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Tyson Foods. By: Sophia Toy. History. John Tyson Springdale, Arkansas Fortune 500 2 nd largest food production. Benchmarking/Trending. Tyson VS. Industry Averages Strong points Inventory Turnover Days Sales Outstanding (DSO) Profit Margin on Sales Weak points Return on Equity (ROE) - PowerPoint PPT Presentation
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Tyson FoodsBy: Sophia Toy
History
John Tyson
Springdale, Arkansas
Fortune 500 2nd largest food production
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)
Capital Budgeting
Increase in chicken production
Expected employment growth
Exports United Kingdom Belgium Spain Hong Kong Japan South Africa Yemen
Debt Ratio
2008 46.0% < 59.30% Industry Average
2007 46.5% < 59.30% Industry Average
Times-interest-earned (TIE)
2008 1.53 <2.50 Industry Average
2007 2.63 < 2.50 Industry Average
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%
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%
Weighted Average Cost of Capital (WACC)
2007: WACC: 6%
2008: WACC: 7%
Good indication for the company
Cash Flow from Operations &Interest Expense Coverage
Operating Income (Loss) 2007: $613 million 2008: $331 million
Interest Expense 2007: $232 million 2008: $215 million
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)
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
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
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
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
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
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
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
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
Current Asset Policy
Tyson’s C/R 2.7x VS. Industry Average 2.0x
Relaxed Current Asset Policy
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
Financial Transactions
Long-term Debt 2008: $2.9 billion 2007: $2.6 billion
Total Liabilities & Shareholders’ Equity 2008: $10.9 billion 2007: $10 billion