UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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


(Mark One)
þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 2006
or

o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number 1-08262

of the Securities Exchange Act of 1934

(Mark One)
[X]		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 2004
or
[ ]		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number 1-08262

Dean Holding Company

(Exact name of Registrant as specified in its charter)

Delaware		75-2932967
(State or other jurisdiction of incorporation or organization)		(I.R.S. ~~Employer~~employer ~~Identification~~identification Nono.)

2515 McKinney Avenue, Suite 1200

Dallas, Texas 75201

(214) 303-3400

(Address, including zip code, and telephone number, including

area code, of ~~Registrant~~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]~~ þ No ~~[ ]~~o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, ~~(as~~or ~~defined~~a innon-accelerated filer. ~~Exchange~~See ~~Act~~definition of “accelerated filer and large accelerated filer” in Rule 12b-2) of the Exchange Act. ~~Yes [ ] No [X]~~ (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Dean Holding Company is a wholly-owned subsidiary of Dean Foods Company.

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.

Table of Contents

		Page
Part I — Financial Information			3
	Item 1 — Financial Statements		3
	Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations		1713
	Item 4 — Controls and Procedures		2416
Part II — Other Information			2618
	Item 6 — Exhibits and Reports on Form 8-K		26
	Item 1 — Legal Proceedings		18
	Item 1A — Risk Factors		18
	Item 6 — Exhibits		19
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

-2-

Part I — Financial Information


Item 1.	Financial Statements

DEAN HOLDING COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(~~Dollars~~In in thousands)

			June 30,			December 31,
			2004			2003
			2006			2005
			(unaudited)
Assets
Current assets:
	Cash and cash equivalents		$	1117,~~375~~501		$	2316,~~963~~056
	Accounts receivable, net			306,273			269,792
	Receivables, net			241,544			283,905
	Inventories			~~240~~100,~~482~~015			~~234~~104,~~311~~488
	Deferred income taxes			7733,~~468~~576			7137,~~946~~071
	Prepaid expenses and other current assets			1913,~~779~~895			1611,~~047~~157
		Total current assets		~~655~~406,~~377~~531			~~616~~452,~~059~~677
Property, plant and equipment, net				~~635~~503,~~921~~882			~~638~~508,~~267~~963
Goodwill				1,~~424~~080,~~810~~529			1,~~421~~080,~~711~~529
Identifiable intangible and other assets				~~227~~196,~~866~~718			~~230~~195,~~570~~704
		Total	$	2,~~943~~187,~~974~~660		$	2,~~906~~237,~~607~~873
Liabilities and Stockholder’s Equity
Liabilities and Parent’s Net Investment
Current liabilities:
	Accounts payable and accrued expenses		$	~~365~~265,~~885~~156		$	~~345~~292,~~806~~163
	Income taxes payable			53,~~642~~234			375,~~475~~492
	Current portion of long-term debt			~~98,755~~29			~~3,509~~28
		Total current liabilities		~~470~~268,~~282~~419			~~386~~297,~~790~~683
Long-term debt				~~657~~746,~~776~~440			~~794~~757,~~062~~743
Other long-term liabilities				158,874			174,044
Deferred income taxes				152,085			148,396
Deferred income taxes				226,351			212,889
Other long-term liabilities				68,322			71,079
Commitments and contingencies (Note 9)
Stockholder’s equity:
Parent’s net investment:
	Common stock, 1,000 shares issued and outstanding
	Parent’s net investment			952,844			963,546
	Additional paid-in capital			1,391,901			1,369,392
	Accumulated other comprehensive loss			(450	)		(574	)
	Retained earnings			382,836			310,529
		Total parent’s net investment		952,394			962,972
	Receivable from parent			(334,204	)		(330,651	)
		Total	$	2,187,660		$	2,237,873
	Accumulated other comprehensive income			(9,842	)		(10,448	)
		Total stockholder’s equity		1,430,691			1,338,822
		Total	$	2,943,974		$	2,906,607

See Notes to Condensed Consolidated Financial Statements.

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DEAN HOLDING COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands)

			Three Months Ended						Six Months Ended
			June 30						June 30
			2004			2003			2004			2003
			2006			2005			2006			2005
			(unaudited)						~~(unaudited)~~
Net sales			$	1893,~~125,817~~952		$	~~949~~917,~~438~~427		$	21,~~118~~806,~~983~~565		$	1,~~868~~823,~~501~~567
Cost of sales				~~874~~651,~~121~~037			~~704~~686,~~661~~305			1,~~623~~336,~~691~~208			1,~~388~~372,~~759~~502
Gross profit				~~251~~242,~~696~~915			~~244~~231,~~777~~122			~~495~~470,~~292~~357			~~479~~451,~~742~~065
Operating costs and expenses:
	Selling and distribution			~~141~~145,~~646~~869			~~129~~137,~~722~~390			~~281~~288,~~388~~414			~~257~~272,~~992~~381
	General and administrative			3230,~~576~~229			2926,~~357~~056			6759,~~375~~583			6257,~~427~~779
	Amortization expense			631			608			1,261			1,783
	Amortization of intangibles			212			327			411			647
	Plant closing and rationalization costs, net			(20	)		525			2,682			525
	Facility closing and reorganization costs			143			597			320			2,120
		Total operating costs and expenses		~~174~~176,~~833~~453			~~160~~164,~~212~~370			~~352~~348,~~706~~728			~~322~~332,~~727~~927
Operating income				7666,~~863~~462			8466,~~565~~752			~~142~~121,~~586~~629			~~157~~118,~~015~~138
Other (income) expense:
	Interest expense, net			13,759			13,736			27,598			27,306
	Interest expense			11,842			13,473			23,635			27,216
	Other (income) expense, net			~~485~~(34	)		~~(414~~97	)		(~~1,482~~66	)		(~~697~~54	)
		Total other (income) expense		14,244			13,322			26,116			26,609
		Total other expense		11,808			13,570			23,569			27,162
Income before income taxes				62,619			71,243			116,470			130,406
Income from continuing operations before income taxes				54,654			53,182			98,060			90,976
Income taxes				2318,~~736~~433			2720,~~135~~289			4436,~~163~~304			4934,~~836~~899
Net income			$	38,883		$	44,108		$	72,307		$	80,570
Income from continuing operations				36,221			32,893			61,756			56,077
Income from discontinued operations, net of tax				—			2,934			—			13,446
Net income			$	36,221		$	35,827		$	61,756		$	69,523

See Notes to Condensed Consolidated Financial Statements.

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DEAN HOLDING COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

					Six Months Ended	~~Six Months Ended~~
					June 30	~~June 30~~
						2004				2003
					2006				2005
					(unaudited)	~~(unaudited)~~
Cash Flows From Operating Activities
Cash flows from operating activities:
	Net Income					$	72,307			$	80,570
	Net income				$	61,756			$	69,523
	Adjustments to reconcile net income to net cash provided by operating activities:
	Income from discontinued operations					—				(13,446	)
		Depreciation and amortization					41,675				36,228
	Adjustments to reconcile net income to net cash provided by operating activities:
		Loss (gain) on disposition of assets					(2,106	)			199
		Depreciation and amortization				38,769				35,818
		Deferred income taxes					7,940				22,193
		Share-based compensation expense				1,208				1,476
		Other, net					1,043				(429	)
		Gain on disposition of assets				(201	)			(82	)
		Changes in operating assets and liabilities, net of acquisitions:
		Deferred income taxes				7,184				5,492
			Accounts receivable				(25,321	)			8,074
		Other				(657	)			2,138
			Inventories				(2,973	)			4,883
	Changes in operating assets and liabilities, net of acquisitions:
			Prepaid expenses and other assets				793				2,078
		Receivables				42,361				12,619
			Accounts payable, accrued expenses and other liabilities				(5,926	)			(52,157	)
		Inventories				4,473				(5,580	)
			Income taxes payable				(16,045	)			(23,314	)
		Prepaid expenses and other assets				(1,437	)			10,126
				Net cash provided by operating activities			71,387				78,325
		Accounts payable and accrued expenses				(29,877	)			(22,487	)
Cash Flows From Investing Activities
		Income taxes payable				(2,258	)			(542	)
	Net additions to property, plant and equipment						(36,240	)			(43,188	)
			Net cash provided by continuing operations			121,321				95,055
	Cash outflows for acquisitions						(26,461	)			(637	)
			Net cash provided by discontinued operations			—				32,076
	Proceeds from sale of fixed assets						3,374				1,889
			Net cash provided by operating activities			121,321				127,131
				Net cash used in investing activities			(59,327	)			(41,936	)
Cash flows from investing activities:
Cash Flows From Financing Activities
	Additions to property, plant and equipment					(32,966	)			(25,130	)
	Proceeds from issuance of debt										43,672
	Proceeds from sale of fixed assets					806				670
	Repayment of debt						(43,604	)
			Net cash used in continuing operations			(32,160	)			(24,460	)
	Additional investment from parent						22,509
			Net cash used in discontinued operations			—				(7,631	)
	Distribution to parent						(3,553	)			(92,746	)
			Net cash used in investing activities			(32,160	)			(32,091	)
				Net cash used in financing activities			(24,648	)			(49,074	)
Cash flows from financing activities:
Decrease in cash and cash equivalents							(12,588	)			(12,685	)
	Repayment of debt					(13,019	)			(114,520	)
Cash and cash equivalents, beginning of period							23,963				27,831
	Distribution to parent					(74,697	)			5,499
Cash and cash equivalents, end of period						$	11,375			$	15,146
			Net cash used in continuing operations			(87,716	)			(109,021	)
			Net cash provided by discontinued operations			—				11,153
			Net cash used in financing activities			(87,716	)			(97,868	)
	Increase (decrease) in cash and cash equivalents					1,445				(2,828	)
	Cash and cash equivalents, beginning of period					16,056				12,490
	Cash and cash equivalents, end of period				$	17,501			$	9,662

See Notes to Condensed Consolidated Financial Statements.

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DEAN HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2004~~2006

(~~Unaudited~~unaudited)


1.	General

Basis of Presentation — The unaudited ~~Condensed~~ Condensed Consolidated Financial Statements contained in this Quarterly ~~report~~Report have been prepared on the same basis as the Consolidated Financial Statements in our Annual Report on Form 10-K for ~~the~~ the year ended December 31, ~~2003~~2005. In our opinion, we have ~~made~~ made all necessary adjustments (which include only normal ~~recurring~~ recurring adjustments) in order to present fairly, in all ~~material~~ material respects, our consolidated financial position, results of 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~~ normally included in financial statements prepared in accordance with accounting principles generally accepted ~~accounting~~in ~~principles~~the United States of America have been omitted. Our results of operations for the period ended June 30, ~~2004~~ 2006 may not be indicative of our operating results for the full year. The Condensed Consolidated Financial Statements contained in this Quarterly ~~report~~Report should be read in conjunction with our ~~2003~~2005 Consolidated Financial Statements ~~and notes thereto~~ contained in our Annual Report on Form 10-K (filed with the Securities and Exchange Commission on March 3028, ~~2004~~2006).

