips and condensed milk. Our Morningstar/White Wave segment
manufactures and sells dairy and non-dairy liquid coffee creamers, extended
shelf-life milks, cultured dairy products, dips and dressings, aerosol whipped
topping, dairy and non-dairy frozen whipped topping and frozen creamers, egg
substitute, as well as soymilk and other soy products. Our Specialty Foods
segment manufactures and sells pickles, relishes and peppers; powdered coffee
creamers and other powdered products; aseptic sauces and puddings and
nutritional beverages.

RESULTS OF OPERATIONS

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

QUARTER ENDED MARCH 31, 2003 COMPARED TO QUARTER ENDED MARCH 31, 2002

Net Sales -- Net sales decreased 4% to $2.14 billion during the first
quarter of 2003 from $2.23 billion in 2002.

Net sales for the Dairy Group decreased 5%, or $93.8 million, in the first
quarter of 2003 compared to the first quarter of 2002. This decrease is
primarily due to the effects of decreased raw milk costs compared to the prior
year. In general, we change the prices that we charge our customers for our
products on a monthly basis, as the costs of our raw materials fluctuate. The
following table sets forth the

23

average monthly Class I "mover" and average monthly Class II minimum prices for
raw skim milk and butterfat for the first quarter of 2003 compared to the first
quarter of 2002:

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

* The prices noted in this table are not the prices that we actually pay. The
federal order minimum prices at any given location for Class I raw skim milk
or Class I butterfat are based on the Class I mover prices plus a location
differential. Class II prices noted in the table are federal minimum prices,
applicable at all federally regulated locations. Our actual cost also
includes producer premiums, procurement costs and other related charges that
vary by location and vendor.

(1) Prices are per hundredweight.

(2) Prices are per pound.

(3) We process Class I raw skim milk and butterfat into fluid milk products.

(4) We process Class II raw skim milk and butterfat into products such as
cottage cheese, creams, ice cream and sour cream.

Net sales for Morningstar/White Wave increased slightly by approximately
0.3%, or $0.7 million, during 2003. The acquisition of White Wave contributed
approximately $49.8 million during 2003. This increase was offset primarily by
the planned phase-out of the Lactaid, Nestle Nesquik and Nestle Coffeemate
co-packing businesses, and to a lesser extent by the effects of lower raw milk
and bulk cream costs, and the transfer of certain cultured dairy product sales
volumes to the Dairy Group.

In 2002, we began tracking the sales growth of our strategic brands.
Morningstar/White Wave's strategic brands include Hershey's flavored milks and
milkshakes, International Delight coffee creamers, Silk soy products, Sun Soy
soymilk, Folger's Jakada milk and coffee beverage, Land O'Lakes extended
shelf-life products, Marie's dips and dressings and Dean's dips. On a pro forma
basis as if White Wave had been acquired on January 1, 2002, strategic brand
sales volumes increased approximately 32% in the first quarter of 2003 from the
first quarter of 2002.

Net sales for our Specialty Foods segment increased slightly by
approximately 1%, or $1.7 million, during the first quarter of 2003 compared to
the first quarter of 2002. This increase was primarily due to an increase in
non-dairy coffee creamer and nutritional beverage sales volumes.

Cost of Sales -- Our cost of sales ratio was 73.4% in the first quarter of
2003 compared to 75.5% in the first quarter of 2002. The cost of sales ratio for
the Dairy Group decreased to 73.4% in the first quarter of 2003 from 75.2% in
the first quarter of 2002 due primarily to lower raw milk costs and also to
realized merger synergies.

The cost of sales ratio for Morningstar/White Wave decreased to 70% in the
first quarter of 2003 from 74% in the first quarter of 2002. This decrease in
2003 was due primarily to the phase-out of the Lactaid and Nestle co-packing
businesses, which had a higher cost of sales, to the acquisition of White Wave,
which has a lower cost of sales, and to a lesser extent to lower raw material
costs. Specialty Foods' cost of sales ratio decreased to 74.7% in the first
quarter of 2003 from 75.9% in the first quarter of 2002. This decrease was due
to synergies resulting from plant rationalization in 2002, offset by an increase
in packaging costs and rising commodity prices.

Operating Costs and Expenses -- Our operating expense ratio was 19.3% in
the first quarter of 2003 compared to 18.0% during the first quarter of 2002.

