UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Dean Foods Company

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

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)

     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 6, 2005 the number of shares outstanding of each class of common stock was: 150,494,779

Common Stock, par value $.01

Table of Contents

Part I — Financial Information

DEAN FOODS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

See Notes to Condensed Consolidated Financial Statements.

DEAN FOODS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share data)

See Notes to Condensed Consolidated Financial Statements.

DEAN FOODS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

See Notes to Condensed Consolidated Financial Statements.

DEAN FOODS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2005

(unaudited)

      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, 2004. 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’s 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, 2005 may not be indicative of our operating results for the full year. The Condensed Consolidated Financial Statements contained in this Quarterly Report should be read in conjunction with our 2004 Consolidated Financial Statements contained in our Annual Report on Form 10-K (filed with the Securities and Exchange Commission on March 16, 2005).

      Unless otherwise indicated, references in this report to “we,” “us” or “our” refer to Dean Foods Company and its subsidiaries, taken as a whole.

      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 inventory warehouse costs, product loading and handling costs. Our Dairy Group includes costs associated with transporting finished products from our manufacturing facilities to our own distribution warehouses within cost of sales while WhiteWave Foods Company includes these costs in selling and distribution expense. 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 recorded as a component of selling and distribution expense were approximately $298.6 million and $268.2 million for the first three months of 2005 and 2004, respectively.

      Stock-Based Compensation — We have elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for our stock options. All options granted to date have been to employees, officers and directors. No compensation expense has been recognized as the stock options were granted at exercise prices that were at or above market value at the grant date. Compensation expense for grants of stock units is recognized over the vesting period. See Note 5 for more information about our stock option and stock unit programs. 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:

      The fair value of each stock option grant is calculated using the Black-Scholes option-pricing model, with the following assumptions:

      Recently Issued Accounting Pronouncements — The Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment” in December 2004. It will require the cost of employee compensation paid with equity instruments to be measured based on grant-date fair values. That cost will be recognized over the vesting period. SFAS No. 123(R) will become effective for us in the first quarter of 2006. We are still evaluating the impact of SFAS No. 123(R) on our Consolidated Financial Statements and have not yet determined the transition method we will apply when we adopt the statement. Refer to the section “Stock-Based Compensation” in this Note for an illustration of the pro-forma impact of expensing our stock options in the historical periods.

      In November 2004, the FASB issued SFAS No. 151, “Inventory Costs — an Amendment of ARB No. 43, Chapter 4.” SFAS No. 151, which is effective for inventory costs incurred during years beginning after June 15, 2005, clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material, requiring that those items be recognized as current-period charges. In addition, SFAS No. 151 requires that allocation of fixed production overheads be based on the normal capacity of the production facilities. We do not believe the adoption of this standard will have a material impact on our Consolidated Financial Statements.

      In December 2004, FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29.” SFAS No. 153 is effective for nonmonetary exchanges occurring in years beginning after June 15, 2005. SFAS No. 153 eliminates the rule in APB No. 29 which excluded from fair value measurement exchanges of similar productive assets. Instead SFAS No. 153 excludes from fair value

measurement exchanges of nonmonetary assets that do not have commercial substance. We do not believe the adoption of this standard will have a material impact on our Consolidated Financial Statements.

      Approximately $68.2 million and $88.2 million of our inventory was accounted for under the LIFO method of accounting at March 31, 2005 and December 31, 2004, respectively. Our LIFO reserve was $4.6 million and $4 million at March 31, 2005 and December 31, 2004, respectively.

      Changes in the carrying amount of goodwill for the three months ended March 31, 2005 are as follows:

      The gross carrying amount and accumulated amortization of our intangible assets other than goodwill as of March 31, 2005 and December 31, 2004 are as follows:

      Amortization expense on intangible assets for the three months ended March 31, 2005 and 2004 was $2.2 million and $1.2 million, respectively. Estimated aggregate intangible asset amortization expense for the next five years is as follows:

      Senior Credit Facility — Our senior credit facility provides for a $1.5 billion revolving credit facility and a $1.5 billion term loan. At March 31, 2005 there were outstanding term loan borrowings of $1.5 billion under the senior credit facility, and $356.2 million outstanding under the revolving line of credit. Letters of credit in the aggregate amount of $129.3 million were issued but undrawn. At March 31, 2005, approximately $1.01 billion was available for future borrowings under the revolving credit facility, subject to satisfaction of certain ordinary course conditions contained in the credit agreement.

