The J. M. Smucker Company Announces Record Fourth Quarter and Full Year Earnings
ORRVILLE, Ohio, June 21 /PRNewswire-FirstCall/ -- The J. M. Smucker
Company (NYSE: SJM) today announced results for the fourth quarter and fiscal
year ended April 30, 2007.
Fourth Quarter Results
Three months ended
April 30, % Increase
2007 2006 (Decrease)
(Dollars in millions, except per share data)
Net sales $ 493.5 $ 501.7 (2%)
Net income:
Income $ 42.5 $ 35.7 19%
Income per diluted share $ 0.75 $ 0.62 21%
Net sales increased 8 percent in the fourth quarter, excluding the
Canadian nonbranded, grain-based foodservice and industrial businesses sold in
September 2006 and the U.S. industrial ingredient business ("divested
businesses"). Growth in the quarter was led by the Jif(R), Smucker's(R), and
Pillsbury(R) brands, strong performance in the foodservice strategic business
area, and the contribution of brands acquired earlier in the fiscal year. Due to
a temporary interruption of supply in the market adding to demand for the
Company's products, peanut butter had a particularly strong quarter. Higher net
sales, gross margin improvements, and a reduction in merger and integration
costs, all contributed to an increase in net income per diluted share for the
quarter.
Net income per diluted share for the quarter was $0.75, a 21 percent
increase over last year's fourth quarter. Net income for the fourth quarter of
2007 included pretax merger and integration costs and restructuring charges of
less than $0.01 per diluted share, while net income for the fourth quarter of
2006 included pretax merger and integration costs of $3.2 million, or $0.04 per
diluted share, and restructuring charges of $0.9 million, or $0.02 per diluted
share. Excluding these costs in both years, the Company's income per diluted
share was $0.75 in the fourth quarter of 2007, and $0.68 in the fourth quarter
of 2006. During the fourth quarter of 2006, the Company reduced its effective
tax rate for the year, resulting in a nonrecurring tax benefit in the quarter of
$0.06 per diluted share.
"We achieved record earnings for the quarter and the year, with solid
growth across most of our brands," commented Richard Smucker, president and
co-chief executive officer. "We had a strong finish to the year and have good
momentum as we enter our new year. In addition, we recently completed the
acquisition of Eagle Family Foods, the largest producer of canned milk in North
America, and look forward to the addition of Eagle Brand(R) to expand our
presence in the baking aisle, providing additional joint merchandising
opportunities."
"We continue to benefit from the focused execution of our strategy -
refining our portfolio, spending behind our brands with marketing support and
new product development, and investing in projects to improve our overall
profitability," added Tim Smucker, chairman and co-chief executive officer. "The
cost environment remains challenging, and we will continue to take actions to
mitigate cost increases. We will also invest in our businesses, maintaining our
commitment to long-term, profitable growth."
Full Year Results
Year ended April 30, %Increase
2007 2006 (Decrease)
(Dollars in millions, except per share data)
Net sales $ 2,148.0 $ 2,154.7 --
Net income:
Income $ 157.2 $ 143.4 10%
Income per diluted share $ 2.76 $ 2.45 13%
Net sales were up 5 percent for fiscal 2007 compared to 2006 after
excluding divested businesses and net income per diluted share was up 13 percent
in the same period. Net income for 2007 included restructuring charges of $12.1
million, or $0.13 per diluted share, primarily related to the divestiture of the
Canadian nonbranded businesses. Net income for the comparable period in 2006
included pretax merger and integration costs of $17.9 million, or $0.20 per
diluted share, and restructuring charges of $10.0 million, or $0.12 per diluted
share. Excluding these costs in both years, the Company's income per diluted
share was $2.89 for 2007, and $2.77 for 2006. The Company's operations also
generated substantial levels of cash during the year. Cash from operations in
2007 was $273.4 million, an increase of $74.7 million over 2006.
