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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, 2004

      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, 2003. 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 2003 Consolidated Financial Statements to the current 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 June 30, 2004 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 2003 Consolidated Financial Statements and notes thereto contained in our Annual Report on Form 10-K (filed with the Securities and Exchange Commission on March 30, 2004).

      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, a portion of which is then allocated to us. Dean Foods Company charged us management fees of $10 million and $9.2 million for the second quarter of 2004 and 2003, respectively, and $20.1 million and $18.5 million for the first half of 2004 and 2003, respectively. 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 December 2003, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits” in an attempt to improve financial statement disclosures regarding defined benefit plans. This standard requires that companies provide more details about their plan assets, benefit obligations, cash flows, benefit costs and other relevant information. In addition to expanded annual disclosures, we are required to report the various elements of pension and other postretirement benefit costs on a quarterly basis. SFAS No. 132 (revised 2003) is effective for fiscal years ending after December 15, 2003, and for quarters beginning after December 15, 2003. The expanded disclosure requirements are included in this report.

      Recently Issued Accounting Pronouncements — On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) was signed into law. The Act introduces a prescription drug benefit under Medicare Part D, as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. We sponsor medical programs for certain of our United States retirees and expect that this legislation will reduce the costs for some of these programs. In April 2004, the FASB issued Staff Position (“FSP”) No. FAS 106-2 to address the accounting and disclosure requirements related to the Act. The FSP is effective for interim or annual periods beginning after June 15, 2004. We are currently evaluating the impact of the FSP on our Consolidated Financial Statements.

      Shipping and Handling Fees — Our shipping and handling costs are included in both costs of sales and selling and distribution expense, depending on the nature of the cost. Shipping and handling costs

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included in cost of sales include inventory warehouse costs, product loading and handling costs and costs associated with transporting finished products from our manufacturing facilities to our own distribution warehouses. 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, and the cost of shipping products to customers through third party carriers. Shipping and handling costs that were recorded as a component of selling and distribution expense were approximately $107.9 million and $94.4 million in the second quarter of 2004 and 2003, respectively, and $215.5 million and $189.3 million during the first six months of 2004 and 2003, respectively.

      On January 26, 2004, the Dairy Group acquired Ross Swiss Dairies, a dairy distributor based in Los Angeles, California, which had net sales of approximately $120 million in 2003. As a result of this acquisition, we have increased the distribution capability of our Dairy Group in southern California, allowing us to better serve our customers. Ross Swiss Dairies has historically purchased a significant portion of its products from other processors. We transitioned the majority of Ross Swiss Dairies’ manufacturing needs into our southern California plants in May 2004. We paid approximately $21.8 million, including transaction costs, for the purchase of Ross Swiss Dairies and funded the purchase price with borrowings under Dean Foods Company’s receivables-backed facility.

      We have not completed the final allocation of purchase price to the fair values of assets and liabilities acquired in 2004 and late 2003, or the related business integration plans. We expect that the ultimate purchase price allocation may include additional adjustments to the fair values of depreciable tangible assets, identifiable intangible assets and the carrying values of certain liabilities. Accordingly, to the extent that such assessments indicate that the fair value of the assets and liabilities differ from their preliminary purchase price allocation, such difference would adjust the amounts allocated to the assets and liabilities and would change the amounts allocated to goodwill.

      Approximately $65.5 million and $97.6 million of our inventory was accounted for under the last-in, first-out (LIFO) method of accounting at June 30, 2004 and December 31, 2003, 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, 2004 are as follows:

      The gross carrying amount and accumulated amortization of our intangible assets other than goodwill as of June 30, 2004 and December 31, 2003 are as follows:

      Amortization expense on intangible assets for the three months ended June 30, 2004 and 2003 was $0.8 million for both periods, and $1.6 million and $2 million for the six months ended June 30, 2004 and 2003, 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, 2004. 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 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 Condensed Consolidated Financial Statements.

      Receivables-Backed Facility — We participate in Dean Foods Company’s $500 million receivables securitization facility. Certain of our subsidiaries sell their accounts receivable to 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 special purpose entities are fully reflected on our balance sheet, and the securitization is treated as a borrowing for accounting purposes. The receivables-backed facility bears interest at a variable rate based on the commercial paper yield, as defined in the agreement.

      Industrial Development Revenue Bond — During 2004, we repaid the remaining principal balances of our outstanding industrial development bonds, which had an aggregate outstanding principal balance of $11.7 million at December 31, 2003.

      Capital Lease Obligations and Other — Capital lease obligations and other subsidiary debt 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.

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      Comprehensive income consists of net income plus all other changes in equity from non-owner sources. Consolidated comprehensive income was $38.5 million and $72.9 million for the second quarter and first half of 2004. The amounts of income tax benefit allocated to each component of other comprehensive income during the six months ended June 30, 2004 are included below.

