The J.m. Smucker Company · NYSE:SJM
The J.m. Smucker — Smucker J M — Merger or Acquisition (July 2008)
67 slides from The J.m. Smucker's merger presentation, Jul 29, 2008
Slide 1: Investor Presentation July 2008 - The J. M. Smucker Company
Investor Presentation July 2008 Entire Presentation The J. M. Smucker Company Investor Presentation July 2008 Entire Presentation The J. M. Smucker Company Filed by The J. M. Smucker Company Pursuant to Rule 425 under the Securities Act of 1933 and Deemed Filed Pursuant to Rule 14a-12 Under the Secu
Slide 2: Table of Contents
Table of Contents Table of Contents • Company History and Background • Current Business Overview • Strategy and Growth Objectives • Trended Results • Acquisitions • Strategic Architecture • Growing Great Brands • Folgers – A Perfect Fit
Slide 3: Forward Looking Statement
Forward Looking Statement Forward Looking Statement This presentation contains forward-looking statements, such as projected operating results, earnings and cash flows, that are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from any future
Slide 4: Additional Information
Additional Information Additional Information Smucker and Folgers have filed registration statements with the U. S. Securities and Exchange Commission (“SEC”) registering the common shares to be issued to P&G shareholders in connection with the Folgers transaction but those registration statements h
Slide 5: Why Invest in Smucker?
Why Invest in Smucker? Why Invest in Smucker? • A history and culture of solid returns • Clear strategy of owning a strong portfolio of #1 brands • Strategic acquisition of Folgers • Enhances #1 brand portfolio • Increases market categories from $8 billion to $15 billion • Creates sales growth to $5
Slide 6: Why Invest in Smucker?
Why Invest in Smucker? Why Invest in Smucker? • Strong cash flow and balance sheet • Continuity of management • Current value of Smucker stock vs. peers • Strong forecasted results in current fiscal year • Special $5.00 dividend in calendar 2008 • Current share performance vs. peers
Slide 7: The J. M. Smucker Company
The J. M. Smucker Company • Over 110 years old • Headquartered in Orrville, Ohio • Leading North American brands • Five generations of family management • Basic Beliefs: quality, people, ethics, growth, & independence The J. M. Smucker Company
Slide 8: Core Competencies
Core Competencies Relationships Emotional Bond Ability to Implement Core Competencies
Slide 9: Our Business – FY 2008
Our Business – FY 2008 x% of Total Sales X% Margin 26% of Total Sales 22% of Segment Profit 74% of Total Sales 78% of Segment Profit Our Business – FY 2008 U.S. Retail Market • Consumer • Consumer Oils & Baking Special Markets • Canada • Foodservice • Beverage • International
Slide 10: Smucker Business Segments
Smucker Business Segments Special Markets U.S. Retail Market Consu m er Consumer Oils / Baking Canada International Foodservice Beverage Smucker Business Segments Business Area Segment Special Markets Brands U.S. Retail Market
Slide 11: FY 2008 Sales by Category
FY 2008 Sales by Category 26% 18% 13% 14% 19% 10% FY 2008 Sales by Category 26% 18% 13% 14% 19% 10% Fruit Spreads Peanut Butter Oils & Shortening Baking Canned Milk All Other FY 2008 Net Sales = $2.5 Billion
Slide 12: Smucker Market Share Leadership – U.S.