24

The operating expense ratio at the Dairy Group was 18.4% in the first
quarter of 2003 compared to 17.7% in the first quarter of 2002. The increase in
the 2003 operating expense ratio was primarily due to the effect of lower raw
material prices in 2003. Lower raw material prices generally result in lower
sales dollars. Therefore, falling raw milk prices will generally increase the
Dairy Group's operating expense ratio and rising raw milk prices will generally
reduce the Dairy Group's operating expense ratio.

The operating expense ratio at Morningstar/White Wave was 24.9% during the
first quarter of 2003 compared to 16.3% in the first quarter of 2002. This
increase was caused primarily by the addition of White Wave, which is accruing
significant amounts for bonuses to be paid in March 2004 under the White Wave
Performance Bonus Plan that was established when we acquired White Wave in May
2002. See Note 10 to our Condensed Consolidated Financial Statements. The ratio
was also significantly impacted by higher marketing, selling and distribution
expenses at Morningstar Foods related to the introduction of new products and
the promotion of strategic brands.

The operating expense ratio for Specialty Foods was 10.7% in the first
quarter of 2003 versus 11.2% in the first quarter of 2002 primarily due to the
sale of EBI Foods, Ltd., which had higher operating expenses.

Operating Income -- Operating income during the first quarter of 2003 was
$157 million, an increase of $11.2 million from the first quarter of 2002
operating income of $145.8 million. Our operating margin in the first quarter of
2003 was 7.3% compared to 6.5% in the first quarter of 2002.

The Dairy Group's operating margin increased to 8.2% in the first quarter
of 2003 from 7.1% in the same period of 2002. This increase is primarily due to
the effects of decreased raw milk costs compared to the prior year.

The operating margin for our Morningstar/White Wave segment declined to 5%
in the first quarter of 2003 from 9.7% in the first quarter of 2002. This
decrease was primarily due to the addition of White Wave and higher marketing,
selling and distribution expenses related to the introduction of new products
and promotion of strategic brands. The ratio was also affected by significant
bonus accruals in the first quarter of 2003 under White Wave's Performance Bonus
Plan.

Specialty Foods' operating margin was 14.6% in the first quarter of 2003
versus 12.9% in the first quarter of 2002. This increase was primarily due to
the increase in non-dairy creamer sales (which tend to have higher margins),
realization of merger synergies and lower promotional costs for pickle products.

Other (Income) Expense -- Total other expense decreased by $3.6 million in
the first quarter of 2003 compared to the first quarter of 2002. Interest
expense decreased to $46.9 million in the first quarter of 2003 from $50.5
million in the first quarter of 2002 as a result of lower interest rates and
lower debt levels. Financing charges on preferred securities were $8.4 million
in both years.

Income Taxes -- Income tax expense was recorded at an effective rate of
38.3% in the first quarter of 2003 compared to 37.6% in the first quarter of
2002. Our tax rate varies as the mix of earnings contributed by our various
business units changes and as tax savings initiatives are adopted.

Discontinued Operations -- We recorded income from discontinued operations
of $0.7 million during the first quarter of 2002. On December 30, 2002, we sold
our operations in Puerto Rico; as a result, all amounts attributable to our
former Puerto Rico operations have been reclassified to "income from
discontinued operations."

Cumulative Effect of Accounting Change -- As part of our adoption of SFAS
142 on January 1, 2002 we wrote down the value of certain trademarks and the
goodwill related to our Puerto Rico operations which our analysis indicated were
impaired. Our adoption of this accounting standard resulted in the recognition
of $85 million, net of an income tax benefit of $29 million, as a charge to
earnings.

25

RECENT DEVELOPMENTS

TIPES REDEMPTIONS

On March 17, 2003, we announced that on April 17, 2003, we would redeem
TIPES with an aggregate liquidation value of $100 million at a redemption price
of $51.035 per security. Holders of approximately 99% of the TIPES called for
redemption elected to convert their TIPES into shares of our common stock rather
than receive the cash redemption price. Each TIPES security is convertible into
1.278 shares of our common stock. Accordingly, we issued a total of
approximately 2.5 million shares of common stock to holders of TIPES that were
called for redemption, approximately 7.4 thousand of which were issued during
the first quarter of 2003, with the remaining shares being issued between April
1 and April 16, 2003.