Certain reclassifications have been made to conform the prior year’s condensed Consolidated Financial Statements to the current year’s classifications. During the six months ended June 30, 2006, we reclassified the presentation of expense recognition for reusable packaging utilized in our distribution process to distribution expense. The reclassification reduced cost of sales and increased distribution expense by $4.9 million and $9.4 million for the three and six months ended June 30, 2005 respectively. The reclassification had no impact on net income.

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 $8.9 million and $7.4 million for the three months ended June 30, 2006 and 2005, respectively, and $17.7 million and $17.8 million for the six months ended June 30, 2006 and 2005, respectively. The management fee is classified within general and administrative expenses in the Consolidated Statements of Income. 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 “Parent’s Net Investment” on our Consolidated Balance Sheets.

On June 27, 2005, Dean Foods Company completed the spin-off (“Spin-off”) of our majority-owned subsidiary TreeHouse Foods, Inc. (“TreeHouse”). Immediately prior to the Spin-off, we transferred to TreeHouse the businesses previously conducted by our Specialty Foods Group segment and Dean Foods Company transferred to TreeHouse certain businesses previously conducted by other segments of Dean Foods Company not consolidated with us. On June 24, 2005, immediately after Dean Foods Company transferred these businesses to TreeHouse, we distributed the common stock of TreeHouse to Dean Foods Company as a dividend. As a result of these transactions, we no longer have a Specialty Foods Group segment and our Dairy Group is our only remaining reportable segment. Our Condensed Consolidated Financial Statements for the periods ended June 30, 2005 have been reclassified to give effect to the businesses previously conducted by our Specialty Foods Group segment as discontinued operations.

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

WeShipping ~~are~~and aHandling ~~wholly-owned~~Fees — ~~subsidiary~~Our ofshipping ~~Dean Foods~~and ~~Company.~~handling ~~Dean~~costs ~~Foods~~are ~~Company~~included ~~provides us with management support~~ in ~~return~~both ~~for~~cost aof ~~management~~sales ~~fee.~~and ~~The~~selling and ~~management~~distribution ~~fee~~expense, isdepending ~~based~~ on ~~budgeted~~ ~~annual~~the ~~expenses~~nature ~~for Dean Foods Company’s corporate headquarters, a portion~~ of ~~which~~such ~~is then allocated to us~~costs. ~~Dean~~ ~~Foods~~Shipping ~~Company charged us management fees of $10 million~~ and ~~$9.2 million~~handling ~~for~~costs ~~the~~included ~~second~~in ~~quarter~~cost of ~~2004~~sales ~~and~~reflect inventory ~~2003,~~warehouse ~~respectively~~costs, ~~and~~ ~~$20.1~~product ~~million~~loading and ~~$18.5~~handling ~~million for the first half of 2004~~costs and ~~2003,~~costs ~~respectively.~~associated ~~Our~~with ~~cash~~transporting isfinished ~~available~~products ~~for use by, and is~~from ~~regularly~~our ~~transferred~~manufacturing ~~to,~~facilities ~~Dean Foods Company at its discretion. Cash that has been transferred~~ to ~~Dean Foods Company is included in “Receivable from Parent” on~~ our ~~balance~~own ~~sheet.~~distribution

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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~~DEAN~~warehouses. ~~HOLDING~~Shipping ~~COMPANY~~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 $121.2 million and $109.6 million in the second quarter of 2006 and 2005, respectively, and $240.0 million and $220.4 million during the six months ended June 30, 2006 and 2005, respectively.

~~NOTES~~Share-Based TOCompensation — ~~CONDENSED~~Certain ~~CONSOLIDATED~~of ~~FINANCIAL~~our ~~STATEMENTS~~employees participate in employee share-based compensation plans sponsored by Dean Foods Company. Dean Foods Company adopted Statement of Financial Accounting Standards (“SFAS”) No. —123(R), “Share-Based Payment” effective January 1, 2006. It requires 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. As permitted under the Statement, Dean Foods Company elected to adopt SFAS No. 123(~~Continued~~R) using the modified retrospective approach. Using this transition method, the results for prior periods have been revised to recognize the non-cash compensation expense in our Consolidated Statements of Income.

~~included~~As ina ~~cost~~result of ~~sales~~Dean ~~include~~Foods ~~inventory warehouse~~Company’s ~~costs~~adopting SFAS No. 123(R), ~~product~~our ~~loading~~income ~~and~~before ~~handling~~taxes ~~costs~~ and ~~costs~~net ~~associated~~income ~~with~~were ~~transporting~~lower ~~finished~~than ~~products~~if ~~from~~Dean ~~our manufacturing~~Foods ~~facilities~~Company tohad ~~our~~continued ~~own distribution warehouses.~~to ~~Shipping~~account ~~and handling costs included in selling and distribution expense consist primarily of route delivery costs~~ for ~~both company~~share-~~owned~~based ~~delivery~~compensation ~~routes~~under ~~and~~APB ~~independent~~Opinion ~~distributor routes,~~No to25 ~~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~~follows: ~~$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.~~

2. Acquisition


		Three Months				Six Months
		Ended				Ended
		June 30				June 30

		2006		2005		2006		2005

		(In thousands)
Decrease in:
	Income before taxes	$	655	$	727	$	1,208	$	1,476
	Net income		413		562		623		1,139

OnRecently ~~January 26,~~Adopted ~~2004,~~Accounting ~~the Dairy Group~~Pronouncements — ~~acquired~~Effective ~~Ross~~January 1, ~~Swiss Dairies~~2006, awe ~~dairy distributor based in Los~~adopted ~~Angeles~~SFAS No. 151, ~~California,~~“Inventory ~~which~~Costs — ~~had net sales of approximately $120~~an ~~million~~Amendment ~~in 2003. As a result~~ of ~~this~~ARB ~~acquisition~~No. 43, weChapter 4.” ~~have~~This ~~increased~~statement clarifies the ~~distribution~~accounting ~~capability~~for ofabnormal ~~our~~amounts ~~Dairy~~of ~~Group in~~idle ~~southern~~facility ~~California~~expense, ~~allowing~~freight, ushandling tocosts, ~~better~~and ~~serve~~wasted ~~our customers.~~material, ~~Ross~~requiring ~~Swiss~~that ~~Dairies~~those ~~has~~items ~~historically~~be ~~purchased~~recognized aas ~~significant~~current-period ~~portion~~charges. ofIn ~~its~~addition, ~~products from other processors~~SFAS No. 151 Werequires ~~transitioned~~that ~~the~~allocation ~~majority~~ of ~~Ross~~fixed ~~Swiss~~production ~~Dairies’~~overheads ~~manufacturing~~be ~~needs into~~based ~~our~~on ~~southern~~the ~~California~~normal capacity ~~plants~~of inthe ~~May~~production ~~2004~~facilities. WeThe ~~paid approximately~~adoption ~~$21.8 million,~~of ~~including transaction costs,~~this ~~for~~statement ~~the~~did ~~purchase~~not ofhave ~~Ross~~a ~~Swiss~~material ~~Dairies~~impact ~~and~~on ~~funded~~our ~~the purchase~~Consolidated ~~price~~Financial ~~with borrowings under Dean Foods Company’s receivables-backed facility~~Statements.

WeEffective ~~have~~January 1, ~~not~~2006, ~~completed~~we ~~the final allocation of~~adopted ~~purchase~~SFAS No. 153, ~~price~~“Exchanges ~~to the fair values~~ of ~~assets~~Nonmonetary ~~and liabilities~~Assets, ~~acquired~~an inamendment ~~2004~~of ~~and~~APB ~~late~~Opinion ~~2003, or the related business~~No. 29.” ~~integration plans~~SFAS No. 153 Weeliminates ~~expect that~~ the ~~ultimate~~rule ~~purchase~~in ~~price~~APB No. 29 ~~allocation~~which ~~may~~excluded ~~include~~from ~~additional~~fair ~~adjustments~~value tomeasurement ~~the~~exchanges ~~fair~~of ~~values~~similar ofproductive ~~depreciable tangible~~ assets,. ~~identifiable~~Instead ~~intangible assets and the carrying values of certain liabilities~~SFAS No. 153 ~~Accordingly,~~excludes tofrom ~~the extent that such assessments indicate that the~~ fair value ~~of the~~measurement ~~assets~~exchanges ~~and~~of ~~liabilities~~nonmonetary ~~differ~~assets ~~from~~that ~~their preliminary~~do ~~purchase~~not ~~price~~have ~~allocation,~~commercial ~~such~~substance. ~~difference~~The ~~would~~adoption ~~adjust~~of ~~the~~this statement ~~amounts~~did ~~allocated~~not tohave ~~the~~a ~~assets~~material ~~and~~impact ~~liabilities~~on ~~and~~our ~~would~~Consolidated ~~change~~Financial ~~the amounts allocated to goodwill~~Statements.

3 Recently Issued Accounting Pronouncements — The Financial Accounting Standards Board (“FASB”) issued Financial Interpretation No. ~~Inventories~~(“FIN”) 48, “Accounting for Uncertainty in Income Taxes” in June 2006. This interpretation clarifies the accounting for income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We are currently evaluating the impact of FIN No. 48, which will become effective for us in the first quarter of 2007, on our Consolidated Financial Statements.

		At June 30,		At December 31,
		2004		2003
		(In thousands)
Raw materials and supplies		$	68,494	$	71,331
Finished goods			171,988		162,980
	Total	$	240,482	$	234,311


2.	Discontinued Operations

~~Approximately~~On ~~$65.5~~January 25, ~~million~~2005, ~~and~~Dean ~~$97.6~~Foods ~~million~~Company ~~of our~~formed ~~inventory was accounted for under the last-in, first-out~~TreeHouse. ~~(LIFO) method~~At ofthat ~~accounting at June 30~~time, ~~2004~~TreeHouse ~~and December 31,~~sold ~~2003,~~shares ~~respectively.~~of ~~There~~common ~~was~~stock noto ~~material~~certain ~~excess~~members of ~~current~~a ~~cost~~newly ~~over~~retained ~~the~~management ~~stated~~team, ~~value~~who ~~of LIFO inventories~~purchased ~~at either date.~~approximately

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~~DEAN~~1.67% ~~HOLDING~~of ~~COMPANY~~the outstanding common stock of TreeHouse, for an aggregate purchase price of $10 million. The proceeds from this transaction were distributed to us as a dividend and are reflected within “Parent’s Net Investment” in our Condensed Consolidated Balance Sheet.