      Both the revolving credit facility and term loan bear interest, at our election, at the base rate plus a margin that varies from zero to 62.5 basis points depending on our credit ratings (as issued by Standard & Poor’s and Moody’s), or LIBOR plus a margin that varies from 75 to 187.5 basis points, depending on our credit ratings (as issued by Standard & Poor’s and Moody’s). The blended interest rate in effect on borrowings under the senior credit facility, including the applicable interest rate margin, was 4.26% at March 31, 2005. However, we had interest rate swap agreements in place that hedged $775 million of our borrowings under the senior credit facility at an average rate of 4.96%, plus the applicable interest rate margin. Interest is payable quarterly or at the end of the applicable interest period.

      Principal payments are required on the term loan as follows:

      No principal payments are due on the $1.5 billion revolving credit facility until maturity on August 13, 2009.

      The credit agreement also requires mandatory principal prepayments upon the occurrence of certain asset dispositions or recovery events.

      In consideration for the revolving commitment, we pay a quarterly commitment fee on unused amounts of the revolving credit facility that ranges from 25 to 37.5 basis points, depending on our credit ratings (as issued by Standard & Poor’s and Moody’s).

      The senior credit facility contains various financial and other restrictive covenants and requires that we maintain certain financial ratios, including a leverage and interest coverage ratio. We are currently in compliance with all covenants contained in our credit agreement.

      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 purchase price is not greater than $500 million, (3) we acquire at least 51% of the

acquired entity, (4) the transaction is approved by the Board of Directors or shareholders, as appropriate, of the target and (5) after giving effect to such acquisition on a pro-forma basis, we are in compliance with all financial covenants. All other acquisitions must be approved in advance by the required lenders.

      The senior credit 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 senior 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 the former Dean Foods Company’s (“Legacy Dean’s”) subsidiaries, and the real property owned by Legacy Dean and its subsidiaries.

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

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

      The related indentures do not contain financial covenants but they do contain certain restrictions including a prohibition against Legacy Dean and its subsidiaries granting liens on certain of their real property interests and a prohibition against Legacy Dean granting liens on the stock of its subsidiaries.

      Receivables-Backed Facility — We have entered into a $600 million receivables securitization facility pursuant to which certain of our subsidiaries sell their accounts receivable to four 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 four 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 2005, we made net borrowings of $19.2 million on this facility leaving an outstanding balance of $519.2 million at March 31, 2005. The receivables-backed facility bears interest at a variable rate based on the commercial paper yield as defined in the agreement. The average interest rate on this facility was 3.38% at March 31, 2005. Our ability to re-borrow under this facility is subject to a standard “borrowing base” formula. At March 31, 2005 there was remaining availability of $9 million under this facility. On January 3, 2005, we amended our receivables-backed facility to increase the borrowing limit to $600 million from $500 million and extended the facility termination date to November 17, 2007.

      Other Lines of Credit — Leche Celta, our Spanish subsidiary, has certain lines of credit separate from the senior credit facility described above. At March 31, 2005, $38.5 million was outstanding under these lines of credit at an average interest rate of 2.74%.

      Capital Lease Obligations and Other — Capital lease obligations and 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.

      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 at both March 31, 2005 and December 31, 2004:

      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, 2005 and December 31, 2004 our derivative asset and liability balances were:

      There was no hedge ineffectiveness for the three months ended March 31, 2005. Approximately $3 million of losses (net of taxes) were reclassified to interest expense from other comprehensive income during the three months ended March 31, 2005. We estimate that approximately $5.1 million of net derivative losses (net of taxes) included in other comprehensive income will be reclassified into earnings within the next 12 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 because the counter parties to our interest rate swap agreements are major financial institutions.

