Exhibit 99.1
THE J. M. SMUCKER COMPANY ANNOUNCES THIRD QUARTER RESULTS
THE COMPANY CONTINUES TO IMPLEMENT ITS LONG-TERM GROWTH STRATEGY
ORRVILLE, Ohio, Feb. 17 /PRNewswire-FirstCall/ -- The J. M. Smucker
Company (NYSE: SJM) today announced results for the third quarter ended
January 31, 2006, of its 2006 fiscal year.
Third Quarter Results
2006 2005 % Change
----------- ----------- ---------
(Dollars in millions,
except per share data)
Net sales $ 536.5 $ 550.2 -3%
Income from continuing operations $ 31.3 $ 35.5 -12%
EPS from continuing operations $ 0.54 $ 0.60 -10%
Excluding the U.S. industrial business, which has been divested, sales were
down 1 percent for the quarter. The quarter's results were adversely affected by
a decrease in sales in the consumer oils and baking business area due to an
overall decline in the categories during December and January and unplanned
inventory reductions by certain key customers. In addition, the Company
experienced higher energy, commodity, and distribution costs in the quarter
compared to last year.
"Our business remains solid for the year and we had a successful Fall Bake,"
said Tim Smucker, chairman and co-chief executive officer. "However, our quarter
was adversely affected by a decrease in sales in our oils and baking businesses
and higher operating costs. We are confident that the fundamentals of the
business have not changed and we remain committed to our long-term growth
goals."
Income from continuing operations for the third quarter of 2006 included
pretax merger and integration costs of $7.8 million, or $0.08 per diluted share,
and restructuring charges of $5.4 million, or $0.06 per diluted share. Included
in other income for the quarter was a pretax gain of $5.6 million, or $0.06 per
diluted share, related to the sale of the Company's Salinas, California,
facility. Income from continuing operations for the third quarter of 2005
included pretax merger and integration costs of $5.2 million, or $0.06 per
diluted share, and restructuring charges of $3.4 million, or $0.04 per diluted
share. Excluding these costs in both years, the Company's earnings per diluted
share would have been $0.68 and $0.70, in the third quarter of 2006 and 2005,
respectively.
Nine-Month Results
2006 2005 % Change
----------- ----------- ---------
(Dollars in millions,
except per share data)
Net sales $ 1,653.0 $ 1,552.4 +6%
Income from continuing operations $ 107.7 $ 103.7 +4%
EPS from continuing operations $ 1.83 $ 1.81 +1%
Since the acquisition of Multifoods closed midway through the first quarter
of last year, an additional six weeks of Multifoods' sales, totaling
approximately $78.8 million, were realized in this year's first nine months.
Excluding the additional six weeks and the U.S. industrial business, sales were
up 3 percent.
Income from continuing operations for the first nine months of 2006 included
pretax merger and integration costs of $14.8 million, or $0.16 per diluted
share, and restructuring charges of $9.1 million, or $0.10 per diluted share.
Income from continuing operations for the first nine months of 2005 included
pretax merger and integration costs of $11.9 million, or $0.13 per diluted
share, and restructuring charges of $8.1 million, or $0.09 per diluted share.
Excluding these costs in both years, the Company's earnings per diluted share
would have been $2.09 and $2.03, for the first nine months of 2006 and 2005,
respectively.
The Company uses earnings from continuing operations, excluding
restructuring and merger and integration costs, as a key performance measure of
results of operations for purposes of evaluating performance internally. These
non-GAAP measurements are not intended to replace the presentation of financial
results in accordance with U.S. GAAP. Rather, management believes the
presentation of results excluding such charges offers additional information to
investors to facilitate the comparison of past and present operations and
provides a more comprehensive understanding of the financial results. A
reconciliation of non-GAAP measures to earnings from continuing operations for
the current quarter and nine-month period is included in the "Financial
Highlights" table.
