ORRVILLE, Ohio, Nov 17, 2005 /PRNewswire-FirstCall via COMTEX News Network/ -- The J. M. Smucker Company (NYSE: SJM) today announced results for the second quarter ended October 31, 2005, of its 2006 fiscal year.
Second Quarter Results
2006 2005 % Change
(Dollars in millions, except per share data)
Sales $606.3 $588.9 +3%
Income from continuing operations $46.4 $40.7 +14%
EPS from continuing operations $0.79 $0.69 +14%
All core businesses experienced sales growth during the quarter. Excluding the U.S. industrial business, which has been divested, sales were up 4 percent. The quarter and first six months' results included a favorable adjustment of approximately $6.7 million to sales and approximately $4.3 million after-tax to earnings reflecting a change in estimate of the expected liability for trade merchandising programs.
Income from continuing operations for the second quarter of 2006 included pretax merger and integration costs of $4.1 million, or $0.05 per diluted share, and restructuring charges of $2.1 million, or $0.02 per diluted share. Income from continuing operations for the second quarter of 2005 included pretax merger and integration costs of $4.0 million, or $0.04 per diluted share, and restructuring charges of $1.8 million, or $0.02 per diluted share. Excluding these costs in both years, the Company's earnings per diluted share would have been $0.86 and $0.75, in the second quarter of 2006 and 2005, respectively, an increase of 15 percent.
"The performance of our businesses continues to offset the significant investments we are making in support of the brands and in our supply chain initiatives and the cost pressures currently impacting the consumer packaged goods sector," said Tim Smucker, chairman and co-chief executive officer. "We are well-positioned for continuing top and bottom line growth."
Six-Month Results
2006 2005 % Change
(Dollars in millions, except per share data)
Sales $1,116.6 $1,002.2 +11%
Income from continuing operations $76.3 $68.2 +12%
EPS from continuing operations $1.30 $1.20 +8%
Since the acquisition of Multifoods closed midway through the first quarter of last year, an additional six weeks of Multifoods' sales, totaling approximately $78.8 million, were realized in this year's first six months. Excluding the additional six weeks and the U.S. industrial business, sales were up 5 percent.
Income from continuing operations for the first six months of 2006 included pretax merger and integration costs of $7.0 million, or $0.08 per diluted share, and restructuring charges of $3.7 million, or $0.04 per diluted share. Income from continuing operations for the first six months of 2005 included pretax merger and integration costs of $6.7 million, or $0.08 per diluted share, and restructuring charges of $4.8 million, or $0.05 per diluted share. Excluding these costs in both years, the Company's earnings per diluted share would have been $1.42 and $1.33, in the first six months of 2006 and 2005, respectively, an increase of 7 percent.
The Company uses earnings from continuing operations, excluding restructuring and merger and integration costs, as a key performance measure of results of operations for purposes of evaluating performance internally. These non-GAAP measurements are not intended to replace the presentation of financial results in accordance with U.S. GAAP. Rather, management believes the presentation of results excluding such charges offers additional information to investors to facilitate the comparison of past and present operations and provides a more comprehensive understanding of the financial results. A reconciliation of non-GAAP measures to earnings from continuing operations for the current quarter and six-month period is included in the "Financial Highlights" table.
Margins Second Quarter First Six Months
2006 2005 2006 2005
Gross margin 33.6% 32.1% 33.0% 33.2%
SD&A % of sales 19.8% 19.6% 20.7% 20.6%
Operating margin 12.8% 11.6% 11.4% 11.6%
Gross margin improvements were driven by a more profitable mix of sales and improved costs in the consumer oils and baking business area were partially offset by higher commodity and freight costs. The trade liability change in estimate contributed approximately half of the improvement. Selling, distribution, and administrative (SD&A) expenses as a percentage of sales increased slightly as a result of a planned increase in marketing expenses and increased distribution costs related to the implementation of the new distribution network. These increases were partially offset by a decrease in selling and administrative overhead costs.
Segment Performance
Second Quarter First Six Months
Sales (Dollars in millions) 2006 2005 % 2006 2005 %
Change Change
U.S. retail market $429.8 $410.4 +5% $771.5 $698.5 +10%
Special markets $176.5 $178.5 -1% $345.1 $303.7 +14%
Special markets excluding
industrial $170.6 $164.7 +4% $327.2 $274.4 +19%
U.S. Retail Market
U.S. retail market sales were up 3 percent excluding the trade liability change in estimate with the consumer business area up 4 percent and the consumer oils and baking business area up 2 percent. Increases in the consumer business area were driven by growth in the Smucker's(R), Jif(R) and Uncrustables(R) brands. In the consumer oils and baking business area, sales increased due to growth in the Crisco(R) brand.