Smucker Market Share Leadership – U.S. Smucker Market Share Leadership – U.S. 7.0% 67.4% 66.2% 46.7% 46.1% 45.0% 44.5% 43.0% 19.9% 18.7% 18.7% 15.3% 10.1% 0% 10% 20% 30% 40% 50% 60% 70% 80% % Dollar Share of Category #2 #2 #2 #2 #1 #1 #3 #3 #3 #3 #1 #1 #1 #1 #1 #1 #1 #1 #1 #1 #1 #1 #1 #1 #1 in 8 out
Slide 13: Smucker Market Share Leadership – Canada
Smucker Market Share Leadership – Canada 3.8% 7.5% 8.2% 35.0% 48.4% 50.6% 51.5% 51.9% 58.2% 59.6% 59.6% 0% 10% 20% 30% 40% 50% 60% 70% #1 #1 #1 #1 #1 #1 #1 #1 #3 #3 #3 #3 #4 #4 Flour Toppings Evap. Milk Shorten. Frozen Swtnd. Condiments Fruit Oils Hot Cereal Peanut Fruit Cond. Milk Spreads Butter $1
Slide 14: U.S. Manufacturing and Distribution Network
U.S. Manufacturing and Distribution Network U.S. Manufacturing and Distribution Network Six Mixing Centers – One order, one invoice across all brands
Slide 15: Canada Manufacturing and Distribution Network
Canada Manufacturing and Distribution Network Canada Manufacturing and Distribution Network Quebec Ontario Manitoba Saskatchewan Alberta British Columbia J.M. Smucker Co. Dunnville, Ontario Condiments & Pickles J.M. Smucker Co. Ste.-Marie de Beauce, Quebec Fruit Spreads & Ice Cream Toppings J.M. Smu
Slide 16: Share Price Performance
Share Price Performance $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 S&P 500 DJIA SJM Share Price Performance Note: The graph shows the value of $20 (Smucker’s IPO price in 1959) invested over a 48+ year period in Smucker’s common stock, the DJIA and S&P 500. Indexed Share Price APR = 10.2% APR = 10.2
Slide 17: Vision Statement
Vision Statement We will own and market food brands which hold the #1 market position in their respective category, with an emphasis on North America We will achieve balanced growth through: • Increased market share of our brands • Acquisition of other leading food brands • New products that provide
Slide 18: Long-Term Objectives
Long-Term Objectives Net Sales Growth Dividend Payment Operating Profit Growth EPS Growth 6% Organic 3- 4% Acquisitions 2-3% 8% Improve Efficiencies +8% Share Repurchase Debt Retirement Target 40% Payout Long-Term Objectives
Slide 19: Sales Growth
Sales Growth $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 Net Sales $650MM $1.3B $2.0B $2.1B 5-Year CAGR through FY 2008 = 15% 10-Year CAGR through FY 2008 = 16% Sales Growth $1.4B $2.2B $2.5B
Slide 20: Earnings Growth
Earnings Growth $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 Earnings Per Share (non-GAAP) $1.38 $2.14 $2.60 $2.89 Earnings Growth $2.42 $2.77 5-Year CAGR through FY 2008 = 8% 10-Year CAGR through FY 2008 = 10% $3.15 (a) Excludes merger, inte
Slide 21: Dividend History
Dividend History Dividend History • Increased dividends paid in 27 out of past 30 years • Average increase was 10.7% • Average payout approximately 40% of earnings
Slide 22: Dividends and Share Repurchase
Dividends and Share Repurchase Dividends and Share Repurchase $0 $50 $100 $150 $200 $250 FY04 FY05 FY06 FY07 FY08 Dividends Share Repurchase ($ in millions)
Slide 23: 2008 Income Statement Highlights
2008 Income Statement Highlights 2008 Income Statement Highlights • Completed 5 acquisitions contributing $280 million in net sales • Sales up 18% over 2007 • Income up 8%, despite $150 million in raw material increases • Operating margin decreased due to raw material increases and Eagle • Repurchas
Slide 24: Types of Acquisitions
Types of Acquisitions Types of Acquisitions Enabling • Smaller in size • New capabilities • Capitalize on Smucker resources Bolt-on • Increase category presence • Leverage existing infrastructure Transformational • Large in size • Game changing • New markets & categories
Slide 25: Keys to a Successful Acquisition
Keys to a Successful Acquisition • Seamless transition with customers • Timely integration • Achieving synergies • Blending cultures - (“People” Basic Belief) • Investing in brands • Innovation / new products Keys to a Successful Acquisition
