The J. M. Smucker Company Announces Record Third Quarter Results
ORRVILLE, Ohio, Feb. 24 /PRNewswire-FirstCall/ --
- Net income up significantly; margins continue to improve
- EPS up 68 percent, up 34 percent excluding charges
- Cash from operations increased to record levels
- 2010 outlook raised
The J. M. Smucker Company (NYSE: SJM) today announced results for the third quarter ended January 31, 2010 of its 2010 fiscal year. Results for the three-month and nine-month periods ended January 31, 2010 and 2009, include the operations of The Folgers Coffee Company ("Folgers") from the close of the transaction on November 6, 2008.
Executive Summary
Three Months Ended Nine Months Ended
January 31, January 31,
-------------------------- -------------------------
% %
Increase Increase
2010 2009 (Decrease) 2010 2009 (Decrease)
---- ---- ---------- ---- ---- ----------
(Dollars in millions, except per share data)
Net sales $1,205.9 $1,182.6 2% $3,536.2 $2,689.4 31%
Operating
income $209.6 $135.5 55% $609.2 $293.6 107%
% of net
sales 17.4% 11.5% 17.2% 10.9%
Net
income:
Income $135.5 $77.9 74% $373.5 $171.7 118%
Income
per
diluted
share $1.14 $0.68 68% $3.14 $2.29 37%
EBITDA $257.4 $178.3 44% $745.8 $370.8 101%
- Merger and integration costs of $0.03 and $0.16 per diluted share are included in the third quarter and first nine months of 2010, respectively, while restructuring and merger and integration costs of $0.19 and $0.39 per diluted share are included in the third quarter and first nine months of 2009, respectively. Excluding these items, the Company's non-GAAP income per diluted share was $1.17 and $0.87 for the third quarter of 2010 and 2009, respectively, an increase of 34 percent, and $3.30 and $2.68 for the first nine months of 2010 and 2009, respectively, an increase of 23 percent.
- Amortization expense of $0.10 and $0.12 per diluted share is included in the third quarter of 2010 and 2009, respectively, and $0.31 and $0.20 per diluted share is included in the first nine months of 2010 and 2009, respectively.
"We delivered record results once again this quarter, driven by a successful Fall Bake and Holiday period, with volume and sales gains across most of our brands," commented Richard Smucker, Executive Chairman and Co-Chief Executive Officer. "Our demonstrated ability to leverage multi-brand, promotional events during key periods enhances our performance and reaffirms the advantage we enjoy by owning leading brands."
"The continued momentum we are experiencing is a result of a solid strategy and the efforts of an outstanding team," added Tim Smucker, Chairman of the Board and Co-Chief Executive Officer. "The businesses have delivered strong performance and we look forward to additional opportunities. We have once again raised our outlook for the year and believe that our brands have proven that they are well-positioned for continued growth."
Net Sales
Three Months Ended Nine Months Ended
January 31, January 31,
------------------ -----------------
In- In-
crease crease
2010 2009 (De- (De-
crease) % 2010 2009 crease) %
---- ---- -------- --- ---- ---- ------- ---
(Dollars in millions)
Net sales $1,205.9 $1,182.6 $23.3 2% $3,536.2 $2,689.4 $846.8 31%
Adjust for
non-
comparable
items:
Acquisi-
tions (31.8) - (31.8) (3%) (920.9) - (920.9) (34%)
Foreign
exchange (14.2) - (14.2) (1%) (6.5) - (6.5) (0%)
----- --- ----- --- ---- --- ---- ----
Net sales
without
acquisitions
and foreign
exchange $1,159.9 $1,182.6 $(22.7) (2%) $2,608.8 $2,689.4 $(80.6) (3%)
======== ======== ====== === ======== ======== ====== ===
Net sales were up 2 percent in the third quarter of 2010, compared to 2009, primarily due to incremental Folgers sales. An additional five days of Folgers net sales, totaling approximately $31.8 million, were realized in this year's third quarter as a result of the closing date of the merger during last year's third quarter. In total, Folgers contributed $510.3 million to net sales in the third quarter of 2010, compared to $468.5 million in the third quarter last year. Excluding the additional Folgers business and the impact of foreign exchange, net sales were down 2 percent in the third quarter of 2010, compared to 2009, primarily due to pricing.
