ORRVILLE, Ohio, Nov. 18, 2010 /PRNewswire-FirstCall/ -- The J. M. Smucker Company (NYSE: SJM) today announced results for the second quarter ended October 31, 2010, of its 2011 fiscal year.
Executive Summary
Three Months Ended October 31, --------------------------- % 2010 2009 Increase ---- ---- --------- (Decrease) ---------- (Dollars in millions, except per share data) Net sales $1,278.9 $1,278.7 0% Operating income $240.0 $231.2 4% % of net sales 18.8% 18.1% Net income: Income $149.7 $140.0 7% Income per diluted share $1.25 $1.18 6% EBITDA $297.4 $276.0 8%
Six Months Ended October 31, ---------------------------- % 2010 2009 Increase ---- ---- --------- (Decrease) ---------- (Dollars in millions, except per share data) Net sales $2,326.2 $2,330.3 (0%) Operating income $405.2 $400.0 1% % of net sales 17.4% 17.2% Net income: Income $252.6 $238.1 6% Income per diluted share $2.11 $2.00 6% EBITDA $520.6 $488.4 7%
-- Non-GAAP income per diluted share was $1.38 and $1.22 for the second quarters of 2011 and 2010, and $2.42 and $2.14 for the first six months of 2011 and 2010, respectively, an increase of 13 percent in both periods. Non-GAAP income per diluted share excludes restructuring and merger and integration costs ("special project costs") of $0.13 and $0.04 per diluted share, in the second quarters of 2011 and 2010, and $0.31 and $0.14 in the first six months of 2011 and 2010, respectively. -- Non-GAAP operating income was up 10 percent, and operating margin improved to 20.6 percent in the second quarter of 2011, compared to 18.7 percent in the second quarter of 2010. -- Results for the second quarter of 2011 include the impact of a lower effective tax rate of 32.5 percent, compared to 34.9 percent in the second quarter of 2010.
"We are pleased to deliver another quarter of strong earnings in this challenging economic environment," commented Tim Smucker, Chairman of the Board and Co-Chief Executive Officer. "Our team continues to take a long-term view of our business, focusing on the health of our brands, delivering value to our consumers, and managing the balance between volume growth, share of market gains, and profitability."
"Our long-term perspective in managing our business is backed by a strong financial position that provides the ability and flexibility to capitalize on opportunities that support our strategy," added Richard Smucker, Executive Chairman and Co-Chief Executive Officer. "As we look ahead, we anticipate that marketplace dynamics, including escalating commodity costs, will continue to present challenges. However, we are confident in the ability of our team to execute our strategy and address these obstacles."
Net Sales
Three Months Ended October 31, ------------------------------ 2010 2009 Increase % ---- ---- -------- --- (Decrease) ---------- (Dollars in millions) Net sales $1,278.9 $1,278.7 $0.2 0% Adjust for noncomparable items: Divestitures - (12.1) 12.1 1% Foreign exchange (4.9) - (4.9) (0%) ---- --- ---- ---- Net sales, excluding divestitures and foreign exchange $1,274.0 $1,266.6 $7.4 1% ======== ======== ==== ===
Six Months Ended October 31, ---------------------------- 2010 2009 Increase % ---- ---- -------- --- (Decrease) ---------- (Dollars in millions) Net sales $2,326.2 $2,330.3 $(4.1) (0%) Adjust for noncomparable items: Divestitures - (22.0) 22.0 1% Foreign exchange (11.6) - (11.6) (1%) ----- --- ----- ---- Net sales, excluding divestitures and foreign exchange $2,314.6 $2,308.3 $6.3 0% ======== ======== ==== ===
Net sales in the second quarter of 2011 were essentially equal to the second quarter of 2010, and increased 1 percent, excluding the impact of the potato products divestiture and foreign exchange. Overall volume declined 4 percent driven by the Company's U.S. Retail Oils and Baking Market segment brands and Folgers® coffee in the U.S. Retail Coffee Market segment. Volume gains were most significant across the Special Markets segment, while gains were also realized in Dunkin' Donuts® packaged coffee, Smucker's® fruit spreads, and Jif® peanut butter. The net impact of pricing contributed approximately 3 percent to net sales and the overall impact of sales mix was favorable.
