UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

For Annual and Transition Reports Pursuant to

Sections 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 001-12755

Dean Foods Company

(Exact name of Registrant as specified in its charter)

2515 McKinney Avenue

Suite 1200

Dallas, Texas 75201

(214) 303-3400

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

area code, of Registrant’s principal executive offices)

Securities Registered Pursuant to Section 12(b) of the Act:

Securities Registered Pursuant to Section 12(g) of the Act:     None

      Indicate by check mark if the registrant is a well-known seasoned-issuer, as defined in Rule 405 of the Securities Act. Yes þ          No o

      Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o          No þ

      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 þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K     o

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large filer” in Rule 12b-2 of the Exchange Act. (Check one):

large accelerated filer þ     accelerated filer o     non-accelerated filer o

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

      The aggregate market value of the registrant’s voting and non-voting common stock held by non-affiliates of the registrant at June 30, 2005, based on the $35.24 per share closing price for the registrant’s common stock on the New York Stock Exchange on June 30, 2005, was approximately $5.22 billion.

      The number of shares of the registrant’s common stock outstanding as of March 6, 2006 was 135,691,129.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the registrant’s definitive Proxy Statement for its Annual Meeting of Stockholders to be held on or about May 19, 2006 (to be filed) are incorporated by reference into Part III of this Form 10-K.

TABLE OF CONTENTS

PART I

      We are a leading food and beverage company. Our Dairy Group is the largest processor and distributor of milk and various other dairy products in the United States. The Dairy Group manufactures and sells its products under a variety of local and regional brand names and under private labels. Our WhiteWave Foods Company manufactures, markets and sells a variety of well known soy, dairy and dairy-related nationally branded products such as Silk^® soymilk and cultured soy products, Horizon Organic^® dairy products, International Delight^® coffee creamers and LAND O’LAKES^® creamers and fluid dairy products. Our International Group is one of the largest processors and distributors of fluid milk in Spain and Portugal.

      Our principal executive offices are located at 2515 McKinney Avenue, Suite 1200, Dallas, Texas 75201. Our telephone number is (214) 303-3400. We maintain a worldwide web site at www.deanfoods.com. We were incorporated in Delaware in 1994.

Segments and Operating Divisions

      We have two reportable segments: the Dairy Group and WhiteWave Foods Company. Our reportable segments and other operating divisions are described below.

      Our Dairy Group manufactures, markets and distributes a wide variety of branded and private label dairy case products to retailers, distributors, foodservice outlets, schools and governmental entities across the United States.

      The Dairy Group’s sales totaled approximately $8.96 billion in 2005, or approximately 85% of our consolidated sales. The following charts graphically depict the Dairy Group’s 2005 sales by product and by channel, and indicate the percentage of private label versus company branded sales in 2005.

      Products not sold under private labels are sold under the Dairy Group’s local and regional proprietary or licensed brands. Our local and regional proprietary and licensed brands include the following:

East Region(1)

Barbers^®

Broughton^®

Borden^® (licensed brand)

Country Charm^®

Country Delite^®

Country Fresh^®

Country Love^®

Dairy Fresh^®

Dean’s^®

Fieldcrest^®

Garelick Farms^®

LAND O’LAKES^®

     (licensed brand)

Lehigh Valley^®

Louis Trauth^®

Maplehurst^®

Mayfield^®

McArthur^®

Meadowbrook^®

Melody Farms^®

Nature’s Pride^®

Pet^® (licensed brand)

Purity^tm

Reiter^tm

Saunders^tm

Schenkel’s All*Star^tm

Sealtest^® (licensed brand)

Shenandoah’s Pride^®

Stroh’s^®

Swiss Premium^tm

TG Lee^®

Tuscan^®

Verifine^®

West Region(1)

Alta Dena^®

Barbe’s^®

Berkeley Farms^tm

Borden^® (licensed brand)

Brown’s^®

Country Charm^®

Creamland^tm

Dean’s^®

Foremost^tm (licensed brand)

Gandy’s^tm

Hygeia^®

Imo^®

Meadow Gold^®

Mile High^tm

Model^®

Mountain High^®

Oak Farms^®

Price’s^tm

Robinson^®

Schepps^®

Swiss

Viva^®

Morningstar Region(1)

Dairy Fresh^®

Kohler^tm

LAND O’LAKES^®

     (licensed brand)

Shenandoah’s Pride^®

Skinny Cow^tm (licensed brand)

      The Dairy Group sells its products primarily on a local or regional basis through its local and regional sales forces, although some national customer relationships are coordinated by the Dairy Group’s corporate sales department. Most of the Dairy Group’s customers, including its largest customer (Wal-Mart, including its subsidiaries, such as Sam’s Club, which accounted for approximately 15.6% of the Dairy Group’s 2005 sales), purchase products from the Dairy Group either by purchase order or pursuant to contracts that are generally terminable at will by the customer.

      Our Dairy Group currently operates 97 manufacturing facilities in 34 states. For more information about facilities in the Dairy Group, see “Item 2. Properties.”

      Due to the perishable nature of the Dairy Group’s products, our Dairy Group delivers the majority of its products from its facilities directly to its customers’ stores in refrigerated trucks or trailers that we own or lease. This form of delivery is called a “direct store delivery” or “DSD” system. We believe our Dairy Group has one of the most extensive refrigerated DSD systems in the United States.

      The primary raw material used in our Dairy Group 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. For more information about raw milk pricing in the United States, see “— Government Regulation — Milk Industry Regulation” and “Part II — Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Known Trends and Uncertainties — Prices of Raw Materials and Other Inputs.” Other raw materials used by the Dairy Group, such as juice concentrates and sweeteners, in addition to packaging supplies, are generally available from numerous suppliers and we are not dependent on any single supplier for these materials. Certain of our Dairy Group’s raw materials and packaging supplies are purchased under long-term contracts in order to obtain lower costs. The prices of our raw materials increase and decrease based on supply and demand.

      The Dairy Group generally increases or decreases the prices of its fluid dairy products on a monthly basis in correlation to fluctuations in the costs of raw materials, packaging supplies and delivery costs. However, in some cases, we are competitively or contractually constrained with respect to the means and/or timing of price increases. This can have a negative impact on the Dairy Group’s profitability.

      The dairy industry is a mature industry that has traditionally been characterized by slow to flat growth, low profit margins, fragmentation and excess capacity. Excess capacity resulted from the development of more efficient manufacturing techniques, the establishment of captive dairy manufacturing operations by some grocery retailers and declining demand for fluid milk products. From 1990 through 2001, the dairy industry experienced significant consolidation, led by us. Consolidation has resulted in lower operating costs, less excess capacity and greater efficiency. However, per capita consumption of traditional fluid dairy products has continued to decline. According to the United States Department of Agriculture (“USDA”), per capita consumption of fluid milk and cream decreased by over 15% from 1990 to the end of 2004, although total consumption has remained relatively flat over the same period due to population increases. Therefore, volume growth across the industry generally remains flat to modest, profit margins generally remain low and excess manufacturing capacity continues to exist. In this environment, price competition is particularly intense, as smaller processors struggle to retain enough volume to cover their fixed costs. In response to this dynamic, and due to the significant competitive pressure caused by the ongoing consolidation among food retailers, many processors, including us, are now placing an increased emphasis on product differentiation and cost reduction in an effort to increase consumption, sales and margins.

