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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

For Annual and Transition Reports Pursuant to Sections 13 or 15(d)

Dean Holding Company

2515 McKinney Avenue, Suite 1200

     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 Exchange Act Rule 12b-2).    Yes [ ]    No [X]

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

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Part I — Financial Information

DEAN HOLDING COMPANY

See Notes to Condensed Consolidated Financial Statements.

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DEAN HOLDING COMPANY

See Notes to Condensed Consolidated Financial Statements.

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DEAN HOLDING COMPANY

See Notes to Condensed Consolidated Financial Statements.

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DEAN HOLDING COMPANY

June 30, 2003

      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 our 2002 Consolidated Financial Statements to current classifications. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. 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.

      This Quarterly Report, including these notes, has 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 Holding Company and its subsidiaries, taken as a whole.

      We are a wholly-owned subsidiary of Dean Foods Company. Dean Foods Company provides us with management support in return for a management fee. The management fee is based on budgeted annual expenses for Dean Foods Company’s corporate headquarters, which is then allocated among the segments of Dean Foods Company. Dean Foods Company began charging us management fees in the second quarter of 2002. Dean Foods Company charged us management fees of $9.2 million and $9.0 million for the three months ended June 30, 2003 and 2002. Our cash is available for use by, and is regularly transferred to, Dean Foods Company at its discretion. Cash that has been transferred to Dean Foods Company is included on our balance sheet as “Receivable from parent.”

      Recently Adopted Accounting Pronouncements — In June 2001, Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations.” This statement requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 became effective for us January 1, 2003. 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 Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in Restructuring).” The statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred and is effective for exit or

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      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 a special purpose limited liability entity to facilitate our receivable-backed loan. Since its formation, this entity has been consolidated in our financial statements for financial reporting purposes. Therefore, FIN No. 46 will have no impact on our Consolidated Financial Statements.

      Recently Issued Accounting Pronouncements — In April of 2003, FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” This statement amends and clarifies financial accounting and reporting for derivative instruments, including derivative instruments embedded in other contracts and hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” This statement requires that contracts with comparable characteristics be accounted for similarly and is effective for contracts entered into or modified after June 30, 2003. We have no derivatives, therefore SFAS No. 149 will have no impact on our Consolidated Financial Statements.

      In May of 2003, FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” This statement requires that certain financial instruments which had previously been classified as equity be classified with liabilities. We have no outstanding securities that meet the criteria of SFAS No. 150. Therefore, SFAS No. 150 will have no impact on our Consolidated Financial Statements.

      Approximately $63.5 million and $97.3 million of our inventory was accounted for under the last-in, first-out (LIFO) method of accounting at June 30, 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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      Changes in the carrying amount of goodwill for the six months ended June 30, 2003 are as follows:

      The gross carrying amount and accumulated amortization of our intangible assets other than goodwill as of June 30, 2003 and December 31, 2002 are as follows:

      Amortization expense on intangible assets for the three months ended June 30, 2003 and 2002 was $0.8 million and $0.5 million, and $2.1 million and $1.5 million for the six months ended June 30, 2003 and 2002, respectively. Estimated aggregate intangible asset amortization expense for the next five years is as follows:

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      Senior Notes — We had $700 million (face value) of senior notes outstanding at June 30, 2003. The related indentures do not contain financial covenants but they do contain certain restrictions including a prohibition against us and our subsidiaries granting liens on our material real estate interests and a prohibition against granting liens on the stock of our subsidiaries. The indentures also place certain restrictions on our ability to divest assets not in the ordinary course of business. At the date of our acquisition by Dean Foods Company, our long-term debt was re-valued to its current market value. The adjustment to fair value is reflected as a discount on senior notes in our consolidated financial statements.

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

      Industrial Development Revenue Bonds — We have certain industrial development 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.

      Other Obligations — Other obligations include various promissory notes for the purchase of property, plant and equipment and capital lease obligations. The various promissory notes payable provide for interest at varying rates and are payable in monthly installments of principal and interest until maturity, when the remaining principal balances are due. Capital lease obligations represent machinery and equipment financing obligations which are payable in monthly installments of principal and interest and are collateralized by the related assets financed.

      Letters of Credit — At June 30, 2003, $42.4 million of letters of credit were outstanding. The majority of letters of credit were required by various utilities and government entities for performance and insurance guarantees.

      Comprehensive income consists of net income plus all other changes in equity from non-owner sources. Consolidated comprehensive income was $43.9 million and $80.2 million for the three-months and

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      Plant Closing Costs — As part of an overall integration and cost reduction program, during the second quarter of 2003, we recorded charges of $0.5 million related to the organizational realignment of the Midwest region of our Dairy Group. Charges for the second quarter of 2003 restructuring were accounted for in accordance with SFAS No. 146 “Accounting for Costs Associated with Exit or Disposal Activities”, which became effective for us in January 2003. Under SFAS 146, the timing of certain costs associated with restructurings are accrued differently than in the past. We expect to incur additional charges related to the Midwest region organizational realignment of approximately $0.6 million primarily for workforce reduction costs. Cash outlays for these additional charges are expected to be completed by June of 2004.

      The principal component of our overall integration and cost reduction program was workforce reductions as a result of a consolidation of administrative functions. The program includes an overall reduction of 37 employees who were primarily regional and plant employees. All except 19 employees had been terminated as of June 30, 2003;

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

      There have not been significant adjustments to the plan.