Slide 26: Benefits of Acquisitions
Benefits of Acquisitions Benefits of Acquisitions • Increased scale and efficiency • New categories • Cross marketing opportunities • Increased financial strength • Enhanced employee opportunities
Slide 27: 12 Transactions
FY 2003 FY 2005 FY 2007 FY 2008 FY 2009 FY 2004 12 Transactions FY 2003 FY 2005 FY 2007 FY 2008 KING KELLY FY 2009 FY 2004 (a) Integration in process. (b) Announced but not closed. 12 Transactions (a) (b)
Slide 28: Strategic Architecture
Good & Good For “You” Strategic Architecture Makes “You” Smile Easy For “You” Emotional Fulfillment Adding Taste Adding Health Fun Strategic Architecture Ease of Use Ease of Purchase
Slide 29: Making Great Brands Better
Making Great Brands Better Making Great Brands Better • Increased sales over 40% • Increase operating margin • Invested in consumer marketing • $33mm capital investment in Lexington plant • Market share increased to over 40% • Jif-to-Go • Jif Natural • Jif Snack Nuts • Jif with Honey • New roaster t
Slide 30: Making Great Brands Better
Making Great Brands Better • Maintained share leadership through commodity volatility • Innovator in oils category • Commodity buying group key to success • $45mm capital investment in Cincinnati plant • Trans Fat Free Shortening • Crisco Peanut Oil • Crisco Olive Oil • Crisco Sprays • Simple Measur
Slide 31: Making Great Brands Better
Making Great Brands Better • Improved product quality • Leveraged presence of Doughboy • Frostings improved to number two brand in category • Pillsbury Bake-Off • Reduced sugar cake mixes and frostings • Expand Funfetti products • Enhanced packaging Making Great Brands Better
Slide 32: “A Perfect Fit”
“A Perfect Fit”
Slide 33: Attractive Strategic Fit
Attractive Strategic Fit • Strong #1 Brand • Center-of-Store • North America VISION STATEMENT We will own and market food brands which hold the #1 market position in their respective category, with an emphasis on North America Attractive Strategic Fit • Strong #1 Brand • Center-of-Store • North Amer
Slide 34: Percent of Sales from #1 Brands
Percent of Sales from #1 Brands Percent of Sales from #1 Brands ~75% of Sales Projected to Come From #1 Brands
Slide 35: Center-of-Store Strategy
Center-of-Store Strategy Center-of-Store Strategy Baking Aisle Spreads / Condiments Aisle Frozen Aisle Specialty Aisle Coffee Aisle Natural Beverage Aisle
Slide 36: Compelling Transaction
Compelling Transaction Compelling Transaction • $1 billion brand • Expands portfolio of #1 brands • Builds on “Center of the Store” focus • Enhanced scale • Financial benefits • Great home for Folgers brand and employees
Slide 37: Transaction Overview
Transaction Overview Transaction Overview • Reverse Morris Trust structure • P&G shareholders will own 53.5% of the combined company shares – ~63 million shares will be issued – ~118 million shares outstanding • Smucker to pay $5 special one-time dividend to Smucker shareholders, as of a record date
Slide 38: Folgers Highlights
Folgers Highlights Folgers Highlights • Superior brand equity – #1 retail coffee brand • Strong and growing market leader – #1 in retail packaged coffee • Leading operational scale and excellence • Strong and longstanding customer relationships • Market leading product innovation and price leadershi
Slide 39: Builds on Center of Store Focus
Builds on Center of Store Focus Greater opportunity as share of market in each category expands Builds on Center of Store Focus $15.0 $8.0 $3.0 $1.0 FY 2002 FY 2004 FY2005 FY2009 Market opportunity ($ in billions)
Slide 40: Added Scale
Added Scale Revenue (1) Added Scale ($ in billions) 1.2 Treehouse 2.0 Flower Foods 2.5 Smucker (Current) 2.9 McCormick 3.3 Ralcorp 3.7 Del Monte 4.7 Smucker (2) 6.2 Hormel 7.9 Campbell 10.1 HJ Heinz 11.6 ConAgra 11.8 Kellogg 12.3 Sara Lee $13.7 General Mills (1) Comparison company revenue based on l
