1 Sequential Page 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 January 31, 1995 --------------------------- 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 14,386,339 Class A Common Shares and 14,780,839 Class B Common Shares outstanding on January 31, 1995. The Exhibit Index is located at Sequential Page No. 9. 2 Sequential Page No. 2 PART I. FINANCIAL INFORMATION THE J. M. SMUCKER COMPANY CONDENSED STATEMENTS OF CONSOLIDATED INCOME (Unaudited) Item 1. Financial Statements -------------------- Three Months Ended Nine Months Ended January 31, January 31 ------------------- ------------------ 1995 1994 1995 1994 -------- --------- -------- -------- (Dollars in thousands, except per share data) Net Sales $157,348 $115,616 $486,034 $358,756 Cost of products sold 100,600 74,708 315,791 229,286 -------- -------- -------- -------- 56,748 40,908 170,243 129,470 Selling, distribution, and administrative expenses 41,841 29,021 119,341 86,250 -------- -------- -------- -------- 14,907 11,887 50,902 43,220 Interest income 108 214 473 651 Other income (net) 749 375 2,772 926 -------- -------- -------- -------- 15,764 12,476 54,147 44,797 Interest expense 1,299 116 3,423 210 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 14,465 12,360 50,724 44,587 Income taxes 5,776 4,973 20,494 17,871 -------- -------- -------- -------- NET INCOME $ 8,689 $ 7,387 $ 30,230 $ 26,716 ======== ======== ======== ======== Net income per Common Share* $ .30 $ .26 $ 1.04 $ .92 ======== ======== ======== ======== Dividends declared on Class A Common Shares $ .125 $ .115 $ .375 $ .345 ======== ======== ======== ======== Dividends declared on Class B Common Shares $ .125 $ .115 $ .375 $ .345 ======== ======== ======== ======== <FN> * Computed on the weighted average number of Class A Common Shares and Class B Common Shares out- standing, namely 29,167,667 29,162,460 29,157,201 29,191,050 See notes to condensed, consolidated financial statements. 3 Sequential Page No. 3 THE J. M. SMUCKER COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS January 31, 1995 April 30, 1994 (Unaudited) ----------- ---------- ASSETS (Dollars in Thousands) CURRENT ASSETS Cash and cash equivalents $ 10,385 $ 14,059 Trade receivables, less allowances 46,297 47,828 Inventories: Finished products 49,352 42,463 Raw materials, containers, and supplies 72,160 60,773 -------- -------- 121,512 103,236 Other current assets 8,244 6,562 -------- -------- Total Current Assets 186,438 171,685 PROPERTY, PLANT, AND EQUIPMENT Land and land improvements 14,115 13,533 Buildings and fixtures 71,705 68,362 Machinery and equipment 137,849 130,403 Construction in progress 7,386 6,486 -------- -------- 231,055 218,784 Less allowances for depreciation (92,752) (81,278) -------- --------- Total Property, Plant and Equipment 138,303 137,506 OTHER NONCURRENT ASSETS Goodwill 40,721 21,833 Other assets 50,799 47,617 -------- -------- Total Other Noncurrent Assets 91,520 69,450 -------- -------- $416,261 $378,641 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 30,308 $ 37,322 Notes payable 15,198 4,327 Income taxes 4,023 2,124 Other current liabilities 42,846 39,422 -------- -------- Total Current Liabilities 92,375 83,195 NONCURRENT LIABILITIES 68,467 61,044 SHAREHOLDERS' EQUITY Class A Common Shares, outstanding shares: 3,597 3,590 14,386,339 and 14,362,999 at stated value Class B Common Shares (nonvoting), out- 3,695 3,687 standing shares: 14,780,839 and 14,749,039 at stated value Additional capital 10,964 9,261 Retained income 252,638 233,420 Less: Deferred compensation (1,532) (576) Amount due from ESOP Trust (10,441) (10,670) Currency translation adjustment (3,502) (4,310) -------- -------- Total Shareholders' Equity 255,419 234,402 -------- -------- $416,261 $378,641 ======== ======== See notes to condensed, consolidated financial statements. 4 Sequential Page No. 4 THE J. M. SMUCKER COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended January 31 -------------------- (Dollars in Thousands) 1995 1994 -------- -------- NET CASH PROVIDED FROM OPERATING ACTIVITIES $ 26,228 $ 14,882 CASH FLOWS FROM INVESTING ACTIVITIES Business acquired - net of cash (28,780) (15,853) Additions to property, plant, and equipment (12,766) (12,935) Other - net (728) (263) -------- -------- NET CASH USED FOR INVESTING ACTIVITIES (42,274) (29,051) CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (10,900) (10,021) Proceeds from long-term debt 7,501 -0- Proceeds from short-term debt 15,198 -0- Other - net 404 (791) ------- -------- NET CASH PROVIDED BY/(USED FOR) FINANCING ACTIVITIES 12,203 (10,812) Effect of exchange rate changes 169 (171) Net Decrease in Cash and Cash Equivalents (3,674) (25,152) Cash and Cash Equivalents at Beginning of Period 14,059 50,445 -------- -------- Cash and Cash Equivalents at End of Period $ 10,385 $ 25,293 ======== ======== <FN> ( ) Denotes use of cash See notes to condensed, consolidated financial statements. 