THE JM SMUCKER COMPANY 
By
First Quarter Results
Three months ended
July 31,
2008 2007 % Increase
(Dollars in millions, except per share data)
Net sales $663.7 $561.5 18%
Net income:
Income $42.3 $40.8 4%
Income per diluted share $0.77 $0.71 8%
Net sales increased 18 percent in the first quarter of 2009 compared to
the first quarter of 2008 as sales growth was broad-based with all major
brands contributing. In addition, the Carnation(R),
The strength of the Company's brands made it possible to successfully implement the price increases necessary to offset rising commodity costs. While pricing was the primary driver of the sales increase, volume gains were realized in several categories including Smucker's(R) fruit spreads and Uncrustables(R) sandwiches, Pillsbury(R) baking mixes and frostings, and Hungry Jack(R) potatoes and pancakes. Volume declines were primarily limited to oils and peanut butter, which were anticipated, resulting in a net tonnage decrease of approximately 4 percent.
Net income per diluted share for the quarter was
"We delivered good sales and earnings growth this quarter, establishing
momentum as we enter the Back-to-School and Fall Bake periods," commented
"We look forward to adding another number one brand with the merger of the
Folgers coffee business into Smucker," added
The Company uses income and income per diluted share, excluding restructuring and merger and integration costs, as key measures of results of operations 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 results excluding such charges is consistent with the way management internally evaluates its businesses, facilitates the comparison of past and present operations, and provides management a more comprehensive understanding of the financial results. A reconciliation of non-GAAP measures to net income for the current quarter is included in the "Unaudited Financial Highlights" table.
Margins
Three months ended
July 31,
2008 2007
(% of net sales)
Gross profit 31.3% 33.1%
Selling, distribution, and administrative expenses:
Marketing and selling 10.2% 10.7%
Distribution 3.5% 3.4%
General and administrative 6.2% 6.7%
19.9% 20.8%
Restructuring and merger and integrations costs 0.6% 0.1%
Other operating expense (income) 0.0% (0.3%)
Operating income 10.8% 12.5%
The impact of price increases taken to date has offset higher raw material
costs, predominantly soybean oil, peanuts and wheat, contributing to a
Selling, distribution, and administrative ("SD&A") expenses increased 13 percent for the first quarter of 2009 compared to 2008, resulting primarily from increased marketing investment, and distribution and amortization expenses. However, most SD&A expenses, particularly corporate overhead, increased at a lesser rate than net sales resulting in an overall decrease in SD&A from 20.8 percent of net sales to 19.9 percent, providing some offset to the decline in gross margin.
Operating income increased 2 percent compared to the first quarter of
2008, and decreased from 12.5 percent to 10.8 percent of net sales.
Restructuring and merger and integration costs were
Other
The effective tax rate decreased to 33.3 percent in the first quarter of
2009, from 36.1 percent in the comparable period in 2008. In the first
quarter of 2008, the Company's divestiture of its industrial ingredient
business in
Segment Performance
Net sales Three months ended July 31,
2008 2007 % Increase
(Dollars in millions)
U.S. retail market $472.1 $418.2 13%
Special markets $191.5 $143.4 34%
U.S. Retail Market
U.S. retail market segment net sales for the quarter were up 13 percent. Net sales in the consumer strategic business area increased 11 percent, with Smucker's fruit spreads, toppings and Uncrustables sandwiches, Jif(R) and Hungry Jack all up. All major categories of the consumer business area were up in volume, except for peanut butter. Net sales in the consumer oils and baking strategic business area were up 15 percent, due to price increases taken over the course of fiscal 2008, and volume gains in baking mixes and frostings. These increases more than offset anticipated volume declines in oils.
Special Markets
Net sales in the first quarter for the special markets segment increased
34 percent. Net sales in the
Outlook
The Company confirmed its outlook for the year. The outlook includes the
impact of its previously announced agreement with The Procter & Gamble Company
("P&G") to merge P&G's Folgers coffee business with and into the Company.
Assuming the transaction closes in the fourth quarter of calendar 2008, the
Company's net sales are estimated to range from
Conference Call
The Company will conduct an earnings conference call and webcast today,
About The J. M. Smucker Company
The J. M. Smucker Company is the leading marketer and manufacturer of
fruit spreads, peanut butter, shortening and oils, ice cream toppings,
sweetened condensed milk, and health and natural foods beverages in
The J. M. Smucker Company is the owner of all trademarks, except Pillsbury is a trademark of The Pillsbury Company, used under license and Carnation is a trademark of Societe des Produits Nestle S.A., used under license.
