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