Exhibit 99.1
THE J. M. SMUCKER COMPANY ANNOUNCES FIRST QUARTER RESULTS
ORRVILLE, Ohio, Aug. 18 /PRNewswire-FirstCall/ -- The J. M. Smucker Company
(NYSE: SJM) today announced results for the first quarter ended July 31, 2006,
of its 2007 fiscal year.
First Quarter Results
2007 2006 % Change
------------- ------------- -------------
(Dollars in millions, except per share data)
Net sales $ 526.5 $ 510.3 +3%
Net income $ 28.7 $ 29.9 -4%
Net income per diluted share $ 0.50 $ 0.51 -2%
Sales, excluding the U.S. industrial business, which has been divested,
increased 5 percent in the quarter, led by growth in the Smucker's(R) and Jif(R)
brands along with strong performance across the special markets segment. Sales
growth and a decrease in administrative costs more than offset increases in
certain raw material costs in the quarter. However, charges related to the
restructuring of the Company's Canadian operations, as detailed below, resulted
in a decline in net income and net income per diluted share.
Net income for the first quarter of 2007 included pretax restructuring
charges of $7.9 million, or $0.09 per diluted share, primarily related to the
previously announced divestiture of the nonbranded, grain-based Canadian
operations. Net income for the first quarter of 2006 included pretax merger and
integration costs of $2.9 million, or $0.03 per diluted share, and restructuring
charges of $1.6 million, or $0.02 per diluted share. Excluding these costs in
both years, the Company's income per diluted share would have been $0.59 and
$0.56, in the first quarter of 2007 and 2006, respectively, an increase of 5
percent.
"We reported good sales growth in the quarter and, despite significantly
higher raw material costs, were able to continue to grow our earnings," said Tim
Smucker, chairman and co-chief executive officer. "We continue to implement our
strategy to focus on core retail brands with the restructuring of our Canadian
businesses. We expect investments in our brands to provide opportunities for
continued growth."
"We are well positioned for continuing top- and bottom-line growth, despite
the challenges of further raw material cost increases," added Richard Smucker,
president and co-chief executive officer. "We will continue to take actions to
offset these increases, including both discretionary cost reductions and
potential pricing actions."
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, 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 net income for the current quarter is
included in the "Financial Highlights" table.
Margins
First Quarter
-------------------
2007 2006
-------- --------
Gross margin 30.0% 32.3%
SD&A % of sales 20.6% 21.7%
Operating margin 9.3% 9.7%
The decline in gross margin this quarter was mainly due to the impact of
the Canadian restructuring. However, over time, the Company expects the
restructuring to improve margins. Higher raw material costs, primarily soybean
oil, fruit and wheat, along with energy-related costs, and mix of sales also
contributed to the lower gross margin. The Company continues to take pricing
actions to offset a portion of the increased input costs. Due to the timing of
these pricing actions, current cost increases have not been fully offset.
SD&A expenses as a percent of sales declined during the first quarter,
primarily due to lower corporate administrative and marketing expenses,
partially offset by higher distribution costs, compared to the same period last
year. Excluding the restructuring and merger and integration costs, operating
margins would have been 10.8 percent and 10.6 percent for the first quarter of
2007 and 2006, respectively. On May 1, 2006, the Company adopted Statement of
Financial Accounting Standards No. 123 (revised), Share-Based Payments, using
the modified prospective method. The impact of the adoption was not significant
for the period.
Segment Performance
First Quarter
------------------------------
Sales (Dollars in millions) 2007 2006 % Change
- ------------------------------------- -------- -------- --------
U.S. retail market $ 353.3 $ 341.7 +3%
Special markets $ 173.2 $ 168.6 +3%
Special markets, excluding industrial $ 170.3 $ 156.6 +9%
U.S. Retail Market
During the first quarter of 2007, sales in the consumer strategic business
area increased 8 percent over the first quarter of last year, as sales of fruit
spreads, toppings, peanut butter, and Uncrustables(R) were all up. In the
consumer oils and baking strategic business area, sales for the quarter were
down 4 percent. Approximately one-half of the decline was attributable to a
decrease in industrial oil sales, with the retail oils and baking businesses
contributing almost equally to the remainder of the decline.
Special Markets
Sales in the first quarter for the special markets segment, excluding the
industrial business, increased 9 percent. All strategic business areas in
special markets were up, with the international business area up 30 percent;
beverage up 21 percent, driven by growth in natural and organic products sold
under the R.W. Knudsen Family(R) and Santa Cruz Organic(R) brands; foodservice
up 5 percent; and Canada up 4 percent. The increase in Canada was driven by the
impact of favorable exchange rates and the acquisition of the Five Roses(R)
flour brand during the quarter, which offset declines in baking and the planned
rationalization of certain unprofitable business.
Restructuring of Canadian Operations
The Company's strategy is to own and market leading North American food
brands sold in the center of the store. The Canadian grain-based foodservice and
industrial businesses, acquired as part of the International Multifoods
acquisition in June 2004, are not aligned with this strategy. During the
quarter, the Company announced an agreement to sell these businesses as part of
the strategic plan to focus the Canadian operations on its consumer retail
business. As previously announced, this sale and related restructuring
activities are expected to result in pretax expense of approximately $10 to $15
million, which will be reported as a restructuring charge. Costs will include
noncash, long-lived asset charges, as well as transaction, legal, severance, and
pension costs. During the quarter, charges of $7.6 million, or $0.09 per diluted
share, were recognized related to the Canadian restructuring.
Share Repurchase
The Company also announces that it will enter into a Rule 10b5-1 trading
plan to facilitate the repurchase of up to one million of its common shares
under its previously announced share repurchase authorization. Rule 10b5-1
allows a company to purchase its shares at times when it otherwise might be
prevented from doing so under insider trading laws or because of self-imposed
trading blackout periods. The shares to be repurchased under the Company's
10b5-1 plan would be part of the share repurchase authorization previously
approved by the Company's Board of Directors. The Company currently has a total
of approximately 2.7 million shares available for repurchase under the
authorization.
The 10b5-1 share purchase period will commence on Tuesday, August 22, 2006.
Purchases will be transacted by a broker and will be based upon the guidelines
and parameters of the 10b5-1 plan. The aggregate amount of shares purchased
pursuant to the plan will not exceed one million shares. There is no guarantee
as to the exact number of shares that will be repurchased under the share
repurchase program. Repurchased shares would be returned to the status of
authorized, but unissued common shares.
Conference Call
The Company will conduct an earnings conference call and webcast on Friday,
August 18, 2006, 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 2844407, and will be available until
Friday, August 25, 2006.
About The J. M. Smucker Company
The J. M. Smucker Company (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 approximately 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 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 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
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended July 31,
----------------------------
2006 2005
------------ ------------
(Dollars in thousands,
except per share data)
Net sales $ 526,509 $ 510,331
Cost of products sold 361,342 345,486
Cost of products sold - restructuring 7,173 132
Gross Profit 157,994 164,713
Selling, distribution, and
administrative expenses 108,397 110,624
Other restructuring costs 731 1,489
Merger and integration costs - 2,928
Operating Income 48,866 49,672
Interest income 1,995 1,820
Interest expense (6,101) (6,107)
Other income - net (569) 194
Income Before Income Taxes 44,191 45,579
Income taxes 15,467 15,682
Net Income $ 28,724 $ 29,897
Net income per common share $ 0.51 $ 0.51
