ORRVILLE,
Executive Summary
Three Months Ended Nine Months Ended
January 31, January 31,
% In- % In-
crease crease
(De- (De-
2009 2008 crease) 2009 2008 crease)
(Dollars in millions, except per share data)
Net sales $1,182.6 $665.4 78% $2,689.4 $1,934.8 39%
Operating income $135.5 $68.6 97% $293.6 $222.5 32%
% of net sales 11.5% 10.3% 10.9% 11.5%
Net income:
Income $77.9 $42.4 84% $171.7 $133.3 29%
Income per diluted share $0.68 $0.75 (9%) $2.30 $2.33 (1%)
EBITDA $179.0 $85.6 109% $371.5 $269.2 38%
-- Excluding the impact of acquisitions and foreign exchange, net sales
increased 6 percent and 11 percent for the third quarter and first nine
months of 2009, respectively, compared to the same periods in 2008.
-- Restructuring and merger and integration costs of $0.20 and $0.04 per
diluted share are included in the third quarter of 2009 and 2008,
respectively. Excluding these items, the Company's non-GAAP income per
diluted share was $0.88 and $0.79 for 2009 and 2008, respectively, an
increase of 11 percent.
-- Restructuring and merger and integration costs of $0.39 and $0.09 per
diluted share are included in the nine month periods of 2009 and 2008,
respectively. Excluding these costs in both years, the Company's non-
GAAP income per diluted share was $2.69 in the first nine months of
2009, and $2.42 in the first nine months of 2008, also an increase of
11 percent.
"We delivered strong financial performance this quarter with solid results in our core Smucker business and the addition of Folgers," commented
"In difficult economic times, families look for reassurance, comfort, consistency and quality -- all hallmarks of our brands," added
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; earnings before interest, taxes, depreciation, and amortization ("EBITDA"); and adjusted EBITDA 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. A reconciliation of non-GAAP measures to the comparable GAAP item for the current quarter and nine-month period is included in the "Unaudited Non-GAAP Measures" table.
Net Sales
Three months ended Nine months ended
January 31, 2009 January 31, 2009
(Dollars in millions)
Increase in net sales as reported $517.2 78% $754.6 39%
Less:
Acquisitions (491.7) (74%) (558.1) (29%)
Foreign exchange 16.0 2% 19.0 1%
Increase in net sales without
acquisitions and foreign exchange $41.5 6% $215.5 11%
Net sales increased 78 percent in the third quarter of 2009 compared to 2008. Acquisitions contributed approximately
Over the last year, the Company has implemented price increases necessary to offset rising costs. While pricing was the main driver of the net sales growth, contributing 13 percent, a number of categories experienced volume gains, including Pillsbury(R) baking mixes and frostings, Hungry Jack(R) pancakes and syrups, and canned milk, all reflecting current back-to-home meal trends. As expected, volume declines were concentrated in the oils and flour categories. Recent pressures in the peanut butter category caused a slight decline in volume and the Company expects this to continue through the fourth quarter although no Company products are involved in the recall.
Margins
Three months ended Nine months ended
January 31, January 31,
2009 2008 2009 2008
(% of net sales)
Gross profit 33.9% 29.4% 31.7% 31.0%
Selling, distribution, and
administrative expenses:
Marketing and selling 10.0% 9.4% 10.0% 9.8%
Distribution 3.6% 3.3% 3.5% 3.4%
General and administrative 4.3% 5.5% 4.8% 5.8%
17.9% 18.2% 18.3% 19.0%
Amortization 1.7% 0.2% 0.9% 0.2%
Restructuring and merger and
integration costs 2.8% 0.5% 1.6% 0.4%
Other operating expense (income) 0.0% 0.2% 0.0% (0.1%)
Operating income 11.5% 10.3% 10.9% 11.5%
Overall, gross profit increased
Selling, distribution, and administrative ("SD&A") expenses increased 74 percent for the third quarter of 2009 compared to 2008. An increase in marketing and distribution expenses, much of which was related to the addition of Folgers, accounted for approximately 70 percent of the SD&A increase. Most SD&A expenses, particularly selling and corporate overhead, increased at a lesser rate than net sales resulting in an overall decrease in SD&A from 18.2 percent of net sales to 17.9 percent, further contributing to the improvement in operating margin.
