ACCT Annual Report-1-Tyson Foods PDF

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A Full Annual Report on Tyson Foods...

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Annual Report Presentation

ACCT 201 ANNUAL REPORT PROJECT PARTS 1 - 6

70 points

Immediately after I assign you to a group, email your group members. Let me know of any problems. For your assigned company, obtain a copy of the most recently audited annual report and/or

Form 10K. Go to your company’s Internet site and click on “investor relations” or “about us” or some similar link. Refer to Chapter 5 for further information. Annual reports and Forms 10K are quite lengthy. Do not print the entire report; only the pages you need to complete your assignment. You will need to spend time reading many sections of your annual report for information and calculations. Do not turn in the annual report and/or 10K. Make sure that your assigned company is a viable, U.S. based, publicly traded corporation. If it is not, let me know immediately so I can assign you another company. PART 1 A. Using the annual report, record the following basic information about your company: 1. 2. 3. 4. 5. 6. 7. 8.

Complete name of company- Tyson Foods Inc. The State in which your company is incorporated- Delaware Year in which company was founded- 1935 Primary Standard Industrial Classification Code (SIC code)- 2015 Name of company’s independent auditor- Ernest & Young, LLP. Stock exchange (s) where company’s stock is traded- New York Stock Exchange Company’s stock ticker symbol- TSN Company’s fiscal year end- October 1

B. Describe the products or services your company offers and the types of customer to whom those products or services are likely sold. Tyson produces poultry, beef, pork and other packaged food products. It purchases millions of cattle and hogs each year in order to supply its ten beef plant and six pork plants. Walmart is currently Tyson’s largest customer. They sell to many different types of businesses, anything from retail to even pharmaceutical companies. Tyson also supplies Yum! Brands, like KFC and Taco Bell, as well as other chains such as McDonald’s, Burger King, and Wendy’s. In 2007, Tyson got involved in the biofuel industry, partnering with ConocoPhillips to produce biofuels from animal fats and greases. This new fuel is comparable to diesel fuel and follows ConocoPhillips’ view for innovative and sustainable energy.

C. How large is your company? You should consider various measures such as, total assets, net income, rank in Fortune 500, etc. Total Assets 2011: 11,071,000,000 Fortune 500 Rank: 96 Net Income 2011: 750,000,000

Revenue 2011: 32,266,000,000 Tyson has approximately 7,600 contracts with family farms, 83 plants in 20 states, including production sites in North America, Ireland, Russia, China, and other places around the globe. They are the world’s largest supplier of premium beef and pork.

PART 2

A. Describe the industry in which your company operates and summarize the major trends/developments and economic conditions in that industry. You must read articles in

order to understand what is happening in your particular industry. Cite the articles you read at the end of this Part. Common sources for this information are: · Standard & Poor’s Industry surveys · Value Line Investment Survey · U.S. Industrial Outlook · Various business periodicals – Wall Street Journal, Fortune, Forbes and Business Week Magazine, New York Times and Washington Post business sections. Check with the Reference Librarian. Companies in the food processing industry are shifting towards organic foods. Industry experts seem to agree that the consumer demand for organics is here to stay. The companies are also moving towards healthier options by using ingredients that target certain medical conditions such as high cholesterol and diabetes. They are adding whole grains, oils, and antioxidants into health and wellness products. The food processing industry is also implementing portioncontrolled products, like 100 Calorie Packs, to allow consumers to monitor the calories they eat. Factories through out the industry are also making changes to become more energy efficient and reduce pollution. As the economy has faltered so has the consumer’s appetites for dining out. Consumers are buying more prepackaged chicken and turkey, packaged sandwiches, and deli salads. Increased sales of these and other processed foods has softened the impact of the current economic condition. Packaged food sales continue to grow. Frozen breakfast products have experienced especially strong sales. Lunch, dinner, and snack foods have seen a rise in sales as well. During the recession, budget constrained consumers are trading down from pricey proteins like steak and sirloin to chicken and eggs. The food-processing sector is praised for its ability to deliver consistently positive investment returns. They have on average delivered high single digit annual total returns with much less volatility than the broader market indexes. Their generally stable franchises are able to produce consistent investment returns throughout the business cycle.