The Company uses income and income per diluted share, excluding
restructuring and merger and integration costs, as key performance measures of
results of operations for purposes of evaluating performance internally. These
non-GAAP measures are not intended to replace the presentation of financial
results in accordance with U.S. GAAP. Rather, the presentation of results
excluding such charges is consistent with the way management internally
evaluates its businesses, facilitates the comparison of past and present
operations, and provides a more comprehensive understanding of the financial
results. A reconciliation of non-GAAP measures to net income for the current
quarter and fiscal year is included in the "Unaudited Financial Highlights"
table.
Margins
Three months ended Year ended
April 30, April 30,
2007 2006 2007 2006
(% of net sales)
Gross margin 36.5% 32.1% 32.7% 32.2%
Selling, distribution, and
administrative expenses 22.2% 20.8% 20.6% 20.3%
Operating margin 14.1% 10.8% 12.0% 10.6%
Operating income increased by $15.5 million, or 29 percent, compared to
the fourth quarter of 2006. The impact of the Canadian divestiture earlier in
the year, combined with favorable product mix mainly attributable to increased
peanut butter sales, accounted for the improvement in gross margin. Pricing
actions taken to date have also contributed to margin improvement. The Company
continues to incur high commodity costs impacting both raw material and freight
and continues to take pricing actions to offset a portion of the increased
costs. Due to the timing of these pricing actions, all cost increases have not
been fully offset. Selling, distribution, and administrative expenses as a
percentage of net sales increased in the fourth quarter of 2007 primarily due to
higher selling and corporate administrative expenses which offset lower
distribution expenses compared to the same period last year.
Segment Performance
Net Sales Three months ended April 30, Year ended April 30,
%Increase %Increase
2007 2006 (Decrease) 2007 2006 (Decrease)
(Dollars in millions)
U.S. retail market $365.5 $337.6 8% $1,547.1 $1,484.9 4%
Special markets $128.0 $164.0 (22%) $ 601.0 $ 669.9 (10%)
Special markets
excluding divested
businesses $128.0 $121.3 6% $ 522.6 $ 477.3 9%
U.S. Retail Market
U.S. retail market segment net sales for the quarter were up 8 percent,
with net sales in the consumer strategic business area up 12 percent and net
sales in the consumer oils and baking strategic business area up 2 percent.
Increases in the consumer strategic business area were led by peanut butter,
fruit spreads, toppings, and Uncrustables(R). In the consumer oils and baking
strategic business area, sales gains in baking mixes and frostings, and the
contribution of the White Lily(R) brand acquired earlier in the year offset
declines in sales of oils.
For the year, net sales in the consumer strategic business area were up 7
percent, and net sales in the oils and baking strategic business area were flat
as a 3 percent sales increase in retail oils and baking were offset by declines
in sales of industrial oils.
Special Markets
Net sales in the fourth quarter for the special markets segment, excluding
divested businesses, increased 6 percent. A 21 percent increase in the
foodservice strategic business area more than offset modest declines in the
Canada, beverage, and international strategic business areas. Increased sales of
traditional portion control products, as well as increases in Uncrustables in
the schools market contributed to the foodservice improvement.
For the year, net sales in the special markets segment, excluding divested
businesses, increased 9 percent over the prior year, with all strategic business
areas up.
Financing
On May 31, 2007, the Company issued $400 million in 5.55 percent Senior
Notes due April 1, 2022. A portion of the proceeds from the notes was used to
repay short-term debt under the revolving credit facility used in financing the
Eagle Family Foods Holdings, Inc. acquisition on May 1, 2007. The remainder of
the proceeds will be used to finance other strategic and long-term business
initiatives.
Outlook
The Company remains committed to its long-term strategic net sales growth
goal of 8 percent, one-half of which is to come from its core business and new
products, and the remainder from acquisitions. Long-term strategic earnings per
share growth would be in line with net sales growth.
Looking forward, the Company expects raw material costs to increase
significantly over 2007 levels. Despite these higher costs, the Company expects
to increase income per diluted share in line with its long-term growth
objective.
Conference Call
The Company will conduct an earnings conference call and webcast on
Thursday, June 21, 2007, at 8:30 a.m. E.T. The webcast, as well as a replay in
downloadable MP3 format, can be accessed from the Company's website at
www.smuckers.com. For those unable to listen to the webcast, an audio replay
will be available following the call and can be accessed by dialing 888-203-1112
or 719-457-0820, with a pass code of 6343621, and will be available until
Thursday, June 28, 2007.