Amortization expense increased
Operating income increased 97 percent compared to the third quarter of 2008 and improved from 10.3 percent to 11.5 percent of net sales. Restructuring and merger and integration costs were
Other
During the third quarter, the Company's debt obligations increased by Folgers'
Income tax expense increased
Segment Performance
Three Months Ended Nine Months Ended
January 31, January 31,
% In- % In-
crease crease
(De- (De-
2009 2008 crease) 2009 2008 crease)
(Dollars in millions)
Net sales
U.S. retail market $549.3 $502.2 9% $1,656.4 $1,455.6 14%
U.S. retail coffee market $442.9 $- n/a $442.9 $- n/a
Special markets $190.4 $163.2 17% $590.1 $479.2 23%
Segment profit:
U.S. retail market $110.3 $79.4 39% $297.1 $256.5 16%
% of net sales 20.1% 15.8% 17.9% 17.6%
U.S. retail coffee market $90.2 $- n/a $90.2 $- n/a
% of net sales 20.4% n/a 20.4% n/a
Special markets $27.0 $25.2 7% $74.2 $67.6 10%
% of net sales 14.2% 15.4% 12.6% 14.1%
With the addition of Folgers, the Company added the U.S. retail coffee market reportable segment representing the domestic sales of Folgers(R), Millstone(R), and Dunkin' Donuts(R) branded coffee to retail customers. Coffee sales to other than domestic retail customers are included in the special markets segment.
U.S. Retail Market
U.S. retail market segment net sales for the quarter were up 9 percent, with pricing accounting for the majority of the increase. Net sales in the consumer strategic business area increased 9 percent, with gains in Smucker's(R) fruit spreads, Jif(R) and Hungry Jack(R). Acquisitions contributed approximately one-quarter of the consumer increase. Net sales in the consumer oils and baking strategic business area were also up 9 percent, with increases in Pillsbury(R), Crisco(R) and Eagle Brand(R) canned milk, primarily due to the effect of price increases. Volume gains were realized in baking mixes, frostings, and canned milk. While total volume in the business area was down 11 percent most of the decline was expected and reflects the impact of last year's price increases in oils and flour.
For the first nine months of 2009, U.S. retail market segment net sales increased 14 percent compared to the first nine months of 2008 with net sales up 12 percent in the consumer strategic business area, and up 15 percent in the consumer oils and baking strategic business area.
U.S. retail market segment profit increased 39 percent for the quarter, sharply ahead of the increase in net sales, and 16 percent for the first nine months of 2009 compared to the same periods in 2008. Much of the gain was in the oils and baking area with almost half of the segment profit increase attributable to improvements in the canned milk business. A better match of prices to costs this year compared to last year accounted for most of the remainder of the profit increase.
U.S. Retail Coffee Market
The U.S. retail coffee market segment contributed
Special Markets
Net sales in the third quarter for the special markets segment increased 17 percent.
Special markets segment profit increased 7 percent for the quarter and 10 percent for the first nine months of 2009 compared to the same periods in 2008, again resulting from the impact of recent acquisitions.
Other Financial Results and Measures
For the third quarter of 2009, EBITDA was
Outlook
The Company estimates net sales for fiscal 2009 to range from
Conference Call
The Company will conduct an earnings conference call and webcast today,
About The
For more than 100 years, The
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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 Smucker and could cause actual results to differ materially from those expressed in the forward-looking statements: (i) volatility of commodity markets from which raw materials, particularly green coffee beans, wheat, soybean oil, milk, and peanuts are procured and the related impact on costs; (ii) the successful integration of the coffee business with Smucker's business, operations and culture and the ability to realize synergies and other potential benefits of the merger within the time frames currently contemplated; (iii) crude oil price trends and their impact on transportation, energy, and packaging costs; (iv) the ability to successfully implement price changes; (v) the success and cost of introducing new products and the competitive response; (vi) the success and cost of marketing and sales programs and strategies intended to promote growth in Smucker's businesses; (vii) general competitive activity in the market, including competitors' pricing practices and promotional spending levels; (viii) the concentration of certain of Smucker's businesses with key customers and the ability to manage and maintain key customer relationships; (ix) the loss of significant customers or a substantial reduction in orders from these customers or the bankruptcy of any such customer; (x) changes in consumer coffee preferences, and other factors affecting the coffee business, which represents a substantial portion of Smucker's business; (xi) the ability of Smucker to obtain any required financing; (xii) the timing and amount of capital expenditures, restructuring, and merger and integration costs; (xiii) the outcome of current and future tax examinations and other tax matters, and their related impact on Smucker's tax positions; (xiv) foreign currency and interest rate fluctuations; (xv) political or economic disruption due to the global recession and credit crisis; (xvi) other factors affecting share prices and capital markets generally; and (xvii) the other factors described under "Risk Factors" in other reports and statements filed by Smucker with the
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. Smucker does not assume any obligation to update or revise these forward-looking statements to reflect new events or circumstances.