Since the acquisition of Multifoods closed midway through the first quarter of last year, an additional six weeks of Multifoods' sales were realized in this year's first six months. These additional sales accounted for approximately half of the segment's increase over the prior year. Excluding these additional sales, the segment was up 5 percent for the first six months.
Special Markets
Key growth contributors for the quarter included the foodservice business area, up 9 percent, and the beverage business area, up 6 percent. Sales in Canada were down 2 percent, as increases in the core retail business and favorable foreign exchange partially offset the planned rationalization of certain unprofitable industrial business. For the first six months, excluding the additional six weeks contribution from Multifoods and the U.S. industrial business, sales in the special markets segment increased 5 percent in the first six months of 2006 as compared to the first six months of last year.
Outlook for Fiscal 2006
Similar to other consumer packaged goods companies, volatility of energy and petroleum costs will challenge the outlook for the second half of 2006. Additional costs in the range of $0.10 to $0.15 per share for natural gas, freight, and resins are expected to be incurred during the last six months. The Company has taken, and will continue to take, actions to offset these cost increases including both discretionary cost reductions across the organization and potential pricing actions. Based on the input cost pressures and the uncertainty of their levels, it is likely that the earnings per share growth rate for the year will fall within the range of 5 to 8 percent. The Company remains committed to its long-term growth rate of 8 percent over its strategic time frame.
"We have always taken a long-term view of running the business," commented Richard Smucker, president and co-chief executive officer. "While we face considerable cost pressures in the second half of the year, we will continue to invest in new products, marketing, and distribution to ensure long-term steady growth, resulting in proven returns for our shareholders."
Conference Call
The Company will conduct an earnings conference call and webcast on Thursday, November 17, 2005, 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 calling 888-203-1112 or 719-457-0820 and entering replay pass code 4681316. The audio replay will be available until Monday, November 28, 2005.
About The J. M. Smucker Company
The J. M. Smucker Company (www.smuckers.com) was founded in 1897 when the Company's namesake and founder sold his first product -- apple butter -- from the back of a horse-drawn wagon. Today, over a century later, the Company is the market leader in fruit spreads, peanut butter, shortening and oils, ice cream toppings, and health and natural foods beverages in North America under such icon brands as Smucker's(R), Jif(R) and Crisco(R). The family of brands also includes Pillsbury(R) baking mixes and ready-to-spread frostings; Hungry Jack(R) pancake mixes, syrups and potato side dishes; and Martha White(R) baking mixes and ingredients in the U.S., along with Robin Hood(R) flour and baking mixes and Bick's(R) pickles and condiments in Canada. For over 108 years, The J. M. Smucker Company has been headquartered in Orrville, Ohio, and has been family run for four generations. Since the 1998 inception of FORTUNE Magazine's annual survey of the 100 Best Companies to Work For, The J. M. Smucker Company has consistently been recognized as one of the top 25 companies to work for in the United States. The J. M. Smucker Company has over 3,500 employees worldwide and distributes products in more than 45 countries.
The J. M. Smucker Company Forward-Looking Language
This press release contains forward-looking statements, including statements regarding estimates of future earnings and cash flows that are subject to risks and uncertainties that could cause actual results to differ materially. Uncertainties that could affect actual results include, but are not limited to, the strength of commodity markets from which raw materials are procured and the related impact on costs, volatility of energy and fuel costs, the ability to achieve the amount and timing of the estimated savings associated with the Multifoods acquisition, the success in introducing new products and the competitive response, particularly in the consumer oils and baking area, success and costs of new marketing and sales programs and strategies intended to promote growth in the Company's businesses, the ability to successfully implement price changes, particularly in the consumer oils and baking business, the Company's ability to effectively manage capacity and costs related to Uncrustables, and other factors affecting share prices and capital markets generally. Other risks and uncertainties that may materially affect the Company are detailed from time to time in the respective reports filed by the Company with the Securities and Exchange Commission, including Forms 10-Q, 10-K, and 8-K.
