ANALYTICAL FOUNDATIONS OF BUSINESS

Agenda
 ANALYTICAL FOUNDATIONS OF BUSINESS | DEAN FOODS

About

Founded in 1925 100 manufacturing Food Processing In 2019 they filled

in Dallas, TX by facilities in 32 Industry for bankruptcy
Samuel E. Dean Sr. states and due to growth in
distributed their demand for plant
products all over based milk
the country
 Offers a portfolio full of
natural, nutritious products
that are stables of a healthy
diet and are served in various
eating places including
homes every day
Competitive Advantage
 ANALYTICAL FOUNDATIONS OF BUSINESS | DEAN FOODS

Market Data of Dairy Industry & Dean

Foods
• Market Size in 2020: $73,977.30 USD Millions
• Market Share in 2010: 8.4%
• Market Share in 2020: 3.3%
• Number of Employees: 15,000
• HQ: 2711 N Haskell Ave. Suite 3400, Dallas,TX.
 ANALYTICAL FOUNDATIONS OF BUSINESS | DEAN FOODS

Industry Behavior

1.0% GDP 3M jobs 620B

Total Economic Impact
$159 B wages
421B indirect
199B direct
 ANALYTICAL FOUNDATIONS OF BUSINESS | DEAN FOODS

Main Customers

55%
ANALYTICAL FOUNDATIONS OF BUSINESS | DEAN FOODS

Competition
 ANALYTICAL FOUNDATIONS OF BUSINESS | DEAN FOODS

Market Structure

Processors Retailers End Consumer

Dairy Farmers

Government
 ANALYTICAL FOUNDATIONS OF BUSINESS | DEAN FOODS

Main Economic Events of Industry

Dairy Farmers

Processors

Retailers
1900-1950 1950-1980 1980 - Today
Dairy Farmers Limited bargaining power Dairy Farmers Local to regional Dairy Farmers Regional
Processors Well capitalized, few competition Processors Local to national Processors Losing market share
Retailers Local Shops Retailers Local to regional Retailers High concentration
FED Regulated the industry Geared towards regulated Focus on lowering prices for
FED FED
competition consumers
 ANALYTICAL FOUNDATIONS OF BUSINESS | DEAN FOODS

Main Events of Dean Foods

2017 - 2018

2000 Walmart builds

its own
processing milk 2019
plant, resulting in
1989 - 1992 Suiza becomes a 2.2% decrease
the largest dairy in net sales for 2020
processor in the Dean Foods
US and acquires Dean Foods
1925 Dean Foods for d e c l a r e s
A c q u i r e d $1.6 B bankruptcy in
companies that add November 2019 Dairy Farmers of
America acquires
Founded in Dallas, $300M in revenue D e a n Fo o d s f o r
TX by Samuel E. i n C a l i f o r n i a , $433 M
Dean Sr. Te n n e s s e e a n d
Washington
 ANALYTICAL FOUNDATIONS OF BUSINESS | DEAN FOODS

S W O T
100 facilities in the US and a
S e a s o n a l c h a n g e s i n t h e Focus on cost reduction and Economic pressures such as
workforce of over 24,000
demand for dairy products. capability building supply shortages, and inflation
people
Offering superior customer
Retail pricing pressures and Driving volume gains though
service through one of the Contamination due to animal
intense competition means the acquisition of new for Free
USA’s largest refrigerated store diseases.
limited market share Dairy Direct.
delivery networks
Fresh Dairy Direct is the largest Fresh Dairy Direct has a several Investing in new and different
Fluid milk category has posted
processor and distributor of milk competitors in each of its major channels and expanding the
declining volumes over the
and other dairy products in the product and geographic geography and platform of
several years.
US markets WhiteWave-Alpro’s portfolio
Bigger demand for plant-based
and organic beverages and
foods due to growing consumer
confidence in the health benefits
attributable to these products,
b e i n g W h i t e Wa v e - A l p ro a
leader in these categories
 ANALYTICAL FOUNDATIONS OF BUSINESS | DEAN FOODS

Altman Z-Score

Altman Z-
Score formula
= (1.2 x (
Working Capital
Total Assets ) + 1.4 x ( Retained Earnings
Total Assets )
( )+0.6 x ( )
The equitys market
+3.3 x Earnings before
Interest & Tax Payment
value
Total Liabilities
Total Assets

