1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended April 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-5111
THE J. M. SMUCKER COMPANY
OHIO 34-0538550
State of Incorporation I.R.S. Employer Identification No.
One Strawberry Lane
Orrville, Ohio 44667-0280
Principal executive offices
Telephone number: (330) 682-3000
Securities registered pursuant to Section 12(b) of the Act:
Class A Common Shares, no par value Registered on the
Class B Common Shares, no par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
The Registrant 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 at least the past 90 days.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of June 30, 1998, 14,393,402 Class A Common Shares and 14,755,836 Class
B Common Shares of The J. M. Smucker Company were issued and outstanding. The
aggregate market value of the voting Common Shares (Class A) held by
non-affiliates of the Registrant at June 30, 1998, was $270,984,384.
Certain sections of the Registrant's definitive Proxy Statement, dated July
13, 1998, for the August 18, 1998 Annual Meeting of Shareholders, and of the
1998 Annual Report to Shareholders are incorporated by reference into Parts I,
II, III, and IV of this Report.
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PART I
ITEM 1. BUSINESS
THE COMPANY. The J. M. Smucker Company was begun in 1897 and was
incorporated in Ohio in 1921. The Company, often referred to as "Smucker's" (a
registered trademark), operates in one industry, the manufacturing and marketing
of food products on a worldwide basis. Unless otherwise indicated by the
context, the term "Company" as used in this report means the continuing
operations of The J. M. Smucker Company and its subsidiaries.
DISCONTINUED OPERATIONS. On May 31, 1996, the Company completed the
sale of its "Mrs. Smith's" frozen pie business to a subsidiary of Flowers
Industries, Inc. for a combination of cash and notes receivable. In connection
with this divestiture, the Company also has entered into agreements to lease
property, plant, and equipment of the "Mrs. Smith's" frozen pie business to
Flowers Industries, Inc. under operating lease agreements, which include the
exclusive right and option to purchase such assets during the term of the
leases.
PRINCIPAL PRODUCTS. The principal products of the Company are fruit
spreads, dessert toppings, peanut butter, industrial fruit products (such as
bakery and yogurt fillings), fruit and vegetable juices, juice beverages,
syrups, condiments, and gift packages.
In its U.S. domestic markets, the Company's products are primarily sold
through brokers to chain, wholesale, cooperative, and independent grocery
accounts and other consumer outlets, and to foodservice distributors and chains
including hotels, restaurants, and institutions. Industrial products such as
bakery and fruit fillings are typically sold directly to other food
manufacturers and marketers for inclusion in their products.
The Company's distribution outside the United States is principally in
Canada, Australia and the Pacific Rim, and Latin America, although products are
exported to other countries as well. International sales represent approximately
12% of total consolidated Company sales for fiscal 1998.
SOURCES AND AVAILABILITY OF RAW MATERIALS. The fruit raw materials used
by the Company in the production of its food products are generally purchased
from independent growers and suppliers, although the Company, through a joint
venture, grows some strawberries for its own use. Because of the seasonal nature
and volatility of quantities of most of the crops on which the Company depends,
it is necessary to prepare and freeze stocks of fruit, fruit juices, berries,
and other food products and to maintain them in cold storage warehouses.
Sweeteners, peanuts, and other ingredients are obtained from various other
sources.
TRADEMARKS. The Company's products are marketed under numerous
trademarks owned by the Company. Major trademarks include: "Smucker's", "The R.
W. Knudsen Family", "After The Fall", "Simply Nutritious", "Mary Ellen",
"Dickinson's", "Lost Acres", "IXL", "Laura Scudder's", "Simply Fruit", "Good
Morning", "Double Fruit", "Goober", "Magic Shell", "Sundae Syrup", "Recharge",
"Santa Cruz Natural", "Santa Cruz Organic", "Sunberry Farms", "Spritzer", and
"Heinke's". In addition, the Company licenses the use of several other
trademarks, none of which individually is material to the Company's business.
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Other slogans or designs considered to be important Company trademarks
include (without limitation) the slogan, "With a name like 'Smucker's', it has
to be good", "Over 100 Years of Family-Made Goodness", the "Smucker's" banner,
the Crock Jar shape, the Gingham design, and the strawberry logo.
SEASONALITY. Historically, the Company's business has not been highly
seasonal.
WORKING CAPITAL. Working capital requirements are greatest during the
late spring and summer months due to seasonal procurement of fruits, berries,
and peanuts. During this period, short-term borrowings may be used to augment
working capital generated by sales.
CUSTOMERS. The Company is not dependent either on a single customer or
on a very few customers for a major part of its sales. No single domestic or
foreign customer accounts for more than 10% of consolidated sales.
