Hill Country

In: Business and Management

Submitted By tangyuanyuan
Words 3622
Pages 15
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 trouble because they have too
much cash; they get into trouble because they have too much debt.” Hill Country had seen its sales
and profits grow at a steady rate during Keener’s tenure as CEO, and at the end of 2011 the company
had zero debt and cash balances equal to 18% of total assets and 13% of market capitalization.
Having just celebrated his 62nd birthday, Keener was approaching retirement, creating speculation by
investors and analysts that the company might change to a more aggressive capital structure in the
near future.

Company Background
Hill Country Snack Foods, located in Austin, Texas, manufactured, marketed, and distributed a
variety of snacks, including churros, tortilla chips, salsa, pretzels, popcorn, crackers, pita chips, and
frozen treats. Although many of its products had a Southwestern flair, it also offered more
traditional snack foods, which were purchased by end consumers thousands of times every day in
supermarkets, wholesale clubs, convenience stores, and other distribution outlets. The company’s
growth and success was driven by its efficient operations; quality products; strong position in…...

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