Executive Officer Of Hill Country Snack Foods Essay

1583 WordsOct 6, 20167 Pages
Staff Analysis Statement of the Problem In January 2012, Howard Keener, the Chief Executive Officer of Hill Country Snack Foods (HCSF), a manufacturer of a variety of snacks including churros, tortilla chips, salsa and much more, was called to an analyst conference to discuss the financial standing of the company. Keener has made the focus of the company to increase shareholder value for the last fifteen years in his position. Efficient operations and tight costs controls were necessary conditions for success for the company could not rely on price increases in the high rivalry industry. Holding one-sixth of the company’s common stock, Keener and other management had a strong preference for equity finance and against debt finance while investments were funded internally, making the balance sheet strong. This intense focus on reducing debt produced consistently strong financial results with a minor decrease during difficult economic years of 2007 and 2008. Return on asset and return on equity numbers had similarly increased with the return on assets reaching 10% and return on equity exceeding 12% in 2011. In each of the past five years, the dividend payout ratio had just been below 30% of the net income. However, the interest rate earned on invested cash was barely over 0% contributing almost nothing to net income. Return on equity was similarly reduced by the avoidance of debt and complete reliance on equity capital. The pro forma results presented in Exhibits 4 and 5 show

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