~~NOTES~~On TOJune 27, ~~CONDENSED~~2005, ~~CONSOLIDATED~~Dean ~~FINANCIAL~~Foods Company completed the Spin-off ~~STATEMENTS~~of our majority owned subsidiary TreeHouse. Immediately prior to the Spin-off, we transferred to TreeHouse the businesses previously conducted by our Specialty Foods Group segment and Dean Foods Company transferred to TreeHouse certain businesses previously conducted by other segments of Dean Foods Company not consolidated with us. On June ~~— (Continued)~~24, 2005, immediately after Dean Foods Company transferred these businesses to TreeHouse, we distributed the common stock of TreeHouse to Dean Foods Company as a dividend. As a result of these transactions, we no longer have a Specialty Foods Group segment and our Dairy Group is our only remaining reportable segment.

Net sales and income before taxes generated by our Specialty Foods Group segment were as follows:


	Three Months		Six Months
	Ended		Ended
	June 30, 2005		June 30, 2005

	(In thousands)
Net sales	$	175,142	$	332,299
Income before taxes		7,959		24,692

Prior to the Spin-off, we transferred the obligation for pension and other postretirement benefit plans of transferred employees and retirees to TreeHouse. In 2005, we transferred a portion of the related plan assets. In 2006, we transferred the remaining plan assets related to such obligations.


3.	Inventories


		June 30,		December 31,
		2006		2005

		(In thousands)
Raw materials and supplies		$	30,047	$	34,530
Finished goods			69,968		69,958

	Total	$	100,015	$	104,488


4.	Intangible Assets

~~Changes~~The incarrying ~~the~~amount of goodwill was $1,080,529 as of June 30, 2006 and December 31, 2005. The gross carrying amount and accumulated amortization of ~~goodwill~~our ~~for~~intangible ~~the~~assets ~~six~~(other ~~months~~than ~~ended~~goodwill) ~~June~~as of June 30, ~~2004~~2006 and December 31, 2005 are as follows:

					Specialty
			June 30, 2006									December 31, 2005
					Foods
			Gross							Net		Gross					Net
		Dairy Group			Group				Total
			Carrying			Accumulated				Carrying		Carrying		Accumulated			Carrying
		(In thousands)
			Amount			Amortization				Amount		Amount		Amortization			Amount
Balance at January 1, 2004		$	1,109,921		$	311,790			$	1,421,711
			(In thousands)
Acquisitions			20,466							20,466
Intangible assets with indefinite lives:
Purchasing accounting adjustments			(12,597	)		(4,770	)			(17,367	)
	Trademarks		$	179,310		$	—			$	179,310	$	179,310	$	—		$	179,310
Balance at June 30, 2004		$	1,117,790		$	307,020			$	1,424,810
Intangible assets with finite lives:
	Customer-related			20,904			(9,156	)			11,748		19,929		(8,015	)		11,914
Total			$	200,214		$	(9,156	)		$	191,058	$	199,239	$	(8,015	)	$	191,224

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:

		At June 30, 2004							At December 31, 2003
		Gross					Net		Gross					Net
		Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
		Amount		Amortization			Amount		Amount		Amortization			Amount
		(In thousands)
Intangible assets with indefinite lives:
	Trademarks	$	190,010				$	190,010	$	190,010				$	190,010
Intangible assets with finite lives:
	Customer-related		30,240	$	(8,152	)		22,088		28,455	$	(6,514	)		21,941
Total		$	220,250	$	(8,152	)	$	212,098	$	218,465	$	(6,514	)	$	211,951

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:

2005	$	3.2 million
2006		3.2 million
2007		3.1 million
2008		3.0 million
2009		3.0 million

-8-

~~DEAN~~Amortization ~~HOLDING~~expense ~~COMPANY~~on intangible assets for the three months ended June 30, 2006 and 2005 was approximately $600,000 and $500,000, respectively, and $1.1 million and $1.0 million for the six months ended June 30, 2006 and 2005, respectively. Estimated aggregate intangible asset amortization expense for the next five years is as follows:

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


2006	$	2.4 million
2007		2.4 million
2008		2.4 million
2009		2.4 million
2010		2.3 million


5.	Long-Term Debt

			At June 30, 2004						At December 31, 2003
			June 30, 2006						December 31, 2005
			Amount			Interest			Amount			Interest
			Outstanding			Rate			Outstanding			Rate
			(Dollars in thousands)
			(In thousands)
$100 million senior notes maturing in 2005			$	98,644			6.750%		$	98,006			6.750	%
$250 million senior notes maturing in August 2007			$	250,141			8.150	%	$	250,198			8.150	%
$250 million senior notes maturing in 2007				250,354			8.150			250,402			8.150
$200 million senior notes maturing in May 2009				191,432			6.625			190,192			6.625
$200 million senior notes maturing in 2009				187,007			6.625			186,070			6.625
$150 million senior notes maturing in October 2017				128,638			6.900			128,103			6.900
$150 million senior notes maturing in 2017				126,633			6.900			126,185			6.900
Receivables-backed facility				176,162			5.500			189,168			4.600
Receivables-backed facility				93,379			2.010			125,174			1.838
Other				96						110
Industrial development revenue bonds										11,700			1.35-1.40
				746,469						757,771
Capital lease obligations and other				514						34
	Less current portion			(29	)					(28	)
				756,531						797,571
		Total	$	746,440					$	757,743
	Less current portion			(98,755	)					(3,509	)
		Total	$	657,776					$	794,062

Senior Notes — We had $~~700~~600 million (face value) of senior notes outstanding at June 30, ~~2004~~2006. 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~~ property 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~~ 600 million receivables securitization facility. ~~Certain~~pursuant to which certain of our subsidiaries sell their accounts receivable to a wholly-owned special purpose ~~entities~~ entity intended to be bankruptcy-remote. ~~The~~ This special purpose ~~entities~~ entity then ~~transfer~~transfers 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 Consolidated ~~balance~~Balance ~~sheet~~Sheets, 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. No principal payments are due on the receivables-backed facility until maturity in November 2008. Dean Foods Company does not allocate interest related to the receivables-backed facility to us. Therefore, no interest costs related to this facility have been reflected on our income statements.

~~Industrial~~Letters ~~Development~~of ~~Revenue Bond~~Credit — ~~During~~At ~~2004~~June 30, we2006, ~~repaid~~$3.6 million ~~the~~of ~~remaining~~letters ~~principal balances~~ of ~~our~~credit were outstanding. The ~~industrial~~majority ~~development~~of ~~bonds,~~letters ~~which~~of ~~had~~credit anwere ~~aggregate~~required ~~outstanding~~by various utilities ~~principal~~and ~~balance~~government ofentities ~~$11.7~~for ~~million~~performance atand ~~December 31,~~insurance ~~2003~~guarantees.

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.

-9-

~~DEAN~~6. ~~HOLDING~~Comprehensive ~~COMPANY~~ Income (Loss)

~~NOTES~~The TOcomponents ~~CONDENSED~~of ~~CONSOLIDATED~~comprehensive ~~FINANCIAL STATEMENTS —~~ income (~~Continued~~loss) are summarized below.

6. Comprehensive Income


		Three Months					Six Months
		Ended					Ended
		June 30					June 30

		2006			2005		2006			2005

		(In thousands)
Net income		$	36,221		$	35,827	$	61,756		$	69,523
Other comprehensive income (loss):
	Cumulative translation adjustment		(150	)		132		(281	)		150
	Transfer to parent		—			—		(31	)		—
	Change in fair value of derivative instruments, net of tax		187			—		436			—
	Minimum pension liability adjustment, net of tax		—			108		—			(738	)

			37			240		124			(588	)

Comprehensive income		$	36,258		$	36,067	$	61,880		$	68,935

~~Comprehensive income consists of net income plus all other changes in equity from non-owner sources~~7. ~~Consolidated comprehensive~~Employee ~~income~~Postretirement 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. Benefits

		Pre-Tax
		Income			Tax		Net
		(Loss)			Benefit		Amount
		(In thousands)
Accumulated other comprehensive income, December 31, 2003		$	(15,906	)	$	5,458	$	(10,448	)
	Cumulative translation adjustment arising during period		943					943
Accumulated other comprehensive income, March 31, 2004			(14,963	)		5,458		(9,505	)
	Cumulative translation adjustment arising during period		(337	)				(337	)
Accumulated other comprehensive income, June 30, 2004.		$	(15,300	)	$	5,458	$	(9,842	)

Certain of our subsidiaries provide health care benefits to certain retirees who are covered under specific group contracts.

7. Employee Retirement and Postretirement Benefits


		Three Months				Six Months
		Ended				Ended
		June 30				June 30

		2006		2005		2006		2005

		(In thousands)
Components of net period cost:
	Service cost	$	219	$	238	$	504	$	476
	Interest cost		292		209		543		418
Amortizations:
	Unrecognized net loss		404		64		493		128

Net periodic benefit cost		$	915	$	511	$	1,540	$	1,022

~~Defined~~We ~~Benefit Plans —~~expect ~~The~~to ~~benefits~~contribute ~~under our~~$1.9 million ~~defined~~to ~~benefit~~our postretirement health plans ~~are~~during ~~based on years of service and employee compensation~~2006.

		Three Months						Six Months
		Ended						Ended
		June 30						June 30
		2004			2003			2004			2003
		(In thousands)
Components of net period cost:
	Service cost	$	282		$	251		$	563		$	502
	Interest cost		2,724			2,628			5,448			5,257
	Expected return on plan assets		(1,699	)		(1,255	)		(3,398	)		(2,511	)
Amortizations:
	Prior service cost		126			125			251			251
	Unrecognized net loss		75			54			149			108
	Effect of settlement		225						450
Net period benefit cost		$	1,733		$	1,803		$	3,463		$	3,607


8.	Facility Closing and Reorganization Costs

Facility Closing and Reorganization Costs — We recorded ~~expect~~net tofacility ~~contribute~~closing and reorganization costs of $~~30.6~~143,000 ~~million~~and to$597,000 ~~our~~during the second quarter of 2006 and ~~pension~~2005, ~~plans~~respectively, and $320,000 and $2.1 million during the ~~2004~~first six months of 2006 and 2005, respectively.

~~Postretirement~~The charges recorded during 2006 are primarily related to ~~Benefits —~~previously ~~Certain~~announced plans including the closing of ~~our~~a ~~subsidiaries~~manufacturing ~~provide~~facility ~~healthcare~~in ~~benefits~~Albuquerque, toNew ~~certain~~Mexico ~~retirees~~and ~~who~~the ~~are~~consolidation ~~covered~~of ~~under~~certain ~~specific~~administrative ~~group contracts~~functions.