On April 22, 2003, we announced that we will redeem a second tranche of
TIPES. On May 22, 2003, we will redeem another $200 million (aggregate
liquidation value) of TIPES at a redemption price of $51.035 per security.
Holders of TIPES selected for redemption will have until 4:00 p.m. (EDT) on May
21, 2003, to elect to convert their TIPES into shares of our common stock rather
than receive the cash redemption price.

Approximately $300 million (aggregate liquidation value) of TIPES will
remain outstanding following completion of the second partial redemption.

COMMON STOCK REPURCHASES

During the first quarter of 2003, our Board of Directors approved two
increases of our common stock repurchase program of $150 million each. During
the first quarter of 2003, we repurchased approximately 3.24 million shares of
our common stock at an average price of $39.72 per share, for an aggregate
purchase price of approximately $129 million. Approximately $171.6 million
remains available under our current stock repurchase authorization.

STOCK SPLIT

On May 7, 2003, our Board of Directors declared a three-for-two split of
our common stock. The split will be payable on June 9, 2003 to shareholders of
record on May 23, 2003.

ORGANIZATIONAL CHANGES

On May 8, 2003, we announced certain organizational changes designed to
sharpen our focus on our strategic brand portfolio, and enable us to realize
additional manufacturing efficiencies. These changes will include (i) shifting
responsibility for manufacturing, selling and distributing Morningstar Foods'
private label dairy products out of Morningstar Foods and into our Dairy Group,
and (ii) shifting responsibility for the manufacture and distribution of all of
Morningstar Foods' remaining products (which are its nationally branded
products) into the Dairy Group, with Morningstar Foods remaining responsible for
the development, marketing and sales of those products. Approximately half of
Morningstar Foods' 2002 sales consisted of sales of private label dairy
products. As a result of these changes, which will be implemented over the
remainder of 2003, Morningstar Foods will be re-named the Dean Branded Products
Group.

When the realignment of our operations is complete, which we expect to be
by January 2004, a new segment reporting structure will begin, pursuant to which
(i) Morningstar Foods' existing private label business will be reported in the
Dairy Group segment, (ii) the results of the Dean Branded Products Group and
White Wave will be aggregated and reported as a segment, and (iii) Specialty
Foods will remain unchanged. Until then, segment results will be reported
consistently with prior years.

26

BRANDED PRODUCT INITIATIVES

We spent approximately $45 million during the first quarter of 2003
marketing our strategic brands. Highlights of our branded product initiatives
during the first quarter of 2003 include:

International Delight(R) Coffee Creamers -- In the first quarter of 2003,
we began the national rollout of International Delight in its newly-designed
plastic pint bottle, beginning in the western and central United States and
moving eastward. We intend to begin introducing International Delight in a
quart-sized plastic bottle in the second half of the year. We are supporting the
product launch with both television and print advertising and marketing efforts.

Silk(R) Soymilk -- In the first quarter of 2003, we announced that White
Wave entered into a three-year agreement with Starbucks pursuant to which,
beginning this summer, Silk will be the exclusive soymilk used in handcrafted
beverages in all Starbucks locations throughout the United States. Single-serve
bottles of Silk will also be sold separately in certain Starbucks locations, and
both companies will participate in consumer advertising and in-store promotions.

Folgers(R) Jakada(R) Milk and Coffee Beverage -- During the first quarter
of 2003, we began producing Folgers Jakada 4-packs in aseptic packaging on our
Stork filler line in Mt. Crawford, Virginia. Products processed on this
equipment can be stored and shipped without refrigeration.

Marie's(R) Dressings -- At the end of the first quarter of 2003, we
launched Marie's dressings in a newly-redesigned oval jar.

LIQUIDITY AND CAPITAL RESOURCES

HISTORICAL CASH FLOW

During the first quarter of 2003, we met our working capital needs with
cash flow from operations. Net cash provided by operating activities from
continuing operations was $64.5 million for 2003 as contrasted to $82.9 million
for 2002, a decrease of $18.4 million. Net cash provided by operating activities
was primarily impacted by changes in working capital which increased $63.6
million more in 2003 than in the same period of the prior year.

Net cash used in investing activities for continuing operations was $49.7
million in 2003 compared to $42.6 million in 2002, an increase of $7.1 million.
We used approximately $53.7 million for capital expenditures.