About The J. M. Smucker Company
The J. M. Smucker Company is the leading marketer and manufacturer of
fruit spreads, peanut butter, shortening and oils, ice cream toppings, sweetened
condensed milk, and health and natural foods beverages in North America. Its
family of brands includes Smucker's(R), Jif(R), Crisco(R), Pillsbury(R), Eagle
Brand(R), R.W. Knudsen Family(R), Hungry Jack(R), White Lily(R) and Martha
White(R) in the United States, along with Robin Hood(R), Five Roses(R) and
Bick's(R) in Canada. The Company remains rooted in the Basic Beliefs of Quality,
People, Ethics, Growth and Independence established by its founder and namesake
more than a century ago. Since 1998, the Company has appeared on FORTUNE
Magazine's annual listing of the 100 Best Companies to Work For in the United
States, ranking number one in 2004. For more information about the company,
visit www.smuckers.com.
The J. M. Smucker Company Forward-Looking Language
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, volatility of commodity markets from which raw materials are
procured and the related impact on costs, volatility of energy and fuel costs,
the success in introducing new products and the competitive response,
particularly in the consumer oils and baking area, costs of new marketing and
sales programs and strategies intended to promote growth in the Company's
businesses, the ability to successfully implement price changes, the timing and
amount of restructuring, and merger and integration costs, the timing of
acquiring common shares under the Company's share repurchase authorization, 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.
The J. M. Smucker Company
Unaudited Condensed Consolidated Statements of Income
Three Months Ended April 30, Year Ended April 30,
2007 2006 2007 2006
(Dollars in thousands, except per share data)
Net sales $ 493,472 $ 501,678 $ 2,148,017 $ 2,154,726
Cost of products sold 313,569 339,418 1,435,981 1,459,611
Cost of products sold -
restructuring -- 1,398 9,981 2,263
Gross Profit 179,903 160,862 702,055 692,852
Selling, distribution, and
administrative expenses 109,540 104,198 442,814 438,457
Other restructuring costs 783 (526) 2,120 7,722
Merger and integration costs 61 3,150 61 17,934
Operating Income 69,519 54,040 257,060 228,739
Interest income 2,600 1,772 9,225 6,630
Interest expense (5,682) (5,910) (23,363) (24,026)
Other (expense) income - net (708) (2,042) (1,918) 4,227
Income Before Income Taxes 65,729 47,860 241,004 215,570
Income taxes 23,230 12,159 83,785 72,216
Net Income $ 42,499 $ 35,701 $ 157,219 $ 143,354
Net income per common share $ 0.76 $ 0.63 $ 2.79 $ 2.48
Net income per common
share- assuming dilution $ 0.75 $ 0.62 $ 2.76 $ 2.45
Dividends declared per
common share $ 0.30 $ 0.28 $ 1.14 $ 1.09
Weighted-average shares
outstanding 56,240,696 57,107,708 56,432,839 57,863,270
Weighted-average shares
outstanding - assuming
dilution 57,044,652 57,566,403 57,056,421 58,425,361
The J. M. Smucker Company
Unaudited Condensed Consolidated Balance Sheets
April 30, 2007 April 30, 2006
(Dollars in thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 200,119 $ 71,956
Marketable securities -- 14,882
Trade receivables 124,048 148,014
Inventories 286,052 279,088
Assets held for sale (1) -- 90,250
Other current assets 29,147 38,648
Total Current Assets 639,366 642,838
Property, Plant, and Equipment, net 454,028 456,554
Other Noncurrent Assets:
Goodwill 990,771 940,967
Other intangible assets, net 478,194 472,915
Marketable securities 44,117 34,107
Other assets 87,347 102,363
Total Noncurrent Assets 1,600,429 1,550,352
$2,693,823 $2,649,744
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 93,500 $ 88,963
Notes payable -- 28,620
Current portion of long-term debt 33,000 --
Other current liabilities 109,968 117,857
Total Current Liabilities 236,468 235,440
Noncurrent Liabilities:
Long-term debt, net of current portion 392,643 428,602
Other noncurrent liabilities 269,055 257,643
Total Noncurrent Liabilities 661,698 686,245
Shareholders' Equity, net 1,795,657 1,728,059
$2,693,823 $2,649,744
(1) Accounts related to the Company's Canadian nonbranded, grain-based
foodservice and industrial business, which was divested in September 2006.