Margins
Three Months Six Months Ended Ended ------------ ---------- October 31, October 31, ----------- ----------- 2010 2009 2010 2009 ---- ---- ---- ---- (% of net sales) Gross profit 38.7% 38.5% 38.8% 38.5% Selling, distribution, and administrative expenses: Marketing 5.8% 6.9% 6.2% 6.8% Selling 3.2% 3.2% 3.3% 3.2% Distribution 3.2% 3.2% 3.3% 3.3% General and administrative 5.2% 4.9% 5.5% 5.3% 17.4% 18.2% 18.3% 18.6% ==== ==== ==== ==== Amortization 1.4% 1.4% 1.6% 1.6% Other restructuring and merger and integration costs 0.9% 0.6% 1.4% 1.1% Other operating expense - net 0.2% 0.2% 0.1% 0.0% Operating Income 18.8% 18.1% 17.4% 17.2% ==== ==== ==== ====
Gross profit increased $2.4 million to 38.7 percent of net sales in the second quarter of 2011, from 38.5 percent in the second quarter of 2010. The second quarter of 2011 includes the impact of $12.1 million of restructuring charges in cost of products sold and $5.9 million of unrealized mark-to-market losses on derivative contracts. The impact of raw material and manufacturing costs on gross profit was mixed. Green coffee costs were significantly higher in the second quarter of 2011, compared to the second quarter of 2010. Pricing actions taken earlier in the year, relative to the recognition of higher green coffee costs, contributed to gross profit in the second quarter of 2011. The Company expects to recognize steadily higher green coffee costs during the remainder of the year. Higher costs were also realized for milk, sugar, and soybean oil while lower costs were recognized for peanuts and flour. The second quarter of 2010 had benefited from volume-related plant efficiencies.
Selling, distribution, and administrative expenses decreased 4 percent for the second quarter of 2011, compared to 2010, and decreased as a percentage of net sales from 18.2 percent to 17.4 percent. Compared to the second quarter of 2010, that included higher levels of investment spending in brand equity initiatives and new advertising, marketing expenses decreased 15 percent for the second quarter of 2011. A portion of the marketing expense decrease was reallocated to support promotional programs, primarily in the U.S. Retail Oils and Baking Market segment. Selling and distribution expenses in the second quarter of 2011 remained relatively even with 2010. General and administrative expenses were up 5 percent over the same period.
Operating income increased $8.8 million, or 4 percent, in the second quarter of 2011, compared to 2010, despite an increase in special project costs of approximately $15.0 million. Excluding the impact of special project costs in both periods, operating income increased $23.9 million, or 10 percent, and improved from 18.7 percent of net sales in 2010, to 20.6 percent in 2011.
Interest and Income Taxes
Interest expense increased $1.0 million during the second quarter of 2011, compared to 2010, as lower average debt outstanding was somewhat offset by modestly higher interest rates.
Income taxes decreased $3.0 million in the second quarter of 2011, compared to 2010, resulting in a quarterly effective tax rate of 32.5 percent in 2011, compared to 34.9 percent in 2010. The lower effective tax rate for the second quarter of 2011 primarily reflects benefits realized from an increased deduction related to U.S. manufacturing activities, compared to 2010, together with lower state income taxes.
Segment Performance
Three Months Ended October 31, --------------------------- % 2010 2009 Increase ---- ---- --------- (Decrease) ---------- (Dollars in millions) Net sales: U.S. Retail Coffee Market $477.3 $445.1 7% U.S. Retail Consumer Market * 272.6 290.1 (6%) U.S. Retail Oils and Baking Market 279.5 303.9 (8%) Special Markets 249.5 239.7 4% Segment profit: U.S. Retail Coffee Market $149.1 $131.9 13% U.S. Retail Consumer Market 74.3 70.5 5% U.S. Retail Oils and Baking Market 40.9 45.4 (10%) Special Markets 49.4 40.0 24% Segment profit margin: U.S. Retail Coffee Market 31.2% 29.6% U.S. Retail Consumer Market 27.3% 24.3% U.S. Retail Oils and Baking Market 14.6% 14.9% Special Markets 19.8% 16.7%
Six Months Ended October 31, ---------------------------- % 2010 2009 Increase ---- ---- --------- (Decrease) ---------- (Dollars in millions) Net sales: U.S. Retail Coffee Market $870.9 $811.3 7% U.S. Retail Consumer Market * 551.8 581.1 (5%) U.S. Retail Oils and Baking Market 453.4 498.3 (9%) Special Markets 450.1 439.5 2% Segment profit: U.S. Retail Coffee Market $261.0 $243.0 7% U.S. Retail Consumer Market 145.7 136.6 7% U.S. Retail Oils and Baking Market 63.4 71.1 (11%) Special Markets 84.3 66.7 26% Segment profit margin: U.S. Retail Coffee Market 30.0% 30.0% U.S. Retail Consumer Market 26.4% 23.5% U.S. Retail Oils and Baking Market 14.0% 14.3% Special Markets 18.7% 15.2%
* Net sales comparability for the U.S. Retail Consumer Market is impacted by the potato products divested in March 2010.