We used approximately $142.6 million to repurchase our stock and received
approximately $45.2 million primarily as a result of stock option exercises and
employee stock purchases through our employee stock purchase plan. We had net
proceeds from the issuance of debt of $63.5 million.

CURRENT DEBT OBLIGATIONS

Our senior credit facility provides us with a revolving line of credit of
up to $800 million and two term loans in the amounts of $900 million and $1
billion, respectively. Both term loans have been fully funded since completion
of our acquisition of Dean Foods Company ("Old Dean") in December 2001. The
senior credit facility contains various financial and other restrictive
covenants and requires that we 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 we maintain a minimum level of net worth (as defined by
the agreement). 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 our other debt, a
change in control and certain other material adverse changes in our business.
The agreement does not contain any default triggers based on our debt rating.
See Note 5 to our Condensed Consolidated Financial Statements for further
information regarding the terms of our credit agreement, including interest
rates, principal payment schedules and mandatory prepayment provisions.
27

At March 31, 2003 we had outstanding borrowings of $1.80 billion under our
senior credit facility (compared to $1.83 billion at December 31, 2002),
including approximately $9.7 million that was drawn under the revolving credit
facility, in addition to $75 million of letters of credit that were issued but
undrawn. As of March 31, 2003 approximately $715.3 million was available for
future borrowings under our credit facility, subject to satisfaction of certain
conditions contained in the loan agreement. We are currently in compliance with
all covenants contained in our credit agreement.

In addition to our senior credit facility, we also have a $400 million
receivables-backed credit facility, which had $245 million outstanding at March
31, 2003. See Note 5 to our Condensed Consolidated Financial Statements for more
information about our receivables-backed facility.

Other indebtedness outstanding at March 31, 2003 included $700 million face
value of outstanding indebtedness under Old Dean's senior notes, $34.1 million
of term indebtedness and a $6.5 million line of credit at our Spanish
subsidiary, $21 million of industrial development revenue bonds and
approximately $38.0 million of capital lease and other obligations. See Note 5
to our Condensed Consolidated Financial Statements.

The table below summarizes our obligations for indebtedness and lease
obligations at March 31, 2003 (dollars in thousands).

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

(1) Represents face value of senior notes.

In addition to the letters of credit secured by our senior credit facility,
we had at March 31, 2003 approximately $48.2 million of letters of credit with
three other banks that were issued but undrawn. The majority of these were
required by various utilities and government entities for performance and
insurance guarantees.

OTHER LONG-TERM LIABILITIES

We offer pension benefits to certain employees through various defined
benefit pension plans and also offer certain health care and life insurance
benefits to eligible employees and their eligible dependents upon the retirement
of such employees. Reported costs of providing noncontributory defined pension
benefits and other postretirement benefits are dependent upon numerous factors,
assumptions and estimates.

For example, these costs are impacted by actual employee demographics
(including age, compensation levels and employment periods), the level of
contributions made to the plan and earnings on plan assets. Our pension plan
assets are primarily made up of equity and fixed income investments. Changes
made to the provisions of the plan may also impact current and future pension
costs. Fluctuations in actual equity market returns as well as changes in
general interest rates may result in increased or decreased pension costs in
future periods. Pension costs may also be significantly affected by changes in

28

key actuarial assumptions, including anticipated rates of return on plan assets
and the discount rates used in determining the projected benefit obligation and
pension costs.

In accordance with SFAS No. 87, "Employers' Accounting for Pensions,"
changes in pension obligations associated with these factors may not be
immediately recognized as pension costs on the income statement, but generally
are recognized in future years over the remaining average service period of plan
participants. As such, significant portions of pension costs recorded in any
period may not reflect the actual level of cash benefits provided to plan
participants.

OTHER COMMITMENTS AND CONTINGENCIES

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

Also in connection with our purchase of DFA's minority interest in our
Dairy Group, we agreed to pay to DFA liquidated damages in an amount of up to
$47 million if we fail to offer them the right, within a specified period of
time after completion of the Old Dean acquisition, to supply raw milk to certain
of Old Dean's plants. The amount of damages to be paid, if any, would be
determined on a plant-by-plant basis for each plant's milk supply that is not
offered to DFA, based generally on the amount of raw milk used by the plants. We
could be required to pay the liquidated damages even if we were prohibited from
offering the business to DFA by an injunction, restraining order or contractual
obligation. See Note 10 to our Condensed Consolidated Financial Statements for
further information regarding this agreement. At this time, we cannot estimate
the amount of damages that we may have to pay, if any.