      Stock Award Plans — The following table summarizes stock option activity during the first quarter of 2005 under our stock-based compensation programs:

      We issued 8,552 shares of restricted stock during the first quarter of 2005 to non-employee directors as compensation for services rendered. Shares of restricted stock granted to non-employee directors vest one-third on grant, one-third on the first anniversary of grant and one-third on the second anniversary of grant.

      In addition to stock options, we issue stock units to certain key employees and directors as part of our long-term incentive program. A stock unit represents the right to receive one share of common stock in the future. Stock units have no exercise price. Each employee’s stock unit grant vests ratably over five years, subject to certain accelerated vesting provisions based primarily on our stock price. Stock units granted to non-employee directors vest ratably over three years. The following table summarizes the status of our stock unit compensation program:

      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”):

      Comprehensive income (loss) consists of net income plus all other changes in equity from non-owner sources. Consolidated comprehensive income was $60.2 million for the three months ended March 31, 2005. The amounts of income tax (expense) benefit allocated to each component of other comprehensive income during the three months ended March 31, 2005 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 $33.7 million to the pension plans during 2005.

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

      We expect to contribute $1.8 million to the postretirement health plans during 2005.

      Facility Closing and Reorganization Costs — We recorded net facility closing and reorganization costs of $6.9 million and $7.7 million during the first three months of 2005 and 2004, respectively.

      The charges recorded during 2005 are primarily related to the following:

      We expect to incur additional charges related to these restructuring plans of approximately $5.8 million, including approximately $800,000 in work force reduction costs and approximately $5 million

in shutdown and other costs. Approximately $4.4 million and approximately $1.2 million of these additional charges are expected to be incurred by December 2005 and December 2006, respectively.

      The principal components of our continued reorganization and cost reduction efforts include the following:

      We consider several factors when evaluating a potential facility closure, including, among other things, the impact of such a closure on our customers, the impact on production, distribution and overhead costs, the investment required to complete any such closure, and the impact on future investment decisions. Some facility closures are pursued to improve our operating cost structure, while others enable us to avoid unnecessary capital expenditures, allowing us to more prudently invest our capital expenditure dollars in our production facilities and better serve our customers.

      Activity for the first three months of 2005 is summarized below:

      Acquired Facility Closing and Other Exit Costs — As part of our purchase price allocations, we accrue costs from time to time pursuant to plans to exit certain facilities and activities of acquired businesses in order to rationalize production and reduce costs and inefficiencies. During 2004, we accrued costs to close two Dairy Group facilities acquired in 2003 and the Horizon Organic Farm and Education Center acquired in 2004, as well as to exit certain acquired contractual obligations.

      The principal components of the plans include the following:

      Activity with respect to these acquisition liabilities during the first three months of 2005 is summarized below:

      Contingent Obligations Related to Divested Operations — We have sold several businesses in recent years. In each case, we have retained certain known contingent obligations related to those businesses and/or assumed an obligation to indemnify the purchasers of the businesses for certain unknown contingent liabilities, including environmental liabilities. 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.

      Contingent Obligations Related to Milk Supply Arrangements — On December 21, 2001, in connection with our acquisition of the former Dean Foods Company, we purchased Dairy Farmers of America’s (“DFA”) 33.8% interest in our Dairy Group. In connection with that transaction, we entered into two agreements with DFA designed to ensure that DFA has the opportunity to continue to supply raw milk to certain of our facilities, or be paid for the loss of that business. One such agreement is a promissory note with a 20-year term that 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 in 2021, without any obligation to pay any portion of the principal or interest. Payments made under the note, if any, would be expensed as incurred. The other agreement would require us to pay damages to DFA if we fail to offer DFA the right to supply milk to certain facilities that we acquired as part of the former Dean Foods after the pre-existing agreements with certain other suppliers or producers expire.

      Insurance — We retain selected levels of property and casualty risks, primarily related to employee health care, workers’ compensation claims and other casualty losses. Many of these potential losses are covered under conventional insurance programs with third party carriers with high deductible limits. In other areas, we are self-insured with stop-loss coverages. 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.

      Leases and Purchase Obligations — 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 one 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.

      We have entered into various contracts obligating us to purchase minimum quantities of raw materials used in our production processes, including organic soybeans, organic raw milk and cucumbers. We enter into these contracts from time to time to ensure a sufficient supply of raw ingredients. In addition, we have contractual obligations to purchase various services that are part of our production process.