      Our Dairy Group has several competitors in each of our major product and geographic markets. Competition between dairy processors for shelf-space with retailers is based primarily on price, service and quality, while competition for consumer sales is based on a variety of factors such as brand recognition, price, taste preference and quality. Dairy products also compete with many other beverages and nutritional products for consumer sales.

      For more financial information about our Dairy Group’s recent operations, see “Part II — Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 20 to our Consolidated Financial Statements.

      WhiteWave Foods Company develops, manufactures, markets and sells a variety of nationally branded soy, dairy and dairy-related products, such as Silk soymilk and cultured soy products, Horizon Organic dairy products, International Delight coffee creamers and LAND O’LAKES creamers and fluid dairy products. WhiteWave Foods Company also sells The Organic Cow^® organic dairy products; White Wave^® and Tofu Town^® branded tofu and Hershey’s^® milks and milkshakes. We license the LAND O’LAKES and Hershey’s names from third parties.

      WhiteWave Foods Company’s sales totaled approximately $1.14 billion in 2005, or approximately 11% of our consolidated sales. WhiteWave Foods Company sells its products to a variety of customers, including

grocery stores, club stores, natural foods stores, mass merchandisers, convenience stores and foodservice outlets. The following charts graphically depict WhiteWave Foods Company’s sales by brand and by channel:

      WhiteWave Foods Company sells its products through its internal sales force and through independent brokers. The majority of WhiteWave Foods Company’s products including sales to its largest customer (Wal-Mart including its subsidiaries, such as Sam’s Club, which accounted for approximately 14.4% of WhiteWave Foods Company’s 2005 sales) are sold pursuant to customer purchase order or pursuant to contracts that are generally terminable at will by the customer.

      In 2005, approximately 70% of the products sold by WhiteWave Foods Company were manufactured in facilities operated by either WhiteWave Foods Company or our Dairy Group. The remaining 30% were manufactured by third-party manufacturers under processing agreements. WhiteWave Foods Company currently operates seven manufacturing facilities, including three facilities that were previously operated by our Dairy Group. The majority of WhiteWave Foods Company’s products are delivered by common carrier to customer warehouses, although some products are distributed through third-party distributors or through our Dairy Group’s DSD system.

      The primary raw materials used in our soy-based products are organic soybeans and organic soybean concentrate. Organic soybeans are generally available from several suppliers and we are not dependent on any single supplier for these products. We have entered into supply agreements for organic soybeans, which we believe will meet our needs in 2006. Generally, these agreements provide pricing at fixed levels. The primary raw material used in our organic milk-based products is organic raw milk. We currently purchase organic raw milk from a network of over 325 dairy farmers across the United States. We also produce certain of our own organic raw milk needs in the U.S. at two organic farms that we own and operate. However, the demand for organic raw milk exceeds the supply available. As a result, at times we are forced to limit quantities we ship to our customers. We are currently taking steps to increase the supply of organic raw milk available to us; however, there can be no assurance as to when supply will fully meet demand because the process of converting a farm from conventional production to organic production takes three years. The growth of our organic dairy business will depend on us being able to obtain sufficient quantities of organic raw milk. We expect to continue to limit quantities available to customers of organic milk into the second quarter of 2006. We generally enter into supply agreements with dairy farmers with typical terms of one to two years, which obligate us to purchase certain minimum quantities. The primary raw material used in our LAND O’LAKES and other non-organic dairy products is raw milk. We purchase raw milk 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. Other raw materials used in WhiteWave Foods Company’s products, such as flavorings, organic sugar and packaging materials, are generally available from several suppliers and we are not dependent on any single supplier for these materials. Certain of these raw materials are purchased under contracts in order to obtain lower costs. The prices of raw materials increase and decrease based on supply and demand. For more information, see “Part II — Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Known Trends and Uncertainties — Prices of Raw Materials and Other Inputs.”

      WhiteWave Foods Company has several competitors in each of its product markets. Competition to obtain shelf-space with retailers for a particular product is based primarily on the expected or historical sales performance of the product compared to its competitors. Also, in some cases, WhiteWave Foods Company pays fees to retailers to obtain shelf-space for a particular product. Competition for consumer sales is based on many factors, including brand recognition, price, taste preferences and quality. Consumer demand for soy and organic foods has grown rapidly in recent years due to growing consumer confidence in the health benefits of soy and organic foods, and WhiteWave Foods Company has a leading position in the soy and organic foods category. However, our soy and organic food products compete with many other beverages and nutritional products for consumer sales.

      Effective January 1, 2006, Rachel’s Organic was consolidated with our WhiteWave Foods Company segment. For more information about WhiteWave Foods Company, see “Part II — Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 20 to our Consolidated Financial Statements.

     International Group

      Our International Group manufactures, markets and sells private label and branded milk, butter and cream through its internal sales force to retailers and distributors across Spain and Portugal. We also own Rachel’s Organic, which markets and sells organic dairy products across the United Kingdom under the brand names Rachel’s Organic^® and Divine Rice^®. The International Group’s sales totaled $399.8 million in 2005, or approximately 4% of our consolidated sales.

      The following charts graphically depict the International Group’s 2005 sales by product category and channel, and indicate the percentage of private label sales versus company branded sales in 2005.

      Our International Group manufactures its products in five facilities in Spain and Portugal. Rachel’s Organic has one manufacturing facility located in Aberystwth, United Kingdom which was moved to the WhiteWave Foods Company segment effective January 1, 2006. For more information about our International Group facilities, see “Item 2. Properties.” Our International Group operates its business primarily from its headquarters located in Pontedeume, Galicia, Spain.

      The long shelf life of our International Group’s fluid milk products allows delivery by common carrier. Most of the International Group’s customers purchase our products either by purchase order or by contracts that are generally terminable at will by the customer. Our International Group’s sales are slightly seasonal, with sales tending to be lower in the third quarter.

      The primary raw material used by our International Group is raw milk. We purchase our raw milk from farmers’ cooperatives and other intermediaries pursuant to formal and informal contractual arrangements.

Raw milk production volume is regulated by European Union quotas, which sometimes limit the availability of raw milk to processors. The price of raw milk is defined solely by supply and demand and can fluctuate widely. Our International Group purchases its packaging materials from two leading suppliers. Packaging materials represent a significant portion of our International Group’s raw material costs and are purchased under long-term contracts in order to obtain lower costs.

