Attached files
| file | filename |
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| 8-K - J M SMUCKER Co | v211811_8k.htm |
For Immediate
Release
The
J. M. Smucker Company Announces Third Quarter Results
|
|
·
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Q3 net sales increase 9
percent; volume up 3 percent
|
|
|
·
|
EPS down 3 percent in Q3 due to
restructuring charges; EPS up 9 percent excluding restructuring
charges
|
|
|
·
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Free cash flow exceeds $325
million in Q3 to record
amount
|
|
|
·
|
Company updates 2011
outlook
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ORRVILLE,
Ohio, February 17, 2011 —The J. M. Smucker Company (NYSE: SJM) today announced
results for the third quarter ended January 31, 2011, of its 2011 fiscal
year.
Executive
Summary
|
Three Months Ended January 31,
|
Nine Months Ended January 31,
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2011
|
2010
|
%
Increase
(Decrease)
|
2011
|
2010
|
%
Increase
(Decrease)
|
|||||||||||||||||||
|
(Dollars in millions, except per share data)
|
||||||||||||||||||||||||
|
Net
sales
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$ | 1,312.4 | $ | 1,205.9 | 9 | % | $ | 3,638.6 | $ | 3,536.2 | 3 | % | ||||||||||||
|
Operating
income
|
$ | 213.0 | $ | 209.9 | 1 | % | $ | 618.2 | $ | 609.9 | 1 | % | ||||||||||||
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%
of net sales
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16.2 | % | 17.4 | % | 17.0 | % | 17.2 | % | ||||||||||||||||
|
Net
income:
|
||||||||||||||||||||||||
|
Income
|
$ | 132.0 | $ | 135.5 | (3 | )% | $ | 384.6 | $ | 373.5 | 3 | % | ||||||||||||
|
Income
per diluted share
|
$ | 1.11 | $ | 1.14 | (3 | )% | $ | 3.23 | $ | 3.14 | 3 | % | ||||||||||||
|
EBITDA
|
$ | 275.3 | $ | 257.4 | 7 | % | $ | 795.9 | $ | 745.8 | 7 | % | ||||||||||||
|
|
·
|
Non-GAAP
income per diluted share was $1.27 and $1.17 for the third quarters
of 2011 and 2010, an increase of 9 percent, and $3.69 and $3.30 for the
first nine months of 2011 and 2010, an increase of 12 percent,
respectively.
|
|
|
·
|
Non-GAAP
income per diluted share excludes restructuring and merger and integration
costs (“special project costs”) of $0.16 and $0.03 per diluted share, in
the third quarters of 2011 and 2010, and $0.46 and $0.16 in the first nine
months of 2011 and 2010,
respectively.
|
|
|
·
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Both
reported and non-GAAP results for the third quarters of 2011 and 2010
include the impact of noncash impairment charges of $17.2 million and $9.8
million, respectively.
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Page
1
“We
continue to deliver solid earnings and sales growth in a dynamic consumer
environment,” commented Richard Smucker, Executive Chairman and Co-Chief
Executive Officer. “These strong results reflect our
disciplined approach to managing our business, the ongoing investments in the
equity of our brands, and the benefit of a cultural commitment to making the
highest-quality products.”
“Our team
continues to drive results, including volume growth and strong cash flow which
have enabled us to repurchase over three percent of outstanding shares and
declare a 10 percent quarterly dividend increase,” added Tim Smucker, Chairman
of the Board and Co-Chief Executive Officer. “As we navigate through an
uncertain commodity cost environment, we expect to continue to drive financial
results by maintaining our balanced approach to pricing, market share growth,
and profitability.”
Net
Sales
|
Three Months Ended January 31,
|
Nine Months Ended January 31,
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|||||||||||||||||||||||||||||||
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2011
|
2010
|
Increase
(Decrease)
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%
|
2011
|
2010
|
Increase
(Decrease)
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%
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|||||||||||||||||||||||||
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(Dollars in millions)
|
||||||||||||||||||||||||||||||||
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Net
sales
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$ | 1,312.4 | $ | 1,205.9 | $ | 106.5 | 9 | % | $ | 3,638.6 | $ | 3,536.2 | $ | 102.4 | 3 | % | ||||||||||||||||
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Adjust
for certain noncomparable items:
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Divestitures
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- | (13.4 | ) | 13.4 | 1 | % | - | (35.4 | ) | 35.4 | 1 | % | ||||||||||||||||||||
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Foreign
exchange
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(5.0 | ) | - | (5.0 | ) | 0 | % | (16.6 | ) | - | (16.6 | ) | (1 | )% | ||||||||||||||||||
|
Net
sales, excluding divestitures and foreign exchange
|
$ | 1,307.4 | $ | 1,192.5 | $ | 114.9 | 10 | % | $ | 3,622.0 | $ | 3,500.8 | $ | 121.2 | 3 | % | ||||||||||||||||
Net sales
in the third quarter of 2011 increased $106.5 million, or 9 percent, compared to
the third quarter of 2010, and increased 10 percent, excluding the impact of the
2010 potato products divestiture and foreign exchange. Overall volume
increased 3 percent as solid gains were realized in Crisco® oils, Jif® peanut butter, Smucker’s® fruit
spreads, Dunkin’
Donuts® packaged
coffee, and natural foods beverages. The net impact of pricing
contributed approximately 4 percent to net sales and the overall impact of sales
mix was favorable.
