The J. M. Smucker Company Announces Fiscal 2013 Second Quarter
Results and Updates Full Year Guidance
ORRVILLE, Ohio, Nov. 16, 2012 /PRNewswire/ -- The J. M.
Smucker Company (NYSE: SJM) today announced results for the second
quarter ended October 31, 2012, of
its 2013 fiscal year. Results for the quarter and six months
ended October 31, 2012, include the
operations of the North American foodservice coffee and hot
beverage business acquired from Sara Lee Corporation ("Sara Lee
foodservice business") since the completion of the acquisition on
January 3, 2012.
Executive Summary
|
|
Three
Months Ended October 31,
|
|
Six Months
Ended October 31,
|
|
|
2012
|
|
2011
|
|
%
Increase
(Decrease)
|
|
2012
|
|
2011
|
|
%
Increase
(Decrease)
|
|
|
(Dollars
in millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
$
1,628.7
|
|
$
1,513.9
|
|
8%
|
|
$
2,998.4
|
|
$
2,702.8
|
|
11%
|
Operating
income
|
$
247.5
|
|
$
211.6
|
|
17%
|
|
$
438.1
|
|
$
392.3
|
|
12%
|
|
% of
net sales
|
15.2%
|
|
14.0%
|
|
|
|
14.6%
|
|
14.5%
|
|
|
Net
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
$
148.8
|
|
$
127.2
|
|
17%
|
|
$
259.7
|
|
$
238.8
|
|
9%
|
|
Income per
diluted share
|
$
1.36
|
|
$
1.12
|
|
21%
|
|
$
2.36
|
|
$
2.09
|
|
13%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income excluding special project costs
|
$
261.5
|
|
$
241.6
|
|
8%
|
|
$
479.8
|
|
$
447.3
|
|
7%
|
|
% of
net sales
|
16.1%
|
|
16.0%
|
|
|
|
16.0%
|
|
16.5%
|
|
|
Net income
excluding special project costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
$
158.1
|
|
$
147.0
|
|
8%
|
|
$
287.4
|
|
$
275.2
|
|
4%
|
|
Income per
diluted share
|
$
1.45
|
|
$
1.29
|
|
12%
|
|
$
2.62
|
|
$
2.41
|
|
9%
|
- The acquired Sara Lee foodservice business contributed
$90.7 million and $177.5 million to net sales for the three and six
months ended October 31, 2012,
respectively.
- Operating income and net income excluding the impact of
restructuring, merger and integration, and certain pension
settlement costs ("special project costs") each increased 8 percent
in the second quarter. Included in these amounts for the
second quarter last year was a pre-tax loss on divestiture of
approximately $11.3 million.
- Second quarter net income excluding special project costs per
diluted share increased 12 percent, which includes the benefit from
the Company's share repurchase activities over the past year.
"We delivered another strong quarter of solid sales and earnings
growth," commented Richard Smucker,
Chief Executive Officer. "Our long-term strategy continues to
serve us well in consistently delivering results. Our iconic
brands are trusted and have demonstrated their strength and
resilience. We have a team of highly talented employees that
are fully committed to our culture and to implementing our
strategy. All of which point to our Company being
well-positioned for continued profitable growth."
"Overall consumer spending appears to be on the upswing which is
welcome news for the industry," added Vince
Byrd, President and Chief Operating Officer. "The
tactical adjustments we made to address market conditions are
working. We have optimized price points, closed price gaps,
and strengthened merchandising. Consumers continue to respond
positively to these actions and to our brand-building initiatives,
product innovations, and new brand additions. We are
well-poised for the holiday season and another year of
growth."
Net Sales
|
|
Three
Months Ended October 31,
|
|
Six Months
Ended October 31,
|
|
|
2012
|
|
2011
|
|
Increase
(Decrease)
|
|
%
|
|
2012
|
|
2011
|
|
Increase
(Decrease)
|
|
%
|
|
|
(Dollars
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
$
1,628.7
|
|
$1,513.9
|
|
$
114.8
|
|
8%
|
|
$
2,998.4
|
|
$
2,702.8
|
|
$
295.7
|
|
11%
|
Adjust for
certain noncomparable items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition
|
(90.7)
|
|
-
|
|
(90.7)
|
|
(6%)
|
|
(177.5)
|
|
-
|
|
(177.5)
|
|
(7%)
|
|
Divestiture
|
-
|
|
(3.0)
|
|
3.0
|
|
0%
|
|
-
|
|
(8.0)
|
|
8.0
|
|
0%
|
|
Foreign
exchange
|
(2.1)
|
|
-
|
|
(2.1)
|
|
(0%)
|
|
3.4
|
|
-
|
|
3.4
|
|
0%
|
Net sales
adjusted for noncomparable impact of acquisition, divestiture, and
foreign exchange
|
$
1,535.9
|
|
$1,510.9
|
|
$
24.9
|
|
2%
|
|
$
2,824.4
|
|
$
2,694.8
|
|
$
129.6
|
|
5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
may not add due to rounding.
|
Net sales increased 8 percent in the second quarter of 2013,
compared to the second quarter of 2012, due to the impact of the
acquired Sara Lee foodservice business and favorable sales
mix. Overall net price realization was slightly lower as
price declines on coffee offset increases taken on peanut butter
over the past year. Volume gains realized in Folgers®
coffee, Robin Hood® and Five Roses® flour in
Canada, and Dunkin' Donuts®
packaged coffee were offset by decreases in Pillsbury®
baking mixes, Crisco® shortening and oils, Jif®
peanut butter, and Smucker's® fruit spreads. Overall
volume, based on weight and excluding acquisition, decreased 2
percent in the second quarter of 2013, compared to the second
quarter of 2012. Favorable sales mix in the quarter was
driven by volume growth in the Company's coffee brands, including
K-Cups®, which are higher priced per pound, compared to
other products within the Company's portfolio.