      The Iberian fluid dairy market, which includes Spain and Portugal, is characterized by relatively high per capita consumption and long shelf-life “brick pack” products dominate the industry. The combination of these factors makes the Iberian region one of the largest long shelf-life markets in the world. The Iberian fluid dairy market has been characterized over the past 20 years by slow growth in the core products and faster growth for value-added products such as nutritionally enriched milks. The Iberian fluid dairy industry is highly competitive, with leading companies investing heavily in innovation and branding. The industry has undergone significant consolidation in the past 5 to 10 years leading to the emergence of several national brands, including our Celta brand. Our International Group competes with all the leading fluid dairy processors operating in the Iberian region. Competition between dairy processors for private label business has intensified recently as a result of retailer consolidation, and is based primarily on price, service and quality. Competition for branded sales to consumers is based on a number of factors, including brand recognition, price and quality.

Current Business Strategy

      As the largest dairy processor in the United States, our Dairy Group is in a unique position to provide unmatched service, convenience and value to our customers. We are intently focused on maintaining and extending our Dairy Group’s leadership position by focusing on our customers’ needs.

      In 2005, our Dairy Group’s fresh milk volumes were up by 2.5% while total U.S. consumption was generally flat, according to data published by the U.S. Department of Agriculture. We believe this increase in market share is an indication of the success of our strategy. In 2006, we are focused on maintaining and growing our Dairy Group’s sales volume by continuing to provide our customers with the highest level of service, quality and value. Also in 2006, we intend to begin a multi-year project designed to extend the competitive advantage of our Dairy Group by further reducing our cost structure, primarily through rationalizing our purchasing and administrative functions and by investing in a new, more efficient information technology platform.

      In 2004, we began the process of consolidating the operations of the three operating units that comprise our WhiteWave Foods Company segment into a single business. We are building a vertically integrated branded business with a focused product portfolio, efficient manufacturing processes and an optimal distribution system. During 2005, we appointed a new President of our business, which was a key step in the development of a consolidated leadership team for the organization. We also completed the consolidation of the sales, marketing and research and development organization and the supply chain integration is in process. We consolidated most product manufacturing into five primary facilities, three of which were transferred from our Dairy Group in 2005, and we narrowed our network of co-packers. In 2006, we will continue to focus on streamlining our product portfolio, focusing on the most profitable opportunities, and on continuing to maximize our production and distribution processes. We are currently in the initial stages of implementing the SAP platform across WhiteWave Foods Company, which we expect will enable us to more effectively and efficiently manage our supply chain and business processes.

      In 2006, we intend to continue to invest in aggressively marketing our WhiteWave Foods Company brands, with an emphasis on our largest and most successful brands: Silk, Horizon Organic, International

Delight and LAND O’LAKES. We will continue to make capital expenditures allowing us to increase internal manufacturing, which we believe will allow us to better manage our working capital and increase profitability. In order to meet the growth in demand for our organic dairy products we will continue to expand our network of dairy farmers, as well as increase our organic farming operations, as necessary.

Developments Since January 1, 2005

      On June 27, 2005, we completed the spin-off (“Spin-off”) of our indirect, majority-owned subsidiary TreeHouse Foods, Inc. (“TreeHouse”). Immediately prior to the Spin-off, we transferred to TreeHouse (1) the businesses previously conducted by our Specialty Foods Group segment, (2) the Mocha Mix^® and

Second Nature^® businesses previously conducted by WhiteWave Foods Company, and (3) the foodservice salad dressings businesses previously conducted by the Dairy Group and WhiteWave Foods Company. The Spin-off was effected by means of a share dividend of the TreeHouse common stock held by us to our stockholders of record on June 20, 2005 (the “Record Date”). In the distribution, our stockholders received one share of TreeHouse common stock for every five shares of our common stock held by them on the Record Date.

      On August 22, 2005, we completed the sale of certain tangible and intangible assets related to the production and distribution of Marie’s dips and dressings and Dean’s dips. We also licensed the Dean trademark to Ventura Foods for use on certain non-dairy dips. The sales price was approximately $194 million.

      Both the TreeHouse Spin-off and the Marie’s dips and dressings and Dean’s dips transactions were part of our strategy to focus on our core dairy and branded businesses. Prior periods have been revised to remove the results of our former Specialty Foods Group segment and Mocha Mix, Second Nature and private label dressings businesses and our Marie’s dips and dressings and Dean’s dips businesses, which have been reclassified as discontinued operations.

      On August 25, 2005, we announced that we had selected Joseph E. Scalzo to serve as President and CEO of WhiteWave Foods Company. Mr. Scalzo, most recently Group President, Personal Care and Global Value Chain of the Gillette Company, joined WhiteWave Foods Company on October 11, 2005.

      On September 7, 2005, we announced the succession plan for the President of our Dairy Group. Alan Bernon, the former Chief Operating Officer of the Northeast region of our Dairy Group, succeeded Pete Schenkel effective January 1, 2006. Mr. Schenkel became Vice Chairman of our Board of Directors effective January 1, 2006 and he will assist in the transition of leadership of the Dairy Group through the end of 2007.

      On October 14, 2005, we announced that Barry Fromberg, Executive Vice President and Chief Financial Officer, will resign from his position on April 1, 2006. We are currently conducting a search for Mr. Fromberg’s successor.

      Between July 1 and December 31, 2005, we spent approximately $699.5 million to repurchase 18.9 million shares of our common stock for an average price of $37.05 per share, excluding commissions and fees. On August 10, 2005, and again on November 2, 2005, our Board of Directors authorized increases in our stock repurchase program in the aggregate amount of $600 million. Between January 1, 2006 and March 6, 2006 we spent approximately $15.3 million to purchase an additional 400,000 shares of our common stock for an average price of $38.37, excluding commissions and fees. At March 6, 2006, approximately $3.2 million remained available under our stock repurchase authorization.

      In 2005, we recorded a charge of $38.6 million as part of our ongoing costs savings initiative. The Dairy Group recorded a charge of $25.3 million, which included the closing of two facilities in 2005; we are consolidating the production from these facilities into other Dairy Group facilities. Also in 2005, we made

significant progress toward the consolidation and optimization of our WhiteWave Foods Company subsidiary. Specifically, we consolidated WhiteWave Foods Company’s sales, marketing and research and development functions which resulted in a charge of $10.2 million related to these activities. Also in 2005, we began a project to reorganize our International Group operations in response to a difficult operating environment including eliminating and consolidating certain management, sales and purchasing functions which resulted in a charge of $3.1 million related to these activities. We expect to incur additional charges related to all of these restructuring plans of approximately $7.1 million, primarily in 2006. These charges include the following costs:

      See Note 15 to our Consolidated Financial Statements for more information regarding our facility closing and reorganization activities.

