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)  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 CGS Sales $24,300 25, %$25,616 26, %Increase Fixed Expense Sales $814 25, %$879 26, %Increase Total Asset Sales $10,227 25, %$10,850 26, %Increase Fixed Assets Sales $3,608 25, %$3,519 26, %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: days  2007: 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