Exhibit 99.1
The J. M. Smucker Company Announces Record First Quarter Results
- Significant Increase in Sales and Earnings Due to Acquisition of
Multifoods
- Integration of Multifoods' Operations on Track
- Board of Directors Authorizes Share Repurchase
- Company Confirms Fiscal Year 2005 Outlook
ORRVILLE, Ohio, Aug. 25 /PRNewswire-FirstCall/ -- The J. M. Smucker Company
(NYSE: SJM) today announced results for the first quarter ended July 31, 2004,
of its 2005 fiscal year. Results for the quarter include the operations of
International Multifoods Corporation (Multifoods) since the acquisition closing
date of June 18, 2004.
As previously announced, the Company sold its Australian based Henry Jones
Foods (HJF) business and is planning to divest the U.S. foodservice business
acquired as part of the Multifoods transaction. Results for both of these
businesses are reported as discontinued operations and all prior periods have
been restated. Quarterly restated results for fiscal year 2004 are included.
First Quarter Results
Company sales were $415.8 million for the first quarter of 2005, up 22
percent compared to $341.9 million in the first quarter of 2004. The acquired
Multifoods' businesses contributed $75.5 million to sales in the first quarter
of 2005. Excluding the contribution of the Multifoods' brands, higher sales of
branded products were offset by declines in non-branded industrial sales. Income
from continuing operations was $27.5 million, an increase of nine percent over
$25.2 million in last year's first quarter, while earnings per diluted share for
the quarter were $0.50 in both years, due to the additional shares issued in the
Multifoods transaction.
Improved margins on the Company's existing business and the addition of
Multifoods were the primary causes for the earnings increase. These increases
were partially offset by higher interest expense, associated with debt related
to the acquisition. Income from continuing operations for the first quarter
of 2005 included pretax merger and integration costs of $2.8 million or $0.03
per diluted share and restructuring charges of $3.0 million or $0.04 per
diluted share. Income from continuing operations for the first quarter of
2004 included restructuring charges of $3.2 million or $0.04 per diluted
share. Excluding these merger and integration and restructuring costs, the
Company's income from continuing operations was up 14 percent and diluted
earnings per share would have been $0.57 and $0.54, in the first quarter of
2005 and 2004, respectively.
"We closed the acquisition of Multifoods this quarter and are pleased to
see its contribution reflected in our first quarter results. With the
addition of Multifoods, we have added an impressive array of leading, North
American icon brands to the family of Smucker," said Tim Smucker, chairman and
co-chief executive officer. "We have already started to invest behind these
brands and the integration of the businesses is well underway."
Net income for the first quarter of 2005 was up 27 percent to
$32.8 million or $0.60 per diluted share, compared to last year's first
quarter net income of $25.8 million or $0.51 per diluted share. Included in
this quarter's net income was income from discontinued operations of
$5.4 million or $0.10 per diluted share, which includes the gain on the
Company's sale of its HJF business. Income from discontinued operations was
$0.5 million or $0.01 per diluted share last year.
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 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 is included in the "Financial Highlights" table.
Scottsville Plant
During the first quarter of 2005, construction of the Smucker's
Uncrustables(R) plant in Scottsville, Kentucky, was completed and the plant
commenced operations. The new facility has experienced a longer ramp-up
schedule than originally anticipated. The Company incurred approximately
$2.8 million or $0.03 per diluted share in costs associated with the start-up
during the first quarter of 2005. These costs consist primarily of additional
labor, materials, and under-absorbed overhead. The Company expects to incur
additional start-up costs for the year, with a majority of the costs to be
incurred during the second quarter. The Company plans to offset these costs
with cost reductions across the organization, and is not changing its fiscal
year earnings guidance.
"We view this ramp-up issue as a short-term hurdle and continue to be
excited about Uncrustables as a growth platform for the Company over the next
several years," commented Richard Smucker, president, co-chief executive
officer and chief financial officer. "We continue to support Uncrustables
with additional promotion and marketing activities this year and anticipate a
significant year-over-year sales increase."