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

- the obligation to pay performance bonuses to White Wave's management team
in the event that established performance hurdles are met by March 2004
(which bonuses we expect to be in the range of $35 million to $40
million); and

- certain indemnification obligations related to businesses that we have
divested.

See Note 10 to our Condensed Consolidated Financial Statements for more
information about our contingent obligations.

PREFERRED SECURITIES

On March 24, 1998, we issued $600 million of company-obligated 5.5%
mandatorily redeemable convertible preferred securities of a Delaware business
trust ("TIPES") in a private placement to "qualified institutional buyers" under
Rule 144A under the Securities Act of 1933. The TIPES, which are recorded net of
related fees and expenses, mature 30 years from the date of issue. Holders of
these securities are entitled to receive preferential cumulative cash
distributions at an annual rate of 5.5% of their liquidation preference of $50
each. These distributions are payable quarterly in arrears on January 1, April
1, July 1 and October 1 of each year. TIPES are convertible at the option of the
holders into shares of our common stock, subject to adjustment in certain
circumstances, at a conversion price of $39.13. These preferred securities are
also redeemable, at our option, at any time at specified premiums and are

29

mandatorily redeemable at their liquidation preference amount of $50 per share
at maturity or upon occurrence of certain specified events.

On March 17, 2003, we announced that on April 17, 2003, we would redeem
TIPES with an aggregate liquidation value of $100 million at a redemption price
of $51.0315 per security. Holders of approximately 99% of the TIPES called for
redemption elected to convert their TIPES into shares of our common stock rather
than receive the cash redemption price. We issued a total of approximately 2.5
million shares of common stock to holders of TIPES called for redemption, 7.4
thousand of which were issued during the first quarter of 2003, and the balance
of which were issued between April 1 and April 16, 2003.

On April 22, 2003, we announced that on May 22, 2003, we will redeem
another $200 million (aggregate liquidation value) of TIPES at a redemption
price of $51.0315 per security.

FUTURE CAPITAL REQUIREMENTS

During 2003, we intend to invest a total of approximately $310 million in
capital expenditures primarily for our existing manufacturing facilities and
distribution capabilities. We intend to fund these expenditures using cash flow
from operations. We intend to spend it as follows:

We expect that cash flow from operations will be sufficient to meet our
requirements for our existing businesses for the foreseeable future.

In the future, we may pursue additional acquisitions that are compatible
with our core business strategy. We may also repurchase our securities pursuant
to our securities repurchase program. Approximately $171.6 million was available
for spending under our securities repurchase program as of March 31, 2003. We
base our decisions regarding when to repurchase securities on a variety of
factors, including primarily an analysis of the optimal use of available
capital, taking into account our stock price, the relative expected return on
alternative investments and the limitations imposed by our credit facility. See
Note 5 to our Condensed Consolidated Financial Statements. Any acquisitions or
equity repurchases will be funded through cash flows from operations or
borrowings under our senior credit facility.

If necessary, we believe that we have the ability to secure additional
financing for our future capital requirements.

CRITICAL ACCOUNTING POLICIES

There have been no changes to our critical accounting policies since we
filed our 2002 annual report on Form 10-K.

KNOWN TRENDS AND UNCERTAINTIES

ECONOMIC ENVIRONMENT

As a result of the recent economic environment in this country, many of our
retail customers have experienced economic difficulty over the past year. A
number of our customers have been forced to close stores and certain others have
sought bankruptcy protection. This trend, if it continues, could have a material
adverse affect on us if a material number of our customers, or any one large
customer, were to be forced to close a significant number of stores or file for
bankruptcy protection.

30

PRICES OF RAW MILK AND CREAM

In our Dairy Group and Morningstar/White Wave segments, our raw milk cost
changes are based on the federal and certain state governments' minimum prices,
regional and national milk supply conditions and arrangements with our
suppliers. Generally, we pay the federal minimum prices for raw milk, plus
certain producer premiums (or "over-order" premiums) and location differentials.
We also incur other raw milk procurement costs in some locations (such as
hauling, field personnel, etc.). A change in the federal minimum price does not
necessarily mean an identical change in our total raw material cost, as
over-order premiums may increase or decrease. This relationship is different in
every region of the country, and sometimes within a region based on supplier
arrangements. However, in general, the overall change in the commodity
environment can be linked to the change in federal minimum prices. Bulk cream is
also a significant raw material cost to the Dairy Group and Morningstar Foods.
Bulk cream is typically purchased based on a multiple of the AA butter price on
the Chicago Mercantile Exchange. Bulk cream is used in our Class II products
such as ice cream, ice cream mix, creams and creamers, sour cream and cottage
cheese.

