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No. 1 of 10 Pages
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1994
--------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------- ----------
Commission File Number 1-5111
---------------------
THE J. M. SMUCKER COMPANY
Ohio 34-0538550
- - ------------------------ ------------------------
State of Incorporation IRS Identification No.
STRAWBERRY LANE
ORRVILLE, OHIO 44667
(216) 682-3000
The Company has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months and has been subject to such filing requirements for the
past 90 days.
The Company had 14,391,339 Class A Common Shares and 14,780,839 Class B
Common Shares outstanding on July 31, 1994.
The Exhibit Index is located on Sequential Page No. 9.
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No. 2
PART I. FINANCIAL INFORMATION
THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
Item I. Financial Statements Three Months Ended
-------------------- July 31,
-----------------------------
1994 1993
---------- ----------
(Dollars in thousands, except
per share data)
Net sales $ 144,347 $ 112,166
Cost of products sold 94,420 70,634
---------- ----------
49,927 41,532
Selling, distribution, and
administrative expenses 34,722 27,511
---------- ----------
15,205 14,021
Interest income 196 346
Other (expense) income - net 699 302
---------- ----------
16,100 14,669
Interest expense 739 56
---------- ----------
INCOME BEFORE INCOME TAXES 15,361 14,613
Income taxes 6,146 5,706
---------- ----------
NET INCOME $ 9,215 $ 8,907
========== ==========
Net income per Common Share* $ .32 $ .31
========== ==========
Dividends declared on Class A
Common Shares $ .125 $ .115
========== ==========
Dividends declared on Class B
Common Shares $ .125 $ .115
========== ==========
* Computed on the weighted average
number of Class A Common Shares
and Class B Common Shares
outstanding, namely 29,131,744 29,204,731
<FN>
See notes to condensed consolidated financial statements.
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No. 3
THE J. M. SMUCKER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
July 31, 1994 April 30, 1994
(Unaudited)
---------------- --------------
(Dollars in Thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,463 $ 14,059
Trade receivables 52,455 47,838
Inventories:
Finished products 56,564 42,463
Raw materials, containers, and supplies 93,193 60,774
-------- --------
149,757 103,237
Other current assets 6,906 6,562
-------- --------
Total Current Assets 214,581 171,686
PROPERTY, PLANT, AND EQUIPMENT
Land and land improvements 13,633 13,532
Buildings and fixtures 69,341 68,362
Machinery and equipment 132,152 130,403
Construction in progress 8,356 6,486
-------- --------
223,482 218,783
Less allowances for depreciation (85,080) (81,278)
-------- --------
Total Property, Plant, and Equipment 138,402 137,505
OTHER NONCURRENT ASSETS
Goodwill, trademarks, and patents 77,516 60,161
Other assets 9,247 9,289
-------- --------
Total Other Noncurrent Assets 86,763 69,450
-------- --------
$439,746 $378,641
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 47,652 $ 37,322
Notes Payable 42,000 -0-
Salaries, wages, and additional compensation 9,458 9,604
Accrued marketing and merchandising 16,582 16,210
Other current liabilities 22,548 20,059
-------- --------
Total Current Liabilities 138,240 83,195
NONCURRENT LIABILITIES 60,874 61,044
SHAREHOLDERS' EQUITY
Class A Common Shares, outstanding shares: 3,598 3,590
14,413,693 and 14,407,493 at stated value
Class B Common Shares, outstanding shares: 3,695 3,687
14,791,173 and 14,791,173 at stated value
Additional capital 10,598 9,261
Retained income 238,993 233,420
Less:
Deferred compensation (1,834) (576)
Amount due from ESOP Trust (10,669) (10,669)
Currency translation adjustment (3,749) (4,311)
-------- --------
Total Shareholders' Equity 240,632 234,402
-------- --------
$439,746 $378,641
======== ========
<FN>
See notes to condensed consolidated financial statements.