We expect to incur additional charges related to these restructuring plans of approximately $1.7 million, primarily related to shutdown and other costs. All of these charges are expected to be incurred by December 2006.

-10-

~~DEAN~~The ~~HOLDING~~principal ~~COMPANY~~components of our continued reorganization and cost reduction efforts include the following:

~~NOTES~~• TOWorkforce ~~CONDENSED~~reductions ~~CONSOLIDATED~~as ~~FINANCIAL STATEMENTS — (Continued)~~ a result of facility closings, facility reorganizations and consolidation of administrative functions; • Shutdown costs, including those costs necessary to prepare 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, 2006 was approximately $1.7 million. We are marketing these properties for sale.

		Three
		Months				Six Months
		Ended				Ended
		June 30				June 30
		2004		2003		2004		2003
		(In thousands)
Components of net period cost:
	Service cost	$	241	$	245	$	482	$	489
	Interest cost		232		170		464		340
Amortizations:
	Unrecognized net loss		68		21		136		42
Net period benefit cost		$	541	$	436	$	1,082	$	871

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.

WeActivity ~~expect~~for tothe ~~contribute~~first $2six ~~million~~months toof ~~our postretirement~~2006 ~~health~~is ~~plans~~summarized ~~during 2004.~~below:

8. Plant Closing and Rationalization Costs


		Accrued								Accrued
		Charges at								Charges at
		December 31,		Charges						June 30,
		2005		(Reversals)			Payments			2006

		(In thousands)
Cash charges:
	Workforce reduction costs	$	449	$	(138	)	$	(288	)	$	23
	Shutdown costs		—		276			(276	)		—
	Lease obligations and other		58		182			(190	)		50

	Total	$	507	$	320		$	(754	)	$	73

~~Plant Closing and Rationalization Costs — As part of our overall rationalization and cost reduction program, we recorded net costs of $2~~9.~~7 million~~ ~~and~~Commitments ~~$0.5 million during the first six months of 2004~~ and ~~2003, respectively.~~ Contingencies

~~The~~Contingent ~~charges~~Obligations ~~recorded~~Related ~~during~~to ~~the~~Divested Operations — ~~first~~We ~~six~~have ~~months~~divested several businesses ofin ~~2004~~recent ~~are~~years. ~~primarily~~In each case, we have retained certain known contingent obligations related to those businesses and/or assumed an obligation to indemnify the ~~closing~~purchasers of ~~two~~the businesses ~~Dairy~~for ~~Group~~certain unknown contingent liabilities, including ~~manufacturing~~environmental ~~facilities~~liabilities. inWe ~~California~~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.

~~These~~Guaranty ~~charges~~of ~~were~~Dean ~~accounted~~Foods ~~for~~Company’s inObligations ~~accordance~~Under Its ~~with~~Senior ~~SFAS~~Credit ~~No.~~Facility ~~146,~~— ~~“Accounting~~Certain ~~for~~of ~~Costs~~Dean ~~Associated~~Foods ~~with~~Company’s ~~Exit~~subsidiaries, orincluding ~~Disposal Activities~~us,” ~~which~~are ~~became~~required ~~effective~~to ~~for~~guarantee usDean inFoods ~~January~~Company’s ~~2003~~indebtedness under its senior credit facility. We ~~expect~~have topledged ~~incur~~substantially ~~additional~~all ~~charges~~ of our ~~approximately~~assets (other than our real property and our ownership interests in our subsidiaries) as security for our guaranty. Dean Foods Company’s senior credit facility provides for a $1.45 ~~million~~billion ~~related~~revolving tocredit ~~shutdown~~facility and ~~other~~a ~~costs~~$1.5 billion ~~The~~term ~~majority~~loan. At June 30, 2006 there were outstanding term loan borrowings of ~~these~~$1.5 billion ~~additional~~under ~~charges~~the senior ~~are~~credit ~~expected~~facility, toand $299.3 million outstanding beunder ~~completed~~the byrevolving ~~December~~credit facility. Letters of ~~2004~~credit in the aggregate amount of $128.2 million were issued but undrawn. At June 30, 2006 approximately $1.07 billion was available for future borrowings under Dean Foods Company’s revolving credit facility.

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.

-11-

~~DEAN~~Principal ~~HOLDING~~payments ~~COMPANY~~are required on Dean Foods Company’s term loan as follows:

~~NOTES~~• TO$56.3 ~~CONDENSED~~million ~~CONSOLIDATED~~quarterly ~~FINANCIAL STATEMENTS — (Continued)~~ beginning on December 31, 2006 through September 30, 2008; • $262.5 million quarterly beginning on December 31, 2008 through June 30, 2009; and • A final payment of $262.5 million on the maturity date of August 13, 2009.

~~Activity~~No ~~with~~principal ~~respect~~payments toare ~~plant~~due ~~closing~~on ~~and~~the $1.5 billion revolving ~~rationalization~~credit isfacility ~~summarized~~until ~~below:~~maturity on August 13, 2009.

			Accrued		Six Months Ended						Accrued
			Charges at		June 30, 2004						Charges at
			December 31,								June 30,
			2003		Charges			Payments			2004
			(In thousands)
Cash charges:
	Workforce reduction costs		$	3,547	$	(529	)	$	(2,318	)	$	700
	Shutdown costs					1,243			(1,243	)
	Lease obligations after shutdown					338			(181	)		157
	Other					2,097			(2,097	)
	Subtotal		$	3,547		3,149		$	(5,839	)	$	857
Noncash charges:
	Net gain on sale of assets					(467	)
		Total charges			$	2,682

Dean Foods Company’s credit agreement also requires mandatory principal prepayments upon the occurrence of certain asset dispositions or recovery events.

~~Transaction~~The ~~Closing~~senior ~~Costs~~credit ~~— As~~facility ~~part~~contains ofvarious ~~our~~financial ~~acquisition~~and ~~by Dean~~other ~~Foods~~restrictive ~~Company,~~covenants weand ~~accrued~~requires ~~costs~~that inDean ~~2002~~Foods ~~pursuant to a plan to~~Company ~~exit~~maintain certain ~~activities~~financial ~~and~~ratios, ~~businesses~~including ina ~~order~~maximum ~~to rationalize~~leverage ~~production~~ and ~~reduce~~minimum ~~costs~~interest ~~and~~coverage ~~inefficiencies~~ratio. AsDean ~~part of this plan we closed two Specialty~~ Foods ~~Group~~Company ~~plants in Atkins,~~is ~~Arkansas~~currently ~~and Cairo, Georgia, and one Dairy Group plant~~ in ~~Escondido,~~ ~~California.~~compliance Wewith ~~also~~all ~~eliminated~~covenants ~~our~~contained ~~administrative offices, closed Dairy Group distribution depots~~ in ~~Parker Ford,~~its ~~Pennsylvania~~credit ~~and Camp Hill, Pennsylvania, shut down two pickle tank yards and relocated production between plants as part of our overall integration and efficiency efforts~~agreement.

The ~~principal~~credit ~~components~~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 ~~plans~~capital ~~include~~stock of our subsidiaries and the real property owned by us and our ~~following:~~subsidiaries).

• The ~~Workforce~~credit ~~reductions~~agreement ascontains astandard ~~result~~default oftriggers including ~~plant~~without ~~closings,~~limitation: ~~plant~~failure ~~rationalizations~~to ~~and~~maintain ~~consolidation~~compliance with ofthe ~~administrative~~financial ~~functions~~ and ~~offices;~~other •covenants ~~Shutdown~~contained ~~costs,~~in ~~including~~the ~~those~~credit agreement, ~~costs~~default ~~that~~on ~~are~~certain ~~necessary~~of toDean ~~clean~~Foods ~~and~~Company’s ~~prepare~~other debt, ~~the~~a ~~abandoned~~change ~~facilities~~in ~~for~~control ~~closure;~~ and •certain ~~Costs~~other ~~incurred~~material ~~after~~adverse changes ~~shutdown~~in ~~such~~its asbusiness. ~~lease~~The ~~obligations~~credit oragreement ~~termination~~does ~~costs,~~not ~~utilities~~contain any ~~and~~default ~~property~~triggers ~~taxes~~based ~~after~~on ~~shutdown~~Dean ofFoods ~~the~~Company’s ~~facility~~credit rating.

~~During~~Guaranty ~~the~~of ~~first~~Dean ~~quarter~~Foods ofCompany’s ~~2004~~Obligations weUnder ~~recorded~~Its ~~certain~~Senior ~~adjustments~~Notes — Certain of Dean Foods Company’s subsidiaries, including us, are required to guarantee ~~reduce~~Dean ~~the~~Foods ~~liability~~Company’s byindebtedness ~~approximately~~under its $1senior notes.5 ~~million~~Dean ~~related~~Foods toCompany ~~the~~issued ~~closures~~$500 million aggregate inprincipal ~~our~~amount ~~Specialty~~of ~~Foods~~7.000% senior unsecured notes ~~Group~~on ~~segment~~May 17, 2006. ~~These~~No ~~adjustments~~principal ~~also~~payments ~~reduced~~are ~~goodwill~~due on these senior notes until maturity on June 1, 2016.

~~Activity~~The ~~with~~indenture ~~respect~~under which Dean Foods Company issued the senior notes does not contain financial covenants but does contain covenants that, among other things, limit Dean Foods Company and its guarantor subsidiaries ability to ~~these~~incur ~~liabilities~~secured indebtedness, ~~for~~enter into sale-leaseback transactions and engage ~~the~~in ~~first~~mergers, ~~six~~consolidations ~~months~~and sales of ~~2004~~all isor ~~summarized~~substantially ~~below:~~all of Dean Foods Company or its guarantor subsidiaries assets.

		Accrued		Six Months Ended						Accrued
		Charges at		June 30, 2004						Charges at
		December 31,								June 30,
		2003		Payments			Adjustments			2004
		(In thousands)
Workforce reduction costs		$	2,181	$	(253	)	$	(456	)	$	1,472
Shutdown costs			4,064		(493	)		(1,016	)		2,555
	Total	$	6,245	$	(746	)	$	(1,472	)	$	4,027

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 $2.0 million for casualty claims. We believe we have established adequate reserves to cover these claims.

Leases — We lease certain property, plant and equipment used in our operations under operating lease agreements. Such leases are primarily for machinery, equipment and vehicles. 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.

Litigation, Investigations and Audits — We are parties 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.

-12-

~~DEAN~~In ~~HOLDING~~our ~~COMPANY~~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.