In 2002 and in the first quarter of 2003, prices for raw milk and butter
were unusually low. Although we cannot predict future raw material prices with
precision, we do expect prices to increase throughout the remainder of 2003.

In general, we change the prices that we charge our customers for our
products on a monthly basis, as the costs of our raw materials fluctuate.
However, there can be a lag between the time of a raw material cost increase or
decrease and the effectiveness of a corresponding price change to our customers,
and in some cases we are contractually restrained with respect to the means and
timing of implementing price changes. Also, at some point price increases do
erode our volumes. These factors can cause volatility in our earnings. Our sales
and operating profit margin tend to fluctuate with the price of our raw
materials.

RISK FACTORS

This report contains statements about our future that are not statements of
historical fact. In some cases, you can identify these statements by terminology
such as "may," "will," "should," "could," "expects," "seek to," "anticipates,"
"plans," "believes," "estimates," "intends," "predicts," "potential" or
"continue" or the negative of such terms and other comparable terminology. These
statements are only predictions, and in evaluating those statements, you should
carefully consider the risks outlined below. Actual performance or results may
differ materially and adversely.

OUR FAILURE TO SUCCESSFULLY COMPETE COULD ADVERSELY AFFECT OUR PROSPECTS AND
FINANCIAL RESULTS

Our businesses are subject to significant competition based on a number of
factors. Our failure to successfully compete against our competitors could have
a material adverse effect on our business. Many of our competitors, especially
those with nationally branded products that compete with our nationally branded
products, have significantly greater resources than we do. Also, in many cases,
those nationally branded products have significantly more name-recognition and
longer histories of success.

The consolidation trend is continuing in the retail grocery and foodservice
industries. As our customer base continues to consolidate, we expect competition
to intensify as we compete for the business of fewer customers. As the
consolidation continues, there can be no assurance that we will be able to keep
our existing customers, or to gain new customers. Winning new customers is
especially important to the growth of our Dairy Group, as demand tends to be
relatively flat in the dairy industry.

Many of our Dairy Group retail customers have become increasingly price
sensitive in the current economic environment and we have recently been subject
to a number of intensely competitive bidding situations in our Dairy Group. The
current competitive environment could result in margin erosion in our Dairy
Group, or the loss of certain customers altogether. In 2002, we lost several key
local and regional grocery customers as a result of pricing battles with our
competitors. Loss of any of our largest customers

31

could have a material adverse impact on our financial results. We do not have
contracts with many of our largest customers.

There are several large regional grocery chains that have captive dairy
operations. As the consolidation of the grocery industry continues, we could be
adversely affected if any one or more of our existing customers were to decide
to establish captive dairy operations, or be sold to a chain with captive dairy
operations. We could also be adversely affected by any expansion of capacity by
our existing competitors or by new entrants in our markets.

OUR BRANDING EFFORTS MAY NOT SUCCEED

We have invested, and intend to continue to invest, significant resources
toward the growth of our branded, value-added portfolio of products,
particularly at our Morningstar/White Wave segment. We believe that sales of
these products could be a significant source of growth for our business.
However, the success of our efforts will depend on customer and consumer
acceptance of our branded products, of which there can be no assurance. If our
efforts do not succeed, we may not be able to continue to significantly increase
sales or profit margins.

CHANGES IN RAW MATERIAL AND OTHER INPUT COSTS CAN ADVERSELY AFFECT US

The most important raw materials that we use in our operations are raw milk
and bulk cream, and high density polyethylene resin. The prices of these
materials increase and decrease based on supply and demand, and, in some cases,
governmental regulation. Weather affects the available supply of raw milk and
cream. Our Specialty Foods segment purchases cucumbers under seasonal grower
contracts with a variety of growers located near our plants. Bad weather in one
of the growing areas can damage or destroy the crop in that area. If we are not
able to buy cucumbers from one of our local growers due to bad weather, we are
forced to purchase cucumbers from non-local sources at substantially higher
prices, which can have an adverse affect on Specialty Foods' results of
operations. Our White Wave operating unit is sensitive to adverse weather due to
its reliance on soybeans. In many cases we are able to adjust our pricing to
reflect changes in raw material costs. Volatility in the cost of our raw
materials can adversely affect our performance as price changes often lag
changes in costs. These lags tend to erode our profit margins. Extremely high
raw material costs can also put downward pressure on our margins and our
volumes. Although we cannot predict future changes in raw material costs, we do
expect raw material prices to increase in 2003.