ORDERS. Generally, orders are filled within a few days of receipt and
the backlog of unfilled orders at any particular time is not material.
GOVERNMENT BUSINESS. No material portion of the Company's business is
subject to negotiation of profits or termination of contracts at the election of
the government.
COMPETITION. The Company is the U.S. market leader in the fruit
spreads, dessert topping, natural peanut butter, and peanut butter combination
categories. The Company's business is highly competitive as all its brands
compete for retail shelf space with other advertised and branded products as
well as unadvertised and private label products. The growth of alternative store
formats (i.e. warehouse club and mass merchandise stores) and changes in
business practices, resulting from both technological advances and new industry
techniques, have added additional variables for companies in the food industry
to consider in order to remain competitive. The principal methods of and factors
in competition are product quality, price, advertising, and promotion.
RESEARCH AND DEVELOPMENT. The Company predominantly utilizes in-house
resources to both develop new products and improve existing products in each of
its business areas. In relation to consolidated assets and operating expenses,
amounts expensed for research and development in each of the areas and in the
aggregate were not material in any of the last three years.
ENVIRONMENTAL MATTERS. Compliance with the provisions of federal,
state, and local environmental regulations regarding either the discharge of
materials into the environment or the protection of the environment is not
expected to have a material effect upon the capital expenditures, earnings, or
competitive position of the Company.
EMPLOYEES. At April 30, 1998, the Company had approximately 2,000
full-time employees, worldwide.
SEGMENT AND GEOGRAPHIC INFORMATION. Information concerning
international operations for the years 1998, 1997, and 1996 is hereby
incorporated by reference from the 1998 Annual Report to Shareholders, on pages
18 and 19 under Note B: "Operating Segments".
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ITEM 2. PROPERTIES
The table below lists all the Company's manufacturing and fruit
processing facilities. All of the Company's properties are maintained and
updated on a regular basis, and the Company continues to make investment for
expansion and technological improvements. The properties listed below are owned.
The Company also leases property in Pottstown, Pennsylvania to a subsidiary of
Flowers Industries, Inc. The corporate headquarters are located in Orrville,
Ohio.
DOMESTIC MANUFACTURING LOCATIONS PRODUCTS PRODUCED
- -------------------------------------------------------------------------------------------------------------
Orrville, Ohio Fruit spreads, toppings, industrial fruit
products
Salinas, California Fruit spreads, toppings
Memphis, Tennessee Fruit spreads, toppings
Ripon, Wisconsin Fruit spreads, toppings, condiments
New Bethlehem, Pennsylvania Peanut butter and "Goober" products
Chico, California Fruit and vegetable juices, beverages
Havre de Grace, Maryland Fruit and vegetable juices, beverages
FRUIT PROCESSING LOCATIONS FRUIT PROCESSED
- -------------------------------------------------------------------------------------------------------------
Watsonville, California Strawberries, oranges, apples, peaches,
apricots. Also, produces industrial fruit
products.
Woodburn, Oregon Strawberries, raspberries, blackberries,
blueberries. Also, produces industrial fruit
products.
Grandview, Washington Grapes, cherries, strawberries, cranberries
Oxnard, California Strawberries
INTERNATIONAL MANUFACTURING LOCATIONS PRODUCTS PRODUCED
- -------------------------------------------------------------------------------------------------------------
Ste-Marie, Quebec, Canada Fruit spreads, pie fillings, sweet spreads
Kyabram, Victoria, Australia Fruit spreads, toppings, fruit pulps, fruit bars
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding that would
be considered material.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The information pertaining to the market for the Company's Common
Shares and other related shareholder information is hereby incorporated by
reference from the Company's 1998 Annual Report to Shareholders under the
caption "Stock Price Data" on page 6.
ITEM 6. SELECTED FINANCIAL DATA
Five year summaries of selected financial data for the Company and
discussions of accounting changes which materially affect the comparability of
the selected financial data are hereby incorporated by reference from the
Company's 1998 Annual Report to Shareholders under the following captions and
page numbers: "Five-Year Summary of Selected Financial Data" on page 5 and Note
D: "Divestiture" on pages 19 and 20.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's discussion and analysis of results of operations and
financial condition, including a discussion of liquidity and capital resources,
is hereby incorporated by reference from the Company's 1998 Annual Report to
Shareholders, on pages 7 through 9.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated financial statements of the Company at April 30, 1998,
1997, and 1996, and for each of the three years in the period ended April 30,
1998, with the report of independent auditors and selected unaudited quarterly
financial data, are hereby incorporated by reference from the Company's 1998
Annual Report to Shareholders on page 6 and pages 10 through 26.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors and nominees for directorship is
incorporated herein by reference from the Company's definitive Proxy Statement,
dated July 13, 1998, for the 1998 Annual Meeting of Shareholders on August 18,
1998, on pages 2 through 4, under the caption "Election of Directors".