Margins
Operating income in the first quarter increased 16 percent from the
comparable quarter last year, while operating margin decreased from
12.1 percent in the first quarter of 2004 to 11.6 percent in the first quarter
of 2005. The increase in operating income was attributed to the overall
revenue growth. The Company's gross margin increased slightly from
34.6 percent in the first quarter of last year to 34.8 percent in the first
quarter of this year, due primarily to the impact of the Company's supply
chain optimization project, favorable manufacturing costs, and a decrease in
restructuring charges.
The Company continues to see escalating raw material costs. Increases in
the cost of certain fruit varieties and rising fuel costs, which primarily
affect packaging components as well as energy costs, are the key contributors.
The Company expects to offset these increases in raw material costs over the
remainder of the year through a variety of cost reduction and pricing
measures.
Selling, distribution, and administrative (SD&A) expenses as a percentage
of sales declined slightly from 22.0 percent in the first quarter of 2004 to
21.9 percent in the current quarter. Marketing and selling expenses decreased
as a percent of sales despite an absolute dollar increase of 11 percent. This
was somewhat offset by administrative costs being incurred at the former
Multifoods' headquarters in Minnesota, which is expected to be closed by the
end of April 2005.
Interest expense increased from $1.9 million in the first quarter of 2004
to $4.5 million in the first quarter of 2005 as a result of an increase in the
Company's debt outstanding associated with the acquisition of Multifoods. The
Company's first quarter earnings benefited from a decrease in the effective
tax rate from 37.5 percent in 2004 to 36.6 percent this quarter.
Segment Performance
U.S. Retail Market
The U.S. retail market segment is comprised of the Company's consumer and
consumer oils and baking business areas. Prior to the acquisition of
Multifoods, this segment represented the domestic sales of Smucker's(R),
Jif(R), and Crisco(R) branded products to retail customers. With the addition
of Multifoods, domestic sales of Pillsbury(R), Hungry Jack(R), Martha
White(R), and Pet(R) branded products to retail customers are now included in
this segment.
Sales in the U.S. retail market segment for the first quarter of 2005 were
$288.1 million, compared to $248.3 million in the first quarter of 2004, an
increase of 16 percent. The Multifoods' brands contributed $39.9 million of
the segment's sales in the quarter.
During the first quarter of 2005, sales in the consumer area increased
11 percent over the first quarter of last year, driven by growth in the
Smucker's and Jif brands, the addition of Hungry Jack, and continued growth of
the Company's Uncrustables products. In the consumer oils and baking area,
sales were up 29 percent due to the addition of the Pillsbury and Martha White
brands. Crisco branded sales in retail were down approximately six percent
during the quarter, an improvement from the fourth quarter of last year. In
addition, non-branded industrial oil sales were down from the prior year.
Special Markets
The special markets segment is comprised of the international,
foodservice, beverage, industrial, and Canada strategic business areas. The
Canadian business acquired from Multifoods has been combined with the
Company's previous Canadian business to form the new Canada business area.
Sales in the special markets segment were $127.7 million in the first
quarter of 2005, compared to $93.6 million for the first quarter of 2004.
Multifoods contributed $35.6 million of the segment's sales in the quarter.
Sales in the Canada and foodservice business areas were up over the prior
year's first quarter. Excluding the Multifoods sales and planned declines in
the industrial and international businesses, special markets increased four
percent in the first quarter of 2005 compared to the comparable period last
year.
Foodservice sales, which exclude the Multifoods' U.S. foodservice
business, were up four percent in the first quarter of 2005, compared to last
year's first quarter. Growth in the Company's traditional portion control
business and increased Uncrustables sales in the school market contributed to
the overall increase in foodservice sales.
Beverage sales were down three percent in the first quarter of 2005
compared to the first quarter of 2004, due mostly to a decrease in sales of
Santa Cruz Organic(R) products. Availability of certain organic raw materials
was the primary cause of the decline. Sales of R. W. Knudsen Family(R)
products and the non-branded business segment were up for the first quarter of
2005 versus the first quarter of last year.