Page
2
Margins
|
Three Months Ended
January 31,
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Nine Months Ended
January 31,
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|||||||||||||||
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2011
|
2010
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2011
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2010
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(%
of net sales)
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Gross
profit
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36.1 | % | 38.0 | % | 37.9 | % | 38.4 | % | ||||||||
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Selling,
distribution, and administrative expenses:
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||||||||||||||||
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Marketing
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5.2 | % | 5.7 | % | 5.8 | % | 6.4 | % | ||||||||
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Selling
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3.2 | % | 3.2 | % | 3.2 | % | 3.3 | % | ||||||||
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Distribution
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3.0 | % | 3.3 | % | 3.2 | % | 3.3 | % | ||||||||
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General
and administrative
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4.9 | % | 5.6 | % | 5.4 | % | 5.3 | % | ||||||||
| 16.3 | % | 17.8 | % | 17.6 | % | 18.3 | % | |||||||||
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Amortization
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1.4 | % | 1.5 | % | 1.5 | % | 1.6 | % | ||||||||
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Impairment
charges
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1.3 | % | 0.8 | % | 0.5 | % | 0.3 | % | ||||||||
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Other
restructuring and merger and integration costs
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0.9 | % | 0.4 | % | 1.2 | % | 0.8 | % | ||||||||
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Other
operating expense - net
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0.0 | % | 0.1 | % | 0.1 | % | 0.2 | % | ||||||||
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Operating
Income
|
16.2 | % | 17.4 | % | 17.0 | % | 17.2 | % | ||||||||
Gross
profit increased $16.1 million in the third quarter of 2011, compared to 2010,
as the increase in net sales offset the impact of overall higher raw material
costs and $16.9 million of special project costs included in cost of products
sold. Excluding special project costs, gross profit increased $33.0
million, or 7 percent, yet decreased as a percent of net sales from 38.0 percent
in the third quarter of 2010, to 37.4 percent in the third quarter of
2011. Raw material cost increases were most significant for green
coffee, milk, sugar, and soybean oil, and more than offset lower costs for
peanuts. Coffee price increases taken earlier in the year offset
higher green coffee cost and contributed to the gross profit increase in the
third quarter of 2011, but did not result in an overall gross margin
gain. Gross margin was further impacted by price declines taken on
oils during the second quarter in response to competitive dynamics.
Selling,
distribution, and administrative expenses in the third quarter of 2011, were
flat compared to 2010, and decreased as a percentage of net sales from 17.8
percent to 16.3 percent. Marketing and distribution expenses for the
third quarter of 2011 both decreased 1 percent, compared to 2010, while selling
expenses increased approximately 7 percent related to the increase in net
sales. General and administrative expenses decreased 3 percent over
the same period.
Operating
income increased $3.1 million, or 1 percent, in the third quarter of 2011,
compared to 2010, despite an overall increase in special project costs of
approximately $23.3 million. Excluding the impact of special project
costs in both periods, operating income increased $26.4 million, or 12 percent,
and improved from 17.8 percent of net sales in 2010, to 18.4 percent in
2011. Additionally, noncash impairment charges of $17.2 million and
$9.8 million, primarily related to the Europe’s Best® intangible
assets in Canada, reduced the Company’s overall operating margin by 1.3 and 0.8
percentage points in the third quarters of 2011 and 2010,
respectively.
Page
3
Interest
and Income Taxes
Interest
expense increased $3.9 million during the third quarter of 2011, compared to
2010, primarily due to higher average debt outstanding.
Income
taxes increased $2.1 million in the third quarter of 2011, compared to
2010. The effective tax rate was 32.6 percent in the third quarter of
2011 and 31.3 percent in the third quarter of 2010. The effective tax
rate for the first nine months of 2011 was 32.2 percent, compared to 33.7
percent for the same period in 2010.
Segment
Performance
|
Three Months Ended January 31,
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Nine Months Ended January 31,
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2011
|
2010
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% Increase
(Decrease)
|
2011
|
2010
|
% Increase
(Decrease)
|
|||||||||||||||||||
|
(Dollars
in millions)
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Net
sales:
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U.S.
Retail Coffee Market
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$ | 554.7 | $ | 471.5 | 18 | % | $ | 1,425.5 | $ | 1,282.8 | 11 | % | ||||||||||||
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U.S.
Retail Consumer Market (1)
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273.5 | 273.8 | (0 | )% | 825.4 | 854.9 | (3 | )% | ||||||||||||||||
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U.S.
Retail Oils and Baking Market
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253.3 | 244.2 | 4 | % | 706.7 | 742.5 | (5 | )% | ||||||||||||||||
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Special
Markets
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230.8 | 216.5 | 7 | % | 680.9 | 656.0 | 4 | % | ||||||||||||||||
|
Segment
profit:
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U.S.
Retail Coffee Market
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$ | 158.1 | $ | 132.6 | 19 | % | $ | 419.1 | $ | 375.6 | 12 | % | ||||||||||||
|
U.S.
Retail Consumer Market
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72.2 | 66.2 | 9 | % | 217.9 | 202.8 | 7 | % | ||||||||||||||||
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U.S.