Information regarding disclosure of late filers pursuant to Item 405 of
Regulation S-K is incorporated herein by reference from the Company's
definitive Proxy Statement, dated July 13, 1998, for the 1998 Annual Meeting of
Shareholders on August 18, 1998, on pages 12 and 13 under the caption
"Ownership of Common Shares".
EXECUTIVE OFFICERS OF THE COMPANY
The names, ages as of July 1, 1998, and positions of the executive
officers of the Company are listed below. All executive officers serve at the
pleasure of the Board of Directors, with no fixed term of office. Paul H.
Smucker is the father of Timothy P. and Richard K. Smucker and the father-in-law
of H. Reid Wagstaff. All of the officers have held various positions with the
Company for more than five years.
Years with Served as an
Name Age Company Position Officer Since
- ----------------------------------------------------------------------------------------------------------------------
Paul H. Smucker 81 59 Chairman of the Executive Committee 1946
Timothy P. Smucker 54 29 Chairman 1973
Richard K. Smucker 50 25 President 1974
Mark R. Belgya 37 13 Corporate Controller 1997
Vincent C. Byrd 43 21 Vice President and General Manager, Consumer 1988
Market
K. Edwin Dountz 56 22 Vice President - Sales 1982
Fred A. Duncan 52 20 Vice President and General Manager, Industrial 1984
Market
Steven J. Ellcessor 46 12 Vice President - Administration, Secretary, and 1986
General Counsel
Robert E. Ellis 51 20 Vice President - Human Resources 1996
Richard G. Jirsa 52 23 Vice President - Information Services 1978
Charles A. Laine 62 33 Vice President and General Manager, 1984
International and Beverage Markets
R. Alan McFalls 53 21 Vice President - Corporate Development and 1984
Planning
John D. Milliken 53 24 Vice President - Logistics 1981
Robert R. Morrison 63 37 Vice President - Operations 1967
H. Reid Wagstaff 63 22 Vice President - Government and Environmental 1994
Affairs
Philip P. Yuschak 59 22 Treasurer 1989
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ITEM 11. EXECUTIVE COMPENSATION
Information regarding the compensation of directors and executive
officers is incorporated by reference from the Company's definitive Proxy
Statement, dated July 13, 1998, for the 1998 Annual Meeting of Shareholders on
August 18, 1998, under the following captions and page numbers: "Additional
Information Concerning the Board of Directors of the Company" on page 4, and
beginning with "Report of the Executive Compensation Committee of the Board of
Directors" on page 5 and continuing through "Pension Plan" on page 10.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners,
of the named executive officers, and of directors and executive officers as a
group, is hereby incorporated by reference from the Company's definitive Proxy
Statement, dated July 13, 1998, for the 1998 Annual Meeting of Shareholders on
August 18, 1998, on pages 12 and 13 under the caption "Ownership of Common
Shares."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is
hereby incorporated by reference from the Company's definitive Proxy Statement
dated July 13, 1998, for the 1998 Annual Meeting of Shareholders on August 18,
1998, under the captions "Election of Directors" and "Additional Information
Concerning the Board of Directors of the Company" on pages 2 through 4.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) 1, 2. Financial Statements and Financial Statement Schedule
The index to Consolidated Financial Statements and Financial
Statement Schedule is included on page F-1 of this Report.
3. Exhibits
Exhibit
No. Description
- --------------------------------------------------------------------------------
3(a) 1991 Amended Articles of Incorporation incorporated by
reference to the 1992 Annual Report on Form 10-K.
3(b) Amended Regulations incorporated by reference to the 1988
Annual Report on Form 10-K.
10(a) Amended Restricted Stock Bonus Plan incorporated by
reference to the 1994 Annual Report on Form 10-K.
10(b) Top Management Supplemental Retirement Benefit Plan
incorporated by reference to the 1994 Annual Report on
Form 10-K.
10(c) 1987 Stock Option Plan incorporated by reference to the
1994 Annual Report on Form 10-K.
10(d) Management Incentive Plan incorporated by reference to the
1996 Annual Report on Form 10-K.
10(e) Nonemployee Director Stock Plan dated January 1, 1997
incorporated by reference to the 1997 Annual Report on
Form 10-K.