While the Company's four reportable segments remain the same for 2011, the calculation of segment profit has been modified 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.
U.S. Retail Coffee Market
The U.S. Retail Coffee Market segment net sales increased 7 percent in the second quarter of 2011, compared to the second quarter in 2010. Price increases totaling 13 percent were taken in 2011 to cover rising green coffee costs, but were partially offset by a 7 percent overall volume decline and additional promotional spending. Volume decreased in the Folgers® brand while Dunkin' Donuts® packaged coffee continued its double-digit growth. The introduction of Folgers Gourmet Selections® and Millstone® K-Cups® offerings during the quarter contributed approximately 2 percent to U.S. Retail Coffee Market segment net sales.
Green coffee costs were significantly higher in the second quarter of 2011, compared to the second quarter of 2010. Pricing actions taken earlier in the year, relative to higher green coffee costs realized during the second quarter, contributed to segment profit. The Company expects the impact of rising green coffee costs to accelerate during the remainder of the year. Marketing expenses decreased in the second quarter of 2011, compared to the second quarter of 2010 which included significant long-term investments in brand equity initiatives and new advertising. U.S. Retail Coffee Market segment profit increased 13 percent in the second quarter of 2011, compared to the second quarter of 2010 that included the benefit of volume-related plant efficiencies. Segment profit margin was 31.2 percent in 2011, compared to 29.6 percent in 2010.
U.S. Retail Consumer Market
The U.S. Retail Consumer Market segment net sales declined approximately 2 percent while volume increased 1 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 Smucker's® fruit spreads, Jif® peanut butter, and Smucker's® Snack'n Waffles® brand waffles, offsetting volume declines in Smucker's Uncrustables® sandwiches and toppings. Reported segment net sales and volume decreased 6 percent and 3 percent, respectively, for the second quarter of 2011, compared to the second quarter of 2010, reflecting the divested potato products.
The U.S. Retail Consumer Market segment profit increased 5 percent for the second quarter of 2011, compared to the second quarter in 2010, due to lower supply chain and raw material costs, primarily peanuts and corn sweetener, and a favorable sales mix that more than offset increased marketing. Segment profit margin for the quarter improved significantly from 24.3 percent in the second quarter of 2010, to 27.3 percent in 2011.
U.S. Retail Oils and Baking Market
Net sales and volume in the U.S. Retail Oils and Baking Market segment were down 8 percent and 10 percent, respectively, for the second quarter of 2011, compared to 2010. Pillsbury® flour and baking mixes volume was down double digits due to a combination of planned reductions in lower-margin products, and an unprecedented competitive and promotional environment. Following a price decline taken earlier in the year, Crisco® oils volume showed modest improvement, but was down 3 percent for the second quarter of 2011, compared to 2010.
The U.S. Retail Oils and Baking Market segment profit decreased 10 percent for the second quarter of 2011, compared to the second quarter of 2010. The impact of the sales decline, along with increases in milk, sugar, and soybean oil costs, and unrealized mark-to-market adjustments on commodity contracts contributed to the profit decrease. Segment profit margin decreased from 14.9 percent in the second quarter of 2010, to 14.6 percent in 2011.
Special Markets
Net sales in the Special Markets segment increased 4 percent in the second quarter of 2011, compared to 2010. Excluding foreign exchange, net sales increased 2 percent over the same time period. Volume increased 4 percent in the second quarter of 2011, compared to 2010, driven by gains in the natural foods, baking, and coffee categories. The impact of volume gains was partially offset by higher promotional spending.