Excluding the additional five days of Folgers sales, total volume increased 4 percent in the third quarter of 2010, compared to 2009, with gains across most of the Company's leading brands. The favorable impact of volume growth on net sales was more than offset by a 6 percent price and mix decline, attributable primarily to price reductions in the U.S. retail oils and baking segment, and an increase in promotional spending across several categories.
Margins
Three Months Ended Nine Months Ended
January 31, January 31,
------------------ -----------------
2010 2009 2010 2009
---- ---- ---- ----
(% of net sales)
Gross profit 38.0% 33.9% 38.4% 31.7%
Selling, distribution, and
administrative expenses:
Marketing and selling 8.9% 10.0% 9.7% 10.0%
Distribution 3.3% 3.6% 3.3% 3.5%
General and administrative 5.6% 4.3% 5.3% 4.8%
--- --- --- ---
17.8% 17.9% 18.3% 18.3%
==== ==== ==== ====
Amortization 1.5% 1.7% 1.6% 0.8%
Impairment charges 0.8% 0.0% 0.3% 0.1%
Restructuring and merger and integration
costs 0.4% 2.8% 0.8% 1.6%
Other operating expense (income) - net 0.1% 0.0% 0.2% (0.0%)
--- --- --- ----
Operating Income 17.4% 11.5% 17.2% 10.9%
==== ==== ==== ====
Gross profit increased $57.3 million to 38.0 percent of net sales in the third quarter of 2010, from 33.9 percent in the third quarter of 2009. Much of the improvement is attributable to Folgers including the impact of lower green coffee raw material costs and the extra five days of business. In addition, last year's gross margin was negatively impacted by inventory adjustments related to the merger. Lower other raw material and freight costs across the businesses also favorably impacted this quarter's gross margin compared to last year.
Driven by gross profit, operating income increased 55 percent, compared to the third quarter of 2009, and improved from 11.5 percent to 17.4 percent of net sales. Excluding the impact of merger and integration costs in both years, and further excluding restructuring costs in 2009, operating income increased from 14.3 percent of net sales in 2009 to 17.8 percent in 2010.
Selling, distribution, and administrative expenses increased 1 percent for the third quarter of 2010, compared to 2009, but decreased slightly as a percentage of net sales. Marketing expense decreased approximately 14 percent in the third quarter of 2010, compared to the prior year, primarily due to the higher concentration of marketing expense last year for Folgers in the third quarter compared to the fourth quarter of last year. The Company expects its total marketing expense for the second half of fiscal 2010 to be higher than the second half of the prior year.
Distribution expenses decreased 8 percent for the third quarter of 2010, compared to 2009, reflecting the impact of synergies related to the addition of Folgers. General and administrative expenses increased 34 percent in the third quarter of 2010 compared to 2009. The current quarter includes increased pension and other employee benefit costs, compared to the prior year's quarter, and partial recognition of expenses related to the pending closure of the Company's West Fargo, North Dakota, manufacturing facility in April 2010. In addition, last year's third quarter expense did not include administrative expenses to fully support the Folgers business.
Amortization expense, a noncash item, was $18.6 million in the third quarter of 2010, primarily reflecting the impact of intangible assets associated with the Folgers transaction. Noncash impairment charges of $9.8 million were recorded in the third quarter of 2010 resulting from the write-down to estimated fair value of certain of the Company's intangible assets, primarily the Europe's Best® tradename in Canada.
Interest and Income Taxes
Interest expense decreased $7.7 million during the third quarter of 2010, compared to 2009, resulting from a decrease in borrowings outstanding during the quarter as scheduled debt repayments of $75 million and $550 million were made in June and November 2009, respectively.
Income tax expense increased $25.3 million during the third quarter of 2010, compared to 2009. The effective tax rate decreased to 31.3 percent in the third quarter of 2010, reflecting the impact of reduced effective rates in Canada, compared to 31.8 percent in 2009.