Because our Dairy Group delivers the majority of its products directly to
customers through our "direct store delivery" system, we are a large consumer of
fuel. Increases in fuel prices can adversely affect our results of operations.
We are also a significant consumer of electricity, so any significant increase
in energy prices could adversely affect our financial performance.

WE HAVE SUBSTANTIAL DEBT AND OTHER FINANCIAL OBLIGATIONS AND WE MAY INCUR EVEN
MORE DEBT

We have substantial debt and other financial obligations and significant
unused borrowing capacity. See "-- Liquidity and Capital Resources."

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

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

- may limit our flexibility in planning for or reacting to changes in our
business and market conditions,

- impose on us additional financial and operational restrictions, and

- expose us to interest rate risk since a portion of our debt obligations
are at variable rates.

32

Our ability to make scheduled payments on our debt and other financial
obligations depends on our financial and operating performance. Our financial
and operating performance is subject to prevailing economic conditions and to
financial, business and other factors, some of which are beyond our control. A
significant increase in interest rates could adversely impact our financial
results. If we do not comply with the financial and other restrictive covenants
under our credit facilities (see Note 5 to our Condensed Consolidated Financial
Statements), we may default under them. Upon default, our lenders could
accelerate the indebtedness under the facilities, foreclose against their
collateral or seek other remedies.

LOSS OF RIGHTS TO ANY OF OUR LICENSED BRANDS COULD ADVERSELY AFFECT US

We sell certain of our products under licensed brand names such as
Hershey's(R), Borden(R), Pet(R), Folgers(R), Land-O-Lakes(R) and others. In some
cases, we have invested, and intend to continue to invest, significant capital
in product development and marketing and advertising related to these licensed
brands. Should our rights to manufacture and sell products under any of these
names be terminated for any reason, our financial performance and results of
operations could be materially and adversely affected.

NEGATIVE HEALTH CLAIMS COULD ADVERSELY AFFECT US

As a manufacturer of food products, positive or negative publicity or
medical research regarding the health effects of the types of foods that we
produce affects us.

For example, incidences of bovine spongiform encephalopathy ("BSE" or "mad
cow disease") in other countries have raised public concern about the safety of
eating beef and using or ingesting certain other animal-derived products. The
World Health Organization, the U.S. Food and Drug Administration and the United
States Department of Agriculture have all affirmed that BSE is not transmitted
to milk. However, we are still subject to risk as a result of public perception
that milk products may be affected by mad cow disease. To date, we have not seen
any measurable impact on our milk sales resulting from concerns about mad cow
disease. However, should public concerns about the safety of milk or milk
products escalate as a result of further occurrences of mad cow disease, we
could suffer a loss of sales, which could have a material and adverse affect on
our financial results.

WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS

We sell food products for human consumption, which involves risks such as:

- product contamination or spoilage,

- product tampering, and

- other adulteration of food products.

Consumption of an adulterated, contaminated or spoiled product may result
in personal illness or injury. We could be subject to claims or lawsuits
relating to an actual or alleged illness or injury, and we could incur
liabilities that are not insured or that exceed our insurance coverages.

Although we maintain quality control programs designed to address food
quality and safety issues, an actual or alleged problem with the quality, safety
or integrity of our products at any of our facilities could result in:

- product withdrawals,

- product recalls,

- negative publicity,

- temporary plant closings, and

- substantial costs of compliance or remediation.

33

Any of these events could have a material and adverse effect on our
financial condition, results of operations or cash flows.

LOSS OF OR INABILITY TO ATTRACT KEY PERSONNEL COULD ADVERSELY AFFECT OUR
BUSINESS

Our success depends to a large extent on the skills, experience and
performance of our key personnel. The loss of one or more of these persons could
hurt our business. We do not maintain key man life insurance on any of our
executive officers, directors or other employees. If we are unable to attract
and retain key personnel, our business will be adversely affected.

