ORRVILLE, Ohio, June 20 /PRNewswire-FirstCall/ -- The J. M. Smucker Company (NYSE: SJM) today announced results for the fourth quarter and fiscal year ended April 30, 2006.
Fourth Quarter Results
2006 2005 % Change
(Dollars in millions, except per share
data)
Net sales $501.7 $491.5 +2%
Income from continuing operations $35.7 $26.8 +33%
EPS from continuing operations $0.62 $0.45 +38%
Sales in each of the Company's strategic business areas increased over the prior year, with the exception of Canada, which was down slightly as a result of a planned sales rationalization. Excluding the U.S. industrial business, which has been divested, sales were up 4 percent for the quarter, led by growth in the Smucker's(R), Jif(R), and Pillsbury(R) brands.
The increase in income from continuing operations for the quarter was driven by sales growth, improved profitability in the Uncrustables(R) business, and decreases in merger and integration and restructuring charges. In addition, during the quarter the Company reduced its effective tax rate for the year from 35.5 percent to 33.5 percent, resulting in a favorable adjustment to income taxes in the fourth quarter. The lower rate results from the Company's realignment of its legal entity structure, coupled with recent state tax law and rate changes.
"For the fourth quarter and the year, we delivered record results while making investments in future growth despite a difficult cost environment," said Tim Smucker, chairman and co-chief executive officer. "As we look forward, we are confident in our strategy and in the fundamentals of the business."
"We recognize the dedicated efforts of our employees," added Richard Smucker, president and co-chief executive officer. "During the year, we revamped our supply chain to better meet the needs of our customers and consumers, and executed on many other initiatives in support of our strategy for long-term growth of the brands. The support of our employees will enable us to continue to generate strong performance in the years to come."
Income from continuing operations for the fourth quarter of 2006 included pretax merger and integration costs of $3.2 million, or $0.04 per diluted share, and restructuring charges of $0.9 million, or $0.02 per diluted share. Income from continuing operations for the fourth quarter of 2005 included pretax merger and integration costs of $6.1 million, or $0.07 per diluted share, and restructuring charges of $5.2 million, or $0.06 per diluted share. Excluding these costs in both years, the Company's earnings per diluted share would have been $0.68 and $0.58, in the fourth quarter of 2006 and 2005, respectively, an increase of 17 percent.
Full Year Results
2006 2005 % Change
(Dollars in millions, except per share
data)
Net sales $2,154.7 $2,043.9 +5%
Income from continuing operations $143.4 $130.5 +10%
EPS from continuing operations $2.45 $2.26 +8%
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 results. Excluding the additional six weeks and the U.S. industrial business, sales for 2006 were up 3 percent compared to last year.
Income from continuing operations for 2006 included pretax merger and integration costs of $17.9 million, or $0.20 per diluted share, and restructuring charges of $10.0 million, or $0.12 per diluted share. Also included in income from continuing operations for the year was a pretax gain of $5.6 million, or $0.06 per diluted share, related to the sale of the Company's Salinas, California, facility. Income from continuing operations for the full year of 2005 included pretax merger and integration costs of $18.0 million, or $0.20 per diluted share, and restructuring charges of $13.3 million, or $0.14 per diluted share. Excluding these costs in both years, the Company's earnings per diluted share would have been $2.77 and $2.60, for the full years of 2006 and 2005, respectively.
The Company uses earnings and earnings per diluted share from continuing operations, excluding restructuring and merger and integration costs, as key performance measures 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 full year is included in the "Financial Highlights" table.
Margins
Fourth Quarter Full Year
2006 2005 2006 2005
Gross margin 32.1% 30.6% 32.2% 32.2%
SD&A % of sales 20.8% 19.4% 20.3% 20.0%
Operating margin 10.8% 9.0% 10.6% 10.8%
The improvement in the fourth quarter operating margin was due to an increase in gross margin and an overall decrease in restructuring and merger and integration costs compared to last year. The increase in gross margin was caused by a decrease in trade merchandise expenses as a percent of sales and a reduction of costs at certain manufacturing and processing locations, partially offset by higher freight costs versus a year ago and generally higher raw material costs. SD&A expenses increased as a percent of sales during the fourth quarter as marketing expenses increased over the fourth quarter of last year. Distribution costs also were higher compared to the same period last year.
For the full year, the slight decrease in operating margin was due primarily to costs associated with the implementation of the new distribution network. Despite higher commodity and freight costs, gross margins were maintained by realizing cost synergies associated with the Multifoods acquisition, efficiencies at certain manufacturing sites, and the impact of the trade merchandising adjustment in the second quarter. Total restructuring and merger and integration costs were down from last year, which positively impacted operating margin by nearly 20 basis points. Excluding the restructuring and merger and integration costs, operating margins would have been 11.6 percent and 11.3 percent for the fourth quarter of 2006 and 2005, and 11.9 percent and 12.3 percent for the full year of 2006 and 2005, respectively.
Segment Performance
Sales (Dollars in millions)
Fourth Quarter Full Year
2006 2005 % Change 2006 2005 % Change
U.S. retail market $337.6 $325.3 +4% $1,484.9 $1,405.2 +6%
Special markets $164.0 $166.2 -1% $669.9 $638.7 +5%
Special markets
excluding industrial $164.0 $156.5 +5% $649.0 $586.2 +11%
U.S. Retail Market
During the fourth quarter of 2006, sales in the consumer strategic business area increased 4 percent over the fourth quarter of last year as sales of fruit spreads, toppings, peanut butter and Uncrustables were all up. For the full year of 2006, sales in the consumer strategic business area were up 6 percent compared to last year.
In the consumer oils and baking strategic business area, sales for the quarter were also up 4 percent, as growth in the Pillsbury and Martha White(R) brands more than offset declines in the oils business. Sales in the consumer oils and baking strategic business area for the full year were up 5 percent compared to last year.
Excluding the additional six weeks contribution from Multifoods, sales in the U.S. retail market segment increased 3 percent in the full year of 2006 as compared to last year.
Special Markets
Sales in the fourth quarter for the special markets segment, excluding the industrial business, increased 5 percent. Key growth contributors for the quarter included the beverage strategic business area, up 14 percent, and the foodservice strategic business area, up 4 percent. In Canada, sales were down 2 percent, as increases in the retail spreads business and the impact of favorable exchange rates did not fully offset declines in baking and the planned rationalization of certain unprofitable businesses. Excluding the additional six weeks contribution from Multifoods and the U.S. industrial business, sales in the special markets segment increased 4 percent in the full year of 2006 as compared to last year.
Share Repurchase
During the fourth quarter, the Company purchased an additional 1.29 million shares for $51.6 million in cash. At its April meeting, the Company's Board of Directors authorized a 2 million share increase to its share repurchase plan, leaving a total of approximately 2.7 million shares available for future repurchase.
Outlook
The Company confirmed its long-term sales growth goal of 8 percent, one-half of which is to come from its core business and new products, and the remainder from acquisitions. Long-term earnings per share growth would be in line with sales growth. The Company recognizes that acquisitions may not occur each year, but, over time, acquisitions have contributed to growth rates consistent with the Company's strategic objective.
Conference Call
The Company will conduct an earnings conference call and webcast on Tuesday, June 20, 2006, at 8:30 a.m. E.T. The webcast, as well as a replay in downloadable MP3 format, 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 and entering replay pass code 4543307. The audio replay will be available until Tuesday, June 27, 2006.
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 109 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 approximately 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 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, 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 April 30, Year Ended April 30,
2006 2005 2006 2005
(Dollars in thousands, except per share data)
Net sales $501,678 $491,454 $2,154,726 $2,043,877
Cost of products sold 339,418 340,616 1,459,611 1,383,995
Cost of products sold -
restructuring 1,398 689 2,263 2,466
Gross Profit 160,862 150,149 692,852 657,416
Selling, distribution,
and administrative expenses 104,198 95,270 438,457 407,839
Other restructuring costs (526) 4,496 7,722 10,854
Merger and integration costs 3,150 6,069 17,934 17,954
Operating Income 54,040 44,314 228,739 220,769
Interest income 1,772 2,254 6,630 4,683
Interest expense (5,910) (6,196) (24,026) (22,555)
Other income (expense)- net (2,042) 1,232 4,227 1,717
Income from Continuing
Operations Before
Income Taxes 47,860 41,604 215,570 204,614
Income taxes 12,159 14,818 72,216 74,154
Income from Continuing
Operations 35,701 26,786 143,354 130,460
Loss on sale of discontinued
operations, net of tax - (3,290) - (1,253)
Discontinued operations, net
of tax - (1,384) - (134)
Net Income $35,701 $22,112 $143,354 $129,073
Earnings per common share:
Income from continuing
operations $0.63 $0.46 $2.48 $2.29
Discontinued operations - (0.08) - (0.03)
Net income $0.63 $0.38 $2.48 $2.26
Income from continuing