Margins
|
Three
Months Ended
October
31,
|
|
Six Months
Ended
October
31,
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
(% of net
sales)
|
|
|
|
|
|
|
|
|
Gross
profit
|
33.3%
|
|
32.9%
|
|
33.7%
|
|
34.4%
|
Selling,
distribution, and administrative expenses:
|
|
|
|
|
|
|
|
Marketing
|
5.1%
|
|
4.9%
|
|
5.2%
|
|
5.3%
|
Selling
|
3.2%
|
|
3.1%
|
|
3.3%
|
|
3.3%
|
Distribution
|
2.5%
|
|
2.7%
|
|
2.6%
|
|
2.9%
|
General
and administrative
|
5.0%
|
|
4.9%
|
|
5.2%
|
|
5.3%
|
Total
selling, distribution, and administrative expenses
|
15.8%
|
|
15.6%
|
|
16.3%
|
|
16.8%
|
Amortization
|
1.5%
|
|
1.4%
|
|
1.6%
|
|
1.5%
|
Other
restructuring, merger and integration, and special projects
costs
|
0.7%
|
|
1.1%
|
|
1.2%
|
|
1.2%
|
Loss on
divestiture
|
0.0%
|
|
0.7%
|
|
0.0%
|
|
0.4%
|
Other
operating expense - net
|
0.1%
|
|
0.1%
|
|
0.0%
|
|
0.0%
|
Operating income
|
15.2%
|
|
14.0%
|
|
14.6%
|
|
14.5%
|
|
|
|
|
|
|
|
|
Amounts
may not add due to rounding.
|
|
|
|
|
|
|
|
Gross profit increased $43.2
million, or 9 percent, in the second quarter of 2013,
compared to 2012. Excluding special project costs, gross
profit increased $33.0 million, or 6
percent, driven by the acquired Sara Lee foodservice business and
strong coffee growth. Gross margin was 33.4 percent in the
second quarter of 2013, compared to 33.8 percent in the second
quarter of 2012, excluding special project costs.
Overall commodity costs were slightly lower during the second
quarter of 2013, compared to the second quarter of 2012, as lower
green coffee costs offset higher costs for peanuts and certain
other commodities. However, the benefit to gross profit of
overall lower costs was mostly offset by lower overall net price
realization. Unrealized mark-to-market adjustments on
derivative contracts did not contribute to the change in
year-over-year gross profit and were a loss of $10.3 million in the second quarter of 2013,
compared to a loss of $10.2 million
in the second quarter of 2012.
Selling, distribution, and administrative expenses increased 9
percent in the second quarter of 2013, compared to the second
quarter of 2012, driven in part by the acquired Sara Lee
foodservice business, and increased as a percentage of net sales
from 15.6 percent to 15.8 percent. Marketing,
selling, and general and administrative expenses increased 11
percent, 10 percent, and 9 percent, respectively.
Higher amortization expense was recognized in the second quarter
of 2013, compared to 2012, primarily related to the intangible
assets associated with the Sara Lee foodservice business
acquisition.
Operating income increased $35.9
million in the second quarter of 2013, compared to
2012. Excluding special project costs in both periods,
operating income increased $19.9
million, or 8 percent, and increased from 16.0 percent of
net sales in 2012 to 16.1 percent in 2013. Both operating
income measures include a loss on divestiture of $11.3 million in 2012.
Interest and Income Taxes
Interest expense increased $4.8
million in the second quarter of 2013, compared to 2012,
primarily representing the cost of higher average debt outstanding,
due to the Company's October 2011
public debt issuance.
Income taxes increased $9.4
million, or 14 percent, in the second quarter of 2013,
compared to 2012, reflecting an increase in income before income
taxes offset slightly by a lower effective tax rate. The
effective tax rate was 33.6 percent in the second quarter of 2013,
compared to 34.1 percent in 2012.
Segment Performance
|
|
|
Three
Months Ended October 31,
|
|
Six Months
Ended October 31,
|
|
|
|
2012
|
|
2011
|
|
% Increase
(Decrease)
|
|
2012
|
|
2011
|
|
% Increase
(Decrease)
|
|
|
|
(Dollars
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Retail Coffee
|
$
622.5
|
|
$
617.5
|
|
1%
|
|
$
1,143.3
|
|
$
1,117.6
|
|
2%
|
|
U.S.
Retail Consumer Foods
|
619.3
|
|
615.2
|
|
1%
|
|
1,147.8
|
|
1,074.7
|
|
7%
|
|
International, Foodservice, and Natural
Foods
|
387.0
|
|
281.2
|
|
38%
|
|
707.4
|
|
510.5
|
|
39%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Retail Coffee
|
$
158.2
|
|
$
140.0
|
|
13%
|
|
$
284.6
|
|
$
279.7
|
|
2%
|
|
U.S.
Retail Consumer Foods
|
111.1
|
|
116.0
|
|
(4%)
|
|
219.0
|
|
195.0
|
|
12%
|
|
International, Foodservice, and Natural
Foods
|
58.2
|
|
39.0
|
|
49%
|
|
98.9
|
|
77.5
|
|
28%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Retail Coffee
|
25.4%
|
|
22.7%
|
|
|
|
24.9%
|
|
25.0%
|
|
|
|
U.S.