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No. 4
THE J. M. SMUCKER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
July 31
--------------------
(Dollars in Thousands)
1994 1993
--------- --------
NET CASH USED FOR OPERATING ACTIVITIES $ (19,923) $(13,512)
CASH FLOWS FROM INVESTING ACTIVITIES
Business acquired - net of cash (22,282) (15,861)
Additions to property, plant, and
equipment (4,806) (4,614)
Proceeds from the sale of property,
plant, and equipment 159 702
Other - net (39) (343)
--------- --------
NET CASH USED FOR INVESTING ACTIVITIES (26,968) (20,116)
CASH FLOWS FROM FINANCING ACTIVITIES
Reduction in Long-Term Debt (101) -0-
Proceeds from Short-Term Debt 42,000 -0-
Dividends paid (3,634) (3,341)
Sale of Common Shares -0- 105
Other - Net (84) -0-
--------- --------
NET CASH USED FOR FINANCING ACTIVITIES 38,181 (3,236)
Effect of exchange rate changes 114 (39)
--------- --------
Net Decrease in Cash and
Cash Equivalents (8,596) (36,903)
Cash and Cash Equivalents at
Beginning of Period 14,059 50,445
--------- --------
Cash and Cash Equivalents at
End of Period $ 5,463 $ 13,542
========= ========
<FN>
( ) Denotes use of cash
See notes to condensed consolidated financial statements.
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No. 5
THE J. M. SMUCKER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation
---------------------
The accompanying unaudited, condensed, consolidated financial
statements have been prepared in accordance with the instructions to Form 10-Q
and do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. Due
to the seasonal nature of the "Mrs. Smith's" business, first quarter results
are not indicative of the estimated results on an annual basis. Due to
anticipated stronger product demand during the upcoming fall and holiday
season, the Company expects "Mrs. Smith" to have a more significant impact on
second and third quarter financial results. For further information, reference
is made to the consolidated financial statements and footnotes included in the
Company's Annual Report on Form 10-K for the year ended April 30, 1994.
Note B - Common Shares
-------------
At July 31, 1994, 35,000,000 Class A Common Shares and 35,000,000
Class B Common Shares were authorized. Outstanding shares of each class are
shown net of 1,820,949 Class A and 1,431,449 Class B treasury shares at July
31 and 1,851,949 Class A and 1,462,449 Class B treasury shares at April 30,
1994.
Note C - Acquisitions
------------
On July 1, 1994, the Company completed its cash acquisition of
substantially all of the assets of After The Fall Products, Inc., located in
Brattleboro, Vermont. That company's business consisted primarily of the sale
of natural juices and juice beverages under the "After The Fall" brand. In
connection with this acquisition, the Company purchased $17,746,500 of
intangible assets, and plans to amortize them over 40 years using the straight
line method. The acquisition was recorded using the purchase method of
accounting.
Note D - Accounting Reclassifications
----------------------------
Certain prior year amounts have been reclassified to conform to current
year classifications.
Note E - Income Per Share
----------------
Income per share has been computed based on the weighted average number
of Class A Common Shares and Class B Common Shares considered outstanding
during the period.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
This discussion and analysis deals with comparisons of material changes
in the condensed, consolidated financial statements for the quarters ended July
31, 1994 and 1993, respectively.
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No. 6
Results of Operations
- - ---------------------
Sales for the first quarter ended July 31, 1994 were $144,347,000, up
approximately 29% over the same period last year. Earnings for the same period
were $9,215,000, or $.32 per share, compared to $8,907,000, or $.31 per share,
for the first quarter last year. The increase in sales is attributable to a
combination of growth in existing markets and the impact of recent
acquisitions. While the addition of the "Mrs. Smith's" business accounted for
approximately one-half of the sales increase, all business areas were up over
the prior year with the Foodservice, Industrial, and Specialty Foods areas
achieving double-digit volume and dollar sales growth.