Retail Oils and Baking Market
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31.5 | 35.9 | (12 | )% | 95.0 | 107.0 | (11 | )% | ||||||||||||||||
|
Special
Markets (2)
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28.3 | 30.7 | (8 | )% | 112.6 | 97.4 | 16 | % | ||||||||||||||||
|
Segment
profit margin:
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||||||||||||||||||||||||
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U.S.
Retail Coffee Market
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28.5 | % | 28.1 | % | 29.4 | % | 29.3 | % | ||||||||||||||||
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U.S.
Retail Consumer Market
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26.4 | % | 24.2 | % | 26.4 | % | 23.7 | % | ||||||||||||||||
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U.S.
Retail Oils and Baking Market
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12.4 | % | 14.7 | % | 13.4 | % | 14.4 | % | ||||||||||||||||
|
Special
Markets
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12.3 | % | 14.2 | % | 16.5 | % | 14.8 | % | ||||||||||||||||
|
(1)
|
Net
sales comparability for the U.S. Retail Consumer Market is impacted by the
potato products divestiture in March
2010.
|
|
(2)
|
Segment
profit for Special Markets includes impairment charges of $17.2 million
for the three months and nine months ended January 31, 2011, and $7.3
million for the three months and nine months ended January 31,
2010.
|
While the
Company’s four reportable segments remain the same for 2011, the calculation of
segment profit was modified at the beginning of 2011 to include intangible asset
amortization and impairment charges related to segment assets, along with
certain other items in each of the segments. These items were
previously considered corporate expenses and were not allocated to the
segments. This change more accurately aligns the segment financial
results with the responsibilities of segment management, most notably in the
area of intangible assets. Fiscal 2010 segment profit has been
recalculated to be consistent with the current methodology.
Page
4
U.S. Retail Coffee
Market
The U.S.
Retail Coffee Market segment net sales increased 18 percent in the third quarter
of 2011, compared to the third quarter of 2010. Through the third
quarter, price increases totaling 13 percent were taken during 2011 to cover
rising green coffee costs. The impact of these price increases, and
favorable sales mix more than offset a 2 percent volume decline. The
introduction of Folgers
Gourmet Selections® and Millstone® K-Cups® offerings earlier in
the fiscal year added approximately 4 percent to U.S. Retail Coffee Market
segment net sales in the third quarter of 2011. Volume decreased 3
percent for the Folgers® brand while Dunkin’ Donuts® packaged
coffee increased 8 percent in the third quarter of 2011, compared to
2010.
U.S.
Retail Coffee Market segment profit increased 19 percent in the third quarter of
2011, compared to the third quarter of 2010. Green coffee costs were
significantly higher in the third quarter of 2011, compared to the third quarter
of 2010, but were offset by previously announced price increases and favorable
sales mix. Promotional spending was up for the third quarter of 2011
compared to 2010, but at an overall lower rate during the Fall Bake and Holiday
period while marketing expenses decreased. As a result, segment
profit margin was 28.5 percent in 2011, compared to 28.1 percent in
2010. The Company expects to recognize higher green coffee
costs in the fourth quarter and, as a result, announced a 10 percent price
increase in early February.
U.S. Retail Consumer Market
The U.S.
Retail Consumer Market segment net sales increased 5 percent while volume
increased 7 percent, excluding the effect of potato products divested in the
fourth quarter of 2010. Net sales include the impact of a peanut
butter price reduction of 5 percent taken earlier in the fiscal
year. Volume gains were realized in Jif® peanut butter, Smucker’s® fruit spreads, and
Hungry Jack® pancake
mixes and syrup. Reported segment net sales were flat and volume
increased 3 percent, respectively, for the third quarter of 2011, compared to
the third quarter of 2010, reflecting the divested potato products.
The U.S.
Retail Consumer Market segment profit increased 9 percent for the
third quarter of 2011, compared to the third quarter in 2010, due to a decrease
in supply chain and certain raw material costs, primarily
peanuts. These more than offset a 5 percent increase in segment
marketing expense during the third quarter of 2011. Segment profit
margin for the quarter improved significantly from 24.2 percent in the third
quarter of 2010, to 26.4 percent in 2011.
Page
5
U.S. Retail Oils and Baking Market
Net sales
and volume in the U.S. Retail Oils and Baking Market segment increased 4 percent
and 3 percent, respectively, for the third quarter of 2011, compared to
2010. Net sales for the Crisco® brand increased 14
percent, on volume gains of 27 percent in the third quarter of 2011, compared to
2010, reflecting the impact of the price decline taken earlier in the fiscal
year. While net sales were flat, Pillsbury® baking volume
declined 9 percent resulting from a combination of planned reductions in
lower-margin products, and a continuing competitive and promotional
environment. Volume also declined in branded canned milk in the third
quarter of 2011, compared to 2010.
The U.S.
Retail Oils and Baking Market segment profit decreased 12 percent for the
third quarter of 2011, compared to the third quarter of 2010, reflecting the
pricing actions taken in response to competitive dynamics. Also,
higher costs were realized for milk, sugar, and soybean oil. Segment
profit margin decreased from 14.7 percent in the third quarter of 2010, to 12.4
percent in 2011.