Retail Consumer Foods
|
17.9%
|
|
18.8%
|
|
|
|
19.1%
|
|
18.1%
|
|
|
|
International, Foodservice, and Natural
Foods
|
15.0%
|
|
13.9%
|
|
|
|
14.0%
|
|
15.2%
|
|
|
U.S. Retail Coffee
The U.S. Retail Coffee segment net sales increased 1 percent in
the second quarter of 2013, compared to the second quarter of 2012,
as increased volume and favorable sales mix driven primarily by
K-Cups® offset the impact of price declines taken since the
second quarter of 2012. Segment volume increased 6 percent in
the second quarter of 2013, compared to the second quarter of 2012,
as the Folgers® brand increased 6 percent and Dunkin'
Donuts® packaged coffee increased 11 percent. Net sales
of Folgers Gourmet Selections® and Millstone®
K-Cups® remained strong and increased $36.4 million, compared to the second quarter of
2012. K-Cups® represented 6 percentage points of
segment net sales growth, while contributing only 1 percentage
point growth to volume.
The U.S. Retail Coffee segment profit increased $18.3 million, or 13 percent, in the second
quarter of 2013, compared to the second quarter of 2012, as
favorable mix and volume growth exceeded a significant increase in
marketing expenses. The impact of lower green coffee costs
was more than offset by price declines but did not significantly
impact segment profit. Unrealized mark-to-market adjustments,
which represented a loss of $4.5
million in the second quarter of 2013, compared to a loss of
$10.1 million in the second quarter
of 2012, contributed $5.6 million to
the segment profit increase.
U.S. Retail Consumer Foods
The U.S. Retail Consumer Foods segment net sales also increased
1 percent in the second quarter of 2013, compared to 2012, as the
impact of higher net price realization offset a 6 percent decline
in segment volume and unfavorable sales mix. Jif®
brand net sales increased 20 percent in the second quarter of 2013,
compared to 2012, primarily reflecting price increases taken since
the second quarter of 2012. Volume of the Jif® brand
decreased 6 percent compared to the strong quarter last year which
benefited from early consumer buy-in in advance of a 30 percent
price increase in the third quarter of 2012.
Smucker's® fruit spreads net sales and volume were
down 11 percent during the same period. Net sales and volume
of Smucker's® Uncrustables® frozen sandwiches
increased 13 percent and 11 percent, respectively, in the second
quarter of 2013, compared to 2012, benefiting from new distribution
at certain retailers.
Crisco® brand net sales and volume decreased 12 percent
and 8 percent, respectively, in the second quarter of 2013,
compared to 2012, resulting from declines at a key retailer.
For the same period, net sales for the Pillsbury® brand
increased 2 percent, while volume decreased 5 percent mostly
reflecting the tonnage impact of the previously announced cake mix
downsizing. Canned milk net sales and volume increased 2
percent and 5 percent, respectively, during the second quarter of
2013, compared to 2012.
The U.S. Retail Consumer Foods segment profit decreased
$4.8 million, or 4 percent, in the
second quarter of 2013, compared to the second quarter of
2012. Unrealized mark-to-market adjustments, which were a loss
of $5.0 million in the second quarter
of 2013, compared to a loss of $0.4
million in the second quarter of 2012, represented
$4.6 million of the segment profit
decrease. Overall raw material costs recognized were higher
in the quarter most significantly for peanuts but were essentially
offset by higher net price realization, and a decrease in marketing
and other support costs. A portion of planned marketing
expenditures in the second quarter of 2013 was redirected to
promotional spending, and contributed to the decrease in marketing
expense.
International, Foodservice, and Natural Foods
Net sales in the International, Foodservice, and Natural Foods
segment increased 38 percent in the second quarter of 2013,
compared to 2012, driven by the acquired Sara Lee foodservice
business, which contributed $90.7
million, or 32 percentage points, of the net sales
growth. Excluding the impact of acquisition, divestiture, and
foreign exchange, segment net sales increased 6 percent over the
same period last year. Volume was up 4 percent with gains
realized in the Robin Hood® and Five Roses® Canadian
flour brands as well as nonbranded beverages.
Segment profit increased $19.2
million in the second quarter of 2013, compared to 2012,
which included an $11.3 million loss
on divestiture. Excluding this loss, segment profit increased
$7.9 million, or 16 percent,
primarily due to the contribution of the Sara Lee foodservice
business. Unrealized mark-to-market adjustments were a loss
of $2.4 million in the second quarter
of 2013, compared to a loss of $0.1
million in the second quarter of 2012.
Other Financial Results and Measures
|
|
Three
Months Ended October 31,
|
|
Six Months
Ended October 31,
|
|
|
2012
|
|
2011
|
|
%
Increase (Decrease)
|
|
2012
|
|
2011
|
|
%
Increase (Decrease)
|
|
|
(Dollars
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
provided by operating activities
|
$
182.9
|
|
$
118.2
|
|
55%
|
|
$
359.6
|
|
$
59.9
|
|
n/m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash
flow
|
$
130.7
|
|
$
50.1
|
|
161%
|
|
$
261.2
|
|
$
(75.8)
|
|
n/m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
$
310.5
|
|
$
273.8
|
|
13%
|
|
$
565.2
|
|
$
514.0
|
|
10%
|
|
% of
net sales
|
19.1%
|
|
18.1%
|
|
|
|
18.8%
|
|
19.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operating activities increased $64.7 million in the second quarter of 2013,
compared to the second quarter of 2012, and resulted in an increase
in cash provided by operating activities of $299.7 million for the first six months of 2013,
primarily due to a lower amount of cash required to fund inventory
during the period, compared to 2012. Capital expenditures
decreased $37.2 million in the first
six months of 2013, compared to 2012, and combined with the
increase in cash provided by operating activities resulted in a
$336.9 million increase in free cash
flow over the same period.