      In May 2005, we amended our senior credit facility to lower the interest rate on the revolving credit facility and term loan. With the amendment, both the revolving credit facility and term loan bear interest, at our election, at the base rate plus a margin that varies from zero to 25 basis points depending on our credit ratings (as issued by Standard & Poor’s and Moody’s), or LIBOR plus a margin that varies from 50 to 150 basis points, depending on our credit ratings (as issued by Standard & Poor’s and Moody’s). On November 18, 2005, we again amended our senior credit facility to change the maximum leverage covenant to 4.35 to 1.00 through March 31, 2007, and 4.00 to 1.00 thereafter.

      On December 14, 2005, we filed an immediately effective shelf registration statement pursuant to which we registered debt securities that we may issue in the future. If and when the debt securities are issued, they will be unsecured obligations and will be fully and unconditionally guaranteed by all of our wholly-owned U.S. subsidiaries other than our receivables securitization subsidiaries.

Employees

      As of December 31, 2005, we had the following employees:

      Approximately 37% of the Dairy Group’s and 18% of WhiteWave Foods Company’s employees participate in collective bargaining agreements.

Government Regulation

      As a manufacturer and distributor of food products, we are subject to a number of food-related regulations, including the Federal Food, Drug and Cosmetic Act and regulations promulgated there under by the U.S. Food and Drug Administration (“FDA”). This comprehensive regulatory framework governs the manufacture (including composition and ingredients), labeling, packaging and safety of food in the United States. The FDA:

      In addition, the FDA enforces the Public Health Service Act and regulations issued there under, which authorize regulatory activity necessary to prevent the introduction, transmission or spread of communicable diseases. These regulations require, for example, pasteurization of milk and milk products. We are subject to numerous other federal, state and local regulations involving such matters as the licensing and registration of manufacturing facilities, enforcement by government health agencies of standards for our products, inspection of our facilities and regulation of our trade practices in connection with the sale of food products.

      We use quality control laboratories in our manufacturing facilities to test raw ingredients. Product quality and freshness are essential to the successful distribution of our products. To monitor product quality at our facilities, we maintain quality control programs to test products during various processing stages. We believe our facilities and manufacturing practices comply with all material government regulations.

      We are subject to certain safety regulations including regulations issued pursuant to the U.S. Occupational Safety and Health Act. These regulations require us to comply with certain manufacturing safety standards to protect our employees from accidents. We believe that we are in material compliance with all employee safety regulations.

      We are subject to various environmental regulations. Ammonia, a refrigerant used extensively in our operations, is considered an “extremely” hazardous substance pursuant to U.S. federal environmental laws due to its toxicity. Also, certain of our facilities discharge biodegradable wastewater into municipal waste treatment facilities in excess of levels permitted under local regulations. As a result, certain of our subsidiaries are required to pay wastewater surcharges or to construct wastewater pretreatment facilities. To date, such wastewater surcharges have not had a material effect on our Consolidated Financial Statements.

      We maintain above-ground or underground petroleum storage tanks at many of our facilities. These tanks are periodically inspected to determine compliance with applicable regulations. We are required to make expenditures from time to time in order to maintain compliance of these tanks. To date, such expenditures have not had a material effect on our Consolidated Financial Statements. In accordance with Financial Accounting Standards Board Interpretation No. 47 “Accounting for Conditional Asset Retirement Obligations”, we recognized a liability of $2.8 million as of December 31, 2005, representing the estimated future cost of removing certain underground fuel storage tanks. As we generally have ceased construction of new underground fuel storage tanks, we do not anticipate the impact of this Interpretation to be material in future periods.

      We believe that we are in material compliance with the environmental regulations applicable to our business. We do not expect environmental compliance to have a material impact on our capital expenditures, earnings or competitive position in the foreseeable future.

      The federal government establishes minimum prices that we must pay to producers in federally regulated areas for raw milk. Raw milk contains primarily raw skim milk, in addition to a small percentage of butterfat. The federal government establishes separate minimum prices for raw skim milk and butterfat. Raw milk delivered to our facilities is tested to determine the percentage of butterfat, and we pay our suppliers separate prices for the raw skim milk and butterfat based on the results of these tests.

      The federal government’s minimum prices are calculated by economic formula based on supply and demand and vary depending on the processor’s geographic location or sales area and the type of product manufactured using the raw product. Federal minimum prices change monthly. Class I butterfat and raw skim milk prices (which are the minimum prices we are required to pay for butterfat and raw skim milk that is processed into milk) and Class II raw skim milk prices (which are the prices we are required to pay for raw skim milk that is processed into products such as cottage cheese, creams, creamers, ice cream and sour cream) for each month are announced by the federal government by the 23rd day of the immediately preceding month. Class II butterfat prices for each month are announced on or before the fifth day after the end of that month.

      Some states have established their own rules for determining minimum prices for raw milk. In addition to the federal or state minimum prices, we also pay producer premiums, procurement costs and other related charges that vary by location and vendor. A few states also have retail pricing requirements.

      In Spain, the government has established a quota system regulating the amount of milk that can be sold by individual farmers and farm cooperatives, which affects the prices we pay for raw milk.

      Our organic products are required to meet the standards set forth in the Organic Foods Production Act (“OFPA”) and the regulations adopted thereunder by the National Organic Standards Board. These regulations require strict methods of production for organic food products and limit the ability of food processors to use non organic or synthetic materials in the production of organic foods or in the raising of organic livestock.

Brief History

      We commenced operations in 1988 through a predecessor entity. Our original operations consisted solely of a packaged ice business. Since then the following activity has occurred:

Minority Holdings

      We own an approximately 25% interest, on a fully diluted basis, in Consolidated Container Company (“CCC”), one of the nation’s largest manufacturers of rigid plastic containers and our largest supplier of plastic bottles and bottle components. We have owned a minority interest in CCC since July 1999 when we sold our U.S. plastic packaging operations to CCC. Vestar Capital Partners controls CCC through a majority ownership interest. Less than 1% of CCC is owned indirectly by Alan Bernon, President of our Dairy Group and a member of our Board of Directors, and his brother Peter Bernon. Pursuant to our agreements with Vestar, we control two of the eight seats on CCC’s Management Committee. We also have entered into various supply agreements with CCC pursuant to which we have agreed to purchase certain of our requirements for plastic bottles and bottle components from CCC. In 2005, we spent approximately $324.1 million on products purchased from CCC. Because CCC has issued certain senior notes, CCC files annual, quarterly and other reports with the Securities and Exchange Commission. More information about CCC can be found on its website at www.cccllc.com or in its filings with the Securities and Exchange Commission available at www.sec.gov.

      See Note 3 to our Consolidated Financial Statements for more information about our investment in CCC.

Where You Can Get More Information

      Our fiscal year ends on December 31. We furnish our stockholders with annual reports containing audited financial statements. In addition, we file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. Legacy Dean, which is now known as Dean

Holding Company and is a wholly-owned subsidiary of ours, also files annual, quarterly and current reports with the Securities and Exchange Commission.

      You may read and copy any reports, statements or other information that we or Dean Holding Company file with the Securities and Exchange Commission at the Securities and Exchange Commission’s Public Reference Room at 100 F Street, N.E., Washington D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing to the Securities and Exchange Commission. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the operation of the Public Reference Room.