      Litigation, Investigations and Audits — We are party from time to time to certain claims, litigation, audits and investigations. We believe that we have established adequate reserves to satisfy any probable 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.

      We currently have three reportable segments: the Dairy Group, WhiteWave Foods Company and the Specialty Foods Group.

      Our Dairy Group segment is our largest segment. It manufactures, markets and distributes a wide variety of branded and private label 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. Effective January 1, 2005 we moved the marketing and sales responsibility for our Dean’s® Dips product line to our Dairy Group from WhiteWave Foods Company. Segment results for 2004 have been restated to reflect this change.

      Our WhiteWave Foods Company segment manufactures, develops, markets and sells a variety of nationally branded soy, dairy and dairy-related products, such as Silk® soymilk and cultured soy products; Horizon Organic® milk, juice and other products; International Delight® coffee creamers; and LAND O’LAKES® creamers and cultured products. WhiteWave Foods Company sells its products to a variety of customers, including grocery stores, club stores, natural foods stores, mass merchandisers, convenience stores and foodservice outlets. WhiteWave Foods Company’s operations have historically been conducted through three distinct operating units: White Wave, Inc., Horizon Organic and Dean National Brand Group. We are currently in the process of consolidating these three operating units and expect the consolidation to be completed in 2006.

      The Dairy Group, which manufactures a portion of WhiteWave Foods Company’s products, transfers finished products to WhiteWave Foods Company at or near cost. A small percentage of our WhiteWave Foods Company’s products (approximately $12.6 million and $9.8 million in 2005 and 2004, respectively) are sold through the Dairy Group’s direct store delivery network. Those sales, together with their related costs, are included in WhiteWave Foods Company for segment reporting purposes. Fixed assets, capital expenditures and depreciation related to the Dairy Group facilities that manufacture WhiteWave Foods Company’s products are reported as part of the Dairy Group, while intangibles and any associated amortization related to WhiteWave Foods Company’s brands are reported as part of WhiteWave Foods Company.

      Our Specialty Foods Group is the nation’s leading private label pickle processor, and the largest manufacturer and seller of non-dairy powdered creamer in the United States. The Specialty Foods Group also manufactures and sells a variety of other foods, such as sauces and puddings. On January 27, 2005 we announced our intent to pursue a spin-off of our Specialty Foods Group. We expect the spin-off to be complete in the third quarter of 2005.

      Our International Group, which does not qualify as a reportable segment, consists of our Leche Celta and Rachel’s Organic businesses. Leche Celta manufactures, markets and sells private label and branded milk, butter and cream through its internal sales force to retailers and distributors across Spain and Portugal. Rachel’s Organic markets and sells premium organic milk, yogurt and desserts in the United Kingdom. Effective January 1, 2005 the Rachel’s Organic business, which had historically been included with our WhiteWave Foods Company segment was moved to our International Group. Segment results for

2004 have been restated to reflect the Rachel’s Organic business in Corporate/ Other. Net sales, income and assets of the International Group are reflected in the charts below on the Corporate/ Other lines.

      We evaluate the performance of our segments based on operating profit or loss before gains and losses on the sale of assets, facility closing and reorganization costs and foreign exchange gains and losses. Therefore, the measure of segment profit or loss presented below is before such items. The accounting policies of our segments are the same as those described in the summary of significant accounting policies set forth in Note 1 to our 2004 Consolidated Financial Statements contained in our 2004 Annual Report on Form  10-K.

      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.

Geographic Information —

      Significant Customers — Our Dairy Group and Specialty Foods Group segments each had a single customer that represented greater than 10% of their sales in the first quarter of 2005. Approximately 13.7% of our consolidated sales in the first quarter of 2005 were to this same customer. In addition, our International Group had a single customer that represented greater than 10% of their sales in the first quarter of 2005. This customer represented less than 1% of our consolidated sales during the first quarter of 2005.