Finally, industrial sales were down 14 percent in the first quarter of
2005 compared to the prior year's first quarter. The decrease in the
industrial area was due to the final phase of the Company's plan to exit low
margin contracts. Approximately $3.4 million in sales of now discontinued
business were included in last year's first quarter. Sales that are planned
to be discontinued are estimated at $11 million for the entire fiscal year.
Share Repurchase
At its most recent meeting, the Company's Board of Directors authorized a
share repurchase plan. Under the plan, the Company is authorized to purchase
up to one million common shares. The buyback program will be implemented
throughout the fiscal year and beyond, at management's discretion.
Outlook for Fiscal 2005
The Company confirmed its objective to increase its 2005 diluted earnings
per share from continuing operations by its long-term growth goal of eight
percent, taking into consideration the previously discussed cost increases.
This equates to an earnings growth rate of approximately 24 percent in 2005.
An increase of approximately eight million shares outstanding resulting from
the Multifoods acquisition accounts for the difference in these growth rates.
This earnings goal excludes the impacts of restructuring, merger and
integration costs, and gains and losses on sales of assets.
With the decision to divest the Multifoods' U.S. foodservice business and
treat it as a discontinued operation, forecasted sales for 2005 have been
revised to approximately $2.1 billion.
Earnings for 2005 will include approximately $20 million or $0.20 per
diluted share in merger and integration costs and approximately $6.5 million
or $0.07 per diluted share in restructuring costs. This is an increase over
the previously announced estimate of restructuring charges and primarily
reflects the Company's first quarter decision to relocate some production from
its Salinas, California, facility to plants in Orrville, Ohio, and Memphis,
Tennessee.
Conference Call
The Company will conduct an earnings conference call and webcast on
Wednesday, August 25, 2004, 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, a replay will be available following the call and can be
accessed by calling (888) 203-1112 in the United States or (719) 457-0820
internationally and entering replay pass code 311218. The audio replay will
be available until Wednesday, September 1, 2004, at 11:59 p.m. E.T.
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). In
June 2004, the Company expanded its family of products to include such brands
as 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 107 years, The J. M.
Smucker Company has been headquartered in Orrville, Ohio, and has been family
run for four generations. The J. M. Smucker Company was recognized as the top
company in FORTUNE Magazine's 2003 annual survey of The 100 Best Companies to
Work For and has ranked consistently in the top 25 companies each year since
FORTUNE began the list in 1998. The J. M. Smucker Company has over 4,500
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 ability to achieve the amount and timing of the estimated
savings associated with the Multifoods acquisition, the timing and amount of
capital expenditures and merger and integration costs, success and cost 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 ramp up and manage capacity related to Uncrustables, the
strength of commodity markets from which raw materials are procured and the
related impact on costs, 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
STATEMENTS OF CONSOLIDATED INCOME
Three Months Ended July 31,
2004 2003
(Dollars in thousands)
Net Sales $415,816 $341,912
Cost of products sold 270,567 222,123
Cost of products sold - restructuring 653 1,388
Gross Profit 144,596 118,401
Selling, distribution, and administrative
expenses 91,222 75,057
Other restructuring costs 2,355 1,825
Merger and integration costs 2,763 ---
Operating Income 48,256 41,519
Interest income 741 363
Interest expense (4,457) (1,940)
Other (expense) income - net (1,205) 452
Income from Continuing Operations Before
Income Taxes 43,335 40,394
Income taxes 15,861 15,148
Income from Continuing Operations 27,474 25,246
Gain on sale of discontinued operation,
