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JM Smucker Processed & Packaged Goods

JM Smucker Processed & Packaged Goods. Connor Myers. “With a name like Smucker’s , it has to be good”. Background. Founded in 1897 in Orville, Ohio. Full-Time Employees: 4,875 Revenues of 5.72 Billion Dollars in 2013. Comparable Companies (Processed & Packaged Goods). Starbucks (SBUX)

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JM Smucker Processed & Packaged Goods

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  1. JM SmuckerProcessed & Packaged Goods Connor Myers

  2. “With a name like Smucker’s, it has to be good”

  3. Background • Founded in 1897 in Orville, Ohio. • Full-Time Employees: 4,875 • Revenues of 5.72 Billion Dollars in 2013

  4. Comparable Companies (Processed & Packaged Goods) • Starbucks (SBUX) • Green Mountain Coffee (GMCR) • Mondelez (MDLZ)

  5. Module 11: Adjusting Enterprise Operations • Adjustment A: Inventory Method • Adjustment B: Operating Leases • Adjustment C: Employee Stock Options

  6. Inventory Method Since everything is kept under FIFO no inventory adjustment is needed

  7. Operating Leases • Do not have any information about capital leases (similar to P&G) • So used weighted average cost of capital that we calculated in Module 6: 5.26%

  8. SJM’s estimated lease liability • As a result: Adjust SJM’s NEA upwards by $88.6 • 19.84 in the current period • 68.76 in the non-current period

  9. Adjustments to Balance Sheet Adjustments to Income Statement

  10. Accounting for Adjustments

  11. Stock Options Beginning Year Price: $73.54 End Year Price: $99.29

  12. Step 1: Compute value of options exercisable at beginning of year using beginning of year share price • (73.54-42.18) * 124,814 = $3.914 million • Step 2: Compute value of options exercisable at beginning of year using end of year share price • (99.29-42.18) * 124,814 = $7.128 million • Step 3: Estimate value of ESOs exercised during current year using estimate of average share price • (86.42-40.91) * 77,408 = $3.522 million

  13. Step 4: Estimate value of ESOs cancelled during current year: • Can’t do it because no information on cancelled options • Step 5: Compute value of options exercisable at end of year using end of year share price: • (99.29-44.26) * 47,433 = $2.61 million • Step 6: Compute estimate of additional share-based compensation from information computed above: • $2.61 million - $7.128 million + $3.522 million = -0.996 million

  14. Increase NFL by (5) $2.61 million • Decrease CSE by (5) $2.61 million • (Increase) EPAT by (6) 0.996 million • (Decrease) FEAT by (2) – (1) – (3) – (4) 0.308 million

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