EXHIBIT 99.1
THE J. M. SMUCKER COMPANY ANNOUNCES FIRST QUARTER RESULTS
- SALES AND EARNINGS GROW TO RECORD LEVELS
- U. S. RETAIL SEGMENT RECORDS STRONG REVENUE GAINS
- FY 2004 OUTLOOK REMAINS UNCHANGED
ORRVILLE, Ohio, August 21---The J. M. Smucker Company (NYSE: SJM) today
announced results for the first quarter of its 2004 fiscal year ended July 31,
2003.
FIRST QUARTER RESULTS
Company sales were $350.3 million for the first quarter, up 27 percent compared
to $274.9 million in the first quarter of fiscal 2003. The Jif(R) and Crisco(R)
brands contributed $156.1 million to sales in the first quarter of fiscal 2004,
compared to $87.0 million in last year. Because the merger closed one month into
last year's first quarter, an additional month of Jif and Crisco sales totaling
$47.3 million, were realized in the first quarter of 2004. Excluding the
additional month, sales were up over 10 percent.
Net income was $25.8 million, or $0.51 per share for the first quarter of 2004
compared to $16.0 million or $0.39 per share in last year's first quarter. Net
income for the first quarter of 2004 included non-cash charges of $3.2 million
or $0.04 per share related to the Company's previously announced restructuring
plan. Net income for the first quarter of 2003 included merger-related costs of
$4.9 million or $0.07 per share. Excluding such costs in the first quarter of
2004 and 2003, the Company's earnings per share would have been $0.55 and $0.46,
respectively.
"The positive momentum we generated last year is continuing as we posted another
strong quarter," commented Richard Smucker, president, co-chief executive
officer, and chief financial officer. "Our Smucker's(R), Jif, and Crisco brands
continue to gain market share and the individual categories in which we
participate continue to grow. Distribution of Smucker's Uncrustables(R)
continues to expand and we have completed our national rollout of both the
peanut butter and jelly and grilled cheese versions of the product. In addition,
construction of the new plant in Scottsville, Kentucky is on track for a May
2004 start-up."
The Company uses earnings, excluding restructuring and merger-related 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, excluding items which management does not believe are
indicative of its ongoing operations. A reconciliation of non-GAAP measures to
net income is included in the "Financial Highlights" table attached.
EXPENSES
First quarter operating income increased $14.7 million over last year and
operating margin improved from 10.0 percent in the first quarter of 2003 to 12.1
percent this year. Excluding restructuring costs this year and merger-related
costs last year, operating margin improved from 11.8 percent to 13.0 percent.
Gross margin performance also improved in the quarter, increasing from 33.6
percent in last year's first quarter to 34.5 percent this year. This improvement
reflects the on-going impact of the higher margin Jif and Crisco businesses and
the benefit of lower peanut costs resulting from the passage of last year's Farm
Bill.
Selling, distribution, and administrative (SD&A) expenses as a percent of
sales were flat with last year, at 21.8 percent in 2003 and 21.9 percent this
year. As expected, marketing costs in the first quarter increased nearly 50
percent over the comparable period last year as the Company continued to invest
in its three primary brands. In addition, marketing support for Uncrustables and
the additional month of the Jif and Crisco businesses resulted in overall higher
costs. Although administrative, distribution and selling expenses were up over
the prior year, costs increased at a lesser rate than that of sales. This
allowed SD&A as a percent of sales to remain virtually unchanged from last year,
despite the increased marketing.
"Our financial performance this quarter met expectations and we look forward to
achieving our plan for the remainder of the year," stated Tim Smucker, chairman
and co-chief executive officer. "In the second quarter we will be debuting new
advertising campaigns for our Smucker's, Jif, and Crisco brands. During the
latter part of the year, we expect to focus a great deal on the previously
announced restructuring project, which is progressing as planned, and our new
Uncrustables facility with the goal of increasing our profitability as we
continue to grow sales."
SEGMENT PERFORMANCE
U.S. RETAIL MARKET
The U.S. retail market segment is comprised of the Company's consumer and
consumer oils business areas and represents domestic sales of Smucker's, Jif,
and Crisco brand products to retail customers.