13 Excerpts from 1998 Annual Report to Shareholders
21 Subsidiaries of the Registrant
23 Consent of Independent Auditors
24 Powers of Attorney
27 Financial Data Schedules
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All other required exhibits are either inapplicable to the Company or require no
answer.
Copies of exhibits are not attached hereto, but the Company will
furnish any of the foregoing exhibits to any shareholder upon written
request. Please address inquiries to: The J. M. Smucker Company,
Strawberry Lane, Orrville, Ohio 44667, Attention: Steven J. Ellcessor,
Secretary. A fee of $1 per page will be charged to help defray the cost
of handling, copying, and return postage.
(b) Reports on Form 8-K filed in the Fourth Quarter of 1998.
No reports on Form 8-K were required to be filed during the last
quarter of the period covered by this report.
(c) The response to this portion of Item 14 is submitted as a separate section
of this report.
(d) The response to this portion of Item 14 is submitted as a separate section
of this report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized.
Date: July 24, 1998 The J. M. Smucker Company
/s/ Steven J. Ellcessor
-----------------------
By: Steven J. Ellcessor
Vice President--Administration, Secretary, and
General Counsel
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report on Form 10-K has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the date indicated.
- ----------------------------------------
Paul H. Smucker Chairman of the Executive Committee and Director
(Principal Executive Officer)
- ----------------------------------------
Timothy P. Smucker Chairman and Director
(Principal Executive Officer)
- ----------------------------------------
Richard K. Smucker President and Director
(Principal Executive Officer)
(Principal Financial Officer)
- ----------------------------------------
Mark R. Belgya Corporate Controller
(Principal Accounting Officer)
- ----------------------------------------
Kathryn W. Dindo Director
- ----------------------------------------
Elizabeth Valk Long Director
/s/ Steven J. Ellcessor
- ---------------------------------------- -----------------------
Russell G. Mawby Director By: Steven J. Ellcessor
Attorney-in-Fact
- ----------------------------------------
Charles S. Mechem, Jr. Director
Date: July 24, 1998
- ----------------------------------------
Robert R. Morrison Director
- ----------------------------------------
William H. Steinbrink Director
- ----------------------------------------
Benjamin B. Tregoe, Jr. Director
- ----------------------------------------
William Wrigley, Jr. Director
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THE J. M. SMUCKER COMPANY
ANNUAL REPORT ON FORM 10-K
ITEMS 14(a) (1) AND (2), (c) AND (d)
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULE
Form Annual
10-K Report To
Report Shareholder
-------- -------------
Data incorporated by reference from the 1998 Annual Report
to Shareholders of The J. M. Smucker Company:
Consolidated Balance Sheets at April 30, 1998 and 1997 . . . . . . . . . . . . 12-13
For the years ended April 30, 1998, 1997, and 1996:
Statements of Consolidated Income . . . . . . . . . . . . . . . . . . . . . 11
Statements of Consolidated Cash Flows . . . . . . . . . . . . . . . . . . . 14
Statements of Consolidated Shareholders' Equity . . . . . . . . . . . . . . 15
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . 16-26
Consolidated financial statement schedule at April 30, 1998, or for the years
ended April 30, 1998, 1997, and 1996:
II. Valuation and qualifying accounts . . . . . . . . . . . . . . . . . . . F-2
All other schedules are omitted because they are not applicable or because
the information required is included in the Consolidated Financial Statements or
the notes thereto.
F-1
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THE J. M. SMUCKER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED APRIL 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)
Balance at Charged to Charged to Deduc- Balance at
Classification Beginning Costs and Other tions End of
of Year Expenses Accounts (A) Year
- ---------------------------------------------------------------------------------------------------------------------------
1998:
Valuation allowance for
deferred tax assets $2,094 $ (363) $ --- $ --- $1,731
Allowance for doubtful accounts 353 163 --- 88 428
--------------------------------------------------------------------------
$2,447 $ (200) $ --- $ 88 $2,159
==========================================================================
1997:
Valuation allowance for
deferred tax assets $2,009 $ 85 $ --- $ --- $2,094
Allowance for doubtful accounts 687 93 --- 427 353
--------------------------------------------------------------------------
$2,696 $ 178 $ --- $ 427 $2,447
==========================================================================
1996:
Valuation allowance for
deferred tax assets $2,660 $ (651) $ --- $ --- $2,009
Allowance for doubtful accounts 475 385 --- 173 687
--------------------------------------------------------------------------
$3,135 $ (266) $ --- $ 173 $2,696
==========================================================================
(A) Uncollectible accounts written off, net of recoveries.
F-2