CERTAIN PROVISIONS OF OUR CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW
COULD DETER TAKEOVER ATTEMPTS

Some provisions in our certificate of incorporation and bylaws could delay,
prevent or make more difficult a merger, tender offer, proxy contest or change
of control. Our stockholders might view any such transaction as being in their
best interests since the transaction could result in a higher stock price than
the current market price for our common stock. Among other things, our
certificate of incorporation and bylaws:

- authorize our board of directors to issue preferred stock in series with
the terms of each series to be fixed by our board of directors,

- divide our board of directors into three classes so that only
approximately one-third of the total number of directors is elected each
year,

- permit directors to be removed only for cause, and

- specify advance notice requirements for stockholder proposals and
director nominations.

In addition, with certain exceptions, the Delaware General Corporation Law
restricts mergers and other business combinations between us and any stockholder
that acquires 15% or more of our voting stock.

We also have a stockholder rights plan. Under this plan, after the
occurrence of specified events, our stockholders will be able to buy stock from
us or our successor at reduced prices. These rights do not extend, however, to
persons participating in takeover attempts without the consent of our board of
directors. Accordingly, this plan could delay, defer, make more difficult or
prevent a change of control.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE FLUCTUATIONS

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

These swaps have been designated as cash flow hedges against variable
interest rate exposure. The following table summarizes our various interest rate
swap agreements in effect as of March 31, 2003:

34

The following table summarizes our various interest rate agreements as of
December 31, 2002:

We have also entered into interest rate swap agreements that provide hedges
for loans under Leche Celta's term loan. See Note 5 to our Condensed
Consolidated Financial Statements. The following table summarizes these
agreements as of March 31, 2003 and 2002:

We are exposed to market risk under these arrangements due to the
possibility of interest rates on our credit facilities falling below the rates
on our interest rate derivative agreements. We incurred $7.1 million of
additional interest expense, net of taxes, during 2003 as a result of interest
rates on our variable rate debt falling below the agreed-upon interest rate on
our existing swap agreements. Credit risk under these arrangements is remote
since the counterparties to our interest rate derivative agreements are major
financial institutions.

A majority of our debt obligations are currently at variable rates. We have
performed a sensitivity analysis assuming a hypothetical 10% adverse movement in
interest rates. As of March 31, 2003, the analysis indicated that such interest
rate movement would not have a material effect on our financial position,
results of operations or cash flows. However, actual gains and losses in the
future may differ materially from that analysis based on changes in the timing
and amount of interest rate movement and our actual exposure and hedges.

FOREIGN CURRENCY

We are exposed to foreign currency risk due to operating cash flows and
various financial instruments that are denominated in foreign currencies. Our
most significant foreign currency exposures relate to the euro. At this time, we
believe that potential losses due to foreign currency fluctuations would not
have a material impact on our consolidated financial position, results of
operations or operating cash flow.

ITEM 4. CONTROLS AND PROCEDURES

Based on their evaluations as of a date within 90 days of the filing date
of this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures (as
defined in Rules 13-a and 15d-14 under the Securities Exchange Act of 1934) are
effective. There have been no significant changes in our 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.

35

PART II -- OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

99.1 Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to section 906
of the Sarbanes-Oxley Act of 2002
99.2 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to section 906
of the Sarbanes-Oxley Act of 2002.

(b) Form 8-K's

- Form 8-K dated May 8, 2003

36

SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

DEAN FOODS COMPANY

/s/ Barry A. Fromberg
--------------------------------------
Barry A. Fromberg
Executive Vice President, Chief
Financial Officer
(Principal Accounting Officer)

Date: May 15, 2003

37

CERTIFICATION

I, Gregg Engles, certify that:

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

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

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

4. 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 the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly 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
quarterly report (the "Evaluation Date"); and

c. Presented in this quarterly 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 weaknesses in the Company's 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
quarterly report whether or not 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: May 15, 2003

38

CERTIFICATION

I, Barry A. Fromberg, certify that:

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

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

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

4. 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 the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly 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
quarterly report (the "Evaluation Date"); and

c. Presented in this quarterly 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 weaknesses in the Company's 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
quarterly report whether or not 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: May 15, 2003

39

EXHIBIT INDEX