1. Names of two companies in your company’s industry that are its major competitors. - Smithfield Foods, Inc - Hormel Foods

PART 3 A.

List and briefly describe the major sections in which your company’s annual report is organized. READ Chapter 5.

1. Summarized financial data: key figures covering a period of 5 or 10 years 2. Management’s discussion and analysis: an honest and detailed analysis of the company’s financial condition and operating results 3. Management’s report on internal control: statements that describe management’s responsibility for ensuring adequate internal control over financial reporting and that report on the effectiveness of these controls during the year 4. Auditor’s report: the auditor’s conclusion about whether GAAP was followed (and, for public companies, whether internal controls were effective) 5. Comparative financial statements: a multi-year presentation of the four basic statements 6. Financial statement notes: further information about the financial statements; crucial to understanding the financial statement data 7. Recent stock price data: brief summary of highs and lows during the year 8. Unaudited quarterly data: condense summary of each quarter’s results 9. Directors and officers: a list of who is overseeing and running the company

Davis, Suzanne. "Trends in Food Processing and the Impact on Corporate Site Selection | Trade and Industry Development." Trade and Industry Development | Defining Corporate Strategies for Growth. 15 Nov. 2012. . "Food Processing Adapts to Environmental, Government Challenges | food processing, biofuels, oilspill | Area Development Online." Area Development | Site Selection and Facility Planning for Business. 15 Nov. 2012. . "Industry Analysis: Food Processing." Value Line - The Most Trusted Name in Investment Research. 15 Nov. 2012. .

B. Read the Management Discussion & Analysis (MD&A) section of the annual report and summarize the following: 1. Management’s general tone or attitude about the company’s recent performance and its potential future performance.

Management’s general tone towards the company’s recent performance was positive. They experienced operating margins of 4% consecutively since the acquisition. The outlook for production is not good as the domestic availability of protein is to be down 2 to 3% compared to fiscal 2011. 2.

In management’s view, was the most recent year positive, negative for the company? Why? Be very specific.

- This last fiscal year was a positive financial year for Tyson Foods. They reported a net income of $750 million despite the increased grain and other feed ingredients costs. Tyson Foods was also able to decrease the total debt by $350 million to $2.2 billion, which is the lowest level since the acquisition of IBP, Inc. 3.

What major achievements and challenges does management perceive the company faces? Be very specific.

Achievements: -The chicken segment is profitable and is expected to strengthen throughout 2012. -Sales expected to exceed $34 billion in 2012 after a 13.5% increase from 2010 to 2011. -Total debt decreased by $350 million. -The company has been profitable over the last eight quarters. Challenges: -Increasing grain and other feed ingredients costs -Slight decline in net income over the past four quarters

C. Read the “Notes to the financial statements section” of the annual report and/or 10K and complete the following table. COMMON TOPICS IN NOTES TO FINANCIAL STATEMENTS

IS THERE A NOTE ABOUT

NOTE number, letter, or page number

YES NO

Significant accounting policies

X

page 43 note: 1

Inventories

X

page 43 note: 1

Long-term assets & depreciation method

X

page 48 note: 4

Long-term debt

X

page 50 note: 7

Income taxes

X

page 52 note: 8

Employee benefit plans (pensions)

X

page 64 note: 14

Contingencies

X

page 71 note: 19

Industry segments

X

page 69 note: 16

Unusual or extraordinary items Stock plans (options)

X X

page 62 note: 13

PART 4 A. Identify the complete names of the basic financial statements included in your company’s annual report. CONSOLIDATED STATEMENTS OF INCOME CONSOLIDATED BALANCE SHEETS CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY CONSOLIDATED STATEMENTS OF CASH FLOWS B. Using the Balance Sheet, answer the following questions: 1.

Is the Balance Sheet classified? How do you know? The Balance Sheet is classified. It is classified because it shows a subtotal for both Current Assets and Current Liabilities.

2.

Did your company present comparative balance sheets? Yes, 2010 and 2011 are presented together.