Slide 41: Financial Benefits
Financial Benefits Financial Benefits • Accretive transaction • Operating margin expansion • Significantly enhanced cash flow • Strong balance sheet with modest debt level • Greater float – more shares outstanding
Slide 42: Coffee Category
Coffee Category Coffee Category • U. S. coffee market • At home coffee market • Mainstream / gourmet • Pricing and cost trends • Impact of economy
Slide 43: U.S. Coffee Market
U.S. Coffee Market Coffee Category Highlights Coffee Market Overview At-Home Coffee Market • Large $31B market – High household penetration – Frequency of use is increasing – High consumer purchase frequency that drives traffic for retailers – Consistent performance through economic cycles • Evolvin
Slide 44: U.S. At Home Coffee Market Share by Segment
U.S. At Home Coffee Market Share by Segment Mainstream Roast & Ground 2 Gourmet Coffee 2 Single Serve 2 Folgers 48% Kraft 24% Rest of Market 28% U.S. At Home Coffee Market Share by Segment Source: P&G internal estimate based on All Outlet Data Excludes approximately $1.2B of packaged roast & ground
Slide 45: About Folgers
About Folgers About Folgers • 1,200 Employees • Four Plants – New Orleans, LA (2) – Kansas City, MO – Sherman, TX • Cincinnati – Marketing, Sales, Commodity Purchasing, Research and Development & Administrative
Slide 46: Long Track Record of Passing Through Coffee Cost Increases
Long Track Record of Passing Through Coffee Cost Increases Folgers List Price vs. Green Coffee Prices $/lb 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 Green Coffee Composite Folgers List Price Long Track Record of Passing Through Coffee Cost Increases Folgers List Price vs. Green Coffee Prices
Slide 47: Manufacturing & Distribution Footprint
and Distribution New Orleans, LA Kansas City, MO Sherman, TX LaCombe, LA Cincinnati, OH Chino, CA Manufacturing & Distribution Footprint Lacombe New Orleans, LA Warehouse and Distribution Chef Site New Orleans, LA Gentilly Site New Orleans, LA Silo New Orleans, LA Decaffeination & Singles Sherman, T
Slide 48: Select Key Coffee Innovations
Select Key Coffee Innovations 1968 2003 2006 2007 1984 Select Key Coffee Innovations Launched Folgers Gourmet Selections – first mainstream premium Folgers Crystals Folgers Decaf– “Tastes as good as regular” Natural process fast decaffeination technology Folgers AromaSeal Canister – First plastic ca
Slide 49: Strengths of Combined Company
Strengths of Combined Company Strengths of Combined Company • Approximately $5 billion in annual net sales • Leading food company with ten #1 brands • Increase in market capitalization • Strong financial profile • Enhanced cash flow • Consistent returns
Slide 50: Go-to-Market Sales
Go-to-Market Sales _ Go-to-Market Sales National Broker- rd largest principal Key Direct Account Teams Already in Place _
Slide 51: Iconic Brands
Iconic Brands Iconic Brands
Slide 52: Household Slogans
Household Slogans Household Slogans “ With a Name Like Smucker’s, It Has to be Good ” “ Choosy Moms Choose Jif ” “ The Best Part of Wakin’ Up ” “ Start Something Good With Crisco ” “ Everybody’s Happy When It’s Hungry Jack ” “ America Runs on Dunkin’ ”
Slide 53: Marketing Synergies – Meals
Marketing Synergies – Meals Marketing Synergies – Meals • The Best Part of Waking Up…
Slide 54: Marketing Synergies – Meals
Marketing Synergies – Meals Marketing Synergies – Meals • The Best Way to End the Day…
Slide 55: Marketing Synergies – Consumer Target
Marketing Synergies – Consumer Target Marketing Synergies – Consumer Target • Same core consumer target • Marketing expertise…over 30 years of experience effectively marketing to this target “With a name like Smucker’s, it has to be good.”
