hill country

2705 WordsOct 18, 201311 Pages
9-913-517 OCTOBER 22, 2012 W. CARL KESTER CRAIG STEPHENSON Hill Country Snack Foods Co. The Chief Executive Officer of Hill Country Snack Foods had never enjoyed analyst conference calls, but in late January of 2012, Howard Keener was yet again asked about the company’s cash balances, capital structure, and performance measures. One analyst complained that Hill Country’s growing cash position, absence of debt finance, and large equity balance made it difficult for a company in a mature industry to earn a high rate of return on equity, and recommended a more aggressive capital structure. “Maybe I don’t fully understand capital structure theory and practice,” replied Keener, “but I have observed that companies don’t get into…show more content…
Keener and other management insiders also held a significant proportion of the company’s common stock, approximately one-sixth of the 33.9 million shares outstanding, so this focus on building shareholder value was also personally beneficial to the members of the management team. Another important component of company culture was a strong commitment to efficiency and controlling costs. The snack foods industry was very competitive, with Hill Country facing off against industry giant PepsiCo and smaller companies like Snyder’s-Lance every day. Efficient operations and tight cost controls were necessary conditions for success; the company could not rely on price increases in this high rivalry industry. Operating and capital budgets were lean and aggressive, and Keener himself was actively involved in both the budget approval process and in ensuring the business was managed to the numbers in the budget. Unfavorable cost variances resulted in management action to bring costs back into line with plans, even when the cost increases were due to external factors. Management didn’t always have a solution to unfavorable variances, but they did all they could to keep costs under control. The final component of Hill Country’s culture and managerial philosophy was caution and riskaversion. The company invested in new capacity and new products when attractive
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