During the second quarter of 2013, the Company repurchased 2.0
million common shares for approximately $170.9 million under the Company's August 2012 Rule 10b5-1 trading plan, completing
the purchase of shares included under the plan. At
October 31, 2012, the Company had
approximately 1.9 million common shares remaining available for
repurchase under the Board of Directors' authorization.
Outlook
For fiscal 2013, the Company expects net sales to increase
approximately 7 percent, compared to 2012, including an
incremental eight-month contribution from the Sara Lee foodservice
business. Non-GAAP net income per diluted share is expected
to range from $5.12 to $5.22,
excluding special project costs of approximately $0.40 per diluted share. Previously, the
range was $5.00 to $5.10 per diluted
share excluding special project costs.
Conference Call
The Company will conduct an earnings conference call and webcast
today, Friday, November 16, 2012, at
8:30 a.m. E.T. The webcast can be accessed from the Company's
website at www.smuckers.com. For those unable to listen to
the live webcast, the webcast replay will be available at
www.smuckers.com following the call. An audio replay will
also be available following the call until Friday, November 23, 2012, and can be accessed by
dialing 888-203-1112 or 719-457-0820, with a pass code of
9289404.
Non-GAAP Measures
The Company uses non-GAAP measures including net sales adjusted
for the noncomparable impact of acquisition, divestiture, and
foreign exchange rate; gross profit, operating income, net income,
and net income per diluted share, excluding special project costs;
earnings before interest, taxes, depreciation, and amortization
("EBITDA"); and free cash flow as key measures for purposes of
evaluating performance internally. These non-GAAP measures
are not intended to replace the presentation of financial results
in accordance with U.S. generally accepted accounting principles
("GAAP"). Rather, the presentation of these non-GAAP measures
supplements other metrics used by management to internally evaluate
its businesses, and facilitates the comparison of past and present
operations. These non-GAAP measures may not be comparable to
similar measures used by other companies and may exclude certain
nondiscretionary expenses and cash payments. A reconciliation
of certain non-GAAP measures to the comparable GAAP items for the
current and prior year quarter and year-to-date periods is included
in the "Unaudited Non-GAAP Measures" table.
About The J. M. Smucker Company
For more than 110 years, The J. M. Smucker Company has been
committed to offering consumers quality products that bring
families together to share memorable meals and moments.
Today, Smucker is a leading marketer and manufacturer of fruit
spreads, retail packaged coffee, peanut butter, shortening and
oils, ice cream toppings, sweetened condensed milk, and health and
natural foods beverages in North
America. Its family of brands includes Smucker's®,
Folgers®, Dunkin' Donuts®, Jif®,
Crisco®, Pillsbury®, Eagle Brand®, R.W.
Knudsen Family®, Hungry Jack®, Café Bustelo®,
Café Pilon®, White Lily® and Martha White® in the United States, along with Robin
Hood®, Five Roses®, Carnation® and Bick's®
in Canada. The Company remains
rooted in the Basic Beliefs of Quality, People, Ethics, Growth and
Independence established by its founder and namesake more than a
century ago. For more information about the Company, visit
www.smuckers.com.
The J. M. Smucker Company is the owner of all trademarks
referenced herein, except for the following, which are used under
license: Pillsbury® is a trademark of The Pillsbury Company,
LLC; Carnation® is a trademark of Societe des Produits
Nestle S.A.; and Dunkin' Donuts® is a registered trademark
of DD IP Holder, LLC.
Dunkin' Donuts® brand is licensed to The J. M. Smucker
Company for packaged coffee products sold in retail channels such
as grocery stores, mass merchandisers, club stores, and drug
stores. This information does not pertain to Dunkin'
Donuts® coffee or other products for sale in Dunkin'
Donuts® restaurants. K-Cup® and K-Cups® are
trademarks of Keurig, Incorporated.
The J. M. Smucker Company Forward-Looking Statements
This press release 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 results,
performance, or achievements expressed or implied by those
forward-looking statements. Readers should understand that
the risks, uncertainties, factors, and assumptions listed and
discussed in this press release, including the following important
factors and assumptions, could affect the future results of the
Company and could cause actual results to differ materially from
those expressed in the forward-looking statements:
- volatility of commodity markets from which raw materials,
particularly green coffee beans, wheat, soybean oil, milk, peanuts,
and sugar, are procured and the related impact on costs;
- risks associated with derivative and purchasing strategies
employed by the Company to manage commodity pricing risks,
including the risk that such strategies could result in significant
losses and adversely impact the Company's liquidity;
- crude oil price trends and their impact on transportation,
energy, and packaging costs;
- the ability to successfully implement and realize the full
benefit of price changes that are intended to fully recover cost
and the competitive, retailer, and consumer response;
- the success and cost of introducing new products and the
competitive response;
- the success and cost of marketing and sales programs and
strategies intended to promote growth in the Company's
businesses;
- general competitive activity in the market, including
competitors' pricing practices and promotional spending
levels;
- the ability of the Company to successfully integrate acquired
and merged businesses in a timely and cost effective manner;
- the successful completion of the Company's restructuring
programs and the ability to realize anticipated savings and other
potential benefits within the time frames currently
contemplated;
- the impact of food security concerns involving either the
Company's or its competitors' products;
- the impact of accidents and natural disasters, including crop
failures and storm damage;
- the concentration of certain of the Company's businesses with
key customers and suppliers, including single-source suppliers of
certain raw materials, such as packaging for its most popular
Folgers® coffee products, and finished goods, such as
K-Cups®, and the ability to manage and maintain key
relationships;
- the loss of significant customers, a substantial reduction in
orders from these customers, or the bankruptcy of any such
customer;
- changes in consumer coffee preferences and other factors
affecting the coffee business, which represents a substantial
portion of the Company's business;
- a change in outlook or downgrade in the Company's public credit
ratings by a rating agency;
- the ability of the Company to obtain any required
financing;
- the timing and amount of capital expenditures, share
repurchases, and restructuring costs;
- impairments in the carrying value of goodwill, other intangible
assets, or other long-lived assets or changes in useful lives of
other intangible assets;
- the impact of new or changes to existing governmental laws and
regulations and their application;
- the impact of future legal, regulatory, or market measures
regarding climate change;
- the outcome of current and future tax examinations, changes in
tax laws, and other tax matters, and their related impact on the
Company's tax positions;
- foreign currency and interest rate fluctuations;
- political or economic disruption;
- other factors affecting share prices and capital markets
generally; and
- risks related to other factors described under "Risk Factors"
in other reports and statements filed by the Company with the
Securities and Exchange Commission, including its most recent
Annual Report on Form 10-K.
