The J.m. Smucker Company · NYSE:SJM
The J.m. Smucker — Smucker J M — Merger or Acquisition (October 2008)
43 slides from The J.m. Smucker's merger presentation, Oct 8, 2008
Slide 1: Investor Presentation October 2008 - The J. M. Smucker Company
Investor Presentation October 2008 The J. M. Smucker Company Investor Presentation October 2008 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-6 Under the Securities Exchange Act of 1934 Subject
Slide 2: 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 3: Transaction Overview
Transaction Overview Variable Cap 12% 20% Discount Transaction Overview • The transaction is structured as an exchange offer followed by a merger – Tendering P&G shareholders will exchange their P&G shares for shares in Smucker – Smucker to guarantee $350MM of Folgers debt upon close – Smucker to fi
Slide 4: Why Invest in Smucker?
Why Invest in Smucker? Why Invest in Smucker? • A history of solid returns • Clear strategy of owning a strong portfolio of #1 brands • Making great brands better • Addition of an iconic #1 brand with Folgers • Enhanced estimated cash flow, margins, and strong balance sheet • Unique culture ®
Slide 5: 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 6: Share Price Performance
Share Price Performance Share Price Performance $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 S&P 500 DJIA SJM 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 = 10.3% APR = 10.3
Slide 7: 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 FY2008 = 15% 10-Year CAGR through FY2008 = 16% Sales Growth $1.4B $2.2B $2.5B
Slide 8: Income Growth
Income Growth Income Growth $0.0 $50.0 $100.0 $150.0 $200.0 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 Net Income $30.9 $96.3 $129.1 $157.2 $111.4 $143.4 $170.4 5-Year CAGR through FY2008 = 12% 10-Year CAGR through FY2008 = 18% ($ in Millions)
Slide 9: Vision Statement
Vision Statement We will achieve balanced growth through: Increased market share of our brands New products that provide convenience, are “good and good for you," and make the consumer smile Acquisition of other leading food brands Vision Statement We will own and market food brands which hold the #
Slide 10: Enhanced Center-of-Store Strategy
Enhanced Center-of-Store Strategy Enhanced Center-of-Store Strategy ABC Store • Greater relevance to retailers • Destination category • Enhanced cross promotional opportunities • Capitalize on relationship with sales agent • Distribution efficiency Center-of-the-store is an important profit center f
Slide 11: Pro Forma Sales by Category
Pro Forma Sales by Category 42% 21% 25% 12% Pro Forma Sales by Category 42% 21% 25% 12% Spreads Baking All Other Coffee Estimated After Transaction (1) (1) Based on FY2008 Smucker adjusted for approximately $1.8B of FY2008 Folgers net sales.
Slide 12: Smucker Market Share Leadership
Smucker Market Share Leadership Source: IRI 52 Week Ending 9/7/08 -- TTL Grocery, Mass, Drug & Walmart Panel Does NOT include Private Label Smucker Market Share Leadership #1 in 8 out of 13 categories Folgers adds another #1 market share % Dollar Share of Category
Slide 13: Growing Market Opportunity
Growing Market Opportunity Greater opportunity as share of market in each category expands Growing Market Opportunity $15.0 $8.0 $3.0 $1.0 FY 2002 FY 2004 FY2005 FY2009E Market opportunity ($ in billions)
Slide 14: Acquisition Expertise
Acquisition Expertise 12 Center-of-Store Transactions in 6 years Acquisition Expertise 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 market
Slide 15: Making Great Brands Better
Making Great Brands Better Making Great Brands Better • Increased sales over 40% • Increased market share to over 40 share points from 34 share points • Increased operating margin • New products including Jif ® snack nuts and Jif To Go • Packaging and product innovator • Expanded Crisco ® brand in o
Slide 16: Making Great Brands Better
Making Great Brands Better Making Great Brands Better • Expanded products and leveraged existing presence • Introduced new line extensions; grew frosting to the #2 brand • Improved product quality and enhanced packaging • Increased sales from $2 million to $115 million in ten years • New offerings •
Slide 17: 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 18: Compelling Transaction
Compelling Transaction Expanding Leading Brands Strengthened Product Portfolio Scale Benefits & Synergies Attractive Financial Impact (1) Compelling Transaction • Acquisition of the #1 Folgers brand • Addition of rights to sell Dunkin’ Donuts ® in retail • Smucker’s first +$1B brand • Builds upon es
Slide 19: Strength of Folgers
Strength of Folgers Strength of Folgers • Superior brand equity – Highest level of unaided consumer awareness • Strong market leader – #1 retail packaged coffee brand • Leader in product innovation – Folgers Crystals – Folgers decaffeinated – AromaSeal ™ plastic canister – Folgers Simply Smooth ™
Slide 20: Dunkin' Donuts
Dunkin’ Donuts Dunkin’ Donuts • Strong presence in gourmet coffee category • Long-term license of brand for retail • $130MM net sales from August 2007 to June 2008