Special Markets segment profit increased 24 percent and profit margin increased to 19.8 percent from 16.7 percent for the second quarter of 2011, compared to 2010, primarily due to coffee price increases taken earlier in the year, lower flour costs, and the favorable impact of sales mix associated with higher natural foods and coffee sales.
Other Financial Results and Measures
Cash provided by operations in the first six months of 2011 was $19.5 million, compared to $187.8 million in the same period in 2010. The decrease of $168.3 million in cash provided by operations in the first six months of 2011, compared to 2010, is primarily due to the timing of income tax payments made in 2011. The Company expects a significant use of cash during the first half of each fiscal year primarily due to the buildup of inventories to support the Fall Bake and Holiday period, and the additional increase of coffee inventory in advance of the Atlantic hurricane season. The Company anticipates cash provided by operations in the second half of the fiscal year to exceed the amount in the first half of the year upon completion of the Company's key promotional periods.
For the second quarter of 2011, earnings before interest, taxes, depreciation, and amortization ("EBITDA") were $297.4 million, or 23.3 percent of net sales, compared to $276.0 million, or 21.6 percent of net sales, in the second quarter of 2010, an increase of 8 percent. For the first six months of 2011, EBITDA was $520.6 million, or 22.4 percent of net sales, compared to $488.4 million, or 21.0 percent of net sales, for the first six months of 2010, an increase of 7 percent.
Outlook
For fiscal 2011, net sales are expected to increase in excess of 3 percent compared to the prior year, primarily due to pricing actions. Income per diluted share, excluding special project costs of $0.70 to $0.75 per diluted share, is expected to increase to a range of $4.55 to $4.65. Previously the range was $4.50 to $4.60, excluding special project costs of $0.55 to $0.60 per diluted share. Approximately $0.40 per diluted share of intangible asset amortization, a noncash expense item, is included in the range of income per diluted share for 2011. The Company currently has approximately 3.7 million common shares authorized for repurchase by its Board of Directors that has not been factored into its outlook.
Conference Call
The Company will conduct an earnings conference call and webcast today, Thursday, November 18, 2010, 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 5826472, and will be available until Thursday, November 25, 2010.
Non-GAAP Measures
The Company uses non-GAAP measures including net sales, excluding divestitures and foreign exchange rate impact; income, operating 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 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. 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 12 times, ranking number one in 2004. For more information about the Company, visit www.smuckers.com.
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 Societe des Produits Nestle S.A., used under license; and Dunkin' Donuts® is a registered trademark of DD IP Holder, LLC, used under license. Dunkin' Donuts® brand is licensed to The J. M. Smucker Company for packaged coffee products sold in retail environments like grocery stores, mass merchandisers, club stores, and drug stores. This information is not applicable to Dunkin' Donuts® coffee or other products for sale in Dunkin' Donuts® stores. Borden® and Elsie are trademarks used under license.
K-Cup® and K-Cups® are trademarks of Keurig, Incorporated.
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; -- 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.
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The J. M. Smucker Company Unaudited Condensed Consolidated Statements of Income
Three Months Ended October 31, ------------------------------ % 2010 2009 Increase ---- ---- --------- (Decrease) ---------- (Dollars in thousands, except per share data) Net sales $1,278,913 $1,278,745 0% Cost of products sold 772,171 786,495 (2%) Cost of products sold - restructuring 12,072 - n/m Gross Profit 494,670 492,250 0% Gross margin 38.7% 38.5% Selling, distribution, and administrative expenses 222,821 232,985 (4%) Amortization 18,501 18,312 1% Merger and integration costs 2,773 8,148 (66%) Other restructuring costs 8,345 - n/m Other operating expense - net 2,194 1,599 37% Operating Income 240,036 231,206 4% Operating margin 18.8% 18.1% Interest income 572 686 (17%) Interest expense (18,505) (17,473) 6% Other (expense) income - net (376) 583 (164%) Income Before Income Taxes 221,727 215,002 3% Income taxes 72,001 75,012 (4%) Net Income $149,726 $139,990 7% ======== ======== === Net income per common share $1.25 $1.18 6% ===== ===== === Net income per common share- assuming dilution $1.25 $1.18 6% ===== ===== === Dividends declared per common share $0.40 $0.35 14% ===== ===== === Weighted-average shares outstanding 119,512,001 118,956,181 0% =========== =========== === Weighted-average shares outstanding - assuming dilution 119,642,398 119,100,430 0% =========== =========== ===
