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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

September 30, 2003

1.     General

      Basis of Presentation — The unaudited Condensed Consolidated Financial Statements contained in this Quarterly 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 Quarterly 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 $9.3 million and $8.0 million for the three months ended September 30, 2003 and 2002 and $27.8 million and $16.4 million for the first nine months of 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 in “Receivable from Parent” on our balance sheet.

      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

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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 accounting for and disclosures of certain guarantees issued and indemnification obligations incurred. FIN No. 45 requires disclosure of certain guarantees and indemnification obligations. It also requires liability recognition for the fair value of certain guarantees and indemnification obligations made or incurred after December 31, 2002. We adopted the requirements of FIN No. 45 effective January 1, 2003. See Note 8 for disclosures required by FIN No. 45. The adoption of this pronouncement did not have a material effect 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, which became effective for us on July 1, 2003, 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 had 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 had no impact 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 FIN, which will become effective for us on December 31, 2003, applies to variable interest entities (“VIEs”) created after January 31, 2003 and to VIEs in which an enterprise obtains an interest after that date. 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.

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2.     Inventories

      Approximately $119.6 million and $97.3 million of our inventory was accounted for under the last-in, first-out (LIFO) method of accounting at September 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.

3.       Intangible Assets

      Changes in the carrying amount of goodwill for the nine months ended September 30, 2003 are as follows:

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

      Amortization expense on intangible assets for the three months ended September 30, 2003 and 2002 was $0.8 million and $2.1 million, and $2.9 million and $4.0 million for the nine months ended September 30, 2003 and 2002, respectively. Estimated aggregate intangible asset amortization expense for the next five years is as follows:

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4.     Long-Term Debt

      Senior Notes — We had $700 million (face value) of senior notes outstanding at September 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.

      Capitalized Lease and Other Obligations — Capitalized lease and 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 September 30, 2003, $41.6 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.

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5.     Comprehensive Income

      Comprehensive income consists of net income plus all other changes in equity from non-owner sources. Consolidated comprehensive income was $40.8 million and $121.0 million for the three months and nine months ending September 30, 2003.

6.     Plant Closing Costs

      Plant Closing Costs — As part of an overall rationalization and cost reduction program, during the first nine months of 2003, we recorded charges of $1.0 million related to the following:

	•	Organizational realignment of the Midwest region of our Dairy Group;
	•	Closing of a Dairy Group ice cream operation and maintenance facility in Ohio.

      These charges 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 No. 146, the timing of certain costs associated with restructurings are accrued differently than in the past. We expect to incur additional charges of approximately $0.4 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 rationalization and cost reduction program was workforce reductions as a result of a consolidation of administrative functions.

      There have not been significant adjustments to the plans.

      Transaction-related closing costs — 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 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;

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	•	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 facility.

      Activity with respect to these liabilities for the first nine months 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.

7.     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 handling costs that were recorded as a component of selling and distribution expense were approximately $96.9 million and $286.2 million during the third quarter and first nine months of 2003 and $92.4 million and $281.2 million in the third quarter and first nine months of 2002, respectively.

8.     Commitments and Contingencies

      Leases — We lease certain property, plant and equipment used in our operations under operating lease agreements. Such leases, which are primarily for machinery, equipment and vehicles, have lease terms ranging from 1 to 20 years. Certain of the operating lease agreements require the payment of additional rentals for maintenance, along with additional rentals based on miles driven or units produced. Certain leases require us to guarantee a minimum value of the leased asset at the end of the lease. Our maximum exposure under those guarantees is not a material amount.

      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 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 for a $1 billion revolving line of credit, a Tranche A $1 billion term loan and a Tranche B $750 million term loan. At September 30, 2003 there were outstanding term loan borrowings of $1.71 billion under this facility, and $43 million outstanding under the revolving line of credit. Letters of credit in the aggregate amount of $123 million were issued under the revolving line of credit but undrawn. At September 30, 2003 approximately $834 million was available for future borrowings under Dean Foods Company’s revolving credit facility.

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      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 0 to 75 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
	•	The London Interbank Offering Rate (“LIBOR”) divided by the product of one minus the Eurodollar Reserve Percentage, plus a margin that varies from 125 to 200 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 of 75 basis points, or
	•	LIBOR divided by the product of one minus the Eurodollar Reserve Percentage, plus a margin of 200 basis points.

      As of September 30, 2003, 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.

      Principal payments are required on the Tranche A term loan as follows:

	•	$37.5 million quarterly beginning on September 30, 2003 through December 31, 2004;
	•	$43.75 million quarterly on March 31, 2005 through December 31, 2005;
	•	$50.0 million quarterly on March 31, 2006 through December 31, 2006;
	•	$62.5 million quarterly on March 31, 2007 and June 30, 2007; and
	•	A final payment of $275.0 million on July 15, 2007.

      Principal payments are required on the Tranche B term loan as follows:

	•	$1.875 million quarterly beginning on September 30, 2003 through December 31, 2007;
	•	$358.1 million on each of March 31, 2008 and July 15, 2008.

No principal payments are due on the $1 billion line of credit until maturity on July 15, 2007.

      The credit agreement also requires mandatory principal prepayments upon the occurrence of certain asset dispositions not in the ordinary course of business.

      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 credit agreement).

      Dean Foods Company’s leverage ratio must be less than or equal to 3.75 to 1. As of September 30, 2003, Dean Foods Company’s leverage ratio was 3.17 to 1. Dean Foods Company’s interest coverage ratio must be greater than or equal to 3 to 1. As of September 30, 2003 Dean Foods Company’s interest coverage ratio was 4.92 to 1.

      Dean Foods Company’s consolidated net worth must be greater than or equal to $1.75 billion, as increased each quarter (beginning with the quarter ended September 30, 2003) by an amount equal to

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      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 from time to time to certain other claims, litigation, audits and investigations. 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.

9.     Business and Geographic Information and Major Customers

      Segment Data — We currently have two reportable segments: Dairy Group and Specialty Foods. Our Dairy Group segment manufactures and distributes branded and private label 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, plant closing costs or 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.

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(1)	Operating income includes plant closing and restructuring costs of $0.5 million in the third quarter and $1.0 million in the first nine 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 first nine months of 2003. Approximately 11% of our consolidated sales in the first nine months 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.

Quarter Ended September 30, 2003 Compared to Quarter Ended September 30, 2002

      Net Sales — Consolidated net sales increased 2.1% to $979.9 million during the third quarter of 2003 from $960.0 million in the third quarter of 2002.

      Net sales for the Dairy Group increased 2.3%, or $18.2 million, in the third quarter of 2003 compared to the third quarter of 2002. This increase is primarily due to the effects of increased raw milk costs compared to the third quarter of the prior year and the shifting of sales to certain of our locations from certain Legacy Suiza Foods locations as part of the overall plant rationalization by Dean Foods Company, partly offset by a 0.6% decrease in fluid milk volumes. 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 average monthly Class I “mover” and average monthly Class II minimum prices for raw skim milk and butterfat for the third quarter of 2003 compared to the third quarter of 2002: