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THIS COPY IS BEING SUBMITTED PURSUANT Sequential Page
TO RULE 901(d) OF REGULATION S-T. No. 1 of 9 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 October 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 October 31, 1994.
The Exhibit Index is located at 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 Six Months Ended
October 31, October 31,
------------------ ------------------
1994 1993 1994 1993
-------- -------- -------- --------
(Dollars in thousands, except per share data)
Net Sales $184,339 $130,974 $328,686 $243,140
Cost of products sold 120,771 83,944 215,191 154,578
-------- -------- -------- --------
63,568 47,030 113,495 88,562
Selling, distribution, and
administrative expenses 42,778 29,718 77,500 57,229
-------- -------- -------- --------
20,790 17,312 35,995 31,333
Interest income 169 91 365 437
Other income (net) 1,324 249 2,023 551
-------- -------- -------- --------
22,283 17,652 38,383 32,321
Interest expense 1,385 38 2,124 94
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 20,898 17,614 36,259 32,227
Income taxes 8,572 7,192 14,718 12,898
-------- -------- -------- --------
NET INCOME $ 12,326 $ 10,422 $ 21,541 $ 19,329
======== ======== ======== ========
Net income per Common Share* $ .42 $ .35 $ .74 $ .66
======== ======== ======== ========
Dividends declared on
Class A Common Shares $ .125 $ .115 $ .25 $ .23
======== ======== ======== ========
Dividends declared on
Class B Common Shares $ .125 $ .115 $ .25 $ .23
======== ======== ======== ========
<FN>
* Computed on the weighted average
number of Class A Common Shares
and Class B Common Shares out-
standing, namely 29,172,179 29,205,974 29,151,961 29,205,352
See notes to condensed, consolidated financial statements.
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No. 3
THE J. M. SMUCKER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
October 31, 1994 April 30, 1994
(Unaudited)
-------- --------
ASSETS (Dollars in Thousands)
CURRENT ASSETS
Cash and cash equivalents $ 6,599 $ 14,059
Trade receivables, less allowances 82,247 47,828
Inventories:
Finished products 53,464 42,463
Raw materials, containers, and supplies 85,983 60,773
-------- --------
139,447 103,236
Other current assets 7,571 6,562
-------- --------
Total Current Assets 235,864 171,685
PROPERTY, PLANT, AND EQUIPMENT
Land and land improvements 13,976 13,533
Buildings and fixtures 71,067 68,362
Machinery and equipment 135,661 130,403
Construction in progress 6,327 6,486
-------- --------
227,031 218,784
Less allowances for depreciation (88,915) (81,278)
-------- ---------
Total Property, Plant and Equipment 138,116 137,506
OTHER NONCURRENT ASSETS
Goodwill 39,299 21,833
Trademarks and patents 37,687 38,328
Other assets 9,519 9,289
-------- --------
Total Other Noncurrent Assets 86,505 69,450
-------- --------
$460,485 $378,641
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 33,750 $ 37,322
Notes payable 54,798 4,327
Salaries, wages, and additional compensation 11,313 9,604
Accrued marketing and merchandising 22,449 16,209
Income taxes 4,646 2,124
Dividends payable 3,671 3,639
Other current liabilities 10,824 9,970
-------- --------
Total Current Liabilities 141,451 83,195
NONCURRENT LIABILITIES 68,456 61,044
SHAREHOLDERS' EQUITY
Class A Common Shares, outstanding shares: 3,598 3,590
14,391,339 and 14,360,339 at stated value
Class B Common Shares, outstanding shares: 3,695 3,687
14,780,839 and 14,749,839 at stated value
Additional capital 10,597 9,261
Retained income 247,694 233,420
Less:
Deferred compensation (1,682) (576)
Amount due from ESOP Trust (10,441) (10,670)
Currency translation adjustment (2,883) (4,310)
-------- --------
Total Shareholders' Equity 250,578 234,402
-------- --------
$460,485 $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)
Six Months Ended
October 31
--------------------
(Dollars in Thousands)
1994 1993
-------- --------
NET CASH USED FOR OPERATING ACTIVITIES $ (32,087) $ (9,448)
CASH FLOWS FROM INVESTING ACTIVITIES
Business acquired - net of cash (22,309) (15,912)
Additions to property, plant, and
equipment (8,192) (8,643)
Proceeds from the sale of property,
plant, and equipment 196 227
Other - net (412) (242)
-------- --------
NET CASH USED FOR INVESTING ACTIVITIES (30,717) (24,570)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (7,267) (6,684)
Proceeds from long-term debt 7,501 -0-
Proceeds from short-term debt 54,798 -0-
Amount received from ESOP trust - net 228 183
Sale of Common Shares -0- 226
Other - net (93) -0-
-------- --------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 55,167 (6,275)
Effect of exchange rate changes 177 (135)
Net Decrease in Cash and
Cash Equivalents (7,460) (40,428)
Cash and Cash Equivalents at
Beginning of Period 14,059 50,445
-------- --------
Cash and Cash Equivalents at
End of Period $ 6,599 $ 10,017
======== ========
<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. The
seasonal nature of the "Mrs. Smith's" business will have a 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 October 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 1,413,449 Class B treasury shares at October
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
conjunction 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 shares of the 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 three-month
and six-month periods ended October 31, 1994 and 1993, respectively.