Sales in the U.S. retail market segment were $248.3 million compared to $168.3
million last year, an increase of nearly 48 percent. Jif and Crisco sales in the
month of May accounted for $46.1 million of the segment's increase over the
prior year. Without May's sales, the segment was up 20 percent due to strong
performance of all three brands.
Sales of Smucker's branded products increased approximately 16 percent over last
year's first quarter. Approximately two-thirds of the year-over-year increase
was attributed to growth in the fruit spreads and natural peanut butter
categories, with the remainder coming from the retail rollout of Uncrustables.
The Jif brand continued to outpace the overall growth of the peanut butter
category, which remains strong. For the quarter, Jif was up 74 percent over last
year including $25.0 million of sales in May. Excluding May, Jif sales were up
20 percent on a comparable basis with last year.
Crisco also experienced a very strong quarter, with sales up 85 percent over
last year's first quarter including May sales of $21.1 million. Again, excluding
the benefit of the additional month, the Crisco brand increased 23 percent.
During the quarter, the Company introduced Crisco 100% Corn Oil into the
marketplace providing the brand an opportunity to participate in the $140
million corn oil segment.
SPECIAL MARKETS
The Special Markets segment is comprised of the foodservice, industrial,
international, and beverage business areas.
First quarter 2004 sales in this segment were $102.0 million compared to $106.7
million for the first quarter of fiscal 2003, a decline of 4 percent. This
decrease was due primarily to the result of exiting certain low margin business
in the foodservice and industrial business areas. Excluding this planned
rationalization, the segment increased 3 percent over last year's first quarter
due to increases in the foodservice and international business areas.
In the foodservice area, sales were up 5 percent over last year due to growth in
the schools market. This market was up over 50 percent, led by continued
expansion of Uncrustables into new school districts and the addition of the
grilled cheese line extension. Sales of traditional portion control items also
were up. These increases were partially offset by the previously announced
decision to discontinue as master distributor in foodservice for the Lea &
Perrins brand, effective at the beginning of fiscal 2004.
International sales were up 22 percent in the first quarter due mostly to
increased sales in Canada and Australia along with favorable exchange rates.
Sales in Canada increased nearly 20 percent as measured in local currency due to
a combination of additional Crisco sales in May and an overall increase in their
core business. Sales of Henry Jones Foods, the Company's Australian subsidiary,
also were up double digit as measured in local currency.
In the beverage area, sales declined slightly, down 2 percent as compared to the
first quarter of 2003. Last year's first quarter benefited from the initial
rollout of new products, primarily Smucker's Powdered Lemonade sold in the club
store channel.
Finally, sales in the industrial area were down 39 percent in the first quarter.
The decrease in sales was primarily due to the Company's previously announced
decision to exit certain contracts. Approximately $5.8 million in sales of now
discontinued business were included in last year's first quarter. In addition,
sales of bakery fruit fillings to existing customers decreased from the prior
year.
OUTLOOK FOR FISCAL 2004
The Company reiterated its guidance originally provided at the time it announced
fiscal 2003 earnings. The Company stated that it expects to increase revenues by
over 6 percent to approximately $1.4 billion in fiscal 2004 and expects to
achieve net income in the range of $105 million to $108 million, an increase of
9 to12 percent over 2003, with a resulting earnings per share range of $2.10 to
$2.15. These estimates include approximately $12 million ($7.5 million
after-tax) or $0.15 per share of restructuring costs to be recognized by the
Company during 2004. Excluding the impact of these charges, income would range
from $113 to $115 million, with a corresponding earnings per share range of
$2.25 to $2.30.
CONFERENCE CALL
The Company will conduct an earnings conference call and webcast on August 21,
2003, 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 (800) 428-6051 in
the United States or (973) 709-2089 internationally and entering replay pass
code 303325. The audio replay will be available until Saturday, August 23, 2003,
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, ice cream toppings, health and natural foods,
beverages, and natural peanut butter in North America. In June of 2002, the
Company further enhanced its leadership position with the addition of Jif peanut
butter and Crisco shortening and oils to the Smucker family of brands. For over
100 years, the Company has been headquartered in Orrville, Ohio, and has been
family run for four generations. The J. M. Smucker Company has over 2,700
employees worldwide and distributes products in more than 45 countries.