The J. M. Smucker Company
Unaudited Condensed Consolidated Statements of Income
Three Months Ended Six Months Ended
October 31, October 31,
2005 2004 2005 2004
(Dollars in thousands, except per share data)
Net sales $606,264 $588,922 $1,116,595 $1,002,189
Cost of products sold 402,726 399,432 748,212 667,858
Cost of products sold -
restructuring 115 609 247 1,262
Gross Profit 203,423 188,881 368,136 333,069
Selling, distribution, and
administrative expenses 120,025 115,279 230,649 206,105
Other restructuring costs 1,976 1,166 3,465 3,521
Merger and integration
costs 4,092 3,970 7,020 6,733
Operating Income 77,330 68,466 127,002 116,710
Interest income 1,329 667 3,149 1,385
Interest expense (6,025) (5,782) (12,132) (10,205)
Other (expense) income -
net (75) 784 119 (398)
Income from Continuing
Operations Before Income
Taxes 72,559 64,135 118,138 107,492
Income taxes 26,115 23,472 41,797 39,342
Income from Continuing
Operations 46,444 40,663 76,341 68,150
(Loss) gain on sale of
discontinued operation,
net of tax - (3,641) - 2,037
Discontinued operations,
net of tax - 983 - 666
Net Income $46,444 $38,005 $76,341 $70,853
Earnings per common share:
Income from continuing
operations $0.80 $0.70 $1.31 $1.22
Discontinued operations - (0.05) - 0.05
Net income $0.80 $0.65 $1.31 $1.27
Income from continuing
operations - assuming
dilution $0.79 $0.69 $1.30 $1.20
Discontinued operations
- assuming dilution - (0.04) - 0.05
Net income - assuming
dilution $0.79 $0.65 $1.30 $1.25
Dividends declared per
common share $0.27 $0.25 $0.54 $0.50
Weighted-average shares
outstanding 58,096,308 58,184,654 58,188,067 56,007,967
Weighted-average shares
outstanding - assuming
dilution 58,695,878 58,815,490 58,819,825 56,663,220
The J. M. Smucker Company
Unaudited Condensed Consolidated Balance Sheets
October 31, 2005 April 30, 2005
(Dollars in thousands)
ASSETS
Current Assets:
Cash and cash equivalents $42,361 $58,085
Marketable securities 19,879 17,739
Trade receivables 187,185 145,734
Inventories 348,919 284,487
Other current assets 48,690 49,806
Total Current Assets 647,034 555,851
Property, Plant, and Equipment, net 527,794 521,101
Other Noncurrent Assets:
Goodwill 949,317 951,208
Other intangible assets, net 471,451 469,758
Marketable securities 45,164 59,074
Other assets 79,637 78,902
Total Noncurrent Assets 1,545,569 1,558,942
$2,720,397 $2,635,894
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $39,790 $33,378
Current portion of long-term debt - 17,000
Accounts payable 141,392 105,290
Other current liabilities 176,043 152,624
Total Current Liabilities 357,225 308,292
Noncurrent Liabilities:
Long-term debt, net of current
portion 430,081 431,560
Other noncurrent liabilities 204,839 205,242
Total Noncurrent Liabilities 634,920 636,802
Shareholders' Equity, net 1,728,252 1,690,800
$2,720,397 $2,635,894
The J. M. Smucker Company
Unaudited Financial Highlights
Three Months Ended Six Months Ended
October 31, October 31,
2005 2004 2005 2004
(Dollars in thousands, except per share data)
Net sales $606,264 $588,922 $1,116,595 $1,002,189
Net income and net income per
common share:
Net income $46,444 $38,005 $76,341 $70,853
Net income per common share
-- assuming dilution $0.79 $0.65 $1.30 $1.25
Income and income per common
share from continuing
operations:
Income $46,444 $40,663 $76,341 $68,150
Income per common share --
assuming dilution $0.79 $0.69 $1.30 $1.20
Income and income per common
share from continuing
operations before
restructuring and merger and
integration costs: (1)
Income $50,401 $44,305 $83,282 $75,451
Income per common share --
assuming dilution $0.86 $0.75 $1.42 $1.33
(1) Reconciliation to income
from continuing operations:
Income from continuing
operations before income
taxes $72,559 $64,135 $118,138 $107,492
Merger and integration costs 4,092 3,970 7,020 6,733
Cost of products sold -
restructuring 115 609 247 1,262
Other restructuring costs 1,976 1,166 3,465 3,521
Income from continuing
operations before income
taxes, restructuring, and
merger and integration
costs 78,742 69,880 128,870 119,008
Income taxes 28,341 25,575 45,588 43,557
Income from continuing
operations before
restructuring and merger
and integration costs $50,401 $44,305 $83,282 $75,451
SOURCE J. M. Smucker Company
Investors, Mark R. Belgya, Vice President, Chief Financial Officer and Treasurer, or George G. Sent, Jr., Director, Corporate Finance and Investor Relations, or Media, Maribeth Badertscher, Director, Corporate Communications, all of The J. M. Smucker Company, +1-330-682-3000
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