5 Sequential Page 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 significantly impacts the Company's 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 January 31, 1995, 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 1,825,949 Class A and 1,431,449 Class B treasury shares at January 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 addition, on December 9, 1994, the Company acquired for cash the Laura Scudder's natural peanut butter business from BAMA Foods Inc., a wholly-owned subsidiary of Welch Foods Inc. In conjunction with these acquisitions, the Company purchased $17,746,500 and $5,250,000 of intangible assets, respectively. The Company plans to amortize them over 40 years using the straight line method. Both acquisitions were 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 nine-month periods ended January 31, 1995 and 1994, respectively. 6 Sequential Page No. 6 Results of Operations - --------------------- Sales for the third quarter ended January 31, 1995 were $157,348,000, up approximately 36% over the same period last year. All business areas with the exception of Specialty Foods, reported increases in sales for the quarter. Approximately 87% of the sales gain was attributed 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 Foodservice and International business areas realized the highest percentage increases for the quarter up 13% and 10%, respectively. The Consumer area had the largest dollar increase, which was attributable to the increase in sales within the beverage market, primarily due to the After The Fall acquisition. On a year-to-date basis, sales are above the prior year by $127,278,000, or 35%, again primarily due to Mrs. Smith's. Earnings for the quarter were $8,689,000, or $.30 per share, compared to $7,387,000, or $.26 per share. The increase in earnings for both the quarter and year-to-date over the same periods last year was attributable to the Mrs. Smith's acquisition. Earnings on the Company's core business were essentially unchanged. Due to the seasonal nature of the Mrs. Smith's business, which is centered around the last four months of the calendar year, it is not expected to contribute to earnings in the fourth quarter. The cost of products sold during both the quarter and year-to-date increased over the same period last year due primarily to the impact of Mrs. Smith's and After The Fall acquisitions, which currently operate at margins below the Company's average. In addition, higher costs of certain fruits and sweeteners and increased plant overhead costs also contributed to the increase. Several factors contributed to the fact that the rate of increase in selling, distribution, and administrative costs for the quarter exceeded the rate of sales growth. The primary contributors were additional marketing dollars to support the Mrs. Smith's business; increased distribution costs, partially due to the expansion of the beverage business; and increased administrative overhead expenses. Selling, distribution, and admininistrative expenses also increased for the nine-month period, due both to the factors noted and to slightly higher marketing expenses on existing business. Interest expense increased significantly from the same period last year due to the additional debt incurred in connection with the recent acquisitions. This was somewhat offset by other income (net), which was up considerably for the quarter and nine-month period. This is primarily attributable to the inclusion of non-operating revenue from the Mrs. Smith's operation and to improved profitability on the sale of excess fruit inventories. 7 Sequential Page No. 7 For the quarter, the increase in income taxes was slightly less than the percentage increase in income before tax due to lower state and local taxes. On a year-to-date basis, income taxes have increased at a slightly greater rate than income before tax due to a higher estimated effective federal tax rate. Financial Condition - Liquidity and Capital Resources - ----------------------------------------------------- The Company's financial position continues to be strong as cash generated from operations increased significantly during the quarter. Cash collected on the second quarter Mrs Smith's receivables and the end of the fruit procurement period were the primary causes for the cash increase. The major uses of cash during the third quarter were the payment of dividends, capital expenditures, and the acquisition of the Laura Scudder's peanut butter business. During the fourth quarter, the Company anticipates that, in the absence of further acquisitions or similar unplanned events, cash from operations will be sufficient to further reduce the outstanding debt balance. On March 11, 1995, the Company's Watsonville, California, processing plant was flooded by the Pajaro River after a levee broke during severe storms. The Watsonville facility processes fresh fruit and stores frozen fruit. The Company has not yet been able to get into the plant to assess damages. The Company does not expect the flooding to have a material effect on the Company's overall operations or performance, but no definitive assessment can be made at this time. 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. 8 Sequential Page No. 8 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. March 17, 1995 THE J. M. SMUCKER COMPANY BY STEVEN J. ELLCESSOR Secretary AND RICHARD K. SMUCKER President 9 Sequential Page 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 first quarter 10-Q dated September 14, 1994). <FN> * 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.