net of tax 5,678 ---
Discontinued operations, net of tax (304) 539
Net Income $32,848 $25,785
Income from continuing operations per common
share $0.51 $0.51
Gain on sale of discontinued operation per
common share 0.10 ---
Discontinued operations per common share --- 0.01
Net income per common share $0.61 $0.52
Income from continuing operations per common
share - assuming dilution $0.50 $0.50
Gain on sale of discontinued operation per
common share - assuming dilution 0.10 ---
Discontinued operations per common share -
assuming dilution --- 0.01
Net income per common share - assuming
dilution $0.60 $0.51
Dividends declared per common share $0.25 $0.23
Weighted-average shares outstanding 53,831,281 49,674,408
Weighted-average shares outstanding -
assuming dilution 54,513,281 50,129,828
The J. M. Smucker Company
CONDENSED CONSOLIDATED BALANCE SHEETS
July 31,
2004 2003
(Dollars in thousands)
ASSETS
Current Assets:
Cash and cash equivalents $45,530 $154,721
Trade receivables 150,124 96,446
Inventories 328,067 187,188
Current assets of discontinued operations 38,655 27,154
Other current assets 11,324 14,984
Total Current Assets 573,700 480,493
Property, Plant & Equipment, Net 510,629 281,153
Other Noncurrent Assets:
Marketable securities 39,005 ---
Other assets of discontinued operations 52,350 15,243
Other noncurrent assets 1,587,956 864,040
Total Noncurrent Assets 1,679,311 879,283
$2,763,640 $1,640,929
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $97,628 $---
Accounts payable 101,919 66,622
Current liabilities of discontinued
operations 21,481 5,110
Other current liabilities 187,002 109,495
Total Current Liabilities 408,030 181,227
Noncurrent Liabilities:
Long-term debt 451,149 135,000
Other noncurrent liabilities of
discontinued operations 14 323
Other noncurrent liabilities 280,836 184,849
Total Noncurrent Liabilities 731,999 320,172
Shareholders' Equity, Net 1,623,611 1,139,530
$2,763,640 $1,640,929
The J. M. Smucker Company
FINANCIAL HIGHLIGHTS
Three Months Ended July 31,
(Dollars in thousands, except per share data) 2004 2003
Net sales $415,816 $341,912
Net income $32,848 $25,785
Net income per common share - assuming dilution $0.60 $0.51
Income and income per common share from
continuing operations:
Income $27,474 $25,246
Income per common share - assuming dilution $0.50 $0.50
Income and income per common share from continuing
operations before restructuring and merger and
integration costs: (1)
Income $31,133 $27,254
Income per common share - assuming dilution $0.57 $0.54
(1) Reconciliation to income from continuing
operations:
Income from continuing operations before
income taxes $43,335 $40,394
Merger and integration costs 2,763 ---
Cost of products sold - restructuring 653 1,388
Other restructuring costs 2,355 1,825
Income from continuing operations before
income taxes, restructuring, and merger and
integration costs 49,106 43,607
Income taxes 17,973 16,353
Income from continuing operations before
restructuring and merger and integration
costs $31,133 $27,254
The J. M. Smucker Company
STATEMENTS OF CONSOLIDATED INCOME
Three Months
Ended
July 31, 2003
Net Sales $341,912
Cost of products sold 222,123
Cost of products sold - restructuring 1,388
Gross Profit 118,401
Selling, distribution, and administrative expenses 75,057
Other restructuring costs 1,825
Merger and integration costs ---
Operating Income 41,519
Interest income 363
Interest expense (1,940)
Other income - net 452
Income from Continuing Operations Before Income Taxes 40,394
Income taxes 15,148
Income from Continuing Operations 25,246
Gain on sale of discontinued operation, net of tax ---
Discontinued operations, net of tax 539
Net Income $25,785
Income from continuing operations per common share $0.51
Gain on sale of discontinued operation per common share ---
Discontinued operations per common share 0.01
Net income per common share $0.52
Income from continuing operations per common share -
assuming dilution $0.50
Gain on sale of discontinued operation per common share -
assuming dilution ---
Discontinued operations per common share - assuming dilution 0.01
Net income per common share - assuming dilution $0.51
Dividends declared per common share $0.23
Weighted-average shares outstanding 49,674,408
Weighted-average shares outstanding -