      We file our reports with the Securities and Exchange Commission electronically via the Securities and Exchange Commission’s Electronic Data Gathering, Analysis and Retrieval system (“EDGAR”). The Securities and Exchange Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding companies that file electronically with the Securities and Exchange Commission via EDGAR. The address of this Internet site is http://www.sec.gov.

      We also make available free of charge through our website at www.deanfoods.com our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

      Our Code of Ethics, which is applicable to all of our employees and directors, is available on our corporate website at www.deanfoods.com, together with the Corporate Governance Principles of our Board of Directors and the charters of all of the Committees of our Board of Directors. Any waivers that we may grant to our executive officers or directors under the Code of Ethics, and any amendments to our Code of Ethics, will be posted on our corporate website. If you would like hard copies of any of these documents, or of any of our filings with the Securities and Exchange Commission, write or call us at:

      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 under the following subheadings: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures About Market Risk.” 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, including in “— Known Trends and Uncertainties,” as well as the risks outlined below. Actual performance or results may differ materially and adversely.

      In 2004, we began the process of consolidating the operations of the three operating units that comprise our WhiteWave Foods Company segment into a single business. We are building a vertically integrated branded business with a focused product portfolio, efficient manufacturing processes and an optimal distribution system. During 2005, we appointed a new President of our business, which was a key step in the development of a consolidated leadership team for the organization. We also completed the consolidation of

the sales, marketing and research and development organization and the supply chain integration is in process. We consolidated most product manufacturing into five primary facilities, three of which were transferred from our Dairy Group in 2005, and we narrowed our network of co-packers. In 2006, we will continue to focus on streamlining our product portfolio, focusing on the most profitable opportunities, and on continuing to maximize our production and distribution processes. We are currently in the initial stages of implementing the SAP platform across the WhiteWave Foods Company, which we expect will enable us to more effectively and efficiently manage our supply chain and business processes. Our failure to successfully manage this process could cause us to incur unexpected costs or to lose customers or sales, which could have a material adverse effect on our financial results.

      Our Silk soymilk and Horizon Organic organic food and beverage products have leading market shares in their categories and have benefited in many cases from being the first to introduce products in their categories. As soy and organic products continue to gain in popularity with consumers, we expect our products in these categories to continue to attract competitors. Many large food and beverage companies have substantially more resources than we do and they may be able to market their soy and organic products more successfully than us, which could cause our growth rate in these categories to be slower than our forecast and could cause us to lose sales. The increase in popularity of soy and organic milks is also attracting private label competitors who sell their products at a lower price. The success of private label brands could adversely affect our sales and profitability. Finally, there is a limited supply of organic raw materials in the United States, especially organic soybeans and organic raw milk. New entrants into our markets can reduce available supply and drive up costs. Even without new entrants, our own growth can put pressure on the availability and price of organic raw materials.

      Our International Delight coffee creamer competes intensely with Nestlé CoffeeMate business, and our Hershey’s milks and milkshakes compete intensely with Nestlé Nesquik. Nestle has significantly greater resources than we do, which allows them to promote their products more aggressively. Our failure to successfully compete with Nestle could have a material adverse effect on the sales and profitability of our International Delight and/or our Hershey’s businesses.

      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.

      We sell certain of our products under licensed brand names such as Borden^®, Hershey’s, LAND O’LAKES, Pet^®, 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.

      We have substantial debt and other financial obligations and significant unused borrowing capacity. See “Part II Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

      We have pledged substantially all of our assets (including the assets of our subsidiaries) to secure our indebtedness. Our high debt level and related debt service obligations:

      The interest rate on our debt is based on our debt rating, as issued by Standard & Poor’s and Moody’s. We have no ability to control the ratings issued by Standard & Poor’s and Moody’s. A downgrade in our debt rating could cause our interest rate to increase, which could adversely affect our ability to achieve our targeted profitability level, as well as our cash flow.

      Our ability to make scheduled payments on our debt and other financial obligations depends on our financial and operating performance. Our financial and operating performance is subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control. A significant increase in interest rates could adversely impact our net income. If we do not comply with the financial and other restrictive covenants under our credit facilities, we may default under them. Upon default, our lenders could accelerate the indebtedness under the facilities, foreclose against their collateral or seek other remedies, which would jeopardize our ability to continue our current operations.

      None.

Dairy Group

      Our Dairy Group currently conducts its manufacturing operations from the following facilities, most of which are owned:

      Each of the Dairy Group’s manufacturing facilities also serves as a distribution facility. In addition, our Dairy Group has numerous distribution branches located across the country, some of which are owned but most of which are leased. The Dairy Group’s headquarters are located in Dallas, Texas in leased premises.

WhiteWave Foods Company

      WhiteWave Foods Company currently conducts its manufacturing operations from the following facilities, all but one of which is owned:

      WhiteWave Foods Company also owns two organic dairy farms located in Paul, Idaho and Kennedyville, Maryland.

      WhiteWave Foods Company’s headquarters are located in leased premises in Broomfield, Colorado.

International Group

      Our International Group currently manufactures its products from facilities in the following locations, all of which are owned:

      The International Group’s headquarters are located in owned premises in Pontedeume, Spain.

Corporate

      Our corporate headquarters are located in leased premises at 2515 McKinney Avenue, Suite 1200, Dallas, Texas 75201.

      We are not currently party to, nor are our properties the subject of, any material pending legal proceedings. However, we are party from time to time to certain claims, litigation, audits and investigations. We believe that we have established adequate reserves to satisfy any potential liability that is reasonably expected under all claims, litigations, audits and investigations that are pending. The settlement of any pending or threatened matter is not expected to have a material adverse impact on our financial position, results of operations or cash flows.

      No matter was submitted by us during the fourth quarter of 2005 to a vote of security holders, through the solicitation of proxies or otherwise.

PART II

      Our common stock began trading on the NASDAQ National Market on April 17, 1996, and continued trading on the NASDAQ until March 5, 1997, when it began trading on the New York Stock Exchange under the symbol “SZA.” We changed our trading symbol to “DF” effective December 24, 2001. The following table sets forth the high and low sales prices of our common stock as quoted on the New York Stock Exchange for the last two fiscal years. At March 6, 2006, there were approximately 5,910 record holders of our common stock.

      On June 27, 2005, we declared a stock dividend related to the Spin-off of TreeHouse Foods, which decreased our stock price. No adjustment has been made to the historical stock prices related to the impact of the stock dividend. See “Developments Since January 1, 2005 — Discontinued Operations.”

      We have never declared or paid a cash dividend on our common stock. Our current intention is to retain all earnings to fund working capital requirements, capital expenditures and scheduled debt repayments, and we do not anticipate paying cash dividends on our common stock in the foreseeable future. Moreover, our senior credit facility contains certain restrictions on our ability to pay cash dividends. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Current Debt Obligations” and Note 9 to our Consolidated Financial Statements for further information regarding the terms of our senior credit facility.