Additional Information
Projected non-GAAP income per diluted share for fiscal 2009 is adjusted from projected GAAP income per diluted share by excluding estimated restructuring and merger and integration costs. The actual amount of those costs for the full fiscal year cannot be determined at this time, but are anticipated to include the same categories of expenses included in the quantitative reconciliation of non-GAAP income before restructuring and merger and integration costs to GAAP net income for the three and nine-month periods ended
The J. M. Smucker Company
Unaudited Condensed Consolidated Statements of Income
Three Months Ended January 31,
%
Increase
2009 2008 (Decrease)
(Dollars in thousands, except per
share data)
Net sales $1,182,594 $665,373 78%
Cost of products sold 781,553 469,658 66%
Cost of products sold - restructuring - 262 (100%)
Gross Profit 401,041 195,453 105%
Gross margin 33.9% 29.4%
Selling, distribution, and
administrative expenses 211,633 121,384 74%
Amortization 20,558 1,523 1250%
Restructuring costs 257 705 (64%)
Merger and integration costs 32,809 2,900 1031%
Other operating expense (income) -net 325 303 7%
Operating Income 135,459 68,638 97%
Operating margin 11.5% 10.3%
Interest income 1,822 3,694 (51%)
Interest expense (21,959) (10,725) 105%
Other (expense) income - net (966) 553 (275%)
Income Before Income Taxes 114,356 62,160 84%
Income taxes 36,415 19,759 84%
Net Income $77,941 $42,401 84%
Net income per common share $0.68 $0.75 (9%)
Net income per common share-
assuming dilution $0.68 $0.75 (9%)
Dividends declared per common share $0.32 $0.30 7%
Weighted-average shares outstanding 114,075,455 56,400,147 102%
Weighted-average shares outstanding -
assuming dilution 114,563,568 56,823,265 102%
Nine Months Ended January 31,
%
Increase
2009 2008 (Decrease)
(Dollars in thousands, except per
share data)
Net sales $2,689,393 $1,934,776 39%
Cost of products sold 1,837,154 1,334,589 38%
Cost of products sold - restructuring - 262 (100%)
Gross Profit 852,239 599,925 42%
Gross margin 31.7% 31.0%
Selling, distribution, and
administrative expenses 491,856 367,957 34%
Amortization 23,511 3,061 668%
Restructuring costs 903 1,606 (44%)
Merger and integration costs 42,419 5,884 621%
Other operating expense (income) -net (34) (1,070) (97%)
Operating Income 293,584 222,487 32%
Operating margin 10.9% 11.5%
Interest income 5,061 11,015 (54%)
Interest expense (44,017) (31,735) 39%
Other (expense) income - net 400 92 335%
Income Before Income Taxes 255,028 201,859 26%
Income taxes 83,343 68,531 22%
Net Income $171,685 $133,328 29%
Net income per common share $2.31 $2.35 (2%)
Net income per common share-
assuming dilution $2.30 $2.33 (1%)
Dividends declared per common share $5.96 $0.90 562%
Weighted-average shares outstanding 74,247,728 56,716,734 31%
Weighted-average shares outstanding -
assuming dilution 74,669,448 57,206,738 31%
The J. M. Smucker Company
Unaudited Condensed Consolidated Balance Sheets
January 31, 2009 April 30, 2008
(Dollars in thousands)
Assets
Current Assets:
Cash and cash equivalents $359,907 $171,541
Trade receivables 259,107 162,426
Inventories 658,451 379,608
Other current assets 66,832 62,632
Total Current Assets 1,344,297 776,207
Property, Plant, and Equipment, Net 841,601 496,296
Other Noncurrent Assets:
Goodwill 2,688,849 1,132,476
Other intangible assets, net 3,270,646 614,000
Other assets 101,150 110,902