3. Identify the most current dollar amount your company reported for each of the following. Make sure that your accounting equation is in balance. a. Current assets

AMOUNT 4,780

b. Property, plant & equipment

3,823

c. Other long-term assets

2,468

d. Current liabilities

2,374

e. Long-term liabilities

3,012

f. Contributed Capital

1,884

g. Retained earnings

3,801

h. Treasury Stock

(365)

i. Comprehensive Income (Loss)

667

in millions

TOTAL ASSETS:

11,071

TOTAL LIABILITIES + EQUITY: 11,071 4. Using the Income Statement, state the major sources of your company’s revenue and its major expenses. - Tyson’s revenue mainly comes from: Sales. - Tyson’s expenses mainly come from: Operating Income (Loss), Interest Expense, Income Tax Expense, Selling, General, and Administrative Expenses, Goodwill Impairment, and losses from discontinued operation. 5. Did your company report the following in its Income Statement? (Refer to Ch. 13, Supplement 13A, pages 627-628). a.

Discontinued operations

Yes____

No__X__

Did net income increase Yes____ over the past two years? No, No ***increased from 2009-2010 but decreased from 2010-2011

No__X__

b.

6. Using the Statement of Cash Flows, identify the dollar amounts for the following: a.

Net cash flow from operating activities

$1,046 in millions

b.

Net cash flow from investing activities

$(644)

c.

Net cash flow from financing activities

$(658)

d.

Is your company growing or shrinking? (Explain your answer) (Look at the Investing Activities of the CF statement. Also at the Evaluate the Results in Chapter 12, p 568-571. Be specific)

Tyson foods is growing. Their cash provided by operating activities is $1.046 billion. Under investing activities on their cash flows statement, it shows a decrease of 643 million for additions to property, plant, and equipment. A positive operating activites amount and a negative investing activities amount are signs of a growing company because the company is acquiring more assets than it is disposing. 7.

Using the Statement of Stockholders’ Equity and Balance Sheet a.

State the major types of stock the company has issued, the par value (if any), and total dollar amount at year-end for each type.

$0.10 par value -Class A, common stock: $32 million -Class B, preferred stock: $7 million

b. Does your company own treasury stock? If so, how many shares and what is the total cost they paid for these shares? Yes, 22 million shares, total cost paid of $365 million

PART 5 A. Using the company’s annual report and/or 10K, compute the following financial analysis ratios and percentages for the current and previous year and interpret what they tell you about your company. That is, state in words what the ratios mean. REFER TO YOUR TEXTBOOK. Did your company improve this year compared to the prior year? How do you know? (You must read Chapter 13. The format on page 617 is helpful.) NOTE: For the previous year averaging calculations, DO NOT average. Use the previous year’s numbers for your denominator. SHOW ALL YOUR CALCULATIONS! (Prepare these calculations on excel) Current Previous Year: 2011 Year: 2010 1. Current Ratio 2.01 1.81 • Whether current assets are sufficient to pay current liabilities; a higher ratio means better ability to pay; the company has improved since 2010 2. Accounts Receivable Turnover Ratio 25.62 24.74 • The number of times receivables turnover into cash during the period; a higher ratio means faster (better) turnover; the company has improved since 2010 3. # Days Sales in Accounts Receivable 14.25 14.75 • Average number of days from sale on account to collection; a higher number means a longer (worse) time to collect; the company has improved since 2010 4. Inventory Turnover Ratio 12.37 12.10 • How quickly inventory is bought and sold during the period; a higher ratio means faster turnover; the company has improved since 2010 5. # Days sales in Inventory 29.51 30.16 • Average number of days from purchase of food products to sale of those food products; a higher number means a longer time to sell; the company has improved since 2010 6. Debt to Assets Ratio 0.49 0.52 • The percentage of assets financed by debt; a higher ratio means greater financing risk; the company has less risk in 2011 than 2010 7. Return on Equity (%) 9.05% 10.52% • The amount of income earned for each dollar of stockholder’s equity; a higher ratio means

stockholders are likely to enjoy greater returns; the company is not doing as well in 2011 as it was in 2010

8. Net Profit Margin (%) 2.32% 2.74% • How well expenses are controlled; a higher ratio means that expenses were better controlled; the company did not control its expenses quite as well in 2011 as it was in 2010 9. Earnings Per Share 1.91 1.99 • The amount of income generated for each share of common stock owned by stockholders; a higher ratio means greater profitability; the company is slightly less profitable in 2011 than it was in 2010 10. Asset Turnover 2.96 2.66 • How well assets are used to generate revenues; a higher ratio means greater efficiency; the company has improved since 2010

Calculations listed on the next page.