Special
Markets
Net sales
in the Special Markets segment increased 7 percent in the third quarter of 2011,
compared to 2010. Excluding foreign exchange, net sales increased 4
percent over the same time period. Volume increased 7 percent in the
third quarter of 2011, compared to 2010, driven by gains in the natural foods,
pickles, baking, and coffee categories.
Special
Markets segment profit decreased 8 percent and profit margin declined to 12.3
percent from 14.2 percent for the third quarter of 2011, compared to
2010. Impairment charges of $17.2 million related to Europe’s
Best® intangible assets in Canada were recorded in the third quarter
of 2011, compared to $7.3 million in the third quarter of 2010. The
incremental charge of $9.9 million reduced segment profit margin by 4.2
percentage points.
Other
Financial Results and Measures
Cash
provided by operations was $374.8 million for the third quarter of 2011,
compared to $323.8 million in the third quarter of 2010, reflecting the
completion of the Company’s key promotional periods. The significant
cash generated in the third quarter of 2011 is consistent with the Company’s
expectations, whereby, cash provided by operations in the second half of the
fiscal year typically exceeds the amount in the first half of the year, upon
completion of the Company’s key Fall Bake and Holiday promotional
periods.
Page
6
During
the third quarter of 2011, the Company completed the repurchase of 3.7
million common shares available under previous Board of Directors’
authorizations utilizing $240.0 million of cash on hand. In January
2011, the Board of Directors authorized up to an additional five million common
shares, all of which remain available for repurchase.
For the
third quarter of 2011, earnings before interest, taxes, depreciation, and
amortization (“EBITDA”) were $275.3 million, or 21.0 percent of net
sales, compared to $257.4 million, or 21.3 percent of net sales, in
the third quarter of 2010, an increase of 7 percent. For the
first nine months of 2011, EBITDA was $795.9 million, or 21.9 percent of net
sales, compared to $745.8 million, or 21.1 percent of net sales, for the first
nine months of 2010, also an increase of 7 percent.
Outlook
For
fiscal 2011, net sales are expected to increase 4 percent compared to the prior
year. The increase from the Company’s previous expectation reflects
further price increases taken during the third quarter. Non-GAAP
income per diluted share is expected to range from $4.60 to
$4.65. This range includes the impact of third quarter impairment
charges of $0.10 per diluted share, but excludes special project costs of $0.65
to $0.70 per diluted share. Previously the range was $4.55 to $4.65,
excluding special project costs of $0.70 to $0.75 per diluted
share. The additional five million common shares authorized for
repurchase have not been factored into this range.
Page
7
Conference
Call
The
Company will conduct an earnings conference call and webcast
today, Thursday, February 17, 2011 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 webcast, an audio replay will be available
following the call and can be accessed by dialing 888-203-1112 or 719-457-0820,
with a pass code of 4716986, and will be available until Thursday, February
24, 2011.
Non-GAAP
Measures
The
Company uses non-GAAP measures including net sales, excluding divestitures and
foreign exchange rate impact; gross profit, operating income, income, and income
per diluted share, excluding restructuring and merger and integration costs;
income and income per diluted share, excluding restructuring, merger and
integration costs, and impairment charges; EBITDA; adjusted 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 non-GAAP measures to
the comparable GAAP items for the current and prior year quarter and
year-to-date period 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 help families create memorable mealtime
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®, White Lily® and Martha White® in the United
States, along with Robin
Hood®, Five
Roses®, Carnation®, Europe’s Best® 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. The Company has appeared on FORTUNE Magazine's list of the 100 Best
Companies to Work For in the United States 13 times, ranking number one in 2004.
For more information about the Company, visit www.smuckers.com.
Page
8
The
J. M. Smucker Company is the owner of all trademarks, except Pillsbury®, the Barrelhead logo and the
Doughboy character are trademarks of The Pillsbury Company, LLC, used under
license; Carnation® is a trademark of
Société des Produits Nestlé S.A., used under license; and Dunkin’ Donuts® is a registered
trademark of DD IP Holder, LLC, used under license. Borden® and Elsie are
trademarks used under license.
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.
Page
9
The
J. M. Smucker Company Forward-Looking Language
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, and peanuts, are procured and the related
impact on costs;
|
|
·
|
risks
associated with hedging, 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 price
changes;
|
|
·
|
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
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 safety concerns, involving either the Company 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 and the ability to manage and maintain key
relationships;
|
|
·
|
the
loss of significant customers or 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;
|
|
·
|
the
ability of the Company to obtain any required
financing;
|
|
·
|
the
timing and amount of capital expenditures 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;
|
Page
10
|
·
|
the
impact of new or changes to existing governmental laws and regulations or
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
|
|
·
|
the
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 and proxy
materials.
|
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.
Contacts:
The J. M.
Smucker Company
(330)
682-3000
Investors:
Sonal
Robinson
Vice
President, Investor Relations
Media:
Maribeth
Badertscher
Vice
President, Corporate Communications
Page
11
The J. M.