Six Months Ended October 31, ---------------------------- % 2010 2009 Increase ---- ---- --------- (Decrease) ---------- (Dollars in thousands, except per share data) Net sales $2,326,225 $2,330,271 (0%) Cost of products sold 1,401,595 1,431,992 (2%) Cost of products sold - restructuring 21,525 - n/m Gross Profit 903,105 898,279 1% Gross margin 38.8% 38.5% Selling, distribution, and administrative expenses 426,082 434,162 (2%) Amortization 36,998 36,689 1% Merger and integration costs 5,429 24,624 (78%) Other restructuring costs 26,449 - n/m Other operating expense - net 2,944 2,764 7% Operating Income 405,203 400,040 1% Operating margin 17.4% 17.2% Interest income 1,005 2,057 (51%) Interest expense (35,044) (36,424) (4%) Other (expense) income - net 317 563 (44%) Income Before Income Taxes 371,481 366,236 1% Income taxes 118,874 128,183 (7%) Net Income $252,607 $238,053 6% ======== ======== === Net income per common share $2.12 $2.00 6% ===== ===== === Net income per common share- assuming dilution $2.11 $2.00 6% ===== ===== === Dividends declared per common share $0.80 $0.70 14% ===== ===== === Weighted-average shares outstanding 119,406,465 118,810,417 1% =========== =========== === Weighted-average shares outstanding - assuming dilution 119,541,445 118,923,337 1% =========== =========== ===
The J. M. Smucker Company Unaudited Condensed Consolidated Balance Sheets
October 31, April 30, 2010 2010 ------------ ---------- (Dollars in thousands) Assets Current Assets: Cash and cash equivalents $487,463 $283,570 Trade receivables 415,826 238,867 Inventories 822,614 654,939 Marketable securities 48,086 - Other current assets 80,197 46,254 ------ ------ Total Current Assets 1,854,186 1,223,630 Property, Plant, and Equipment, Net 841,095 858,313 Other Noncurrent Assets: Goodwill 2,807,418 2,807,730 Other intangible assets, net 2,989,374 3,026,515 Other noncurrent assets 61,277 58,665 ------ ------ Total Other Noncurrent Assets 5,858,069 5,892,910 $8,553,350 $7,974,853 ========== ========== Liabilities and Shareholders' Equity Current Liabilities: Accounts payable $194,194 $179,509 Current portion of long-term debt - 10,000 Other current liabilities 282,725 289,388 ------- ------- Total Current Liabilities 476,919 478,897 Noncurrent Liabilities: Long-term debt, net of current portion 1,300,000 900,000 Other noncurrent liabilities 1,272,422 1,269,636 --------- --------- Total Noncurrent Liabilities 2,572,422 2,169,636 Shareholders' Equity 5,504,009 5,326,320 --------- --------- $8,553,350 $7,974,853 ========== ==========
The J. M. Smucker Company Unaudited Condensed Consolidated Statements of Cash Flow
Six Months Ended October 31, ---------------- 2010 2009 ---- ---- (Dollars in thousands) Operating Activities Net income $252,607 $238,053 Adjustments to reconcile net income to net cash used for operating activities: Depreciation 56,646 51,148 Amortization 36,998 36,689 Share-based compensation expense 12,268 13,098 Noncash restructuring charges 26,807 - Loss on sale of assets - net 1,027 1,621 Working capital (366,807) (152,797) -------- -------- Net Cash Provided by Operating Activities 19,546 187,812 Investing Activities Additions to property, plant, and equipment (62,073) (89,433) Purchases of marketable securities (57,037) - Sale and maturities of marketable securities 9,000 13,519 Other - net 350 (818) --- ---- Net Cash Used for Investing Activities (109,760) (76,732) Financing Activities Repayments of long-term debt (10,000) (75,000) Proceeds from long-term debt 400,000 - Quarterly dividends paid (95,333) (82,993) Purchase of treasury shares (5,147) (5,225) Other - net 4,576 1,958 ----- ----- Net Cash Provided by (Used for) Financing Activities 294,096 (161,260) Effect of exchange rate changes 11 3,195 Net increase (decrease) in cash and cash equivalents 203,893 (46,985) Cash and cash equivalents at beginning of period 283,570 456,693 ------- ------- Cash and cash equivalents at end of period $487,463 $409,708 ======== ========
( ) Denotes use of cash
The J. M. Smucker Company Unaudited Non-GAAP Measures