Readers are cautioned not to unduly rely on such forward-looking
statements, which speak only as of the date made, when evaluating
the information presented in this press release. The Company
does not undertake any obligation to update or revise these
forward-looking statements to reflect new events or
circumstances.
The J.
M. Smucker Company
Unaudited Condensed Consolidated Statements of
Income
|
|
|
|
Three
Months Ended October 31,
|
|
Six Months
Ended October 31,
|
|
|
2012
|
|
2011
|
|
%
Increase
(Decrease)
|
|
2012
|
|
2011
|
|
%
Increase
(Decrease)
|
|
|
(Dollars
in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
$
1,628,746
|
|
$
1,513,905
|
|
8%
|
|
$
2,998,449
|
|
$
2,702,788
|
|
11%
|
Cost of
products sold
|
1,084,377
|
|
1,002,517
|
|
8%
|
|
1,980,343
|
|
1,749,890
|
|
13%
|
Cost of
products sold - restructuring and merger and integration
|
2,458
|
|
12,719
|
|
(81%)
|
|
6,422
|
|
23,145
|
|
(72%)
|
Gross
Profit
|
541,911
|
|
498,669
|
|
9%
|
|
1,011,684
|
|
929,753
|
|
9%
|
|
Gross
margin
|
33.3%
|
|
32.9%
|
|
|
|
33.7%
|
|
34.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
distribution, and administrative expenses
|
257,187
|
|
236,602
|
|
9%
|
|
489,403
|
|
453,154
|
|
8%
|
Amortization
|
24,203
|
|
20,559
|
|
18%
|
|
48,394
|
|
40,794
|
|
19%
|
Other
restructuring costs
|
8,230
|
|
10,356
|
|
(21%)
|
|
19,140
|
|
20,253
|
|
(5%)
|
Other
merger and integration costs
|
3,243
|
|
6,871
|
|
(53%)
|
|
9,512
|
|
11,556
|
|
(18%)
|
Other
special project costs
|
-
|
|
-
|
|
n/m
|
|
6,669
|
|
-
|
|
n/m
|
Loss on
divestiture
|
-
|
|
11,287
|
|
(100%)
|
|
-
|
|
11,287
|
|
(100%)
|
Other
operating expense - net
|
1,506
|
|
1,380
|
|
9%
|
|
499
|
|
392
|
|
27%
|
Operating Income
|
247,542
|
|
211,614
|
|
17%
|
|
438,067
|
|
392,317
|
|
12%
|
|
Operating margin
|
15.2%
|
|
14.0%
|
|
|
|
14.6%
|
|
14.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
378
|
|
324
|
|
17%
|
|
656
|
|
626
|
|
5%
|
Interest
expense
|
(24,266)
|
|
(19,448)
|
|
25%
|
|
(48,148)
|
|
(34,870)
|
|
38%
|
Other
income - net
|
564
|
|
711
|
|
(21%)
|
|
908
|
|
1,954
|
|
(54%)
|
Income
Before Income Taxes
|
224,218
|
|
193,201
|
|
16%
|
|
391,483
|
|
360,027
|
|
9%
|
Income
taxes
|
75,371
|
|
65,954
|
|
14%
|
|
131,773
|
|
121,257
|
|
9%
|
Net
Income
|
$
148,847
|
|
$
127,247
|
|
17%
|
|
$
259,710
|
|
$
238,770
|
|
9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per common share
|
$
1.36
|
|
$
1.12
|
|
21%
|
|
$
2.37
|
|
$
2.09
|
|
13%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per common share - assuming dilution
|
$
1.36
|
|
$
1.12
|
|
21%
|
|
$
2.36
|
|
$
2.09
|
|
13%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared per common share
|
$
0.52
|
|
$
0.48
|
|
8%
|
|
$
1.04
|
|
$
0.96
|
|
8%
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding
|
109,224,855
|
|
113,893,035
|
|
(4%)
|
|
109,796,564
|
|
114,085,291
|
|
(4%)
|
Weighted-average shares outstanding – assuming
dilution
|
109,251,455
|
|
113,944,705
|
|
(4%)
|
|
109,824,632
|
|
114,139,945
|
|
(4%)
|
The J.
