Tyson Foods
description
Transcript of Tyson Foods
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Tyson FoodsBy: Sophia Toy
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History
John Tyson
Springdale, Arkansas
Fortune 500 2nd largest food production
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Benchmarking/Trending
Tyson VS. Industry Averages
Strong points Inventory Turnover Days Sales Outstanding (DSO) Profit Margin on Sales
Weak points Return on Equity (ROE) Return on Assets (ROA)
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Capital Budgeting
Increase in chicken production
Expected employment growth
Exports United Kingdom Belgium Spain Hong Kong Japan South Africa Yemen
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Debt Ratio
2008 46.0% < 59.30% Industry Average
2007 46.5% < 59.30% Industry Average
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Times-interest-earned (TIE)
2008 1.53 <2.50 Industry Average
2007 2.63 < 2.50 Industry Average
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Interest Rate
Long-term Investment Gain 1.09% 2008: $2.89 Billion 2007: $2.62 Billion
Average Borrowing Interest Rate 2008: 7.0% 2007: 7.4%
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Return on Equity (ROE)
2008 1.71% <5.80% Industry Average Difference: 4.09% RMA: 3.07%
2007 5.66% <5.80% Industry Average RMA: 8.67%
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Weighted Average Cost of Capital (WACC)
2007: WACC: 6%
2008: WACC: 7%
Good indication for the company
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Cash Flow from Operations &Interest Expense Coverage
Operating Income (Loss) 2007: $613 million 2008: $331 million
Interest Expense 2007: $232 million 2008: $215 million
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Off-Balance Sheet Financing
Guarantees of debt of outside third parties:
Lease & Grower Loans
Residual Value (covers certain operating leases for various types of equipment)
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Growth
Expansion
International Enterprise Brazil India China
Exportation to over 90+ Countries Chicken Beef Pork Prepared foods
Sales Growth Rose 4.4%
Retained Earnings 2007: $2.9 Billion 2008: $3.0 Billion
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Dividends
Quarterly Dividends Class A or Class B
Stock
Low-regular-dividend-plus-extra Policy Steady over the years
2008 & 2007 $56 Million
Dividends Per Share 2008: $0.24/share 2007: $0.75/share
Total Share Outstanding 2008: $356 Million 2007: $355 Million
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Income Statement
Sales 2007: $26 billion 2008: $27 billion
Net Sales 2007: $268 million 2008: $86 million
Operating Loss $26 million of charges
Plant closing Impairments of
unimproved real property
Software
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Spontaneous Assets, Liabilities, & Equipment
2008: Adopted FIN 48 Accounting for Uncertainty in Income Taxes
No dramatic change
Slight increase in Total Assets, Total Liabilities, & Stockholders’ Equity $10.23 million to $10.85 million
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Plant Property & Equipment/Acquistions
Cash Spent on investing activities: 2007: $285 million 2008: $425 million
New equipment to upgrade facilities
Capital spending Equipment updates
Chicken plants & Packaging equipments
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Economies of Scale
2007
2008
CGSSales
$24,30025,729
94.45% $25,61626,862
95.36% Increase
Fixed ExpenseSales
$81425,729
3.16% $87926,862
3.27% Increase
Total AssetSales
$10,22725,729
39.95% $10,85026,862
40.39% Increase
Fixed AssetsSales
$3,60825,729
14.02% $3,51926,862
13.10% Decrease
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Working Capital/Net Working Capital
Working Capital: Current Assets used in operations
2008: $4.36 billion 2007: $3.68 billion
Net Working Capital: Current Assets - Current Liabilities
2008: $2.26 billion 2007: $1.57 billion
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Working Capital/Net Working Capital
Cash Conversion Cycle: 2008: 35.36 days 2007: 34.34 days Industry Average:49 days
Overall, Tyson had a faster CCC than the industry average
Would not be able to operate with zero working capital Financed a lot of financial activities with their working
capital
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Current Asset Policy
Tyson’s C/R 2.7x VS. Industry Average 2.0x
Relaxed Current Asset Policy
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Management of Cash
Risks Foreign exchange gain/loss exposure
Fluctuation in currency exchange rates Impacts receivables & payable balance
Inventory Costs 2007: $2.16 billion 2008: $2.54 billion
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Financial Transactions
Long-term Debt 2008: $2.9 billion 2007: $2.6 billion
Total Liabilities & Shareholders’ Equity 2008: $10.9 billion 2007: $10 billion