Three Months Ended October 31, ------------------------------ 2010 2009 ---- ---- (Dollars in thousands, except per share data) Operating income before restructuring and merger and integration costs: (1) $263,226 $239,354 % of net sales 20.6% 18.7% Income before restructuring and merger and integration costs: (2) Income $165,284 $145,313 Income per common share --assuming dilution $1.38 $1.22 Income before restructuring, merger and integration costs, and amortization: (3) Income $177,735 $157,244 Income per common share --assuming dilution $1.49 $1.32 Reconciliation to operating (1) income: Operating income $240,036 $231,206 Merger and integration costs 2,773 8,148 Cost of products sold - restructuring 12,072 - Other restructuring costs 8,345 - Operating income before restructuring and merger and integration costs $263,226 $239,354 ======== ======== (2) Reconciliation to net income: Income before income taxes $221,727 $215,002 Merger and integration costs 2,773 8,148 Cost of products sold - restructuring 12,072 - Other restructuring costs 8,345 - Income before income taxes, restructuring, and merger and integration costs 244,917 223,150 Income taxes 79,633 77,837 Income before restructuring and merger and integration costs $165,284 $145,313 ======== ======== (3) Reconciliation to net income: Income before income taxes $221,727 $215,002 Merger and integration costs 2,773 8,148 Cost of products sold - restructuring 12,072 - Other restructuring costs 8,345 - Amortization 18,501 18,312 Income before income taxes, restructuring, merger and integration costs, and amortization 263,418 241,462 Income taxes 85,683 84,218 Income before restructuring, merger and integration costs, and amortization $177,735 $157,244 ======== ========
Six Months Ended October 31, ------------------------- 2010 2009 ---- ---- (Dollars in thousands, except per share data) Operating income before restructuring and merger and integration costs: (1) $458,606 $424,664 % of net sales 19.7% 18.2% Income before restructuring and merger and integration costs: (2) Income $288,921 $254,059 Income per common share -- assuming dilution $2.42 $2.14 Income before restructuring, merger and integration costs, and amortization: (3) Income $314,080 $277,906 Income per common share -- assuming dilution $2.63 $2.34 Reconciliation to operating (1) income: Operating income $405,203 $400,040 Merger and integration costs 5,429 24,624 Cost of products sold - restructuring 21,525 - Other restructuring costs 26,449 - Operating income before restructuring and merger and integration costs $458,606 $424,664 ======== ======== (2) Reconciliation to net income: Income before income taxes $371,481 $366,236 Merger and integration costs 5,429 24,624 Cost of products sold - restructuring 21,525 - Other restructuring costs 26,449 - Income before income taxes, restructuring, and merger and integration costs 424,884 390,860 Income taxes 135,963 136,801 Income before restructuring and merger and integration costs $288,921 $254,059 ======== ======== (3) Reconciliation to net income: Income before income taxes $371,481 $366,236 Merger and integration costs 5,429 24,624 Cost of products sold - restructuring 21,525 - Other restructuring costs 26,449 - Amortization 36,998 36,689 Income before income taxes, restructuring, merger and integration costs, and amortization 461,882 427,549 Income taxes 147,802 149,643 Income before restructuring, merger and integration costs, and amortization $314,080 $277,906 ======== ========
The J. M. Smucker Company Unaudited Non-GAAP Measures
Three Months Ended October 31, --------------------------- 2010 2009 ---- ---- (Dollars in thousands, except per share data) Earnings before interest, taxes, depreciation, and amortization:(4) $297,434 $275,978 % of net sales 23.3% 21.6% Free cash flow: (5) $11,657 $151,498 Reconciliation to net (4) income: Income before income taxes $221,727 $215,002 Interest income (572) (686) Interest expense 18,505 17,473 Depreciation 27,286 25,877 Amortization 18,501 18,312 Accelerated depreciation - restructuring 11,987 - Earnings before interest, taxes, depreciation, and amortization $297,434 $275,978 Merger and integration costs 2,773 8,148 Other cost of products sold -restructuring(6) 85 - Other restructuring costs 8,345 - Share-based compensation expense 5,968 5,268 Adjusted earnings before interest, taxes, depreciation, and amortization $314,605 $289,394 ======== ======== % of net sales 24.6% 22.6% Reconciliation to cash provided by operating (5) activities: Cash provided by operating activities $46,784 $213,660 Additions to property, plant, and equipment (35,127) (62,162) Free cash flow $11,657 $151,498 ======= ======== (6) Represents long- lived asset accelerated depreciation charges included in cost of products sold - restructuring.