Margins
Third Quarter First Nine Months
-------------------- --------------------
2006 2005 2006 2005
-------- -------- -------- --------
Gross margin 30.5% 31.7% 32.2% 32.7%
SD&A % of sales 19.3% 19.3% 20.2% 20.1%
Operating margin 8.9% 10.9% 10.6% 11.4%
Approximately one-half of the decline in operating margin for the quarter
was due to the increase in restructuring and merger and integration costs over
last year. The remainder was due to changes in gross margin. Gross margin
declined primarily due to the volume decrease in the consumer oils and baking
business area, increased trade merchandising expenses, and higher commodity and
freight costs. The decline in gross margin flowed through to operating margin as
the percentage of selling, distribution, and administrative (SD&A) expenses to
sales were flat for the quarter. Increased costs associated with the Company's
distribution network were offset by a reduction in marketing and selling
expenses and lower administrative overhead costs. Excluding the restructuring
and merger and integration costs, operating margins would have been 11.3 percent
and 12.4 percent for the third quarter of 2006 and 2005, and 12.0 percent and
12.7 percent for the first nine months of 2006 and 2005, respectively.
Segment Performance
Sales (Dollars in millions)
Third Quarter First Nine Months
--------------------------------- ---------------------------------
2006 2005 % Change 2006 2005 % Change
--------- --------- --------- --------- --------- ---------
U.S. retail market $ 375.8 $ 381.4 -1% $ 1,147.2 $ 1,079.9 +6%
Special markets $ 160.7 $ 168.9 -5% $ 505.8 $ 472.5 +7%
Special markets
excluding industrial $ 157.7 $ 155.2 +2% $ 484.9 $ 429.7 +13%
U.S. Retail Market
During the third quarter of 2006, sales in the consumer business area
increased 4 percent over the third quarter of last year as sales of fruit
spreads, toppings, and peanut butter were all up. Solid performance in the
Hungry Jack(R) brand and significant growth in Uncrustables(R) also contributed.
For the first nine months of 2006, sales in the consumer business area were up 7
percent compared to last year.
In the consumer oils and baking business area, sales for the quarter were
down 8 percent as the Company faced significant competitive activity. Although
sales of Crisco(R) were up over last year for the first nine months, much of the
gain was given back in December and January as a result of lower sell through
and inventory reductions by key customers. The Pillsbury(R) brand had a solid
first six months but reflected similar declines in the category during December
and January. Sales in the consumer oils and baking business area were up
slightly during the Fall Bake period running from September through December,
compared to the same period last year.
Special Markets
Key growth contributors for the quarter included the beverage business area,
up 16 percent, and the foodservice business area, up 5 percent. Sales in Canada
were down 6 percent, as increases in the retail spreads business and the impact
of favorable exchange rates partially offset declines in baking and the planned
rationalization of certain unprofitable businesses. Excluding the additional six
weeks contribution from Multifoods and the U.S. industrial business, sales in
the special markets segment increased 4 percent in the first nine months of 2006
as compared to the first nine months of last year.
Sale of Salinas Facility
During the third quarter, the Company completed its restructuring efforts
around its Salinas, California, manufacturing and distribution facility. In
January 2006, the Company completed the sale of the facility resulting in cash
proceeds of $8.8 million and a gain on the sale of $5.6 million or $0.06 per
diluted share. Production has been transferred to facilities in Orrville, Ohio,
and Memphis, Tennessee, while distribution will be handled through a third-party
warehouse in southern California.
Share Repurchase
At its most recent meeting, the Company's Board of Directors authorized an
increase to its share repurchase plan. Under the plan, the Company is authorized
to purchase an additional 2 million common shares. The buyback program will be
implemented at management's discretion. During the third quarter, the Company
purchased 200,000 shares toward the previously authorized 1 million shares
leaving approximately 30,000 remaining.