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No. 6
Results of Operations
- ---------------------
Sales for the second quarter ended October 31, 1994 were $184,339,000, up
approximately 41% over the same period last year. All business areas
contributed to the sales increase for the quarter, with a majority of the sales
gain being attributable to the "Mrs. Smith's" pie business which was acquired in
March 1994. The "Mrs. Smith's" business is seasonal in nature and traditionally
realizes the largest percentage of its annual sales during the fall and holiday
season. The International and Specialty Foods business areas realized the
highest percentage increases for the quarter, while the Consumer area had the
largest dollar increase. In the Consumer area, the grocery and beverage
markets accounted for most of the increase in sales. The beverage sales were
up due to growth in existing lines and to the "After The Fall" acquisition.
On a year-to-date basis, sales are above the prior year by $85,546,000, or 35%,
again primarily due to "Mrs. Smith's."
Earnings for the quarter were $12,326,000, or $.42 per share, compared
to $10,422,000, or $.35 per share for the same period last year. All business
areas also contributed to earnings during the quarter, and a large part of the
increase in earnings over the second quarter last year was attributable to the
"Mrs. Smith's" acquisition. "Mrs. Smith's" will continue to contribute to
earnings during the third quarter, although its level of contribution will be
less significant as the holiday season comes to an end.
The cost of products sold during the quarter increased as a percentage of
sales over the same period last year. An increase in costs of certain raw
material components, including fruit, along with increased plant overhead were
the primary factors. The recent "Mrs. Smith's" and "After The Fall"
acquisitions also contributed as those operations have margins below the
corporate average.
The percentage increase in selling, distribution, and administration costs
for the second quarter over the same period last year was slightly greater than
the percentage increase in sales. An increase in marketing costs to support
both the "Mrs. Smith's" and "Smucker's" businesses accounted for a majority of
the change. For the six-month period, the increase in selling, distribution,
and administration costs is consistent with the percentage increase in sales.
Interest expense increased significantly from the same period last year
due to the additional debt incurred as a result of the recent acquisitions.
The interest expense was offset somewhat by other income (net), which was up
considerably for both the quarter and the six-month period. The increase in
other income was primarily attributable to the inclusion of non-operating
revenue from the "Mrs. Smith's" business and improved profitability on the sale
of excess fruit inventories.
For the quarter, the increase in income taxes was consistent with the
percentage increase in income before tax. On a year-to-date basis, income
taxes have increased at a slightly greater rate than income before tax (14.1%
vs. 12.5%), due to a higher estimated effective federal tax rate.
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No. 7
Financial Condition - Liquidity and Capital Resources
- -----------------------------------------------------
The Company's financial position continues to be strong despite the
decrease in cash and cash equivalents from balances at April 30, 1994. The
acquisition of "After The Fall" and the seasonal procurement of fruit, which
primarily occurs during the first half of the year, were the major uses of
cash during this period. Other significant uses of cash during the
quarter were the payment of dividends and capital expenditures.
On December 9th, the Company acquired the "Laura Scudder's" natural
peanut butter business from BAMA Foods Inc., a wholly-owned subsidiary of Welch
Foods Inc. The acquisition was financed with funds borrowed against the
Company's revolving credit agreement. Despite the current debt level, the
Company anticipates that, in the absence of further acquisitions or similar
unplanned events, cash from future operations will be sufficient to reduce
significantly the outstanding debt balance by the end of the fiscal year.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The annual meeting of shareholders of the Company was held on August
16, 1994. At the meeting, the names of Charles S. Mechem, Jr., Vernon D.
Netzly, Timothy P. Smucker, and Benjamin B. Tregoe, Jr. were placed in
nomination for the Board of Directors to serve three-year terms ending in 1997.
All four nominees were elected with the results as follows:
Votes For Votes Withheld
--------- --------------
Charles S. Mechem, Jr. 65,190,313 305,215
Vernon D. Netzly 65,205,191 290,337
Timothy P. Smucker 65,208,415 287,113
Benjamin B. Tregoe, Jr. 65,197,027 298,501
The second matter voted upon at the meeting related to the ratification of
the appointment of Ernst & Young as the Company's independent auditors for the
1995 fiscal year. The measure was ratified as follows:
Votes For Votes Against Abstentions
--------- ------------- -----------
65,118,989 154,099 222,440
No broker non-votes were identified with regard to either matter submitted to
the shareholders.
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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
-------------------
No Reports on Form 8-K were required to be filed during
the quarter for which this report is filed.
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.
December 13, 1994 THE J. M. SMUCKER COMPANY
BY STEVEN J. ELLCESSOR
Secretary
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 the First of America Bank -
Central dated as of March 15, 1993.
27 Financial data schedules 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. (Previously filed with the First
Quarter Report dated September 14, 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, no copy
of this instrument is filed; however, a copy will be furnished
to the Commission upon request.