M. Smucker Company
Unaudited Condensed Consolidated Balance
Sheets
|
|
|
|
|
October
31, 2012
|
|
April 30,
2012
|
|
October
31, 2011
|
|
|
|
(Dollars
in thousands)
|
Assets
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash and
cash equivalents
|
$
203,555
|
|
$
229,708
|
|
$
496,288
|
|
Trade
receivables
|
469,367
|
|
347,518
|
|
462,169
|
|
Inventories
|
975,427
|
|
961,576
|
|
1,143,951
|
|
Other
current assets
|
87,713
|
|
104,663
|
|
91,299
|
|
|
Total
Current Assets
|
1,736,062
|
|
1,643,465
|
|
2,193,707
|
|
|
|
|
|
|
|
|
Property, Plant, and Equipment -
Net
|
1,113,446
|
|
1,096,089
|
|
948,225
|
|
|
|
|
|
|
|
|
Other
Noncurrent Assets:
|
|
|
|
|
|
|
Goodwill
|
3,053,549
|
|
3,054,618
|
|
2,897,981
|
|
Other
intangible assets - net
|
3,138,056
|
|
3,187,007
|
|
3,099,067
|
|
Other
noncurrent assets
|
147,640
|
|
134,047
|
|
76,440
|
|
|
Total
Other Noncurrent Assets
|
6,339,245
|
|
6,375,672
|
|
6,073,488
|
|
|
|
$
9,188,753
|
|
$
9,115,226
|
|
$
9,215,420
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders'
Equity
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
$
290,054
|
|
$
274,725
|
|
$
260,653
|
|
Current
portion of long-term debt
|
50,000
|
|
50,000
|
|
-
|
|
Other
current liabilities
|
366,011
|
|
292,247
|
|
284,268
|
|
|
Total
Current Liabilities
|
706,065
|
|
616,972
|
|
544,921
|
|
|
|
|
|
|
|
|
Noncurrent Liabilities:
|
|
|
|
|
|
|
Long-term
debt
|
2,019,196
|
|
2,020,543
|
|
2,071,852
|
|
Other
noncurrent liabilities
|
1,310,745
|
|
1,314,325
|
|
1,235,298
|
|
|
Total
Noncurrent Liabilities
|
3,329,941
|
|
3,334,868
|
|
3,307,150
|
|
|
|
|
|
|
|
|
Shareholders' Equity
|
5,152,747
|
|
5,163,386
|
|
5,363,349
|
|
|
|
$
9,188,753
|
|
$
9,115,226
|
|
$
9,215,420
|
|
|
|
|
|
|
|
|
The J.
M. Smucker Company Unaudited Condensed Consolidated
Statements of Cash Flow
|
|
|
|
|
|
Three
Months Ended October 31,
|
|
Six Months
Ended October 31,
|
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
Net
income
|
$
148,847
|
|
$
127,247
|
|
$
259,710
|
|
$
238,770
|
|
Adjustments to reconcile net income to net cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
35,920
|
|
28,227
|
|
71,974
|
|
55,796
|
|
|
Depreciation - restructuring and merger and
integration
|
2,254
|
|
12,712
|
|
5,844
|
|
23,127
|
|
|
Amortization
|
24,203
|
|
20,559
|
|
48,394
|
|
40,794
|
|
|
Share-based compensation expense
|
6,196
|
|
6,522
|
|
10,505
|
|
12,554
|
|
|
Other
noncash restructuring activities
|
(255)
|
|
860
|
|
(249)
|
|
1,769
|
|
|
Loss on
sale of assets - net
|
1,684
|
|
2,001
|
|
2,698
|
|
2,726
|
|
|
Loss on
divestiture
|
-
|
|
11,287
|
|
-
|
|
11,287
|
|
|
Changes in
assets and liabilities, net of effect from
|
|
|
|
|
|
|
|
|
|
businesses
acquired:
|
|
|
|
|
|
|
|
|
|
|
Trade
receivables
|
(78,301)
|
|
(113,874)
|
|
(122,291)
|
|
(106,362)
|
|
|
|
Inventories
|
44,096
|
|
58,241
|
|
(14,594)
|
|
(272,613)
|
|
|
|
Accounts
payable and accrued items
|
37,731
|
|
15,753
|
|
98,851
|
|
71,133
|
|
|
|
Proceeds
from settlement of interest rate swaps - net
|
-
|
|
17,718
|
|
-
|
|
17,718
|
|
|
|
Defined
benefit pension contributions
|
(6,536)
|
|
(805)
|
|
(7,569)
|
|
(4,496)
|
|
|
|
Accrued
and prepaid taxes
|
(58,229)
|
|
(74,275)
|
|
(13,423)
|
|
(33,069)
|
|
|
|
Other -
net
|
25,289
|
|
5,999
|
|
19,768
|
|
800
|
Net
Cash Provided by Operating Activities
|
182,899
|
|
118,172
|
|
359,618
|
|
59,934
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
Business
acquired, net of cash acquired
|
-
|
|
-
|
|
-
|
|
(362,846)
|
|
Additions
to property, plant, and equipment
|
(52,176)
|
|
(68,075)
|
|
(98,458)
|
|
(135,707)
|
|
Proceeds
from divestiture
|
-
|
|
9,268
|
|
-
|
|
9,268
|
|
Sales and
maturities of marketable securities
|
-
|
|
-
|
|
-
|
|
18,600
|
|
Proceeds
from disposal of property, plant, and equipment
|
322
|
|
773
|
|
578
|
|
903
|
|
Other -
net
|
(11,861)
|
|
(2,232)
|
|
5,852
|
|
(2,250)
|
Net
Cash Used for Investing Activities
|
(63,715)
|
|
(60,266)
|
|
(92,028)
|
|
(472,032)
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
Revolving
credit agreement - net
|
-
|
|
(306,700)
|
|
-
|
|
-
|
|
Proceeds
from long-term debt - net
|
-
|
|
748,560
|
|
-
|
|
748,560
|
|
Quarterly
dividends paid
|
(57,331)
|
|
(54,666)
|
|
(110,176)
|
|
(104,825)
|
|
Purchase
of treasury shares
|
(171,062)
|
|
(39,207)
|
|
(175,302)
|
|
(44,592)
|
|
Proceeds
from stock option exercises
|
575
|
|
276
|
|
760
|
|
518
|
|
Other -
net
|
144
|
|
(7,635)
|
|
(7,564)
|
|
(5,101)
|
Net
Cash (Used for) Provided by Financing Activities
|
(227,674)
|
|
340,628
|
|
(292,282)
|
|
594,560
|
Effect of
exchange rate changes on cash
|
571
|
|
(4,721)
|
|
(1,461)
|
|
(6,019)
|
Net
(decrease) increase in cash and cash equivalents
|
(107,919)
|
|
393,813
|
|
(26,153)
|
|
176,443
|
Cash and
cash equivalents at beginning of period
|
311,474
|
|
102,475
|
|
229,708
|
|
319,845
|
Cash
and Cash Equivalents at End of Period
|
$
203,555
|
|
$
496,288
|
|
$
203,555
|
|
$
496,288
|
The J.