Smucker Company
Unaudited
Condensed Consolidated Statements of Income
|
Three Months Ended January 31,
|
Nine Months Ended January 31,
|
|||||||||||||||||||||||
|
2011
|
2010
|
% Increase
(Decrease)
|
2011
|
2010
|
% Increase
(Decrease)
|
|||||||||||||||||||
|
(Dollars in thousands, except per share data)
|
||||||||||||||||||||||||
|
Net sales
|
$ | 1,312,351 | $ | 1,205,939 | 9 | % | $ | 3,638,576 | $ | 3,536,210 | 3 | % | ||||||||||||
|
Cost
of products sold
|
821,086 | 747,635 | 10 | % | 2,222,681 | 2,179,627 | 2 | % | ||||||||||||||||
|
Cost
of products sold - restructuring
|
16,851 | - | n/m | 38,376 | - | n/m | ||||||||||||||||||
|
Gross
Profit
|
474,414 | 458,304 | 4 | % | 1,377,519 | 1,356,583 | 2 | % | ||||||||||||||||
|
Gross
margin
|
36.1 | % | 38.0 | % | 37.9 | % | 38.4 | % | ||||||||||||||||
|
Selling,
distribution, and administrative expenses
|
214,325 | 214,411 | (0 | )% | 640,407 | 648,573 | (1 | )% | ||||||||||||||||
|
Amortization
|
18,515 | 18,570 | (0 | )% | 55,513 | 55,259 | 0 | % | ||||||||||||||||
|
Impairment
charges
|
17,155 | 9,807 | 75 | % | 17,155 | 9,807 | 75 | % | ||||||||||||||||
|
Merger
and integration costs
|
2,746 | 4,672 | (41 | )% | 8,175 | 29,296 | (72 | )% | ||||||||||||||||
|
Other
restructuring costs
|
8,414 | - | n/m | 34,863 | - | n/m | ||||||||||||||||||
|
Other
operating expense – net
|
297 | 978 | (70 | )% | 3,241 | 3,742 | (13 | )% | ||||||||||||||||
|
Operating
Income
|
212,962 | 209,866 | 1 | % | 618,165 | 609,906 | 1 | % | ||||||||||||||||
|
Operating
margin
|
16.2 | % | 17.4 | % | 17.0 | % | 17.2 | % | ||||||||||||||||
|
Interest
income
|
779 | 310 | 151 | % | 1,784 | 2,367 | (25 | )% | ||||||||||||||||
|
Interest
expense
|
(18,132 | ) | (14,236 | ) | 27 | % | (53,176 | ) | (50,660 | ) | 5 | % | ||||||||||||
|
Other
income – net
|
170 | 1,221 | (86 | )% | 487 | 1,784 | (73 | )% | ||||||||||||||||
|
Income
Before Income Taxes
|
195,779 | 197,161 | (1 | )% | 567,260 | 563,397 | 1 | % | ||||||||||||||||
|
Income
taxes
|
63,784 | 61,682 | 3 | % | 182,658 | 189,865 | (4 | )% | ||||||||||||||||
|
Net
Income
|
$ | 131,995 | $ | 135,479 | (3 | )% | $ | 384,602 | $ | 373,532 | 3 | % | ||||||||||||
|
Net
income per common share
|
$ | 1.12 | $ | 1.14 | (2 | )% | $ | 3.23 | $ | 3.14 | 3 | % | ||||||||||||
|
Net
income per common share– assuming dilution
|
$ | 1.11 | $ | 1.14 | (3 | )% | $ | 3.23 | $ | 3.14 | 3 | % | ||||||||||||
|
Dividends
declared per common share
|
$ | 0.44 | $ | 0.35 | 26 | % | $ | 1.24 | $ | 1.05 | 18 | % | ||||||||||||
|
Weighted-average
shares outstanding
|
118,331,034 | 119,069,183 | (1 | )% | 119,047,986 | 118,896,672 | 0 | % | ||||||||||||||||
|
Weighted-average
shares outstanding – assuming dilution
|
118,434,280 | 119,216,915 | (1 | )% | 119,172,388 | 119,021,196 | 0 | % | ||||||||||||||||
Page
12
The J. M.
Smucker Company
Unaudited
Condensed Consolidated Balance Sheets
|
January 31, 2011
|
April 30, 2010
|
|||||||
|
(Dollars
in thousands)
|
||||||||
|
Assets
|
||||||||
|
Current
Assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 549,583 | $ | 283,570 | ||||
|
Trade
receivables
|
289,548 | 238,867 | ||||||
|
Inventories
|
735,275 | 654,939 | ||||||
|
Marketable
securities
|
38,599 | - | ||||||
|
Other
current assets
|
76,055 | 46,254 | ||||||
|
Total
Current Assets
|
1,689,060 | 1,223,630 | ||||||
|
Property,
Plant, and Equipment, Net
|
841,067 | 858,313 | ||||||
|
Other
Noncurrent Assets:
|
||||||||
|
Goodwill
|
2,808,684 | 2,807,730 | ||||||
|
Other
intangible assets, net
|
2,955,305 | 3,026,515 | ||||||
|
Other
noncurrent assets
|
64,632 | 58,665 | ||||||
|
Total
Other Noncurrent Assets
|
5,828,621 | 5,892,910 | ||||||
| $ | 8,358,748 | $ | 7,974,853 | |||||
|
Liabilities
and Shareholders' Equity
|
||||||||
|
Current
Liabilities:
|
||||||||
|
Accounts
payable
|
$ | 174,882 | $ | 179,509 | ||||
|
Current
portion of long-term debt
|
- | 10,000 | ||||||
|
Other
current liabilities
|
247,875 | 289,388 | ||||||
|
Total
Current Liabilities
|
422,757 | 478,897 | ||||||
|
Noncurrent
Liabilities:
|
||||||||
|
Long-term
debt, net of current portion
|
1,300,000 | 900,000 | ||||||
|
Other
noncurrent liabilities
|
1,272,690 | 1,269,636 | ||||||
|
Total
Noncurrent Liabilities
|
2,572,690 | 2,169,636 | ||||||
|
Shareholders'
Equity
|
5,363,301 | 5,326,320 | ||||||
| $ | 8,358,748 | $ | 7,974,853 | |||||
Page
13
The J. M.