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. You 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 Smucker following the transactions between P&G and Smucker (the "Transactions") and could cause actual results to differ materially from those expressed in the forward-looking statements: (i) volatility of commodity markets from which raw materials, particularly corn, wheat, soybean oil, milk and green coffee beans, are procured and the related impact on costs; (ii) the successful integration of P&G's coffee business (the "Coffee Business") with Smucker's business, operations and culture and the ability to realize synergies and other potential benefits of the Transactions within the time frames currently contemplated; (iii) crude oil price trends and their impact on transportation, energy, and packaging costs; (iv) the ability to successfully implement price changes; (v) the success and cost of introducing new products and the competitive response; (vi) the success and cost of marketing and sales programs and strategies intended to promote growth in Smucker's businesses, which will include the Coffee Business after the completion of the Transactions; (vii) general competitive activity in the market, including competitors' pricing practices and promotional spending levels; (viii) the concentration of certain of Smucker's businesses, which will include the Coffee Business after the completion of the Transactions, with key customers and the ability to manage and maintain key customer relationships; (ix) the loss of significant customers or a substantial reduction in orders from these customers or the bankruptcy of any such customer; (x) changes in consumer coffee preferences, and other factors affecting the Coffee Business, which will represent a substantial portion of Smucker's business after the completion of the Transactions; (xi) the ability of Smucker and Folgers to obtain any required financing; (xii) the timing and amount of Smucker's capital expenditures, restructuring, and merger and integration costs; (xiii) the outcome of current and future tax examinations and other tax matters, and their related impact on Smucker's tax positions; (xiv) foreign currency and interest rate fluctuations; (xv) other factors affecting share prices and capital markets generally; and (xvi) the other factors described under "Risk Factors" in the registration statements filed by Folgers and Smucker with the Securities and Exchange Commission and in the other reports and statements filed by Smucker with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and the preliminary proxy materials prepared in connection with the Folgers transaction.
You 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. None of Smucker, Folgers, P&G or any of their respective advisors assumes any obligation to update or revise these forward- looking statements to reflect new events or circumstances.
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 but
those registration statements have not become effective. Smucker has also
filed a proxy statement with the SEC that will be sent to the shareholders of
Smucker after it has been finalized. Shareholders are urged to read the proxy
statement and the prospectus included in the registration statements and any
other relevant documents when they become available, because they will contain
important information about Smucker, Folgers and the proposed transaction.
The proxy statement, prospectus and other documents relating to the proposed
transaction (when they are available) can be obtained free of charge from the
SEC's website at www.sec.gov. The documents (when they are available) can
also be obtained free of charge from Smucker upon written request to The J. M.
Smucker Company, Shareholder Relations, Strawberry Lane,
This communication is not a solicitation of a proxy from any security
holder of Smucker and shall not constitute an offer to sell or the
solicitation of an offer to buy securities, nor shall there be any sale of
securities in any jurisdiction in which such solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
such jurisdiction. However, P&G, Smucker and certain of their respective
directors and executive officers may be deemed to be participants in the
solicitation of proxies from shareholders in connection with the proposed
transaction under the rules of the SEC. Information about the directors and
executive officers of The J. M. Smucker Company may be found in its 2008
Annual Report on Form 10-K filed with the SEC on
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The J. M. Smucker Company
Unaudited Condensed Consolidated Statements of Income
Three Months Ended July 31,
2008 2007
(Dollars in thousands, except
per share data)
Net sales $663,657 $561,513
Cost of products sold 455,878 375,529
Gross Profit 207,779 185,984