~~NOTES~~10. TOGeographic ~~CONDENSED~~Information ~~CONSOLIDATED~~and ~~FINANCIAL STATEMENTS — (Continued)~~ Major Customers

9. ~~Commitments~~ ~~and~~Geographic ~~Contingencies~~Information — Substantially all of our business is within the United States.

~~Leases~~Significant Customers — 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~~a ~~terms ranging from 1 to 20 years.~~single ~~Certain~~customer ofthat ~~the~~represented ~~operating~~greater ~~lease~~than ~~agreements~~10% ~~require the payment~~ of ~~additional~~ ~~rentals~~our ~~for~~net ~~maintenance,~~sales ~~along with additional~~in ~~rentals based on miles driven or units produced. Certain leases require us to guarantee a minimum value of~~ the ~~leased~~first ~~asset~~six ~~at the~~months ~~end~~ of ~~the lease~~2006. ~~Our~~Approximately ~~maximum~~18.7% ~~exposure~~of ~~under~~our ~~those~~net ~~guarantees~~sales iswere ~~not~~to athis ~~material amount~~customer.

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).

-13-

DEAN HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

-14-

DEAN HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

			Three Months Ended						Six Months Ended
			June 30						June 30
			2004			2003			2004			2003
			(In thousands)
Net sales to external customers:
	Dairy Group		$	951,649		$	773,762		$	1,779,332		$	1,529,887
	Specialty Foods Group			174,168			175,676			339,651			338,614
		Total	$	1,125,817		$	949,438		$	2,118,983		$	1,868,501
Operating income:
	Dairy Group		$	68,696		$	69,566		$	129,590		$	130,463
	Specialty Foods Group			19,832			26,584			39,138			49,775
	Corporate/Other			(11,685	)		(11,060	)		(23,460	)		(22,698	)
	Segment operating income			76,843			85,090			145,268			157,540
	Plant closing and rationalization costs, net			(20	)		525			2,682			525
		Total	$	76,863		$	84,565		$	142,586		$	157,015

		At June 30
		2004		2003
		(In thousands)
Assets:
	Dairy Group	$	2,244,640	$	2,156,034
	Specialty Foods Group		609,899		597,810
	Corporate/Other		89,435		93,626
	Total	$	2,943,974	$	2,847,470

Substantially all of our business is within the United States.

Significant Customers — The Dairy Group and Specialty Foods Group segments had one customer that represented greater than 10% of their sales in the first six months of 2004. Approximately 12.9% of our consolidated sales in the first six months of 2004 were to that same customer.

11. Subsequent Events

On August 13, 2004, Dean Foods Company completed an amendment to its senior credit facility that (1) increased the size of its revolving credit facility from $1 billion to $1.5 billion, (2) increased the size of its term loan A from $850 million to $1.5 billion, and (3) eliminated term loans B and C. Previously, the interest rate on the revolving credit facility and the term loan A was either, at Dean Foods Company’s election, a base rate (defined as the higher of the federal funds rate plus 50 basis points or the prime rate) plus a margin that varied from 0 to 75 basis points depending on its leverage ratio (which is the ratio of indebtedness to EBITDA, as such terms are defined in the credit agreement), or LIBOR plus a margin that varied from 125 to 200 basis points, which depended on its leverage ratio. With this amendment, both the revolver and the term loan bear interest, at Dean Foods Company’s election, at the base rate plus a margin that varies from 0 to 62.5 basis points depending on its credit ratings (as issued by Standard & Poor’s and Moody’s), or LIBOR plus a margin that varies from 75 to 187.5, depending on its credit ratings (as issued by Standard & Poor’s and Moody’s). The maturity date of the revolving credit facility

-15-

DEAN HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

and the term loan A was extended from July 2007 to August 2009, and the amortization of the term loan A changed so that no principal payments are due in 2004 or 2005, and principal payments totaling $56.3 million, $225 million, $431.3 million and $787.5 million are due in 2006, 2007, 2008 and 2009, respectively. Also, the net worth covenant was eliminated, the maximum leverage ratio requirement is fixed at 4 to 1 and the minimum interest coverage requirement is fixed at 3 to 1.

-16-


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

We are a wholly-owned subsidiary of Dean Foods Company. Our operations ~~consist~~are ~~of two segments: the Dairy Group and the Specialty Foods Group. Our Dairy Group is~~ part of the Dairy Group segment of Dean Foods ~~Company and our Specialty~~ ~~Foods Group segment comprises the entirety of Dean Foods~~ Company~~’s Specialty Foods Group 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 June 30											Six Months Ended June 30
			2004						2003					2004					2003
			2006						2005					2006					2005
			Dollars			Percent			Dollars		Percent			Dollars		Percent			Dollars		Percent
			(Dollars in thousands)
			(Dollars in millions)
Net sales			$	~~1,125,817~~894.0			100.0	%	$	~~949,438~~917.4		100.0	%	$	21,~~118,983~~806.6		100.0	%	$	1,~~868,501~~823.6		100.0	%
Cost of sales				~~874,121~~651.0			7772.68			~~704,661~~686.3		74.28			1,~~623,691~~336.2		7674.60			1,~~388,759~~372.5		7475.3
Gross profit				~~251,696~~243.0			2227.42			~~244,777~~231.1		25.82			~~495,292~~470.4		2326.40			~~479,742~~451.1		2524.7
Operating costs and expenses:
	Selling and distribution			~~141,646~~145.9			1216.64			~~129,722~~137.4		1315.70			~~281,388~~288.5		1316.30			~~257,992~~272.4		1314.89
	General and administrative			~~32,576~~30.2			23.94			~~29,357~~26.0		32.08			~~67,375~~59.6		3.23			~~62,427~~57.8		3.42
	Amortization expense			631			0.1			608		0.1			1,261		0.1			1,783		0.1
	Amortization of intangibles			0.2			—			0.3		—			0.4		—			0.7		—
	Plant closing and rationalization costs, net			(20	)					525		0.1			2,682		0.1			525
	Facility closing and reorganization costs			0.2			—			0.6		0.1			0.3		—			2.1		0.1
		Total operating expenses		174,833			15.6			160,212		16.9			352,706		16.7			322,727		17.3
		Total operating costs and expenses		176.5			19.8			164.3		17.9			348.8		19.3			333.0		18.2
Total operating income			$	76,863			6.8	%	$	84,565		8.9	%	$	142,586		6.7	%	$	157,015		8.4	%
Operating income			$	66.5			7.4	%	$	66.8		7.3	%	$	121.6		6.7	%	$	118.1		6.5	%

Quarter Ended June 30, ~~2004~~2006 Compared to Quarter Ended June 30, 2005 ~~2003~~

Net Sales — ~~Consolidated~~Net ~~net~~ sales ~~increased~~decreased approximately 18 2.6% to $1894.130 million ~~billion~~ during the second quarter of ~~2004~~ 2006 from $~~949~~917.4 million during the second quarter of ~~2003~~2005. ~~Net sales by segment are shown in the table~~ ~~below.~~

		Quarter Ended June 30
						$ Increase/			% Increase/
		2004		2003		(Decrease)			(Decrease)
		(Dollars in thousands)
Dairy Group		$	951,649	$	773,762	$	177,887			23.0	%
Specialty Foods Group			174,168		175,676		(1,508	)		(0.9	)
	Total	$	1,125,817	$	949,438	$	176,379			18.6	%

The change in net sales from the second quarter of 2005 to the second quarter of 2006 was due to the following:

The change in net sales was due to the following:


		Dollars			Percent

		(Dollars in millions)
2005 Net sales		$	917.4
	Volume		23.3			2.5	%
	Pricing and product mix		(46.7	)		(5.1	)

2006 Net sales		$	894.0			(2.6	)%

		Quarter Ended June 30, 2004 vs. Quarter Ended
		June 30, 2003
				Pricing, Volume
				and Product			Total
		Acquisitions		Mix Changes			Increase/(Decrease)
		(In thousands)
Dairy Group		$	38,706	$	139,181		$	177,887
Specialty Foods Group			2,250		(3,758	)		(1,508	)
	Total	$	40,956	$	135,423		$	176,379

-13-

-17-

Net sales ~~for~~decreased ~~the~~primarily ~~second~~due ~~quarter~~to the effects of ~~2004~~lower ~~increased~~selling ~~approximately~~prices ~~$176.4~~resulting ~~million~~from ~~compared~~the topass-through ~~the~~of ~~second~~lower ~~quarter~~Class I ofraw ~~2003~~skim ~~primarily~~milk ~~due~~and tobutterfat ~~higher~~costs. ~~selling~~In ~~prices~~general, atwe change the prices that we charge our customers for fluid dairy ~~Dairy~~products ~~Group~~on ~~resulting~~a ~~from~~monthly basis, as the ~~pass-through~~costs of ~~increased~~our raw materials fluctuate. Class I raw skim milk ~~costs~~prices ~~and~~were ~~due~~approximately 21% lower in the second quarter of 2006 compared to ~~acquisitions~~the second quarter of 2005. WeThe ~~acquired~~following ~~Ross~~table ~~Swiss~~sets forth the average ~~Dairies~~monthly incomponent prices of the ~~Dairy~~Class I ~~Group~~“mover” and ~~segment~~average monthly Class II minimum prices for raw skim milk and ~~Cremora~~butterfat infor ~~our~~the second quarter of 2006 compared to ~~Specialty~~the ~~Foods~~second ~~Group~~quarter ~~segment.~~of 2005:

See “— Results by Segment” for more information.


	Quarter Ended June 30*

	2006			2005			% Change

Class I raw skim milk mover(3)	$	6.83	(1)	$	8.69	(1)		(21	)%
Class I butterfat mover(3)		1.26	(2)		1.66	(2)		(24	)
Class II raw skim milk minimum(4)		7.03	(1)		7.63	(1)		(8	)
Class II butterfat minimum(4)		1.25	(2)		1.62	(2)		(23	)

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; plant and equipment costs, including costs to operate and maintain our coolers and freezers; and costs associated with transporting our finished products from our manufacturing facilities to our own distribution facilities. Our cost of sales ratio was 77.6% in the second quarter of 2004 compared to 74.2% in the second quarter of 2003. Increased raw material costs affected both of our segments in 2004.


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

(1)	Prices are per hundredweight.

(2)	Prices are per pound.

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

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

~~See~~These ~~“— Results~~price decreases were partly offset by ~~Segment”~~higher fresh milk, ~~for~~dips ~~more~~and ~~information~~ice cream volumes. Fresh milk volumes (which represented approximately 72% of our sales volume during the quarter) increased 1.9%. We believe the increase in volume is a result of the superior value and service that we are able to offer our customers as part of the largest dairy processor in the nation.