Outlook
The Company expects sales for the year of approximately $2.14 billion. The
Company has taken, and will continue to take, actions to offset the cost
increases it has experienced including both discretionary cost reductions across
the organization and potential pricing actions. Based on the input cost
pressures and the uncertainty of their levels, the Company expects earnings per
share for the year, excluding restructuring and merger and integration costs and
the gain on the sale of the Salinas facility, to be comparable with last year's
result of $2.60 per diluted share. The Company remains committed to its
long-term annual growth rate for earnings per share of 8 percent over its
strategic time frame.
Conference Call
The Company will conduct an earnings conference call and webcast on Friday,
February 17, 2006, at 8:30 a.m. E.T. The webcast can be accessed from the
Company's website at http://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 calling 888-203-1112 or 719-457-0820 and entering replay pass code
9006574. The audio replay will be available until Friday, February 24, 2006.
About The J. M. Smucker Company
The J. M. Smucker Company (http://www.smuckers.com) was founded in 1897 when
the Company's namesake and founder sold his first product -- apple butter --
from the back of a horse-drawn wagon. Today, over a century later, the Company
is the market leader in fruit spreads, peanut butter, shortening and oils, ice
cream toppings, and health and natural foods beverages in North America under
such icon brands as Smucker's(R), Jif(R) and Crisco(R). The family of brands
also includes Pillsbury(R) baking mixes and ready-to-spread frostings; Hungry
Jack(R) pancake mixes, syrups and potato side dishes; and Martha White(R) baking
mixes and ingredients in the U.S., along with Robin Hood(R) flour and baking
mixes and Bick's(R) pickles and condiments in Canada. For over 109 years, The J.
M. Smucker Company has been headquartered in Orrville, Ohio, and has been family
run for four generations. Since the 1998 inception of FORTUNE Magazine's annual
survey of the 100 Best Companies to Work For, The J. M. Smucker Company has
consistently been recognized as one of the top 25 companies to work for in the
United States. The J. M. Smucker Company has over 3,500 employees worldwide and
distributes products in more than 45 countries.
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, the strength of commodity markets from which raw materials are
procured and the related impact on costs, volatility of energy and fuel costs,
the ability to achieve the amount and timing of the estimated savings associated
with the Multifoods acquisition, the success in introducing new products and the
competitive response, particularly in the consumer oils and baking area, success
and 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, particularly in the consumer oils and baking business, the Company's
ability to effectively manage capacity and costs related to Uncrustables, 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 Nine Months Ended
January 31, January 31,
------------------------------ ------------------------------
2006 2005 2006 2005
------------- ------------- ------------- -------------
(Dollars in thousands, except per share data)
Net sales $ 536,453 $ 550,234 $ 1,653,048 $ 1,552,423
Cost of products sold 371,981 375,521 1,120,193 1,043,379
Cost of products sold -
restructuring 618 515 865 1,777
Gross Profit 163,854 174,198 531,990 507,267
Selling, distribution, and
administrative expenses 103,610 106,464 334,259 312,569
Other restructuring costs 4,783 2,837 8,248 6,358
Merger and integration costs 7,764 5,152 14,784 11,885
Operating Income 47,697 59,745 174,699 176,455
Interest income 1,709 1,044 4,858 2,429
Interest expense (5,984) (6,154) (18,116) (16,359)
Other income - net 6,150 883 6,269 485
Income from Continuing
Operations Before Income
Taxes 49,572 55,518 167,710 163,010