Business Overview

      We are a leading food and beverage company. Our Dairy Group is the largest processor and distributor of milk and various other dairy products in the United States. The Dairy Group manufactures and sells its products under a variety of local and regional brand names and under customer private labels. Our WhiteWave Foods Company segment manufactures, markets and sells a variety of well known soy, dairy and dairy-related nationally branded products including, for example: Silk® soymilk and cultured soy products; Horizon Organic® dairy products, juices and other products; International Delight® coffee creamers; Marie’s® refrigerated dips and dressings; and LAND O’ LAKES® creamers and cultured products. Our Specialty Foods Group is the leading private label pickle processor in the United States and a maker of a variety of other food products. In January 2005, we announced our intention to pursue a spin-off of our Specialty Foods Group segment to our shareholders. See “— Recent Developments — Spin-Off of Specialty Foods Group.” We also own the fourth largest dairy processor in Spain and an organic dairy business in the United Kingdom.

      Dairy Group — Our Dairy Group segment is our largest segment, with approximately 80% of our consolidated sales in the three months ended March 31, 2005. Our Dairy Group manufactures, markets and distributes a wide variety of branded and private label 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. The Dairy Group also manufactures a portion of the products marketed and sold by WhiteWave Foods Company. Due to the perishable nature of the Dairy Group’s products, our Dairy Group delivers the majority of its products directly to its customers’ stores in refrigerated trucks or trailers that we own or lease. This form of delivery is called a “direct store delivery” or “DSD” system and we believe we have one of the most extensive refrigerated DSD systems in the United States.

      Effective January 1, 2005 we transferred the sales and marketing responsibilities for our Dean’s® Dips product line to our Dairy Group from WhiteWave Foods Company. Segment results for 2004 have been restated to reflect this change.

      WhiteWave Foods Company — WhiteWave Foods Company’s operations have historically been conducted through three distinct operating units: White Wave, Inc., Horizon Organic and Dean National Brand Group. We are currently in the process of consolidating these three operating units and expect the consolidation to be completed in 2006. WhiteWave Foods Company manufactures, develops, markets and sells a variety of nationally-branded soy, dairy and dairy-related products, such as Silk soymilk and cultured soy products; Horizon Organic dairy products, juices and other products; International Delight coffee creamers; and LAND O’LAKES creamers and cultured products. WhiteWave Foods Company also sells Sun Soy® soymilk; The Organic Cow of Vermont® organic dairy products; White Wave® and Tofu Town® branded tofu; Hershey’s® milks and milkshakes; Marie’s dips and dressings; and Naturally Yours® sour cream. We license the LAND O’LAKES and Hershey’s names from third parties.

      Specialty Foods Group — Our Specialty Foods Group is the nation’s leading private label pickle processor, and the largest manufacturer and seller of non-dairy powdered creamer in the United States. The Specialty Foods Group also manufactures and sells a variety of other foods, such as aseptic sauces and puddings. In January 2005 we announced our intention to pursue a spin-off of our Specialty Foods Group segment. See “— Recent Developments.”

      International Group — Our International Group, which consists of our Leche Celta and Rachel’s Organic businesses, does not qualify as a reportable segment. Leche Celta manufactures, markets and sells private label and branded milk, butter and cream through its internal sales force to retailers and distributors across Spain and Portugal. Rachel’s Organic markets and sells premium organic milk, yogurt and desserts in the United Kingdom. Effective January 1, 2005, our Rachel’s Organic Dairy business, which has historically been part of our WhiteWave Foods Company segment’s operations, was transferred

to the International Group. Our segment discussion for 2004 has been restated to reflect the results of Rachel’s Organic Dairy business in our Corporate/ Other segment.

Recent Developments

      On January 27, 2005, we announced our intent to pursue a spin-off of our Specialty Foods Group. The spin-off will create a publicly traded food manufacturing company serving the retail grocery and foodservice markets with approximately 1,800 employees and estimated 2005 net sales of approximately $700 million. Also effective January 27, 2005, we hired a management team, headed by Sam Reed, former CEO of Keebler Foods Company, to lead the new company. In conjunction with their employment, the management team made a cash investment of $10 million in the Specialty Foods Group, representing 1.7% ownership of the new business.

      As part of the spin-off, we intend to transfer our Mocha Mix® non-dairy creamer, Second Nature® egg substitute and foodservice salad dressings businesses to the Specialty Foods Group from WhiteWave Foods Company and our Dairy Group.