Segment Performance
Three Months Ended Nine Months Ended
January 31, January 31,
---------------------- -----------------------
% %
Increase Increase
2010 2009 (Decrease) 2010 2009 (Decrease)
---- ---- ---------- ---- ---- -----------
(Dollars in millions)
Net sales:
U.S. retail coffee
market $471.5 $432.0 9% $1,282.8 $432.0 197%
U.S. retail
consumer market 273.8 270.5 1% 854.9 846.1 1%
U.S. retail oils
and baking market 244.2 278.8 (12%) 742.5 810.2 (8%)
Special markets 216.5 201.3 8% 656.0 601.0 9%
Segment profit:
U.S. retail coffee
market $148.6 $91.9 62% $424.4 $91.9 362%
U.S. retail
consumer market 66.5 62.8 6% 204.5 190.6 7%
U.S. retail oils
and baking market 39.2 47.5 (17%) 115.9 106.5 9%
Special markets 38.6 25.3 53% 108.1 72.5 49%
Segment profit
margin:
U.S. retail coffee
market 31.5% 21.3% 33.1% 21.3%
U.S. retail
consumer market 24.3% 23.2% 23.9% 22.5%
U.S. retail oils
and baking market 16.1% 17.0% 15.6% 13.1%
Special markets 17.8% 12.6% 16.5% 12.1%
Segment performance for the three-month and nine-month periods ended January 31, 2009, has been reclassified to include Canadian Folgers results in the special markets segment, rather than in the U.S. retail coffee market segment, consistent with 2010 presentations. Reclassification of segment performance for the three-month period ended April 30, 2009, has been provided in the "Unaudited Reportable Segments Supplemental Information" table.
U.S. Retail Coffee Market
The U.S. retail coffee market segment net sales increased 9 percent in the third quarter of 2010, including the additional five days of sales totaling approximately $29.2 million, compared to the third quarter of 2009. Volume increased approximately 4 percent as compared to the same three-month period last year, including the five days prior to the merger. The Folgers® brand contributed the majority of the volume increase compared to last year, while the continued growth of Dunkin' Donuts® coffee in the gourmet category also contributed double-digit growth.
The U.S. retail coffee market segment profit increased 62 percent to $148.6 million in the third quarter of 2010, compared to 2009, and improved to 31.5 percent of net sales from 21.3 percent in 2009. Last year's coffee segment margins included unfavorable merger-related inventory valuation adjustments and higher marketing and promotional expense recognition. The current quarter margin was favorably impacted by lower green coffee raw material costs.
U.S. Retail Consumer Market
U.S. retail consumer market segment net sales for the quarter increased 1 percent compared to the prior year. Total volume in the U.S. retail consumer market increased 4 percent, compared to the third quarter last year, with gains in Hungry Jack® pancake mixes and syrups, Jif® peanut butter, and Smucker's® fruit spreads. Volume gains were mostly offset by increases in promotional spending, sales mix, and price declines on selected items.
The U.S. retail consumer market segment profit increased 6 percent for the third quarter of 2010, compared to the same period in 2009, mainly due to lower raw material and freight costs offset by incremental marketing. Segment profit margin for the quarter improved from 23.2 percent in the third quarter of 2009 to 24.3 percent in 2010.
U.S. Retail Oils and Baking Market
Total volume in the U.S. retail oils and baking market segment was up 3 percent, with gains in the Pillsbury® and Crisco® brands. Net sales in the U.S. retail oils and baking market were down 12 percent for the third quarter of 2010, compared to 2009, reflecting the impact of price declines taken last year and increased promotional spending across the segment.
The U.S. retail oils and baking market segment profit decreased 17 percent for the third quarter of 2010, compared to the same period in 2009, resulting in a segment profit margin of 16.1 percent compared to 17.0 percent in 2009. Last year's third quarter benefited from the favorable impact of a partial reversal of unrealized mark-to-market adjustments on commodity instruments, previously recorded during the second quarter. A higher portion of sales sold on promotion in the third quarter of 2010, compared to 2009, and mix reduced segment margin in 2010.
Special Markets
Net sales in the special markets segment increased 8 percent, in the third quarter of 2010, compared to 2009, due to a favorable exchange rate impact of $14.2 million, and an additional five days of Folgers sales totaling approximately $2.6 million. Volume increased 6 percent in the third quarter of 2010, compared to 2009. Gains in Canada's baking and spreads categories, coffee in the foodservice and export businesses, and the natural foods business were offset somewhat by declines in foodservice portion control. The impact of volume growth was more than offset by mix and increases in promotional spending. Net sales, excluding acquisitions and foreign exchange, decreased 1 percent in the third quarter of 2010 compared to 2009.