Income taxes 18,260 19,994 60,057 59,336
Income from Continuing
Operations 31,312 35,524 107,653 103,674
Gain on sale of discontinued
operations, net of tax - - - 2,037
Discontinued operations,
net of tax - 584 - 1,250
Net Income $ 31,312 $ 36,108 $ 107,653 $ 106,961
Earnings per common share:
Income from continuing
operations $ 0.54 $ 0.61 $ 1.85 $ 1.83
Discontinued operations - 0.01 - 0.06
Net income $ 0.54 $ 0.62 $ 1.85 $ 1.89
Income from continuing
operations - assuming
dilution $ 0.54 $ 0.60 $ 1.83 $ 1.81
Discontinued operations -
assuming dilution - 0.01 - 0.05
Net income - assuming
dilution $ 0.54 $ 0.61 $ 1.83 $ 1.86
Dividends declared per
common share $ 0.27 $ 0.25 $ 0.81 $ 0.75
Weighted-average shares
outstanding 57,944,604 58,108,123 58,106,913 56,708,018
Weighted-average shares
outstanding - assuming
dilution 58,486,412 58,743,522 58,708,209 57,356,653
The J. M. Smucker Company
Unaudited Condensed Consolidated Balance Sheets
January 31, April 30,
2006 2005
------------ ------------
(Dollars in thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 89,246 $ 58,085
Marketable securities 15,176 17,739
Trade receivables 122,514 145,734
Inventories 321,484 284,487
Other current assets 52,417 49,806
Total Current Assets 600,837 555,851
Property, Plant, and Equipment, net 524,061 521,101
Other Noncurrent Assets:
Goodwill 950,253 951,208
Other intangible assets, net 472,477 469,758
Marketable securities 36,974 59,074
Other assets 81,702 78,902
Total Noncurrent Assets 1,541,406 1,558,942
$ 2,666,304 $ 2,635,894
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 37,749 $ 33,378
Current portion of long-term debt - 17,000
Accounts payable 80,608 105,290
Other current liabilities 146,740 152,624
Total Current Liabilities 265,097 308,292
Noncurrent Liabilities:
Long-term debt, net of current portion 429,341 431,560
Other noncurrent liabilities 230,251 205,242
Total Noncurrent Liabilities 659,592 636,802
Shareholders' Equity, net 1,741,615 1,690,800
$ 2,666,304 $ 2,635,894
The J. M. Smucker Company
Unaudited Financial Highlights
Three Months Ended Nine Months Ended
January 31, January 31,
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
(Dollars in thousands, except per share data)
Net sales $ 536,453 $ 550,234 $ 1,653,048 $ 1,552,423
Net income and net income per
common share:
Net income $ 31,312 $ 36,108 $ 107,653 $ 106,961
Net income per common share --
assuming dilution $ 0.54 $ 0.61 $ 1.83 $ 1.86
Income and income per common
share from continuing operations:
Income $ 31,312 $ 35,524 $ 107,653 $ 103,674
Income per common share --
assuming dilution $ 0.54 $ 0.60 $ 1.83 $ 1.81
Income and income per common
share from continuing
operations before
restructuring and merger and
integration costs: (1)
Income $ 39,711 $ 40,956 $ 122,993 $ 116,407
Income per common share --
assuming dilution $ 0.68 $ 0.70 $ 2.09 $ 2.03
(1)Reconciliation to income from
continuing operations:
Income from continuing
operations before income
taxes $ 49,572 $ 55,518 $ 167,710 $ 163,010
Merger and integration costs 7,764 5,152 14,784 11,885
Cost of products sold -
restructuring 618 515 865 1,777
Other restructuring costs 4,783 2,837 8,248 6,358
Income from continuing
operations before income
taxes, restructuring, and
merger and integration costs 62,737 64,022 191,607 183,030
Income taxes 23,026 23,066 68,614 66,623
Income from continuing
operations before
restructuring and merger
and integration costs $ 39,711 $ 40,956 $ 122,993 $ 116,407
SOURCE J. M. Smucker Company
-0- 02/17/2006
/CONTACT: The J. M. Smucker Company, +1-330-682-3000, or Investors, Mark
R. Belgya, Vice President, Chief Financial Officer and Treasurer,
+1-330-684-3312, or George G. Sent, Jr., Director, Corporate Finance and
Investor Relations, +1-330-684-3855, or Media, Maribeth Badertscher, Director,
Corporate Communications, +1-330-684-3034, all of The J. M. Smucker Company/
/Web site: http://www.smuckers.com /
(SJM)