Slide 56: gMUCKERS,
gMUCKERS,
Slide 57: Projected Sales by Category
Projected Sales by Category 42% 7% 8% 11% 6% 15% 11% Projected Sales by Category 42% 7% 8% 11% 6% 15% 11% Fruit Spreads Peanut Butter Oils & Shortening Baking Canned Milk All Other Coffee Estimated After Transaction
Slide 58: Net Sales and EBITDA
Net Sales and EBITDA 14.7% 17.3% 17.5% Net Sales and EBITDA $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 FY2008 FY2009 FY2010 Net Sales $0 $250 $500 $750 $1,000 FY2008 FY2009 FY2010 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% EBITDA (Excluding Merger and Integration Costs) Pro forma * (a) $2.5B $4.7B $4.9B $371 $
Slide 59: Cash Flow From Operations
Cash Flow From Operations Cash Flow From Operations $ 116 $ (76) $ 192 FY 2008 $ 400 $(115) $ 515 FY2009 (a) Pro forma $ 430 Free Cash Flow $(120) Capital Expenditures $ 550 Cash Flow From Operations FY 2010 Pro forma ($ in millions) (a) Assumes Folgers transaction had closed on May 1, 2008.
Slide 60: Debt Profile Supports Continued Growth
Debt Profile Supports Continued Growth 2009 Standalone Smucker 2009 (a) Combined Smucker Total Debt $790mm $1,440mm Debt / EBITDA 2.1x 1.8x Interest Coverage 8.1x 9.7x Debt Profile Supports Continued Growth • Stronger balance sheet post-closing • Modest leverage and strong cash flow will facilitate
Slide 61: Cash Flow / Allocation of Cash
Cash Flow / Allocation of Cash (after expiration of two year repurchase limitation) Acquisition Capital Expenditures Stock Repurchase Dividends Free Cash Flow Cash From Operations Dividends Acquisition Repurchase CapEx = 2½ - 3% of Sales Cash Flow / Allocation of Cash (after expiration of two year r
Slide 62: One-Time Costs
One-Time Costs One-Time Costs • Estimating $100 million over next 24 months • Estimate 75% of total will be charged to expense, while 25% capitalized to goodwill • Consistent treatment under “merger and integration costs” on income statement • Key costs – Bankers, legal, accounting, valuation servic
Slide 63: Why Invest in Smucker?
Why Invest in Smucker? Why Invest in Smucker? • A history and culture of solid returns • Clear strategy of owning a strong portfolio of #1 brands • Strategic acquisition of Folgers • Enhances #1 brand portfolio • Increases market categories from $8 billion to $15 billion • Creates sales growth to $5
Slide 64: Why Invest in Smucker?
Why Invest in Smucker? Why Invest in Smucker? • Strong cash flow and balance sheet • Continuity of management • Current value of Smucker stock vs. peers • Strong forecasted results in current fiscal year • Special $5.00 dividend in calendar 2008 • Current share performance vs. peers
Slide 65: Additional Information
Additional Information Additional Information FOLGERS, the FOLGERS logo, AROMASEAL, FOLGERS GOURMET SELECTIONS and THE BEST PART OF WAKIN' UP IS FOLGERS IN YOUR CUP are the registered trademarks of The Proctor & Gamble Company. PILLSBURY, the PILLSBURY Logo, and Poppin' Fresh the Pillsbury Doughboy
Slide 66: Thank you!
Thank you! Thank you!
Slide 67: Entire Presentation The J. M. Smucker Company
Investor Presentation July 2008 Entire Presentation The J. M. Smucker Company Investor Presentation July 2008 Entire Presentation The J. M. Smucker Company