Smucker Company
Unaudited
Condensed Consolidated Statements of Cash Flow
|
Three Months Ended January 31,
|
Nine Months Ended January 31,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
(Dollars
in thousands)
|
||||||||||||||||
|
Operating
Activities
|
||||||||||||||||
|
Net
income
|
$ | 131,995 | $ | 135,479 | $ | 384,602 | $ | 373,532 | ||||||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||||||||
|
Depreciation
|
26,829 | 27,741 | 83,475 | 78,889 | ||||||||||||
|
Depreciation
- restructuring
|
16,823 | - | 38,263 | - | ||||||||||||
|
Amortization
|
18,515 | 18,570 | 55,513 | 55,259 | ||||||||||||
|
Impairment
charges
|
17,155 | 9,807 | 17,155 | 9,807 | ||||||||||||
|
Share-based
compensation expense
|
5,718 | 5,698 | 17,986 | 18,796 | ||||||||||||
|
Other
noncash restructuring charges
|
1,619 | - | 6,986 | - | ||||||||||||
|
Loss
on sale of assets - net
|
784 | 1,267 | 1,811 | 2,888 | ||||||||||||
|
Working
capital
|
155,396 | 125,200 | (211,411 | ) | (27,597 | ) | ||||||||||
|
Net
Cash Provided by Operating Activities
|
374,834 | 323,762 | 394,380 | 511,574 | ||||||||||||
|
Investing
Activities
|
||||||||||||||||
|
Additions
to property, plant, and equipment
|
(49,060 | ) | (23,231 | ) | (111,133 | ) | (112,664 | ) | ||||||||
|
Purchases
of marketable securities
|
(18,600 | ) | - | (75,637 | ) | - | ||||||||||
|
Sale
and maturities of marketable securities
|
28,100 | - | 37,100 | 13,519 | ||||||||||||
|
Other
- net
|
4,553 | (2 | ) | 4,903 | (820 | ) | ||||||||||
|
Net
Cash Used for Investing Activities
|
(35,007 | ) | (23,233 | ) | (144,767 | ) | (99,965 | ) | ||||||||
|
Financing
Activities
|
||||||||||||||||
|
Repayments
of long-term debt
|
- | (200,000 | ) | (10,000 | ) | (275,000 | ) | |||||||||
|
Repayment
of bank note payable
|
- | (350,000 | ) | - | (350,000 | ) | ||||||||||
|
Proceeds
from long-term debt
|
- | - | 400,000 | - | ||||||||||||
|
Quarterly
dividends paid
|
(47,732 | ) | (41,593 | ) | (143,065 | ) | (124,586 | ) | ||||||||
|
Purchase
of treasury shares
|
(242,182 | ) | (206 | ) | (247,329 | ) | (5,431 | ) | ||||||||
|
Other
- net
|
10,386 | 6,075 | 14,962 | 8,033 | ||||||||||||
|
Net
Cash (Used for) Provided by Financing Activities
|
(279,528 | ) | (585,724 | ) | 14,568 | (746,984 | ) | |||||||||
|
Effect
of exchange rate changes
|
1,821 | 1,048 | 1,832 | 4,243 | ||||||||||||
|
Net
increase (decrease) in cash and cash equivalents
|
62,120 | (284,147 | ) | 266,013 | (331,132 | ) | ||||||||||
|
Cash
and cash equivalents at beginning of period
|
487,463 | 409,708 | 283,570 | 456,693 | ||||||||||||
|
Cash
and cash equivalents at end of period
|
$ | 549,583 | $ | 125,561 | $ | 549,583 | $ | 125,561 | ||||||||
( )
Denotes use of cash
Page
14
The J. M.