M. Smucker Company
Unaudited Non-GAAP Measures
|
|
|
|
Three
Months Ended October 31,
|
|
Six Months
Ended October 31,
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
(Dollars
in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
Gross
profit excluding special project costs (1)
|
$
544,369
|
|
$
511,388
|
|
$
1,018,106
|
|
$
952,898
|
|
% of
net sales
|
33.4%
|
|
33.8%
|
|
34.0%
|
|
35.3%
|
|
|
|
|
|
|
|
|
|
Operating
income excluding special project costs (2)
|
$
261,473
|
|
$
241,560
|
|
$
479,810
|
|
$
447,271
|
|
% of
net sales
|
16.1%
|
|
16.0%
|
|
16.0%
|
|
16.5%
|
|
|
|
|
|
|
|
|
|
Net income
excluding special project costs: (3)
|
|
|
|
|
|
|
|
|
Income
|
$
158,105
|
|
$
146,976
|
|
$
287,402
|
|
$
275,216
|
|
Income per
common share -- assuming dilution
|
$
1.45
|
|
$
1.29
|
|
$
2.62
|
|
$
2.41
|
|
|
|
|
|
|
|
|
|
(1)
|
Reconciliation to gross profit:
|
|
|
|
|
|
|
|
|
Gross
profit
|
$
541,911
|
|
$
498,669
|
|
$
1,011,684
|
|
$
929,753
|
|
Cost of
products sold - restructuring and merger and integration
|
2,458
|
|
12,719
|
|
6,422
|
|
23,145
|
|
Gross
profit excluding special project costs
|
$
544,369
|
|
$
511,388
|
|
$
1,018,106
|
|
$
952,898
|
|
|
|
|
|
|
|
|
|
(2)
|
Reconciliation to operating income:
|
|
|
|
|
|
|
|
|
Operating
income
|
$
247,542
|
|
$
211,614
|
|
$
438,067
|
|
$
392,317
|
|
Cost of
products sold - restructuring and merger and integration
|
2,458
|
|
12,719
|
|
6,422
|
|
23,145
|
|
Other
restructuring costs
|
8,230
|
|
10,356
|
|
19,140
|
|
20,253
|
|
Other
merger and integration costs
|
3,243
|
|
6,871
|
|
9,512
|
|
11,556
|
|
Other
special project costs
|
-
|
|
-
|
|
6,669
|
|
-
|
|
Operating
income excluding special project costs
|
$
261,473
|
|
$
241,560
|
|
$
479,810
|
|
$
447,271
|
|
|
|
|
|
|
|
|
|
(3)
|
Reconciliation to net income:
|
|
|
|
|
|
|
|
|
Net
income
|
$
148,847
|
|
$
127,247
|
|
$
259,710
|
|
$
238,770
|
|
Income
taxes
|
75,371
|
|
65,954
|
|
131,773
|
|
121,257
|
|
Cost of
products sold - restructuring and merger and integration
|
2,458
|
|
12,719
|
|
6,422
|
|
23,145
|
|
Other
restructuring costs
|
8,230
|
|
10,356
|
|
19,140
|
|
20,253
|
|
Other
merger and integration costs
|
3,243
|
|
6,871
|
|
9,512
|
|
11,556
|
|
Other
special project costs
|
-
|
|
-
|
|
6,669
|
|
-
|
|
Income
before income taxes, excluding special project costs
|
$
238,149
|
|
$
223,147
|
|
$
433,226
|
|
$
414,981
|
|
Income
taxes, as adjusted
|
80,044
|
|
76,171
|
|
145,824
|
|
139,765
|
|
Net income
excluding special project costs
|
$
158,105
|
|
$
146,976
|
|
$
287,402
|
|
$
275,216
|
The J.