Special markets segment profit increased 53 percent for the third quarter of 2010, compared to 2009, primarily due to lower raw material costs and the impact of increased coffee sales. Profit margin for the quarter improved from 12.6 percent in the third quarter of 2009 to 17.8 percent in 2010.
Other Financial Results and Measures
During the quarter, the Company repaid $350 million of Folgers' bank debt and $200 million of Senior Notes utilizing a combination of cash on hand and borrowings against an existing $180 million credit facility. The Company subsequently paid off the borrowings against the credit facility during the third quarter.
Cash provided by operations in the third quarter of 2010 was a record $322.5 million resulting in cash provided by operations of $508.7 million in the first nine months of 2010, compared to $289.0 million in 2009.
For the third quarter of 2010, earnings before interest, taxes, depreciation, and amortization ("EBITDA") were $257.4 million, or 21.3 percent of net sales, compared to $178.3 million, or 15.1 percent of net sales, in the third quarter of 2009.
Outlook
The Company raised its outlook for the year. For fiscal 2010, net sales are expected to range between $4.5 billion and $4.6 billion. Income per diluted share, excluding merger and integration costs of $0.17 to $0.19 per diluted share, is now expected to range between $4.02 and $4.07, an increase from the previous range of $3.95 to $4.05. Income per diluted share is expected to reflect approximately $0.40 per share of noncash amortization expense resulting from the significant amount of intangible assets recorded on the Company's balance sheet.
The Company remains committed to its long-term strategic objectives of 6 percent annual sales growth and greater than 8 percent earnings per share growth, excluding charges.
Conference Call
The Company will conduct an earnings conference call and webcast today, Wednesday, February 24, 2010, at 8:30 a.m. ET. 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 7290467, and will be available until Wednesday, March 3, 2010.
Non-GAAP Measures
The Company uses non-GAAP measures including net sales excluding acquisitions 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. GAAP. Rather, the presentation of these non-GAAP measures is consistent with the way management internally evaluates 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. A reconciliation of non-GAAP measures to the comparable GAAP item for the quarter and year-to-date periods is included in the "Unaudited Non-GAAP Measures" table.
About The J. M. Smucker Company
For more than 100 years, The J. M. Smucker Company has been committed to offering consumers quality products that help families create memorable mealtime moments. Today, Smucker is the 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® is a trademark of The Pillsbury Company, 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.
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 impact of food safety concerns, involving either the Company or its competitors' products;
- the impact of 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 merger and integration 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 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 assume any obligation to update or revise these forward-looking statements to reflect new events or circumstances.
The J. M. Smucker Company
Unaudited Condensed Consolidated Statements of Income
Three Months Ended January 31, Nine Months Ended January 31,
---------------------------- -----------------------------
% %
In- In-
crease crease
(De- (De-
2010 2009 crease) 2010 2009 crease)
---- ---- ------- ---- ---- -------
(Dollars in thousands, except per share data)
Net sales $1,205,939 $1,182,594 2% $3,536,210 $2,689,393 31%
Cost of
products
sold 747,635 781,553 (4%) 2,179,627 1,837,154 19%
------- ------- --- --------- --------- ---
Gross Profit 458,304 401,041 14% 1,356,583 852,239 59%
Gross margin 38.0% 33.9% 38.4% 31.7%
Selling,
distribution,
and
administrative
expenses 214,411 211,633 1% 648,573 491,856 32%
Amortization 18,570 19,810 (6%) 55,259 22,763 143%