+0.999 x ( ) Total Sales

Total Assets
 ANALYTICAL FOUNDATIONS OF BUSINESS | DEAN FOODS

Dean Foods | Altman Z-Score

5

0
2015 2016 2017 2018 2019
 ANALYTICAL FOUNDATIONS OF BUSINESS | DEAN FOODS

Financial Accounting Analysis | Ratios

Profitability 2015 2016 2017 2018 2019 Company’s Average Industry’s Average
Net Profit Margin 0.1% 1.5% 0.8% -4.0% -6.2% -1.6% 4.1%
ROE N/A 20.7% 9.7% -67.4% -692.0% -182.2% 6.7%
ROA N/A 4.7% 2.4% -14.1% -23.0% -7.5% 4.1%
Operating Margin 1.1% 3.4% 1.1% -4.1% -5.5% -0.8% 3.1%
GPM 24.3% 25.8% 23.3% 21.3% 19.6% 22.9% 30.8%
Operating Expense Margin 23.2% 22.4% 22.2% 25.4% 25.1% 23.6% Should increase each year

Productivity 2015 2016 2017 2018 2019 Company’s Average Industry’s Average
Inventory Turnover N/A 16.92 16.94 15.74 15.47 16.27 24.0
Receivables Turnover N/A 30.87 31.06 29.36 28.57 29.97 10.0
Fixed Assets Turnover N/A 6.60 6.90 7.39 8.02 7.23 The higher, the better
Accounts Payable Turnover N/A 7.90 8.67 8.90 9.31 8.70 The higher, the better
Days Inventory Outstanding N/A 21.28 21.25 22.87 23.28 22.17 The higher, the better
Days Sales Outstanding N/A 11.66 11.59 12.26 12.60 12.03 45.0
Days Payable Outstanding N/A 45.58 41.50 40.45 38.68 41.55 30-60
Cash Conversion Cycle N/A -12.63 -8.66 -5.32 -2.80 -7.35 Negative is the best
Liquidity 2015 2016 2017 2018 2019 Company’s Average Industry’s Average
Current Ratio 1.41 1.25 1.52 1.30 0.88 1.27 1.52
Cash Ratio 0.08 0.02 0.02 0.03 0.07 0.05 0.14
Quick Ratio 1.08 0.91 1.10 0.94 0.66 0.94 0.76
Solvency 2015 2016 2017 2018 2019 Company’s Average Industry’s Average
Times Interest Earned 1.40 3.95 1.35 -5.58 -5.82 -0.94 1.96
Liabilities to Equity 3.62 3.27 2.82 5.73 -14.09 0.27 Tends to be negative
Debt Ratio 0.78 0.77 0.74 0.85 1.08 0.84 0.57
 ANALYTICAL FOUNDATIONS OF BUSINESS | DEAN FOODS

Financial Accounting Analysis | Vertical Analysis

Amounts Vertical Analysis

Balance Sheets
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Total Current Assets $1,077,563.00 $1,058,630.00 $1,019,879.00 $912,280.00 $966,667.00 42.76% 40.62% 40.73% 43.06% 43.38%
Total Current Liabilities $761,895.00 $847,787.00 $672,195.00 $700,835.00 $1,092,414.00 30.23% 32.53% 26.85% 33.08% 49.02%

Amounts Vertical Analysis

Balance Sheets
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Total Long-term Assets $1,442,600.00 $1,547,597.00 $1,483.950.00 $1,206.212. $1,261,890.00 57.24% 59.38% 59.27% 56.94% 56.62%
Total Long-term 00 48.12% 44.04% 46.96% 52.06% 58.62%

Amounts Vertical Analysis

Balance Sheets
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Total Liabilities $1,974,659.00 $1,995,671.00 $1,847,882.00 $1,803,760.00 $2,398,797.00 78.35% 76.57% 73.80% 85.14% 107.64%
Total Stockholder’s 0 21.65% 23.43% 26.20% 14.86% -7.64%
$545,504.00 $610,556.00 $655,947.00 $314,732.00 -$170,240.00
Equity (deficiency)
 ANALYTICAL FOUNDATIONS OF BUSINESS | DEAN FOODS

Financial Accounting Analysis | Horizontal Analysis

Income Statements
Amounts Horizontal Analysis
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Impairment of goodwill and long-lived assets $109,910.00 $0.00 $30,668.00 $204,414.00 $177,357.00 100.00% -100.00% -72.10% 85.98% 61.37%
Other operating income $0.00 $0.00 $0.00 -$2,289.00 $0.00 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Equity in (earnings) loss of unconsolidated affiliate $0.00 $0.00 $0.00 -$7,939.00 -$4,835.00 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Total operating costs and expenses $1,881,048.00 $1,723,848.00 $1,730,501.00 $1,970,471.00 $1,839,416.00 100.00% -8.36% -8.0% 4.75% -2.21%