~~Operating~~Cost ~~Costs~~of ~~and Expenses~~Sales — ~~Our~~All ~~operating~~ expenses ~~increased~~incurred ~~approximately~~to ~~$14~~bring a product to completion are included in cost of sales, such as raw material, ingredient and packaging costs; labor costs; plant and equipment costs, including costs to operate and maintain our coolers and freezers; and costs associated with transporting our finished products from our manufacturing facilities to our own distribution facilities.6 ~~million~~Our ~~during~~cost of sales as a percentage of net sales decreased to 72.8% in the second quarter of 2006 from 74.8% in the second quarter of ~~2004~~2005 asprimarily ~~compared~~due to ~~the~~decreased raw ~~same~~milk ~~period~~costs incompared to the prior year. ~~Operating~~This ~~expenses~~decrease ~~increased~~was partly ~~primarily~~offset ~~due~~by higher resin costs during the second quarter of 2006 compared to: the second quarter of 2005. Resin is the primary component used in our plastic bottles.

	•	Acquisitions, which represented approximately $9 million of the increase; and
	•	Distribution costs, which were approximately $6.7 million higher in the second quarter of 2004 compared to last year partially due to higher fuel costs at both our segments.

Operating Costs and Expenses — Our operating expenses increased approximately $12.2 million during the second quarter of 2006 as compared to the same period in the prior year. Our operating expense as a percentage of net sales was 19.8% in the second quarter of 2006 compared to 17.9% during the second quarter of 2005. Operating expenses increased primarily due to an increase in distribution costs of $11.5 million as a result of increased deliveries in our “direct store delivery” or “DSD” system due to the addition of certain customers and higher fuel costs. In addition, there was a $1.5 million increase in the management fee paid to Dean Foods Company.

~~These~~Operating ~~increases~~Income — ~~were~~Operating ~~slightly~~income ~~offset~~during ~~by a~~the ~~decrease~~second quarter of ~~approximately~~2006 was $066.5 million, ina ~~net~~decrease ~~plant~~of $300,000 ~~closing~~from ~~and rationalization~~the ~~costs.~~second ~~Our~~quarter ~~operating~~of ~~expense~~2005 ~~ratio~~operating ~~decreased~~income toof 15$66.6%8 million. Our operating margin in the second quarter of ~~2004~~2006 was 7.4% compared to 167.93% ~~during~~in the second quarter of ~~2003,~~2005. Our ~~due~~operating tomargin ~~the~~increased ~~effect~~primarily as a result of ~~increased~~lower raw ~~sales~~milk costs, partly offset by higher distribution costs.

-14- ~~Operating~~ Income — Operating income during the second quarter of 2004 was $76.9 million, a decrease of $7.7 million from the second quarter of 2003 operating income of $84.6 million. Our operating margin in the second quarter of 2004 was 6.8% compared to 8.9% in the second quarter of 2003. Our operating income decreased primarily as a result of higher raw material costs and our operating margin decreased for the same reason, in addition to the effect of increased sales. See “— Results by Segment” for more information.

Other (Income) Expense — Total other expense increased by $0.9 million in the second quarter of 2004 compared to the second quarter of 2003. Interest expense was relatively flat at $13.8 million in the second quarter of 2004 as compared to $13.7 million in the second quarter of 2003.

Income Taxes — Income tax expense was recorded at an effective rate of 37.9% in the second quarter of 2004 compared to 38.1% in the second quarter of 2003. Our tax rate varies as the mix of earnings contributed by our various business unit changes, and as tax savings initiatives are adopted.

Quarter Ended June 30, 2004 Compared to Quarter Ended June 30, 2003 — Results by Segment

Dairy Group —

	Quarter Ended June 30
	2004					2003
	Dollars		Percent			Dollars		Percent
	(Dollars in thousands)
Net sales	$	951,649		100.0	%	$	773,762		100.0	%
Cost of sales		738,753		77.6			573,903		74.2
Gross profit		212,896		22.4			199,859		25.8
Operating costs and expenses		144,200		15.2			130,293		16.8
Total segment operating income	$	68,696		7.2	%	$	69,566		9.0	%

-18-

~~The~~Other ~~Dairy~~(Income) ~~Group’s~~Expense — ~~net~~Total ~~sales~~other ~~increased by~~expense ~~approximately~~decreased to $~~177~~11.9 8 million, ~~or 23%,~~ in the second quarter of 2006 ~~2004~~compared ~~versus~~to $13.6 million in the second quarter of ~~2003.~~2005 ~~The~~due to ~~change~~lower ininterest ~~net~~expense. ~~sales from~~Interest ~~the~~expense ~~second~~decreased ~~quarter~~as one of our ~~2003~~senior tonotes ~~the~~($100 million ~~second~~face ~~quarter~~value ofat ~~2004~~6.75% interest) matured and was ~~due~~repaid toin ~~the~~June ~~following:~~2005.

		Dollars			Percent
		(Dollars in millions)
2003 Net sales		$	773.7
	Acquisitions		38.7			5.0	%
	Volume		(16.2	)		(2.1)
	Pricing and product mix		155.4			20.1
2004 Net sales		$	951.6			23.0	%

Income Taxes — Income tax expense was recorded at an effective rate of 33.7% in the second quarter of 2006 compared to 38.2% in the second quarter of 2005 due to the release of valuation allowances in the second quarter of 2006 related to certain state net operating losses. Our tax rate varies as the mix of earnings contributed by our various business units changes.

~~The~~Six ~~most~~Months ~~significant~~Ended ~~cause of the increase in the Dairy Group’s net sales was price increases. In general~~June 30, ~~we change~~2006 ~~the~~Compared ~~prices that we charge our customers for fluid dairy products on a monthly basis, as the costs of our raw materials fluctuate. The increase in net sales due~~ to ~~price~~Six ~~and product~~Months ~~mix~~Ended shown in the above table primarily results from higher raw milk costs in the second quarter of 2004 compared to the second quarter of 2003. These price increases due to increases in the cost of raw milk were offset somewhat by the effect of price concessions that were granted in some markets in the third quarter of 2003 due to the competitive environment. The following table sets forth the average monthly ClassJune ~~I “mover”~~30, ~~and average monthly Class II minimum~~2005 ~~prices for raw skim milk and butterfat (which are indicators of the prices we pay for raw milk) for the second quarter of 2004 compared to the second quarter of 2003:~~

	Quarter Ended June 30*
	2004			2003			% Change
Class I raw skim milk mover(1)	$	10.15	(2)	$	5.92	(2)		71.5	%
Class I butterfat mover(1)		2.38	(3)		1.14	(3)		108.8
Class II raw skim milk minimum(4)		6.77	(2)		6.62	(2)		2.3
Class II butterfat minimum(4)		2.38	(3)		1.16	(3)		105.2

Net Sales — Net sales decreased approximately 0.9% to $1.81 billion during the first six months of 2006 from $1.82 billion during the first six months of 2005.

* The ~~prices~~change ~~noted~~ in ~~this~~net ~~table~~sales ~~are~~from ~~not~~ the ~~prices~~first ~~that~~six wemonths ~~actually~~of ~~pay.~~2005 ~~The~~to ~~minimum prices applicable at any given location for Class I raw skim milk or Class I butterfat are based on~~ the first ~~Class~~six Imonths ~~mover~~of ~~plus~~2006 awas ~~location~~due ~~differential.~~to ~~Class II prices noted in~~ the ~~table are federal minimum prices, applicable at all locations. Our actual cost also includes producer premiums, procurement costs and other related charges that vary by location and vendor.~~following:

(1)	We process Class I raw skim milk and butterfat into fluid milk products.
		Dollars			Percent
(2)	Prices are per hundredweight.
		(Dollars in millions)
(3)	Prices are per pound.
2005 Net sales		$	1,823.6
(4)	We process Class II raw skim milk and butterfat into products such as cottage cheese, creams and creamers, ice cream and sour cream.
	Volume		55.3			3.0	%
	Pricing and product mix		(72.3	)		(3.9	)
2006 Net sales		$	1,806.6			(0.9	)%

~~The~~Net ~~other~~sales ~~cause~~decreased ofprimarily due to the ~~increase~~effects inof lower selling prices resulting from the ~~Dairy~~pass-through of lower ~~Group’s~~Class I ~~net~~raw ~~sales~~skim ~~was~~milk ~~acquisitions~~and butterfat costs. ~~The~~In ~~Dairy~~general, ~~Group~~we ~~acquired~~change ~~Ross~~the ~~Swiss~~prices ~~Dairies~~that inwe ~~January~~charge ~~2004~~our customers for fluid dairy products on a monthly basis, ~~which~~as ~~contributed~~the costs of our raw materials ~~$38~~fluctuate.7 ~~million~~Class I raw skim milk prices were approximately 15% lower in ~~sales~~the ~~during~~first six months of 2006 compared to the ~~second~~first six ~~quarter~~months of ~~2004~~2005. The following table sets forth the average monthly component prices of the Class I “mover” and average monthly Class II minimum prices for raw skim milk and butterfat for the first six months of 2006 compared to the first six months of 2005:

Volume sales of all products, net of the effect of acquisitions, fell approximately 2.1% in the second quarter of 2004 compared to the second quarter of 2003, primarily due to decreased demand.


	Six Months Ended June 30*

	2006			2005			% Change

Class I raw skim milk mover(3)	$	7.56	(1)	$	8.89	(1)		(15	)%
Class I butterfat mover(3)		1.35	(2)		1.76	(2)		(23	)
Class II raw skim milk minimum(4)		7.53	(1)		7.48	(1)		1
Class II butterfat minimum(4)		1.31	(2)		1.69	(2)		(22	)

The Dairy Group’s cost of sales ratio was significantly higher in the second quarter of 2004 compared to the second quarter of 2003, almost entirely due to the increase in raw milk costs compared to the prior year. The average minimum price of Class I raw skim milk (as indicated by the Class I mover, described above) was 71.5% higher in the second quarter of 2004 compared to the second quarter of 2003.


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

(1)	Prices are per hundredweight.

(2)	Prices are per pound.

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

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

~~-19-~~ These price decreases were partly offset by higher fresh milk and dips volumes. Fresh milk volumes (which represented approximately 73% of our sales volume during the first six months of 2006) increased 2.4% during the first six months of 2006. We believe the increase in volume is a result of the superior value and service that we are able to offer our customers as part of the largest dairy processor in the nation.