Slide 21: 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 22: The Best Part of Wakin' Up…
The Best Part of Wakin’ Up… The Best Part of Wakin’ Up…
Slide 23: The Best Way to End the Day…
The Best Way to End the Day… The Best Way to End the Day…
Slide 24: Long Term Financial Objectives
Long Term Financial Objectives Net Sales Growth Operating Profit Growth EPS Growth Dividend Payment 6% Organic 3-4% Acquisitions 2-3% 8% Improve Efficiencies Target 40% Payout > 8% Share Repurchase Debt Retirement Long Term Financial Objectives
Slide 25: 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 FY2009E FY2010E Net Sales $0 $250 $500 $750 $1,000 FY2008 FY2009E FY2010E 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% EBITDA (Excluding Merger and Integration Costs) Pro forma (1) (2) $2.5B $4.7B $4.9B
Slide 26: Cash Flow From Operations
Cash Flow From Operations FY2008 FY2009E (1) Pro forma FY2010E Pro forma ($ in millions) Cash Flow From Operations 4% $ 116 $ (76) $ 192 7% $ 390 $(115) $ 505 $ 425 Free Cash Flow 7% Free Cash Flow Yield (2) $(120) Capital Expenditures $ 545 Cash Flow From Operations (1) Assumes Folgers transaction
Slide 27: Slide 27
Slide 28: Synergy Opportunities
Synergy Opportunities ($ in millions) Synergy Estimate Synergy Opportunities 4% $ 80 $ 65 $ 15 Total Synergies Estimated Synergies as % of Projected 2009 Folgers Net Sales SG&A COGS
Slide 29: Debt Profile Supports Continued Growth
Debt Profile Supports Continued Growth FY2009E Standalone Smucker FY2009E (1) Combined Smucker Total Debt $790mm $1,540mm Debt / EBITDA 2.1x 1.9x Interest Coverage 8.1x 8.6x (2) Debt Profile Supports Continued Growth • Stronger balance sheet post-closing – Ample liquidity • Modest leverage and stron
Slide 30: Dividends and Share Repurchase
Dividends and Share Repurchase Dividends and Share Repurchase $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009E Dividends Share Repurchase ($ in millions) (1) Estimated dividends assumes current quarterly dividend rate, payment of special dividend, and payment
Slide 31: Core Competencies
Core Competencies Ability to Implement Relationships Emotional Bond Strategic Advantage Core Competencies Ability to Implement Relationships Emotional Bond Strategic Advantage
Slide 32: Relationships
Relationships Retailers Sales Agent Employees Suppliers Relationships
Slide 33: Emotional Bond
Emotional Bond Focus on Consumer Mealtime Moments Memorable Tag Lines Emotional Bond “ With a Name Like Smucker’s, It Has to be Good ” “ Choosy Moms Choose Jif ” “ The Best Part of Wakin’ Up ”
Slide 34: Ability to Implement
Ability to Implement Single IS Platform Acquisition experience Improved Productivity Ability to Implement $283 $552 $777 $0 $300 $600 $900 $1,200 Sales / Employee (‘000’s) Net Income / Employee (‘000’s) $13 $35 $52 $0 $20 $40 $60 $80 $100 FY2002 FY2005 FY2008 FY2002 FY2005 FY2008 Continuity of proce
Slide 35: SD&A as % of Net Sales
SD&A as % of Net Sales 15.0% 17.0% 19.0% 21.0% 23.0% 25.0% FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 24.6% 21.6% 21.7% 20.0% 20.3% 20.6% 19.4% SD&A as % of Net Sales
Slide 36: Why Invest in Smucker?
Why Invest in Smucker? Why Invest in Smucker? • A history of solid returns • Clear strategy of owning a strong portfolio of #1 brands • Making great brands better • Addition of an iconic #1 brand with Folgers • Enhanced estimated cash flow, margins, and strong balance sheet • Unique culture
Slide 37: The J. M. Smucker Company
The J. M. Smucker Company Investor Presentation October 2008 The J. M. Smucker Company Investor Presentation October 2008
Slide 38: Appendix
Appendix Appendix
Slide 39: Regulation G Compliance
Regulation G Compliance Regulation G Compliance You are also reminded that during this presentation, certain non-GAAP financial measures, such as EBITDA and Free Cash Flow may be discussed. These measures should not be considered an alternative to net income, or any other measure of financial perfor
Slide 40: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Reconciliation of Non-GAAP Financial Measures ($ in Millions) FY2008 Income before income taxes $ 255 Add (deduct): Interest income (13) Interest expense Amortization Share-based compensation expense Depreciation Merger and integration costs Cost of prod
Slide 41: Financial Forecasts
Financial Forecasts Financial Forecasts The preceding financial forecasts were prepared by Smucker management in evaluating the Transaction. For fiscal years after 2009 through 2013, Smucker assumed compounded annual growth rates for Folgers and Smucker of approximately 2.5% and 5.0%, respectively,
Slide 42: 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. Smucker has also filed a proxy sta
Slide 43: Additional Information
Additional Information Additional Information P&G, Folgers , the Folgers logo, AromaSeal , Folgers Gourmet Selections , The Best Part of Wakin’ Up is Folgers in your Cup , Millstone and the Millstone logo are the registered trademarks of The Procter & Gamble Company. Pillsbury , the Pillsbury Logo,