Operating Income (loss) EBIT $93,361.00 $263,668.00 $87,566.00 -$315,193.00 -$399,684.00 100.00% 182.42% -6.21% -$437.61 -528.11%

Other (income) expense

Interest expense $66,813.00 $66,795.00 $64,961.00 $56,443.00 $68,730.00 100.00% -0.3% -2.77% -15.52% 2.87%
Loss on early retirement of long-term debt $43,609.00 $0.00 $0.00 $0.00 $0.00 100.00% -100.00% -100.00% -100.00% -100.00%
Other (income) expense, net -$3,751.00 -$5,778.00 $1,362.00 $2,877.00 -$3,012.00 100.00% 54.04% -136.31% -176.70% -19.70%
Reorganization items $0.00 $0.00 $0.00 $0.00 $44,527.00 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Total Other (income) expense $106,671.00 $61,017.00 $66,323.00 $59,320.00 $110,245.00 100.00% -42.80% -37.82% -44.39% 3.35%

Income (loss) before income taxes -$13,310.00 $202,651.00 $21,243.00 -$374,513.00 -$509,929.00 100.00% -1622.55% -259.60% 2713.77% 3731.17%
Income tax benefit -$5,229.00 $82,034.00 -$26,179.00 -$42,283.00 -$9,195.00 100.00% -1668.83% 400.65% 708.62% 75.85%

Income (loss) from continuing operations, net of tax -$8,081.00 $120,617.00 $47,422.00 -$332,230.00 -$500,734.00 100.00% -1,592.6% -686.83% 4,011.25% 6,096.44%

Income from discontinued operations, net of tax -$1,095.00 -$312.00 $11,291.00 $0.00 $0.00 100.00% -71.51% -1,131.14% -100.00% -100.00%
Gain (loss) on sale of discontinued operations, net of tax $668.00 -$376.00 $2,875.00 $4,872.00 -$70.00 100.00% -156.29% 330.39% 629.34% -110.48%
Net Income (loss) $8,508.00 $119,929.00 $61,588.00 -$327,358.00 -$500,804.00 100.00% 1,309.60% 623.88% -3,947.65% -5,986.27%
Net loss attributable to non-controlling interest $0.00 $0.00 $0.00 $458.00 $862.00 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Net Income (loss) attributable to Dean Foods Co. $8,508.00 $119,929.00 $61,588.00 -$326,900.00 -$499,942.00 100.00% 1,309.60% 623.88% -3,942.27% -5,976.14%
 ANALYTICAL FOUNDATIONS OF BUSINESS | DEAN FOODS

Financial Accounting Analysis | Horizontal Analysis

Amounts Amounts
Balance Sheet
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Assets held for sale $0.00 $0.00 $0.00 $8,472.00 $0.00 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Total Current Assets $1,077,563.00 $1,058,630.00 $1,019,879.00 $912,280.00 $966,667.00 100% -1.76% -5.35% -15.34% -10.29

Operating lease right of use assets $0.00 $0.00 $0.00 $0.00 $275,596.00 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Identifiable intangible and other assets, net $150,236.00 $207,897.00 $211,620.00 $197,512.00 $165,928.00 100% 38.38% 40.86% 31.47% 10.44%
Deferred income taxes $31,386.00 $21,737.00 $10,731.00 $2,518.00 $0.00 100% -30.74% -65.81% -91.98% -100%
Total Long-term Assets $1,442,600.00 $1,547,597.00 $1,483,950.00 $1,206,212.00 $1,261,890.00 100% 7.28% 2.87% -16.39% -12.53%

Current maturities of long-term debt and finance leases $0.00 $0.00 $0.00 $1,174.00 $440,385.00 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Operating lease liabilities $0.00 $0.00 $0.00 $0.00 $86,297.00 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Total Current Liabilities $761,895.00 $847,787.00 $672,195.00 $700,835.00 $1,092,414.00 100% 11.27% -11.77% -8.01% 43.38%

Long-term operating lease liabilities $0.00 $0.00 $0.00 $0.00 $203,477.00 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Other long-term liabilities $274,864.00 $276,630.00 $203,595.00 $184,048.00 $65,777.00 100% 1.38% -25.39% -32.55% -75.89%%
Liabilities subject to compromise (note 2) $0.00 $0.00 $0.00 $0.00 $1,027,393.00 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Total Long-term Liabilities $1,212,764.00 $1,147,884.00 $1,175,687.00 $1,102,925.00 $1,306,383.00 100% -5.35% -3.06% -9.06% 7.72%