Smucker Company
Unaudited
Non-GAAP Measures
|
Three Months Ended January 31,
|
Nine Months Ended January 31,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
(Dollars
in thousands, except per share data)
|
||||||||||||||||
|
Gross
profit before restructuring and merger and integration costs (1)
|
$ | 491,265 | $ | 458,304 | $ | 1,415,895 | $ | 1,356,583 | ||||||||
|
%
of net sales
|
37.4 | % | 38.0 | % | 38.9 | % | 38.4 | % | ||||||||
|
Operating
income before restructuring and merger and integration costs (2)
|
$ | 240,973 | $ | 214,538 | $ | 699,579 | $ | 639,202 | ||||||||
|
%
of net sales
|
18.4 | % | 17.8 | % | 19.2 | % | 18.1 | % | ||||||||
|
Income
before restructuring and merger and integration costs: (3)
|
||||||||||||||||
|
Income
|
$ | 150,880 | $ | 138,896 | $ | 439,801 | $ | 392,955 | ||||||||
|
Income
per common share — assuming dilution
|
$ | 1.27 | $ | 1.17 | $ | 3.69 | $ | 3.30 | ||||||||
|
(1) Reconciliation
to gross profit:
|
||||||||||||||||
|
Gross
profit
|
$ | 474,414 | $ | 458,304 | $ | 1,377,519 | $ | 1,356,583 | ||||||||
|
Cost
of products sold - restructuring
|
16,851 | - | 38,376 | - | ||||||||||||
|
Gross
profit before restructuring and merger and integration
costs
|
$ | 491,265 | $ | 458,304 | $ | 1,415,895 | $ | 1,356,583 | ||||||||
|
(2)
Reconciliation to operating income:
|
||||||||||||||||
|
Operating
income
|
$ | 212,962 | $ | 209,866 | $ | 618,165 | $ | 609,906 | ||||||||
|
Merger
and integration costs
|
2,746 | 4,672 | 8,175 | 29,296 | ||||||||||||
|
Cost
of products sold - restructuring
|
16,851 | - | 38,376 | - | ||||||||||||
|
Other
restructuring costs
|
8,414 | - | 34,863 | - | ||||||||||||
|
Operating
income before restructuring and merger and integration
costs
|
$ | 240,973 | $ | 214,538 | $ | 699,579 | $ | 639,202 | ||||||||
|
(3)
Reconciliation to net income:
|
||||||||||||||||
|
Income
before income taxes
|
$ | 195,779 | $ | 197,161 | $ | 567,260 | $ | 563,397 | ||||||||
|
Merger
and integration costs
|
2,746 | 4,672 | 8,175 | 29,296 | ||||||||||||
|
Cost
of products sold - restructuring
|
16,851 | - | 38,376 | - | ||||||||||||
|
Other
restructuring costs
|
8,414 | - | 34,863 | - | ||||||||||||
|
Income
before income taxes, restructuring, and merger and integration
costs
|
223,790 | 201,833 | 648,674 | 592,693 | ||||||||||||
|
Income
taxes, as adjusted
|
72,910 | 62,937 | 208,873 | 199,738 | ||||||||||||
|
Income
before restructuring and merger and integration costs
|
$ | 150,880 | $ | 138,896 | $ | 439,801 | $ | 392,955 | ||||||||
Page
15
The J. M.
Smucker Company
Unaudited
Non-GAAP Measures
|
Three Months Ended January 31,
|
Nine Months Ended January 31,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
(Dollars
in thousands, except per share data)
|
||||||||||||||||
|
Income
before restructuring, merger and integration costs, and impairment
charges: (4)
|
||||||||||||||||
|
Income
|
$ | 162,511 | $ | 145,398 | $ | 451,432 | $ | 399,457 | ||||||||
|
Income
per common share — assuming dilution
|
$ | 1.37 | $ | 1.22 | $ | 3.79 | $ | 3.36 | ||||||||
|
Earnings
before interest, taxes, depreciation, and amortization
(5)
|
$ | 275,299 | $ | 257,398 | $ | 795,903 | $ | 745,838 | ||||||||
|
%
of net sales
|
21.0 | % | 21.3 | % | 21.9 | % | 21.1 | % | ||||||||
|
Free
cash flow (6)
|
$ | 325,774 | $ | 300,531 | $ | 283,247 | $ | 398,910 | ||||||||
|
(4) Reconciliation
to net income:
|
||||||||||||||||
|
Income
before income taxes
|
$ | 195,779 | $ | 197,161 | $ | 567,260 | $ | 563,397 | ||||||||
|
Merger
and integration costs
|
2,746 | 4,672 | 8,175 | 29,296 | ||||||||||||
|
Cost
of products sold - restructuring
|
16,851 | - | 38,376 | - | ||||||||||||
|
Other
restructuring costs
|
8,414 | - | 34,863 | - | ||||||||||||
|
Impairment
charges
|
17,155 | 9,807 | 17,155 | 9,807 | ||||||||||||
|
Income
before income taxes, restructuring, merger and integration costs, and
impairment charges
|
240,945 | 211,640 | 665,829 | 602,500 | ||||||||||||
|
Income
taxes, as adjusted
|
78,434 | 66,242 | 214,397 | 203,043 | ||||||||||||
|
Income
before restructuring, merger and integration costs, and impairment
charges
|
$ | 162,511 | $ | 145,398 | $ | 451,432 | $ | 399,457 | ||||||||
|
(5)
Reconciliation to net income:
|
||||||||||||||||
|
Income
before income taxes
|
$ | 195,779 | $ | 197,161 | $ | 567,260 | $ | 563,397 | ||||||||
|
Interest
income
|
(779 | ) | (310 | ) | (1,784 | ) | (2,367 | ) | ||||||||
|
Interest
expense
|
18,132 | 14,236 | 53,176 | 50,660 | ||||||||||||
|
Depreciation
|
26,829 | 27,741 | 83,475 | 78,889 | ||||||||||||
|
Depreciation
- restructuring
|
16,823 | - | 38,263 | - | ||||||||||||
|
Amortization
|
18,515 | 18,570 | 55,513 | 55,259 | ||||||||||||
|
Earnings
before interest, taxes, depreciation, and amortization
|
$ | 275,299 | $ | 257,398 | $ | 795,903 | $ | 745,838 | ||||||||
|
Merger
and integration costs
|
2,746 | 4,672 | 8,175 | 29,296 | ||||||||||||
|
Other
cost of products sold - restructuring (7)
|
28 | - | 113 | - | ||||||||||||
|
Other
restructuring costs
|
8,414 | - | 34,863 | - | ||||||||||||
|
Share-based
compensation expense
|
4,495 | 4,631 | 14,803 | 14,452 | ||||||||||||
|
Adjusted
earnings before interest, taxes, depreciation, and
amortization
|
$ | 290,982 | $ | 266,701 | $ | 853,857 | $ | 789,586 | ||||||||
|
%
of net sales
|
22.2 | % | 22.1 | % | 23.5 | % | 22.3 | % | ||||||||
|
(6)
Reconciliation to cash provided by operating activities:
|
||||||||||||||||
|
Cash
provided by operating activities
|
$ | 374,834 | $ | 323,762 | $ | 394,380 | $ | 511,574 | ||||||||
|
Additions
to property, plant, and equipment
|
(49,060 | ) | (23,231 | ) | (111,133 | ) | (112,664 | ) | ||||||||
|
Free
cash flow
|
$ | 325,774 | $ | 300,531 | $ | 283,247 | $ | 398,910 | ||||||||
(7)
Excludes accelerated depreciation charges included in cost of products sold -
restructuring.