      On September 15, 1998, our Board of Directors authorized a stock repurchase program of up to $100 million. On September 28, and again on November 17, 1999, the Board increased the program by an aggregate amount of $200 million. On May 19 and again on November 2, 2000, the Board authorized additional increases in the aggregate amount of $200 million. On January 8 and again on February 12, 2003, the Board authorized additional increases by an aggregate amount of $300 million. On September 7, 2004, the Board authorized an additional increase of $200 million and on November 2, 2004, the Board authorized an additional increase of $100 million. On August 10, 2005 and again on November 2, 2005, our Board authorized increases in our stock repurchase program in the aggregate amount of $600 million. Authorizations under our stock repurchase program totaled $1.70 billion at December 31, 2005, of which $18.5 million remained available for repurchases under our program at December 31, 2005.

      The following table summarizes the repurchase of our common stock during 2005:

      The following selected financial data as of and for each of the five years in the period ended December 31, 2005 has been derived from our audited Consolidated Financial Statements. The selected financial data do not purport to indicate results of operations as of any future date or for any future period. The selected financial data should be read in conjunction with our Consolidated Financial Statements and related Notes.

Business Overview

      We are a leading food and beverage company. Our Dairy Group is the largest processor and distributor of milk and various other dairy products in the United States. The Dairy Group manufactures and sells its products under a variety of local and regional brand names and under private labels. Our WhiteWave Foods Company manufactures, markets and sells a variety of well known soy, dairy and dairy-related nationally branded products such as Silk^® soymilk and cultured soy products, Horizon Organic^® dairy products, International Delight^® coffee creamers and LAND O’LAKES^® creamers and fluid dairy products. Our International Group is one of the largest processors and distributors of fluid milk in Spain and Portugal.

      Dairy Group — Our Dairy Group segment is our largest segment, with approximately 85% of our consolidated sales in 2005. Our Dairy Group manufactures, markets and distributes a wide variety of branded and private label dairy case products, such as milk, cream, ice cream, cultured dairy products and juices to retailers, distributors, foodservice outlets, schools and governmental entities across the United States. Due to the perishable nature of the Dairy Group’s products, our Dairy Group delivers the majority of its products directly to its customers’ stores in refrigerated trucks or trailers that we own or lease. This form of delivery is called a “direct store delivery” or “DSD” system and we believe we have one of the most extensive refrigerated DSD systems in the United States. The Dairy Group sells its products primarily on a local or regional basis through its local and regional sales forces, although some national customer relationships are coordinated by the Dairy Group’s corporate sales department. Most of the Dairy Group’s customers, including its largest customer, purchase products from the Dairy Group either by purchase order or pursuant to contracts that are generally terminable at will by the customer.

      The dairy industry is a mature industry that has traditionally been characterized by slow to flat growth, low profit margins, fragmentation and excess capacity. Excess capacity resulted from the development of more efficient manufacturing techniques, the establishment of captive dairy manufacturing operations by some grocery retailers and declining demand for fluid milk products. From 1990 through 2001, the dairy industry experienced significant consolidation, led by us. Consolidation has resulted in lower operating costs, less excess capacity and greater efficiency. However, consumption of traditional fluid dairy products has continued to decline. According to the United States Department of Agriculture, per capita consumption of fluid milk and cream decreased by over 15% from 1990 to the end of 2004, although total consumption has remained relatively flat over the same period due to population increases. Therefore, volume sales growth across the industry generally remains flat to modest, profit margins generally remain low and excess manufacturing capacity continues to exist. In this environment, price competition is particularly intense, as smaller processors struggle to retain enough volume to cover their fixed costs. In response to this dynamic, in addition to the significant competitive pressure caused by the ongoing consolidation among food retailers, many processors, including us, are now placing an increased emphasis on product differentiation, and cost reduction in an effort to increase consumption, sales and margins.

      Our Dairy Group has several competitors in each of our major product and geographic markets. Competition between dairy processors for shelf-space with retailers is based primarily on price, service and quality, while competition for consumer sales is based on a variety of factors such as brand recognition, price, taste preference and quality. Dairy products also compete with many other beverages and nutritional products for consumer sales.

      WhiteWave Foods — WhiteWave Foods Company manufactures, develops, markets and sells a variety of nationally-branded soy, dairy and dairy-related products, such as Silk soymilk and cultured soy products; Horizon Organic dairy and other products; International Delight coffee creamers; and LAND O’LAKES creamers and fluid dairy products. WhiteWave Foods Company also sells The Organic Cow^® organic dairy products; White Wave^® and Tofu Town^® branded tofu and Hershey’s^® milks and milkshakes. We license the LAND O’LAKES and Hershey’s names from third parties.

      WhiteWave Foods Company sells its products to a variety of customers, including grocery stores, club stores, natural foods stores, mass merchandisers, convenience stores and foodservice outlets. WhiteWave

Foods Company sells its products through its internal sales force and through independent brokers. Most of the WhiteWave Foods Company’s customers, including its largest customer, purchase products from the Dairy Group either by purchase order or pursuant to contracts that are generally terminable at will by the customer.

      WhiteWave Foods Company has several competitors in each of its product markets. Competition to obtain shelf-space with retailers for a particular product is based primarily on the expected or historical sales performance of the product compared to its competitors. In some cases, WhiteWave Foods Company pays fees to retailers to obtain shelf-space for a particular product. Competition for consumer sales is based on many factors, including brand recognition, price, taste preferences and quality. Consumer demand for soy and organic foods has grown rapidly in recent years due to growing consumer confidence in the health benefits of soy and organic foods, and WhiteWave Foods Company has a leading position in the soy and organic foods category. However, our soy and organic food products compete with many other beverages and nutritional products for consumer sales.

      International Group — Our International Group, which consists of Leche Celta and Rachel’s Organic, does not qualify as a reportable segment. Leche Celta manufactures, markets and sells private label and branded milk, butter and cream through its internal sales force to retailers and distributors across Spain and Portugal. Rachel’s Organic markets and sells organic dairy products across the United Kingdom under the Rachel’s Organic^® and Divine Rice^® brand names. Effective January 1, 2006, Rachel’s Organic was consolidated with our WhiteWave Foods Company segment.

Recent Developments

      On June 27, 2005, we completed the spin-off (“Spin-off”) of our indirect, majority-owned subsidiary TreeHouse Foods, Inc. (“TreeHouse”). Immediately prior to the Spin-off, we transferred to TreeHouse (1) the businesses previously conducted by our Specialty Foods Group segment, (2) the Mocha Mix^® and Second Nature^® businesses previously conducted by WhiteWave Foods Company, and (3) the foodservice salad dressings businesses previously conducted by the Dairy Group and WhiteWave Foods Company. The Spin-off was effected by means of a share dividend of the TreeHouse common stock held by us to our stockholders of record on June 20, 2005 (the “Record Date”). In the distribution, our stockholders received one share of TreeHouse common stock for every five shares of our common stock held by them on the Record Date.