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 success and cost of new marketing and sales programs and strategies intended
to promote growth in the Jif and Crisco businesses as well as the Company's
other businesses, estimated costs associated with the Company's restructuring
activities, successful construction and start-up of the Scottsville, Kentucky,
plant, the strength of commodity markets from which raw materials are procured
and the related impact on costs, the exact time frame in which loss of sales
associated with discontinued industrial contracts will occur, 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.
Contact:
Richard K. Smucker
President, Co-CEO, and CFO
The J. M. Smucker Company,
(330) 682-3000
Mark R. Belgya
Treasurer
The J. M. Smucker Company
(330) 682-3000
The J.M. Smucker Company
STATEMENTS OF CONSOLIDATED INCOME
Three Months Ended July 31,
-----------------------------
2003 2002
-----------------------------
(Dollars in thousands)
NET SALES $ 350,307 $ 274,936
Cost of products sold 228,220 182,584
Cost of products sold - restructuring 1,388 --
------------ ------------
GROSS PROFIT 120,699 92,352
Selling, distribution, and administrative expenses 76,615 59,947
Other restructuring costs 1,825 --
Merger and integration costs -- 4,887
------------ ------------
OPERATING INCOME 42,259 27,518
Interest income 515 569
Interest expense (1,960) (2,313)
Other income - net 443 60
------------ ------------
INCOME BEFORE INCOME TAXES 41,257 25,834
Income taxes 15,472 9,817
------------ ------------
NET INCOME $ 25,785 $ 16,017
============ ============
NET INCOME PER COMMON SHARE $ 0.52 $ 0.39
============ ============
NET INCOME PER COMMON SHARE - ASSUMING DILUTION $ 0.51 $ 0.39
============ ============
Dividends declared per common share $ 0.23 $ 0.20
============ ============
Weighted-average shares outstanding 49,674,408 40,645,895
============ ============
Weighted-average shares outstanding -
assuming dilution 50,129,828 41,016,759
============ ============
The J. M. Smucker Company
CONDENSED CONSOLIDATED BALANCE SHEETS
July 31,
2003 2002
---------- ----------
(Dollars in thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 167,468 $ 74,095
Trade receivables 103,253 111,443
Inventories 194,556 195,711
Other current assets 15,217 16,762
---------- ----------
Total Current Assets 480,494 398,011
Property, Plant & Equipment, Net 288,684 280,588
Other Noncurrent Assets 871,751 858,661
---------- ----------
$1,640,929 $1,537,260
========== ==========
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 70,064 $ 71,763
Other current liabilities 111,163 94,259
---------- ----------
Total Current Liabilities 181,227 166,022
Long-Term Debt 135,000 135,000
Other Noncurrent Liabilities 185,171 166,966
Shareholders' Equity, Net 1,139,531 1,069,272
---------- ----------
$1,640,929 $1,537,260
========== ==========
The J. M. Smucker Company
FINANCIAL HIGHLIGHTS
Three Months Ended July 31,
- -----------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data) 2003 2002
- -----------------------------------------------------------------------------------------------------
Net sales $ 350,307 $ 274,936
Net income and net income per common share:
Net income $ 25,785 $ 16,017
Net income per common share - assuming dilution $ 0.51 $ 0.39
Income and income per common share before restructuring and merger and
integration costs: (1)
Income $ 27,794 $ 19,047
Income per common share - assuming dilution $ 0.55 $ 0.46
(1) Reconciliation to net income:
Income before income taxes $ 41,257 $ 25,834
Merger and integration costs -- 4,887
Cost of products sold - restructuring 1,388 --
Other restructuring costs 1,825 --
- -----------------------------------------------------------------------------------------------------
Income before income taxes, restructuring, and merger and
integration costs 44,470 30,721
Income taxes 16,676 11,674
- -----------------------------------------------------------------------------------------------------
Income before restructuring and merger and integration costs $ 27,794 $ 19,047
- -----------------------------------------------------------------------------------------------------