Six Months Ended October 31, ------------------------- 2010 2009 ---- ---- (Dollars in thousands, except per share data) Earnings before interest, taxes, depreciation, and amortization:(4) $520,604 $488,440 % of net sales 22.4% 21.0% Free cash flow: (5) $(42,527) $98,379 Reconciliation to net (4) income: Income before income taxes $371,481 $366,236 Interest income (1,005) (2,057) Interest expense 35,044 36,424 Depreciation 56,646 51,148 Amortization 36,998 36,689 Restructuring long- lived asset costs (6) 21,440 - Earnings before interest, taxes, depreciation, and amortization $520,604 $488,440 Merger and integration costs 5,429 24,624 Cost of products sold - restructuring 85 - Other restructuring costs 26,449 - Share-based compensation expense 10,308 9,821 Adjusted earnings before interest, taxes, depreciation, and amortization $562,875 $522,885 ======== ======== % of net sales 24.2% 22.4% Reconciliation to cash provided by operating (5) activities: Cash provided by operating activities $19,546 $187,812 Additions to property, plant, and equipment (62,073) (89,433) Free cash flow $(42,527) $98,379 ======== ======= (6) 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; income, operating 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 amortization; 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.
The J. M. Smucker Company Unaudited Reportable Segments
Three Months Ended October 31, ------------------ 2010 2009 ---- ---- (Dollars in thousands) Net sales: U.S. Retail Coffee Market $477,287 $445,102 U.S. Retail Consumer Market 272,564 290,090 U.S. Retail Oils and Baking Market 279,523 303,896 Special Markets 249,539 239,657 ------- ------- Total net sales $1,278,913 $1,278,745 ========== ========== Segment profit: U.S. Retail Coffee Market $149,099 $131,850 U.S. Retail Consumer Market 74,287 70,512 U.S. Retail Oils and Baking Market 40,854 45,398 Special Markets 49,406 40,003 ------ ------ Total segment profit $313,646 $287,763 ======== ======== Interest income 572 686 Interest expense (18,505) (17,473) Share-based compensation expense (5,968) (5,268) Merger and integration costs (2,773) (8,148) Cost of products sold - restructuring (12,072) - Other restructuring costs (8,345) - Corporate administrative expense (44,452) (43,141) Other (expense) income - net (376) 583 ---- --- Income before income taxes $221,727 $215,002 ======== ======== Segment profit margin: U.S. Retail Coffee Market 31.2% 29.6% U.S. Retail Consumer Market 27.3% 24.3% U.S. Retail Oils and Baking Market 14.6% 14.9% Special Markets 19.8% 16.7%
Six Months Ended October 31, ---------------- 2010 2009 ---- ---- (Dollars in thousands) Net sales: U.S. Retail Coffee Market $870,857 $811,331 U.S. Retail Consumer Market 551,839 581,092 U.S. Retail Oils and Baking Market 453,394 498,312 Special Markets 450,135 439,536 ------- ------- Total net sales $2,326,225 $2,330,271 ========== ========== Segment profit: U.S. Retail Coffee Market $260,981 $243,017 U.S. Retail Consumer Market 145,704 136,635 U.S. Retail Oils and Baking Market 63,441 71,078 Special Markets 84,278 66,697 ------ ------ Total segment profit $554,404 $517,427 ======== ======== Interest income 1,005 2,057 Interest expense (35,044) (36,424) Share-based compensation expense (10,308) (9,821) Merger and integration costs (5,429) (24,624) Cost of products sold - restructuring (21,525) - Other restructuring costs (26,449) - Corporate administrative expense (85,490) (82,942) Other (expense) income - net 317 563 --- --- Income before income taxes $371,481 $366,236 ======== ======== Segment profit margin: U.S. Retail Coffee Market 30.0% 30.0% U.S. Retail Consumer Market 26.4% 23.5% U.S. Retail Oils and Baking Market 14.0% 14.3% Special Markets 18.7% 15.2%
SOURCE The J. M. Smucker Company