      On August 22, 2005, we completed the sale of certain tangible and intangible assets related to the production and distribution of Marie’s dips and dressings and Dean’s dips. We also licensed the Dean trademark to Ventura Foods for use on certain non-dairy dips. The sales price was approximately $194 million.

      Both the TreeHouse Spin-off and the Marie’s dips and dressings and Dean’s dips transactions were part of our strategy to focus on our core dairy and branded businesses. Prior periods have been revised to remove the results of our former Specialty Foods Group segment and Mocha Mix, Second Nature and private label dressings businesses and our Marie’s dips and dressings and Dean’s dips businesses, which have been reclassified as discontinued operations.

      On August 25, 2005, we announced that we had selected Joseph E. Scalzo to serve as President and CEO of WhiteWave Foods Company. Mr. Scalzo, most recently Group President, Personal Care and Global Value Chain of the Gillette Company, joined WhiteWave Foods Company on October 11, 2005.

      On September 7, 2005, we announced the succession plan for the President of our Dairy Group. Alan Bernon, the former Chief Operating Officer of the Northeast region of our Dairy Group, succeeded Pete Schenkel effective January 1, 2006. Mr. Schenkel became Vice Chairman of our Board of Directors effective January 1, 2006, and he will assist in the transition of leadership of the Dairy Group through the end of 2007.

      On October 14, 2005, we announced that Barry Fromberg, Executive Vice President and Chief Financial Officer, will resign from his position on April 1, 2006. We are currently conducting a search for Mr. Fromberg’s successor.

      Between July 1 and December 31, 2005, we spent approximately $699.5 million to repurchase 18.9 million shares of our common stock for an average price of $37.05 per share, excluding commissions and fees. On August 10, 2005, and again on November 2, 2005 our Board of Directors authorized increases in our stock repurchase program in the aggregate amount of $600 million. Between January 1, 2006 and March 6, 2006 we spent approximately $15.3 million to repurchase an additional 400,000 shares of our common stock for an average price of $38.37, excluding commissions and fees. At March 6, 2006, approximately $3.2 million remained available under our stock repurchase authorization.

      In 2005, we recorded a charge of $38.6 million as part of our ongoing costs savings initiative. The Dairy Group recorded a charge of $25.3 million which included the closing of two facilities in 2005; we are consolidating production from these facilities into other Dairy Group facilities. Also in 2005, we made significant progress toward the consolidation and optimization of our WhiteWave Foods Company subsidiary. Specifically, we consolidated WhiteWave Foods Company’s sales, marketing and research and development functions, which resulted in a charge of $10.2 million related to these activities. Also in 2005, we began a project to reorganize our International Group operations in response to a difficult operating environment, including eliminating and consolidating certain management, sales and purchasing functions, which resulted in a charge of $3.1 million related to these activities. We expect to incur additional charges related to all of these restructuring plans of approximately $7.1 million, primarily in 2006. These charges include the following costs:

      See Note 15 to our Consolidated Financial Statements for more information regarding our facility closing and reorganization activities.

      In May 2005, we amended our senior credit facility to lower the interest rate on the revolving credit facility and term loan. With the amendment, both the revolving credit facility and term loan bear interest, at our election, at the base rate plus a margin that varies from zero to 25 basis points depending on our credit ratings (as issued by Standard & Poor’s and Moody’s), or LIBOR plus a margin that varies from 50 to 150 basis points, depending on our credit ratings (as issued by Standard & Poor’s and Moody’s). On November 18, 2005, we again amended our senior credit facility to change the maximum leverage covenant to 4.35 to 1.00 through March 31, 2007, and 4.00 to 1.00 thereafter.

      On December 14, 2005, we filed an immediately effective shelf registration statement pursuant to which we registered debt securities that we may issue in the future. If and when the debt securities are issued, they will be unsecured obligations and will be fully and unconditionally guaranteed by all of our wholly-owned U.S. subsidiaries other than our receivables securitization subsidiaries.

Results of Operations

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

      Net Sales — Consolidated net sales increased approximately 4.7% to $10.51 billion during 2005 from $10.04 billion in 2004. Net sales by segment are shown in the table below.

      The change in net sales was due to the following:

      Net sales increased approximately $469.3 million during 2005 compared to the prior year primarily due to strong volume growth and increased pricing in the Dairy Group and WhiteWave Foods Company segments. Net sales in Corporate/ Other increased approximately $39.2 million primarily due to sales volume growth at Rachel’s Organic and Leche Celta’s acquisition of Tiger Foods in the second quarter of 2004.

      Cost of Sales — All expenses incurred to bring a product to completion are included in cost of sales, such as raw material, ingredient and packaging costs; labor costs; and plant and equipment costs, including costs to operate and maintain our coolers and freezers. In addition, our Dairy Group includes costs associated with transporting our finished products from our manufacturing facilities to our own distribution facilities. Cost of goods sold increased by approximately 3.6% to $7.92 billion in 2005 from $7.64 billion in 2004 primarily due to increased volumes and increased resin and other commodity costs, partly offset by lower raw milk costs in our Dairy Group. Our cost of sales ratio decreased to 75.4% in 2005 compared to 76.1% in 2004 primarily due to the impact of higher volumes and efficiencies gained through our facility rationalization activities.

      Operating Costs and Expenses — Our operating expenses increased approximately $171.7 million, or approximately 9.5%, during 2005 versus the prior year. Operating expenses increased primarily due to the following:

      Our operating expense ratio increased to 18.8% for 2005 as compared to 18.0% for 2004.

      Operating Income — Operating income was $607.1 million in 2005, an increase of $19.7 million from 2004 operating income of $587.4 million. Our operating margin was 5.8% in 2005 compared to 5.9% in 2004.

      Other (Income) Expense — Interest expense decreased to $169 million in 2005 from $198.9 million in 2004, primarily due to a charge of $32.6 million in 2004 to write-off deferred financing costs related to our senior credit facility amended in August 2004.

      Income Taxes — Income tax expense was recorded at an effective rate of 37.9% in 2005 compared to 38.5% in 2004. Our effective tax rate varies based on the relative earnings of our business units. In 2005, our income tax rate was positively impacted by the change in expected realization of net operating loss

carryforwards and a favorable tax settlement. In 2004, our tax rate was negatively impacted by the write-off of deferred financing costs that were incurred in a business unit with a lower relative effective tax rate.

      Dairy Group —

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

      The Dairy Group’s net sales increased approximately $296.1 million, or 3.4%, in 2005 versus 2004. The change in net sales from 2004 to 2005 was due to the following:

      The increase in the Dairy Group’s sales was driven primarily by increased volumes. Volume sales of all Dairy Group products, excluding the impact of acquisitions, increased 1.9% in 2005 compared to 2004. Volume sales of fresh milk, which were approximately 69% of the Dairy Group’s 2005 volumes, were up approximately 2.5% for the year compared to USDA data showing a relatively flat total consumption of milk in the U.S. during the year.