      The spin-off is intended to take the form of a tax-free distribution to our shareholders of a new publicly traded stock, which we expect to be listed on the New York Stock Exchange. We expect the spin-off to be completed in the third quarter of 2005, subject to registration of the new security with the Securities and Exchange Commission and other customary closing conditions.

      As part of our continued reorganization and cost reduction efforts in our Dairy Group, we closed one Dairy Group distribution facility in 2005.

      We recorded a total of approximately $6.9 million in facility closing and reorganization costs during the first three months of 2005, primarily related to plans announced in 2004. We expect to incur additional charges related to these restructuring plans of approximately $5.8 million, primarily in 2005. These charges include the following costs:

      See Note 8 to our Condensed Consolidated Financial Statements for more information regarding our facility closing and reorganization activities.

Results of Operations

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

      Net Sales — Consolidated net sales increased approximately 11.9% to $2.74 billion during the first quarter of 2005 from $2.45 billion during the first quarter of 2004. Net sales by segment are shown in the table below.

      The change in net sales was due to the following:

      Net sales increased approximately $291 million during the first quarter of 2005 compared to the same period in the prior year primarily due to higher selling prices resulting from the pass-through of increased Class I raw milk costs. In addition, we benefited from the acquisitions of a small dairy in our Dairy Group

segment; LAND O’ LAKES® East in our WhiteWave Foods Company segment; and Tiger Foods in our Corporate/ Other segment. See “— Results by Segment” for more information.

      Cost of Sales — All expenses incurred to bring a product to completion are included in cost of sales, such as raw material, ingredient and packaging costs; labor costs; and plant and equipment costs, including costs to operate and maintain our coolers and freezers. In addition, our Dairy Group includes costs associated with transporting finished products from our manufacturing facilities to our own distribution facilities. Our cost of sales ratio increased to 76% in the first quarter of 2005 compared to 75% in the first quarter of 2004 due to increased raw material costs that affected all of our segments in the first quarter of 2005.

      Operating Costs and Expenses — Our operating expenses increased approximately $47.9 million during the first quarter of 2005 as compared to the same period in the prior year. Our operating expense ratio was 18.5% in the first quarter of 2005 compared to 18.8% during the first quarter of 2004. Operating expenses increased primarily due to (1) an increase in distribution costs of $30.4 million due primarily to increased volumes; (2) approximately $8.5 million of expenses related to our WhiteWave Foods Company reorganization, including $3.1 million of severance costs to a former employee; (3) approximately $3 million of expenses associated with the Specialty Foods Group spin-off; and (4) higher marketing expenses at WhiteWave Foods Company.

      Operating Income — Operating income during the first quarter of 2005 was $150.1 million, a decrease of $2.3 million from the first quarter of 2004 operating income of $152.4 million. Our operating margin in the first quarter of 2005 was 5.5% compared to 6.2% in the first quarter of 2004. Our operating margin decreased primarily as a result of higher raw material and distribution costs, and the effect of increased sales. See “— Results by Segment” for more information.

      Other (Income) Expense — Total other expense increased slightly to $42.4 million in the first quarter of 2005 compared to $41 million in the first quarter of 2004. Interest expense increased to $42.6 million in the first quarter of 2005 from $42.5 million in the first quarter of 2004.

      Income Taxes — Income tax expense was recorded at an effective rate of 38.5% in the first quarter of 2005 compared to 37.8% in the prior year. Our tax rate varies as the mix of earnings contributed by our various business units changes.

      The key performance indicators of our Dairy Group are sales volumes, gross profit and operating income.

      The Dairy Group’s net sales increased by approximately $232.9 million, or 11.9%, in the first quarter of 2005 versus the first quarter of 2004. The change in net sales from the first quarter of 2004 to the first quarter of 2005 was due to the following:

      The most significant cause of the increase in the Dairy Group’s net sales was price increases. In general, we change the prices that we charge our customers for fluid dairy products on a monthly basis, as the costs of our raw materials fluctuate. Class I raw milk prices were approximately 36% higher in the first quarter of 2005 compared to the first quarter of 2004. 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 first quarter of 2005 compared to the first quarter of 2004:

      The Dairy Group’s net sales also increased $9.7 million due to the acquisition of a small dairy in late 2004.