B. Using the annual report and/or 10K for your company’s main competitor compute the same ratios above for the current year only. Smithfield Foods Inc.: 1.

Current Ratio

Year: 2012 (most current) 2.90

2.

Accounts Receivable Turnover Ratio

19.63

3.

# Days Sales in Accounts Receivable

18.60

4.

Inventory Turnover Ratio

5.64

5.

# Days sales in Inventory

64.69

6.

Debt to Assets Ratio

.54

7.

Return on Equity (%)

10.42%

8.

Net Profit Margin (%)

2.76%

9.

Earnings Per Share

2.18

10.

Asset Turnover

1.17

C. Compare your company to its main competitor. Is it doing better, worse, or about the same in each ratio category? Explain how you reached your conclusion. 1. Smithfield is doing better. Smithfield has a higher current ratio and can more easily pay off its current liabilities. 2. Tyson is better. Tyson has a higher receivables turnover ratio, so they have a faster (better) receivables turnover. 3. Tyson is better. Tyson’s days to collect ratio is lower, so they collect their receivables faster. 4. Tyson is better. Tyson has a much higher inventory turnover ratio than Smithfield. Tyson has to buy inventory more often because it sells its inventory quicker than Smithfield. 5. Tyson is better. Tyson has a much lower days to sell ratio than Smithfield. 6. Tyson is better. Tyson’s debt to assets ratio is lower, so they are not as risky. 7. Smithfield is better. Smithfield has a higher return on equity ratio than Tyson. Smithfield’s investors will enjoy greater returns. 8. Smithfield is better. Smithfield has a higher net profit margin than Tyson, so it better controls its expenses. 9. Smithfield is better. Smithfield has a higher earnings per share ratio, so it is more profitable than Tyson. 10. Tyson is better. Tyson has a higher asset turnover ratio, so it generated revenues from its assets more efficiently. ** Current year refers to the most recent one as shown on the comparative financial statements in the annual report. PART 6 A. Using your company’s Annual Report and/or 10K and those of its main competitor, answer the following questions. 1.

Rank the companies in the order in which they rely most heavily on debt Financing - from most to least. Explain how you reached your conclusion. 1. Smithfield Foods 2. Tyson Foods When looking at the debt to asset ratio, Smithfield has a ratio of .54 compared to Tyson’s ratio of .49 representing a higher percentage of assets financed by debt

2.

Rank the companies in the order in which they rely most heavily on equity financing - from most to least. Explain how you reached your conclusion. 1. Tyson Foods

2. Smithfield Foods Due to the fact that 49% of Tyson’s financing comes from debt, 51% of their financing would be the result of equity financing compared to Smithfield’s percentage of 46. 3.

Did any of the two companies borrow or repay long-term debt during The current year? If so, how much (in dollars)? (See the Cash Flow Statement) In the current year, Tyson Foods did not borrow any money; however, Tyson did make payments totaling $500 million in 2011. In the current year, Smithfield Foods borrowed $300,000 and made payments totaling $152,700,000 in 2012.

4.

Did any of the two companies sell or repurchase common or preferred stock during the current year? If so, how much (in dollars)? (See CF Statement) In 2012, Smithfield repurchased $189.5 million worth of common stock. On the other hand, they issued (sold) $1.3 million worth of common stock and preferred stock. In 2011, Tyson repurchased $207 million worth of their Class A common stock but did not issue (sell) any stock.

5.

Which company is riskier? How do you know? Smithfield Foods is riskier as its debt-to-asset ratio is higher than that of Tyson. Smithfield Foods has a ratio of 0.54 compared to 0.49 of Tyson Foods.

6.

Which company is more profitable in the current year? How do you know? Smithfield Foods is more profitable in the current year as it has a higher earnings per share. Tyson had earn...