Accumulated deficit $0.00 $0.00 $0.00 $203,477.00 $203,477.00 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Accumulated other comprehensive loss -$85,803.00 -$89,633.00 -$78,410.00 -$98,607.00 -$85,163.00 100% 100% 100% 100% 100%
Total Dean Foods Co. stockholder’s equity (deficiency) $0.00 $0.00 $0.00 $302,960.00 -$181,122.00 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Non-controlling interest $0.00 $0.00 $0.00 $11,772.00 $10,882.00 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Total Stockholder’s Equity (deficiency) $545,504.00 $610,556.00 $655.947.00 $314,732.00 -$170,240.00 100% 11.93% 20.25% -42.30% -131.21%
ANALYTICAL FOUNDATIONS OF BUSINESS | DEAN FOODS

FORECAST
 ANALYTICAL FOUNDATIONS OF BUSINESS | DEAN FOODS

STATISTIC INDICATORS
 ANALYTICAL FOUNDATIONS OF BUSINESS | DEAN FOODS

STOCK ANALYSIS
ANALYTICAL FOUNDATIONS OF BUSINESS | DEAN FOODS

Stock Behavior
ANALYTICAL FOUNDATIONS OF BUSINESS | DEAN FOODS

Global Factors
ANALYTICAL FOUNDATIONS OF BUSINESS | DEAN FOODS

Conclusions
 Datos curiosos de la industria
• The U.S. has lost nearly 20,000 licensed dairy farms, a
roughly 30% decline, over the past decade, according to
the USDA.
• Milk makers in the United States are disappearing as
consolidation in the industry and changing consumer tastes
have made it tougher for small farms to survive
• Americans are drinking less traditional cow’s milk and
switching to non-dairy alternatives
• President Donald Trump’s trade wars have sent scores of
farmers out of business. Overall, the U.S. has lost nearly
20,000 licensed dairy farms, a roughly 30% decline, over the
past decade, according to the U.S. Department of
Agriculture
• Between 1992 to 2018, over 94,000 family dairy farms
closed their operations at a rate of 10 per day, according to
the National Farmers Union.
• Exports of U.S. dairy products to China have declined over
50% in 2019. The U.S. and China announced a phase-one
agreement in December, with Trump saying that the
Chinese would buy $50 billion in agricultural purchases.
• The president has argued that his trade war will help
American producers in the long-term, and announced a
billion dollar aid program for farmers hurt by the trade war.
But the dairy industry was especially critical of that aid,
arguing that the subsidies weren’t nearly enough to
compensate farmers and that the USDA didn’t use up to
date production data for determining aid.
• Higher temperatures and humidity can stress out cows and
reduce reproduction rates and milk yields if the cows eat
less.
• Some dairy farmers have switched to lighter equipment
to reduce soil compaction and have installed tile
drainage systems. They’ve also changed the type of
crops they grow and when they plant them.
• The farmers that can afford technology to mitigate all
these climate risks are the largest dairies, and the smaller
dairies that can’t will go out of business
• 2020 was finally supposed to be a better one for U.S. dairy
farmers. But now it could be what drives many of them out
of business for good.
 Datos Dean Foods 2019-2020
1. On November 12, 2019, Dean Foods and all its
subsidiaries initiated voluntary Chapter 11
reorganization proceedings in the Southern
District of Texas.
2. On February 17, 2020, Dean Foods and certain
of the subsidiaries entered into an asset
purchase agreement with Dairy Farmers of
America through which DFA will acquire a
substantial portion of our business operations.
The transaction is subject to regulatory and
Court approval, as well as higher or otherwise
better offers.
3. U.S. Bankruptcy Court for the Southern District
of Texas has approved the sale, subject to entry
of final agreed orders, of a substantial portion
of Dean Foods’ business operations, including
the sale of the assets, rights, interests and
properties relating to 44 of the Company’s
fluid and frozen facilities, to Dairy Farmers of
America for $433 million. (April 2020)
4. U.S. Bankruptcy Court for the Southern District
of Texas also approved the sale of Dean Foods’
facility in Miami, Florida to Mana Saves
McArthur, LLC for $16.5 million
5. On April 30, 2020, Dean Foods completed the
sales of the Company’s Uncle Matt’s business
to Harmoni, Inc., and of its Hilo facility and
related distribution branches on the Big Island,
Kauai and Maui, as well as a license to the
Meadow Gold Hawaii brand name and related
intellectual property, to MGD Acquisition, LLC.