Earnings for the quarter were consistent with expectations and margins
on the Company's core business remain favorable. Although the "Mrs. Smith's"
business contributed significantly to overall sales growth in the first
quarter, that business did not make a comparable contribution to first quarter
earnings. This was due primarily to the fact that the "Mrs. Smith's" business
tends to be seasonal in nature, with the first quarter of the fiscal year being
the weakest quarter. The "Mrs. Smith's" business is expected to make a larger
profit contribution during the second quarter of the year.
In the Consumer area, the grocery and beverage markets accounted for
most of the increase in sales over the prior year. These were offset somewhat
by decreases in the warehouse club and mass retail markets. International
sales were up over 50%, primarily due to the inclusion of sales from Canada
Group East, which was acquired in July 1993, although all markets in the
International area were up over prior year sales levels.
The cost of products sold during the quarter increased as a percentage
of sales over the same period last year due primarily to the acquisitions of
Canada Group East and the "Mrs. Smith's" and "After The Fall" businesses.
These operations currently perform at margins below the Corporate average.
Excluding the acquisitions, margins otherwise were consistent with last year's
results.
The percentage increase in selling, distribution, and administration
costs for the first quarter over the same period last year was slightly less
than the percentage increase in sales. Marketing and selling expenses were up
slightly but at a lesser rate than the increase in sales, thereby helping to
offset higher administrative overhead and amortization costs.
Interest expense increased significantly from the same period last year
due to the additional debt incurred as a result of the recent acquisitions.
Conversely, interest income decreased due to lower investment balances this
year compared to the first quarter of fiscal 1994.
The increase in income taxes was slightly greater than the percentage
increase in income before tax. The Company elected to recognize the increase
in the statutory federal tax rate during the second quarter of fiscal 1994.
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No. 7
Financial Condition - Liquidity and Capital Resources
- - -----------------------------------------------------
The Company's financial position continues to be strong despite the
increase in debt during the first quarter. The acquisition of the "After The
Fall" beverage business and the seasonal procurement of fruit, which primarily
occurs during the first half of the fiscal year, were the major uses of cash
during the quarter. Other significant uses of cash during the quarter were the
payment of dividends and capital expenditures.
During the second quarter, the Company will continue to borrow against
its revolving credit agreement in order to pay for remaining fruit purchases
and other working capital requirements. The Company expects that borrowings
will peak at a level within the $125 million maximum under the agreement. The
Company expects that cash from future operations will be sufficient to allow it
to begin paying down outstanding debt during the latter part of the fiscal
year, assuming there are no additional acquisitions or other extraordinary cash
requirements.
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No. 8
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
See the Index of Exhibits that appears on Sequential
Page No. 9 of this report.
(b) Reports on Form 8-K
-------------------
On June 13, 1994, the Company amended its April 15, 1994,
Form 8-K filing to include both audited financial statements
and proforma information as required under item 7(a) and 7(b)
of Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
September 13, 1994 THE J. M. SMUCKER COMPANY
/s/ Steven J. Ellcessor
BY STEVEN J. ELLCESSOR
Secretary
/s/ Richard K. Smucker
AND RICHARD K. SMUCKER
President
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No. 9
INDEX OF EXHIBITS
That are filed with the Commission and
the New York Stock Exchange
Assigned Sequential
Exhibit No. * Description Page No.
- - --------------------------------------------------------------------------
4 (a) Industrial Development Revenue Bond Project **
Agreement dated as of December 1, 1986.
(b) Promissory Note between The J. M. Smucker **
Company and First of America Bank - Central
dated as of March 15, 1993.
27 Financial Data Schedule pursuant to Article 5
in Regulation S-X.
99 Revolving credit agreement between The J.M.
Smucker Company and Society National Bank
(Individually and as Agent), National City
Bank and the First National Bank of Chicago
dated as of April 27, 1994.
* Exhibits 2, 10, 11, 15, 18, 19, 20, 23, 24, and 25
are either inapplicable to the Company or require no answer.
** As permitted by Item 601(b)(4)(iii) of Regulation S-K, copies
of these instruments are not filed herewith; however, copies
will be furnished to the Commission upon request.