Impairment
charges 9,807 748 1211% 9,807 748 1211%
Merger and
integration
costs 4,672 32,809 (86%) 29,296 42,419 (31%)
Other
restructuring
costs - 257 (100%) - 903 (100%)
Other operating
expense (income)
– net 1,203 325 270% 4,482 (34) (13282%)
----- --- --- ----- --- -------
Operating
Income 209,641 135,459 55% 609,166 293,584 107%
Operating
margin 17.4% 11.5% 17.2% 10.9%
Interest income 310 1,822 (83%) 2,367 5,061 (53%)
Interest
expense (14,236) (21,959) (35%) (50,660) (44,017) 15%
Other income
(expense)
– net 1,446 (966) (250%) 2,524 400 531%
----- ---- ----- ----- --- ---
Income Before
Income Taxes 197,161 114,356 72% 563,397 255,028 121%
Income taxes 61,682 36,415 69% 189,865 83,343 128%
------ ------ --- ------- ------ ---
Net Income $135,479 $77,941 74% $373,532 $171,685 118%
======== ======= === ======== ======== ===
Net income
per common
share $1.14 $0.68 68% $3.14 $2.29 37%
===== ===== === ===== ===== ===
Net income
per common
share–
assuming
dilution $1.14 $0.68 68% $3.14 $2.29 37%
===== ===== === ===== ===== ===
Dividends
declared
per common
share $0.35 $0.32 9% $1.05 $5.96 (82%)
===== ===== === ===== ===== ===
Weighted-
average
shares
outstand-
ing 119,069,183 114,922,817 4% 118,896,672 74,813,587 59%
=========== =========== === =========== ========== ===
Weighted-
average
shares
outstanding
– assuming
dilution 119,216,915 114,987,828 4% 119,021,196 74,930,937 59%
=========== =========== === =========== ========== ===
The J. M. Smucker Company
Unaudited Condensed Consolidated Balance Sheets
January 31, 2010 April 30, 2009
---------------- --------------
(Dollars in thousands)
Assets
Current Assets:
Cash and cash equivalents $125,561 $456,693
Trade receivables 281,678 266,037
Inventories 663,436 603,926
Other current assets 52,151 72,235
------ ------
Total Current Assets 1,122,826 1,398,891
Property, Plant, and Equipment, Net 867,622 838,433
Other Noncurrent Assets:
Goodwill 2,804,305 2,791,391
Other intangible assets, net 3,042,864 3,098,976
Other assets 61,815 64,470
------ ------
Total Other Noncurrent Assets 5,908,984 5,954,837
--------- ---------
$7,899,432 $8,192,161
========== ==========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $150,441 $198,954
Note payable - 350,000
Current portion of long-term debt 10,000 276,726
Other current liabilities 307,842 235,556
------- -------
Total Current Liabilities 468,283 1,061,236
Noncurrent Liabilities:
Long-term debt, net of current portion 900,000 910,000
Other noncurrent liabilities 1,290,905 1,280,994
--------- ---------
Total Noncurrent Liabilities 2,190,905 2,190,994
Shareholders' Equity 5,240,244 4,939,931
--------- ---------
$7,899,432 $8,192,161
========== ==========
The J. M. Smucker Company
Unaudited Condensed Consolidated Statements of Cash Flow
Nine Months Ended January 31,
-----------------------------
2010 2009
---- ----
(Dollars in thousands)
Operating Activities
Net income $373,532 $171,685
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 78,889 54,016
Amortization 55,259 22,763
Impairment charges 9,807 748
Share-based compensation expense 18,796 12,836
Working capital (27,597) 26,962
------- ------
Net Cash Provided by Operating Activities 508,686 289,010
Investing Activities
Businesses acquired, net of cash acquired - (72,149)
Additions to property, plant, and equipment (112,664) (84,888)
Other - net 15,587 10,752
------ ------
Net Cash Used for Investing Activities (97,077) (146,285)
Financing Activities
Repayments of long-term debt (275,000) -
Repayments of bank note payable (350,000) -
Proceeds from long-term debt - 400,000
Quarterly dividends paid (124,586) (72,815)
Special dividends paid - (274,208)
Purchase of treasury shares (5,431) (3,356)
Other - net 8,033 700
----- ---
Net Cash (Used for) Provided by Financing Activities (746,984) 50,321
Effect of exchange rate changes 4,243 (4,680)
----- ------
Net (decrease) increase in cash and cash equivalents (331,132) 188,366
Cash and cash equivalents at beginning of period 456,693 171,541
------- -------
Cash and cash equivalents at end of period $125,561 $359,907
======== ========
( ) Denotes use of cash
The J. M. Smucker Company