Selling, distribution, and administrative expenses 131,884 116,750
Restructuring costs 519 313
Merger and integration costs 3,400 432
Other operating expense (income) - net 148 (1,686)
Operating Income 71,828 70,175
Interest income 1,338 3,495
Interest expense (10,744) (10,093)
Other income - net 1,025 246
Income Before Income Taxes 63,447 63,823
Income taxes 21,156 23,062
Net Income $42,291 $40,761
Net income per common share $0.78 $0.72
Net income per common share- assuming dilution $0.77 $0.71
Dividends declared per common share $0.32 $0.30
Weighted-average shares outstanding 54,282,700 56,645,611
Weighted-average shares outstanding - assuming
dilution 54,667,666 57,265,133
The J. M. Smucker Company
Unaudited Condensed Consolidated Balance Sheets
July 31, 2008 April 30, 2008
(Dollars in thousands)
Assets
Current Assets:
Cash and cash equivalents $142,699 $184,175
Trade receivables 182,693 162,426
Inventories 471,768 379,608
Other current assets 37,920 49,998
Total Current Assets 835,080 776,207
Property, Plant, and Equipment, Net 505,919 496,296
Other Noncurrent Assets:
Goodwill 1,149,494 1,132,476
Other intangible assets, net 632,914 614,000
Other assets 108,914 110,902
Total Other Noncurrent Assets 1,891,322 1,857,378
$3,232,321 $3,129,881
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $154,942 $119,844
Current portion of long-term debt 75,000 -
Other current liabilities 173,811 119,553
Total Current Liabilities 403,753 239,397
Noncurrent Liabilities:
Long-term debt, net of current portion 713,945 789,684
Other noncurrent liabilities 297,338 300,947
Total Noncurrent Liabilities 1,011,283 1,090,631
Shareholders' Equity, net 1,817,285 1,799,853
$3,232,321 $3,129,881
The J. M. Smucker Company
Unaudited Condensed Consolidated Statements of Cash Flow
Three Months Ended July 31,
2008 2007
(Dollars in thousands)
Operating Activities
Net income $42,291 $40,761
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 15,036 14,770
Amortization 1,471 121
Share-based compensation expense 2,799 2,826
Working capital (6,094) (48,851)
Net Cash Provided by Operating Activities 55,503 9,627
Investing Activities
Businesses acquired, net of cash acquired (55,593) (133,446)
Additions to property, plant, and equipment (22,197) (16,787)
Proceeds from sale of business - 3,407
Purchases of marketable securities - (144,705)
Other - net 1,694 2,931
Net Cash Used for Investing Activities (76,096) (288,600)
Financing Activities
Proceeds from long-term debt - 400,000
Repayments of long-term debt - (115,000)
Dividends paid (17,451) (17,014)
Purchase of treasury shares (3,356) (3,627)
Other - net 322 19,296
Net Cash (Used for) Provided by Financing Activities (20,485) 283,655
Effect of exchange rate changes (398) 1,861
Net (decrease) increase in cash and cash equivalents (41,476) 6,543
Cash and cash equivalents at beginning of period 184,175 200,119
Cash and cash equivalents at end of period $142,699 $206,662
The J. M. Smucker Company
Unaudited Financial Highlights
Three Months Ended July 31,
2008 2007
(Dollars in thousands, except
per share data)
Net sales $663,657 $561,513
Net income and net income per common share:
Net income $42,291 $40,761
Net income per common share -- assuming dilution $0.77 $0.71
Income before restructuring and merger and
integration costs: (1)
Income $44,903 $41,237
Income per common share -- assuming dilution $0.82 $0.72
(1) Reconciliation to net income:
Income before income taxes $63,447 $63,823
Merger and integration costs 3,400 432
Restructuring costs 519 313
Income before income taxes, restructuring, and
merger and integration costs 67,366 64,568
Income taxes 22,463 23,331
Income before restructuring and merger and
integration costs $44,903 $41,237
The Company uses income and income per diluted share, excluding restructuring and merger and integration costs, as key performance measures of results of operations 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 results excluding such charges is consistent with the way management internally evaluates its businesses, facilitates the comparison of past and present operations and provides management a more comprehensive understanding of the financial results.
The J. M. Smucker Company
Unaudited Reportable Segments
Three Months Ended July 31,
2008 2007
(Dollars in thousands)
Net sales:
U.S. retail market $472,141 $418,155
Special markets 191,516 143,358
Total net sales $663,657 $561,513
Segment profit:
U.S. retail market $87,861 $78,758
Special markets 20,738 21,636
Total segment profit $108,599 $100,394
Interest income 1,338 3,495
Interest expense (10,744) (10,093)
Amortization (1,471) (121)
Share-based compensation expense (2,799) (2,826)
Restructuring costs (519) (313)
Merger and integration costs (3,400) (432)
Corporate administrative expense (28,892) (28,131)
Other unallocated income 1,335 1,850
Income before income taxes $63,447 $63,823
SOURCE J. M. Smucker Company