      Fluid milk volumes increased 1.2% during the first quarter of 2005. Approximately 70% of the Dairy Group’s sales during the quarter were fluid milk. This volume increase was offset by a decline in other products, primarily ice cream, resulting in an overall volume decline of 0.1% during the first quarter of 2005 compared to the first quarter of 2004. Ice cream volumes declined by approximately 11% during the quarter primarily because we sell our ice cream under private labels and local brands, and we believe we lost sales to nationally branded products.

      The Dairy Group’s cost of sales ratio was 76.6% in the first quarter of 2005 compared to 75.3% in the first quarter of 2004 primarily due to the increase in raw milk costs compared to the prior year. In addition increased resin costs negatively impacted cost of goods sold by approximately $15 million. Resin is the primary component used in our plastic bottles. Partly offsetting these increases was an approximately 9%

decline in Class II butterfat prices. Because monthly Class II butterfat prices are not announced by the government until after the end of the month, there is a lag between the time of a Class II butterfat price decrease and the effectiveness of a corresponding price decrease to our customers.

      The Dairy Group’s operating expense ratio decreased to 16.6% in the first quarter of 2005 from 17.6% in the first quarter of 2004, primarily due to the relatively smaller increase in operating expense dollars compared to the increase in sales dollars. Operating expense dollars increased approximately $19.8 million during the first quarter of 2005 compared to the first quarter of 2004, primarily due to an increase in distribution costs. Total distribution costs increased $15.4 million as a result of higher fuel prices, increased deliveries in our DSD system due to the addition of certain customers and the acquisition of several small distributors in the fourth quarter of 2004. In addition, bad debt expense increased in the first quarter of 2005 primarily as a result of the bankruptcy of a large retail customer that added approximately $1.9 million to our bad debt expense.

      The key performance indicators of WhiteWave Foods Company are sales dollars, gross profit and operating income.

      WhiteWave Foods Company’s net sales increased by $46 million, or 19.1%, in the first quarter of 2005 versus the first quarter of 2004. The change in net sales from the first quarter of 2004 to the first quarter of 2005 was due to the following:

      The increase in sales was primarily due to increased volumes. Volume sales for WhiteWave Foods Company increased 8.2% in the first quarter of 2005 compared to the same period in the prior year due to the growth of our brands, particularly Silk and Horizon Organic.

      Price increases implemented in mid-2004 in response to higher commodity costs continued to impact sales during the first quarter of 2005. This increase was partially offset by a 7% increase in slotting fees, couponing and certain other promotional costs, which are recorded as reductions of sales.

      The cost of sales ratio for WhiteWave Foods Company decreased to 67.1% in the first quarter of 2005 from 68.4% in the first quarter of 2004 primarily due to the relatively smaller increase in cost of goods sold dollars compared to the increase in sales dollars. Cost of goods sold dollars increased $27.8 million primarily due to higher organic raw milk and organic soybean costs, and due to higher sales volumes.

      Operating expenses increased approximately $21 million in the first quarter of 2005 compared to the same period in the prior year primarily due to higher distribution costs. Distribution costs increased $13.8 million due to higher sales volumes and to a lesser extent, higher fuel costs. Also distribution costs were negatively impacted in the quarter due to certain temporary inefficiencies in our Horizon Organic distribution system due to an industry-wide shortage of organic raw milk that caused us to ship both organic raw milk and finished Horizon Organic product from more distant locations. We are working to secure additional sources of organic raw milk and improve our supply chain efficiency. We continue to add new organic milk supply.

      Marketing expenses for our brands were approximately 32% higher during the first quarter of 2005 compared to the same period in the prior year. We initiated certain advertising campaigns during the latter part of 2004 that continued into 2005. We also recorded severance costs of $3.1 million for a former employee. These increases were partly offset by a decline of $5 million related to the WhiteWave management earn-out that was expensed during the first quarter of 2004.

      The key performance indicators of our Specialty Foods Group are sales dollars, gross profit and operating income.