      Defined Benefit Plans — The benefits under our defined benefit plans are based on years of service and employee compensation.

      We expect to contribute $30.6 million to our pension plans during 2004.

      Postretirement Benefits — Certain of our subsidiaries provide healthcare benefits to certain retirees who are covered under specific group contracts.

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      We expect to contribute $2 million to our postretirement health plans during 2004.

      Plant Closing and Rationalization Costs — As part of our overall rationalization and cost reduction program, we recorded net costs of $2.7 million and $0.5 million during the first six months of 2004 and 2003, respectively.

      The charges recorded during the first six months of 2004 are primarily related to the closing of two Dairy Group manufacturing facilities in California.

      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. We expect to incur additional charges of approximately $1.4 million related to shutdown and other costs. The majority of these additional charges are expected to be completed by December of 2004.

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

	•	Workforce reductions as a result of plant closings, plant rationalizations and consolidation of administrative functions;
	•	Shutdown costs, including those costs that are necessary to prepare the abandoned 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 written down to their estimated fair value and held for sale. 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 June 30, 2004 was approximately $3.9 million. We are marketing these properties for sale.

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      Activity with respect to plant closing and rationalization is summarized below:

      Transaction Closing Costs — As part of our acquisition by Dean Foods Company, we accrued costs in 2002 pursuant to a plan to exit certain activities and businesses in order to rationalize production and reduce costs and inefficiencies. As part of this plan we closed two Specialty Foods Group plants in Atkins, Arkansas and Cairo, Georgia, and one Dairy Group plant in Escondido, California. 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;
	•	Shutdown costs, including those costs that are necessary to clean and prepare the abandoned facilities for closure; and
	•	Costs incurred after shutdown such as lease obligations or termination costs, utilities and property taxes after shutdown of the facility.

      During the first quarter of 2004 we recorded certain adjustments to reduce the liability by approximately $1.5 million related to the closures in our Specialty Foods Group segment. These adjustments also reduced goodwill.

      Activity with respect to these liabilities for the first six months of 2004 is summarized below:

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9.     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. 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. At June 30, 2004 the senior credit facility provided for a $1 billion multi-currency revolving line of credit (which provides for borrowings up to $200 million in euros), a Tranche A $1 billion term loan, Tranche B $750 million term loan and a Tranche C $400 million term loan. At June 30, 2004 there were outstanding term loan borrowings of $1.99 billion under this facility, and $188.1 million outstanding under the revolving line of credit. Letters of credit in the aggregate amount of $101.2 million were issued but undrawn. At June 30, 2004 approximately $710.7 million was available for future borrowings under Dean Foods Company’s revolving credit facility. Dean Foods Company is currently in compliance with all covenants contained in their credit agreement.

      Principal payments are required on Dean Foods Company’s 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 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 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.

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

	•	$1 million quarterly beginning on June 30, 2004 through December 31, 2007;
	•	$192.5 million on March 31, 2008; and
	•	$192.5 million on July 15, 2008.

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

      Dean Foods Company’s 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 Dean Foods Company’s credit agreement).

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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 credit rating.

      Dean Foods Company expects to finalize a significant amendment to their credit facility in mid-August 2004. See Note 11.

      Insurance — We retain selected levels of property and casualty risks, primarily related to employee healthcare, workers’ compensation claims and other casualty losses. Many of these potential losses are covered under conventional insurance programs with third party carriers with high deductible limits. In other areas, we are self-insured with stop-loss coverages. These deductibles range from $350,000 for medical claims to $2 million for casualty claims. We believe we have established adequate reserves to cover these claims.

      Litigation, Investigations and Audits — We and our subsidiaries are parties from time to time to certain other claims, litigation, audits and investigations. We believe that we have established adequate reserves to satisfy any potential liability we may have under all such claims, litigations, audits and investigations that are currently pending. 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.

10.     Business and Geographic Information and Major Customers

      We currently have two reportable segments: the Dairy Group and the Specialty Foods Group.

      Our Dairy Group is our largest segment. It manufactures, markets and distributes a wide variety of “dairy case” products, such as milk, cream, ice cream, cultured dairy products and juices to retailers distributors, foodservice outlets, schools and governmental entities across the United States, under customer labels and under proprietary local and regional brands.

      The Specialty Foods Group is the nation’s leading pickle processor, and one of the largest manufacturers and sellers of powdered non-dairy coffee creamers in the United States. The Specialty Foods Group also manufactures and sells a variety of specialty foods, such as powdered ingredients, aseptic sauces and nutritional beverages.

      We evaluate the performance of our segments based on operating profit or loss before gains and losses on sale of assets, plant closing and rationalization costs and foreign exchange gains and losses. Therefore, the segment profit or loss presented below is before such items.

      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 2003 Consolidated Financial Statements contained in our 2003 Annual Report on Form 10-K.

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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.