Total Other Noncurrent Assets 6,060,645 1,857,378
$8,246,543 $3,129,881
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $176,399 $119,844
Note payable 350,000 -
Current portion of long-term debt 277,466 -
Other current liabilities 319,660 119,553
Total Current Liabilities 1,123,525 239,397
Noncurrent Liabilities:
Long-term debt, net of current portion 910,000 789,684
Other noncurrent liabilities 1,298,078 300,947
Total Noncurrent Liabilities 2,208,078 1,090,631
Shareholders' Equity, net 4,914,940 1,799,853
$8,246,543 $3,129,881
The J. M. Smucker Company
Unaudited Condensed Consolidated Statements of Cash Flow
Nine Months Ended January 31,
2009 2008
(Dollars in thousands)
Operating Activities
Net income $171,685 $133,328
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 54,016 43,528
Amortization 23,511 3,061
Asset impairments and other
restructuring charges - 262
Share-based compensation expense 12,836 8,692
Working capital 26,962 (7,629)
Net Cash Provided by Operating Activities 289,010 181,242
Investing Activities
Businesses acquired, net of cash acquired (72,149) (166,963)
Additions to property, plant, and equipment (84,888) (53,562)
Proceeds from sale of business - 3,407
Purchases of marketable securities - (229,405)
Sales and maturities of marketable securities 1,308 256,861
Other - net 9,444 973
Net Cash Used for Investing Activities (146,285) (188,689)
Financing Activities
Proceeds from long-term debt 400,000 400,000
Repayments of long-term debt - (148,000)
Dividends paid (347,023) (51,478)
Purchase of treasury shares (3,356) (86,300)
Other - net 700 18,689
Net Cash Provided by Financing Activities 50,321 132,911
Effect of exchange rate changes (4,680) 4,901
Net increase in cash and cash equivalents 188,366 130,365
Cash and cash equivalents at beginning of period 171,541 199,541
Cash and cash equivalents at end of period $359,907 $329,906
( ) Denotes use of cash
The J. M. Smucker Company
Unaudited Non-GAAP Measures
Three Months Ended Nine Months Ended
January 31, January 31,
% In- % In-
crease crease
(De- (De-
2009 2008 crease) 2009 2008 crease)
(Dollars in thousands, except per share data)
Operating income before
restructuring and
merger and
integration costs: (1) $168,525 $72,505 132% $336,906 $230,239 46%
% of net sales 14.3% 10.9% 12.5% 11.9%
Income before
restructuring and
merger and
integration costs: (2)
Income $100,271 $44,992 123% $200,849 $138,448 45%
Income per common
share -- assuming
dilution $0.88 $0.79 11% $2.69 $2.42 11%
Earnings before
interest, taxes,
depreciation, and
amortization:(3) $179,024 $85,591 109% $371,511 $269,168 38%
% of net sales 15.1% 12.9% 13.8% 13.9%
(1) Reconciliation to
operating income:
Operating income $135,459 $68,638 97% $293,584 $222,487 32%
Merger and
integration costs 32,809 2,900 1031% 42,419 5,884 621%
Cost of products
sold -
restructuring - 262 (100%) - 262 (100%)
Restructuring costs 257 705 (64%) 903 1,606 (44%)
Operating income
before
restructuring and
merger and
integration costs $168,525 $72,505 132% $336,906 $230,239 46%
(2) Reconciliation to
net income:
Income before
income taxes $114,356 $62,160 84% $255,028 $201,859 26%
Merger and
integration costs 32,809 2,900 1031% 42,419 5,884 621%
Cost of products
sold -
restructuring - 262 (100%) - 262 (100%)
Restructuring costs 257 705 (64%) 903 1,606 (44%)
Income before
income taxes,
restructuring, and
merger and
integration costs 147,422 66,027 123% 298,350 209,611 42%