Net income per common share
- assuming dilution $ 0.50 $ 0.51
Dividends declared per common share $ 0.28 $ 0.27
Weighted-average shares outstanding 56,677,665 58,279,424
Weighted-average shares outstanding
- assuming dilution 57,194,161 58,920,456
The J. M. Smucker Company
Condensed Consolidated Balance Sheets
(Unaudited)
July 31, April 30,
2006 2006
------------ ------------
(Dollars in thousands)
Assets
Current Assets:
Cash and cash equivalents $ 96,140 $ 71,956
Marketable securities 4,967 14,882
Trade receivables 144,714 148,014
Inventories 305,063 279,088
Assets held for sale (1) 87,623 90,250
Other current assets 37,873 38,648
Total Current Assets 676,380 642,838
Property, Plant, and Equipment, Net 456,302 456,554
Other Noncurrent Assets:
Goodwill 955,452 940,967
Other intangible assets, net 474,371 472,915
Marketable securities 52,556 34,107
Other assets 102,977 102,363
Total Noncurrent Assets 1,585,356 1,550,352
$ 2,718,038 $ 2,649,744
Liabilities and Shareholders' Equity
Current Liabilities:
Notes payable $ 48,604 $ 28,620
Accounts payable 95,028 88,963
Liabilities held for sale (1) 2,124 2,819
Other current liabilities 143,989 115,038
Total Current Liabilities 289,745 235,440
Noncurrent Liabilities:
Long-term debt, net of current portion 427,862 428,602
Other noncurrent liabilities 254,902 257,643
Total Noncurrent Liabilities 682,764 686,245
Shareholders' Equity, net 1,745,529 1,728,059
$ 2,718,038 $ 2,649,744
(1) Accounts related to the announced sale of the Company's Canadian grain-based
foodservice and industrial businesses.
The J. M. Smucker Company
Condensed Consolidated Statements of Cash Flow
(Unaudited)
Three Months Ended July 31,
---------------------------
2006 2005
------------ ------------
(Dollars in thousands)
Operating Activities
Net income $ 28,724 $ 29,897
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation/Amortization 25,000 18,639
Working capital 7,084 (28,348)
Net Cash Provided by Operating Activities 60,808 20,188
Investing Activities
Business acquired, net of cash acquired (19,408) -
Additions to property, plant, and
equipment (14,895) (13,615)
Other - net (8,121) 14,759
Net Cash (Used for) Provided by
Investing Activities (42,424) 1,144
Financing Activities
Dividends paid (15,809) (15,707)
Purchase of treasury shares (1,047) (16,201)
Other - net 22,585 131
Net Cash Provided by (Used for)
Financing Activities 5,729 (31,777)
Effect of exchange rate changes 71 (153)
Net increase (decrease) in cash and
cash equivalents 24,184 (10,598)
Cash and cash equivalents at
beginning of period 71,956 58,085
Cash and cash equivalents at end of period $ 96,140 $ 47,487
( ) Denotes use of cash
The J. M. Smucker Company
Financial Highlights
(Unaudited)
Three Months Ended July 31,
---------------------------
2006 2005
------------ ------------
(Dollars in thousands,
except per share data)
Net sales $ 526,509 $ 510,331
Net income and net income per common share:
Net income $ 28,724 $ 29,897
Net income per common share --
assuming dilution $ 0.50 $ 0.51
Income excluding restructuring and merger
and integration costs: (1)
Income $ 33,861 $ 32,881
Income per common share --
assuming dilution $ 0.59 $ 0.56
(1) Reconciliation to net income:
Income before income taxes $ 44,191 $ 45,579
Merger and integration costs - 2,928
Cost of products sold - restructuring 7,173 132
Other restructuring costs 731 1,489
Income excluding income taxes,
restructuring, and merger and
integration costs 52,095 50,128
Income taxes 18,234 17,247
Income excluding restructuring and
merger and integration costs $ 33,861 $ 32,881
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, 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.
SOURCE The J. M. Smucker Company
-0- 08/18/2006
/CONTACT: Investors, Mark R. Belgya, Vice President, Chief Financial
Officer and Treasurer, or George G. Sent, Jr., Director, Corporate Finance and
Investor Relations, or Media, Maribeth Badertscher, Director, Corporate
Communications, all of The J. M. Smucker Company, +1-330-682-3000 /
/First Call Analyst: /
/FCMN Contact: /
/Web site: http://www.smuckers.com/