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

      The principal components of the plans include the following:

	•	Workforce reductions as a result of plant closings, plant rationalizations and consolidation of administrative functions and offices, resulting in an overall reduction of 721 plant and administrative personnel. The costs incurred were charged against our acquisition liabilities for these costs. As of June 30, 2003, 10 employees had not yet been terminated;
	•	Shutdown costs, including those costs that are necessary to clean and prepare the plant facilities for closure; and

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

      Activity with respect to these liabilities for the first half of 2003 is summarized below:

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

      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 handling costs that were recorded as a component of selling and distribution expense were approximately $94.4 million and $189.3 million during the second quarter and first half of 2003 and $93.1 million and $188.8 million in the second quarter and first half of 2002, respectively.

      Leases — We lease certain property, plant and equipment used in our operations under operating lease agreements. Such leases, which are primarily for machinery, equipment and vehicles, have lease terms ranging from 1 to 20 years. Certain of the operating lease agreements require the payment of additional rentals for maintenance, along with additional rentals based on miles driven or units produced.

      Guaranty of Dean Foods Company’s Obligations Under Its Senior Credit Facility — Certain of Dean Foods Company’s subsidiaries, including us, are required to guarantee Dean Foods Company’s indebtedness under its $2.7 billion senior credit facility. We have pledged substantially all of our assets (other than our real property and our ownership interests in our subsidiaries) as security for our guaranty. The senior credit facility provides Dean Foods Company with an $800 million revolving line of credit, a Tranche A $900 million term loan and a Tranche B $1 billion term loan. At June 30, 2003 there were outstanding term loan borrowings of $1.76 billion under this facility, plus $23.7 million that was outstanding under the revolving line of credit. Letters of credit in the aggregate amount of $109.3 million were issued but undrawn. At June 30, 2003 approximately $667.0 million was available for future borrowings under Dean Foods Company’s revolving credit facility. Dean Foods Company is currently in compliance with all of the requirements contained in its credit facility.

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

	•	a base rate equal to the higher of the Federal Funds rate plus 50 basis points or the prime rate, plus a margin that varies from 25 to 150 basis points, depending on Dean Foods Company’s leverage ratio (which is computed as the ratio of indebtedness to EBITDA, as such terms are defined in the credit agreement) or

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	•	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 Dean Foods Company’s leverage ratio (as defined in the credit agreement).

      Borrowings under the Tranche B term loan bear interest at a rate per annum equal to one of the following rates, at Dean Foods Company’s option:

	•	a base rate equal to the higher of the Federal Funds rate plus 50 basis points or the prime rate, plus a margin that varies from 75 to 150 basis points, depending on Dean Foods Company’s 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 Dean Foods Company’s leverage ratio.

      The blended interest rate in effect on borrowings under the senior credit facility, including the applicable interest rate margin, was 3.35% at June 30, 2003. However, Dean Foods Company had interest rate swap agreements in place that hedged $1.43 billion of their borrowings under this facility at an average rate of 4.27%, plus the applicable interest rate margin. Interest is payable quarterly or at the end of the applicable interest period.

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

	•	$16.87 million quarterly from March 31, 2002 through December 31, 2002;
	•	$33.75 million quarterly from March 31, 2003 through December 31, 2004;
	•	$39.38 million quarterly from March 31, 2005 through December 31, 2005;
	•	$45.0 million quarterly from March 31, 2006 through December 31, 2006;
	•	$56.25 million quarterly from March 31, 2007 through June 30, 2007; and
	•	A final payment of $112.5 million on July 15, 2007.

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

	•	$1.25 million quarterly from March 31, 2002 through December 31, 2002;
	•	$2.5 million quarterly from March 31, 2003 through December 31, 2007;
	•	A payment of $472.5 million on March 31, 2008; and
	•	A final payment of $472.5 million on July 15, 2008.

      No principal payments are due on the $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 Dean Foods Company’s leverage ratio is greater than 3.75 to 1.0. The credit agreement requires that Dean Foods Company prepay 50% of defined excess cash flow for any fiscal year (beginning in 2003) in which their leverage ratio at year end is greater than 3.75 to 1.0. As of June 30, 2003, Dean Foods Company’s leverage ratio was 3.3 to 1.0.

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

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

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

      Dean Foods Company’s consolidated net worth must be greater than or equal to $1.2 billion, as increased each quarter (beginning with the quarter ended March 31, 2002) by an amount equal to 50% of their consolidated net income for the quarter, plus 75% of the amount by which stockholders’ equity is increased by certain equity issuances. As of June 30, 2003, the minimum net worth requirement was $1.4 billion.

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

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

      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.

      Segment Data — We currently have two reportable segments: Dairy Group 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. Specialty Foods processes and sells pickles, relishes and peppers; powdered products such as non-dairy coffee creamers; aseptic sauces and puddings and nutritional beverages.

      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.

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      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 plant closing and restructuring costs of $0.5 million in the second quarter and first six months of 2003.

      Substantially all of our business is within the United States.

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

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      We are a wholly-owned subsidiary of Dean Foods Company. Dean Foods Company is the leading processor and distributor of milk and other dairy products in the United States, and a leading manufacturer of specialty foods. Our operations consist of two segments: Dairy Group and Specialty Foods. Our Dairy Group is part of the Dairy Group segment of Dean Foods Company and our Specialty Foods segment comprises the entirety of Dean Foods Company’s Specialty Foods segment.

      As permitted by General Instruction H to Form 10-Q, in lieu of providing the information required by Item 2, we are providing only the information required by General Instruction H(2)(a).

Results of Operations

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