operations - assuming
dilution $0.62 $0.45 $2.45 $2.26
Discontinued operations -
assuming dilution - (0.07) - (0.02)
Net income - assuming
dilution $0.62 $0.38 $2.45 $2.24
Dividends declared
per common share $0.28 $0.27 $1.09 $1.02
Weighted-average
shares outstanding 57,107,708 58,261,152 57,863,270 57,086,734
Weighted-average
shares outstanding -
assuming dilution 57,566,403 58,963,433 58,425,361 57,748,780
The J. M. Smucker Company
Unaudited Condensed Consolidated Balance Sheets
April 30,
2006 2005
(Dollars in thousands)
ASSETS
Current Assets:
Cash and cash equivalents $71,956 $58,085
Marketable securities 14,882 17,739
Trade receivables 148,014 145,734
Inventories 297,621 284,487
Other current assets 39,022 49,806
Total Current Assets 571,495 555,851
Property, Plant, and Equipment, Net 527,735 521,101
Other Noncurrent Assets:
Goodwill 940,967 951,208
Other intangible assets, net 472,915 469,758
Marketable securities 34,107 59,074
Other assets 102,525 78,902
Total Noncurrent Assets 1,550,514 1,558,942
$2,649,744 $2,635,894
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $28,620 $33,378
Current portion of long-term debt - 17,000
Accounts payable 88,963 105,290
Other current liabilities 117,857 152,624
Total Current Liabilities 235,440 308,292
Noncurrent Liabilities:
Long-term debt, net of current portion 428,602 431,560
Other noncurrent liabilities 257,643 205,242
Total Noncurrent Liabilities 686,245 636,802
Shareholders' Equity, net 1,728,059 1,690,800
$2,649,744 $2,635,894
The J. M. Smucker Company
Unaudited Summary of Quarterly Results of Operations
The following is a summary of unaudited quarterly results of operations
for the years ended April 30, 2006 and 2005.
(Dollars in thousands, except per share data)
Income From
Continuing
Quarter Ended Net Sales Gross Profit Operations Net Income
2006 July 31, 2005 $510,331 $164,713 $29,897 $29,897
October 31, 2005 606,264 203,423 46,444 46,444
January 31, 2006 536,453 163,854 31,312 31,312
April 30, 2006 501,678 160,862 35,701 35,701
2005 July 31, 2004 $413,267 $144,188 $27,487 $32,848
October 31, 2004 588,922 188,881 40,663 38,005
January 31, 2005 550,234 174,198 35,524 36,108
April 30, 2005 491,454 150,149 26,786 22,112
(Dollars in thousands, except per share data)
Earnings per Common
Earnings per Common Share Share - Assuming
Dilution
Income From Income From
Continuing Continuing
Quarter Ended Operations Net Income Operations Net Income
2006 July 31, 2005 $0.51 $0.51 $0.51 $0.51
October 31, 2005 0.80 0.80 0.79 0.79
January 31, 2006 0.54 0.54 0.54 0.54
April 30, 2006 0.63 0.63 0.62 0.62
2005 July 31, 2004 $0.51 $0.61 $0.50 $0.60
October 31, 2004 0.70 0.65 0.69 0.65
January 31, 2005 0.61 0.62 0.60 0.61
April 30, 2005 0.46 0.38 0.45 0.38
Annual earnings per share may not equal the sum of the individual quarters
due to differences in the average number of shares outstanding during the
respective periods.
The J. M. Smucker Company
Unaudited Financial Highlights
Three Months Ended Year Ended
April 30, April 30,
2006 2005 2006 2005
(Dollars in thousands, except per share data)
Net sales $501,678 $491,454 $2,154,726 $2,043,877
Net income and net income per
common share:
Net income $35,701 $22,112 $143,354 $129,073
Net income per common share
-- assuming dilution $0.62 $0.38 $2.45 $2.24
Income and income per common
share from continuing
operations:
Income $35,701 $26,786 $143,354 $130,460
Income per common share --
assuming dilution $0.62 $0.45 $2.45 $2.26
Income and income per common
share from continuing
operations before restructuring
and merger and integration
costs: (1)
Income $38,927 $33,994 $161,920 $150,401
Income per common share --
assuming dilution $0.68 $0.58 $2.77 $2.60
(1) Reconciliation to income
from continuing operations:
Income from continuing
operations before income
taxes $47,860 $41,604 $215,570 $204,614
Merger and integration costs 3,150 6,069 17,934 17,954
Cost of products sold -
restructuring 1,398 689 2,263 2,466
Other restructuring costs (526) 4,496 7,722 10,854
Income from continuing
operations before income
taxes, restructuring, and
merger and integration
costs 51,882 52,858 243,489 235,888
Income taxes 12,955 18,864 81,569 85,487
Income from continuing
operations before
restructuring and merger
and integration costs $38,927 $33,994 $161,920 $150,401
SOURCE: J. M. Smucker Company CONTACT: The J. M. Smucker Company, +1-330-682-3000 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 Web site: http://www.smuckers.com
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