The
Company uses non-GAAP measures including net sales, excluding divestitures and
foreign exchange rate impact; gross profit, operating income, income, and income
per diluted share, excluding restructuring and merger and integration costs;
income and income per diluted share, excluding restructuring, merger and
integration costs, and impairment charges; earnings before interest, taxes,
depreciation, and amortization ("EBITDA"); adjusted 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.
Page
16
The J. M.
Smucker Company
Unaudited
Reportable Segments
|
Three Months Ended January 31,
|
Nine Months Ended January 31,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||
|
Net
sales:
|
||||||||||||||||
|
U.S.
Retail Coffee Market
|
$ | 554,667 | $ | 471,463 | $ | 1,425,524 | $ | 1,282,794 | ||||||||
|
U.S.
Retail Consumer Market
|
273,549 | 273,837 | 825,388 | 854,929 | ||||||||||||
|
U.S.
Retail Oils and Baking Market
|
253,335 | 244,175 | 706,729 | 742,487 | ||||||||||||
|
Special
Markets
|
230,800 | 216,464 | 680,935 | 656,000 | ||||||||||||
|
Total
net sales
|
$ | 1,312,351 | $ | 1,205,939 | $ | 3,638,576 | $ | 3,536,210 | ||||||||
|
Segment
profit:
|
||||||||||||||||
|
U.S.
Retail Coffee Market
|
$ | 158,093 | $ | 132,617 | $ | 419,074 | $ | 375,634 | ||||||||
|
U.S.
Retail Consumer Market
|
72,242 | 66,178 | 217,946 | 202,813 | ||||||||||||
|
U.S.
Retail Oils and Baking Market
|
31,515 | 35,919 | 94,956 | 106,997 | ||||||||||||
|
Special
Markets
|
28,293 | 30,686 | 112,571 | 97,383 | ||||||||||||
|
Total
segment profit
|
$ | 290,143 | $ | 265,400 | $ | 844,547 | $ | 782,827 | ||||||||
|
Interest
income
|
779 | 310 | 1,784 | 2,367 | ||||||||||||
|
Interest
expense
|
(18,132 | ) | (14,236 | ) | (53,176 | ) | (50,660 | ) | ||||||||
|
Share-based
compensation expense
|
(4,495 | ) | (4,631 | ) | (14,803 | ) | (14,452 | ) | ||||||||
|
Merger
and integration costs
|
(2,746 | ) | (4,672 | ) | (8,175 | ) | (29,296 | ) | ||||||||
|
Cost
of products sold - restructuring
|
(16,851 | ) | - | (38,376 | ) | - | ||||||||||
|
Other
restructuring costs
|
(8,414 | ) | - | (34,863 | ) | - | ||||||||||
|
Corporate
administrative expense
|
(44,675 | ) | (46,231 | ) | (130,165 | ) | (129,173 | ) | ||||||||
|
Other
income - net
|
170 | 1,221 | 487 | 1,784 | ||||||||||||
|
Income
before income taxes
|
$ | 195,779 | $ | 197,161 | $ | 567,260 | $ | 563,397 | ||||||||
|
Segment
profit margin:
|
||||||||||||||||
|
U.S.
Retail Coffee Market
|
28.5 | % | 28.1 | % | 29.4 | % | 29.3 | % | ||||||||
|
U.S.
Retail Consumer Market
|
26.4 | % | 24.2 | % | 26.4 | % | 23.7 | % | ||||||||
|
U.S.
Retail Oils and Baking Market
|
12.4 | % | 14.7 | % | 13.4 | % | 14.4 | % | ||||||||
|
Special
Markets
|
12.3 | % | 14.2 | % | 16.5 | % | 14.8 | % | ||||||||
Page
17