-15-

~~The~~Cost ~~Dairy~~of ~~Group’s~~Sales — ~~operating~~All expenses incurred to bring ~~increased~~a ~~approximately~~product ~~$13.9~~to ~~million~~completion ~~during~~are ~~the~~included ~~second~~in ~~quarter~~ cost of ~~2004~~sales, ~~compared~~such toas raw ~~the~~material, ~~second~~ingredient ~~quarter~~and ofpackaging ~~2003.~~costs; ~~The~~labor ~~increase~~costs; ~~was~~plant ~~primarily~~and ~~due~~equipment costs, including costs to ~~acquisitions,~~operate ~~which~~and ~~contributed~~maintain ~~approximately~~our $9coolers ~~million~~and infreezers; ~~operating~~and costs, ~~and~~associated ~~due~~with totransporting ~~higher distribution~~our ~~expenses~~finished ~~related~~products tofrom anour ~~increase~~manufacturing infacilities ~~fuel~~to ~~costs~~our own distribution facilities. ~~Despite~~Our ~~the increased~~cost ~~operating~~of ~~expenses,~~sales ~~the~~as ~~Dairy~~a ~~Group’s~~percentage ~~operating~~of ~~expense~~net ~~ratio~~sales decreased to 1574.20% in the ~~second~~first ~~quarter~~six months of ~~2004~~2006 ~~from~~compared 16to 75.83% in the ~~second~~first ~~quarter~~six months of ~~2003~~2005 due primarily to the ~~effect~~decline in raw milk prices. Cost of ~~increased~~ sales dollars decreased $36.3 million primarily due to lower raw milk costs in the first six months of 2006. This decrease was offset somewhat by higher volumes compared to the prior year. In addition, increased resin costs negatively impacted cost of goods sold. Resin is the primary component used in our plastic bottles.

~~Specialty~~Operating ~~Foods~~Costs ~~Group~~and Expenses — Our operating expenses increased approximately $15.8 million during the first six months of 2006 as compared to the same period in the prior year. Our operating expense as a percentage of net sales was 19.3% in the first six months of 2006 compared to 18.2% during the first six months of 2005. Operating expenses increased primarily due to an increase in distribution costs of $19.6 million as a result of increased deliveries in our “direct store delivery” of “DSD” system due to the addition of certain customers and higher fuel costs. This increase was offset somewhat by lower bad debt expense.

	Quarter Ended June 30
	2004					2003
	Dollars		Percent			Dollars		Percent
	(Dollars in thousands)
Net sales	$	174,168		100.0	%	$	175,676		100.0	%
Cost of sales		135,492		77.8			131,194		74.7
Gross profit		38,676		22.2			44,482		25.3
Operating costs and expenses		18,844		10.8			17,898		10.2
Total segment operating income	$	19,832		11.4	%	$	26,584		15.1	%

Operating Income — Operating income during the first six months of 2006 was $121.6 million, an increase of $3.5 million from the first six months of 2005 operating income of $118.1 million. Our operating margin in the first six months of 2006 was 6.7% compared to 6.5% in the same period in the prior year.

~~The~~Other ~~Specialty~~(Income) ~~Foods~~Expense — ~~Group’s~~Total ~~net~~other ~~sales~~expense decreased byto $123.5 6 million, ~~or 0.9%,~~ in the ~~second~~first ~~quarter~~six months of 2006 ~~2004~~compared ~~versus~~to $27.2 million in the ~~second~~first ~~quarter~~six months of ~~2003.~~2005 due ~~The~~to ~~change~~lower ininterest ~~net~~expense. ~~sales from~~Interest ~~the~~expense ~~second~~decreased ~~quarter~~as one of ~~2003~~our tosenior ~~the~~notes ~~second~~($100 million ~~quarter~~face ofvalue ~~2004~~at 6.75% interest) matured and was ~~due~~repaid toin ~~the~~June ~~following:~~2005.

		Dollars			Percent
		(Dollars in millions)
2003 Net sales		$	175.7
	Acquisitions		2.3			1.3	%
	Volume		1.6			0.9
	Pricing and product mix		(5.4	)		(3.1	)
2004 Net sales		$	174.2			(0.9	)%

Income Taxes — Income tax expense was recorded at an effective rate of 37.0% in the first six months of 2006 compared to 38.4% in the first six months of 2005 due to the release of valuation allowances in the second quarter of 2006 related to certain state net operating losses. Our tax rate varies as the mix of earnings contributed by our various business units changes.

The net decrease in sales was primarily due to a shift in product mix as volumes of products with a higher sales price declined. The nutritional drink and aseptic product categories, which have a higher sales price, were down approximately $7 million and $2 million, respectively, for the second quarter of 2004 compared to the second quarter of 2003, primarily due to decreased consumer demand and the loss of a significant co-pack customer. These decreases were partly offset by an increase in non-dairy coffee creamer sales of approximately $6 million (net of the effect of the acquisition of Cremora) as a result of increased pricing.

Despite a decrease in sales, the Specialty Foods Group’s cost of sales increased by approximately $4.3 million, and its cost of sales ratio increased to 77.8% in the second quarter of 2004 versus 74.7% in the second quarter of 2003. This increase was due to substantially higher commodity costs, particularly soybean oil, casein and cheese as well as increases in glass and other packaging costs.

Operating expenses for the Specialty Foods Group increased slightly by $0.9 million and the operating expense ratio increased to 10.8% in the second quarter of 2004 as compared to 10.2% in the second quarter of 2003. The increase in operating expenses was primarily due to an increase in distribution expenses related to higher fuel costs.

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First Six Months of 2004 Compared to the First Six Months of 2003 — Consolidated Results

Net Sales — Consolidated net sales increased approximately 13.4% to $2.12 billion during the first six months of 2004 from $1.87 billion during the first six months of 2003. Net sales by segment are shown in the table below.

		Six Months Ended June 30
		2004		2003		$ Increase		% Increase
		(In thousands)
Dairy Group		$	1,779,332	$	1,529,887	$	249,445		16.3%
Specialty Foods Group			339,651		338,614		1,037		0.3
	Total	$	2,118,983	$	1,868,501	$	250,482		13.4%

The change in net sales was due to the following:

		Six Months Ended June 30, 2004 vs. Six Months
		Ended June 30, 2003
				Pricing, Volume
				and Product			Total
		Acquisitions		Mix Changes			Increase
		(In thousands)
Dairy Group		$	75,762	$	173,683		$	249,445
Specialty Foods Group			3,838		(2,801	)		1,037
	Total	$	79,600	$	170,882		$	250,482

Net sales for the first six months of 2004 increased approximately $250.5 million compared to the same period in the prior year primarily due to higher selling prices at the Dairy Group resulting from the pass-through of increased raw milk costs and due to acquisitions. We acquired Ross Swiss Dairies in the Dairy Group segment and Cremora in our Specialty Foods Group 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; plant and equipment costs, including costs to operate and maintain our coolers and freezers; and costs associated with transporting our finished products from our manufacturing facilities to our own distribution facilities. Our cost of sales ratio was 76.6% in the first six months of 2004 compared to 74.3% in the first six months of 2003. Increased raw material costs affected both of our segments in 2004.

See “— Results by Segment” for more information.

Operating Costs and Expenses — Our operating expenses increased approximately $30 million during the first six months of 2004 as compared to the same period in the prior year. Operating expenses increased primarily due to the following:

• Acquisitions, which represented approximately $18.4 million of the increase; • Distribution costs, which were approximately $12.5 million higher in the second quarter of 2004 compared to last year partially due to higher fuel costs across both our segments; and • Net plant closing and rationalization costs that were approximately $2.2 million higher than last year.

Our operating expense ratio decreased to 16.7% for the first six months of 2004 from 17.3% during the first six months of 2003, due to the effects of increased sales.

Operating Income — Operating income during the first six months of 2004 was $142.6 million, a decrease of $14.4 million from the first six months of 2003 operating income of $157 million. Our operating margin in the first six months of 2004 was 6.7% compared to 8.4% in the first six months of

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2003. Our operating margin decreased primarily as a result of higher raw material costs and the effect of increased sales. See “— Results by Segment” for more information.

Other (Income) Expense — Total other expense decreased by $0.5 million in the first six months of 2004 compared to the first six months of 2003. Interest expense was relatively flat at $27.6 million in the second quarter of 2004 as compared to $27.3 million in the second quarter of 2003.

Income Taxes — Income tax expense was recorded at an effective rate of 37.9% in the first six months of 2004 compared to 38.2% in the first six months of 2003. Our tax rate varies as the mix of earnings contributed by our various business unit changes, and as tax savings initiatives are adopted.

First Six Months of 2004 Compared to the First Six Months of 2003 — Results by Segment

Dairy Group —

	Six Months Ended June 30
	2004					2003
	Dollars		Percent			Dollars		Percent
	(Dollars in thousands)
Net sales	$	1,779,332		100.0	%	$	1,529,887		100.0	%
Cost of sales		1,359,828		76.4			1,136,250		74.3
Gross profit		419,504		23.6			393,637		25.7
Operating costs and expenses		289,914		16.3			263,174		17.2
Total segment operating income	$	129,590		7.3	%	$	130,463		8.5	%

The Dairy Group’s net sales increased by approximately $249.4 million, or 16.3%, in the first six months of 2004 versus the first six months of 2003. The change in net sales from the first six months of 2003 to the first six months of 2004 was due to the following:

		Dollars			Percent
		(Dollars in millions)
2003 Net sales		$	1,529.9
	Acquisitions		75.8			5.0	%
	Volume		(19.9	)		(1.3	)
	Pricing and product mix		193.5			12.6
2004 Net sales		$	1,779.3			16.3%

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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. The increase in net sales due to price and product mix shown in the above table primarily results from higher raw milk costs in the first six months of 2004 compared to the first six months of 2003. These price increases due to increases in the cost of raw milk were offset somewhat by the effects of price concessions that were granted in some markets in the third quarter of 2003 due to the competitive environment. 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 six months of 2004 compared to the first six months of 2003:

	Six Months Ended June 30*
	2004			2003			% Change
Class I raw skim milk mover(1)	$	8.40(2	)	$	6.11(2	)		37.5%
Class I butterfat mover(1)		1.96(3	)		1.16(3	)		69.0
Class II raw skim milk minimum(4)		6.71(2	)		6.81(2	)		(1.5	)
Class II butterfat minimum(4)		2.15(3	)		1.16(3	)		85.3

*	The prices noted in this table are not the prices that we actually pay. The minimum prices applicable at any given location for Class I raw skim milk or Class I butterfat are based on the Class I mover plus a location differential. Class II prices noted in the table are federal minimum prices, applicable at all locations. Our actual cost also includes producer premiums, procurement costs and other related charges that vary by location and vendor.
(1)	We process Class I raw skim milk and butterfat into fluid milk products.
(2)	Prices are per hundredweight.
(3)	Prices are per pound.
(4)	We process Class II raw skim milk and butterfat into products such as cottage cheese, creams and creamers, ice cream and sour cream.