M. Smucker Company
Unaudited Non-GAAP Measures
|
|
|
|
Three
Months Ended October 31,
|
|
Six Months
Ended October 31,
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
(Dollars
in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
Earnings
before interest, taxes, depreciation, and
amortization(4)
|
$
310,483
|
|
$
273,823
|
|
$
565,187
|
|
$
513,988
|
|
% of
net sales
|
19.1%
|
|
18.1%
|
|
18.8%
|
|
19.0%
|
|
|
|
|
|
|
|
|
|
Free cash
flow (5)
|
$
130,723
|
|
$
50,097
|
|
$
261,160
|
|
$
(75,773)
|
|
|
|
|
|
|
|
|
|
(4)
|
Reconciliation to net income:
|
|
|
|
|
|
|
|
|
Net
income
|
$
148,847
|
|
$
127,247
|
|
$
259,710
|
|
$
238,770
|
|
Income
taxes
|
75,371
|
|
65,954
|
|
131,773
|
|
121,257
|
|
Interest
income
|
(378)
|
|
(324)
|
|
(656)
|
|
(626)
|
|
Interest
expense
|
24,266
|
|
19,448
|
|
48,148
|
|
34,870
|
|
Depreciation
|
35,920
|
|
28,227
|
|
71,974
|
|
55,796
|
|
Depreciation - restructuring and merger and
integration
|
2,254
|
|
12,712
|
|
5,844
|
|
23,127
|
|
Amortization
|
24,203
|
|
20,559
|
|
48,394
|
|
40,794
|
|
Earnings
before interest, taxes, depreciation, and amortization
|
$
310,483
|
|
$
273,823
|
|
$
565,187
|
|
$
513,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)
|
Reconciliation to cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Cash
provided by operating activities
|
$
182,899
|
|
$
118,172
|
|
$
359,618
|
|
$
59,934
|
|
Additions
to property, plant, and equipment
|
(52,176)
|
|
(68,075)
|
|
(98,458)
|
|
(135,707)
|
|
Free cash
flow
|
$
130,723
|
|
$
50,097
|
|
$
261,160
|
|
$
(75,773)
|
|
The
Company uses non-GAAP measures including net sales adjusted for the
noncomparable impact of acquisition, divestiture, and foreign
exchange rate; gross profit, operating income, net income, and net
income per diluted share, excluding special project costs; earnings
before interest, taxes, depreciation, and amortization ("EBITDA");
and free cash flow as key measures for purposes of evaluating
performance internally. These non-GAAP measures are not intended to
replace the presentation of financial results in accordance with
U.S. GAAP. Rather, the presentation of these non-GAAP measures
supplement other metrics used by management to internally evaluate
its businesses, and facilitates the comparison of past and present
operations. These non-GAAP measures may not be comparable to
similar measures used by other companies and may exclude certain
nondiscretionary expenses and cash payments.
|
The J.
M. Smucker Company
Unaudited Reportable Segments
|
|
|
|
|
Three
Months Ended October 31,
|
|
Six Months
Ended October 31,
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
Net
sales:
|
|
|
|
|
|
|
|
|
U.S.
Retail Coffee
|
$
622,470
|
|
$
617,523
|
|
$
1,143,263
|
|
$
1,117,632
|
|
U.S.
Retail Consumer Foods
|
619,308
|
|
615,192
|
|
1,147,752
|
|
1,074,692
|
|
International, Foodservice, and Natural
Foods
|
386,968
|
|
281,190
|
|
707,434
|
|
510,464
|
Total net
sales
|
$
1,628,746
|
|
$
1,513,905
|
|
$
2,998,449
|
|
$
2,702,788
|
|
|
|
|
|
|
|
|
|
|
Segment
profit:
|
|
|
|
|
|
|
|
|
U.S.
Retail Coffee
|
$
158,211
|
|
$
139,958
|
|
$
284,599
|
|
$
279,669
|
|
U.S.
Retail Consumer Foods
|
111,126
|
|
115,955
|
|
218,961
|
|
194,974
|
|
International, Foodservice, and Natural
Foods
|
58,180
|
|
38,991
|
|
98,866
|
|
77,536
|
Total
segment profit
|
$
327,517
|
|
$
294,904
|
|
$
602,426
|
|
$
552,179
|
|
Interest
income
|
378
|
|
324
|
|
656
|
|
626
|
|
Interest
expense
|
(24,266)
|
|
(19,448)
|
|
(48,148)
|
|
(34,870)
|
|
Share-based compensation expense
|
(6,009)
|
|
(5,593)
|
|
(10,125)
|
|
(10,744)
|
|
Cost of
products sold - restructuring and merger and integration
|
(2,458)
|
|
(12,719)
|
|
(6,422)
|
|
(23,145)
|
|
Other
restructuring costs
|
(8,230)
|
|
(10,356)
|
|
(19,140)
|
|
(20,253)
|
|
Other
merger and integration costs
|
(3,243)
|
|
(6,871)
|
|
(9,512)
|
|
(11,556)
|
|
Other
special project costs
|
-
|
|
-
|
|
(6,669)
|
|
-
|
|
Corporate
administrative expenses
|
(60,035)
|
|
(47,751)
|
|
(112,491)
|
|
(94,164)
|
|
Other
income - net
|
564
|
|
711
|
|
908
|
|
1,954
|
Income
before income taxes
|
$
224,218
|
|
$
193,201
|
|
$
391,483
|
|
$
360,027
|
|
|
|
|
|
|
|
|
|
|
Segment
profit margin:
|
|
|
|
|
|
|
|
|
U.S.
Retail Coffee
|
25.4%
|
|
22.7%
|
|
24.9%
|
|
25.0%
|
|
U.S.
Retail Consumer Foods
|
17.9%
|
|
18.8%
|
|
19.1%
|
|
18.1%
|
|
International, Foodservice, and Natural
Foods
|
15.0%
|
|
13.9%
|
|
14.0%
|
|
15.2%
|
(Logo: http://photos.prnewswire.com/prnh/20071219/SMUCKERLOGO
)
SOURCE The J. M. Smucker Company