Unaudited Non-GAAP Measures
Three Months Ended Nine Months Ended
January 31, January 31,
------------------- -----------------
2010 2009 2010 2009
---- ---- ---- ----
(Dollars in thousands, except per share data)
Operating income
before restructuring
and merger and
integration costs: (1) $214,313 $168,525 $638,462 $336,906
% of net sales 17.8% 14.3% 18.1% 12.5%
Income before restructuring
and merger and integration
costs: (2)
Income $138,896 $100,271 $392,955 $200,849
Income per common share
-- assuming dilution $1.17 $0.87 $3.30 $2.68
Income before restructuring,
merger and integration
costs, and amortization: (3)
Income $151,686 $113,627 $429,592 $216,173
Income per common share
-- assuming dilution $1.27 $0.99 $3.61 $2.88
(1) Reconciliation to
Operating income:
Operating income $209,641 $135,459 $609,166 $293,584
Merger and integration
costs 4,672 32,809 29,296 42,419
Restructuring costs - 257 - 903
--- --- --- ---
Operating income before
restructuring and merger
and integration costs $214,313 $168,525 $638,462 $336,906
======== ======== ======== ========
(2) Reconciliation to net
income:
Income before
income taxes $197,161 $114,356 $563,397 $255,028
Merger and integration
costs 4,672 32,809 29,296 42,419
Restructuring costs - 257 - 903
--- --- --- ---
Income before
income taxes,
restructuring, and
merger and
integration costs 201,833 147,422 592,693 298,350
Income taxes 62,937 47,151 199,738 97,501
------ ------ ------- ------
Income before
restructuring
and merger and
integration costs $138,896 $100,271 $392,955 $200,849
======== ======== ======== ========
(3) Reconciliation to net
income:
Income before
income taxes $197,161 $114,356 $563,397 $255,028
Merger and integration
costs 4,672 32,809 29,296 42,419
Restructuring costs - 257 - 903
Amortization 18,570 19,810 55,259 22,763
------ ------ ------ ------
Income before
income taxes,
restructuring,
merger and integration
costs, and amortization 220,403 167,232 647,952 321,113
Income taxes 68,717 53,605 218,360 104,940
------ ------ ------- -------
Income before
restructuring,
merger and integration
costs, and amortization $151,686 $113,627 $429,592 $216,173
======== ======== ======== ========
The Company uses non-GAAP measures including net sales excluding
acquisitions 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 is consistent with the way
management internally evaluates 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.
The J. M. Smucker Company
Unaudited Non-GAAP Measures
Three Months Ended Nine Months Ended
January 31, January 31,
------------------ -----------------
2010 2009 2010 2009
---- ---- ---- ----
(Dollars in thousands, except per share data)
Earnings before interest,
taxes, depreciation, and
amortization:(4) $257,398 $178,276 $745,838 $370,763
% of net sales 21.3% 15.1% 21.1% 13.8%
Free cash flow: (5) $299,264 $251,170 $396,022 $204,122
(4) Reconciliation to net
income:
Income before
income taxes $197,161 $114,356 $563,397 $255,028
Interest income (310) (1,822) (2,367) (5,061)
Interest expense 14,236 21,959 50,660 44,017
Depreciation 27,741 23,973 78,889 54,016
Amortization 18,570 19,810 55,259 22,763
Earnings before
interest, taxes,
depreciation, and
amortization $257,398 $178,276 $745,838 $370,763
Merger and integration
costs 4,672 32,809 29,296 42,419
Restructuring costs - 257 - 903
Share-based compensation
expense 4,631 2,928 14,452 8,963
----- ----- ------ -----
Adjusted earnings before
interest, taxes,
depreciation, and
amortization $266,701 $214,270 $789,586 $423,048
======== ======== ======== ========
% of net sales 22.1% 18.1% 22.3% 15.7%
(5) Reconciliation to cash
provided by operating
activities:
Cash provided by
operating activities $322,495 $280,288 $508,686 $289,010
Additions to property,
plant, and equipment (23,231) (29,118) (112,664) (84,888)
------- ------- -------- -------
Free cash flow $299,264 $251,170 $396,022 $204,122
======== ======== ======== ========
The Company uses non-GAAP measures including net sales excluding
acquisitions 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 is consistent with the way
management internally evaluates 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.