The other cause of the increase in the Dairy Group’s net sales was acquisitions. The Dairy Group acquired Ross Swiss Dairies in January 2004, which contributed $75.8 million in sales during the first six months of 2004.

Volume sales of all products, net of the effect of acquisitions, fell approximately 1.3% in the first six months of 2004 compared to the first six months of 2003, primarily due to decreased demand.

The Dairy Group’s cost of sales ratio was substantially higher in the first six months of 2004 compared to the first six months of 2003 primarily due to the increase in raw milk costs compared to the prior year. The average minimum price of Class I raw skim milk (as indicated by the Class I mover, described above) was 37.5% higher in the second quarter of 2004 than in the second quarter of 2003.

The Dairy Group’s operating expenses increased approximately $26.7 million during the first six months of 2004 compared to the first six months of 2003 primarily due to acquisitions, which contributed approximately $18.4 million in operating costs and to an increase in fuel costs. The Dairy Group’s operating expense ratio decreased to 16.3% in the first six months of 2004 from 17.2% in the first six months of 2003 due to the effect of increased sales.

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Specialty Foods Group —

	Six Months Ended June 30
	2004					2003
	Dollars		Percent			Dollars		Percent
	(Dollars in thousands)
Net sales	$	339,651		100.0	%	$	338,614		100.0	%
Cost of sales		264,207		77.8			253,575		74.9
Gross profit		75,444		22.2			85,039		25.1
Operating costs and expenses		36,306		10.7			35,264		10.4
Total segment operating income	$	39,138		11.5	%	$	49,775		14.7	%

The Specialty Foods Group’s net sales increased by $1 million, or 0.3%, in the first six months of 2004 versus the first six months of 2003. The change in net sales from the first six months of 2003 to the first six months of 2004 was due to the following:

		Dollars			Percent
		(Dollars in millions)
2003 Net sales		$	338.6
	Acquisitions		3.9			1.1	%
	Volume		(0.4	)		(0.1	)
	Pricing and product mix		(2.4	)		(0.7	)
2004 Net sales		$	339.7			0.3	%

The increase was due to the acquisition of Cremora in December 2003. This increase was offset by a net decrease in sales due to a shift in product mix as volumes of products with a higher sales price declined. The aseptic product and nutritional drink categories, which have a higher sales price, were down approximately $5 million and $3 million, respectively, for the first six months of 2004 compared to the first six months of 2003, primarily due to decreased consumer demand and the loss of a significant co-pack customer. Pickle sales also declined approximately $3 million primarily due to an increase in promotional spending (which is required to be recorded as a reduction of revenue) in response to competition. These decreases were partly offset by an increase in non-dairy coffee creamer sales of approximately $8 million (net of the effects of the acquisition of Cremora) as a result of higher volumes and increased pricing.

The Specialty Foods Group’s cost of sales ratio increased from 74.9% for the first six months of 2003 to 77.8% for the first six months of 2004, primarily due to substantially higher commodity costs, particularly soybean oil, casein and cheese as well as increases in glass and other packaging costs.

Operating expenses for the Specialty Foods Group increased approximately $1 million primarily related to increased distribution expenses as a result of higher fuel costs.


Item 4.	*Controls and Procedures*

Quarterly Controls Evaluation and Related CEO and CFO Certifications

We conducted an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (“Disclosure Controls”) as of the end of the period covered by this ~~Quarterly~~quarterly ~~Report~~report. The controls ~~evaluation~~ evaluation was done under the supervision and with the participation of management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO).

Attached as exhibits to this quarterly report are certifications of the CEO and the CFO, which are required in accordance with Rule 13a-14 of the Exchange Act. This Controls and Procedures section includes the information concerning the controls evaluation referred to in the certifications and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.

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Definition of Disclosure Controls

Disclosure Controls are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed with the Securities and Exchange ~~Commission~~ Commission (the “SEC”) is recorded, processed, ~~summarized~~ summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure Controls are also designed to reasonably assure that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding ~~required~~ required disclosure. Our Disclosure Controls include components of our internal control over financial reporting, which consists of of control processes designed to provide reasonable assurance regarding ~~the reliability of our financial reporting and the~~ ~~preparation of financial statements in accordance with US generally accepted accounting principles.~~

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the reliability of our financial reporting and the preparation of financial statements in accordance with United States generally accepted accounting principles.

Limitations on the Effectiveness of Controls

We do not expect that our Disclosure Controls or our internal controls over financial reporting will prevent all error and ~~all~~ fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, ~~misstatements~~ misstatements due to error or fraud may occur and not be detected.

Scope of the Controls Evaluation

Our evaluations of our Disclosure Controls include reviews of the controls’ objectives and design, our implementation of the controls and the effect of the controls on the information generated for use in our SEC filings. In the course of our controls evaluations, we seek to identify data errors, controls problems or acts of fraud and confirm that appropriate corrective actions, including process improvements, are undertaken. Many of the components of our Disclosure Controls are evaluated on an ongoing basis by Dean Foods Company’s Audit Services department. The overall goals of these various evaluation activities are to monitor our Disclosure Controls, and to modify them as necessary. Our intent is to maintain the Disclosure Controls as dynamic systems that change as conditions warrant.

Conclusions

Based upon our most recent controls evaluation, our CEO and CFO have concluded that, as of the end of the period covered by this quarterly ~~Quarterly Report~~report, our Disclosure Controls were effective toat ~~provide~~ the reasonable assurance ~~that material information is made known to management, particularly during the period when our periodic reports are being prepared~~level. In the ~~three~~ ~~months~~first ~~ended~~six ~~June 30,~~months ~~2004,~~of 2006, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

-2517-

Part II — Other Information

Item 61. ~~Exhibits~~Legal ~~and Reports on Form 8-K~~Proceedings

We are not party to, nor are our properties the subject of, any material pending legal proceedings. However, we are parties from time to time to certain 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.

Item 1A. Risk Factors

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Statements that are not historical in nature are forward-looking statements about our future that are not statements of historical fact. Most of these statements are found in this report within “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. In some cases, you can identify these statements by terminology such as “may,” “should,” “could,” “expects,” “seek to,” “anticipates,” “plans,” “believes,” “estimates,” “intends,” “predicts,” “projects,” “potential” or “continue” or the negative of such terms and other comparable terminology. These statements are only predictions, and in evaluating them, you should carefully consider the information above, as well as the risks outlined below. Actual performance or results may differ materially and adversely.

Changes in Laws, Regulations and Accounting Standards Could Have an Adverse Effect on Our Financial Results

We are subject to federal, state, local and foreign governmental laws and regulations, including those promulgated by the United States Food and Drug Administration, the United States Department of Agriculture, the Sarbanes-Oxley Act of 2002 and numerous related regulations promulgated by the Securities and Exchange Commission, the Public Company Accounting Oversight Board and the Financial Accounting Standards Board. Changes in federal, state or local laws, or the interpretations of such laws and regulations may negatively impact our financial results or our ability to market our products.

Changes in Raw Milk and Other Input Costs Can Adversely Affect Us

The primary raw material we use is raw milk. We purchase our raw milk primarily from farmers’ cooperatives, typically pursuant to requirements contracts (with no minimum purchase obligation). Raw milk is generally readily available. The minimum price of raw milk is regulated in most parts of the country by the federal government. Several states also regulate raw milk pricing through their own programs. In many cases we are able to adjust our pricing to reflect changes in raw milk costs. Volatility in the cost of our raw milk can adversely affect our performance as price changes may lag changes in costs. These lags tend to erode our profit margins. Furthermore, cost increases may exceed the price increases we are able to pass along to our customers. Extremely high raw milk costs can also put downward pressure on our margins and our volumes. Although we cannot predict future changes in raw milk costs, we do expect raw milk prices to increase in the second half of 2006.

Because we deliver the majority of our products directly to customers through our “direct store delivery” system, we are a large consumer of fuel. We also utilize a significant amount of resin, which is the primary component used in our plastic bottles. Recently, the prices of resin and fuel have increased dramatically and resin supplies have from time to time been insufficient to meet demand. Increases in fuel and resin prices can adversely affect our results of operations. In addition, a disruption in our ability to secure an adequate resin supply could adversely affect our operations.

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Loss of Rights to Any of Our Licensed Brands Could Adversely Affect Our Sales and Profits

We sell certain of our products under licensed brand names such as LAND O’LAKES and others. In some cases, we have invested significant capital in product development and marketing and advertising related to these licensed brands. Should our rights to manufacture and sell products under any of these names be terminated for any reason, our financial performance and results of operations could be materially and adversely affected.

Decisions Made by Dean Foods Company Could Affect Our Performance

We are a wholly-owned subsidiary of Dean Foods Company. Our operations are part of the larger Dairy Group segment of Dean Foods Company. Dean Foods Company’s management makes decisions regarding allocation of capital resources, facility closings and reorganizations, customer contracts, purchases of new business and sales of our assets.

Dean Foods Company has Substantial Debt and Other Financial Obligations that We Guarantee

Certain of Dean Foods Company’s subsidiaries, including us, guarantee Dean Foods Company’s indebtedness under its senior credit facility and its $500 million 7.000% senior notes issued in May 2006. 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 under Dean Foods Company’s senior credit facility. Dean Foods Company’s senior credit facility provides for a $1.5 billion revolving credit facility and a $1.5 billion term loan. Dean Foods Company’s $500 million senior notes are senior unsecured obligations. We may provide additional guarantees of financial obligations in the future.

Dean Foods Company’s ability to make scheduled payments on its debt and other financial obligations depends on its financial and operating performance. Dean Foods Company’s financial and operating performance is subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond its control. If Dean Foods Company does not comply with the financial and other restrictive covenants under its senior credit facility or senior notes, it may default under such facility or notes. Upon default, Dean Foods Company’s lenders could accelerate the indebtedness under the facility or notes, foreclose against its collateral or seek other remedies, which would jeopardize our ability to continue our current operations.


Item 6.	Exhibits


	(a)	Exhibits

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31	.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31	.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32	.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32	.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~(b) Form 8~~-~~K’s~~19-

None

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SIGNATURES

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

DEAN HOLDING COMPANY /s/ ~~BARRY~~Ronald AL. ~~FROMBERG~~McCrummen ~~Barry~~Ronald AL. ~~Fromberg~~McCrummen ~~Executive~~Senior Vice President, and Chief ~~Financial Officer (Principal~~ Accounting Officer)

August 16 14, ~~2004~~2006

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EXHIBIT INDEX


Exhibit
Number			Description

	31	.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	31	.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	32	.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	32	.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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Filing Compare · DEAN HOLDING CO