Income taxes 47,151 21,035 124% 97,501 71,163 37%
Income before
restructuring and
merger and
integration costs $100,271 $44,992 123% $200,849 $138,448 45%
(3) Reconciliation to
net income:
Income before
income taxes $114,356 $62,160 84% $255,028 $201,859 26%
Interest income (1,822) (3,694) (51%) (5,061) (11,015) (54%)
Interest expense 21,959 10,725 105% 44,017 31,735 39%
Depreciation 23,973 14,877 61% 54,016 43,528 24%
Amortization 20,558 1,523 1250% 23,511 3,061 668%
Earnings before
interest, taxes,
depreciation, and
amortization $179,024 $85,591 109% $371,511 $269,168 38%
Merger and
integration costs 32,809 2,900 1031% 42,419 5,884 621%
Cost of products
sold -
restructuring - 262 (100%) - 262 (100%)
Restructuring costs 257 705 (64%) 903 1,606 (44%)
Share-based
compensation
expense 2,928 2,719 8% 8,963 8,692 3%
Adjusted earnings
before interest,
taxes,
depreciation, and
amortization $215,018 $92,177 133% $423,796 $285,612 48%
% of net sales 18.2% 13.9% 15.8% 14.8%
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; earnings before interest, taxes, depreciation, and
amortization ("EBITDA"); and adjusted EBITDA 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.
The J. M. Smucker Company
Unaudited Reportable Segments
Three Months Ended January 31,
%
Increase
2009 2008 (Decrease)
(Dollars in thousands)
Net sales:
U.S. retail market $549,258 $502,174 9%
U.S. retail coffee market 442,933 - n/a
Special markets 190,403 163,199 17%
Total net sales $1,182,594 $665,373 78%
Segment profit:
U.S. retail market $110,259 $79,379 39%
U.S. retail coffee market 90,218 - n/a
Special markets 26,982 25,206 7%
Total segment profit $227,459 $104,585 117%
Interest income 1,822 3,694 (51%)
Interest expense (21,959) (10,725) 105%
Amortization (20,558) (1,523) 1250%
Share-based compensation expense (2,928) (2,719) 8%
Restructuring costs (257) (967) (73%)
Merger and integration costs (32,809) (2,900) 1031%
Corporate administrative expense (33,667) (27,929) 21%
Other unallocated (expense) income (2,747) 644 (527%)
Income before income taxes $114,356 $62,160 84%
Segment profit margin:
U.S. retail market 20.1% 15.8%
U.S. retail coffee market 20.4% n/a
Special markets 14.2% 15.4%
Nine Months Ended January 31,
%
Increase
2009 2008 (Decrease)
(Dollars in thousands)
Net sales:
U.S. retail market $1,656,387 $1,455,553 14%
U.S. retail coffee market 442,933 - n/a
Special markets 590,073 479,223 23%
Total net sales $2,689,393 $1,934,776 39%
Segment profit:
U.S. retail market $297,080 $256,544 16%
U.S. retail coffee market 90,218 - n/a
Special markets 74,171 67,630 10%
Total segment profit $461,469 $324,174 42%
Interest income 5,061 11,015 (54%)
Interest expense (44,017) (31,735) 39%
Amortization (23,511) (3,061) 668%
Share-based compensation expense (8,963) (8,692) 3%
Restructuring costs (903) (1,868) (52%)
Merger and integration costs (42,419) (5,884) 621%
Corporate administrative expense (90,295) (83,309) 8%
Other unallocated (expense) income (1,394) 1,219 (214%)
Income before income taxes $255,028 $201,859 26%
Segment profit margin:
U.S. retail market 17.9% 17.6%
U.S. retail coffee market 20.4% n/a
Special markets 12.6% 14.1%
SOURCE
CONTACT: Investors, Mark R. Belgya, Vice President and Chief Financial
Officer, or Sonal Robinson, Director, Corporate Finance and Investor
Relations, or Media,
+1-330-682-3000, all of The
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