The J. M. Smucker Company
Unaudited Condensed Consolidated Statements of Cash Flow
Year Ended April 30,
2007 2006
Operating Activities
Net income $ 157,219 $ 143,354
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation 57,346 62,452
Amortization 1,528 190
Asset impairments and other
restructuring charges 10,089 2,264
Share-based compensation expense 11,257 7,255
Gain on sale of assets -- (5,638)
Working capital 35,985 (11,188)
Net Cash Provided by Operating Activities 273,424 198,689
Investing Activities
Business acquired, net of cash acquired (60,488) --
Proceeds from sale of business 84,054 8,754
Additions to property, plant, and
equipment (57,002) (63,580)
Other - net 6,395 38,571
Net Cash Used for Investing Activities (27,041) (16,255)
Financing Activities
Dividends paid (63,632) (62,656)
Purchase of treasury shares (52,125) (81,717)
Other - net (1,868) (24,756)
Net Cash Used for Financing Activities (117,625) (169,129)
Effect of exchange rate changes (595) 566
Net increase in cash and cash equivalents 128,163 13,871
Cash and cash equivalents at
beginning of period 71,956 58,085
Cash and cash equivalents at end of period $ 200,119 $ 71,956
The J. M. Smucker Company
Unaudited Financial Highlights
Three Months Ended Year Ended
April 30, April 30,
2007 2006 2007 2006
(Dollars in thousands, except per share data)
Net sales $ 493,472 $ 501,678 $2,148,017 $2,154,726
Net income and net income per common share:
Net income $ 42,499 $ 35,701 $ 157,219 $ 143,354
Net income per common share
-- assuming dilution $ 0.75 $ 0.62 $ 2.76 $ 2.45
Income excluding restructuring
and merger and integration
costs: (1)
Income $ 43,025 $ 38,927 $ 165,152 $ 161,920
Income per common share --
assuming dilution $ 0.75 $ 0.68 $ 2.89 $ 2.77
(1)Reconciliation to net income
Income before income taxes $ 65,729 $ 47,860 $ 241,004 $ 215,570
Merger and integration costs 61 3,150 61 17,934
Cost of products sold -
restructuring -- 1,398 9,981 2,263
Other restructuring costs 783 (526) 2,120 7,722
Income excluding income
taxes, restructuring, and
merger and integration costs 66,573 51,882 253,166 243,489
Income taxes 23,548 12,955 88,014 81,569
Income excluding
restructuring and merger
and integration costs $ 43,025 $ 38,927 $ 165,152 $ 161,920
The Company uses income and income per diluted share, excluding restructuring
and merger and integration costs, as key performance measures of results of
operations for purposes of evaluating performance internally. These non-GAAP
measures are not intended to replace the presentation of financial results in
accordance with U.S. GAAP. Rather, the presentation of results excluding such
charges is consistent with the way management internally evaluates its
businesses, facilitates the comparison of past and present operations and
provides a more comprehensive understanding of the financial results.
The J. M. Smucker Company
Unaudited Reportable Segments
Three Months Ended April 30, Year Ended April 30,
2007 2006 2007 2006
(Dollars in thousands, except per share data)
Net sales:
U.S. retail market $ 365,508 $ 337,633 $1,547,064 $1,484,873
Special markets 127,964 164,045 600,953 669,853
Total net sales $ 493,472 $ 501,678 $2,148,017 $2,154,726
Segment profit:
U.S. retail market $ 82,999 $ 70,834 $ 319,795 $ 305,121
Special markets 20,526 16,834 72,974 68,033
Total segment profit $ 103,525 $ 87,668 $ 392,769 $ 373,154