The J. M. Smucker Company
Unaudited Reportable Segments
Three Months Ended Nine Months Ended
January 31, January 31,
------------------ -----------------
2010 2009 2010 2009
---- ---- ---- ----
(Dollars in thousands)
Net sales:
U.S. retail coffee
market $471,463 $431,997 $1,282,794 $431,997
U.S. retail consumer
market 273,837 270,465 854,929 846,142
U.S. retail oils and
baking market 244,175 278,793 742,487 810,245
Special markets 216,464 201,339 656,000 601,009
------- ------- ------- -------
Total net sales $1,205,939 $1,182,594 $3,536,210 $2,689,393
========== ========== ========== ==========
Segment profit:
U.S. retail coffee
market $148,564 $91,886 $424,387 $91,886
U.S. retail consumer
market 66,460 62,750 204,495 190,609
U.S. retail oils and
baking market 39,244 47,509 115,855 106,471
Special markets 38,607 25,314 108,064 72,503
------ ------ ------- ------
Total segment profit $292,875 $227,459 $852,801 $461,469
======== ======== ======== ========
Interest income 310 1,822 2,367 5,061
Interest expense (14,236) (21,959) (50,660) (44,017)
Amortization (18,570) (19,810) (55,259) (22,763)
Impairment charges (9,807) (748) (9,807) (748)
Share-based
compensation expense (4,631) (2,928) (14,452) (8,963)
Merger and
integration costs (4,672) (32,809) (29,296) (42,419)
Restructuring costs - (257) - (903)
Corporate
administrative
expense (46,231) (33,667) (129,173) (90,295)
Other unallocated
income (expense) 2,123 (2,747) (3,124) (1,394)
----- ------ ------ ------
Income before income
taxes $197,161 $114,356 $563,397 $255,028
======== ======== ======== ========
Segment profit margin:
U.S. retail coffee
market 31.5% 21.3% 33.1% 21.3%
U.S. retail consumer
market 24.3% 23.2% 23.9% 22.5%
U.S. retail oils and
baking market 16.1% 17.0% 15.6% 13.1%
Special markets 17.8% 12.6% 16.5% 12.1%
Segment performance for the three-month and nine-month periods ended
January 31, 2009, has been reclassified to include Canadian Folgers
results in special markets segment, rather than in the U.S. retail coffee
market segment, consistent with 2010 presentations.
The J. M. Smucker Company
Unaudited Reportable Segments Supplemental Information
Three Months Ended Year Ended
April 30, April 30,
------------------ ----------------
2009 2008 2009 2008
---- ---- ---- ----
(Dollars in thousands)
Net sales:
U.S. retail coffee
market $423,574 $- $855,571 $-
U.S. retail consumer
market 257,122 245,545 1,103,264 998,556
U.S. retail oils and
baking market 185,229 173,449 995,474 875,991
Special markets 202,615 171,004 803,624 650,227
------- ------- ------- -------
Total net sales $1,068,540 $589,998 $3,757,933 $2,524,774
========== ======== ========== ==========
Segment profit:
U.S. retail coffee
market $149,085 $- $240,971 $-
U.S. retail consumer
market 58,704 54,984 249,313 233,201
U.S. retail oils and
baking market 17,679 21,299 124,150 99,626
Special markets 39,238 24,389 111,741 92,019
------ ------ ------- ------
Total segment profit $264,706 $100,672 $726,175 $424,846
======== ======== ======== ========
Segment profit margin:
U.S. retail coffee
market 35.2% n/a 28.2% n/a
U.S. retail consumer
market 22.8% 22.4% 22.6% 23.4%
U.S. retail oils and
baking market 9.5% 12.3% 12.5% 11.4%
Special markets 19.4% 14.3% 13.9% 14.2%
Segment performance for the three-month period ended April 30, 2009, has
been reclassified to reflect Canadian Folgers results between the special
markets segment and the U.S. retail coffee market segment, consistent with
2010 presentations. Segment performance for the year ended April 30, 2009
has not been impacted.
(Logo: http://www.newscom.com/cgi-bin/prnh/20071219/SMUCKERLOGO )
SOURCE The J. M. Smucker Company
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