assuming dilution 50,129,828
The J. M. Smucker Company
STATEMENTS OF CONSOLIDATED INCOME
Three Months Ended
October 31, 2003
Net Sales $376,789
Cost of products sold 242,147
Cost of products sold - restructuring 1,806
Gross Profit 132,836
Selling, distribution, and administrative expenses 79,237
Other restructuring costs 1,302
Merger and integration costs ---
Operating Income 52,297
Interest income 768
Interest expense (1,706)
Other income - net (395)
Income from Continuing Operations Before Income Taxes 50,964
Income taxes 19,111
Income from Continuing Operations 31,853
Gain on sale of discontinued operation, net of tax ---
Discontinued operations, net of tax 214
Net Income $32,067
Income from continuing operations per common share $0.64
Gain on sale of discontinued operation per common share ---
Discontinued operations per common share ---
Net income per common share $0.64
Income from continuing operations per common share -
assuming dilution $0.63
Gain on sale of discontinued operation per common share -
assuming dilution ---
Discontinued operations per common share - assuming dilution 0.01
Net income per common share - assuming dilution $0.64
Dividends declared per common share $0.23
Weighted-average shares outstanding 49,784,767
Weighted-average shares outstanding - assuming dilution 50,301,060
The J. M. Smucker Company
STATEMENTS OF CONSOLIDATED INCOME
Three Months Ended
January 31, 2004
Net Sales $346,421
Cost of products sold 219,107
Cost of products sold - restructuring 425
Gross Profit 126,889
Selling, distribution, and administrative expenses 75,366
Other restructuring costs 2,074
Merger and integration costs ---
Operating Income 49,449
Interest income 851
Interest expense (1,408)
Other income - net 291
Income from Continuing Operations Before Income Taxes 49,183
Income taxes 18,444
Income from Continuing Operations 30,739
Gain on sale of discontinued operation, net of tax ---
Discontinued operations, net of tax 579
Net Income $31,318
Income from continuing operations per common share $0.62
Gain on sale of discontinued operation per common share ---
Discontinued operations per common share 0.01
Net income per common share $0.63
Income from continuing operations per common share -
assuming dilution $0.61
Gain on sale of discontinued operation per common share -
assuming dilution ---
Discontinued operations per common share - assuming dilution 0.01
Net income per common share - assuming dilution $0.62
Dividends declared per common share $0.23
Weighted-average shares outstanding 49,867,349
Weighted-average shares outstanding - assuming dilution 50,498,462
The J. M. Smucker Company
STATEMENTS OF CONSOLIDATED INCOME
Three Months Ended
April 30, 2004
Net Sales $315,025
Cost of products sold 205,810
Cost of products sold - restructuring 4,845
Gross Profit 104,370
Selling, distribution, and administrative expenses 68,968
Other restructuring costs 2,163
Merger and integration costs 1,266
Operating Income 31,973
Interest income 815
Interest expense (1,311)
Other income - net 2,909
Income from Continuing Operations Before Income Taxes 34,386
Income taxes 13,292
Income from Continuing Operations 21,094
Gain on sale of discontinued operation, net of tax ---
Discontinued operations, net of tax 1,086
Net Income $22,180
Income from continuing operations per common share $0.42
Gain on sale of discontinued operation per common share ---
Discontinued operations per common share 0.02
Net income per common share $0.44
Income from continuing operations per common share -
assuming dilution $0.42
Gain on sale of discontinued operation per common share -
assuming dilution ---
Discontinued operations per common share - assuming dilution 0.02
Net income per common share - assuming dilution $0.44
Dividends declared per common share $0.25
Weighted-average shares outstanding 49,944,566
Weighted-average shares outstanding - assuming dilution 50,657,023
SOURCE J. M. Smucker Company
-0- 08/25/2004
/CONTACT: Investors, Mark R. Belgya, Vice President and Treasurer, or
Media, Maribeth Badertscher, Manager, Corporate Communications of The J. M.
Smucker Company, +1-330-682-3000/
/Web site: http://www.smuckers.com /
(SJM)
CO: J. M. Smucker Company; International Multifoods Corporation
ST: Ohio
IN: FOD REA
SU: ERN ERP CCA MAV