This assignment is based on excerpts from the 2011 10-K for Peet’s Coffee & Tea, Inc., which is attached. (Note: The excerpts contained in this assignment are a simplified version of the Peets 10-K. Certain schedules and notes have been eliminated for the purposes of this assignment. You should NOT download or look at the actual Peets 10-K. They will not help you answer the assignment questions.)
You will need to review the excerpts, assumptions, financial statements, and selected footnotes that follow these instructions (pages 3-9). You will also need to use the Final Assignment-Peets Student Template (excel spreadsheet). All answers should be saved to the template.
Questions:
1. Perform a financial analysis of Peet’s Coffee & Tea, Inc. by computing ratios for the years 2009-2011 in the space provided in the worksheet.
Please refer to attached spreadsheet.
2. Briefly assess Peets financial performance. Use the shaded box within the same spreadsheet.
Please refer to attached spreadsheet.
3. Using the information contained in the excerpts from Peets 10-K as well as your analysis of trends over the past three years, forecast the highlighted (in yellow) amounts on the Income Statement and Balance Sheet for 2012.
Please refer to attached spreadsheet.
4.
Excerpts from Peets 2011 10-K
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Additional Assumptions:
1. 2012 revenue growth is expected to be much higher for specialty sales than retail sales, reflecting recent trends. Specialty sales are expected to increase by 26-28% over 2011 levels. Retail locations will increase and sales in this segment are expected to grow by approximately 6%.
2. Due to the increase in coffee prices and given purchase commitments that are already in place through 2012, we expect cost of sales to increase by 12%.
3. In order to offset these commodity price increases, Peets has implemented a number of process improvements designed to create cost efficiencies in our purchasing, inventory management, and other administrative functions. These improvements should result in general and administrative expense increasing by only 4.5% in 2012.
4. Accounts receivable and inventories increased significantly in 2011 and we expect this to continue, but at a slightly slower pace. Receivables should grow by approximately 30% while inventories will increase by 45%.
5. Peets continues to be under significant pressure from our suppliers to help them manage through the recent recession. Consequently, we anticipate a further decrease in our payables balance of approximately 6%.
6. No new issuances or repurchases of common stock are planned for 2012.
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