      The increase in the Dairy Group’s net sales due to pricing and product mix shown in the above table primarily resulted from increased pricing due to the pass through of increased fuel and packaging costs, partly offset by lower raw milk costs in 2005. In general, our Dairy Group changes the prices it charges customers for fluid dairy products on a monthly basis, as the costs of raw materials and other variable costs fluctuate. Because of competitive pressures, the price increases do not always reflect the entire increase in raw material and other input costs that we may experience. 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 2005 compared to 2004:

      The Dairy Group acquired Milk Products of Alabama in October 2004, which we estimate contributed an additional $35.4 million in sales during 2005.

      The Dairy Group’s cost of sales increased to $6.84 billion in 2005 compared to $6.67 billion in 2004 primarily due to increased volumes and an approximately $43 million increase in resin costs, partly offset by lower raw milk costs. Resin prices increased primarily due to significant supply constraints resulting from the Gulf Coast hurricanes. Resin is the primary raw material in our plastic bottles. The Dairy Group’s cost of sales ratio decreased to 76.4% in 2005 compared to 77.0% in 2005 primarily due to the impact of higher volumes and efficiencies gained through our facility rationalization activities.

      The Dairy Group’s operating expenses increased approximately $77.5 million during 2005 compared to 2004 primarily due to (1) higher distribution costs of $60.7 million, $31 million of which was due to increased fuel prices and the remaining increase was driven by increased volumes; (2) higher incentive compensation costs of approximately $12 million due to improved operating results and (3) higher bad debt expense. Bad debt expense increased approximately $9 million in 2005 compared to the prior year due to the impact of Hurricane Katrina, the write-off of a receivable from a large customer, as well as the relatively higher level of bad debt recoveries recognized in 2004. The Dairy Group’s operating expense ratio increased to 16.5% in 2005 from 16.1% in 2004.

      WhiteWave Foods Company —

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

      WhiteWave Foods Company’s net sales increased by approximately $134 million, or 13.3%, in 2005 versus 2004. The change in net sales from 2004 to 2005 was due to the following:

      Double digit volume growth in our Silk and Horizon Organic brands, combined with somewhat slower growth in International Delight and LAND O’LAKES, was partly offset by elimination of certain product offerings. We believe increased Silk and Horizon Organic volumes were due primarily to increased consumer acceptance and increased marketing efforts. We are in the process of eliminating certain products and brands from our portfolio of products, which negatively impacted our sales growth in 2005. If we excluded the discontinued products from 2004 and 2005 results, our sales would have increased approximately 15% in 2005 over the prior year.

      Higher pricing also contributed to the increase in sales. The two primary drivers of this increase were (1) increased selling prices in response to increased commodity costs, and (2) a decline in slotting fees, couponing and certain other promotional costs that are required to be recorded as reductions of net sales. We also benefited from the 2004 acquisition of the LAND O’LAKES cream, sour cream, and whipping cream business in the Eastern part of the U.S. which we estimate added $9.2 million to our sales growth.

      Cost of sales for WhiteWave Foods Company increased to $734.5 million in 2005 from $660.3 million in 2004 primarily due to increased volumes and the impact of higher raw material costs, particularly organic raw milk and organic soybeans, which increased cost of sales by approximately $26 million. The cost of sales ratio declined to 64.2% in 2005 from 65.4% in 2004 due to the impact of supply chain changes and product rationalization in 2005.

      Operating expenses increased approximately $32.3 million in 2005 compared to the prior year primarily due to increased volumes and higher fuel costs which together contributed approximately $22 million to distribution expenses. Compensation expense also increased as a result of increased staffing levels to support the growth of our organization.

      Net Sales — Consolidated net sales increased approximately 19.6% to $10.04 billion during 2004 from $8.39 billion in 2003. Net sales by segment are shown in the table below.

      The change in net sales was due to the following:

      Net sales increased approximately $1.65 billion during 2004 compared to the prior year primarily due to higher selling prices resulting from the pass-through of increased raw milk costs and due to acquisitions. We acquired Kohler Mix Specialties, Melody Farms and Ross Swiss Dairies in our Dairy Group segment; Horizon Organic and LAND O’LAKES East in our WhiteWave Foods Company segment and Tiger Foods in our Corporate/ Other segment.

      Cost of Sales — All expenses incurred to bring a product to completion are included in cost of sales, such as raw material, ingredient and packaging costs; labor costs; and plant and equipment costs, including costs to operate and maintain our coolers and freezers. In addition, our Dairy Group includes costs associated with transporting our finished products from our manufacturing facilities to our own distribution facilities. Our cost of sales ratio increased to 76.1% in 2004 compared to 74.1% in 2003 due almost entirely to increased raw material costs that affected both of our segments in 2004.

      Operating Costs and Expenses — Our operating expenses increased approximately $265.7 million, or approximately 17.2%, during 2004 versus the prior year. Operating expenses increased primarily due to the following:

      Our operating expense ratio decreased slightly to 18.0% for 2004 compared to 18.3% for 2003.

      Operating Income — Operating income during 2004 was $587.4 million, a decrease of $47 million from 2003 operating income of $634.4 million. This decrease was primarily due to the $66.2 million gain on the sale of our frozen pre-whipped topping business in 2003. Our operating margin in 2004 was 5.9% compared to 7.6% in 2003. Our operating margin decreased primarily as a result of higher raw material costs and the effect of increased sales.

      Other (Income) Expense — Total other (income) expense increased by $13.2 million in 2004 compared to 2003. Interest expense increased to $198.9 million in 2004 from $173.9 million in 2003, primarily due to a charge of $32.6 million in 2004 to write-off deferred financing costs related to our senior credit facility amended in August 2004. This charge was partially offset by lower interest expense due to lower interest rates during 2004. There were no financing charges on preferred securities in 2004 as compared to $14.2 million in

2003. Our convertible preferred securities were converted into common stock in the second quarter of 2003. See Note 10 to our Consolidated Financial Statements.

      Income Taxes — Income tax expense was recorded at an effective rate of 38.5% in 2004 compared to 38.6% in 2003. Our effective tax rate varies based on the relative earnings of our business units.

      Dairy Group —

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

      The Dairy Group’s net sales increased by approximately $1.12 billion, or 14.8%, in 2004 versus 2003. The change in net sales from 2003 to 2004 was due to the following:

      The Dairy Group’s net sales increased primarily due to pricing and product mix resulting from increased pricing due to the pass through of higher raw milk costs in 2004. In general, our Dairy Group changes the prices it charges customers for fluid dairy products on a monthly basis, as the costs of raw materials and other variable input costs fluctuate. Because of competitive pressures, the price increase may not reflect the entire increase in raw material or other variable costs that we experience. 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 2004 compared to 2003: