<PAGE> 1
Sequential Page
No. 1 of 10 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 October 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 14,384,139 Class A Common Shares and 14,778,839
Class B Common Shares outstanding on October 31, 1995.
The Exhibit Index is located at Sequential Page No. 10.
<PAGE> 2
Sequential Page
No. 2
PART I. FINANCIAL INFORMATION
THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
Item 1. Financial Statements
--------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
October 31 October 31
------------------------ ----------------------
1995 1994 1995 1994
-------- -------- -------- --------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Net Sales $179,152 $184,339 $327,117 $328,686
Cost of products sold 120,419 119,787 215,038 213,190
-------- -------- -------- --------
58,733 64,552 112,079 115,496
Selling, distribution, and administration 42,050 43,762 79,034 79,501
Interest income 421 169 577 365
Other income - net 877 1,324 1,751 2,023
Interest expense (1,804) (1,385) (3,005) (2,124)
Provision for disposal of foreign subsidiary (6,996) --- (6,996) ---
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 9,181 20,898 25,372 36,259
Income taxes (Credit) (235) 8,572 6,432 14,718
-------- -------- -------- --------
NET INCOME $ 9,416 $12,326 $18,940 $21,541
-------- -------- -------- --------
Net income per Common Share* $ .32 $ .42 $ .65 $ .74
-------- -------- -------- --------
Dividends declared on Class A Common Shares** $ --- $ .125 $ .13 $ .25
-------- -------- -------- --------
Dividends declared on Class B Common Shares** $ --- $ .125 $ .13 $ .25
-------- -------- -------- --------
* Computed on the weighted average number
of Class A Common Shares and Class B
Common Shares outstanding, namely: 29,163,532 29,172,179 29,163,606 29,151,961
</TABLE>
** The Board of Directors declared a $.13 dividend on both Class A and Class B
Common Shares on November 13, 1995.
See notes to condensed, consolidated financial statements.
<PAGE> 3
Sequential Page
No. 3
THE J. M. SMUCKER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 31, 1995 April 30, 1995
(Unaudited) (Audited)
----------- ---------
(Dollars in Thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 13,419 $ 11,244
Trade receivables, less allowances 91,946 53,600
Inventories:
Finished products 60,851 49,825
Raw materials, containers, and supplies 82,330 60,849
-------- --------
143,181 110,674
Other current assets 14,713 16,318
-------- --------
Total Current Assets 263,259 191,836
PROPERTY, PLANT, AND EQUIPMENT
Land and land improvements 14,731 14,260
Buildings and fixtures 72,787 72,079
Machinery and equipment 153,770 144,141
Construction in progress 9,523 5,605
------- -------
250,811 236,085
Less allowances for depreciation (103,790) (95,960)
--------- --------
Total Property, Plant and Equipment 147,021 140,125
OTHER NONCURRENT ASSETS
Goodwill 40,228 40,621
Trademarks and patents 39,431 40,019
Other assets 10,110 8,416
-------- --------
Total Other Noncurrent Assets 89,769 89,056
-------- --------
$500,049 $421,017
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 44,742 $ 40,527
Notes payable 55,700 0
Salaries, wages, and additional compensation 10,672 10,235
Accrued marketing and merchandising 18,647 14,260
Income taxes 3,138 3,858
Other current liabilities 8,877 10,963
------ -------
Total Current Liabilities 141,776 79,843
NONCURRENT LIABILITIES 83,662 83,182
SHAREHOLDERS' EQUITY
Class A Common Shares, outstanding shares: 3,596 3,596
14,384,139 at stated value
Class B Common Shares (Non-voting), out- 3,695 3,695
standing shares: 14,778,839 at stated value
Additional capital 10,963 10,963
Retained income 269,861 254,854
Less:
Deferred compensation (1,010) (1,292)
Amount due from ESOP Trust (10,251) (10,441)
Currency translation adjustment (2,243) (3,383)
--------- ---------
Total Shareholders' Equity 274,611 257,992
-------- --------
$500,049 $421,017
======== ========
</TABLE>
See notes to condensed, consolidated financial statements.
<PAGE> 4
Sequential Page
No. 4
THE J. M. SMUCKER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
October 31
-----------------------------
(Dollars in Thousands)
1995 1994
-------- --------
<S> <C> <C>
NET CASH USED FOR OPERATING ACTIVITIES $(36,756) $ (32,087)
CASH FLOWS FROM INVESTING ACTIVITIES
Business acquired - net of cash -0- (22,309)
Additions to property, plant, and
equipment (15,447) (8,192)
Proceeds from the sale of property,
plant, and equipment 193 196
Insurance proceeds to replace property, 1,015 -0-
plant, and equipment
Other - net -0- (412)
-------- ---------
NET CASH USED FOR INVESTING ACTIVITIES (14,239) (30,717)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term debt 55,700 54,798
Proceeds from long-term debt -0- 7,501
Dividends paid (3,779) (7,267)
Other - net 908 135
------- -------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 52,829 55,167
Effect of exchange rate changes 341 177
Net Increase/(Decrease) in Cash and
Cash Equivalents 2,175 (7,460)
Cash and Cash Equivalents at
Beginning of Period 11,244 14,059
------- -------
Cash and Cash Equivalents at
End of Period $13,419 $ 6,599
======= =======
</TABLE>
( ) Denotes use of cash
See notes to condensed, consolidated financial statements.
<PAGE> 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 has its most significant impact on
the Company's business during the second and third quarters. 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, 1995.
Note B - Common Shares
-------------
At October 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 1,828,149 Class A and 1,433,449 Class B treasury shares at October
31, 1995, and 1,827,449 Class A and 1,433,449 Class B treasury shares at April
30, 1995.
Note C- Pending Divestitures
--------------------
During the second quarter, the Company reached an agreement in
principle to divest its English subsidiary, Elsenham Quality Foods Ltd. As a
result, the Company established a provision for the disposal of this subsidiary
in the amount of $6,996,000 during the quarter, representing the write-off of
its investment in Elsenham. The tax benefit associated with the transaction is
estimated at $6,870,000. The net impact on earnings is immaterial once the tax
benefit is taken into consideration. The acquisition by Cheergrey Limited, an
English specialty foods holding company, is expected to be completed by the end
of the calendar year.
Subsequent to the end of the quarter, the Company also reached an
agreement in principle to sell its Mrs. Smith's frozen pie business to a
subsidiary of SBI Brands Inc., a newly-formed food brands holding company.
This transaction is expected to be completed by the end of the third quarter.
Due to the seasonal nature of the Mrs. Smith's business, the majority of its
fiscal 1996 sales and earnings contribution will have been realized by the
Company prior to the completion of the sale. The sale of the Mrs. Smith's
business is not expected to have a material impact on the operating results of
the Company during the remainder of fiscal 1996.
Note D - Accounting Reclassifications
----------------------------
Certain prior year amounts have been reclassified to conform to
current year classifications.
<PAGE> 6
Sequential Page
No. 6
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 six-month periods ended October 31, 1995 and 1994, respectively.
Results of Operations
- ---------------------
Sales for the second quarter ended October 31, 1995 were $179,152,000, down
approximately 3% over the same period last year. Sales were down in the
Consumer and Mrs. Smith's business areas but up in the Beverage, Foodservice,
Industrial, International, and Specialty areas. In the Consumer area, the
decline in sales was principally attributable to shortfalls in grocery market
sales of fruit spreads. Fruit spread volume decreased at a lesser rate than
the percentage decrease in dollar sales due to a shift in the mix of products
sold. The decline in sales of traditional fruit spreads corresponded with a
continuing increase during the quarter in the share of market of private label
fruit spreads. Sales of natural peanut butter, Goober, and dessert toppings
all increased over last year.
Mrs. Smith's second quarter sales were down 17% from the same quarter last
year. Approximately one-half of the total decline was anticipated and was due
partly to the Company's discontinuation of the SmartStyle line which was in
national distribution during last fiscal year. Also, last year's second
quarter included approximately $2,200,000 of non-recurring sales to a
foodservice customer. The remaining sales shortfall was in the retail pies
segment and related to a decision to move a greater proportion of marketing and
promotional spending to later in the holiday season.
In the Company's other business areas, the International, Industrial and
Specialty Foods areas realized the largest sales growth. In the International
area, the trend of strong sales of Smucker's branded fruit spreads in Eastern
Europe and the Middle East continued from last quarter. Latin America sales
were also up over last year. Volume growth in the bakery fruit filling and
fruit flakes categories contributed to the growth in the Industrial area.
<PAGE> 7
Sequential Page
No. 7
On a year-to-date basis, Company sales were essentially flat in comparison with
the first six months of fiscal 1995. The Mrs. Smith's business was down 19%
from last year and the Consumer area was slightly behind the prior year, but
growth in the other business areas helped offset most of the shortfall.
Earnings for the quarter were $9,416,000, or $.32 per share, compared to
$12,326,000, or $.42 per share for the same period last year. The decline in
earnings is attributable to the Mrs. Smith's and Consumer businesses. The
Company's other business areas contributed increased earnings over last year.
The decrease in contribution from Mrs. Smith's was a combination of lower sales
volume and the impact of new marketing and sales initiatives which were
instituted for this year's holiday season. The decrease in earnings in the
Consumer area was primarily the result of lower fruit spread sales volumes.
Also included in the second quarter results was the provision for the disposal
of a subsidiary in the amount of $6,996,000, representing the write-off of the
Company's investment in Elsenham. See footnote C for further information
relating to the divestiture.
The cost of products sold during the quarter increased as a percentage of sales
due to the impact of two key factors. First, margins at Mrs. Smith's were
impacted by a competitive decision to increase the size of four of its best
selling pies from eight inches to nine inches. The second factor relates to
the mix of products sold during the quarter. The percentage decrease in
selling, distribution, and administration costs for the quarter and
year-to-date was consistent with the slight decline in overall sales for the
same periods.
Interest expense was up for both the quarter and six-month periods due to an
increase in the average outstanding debt balance and higher interest rates,
which averaged approximately two percentage points higher than in fiscal 1995.
Despite the increased borrowing levels, the Company's interest income was also
up over last year's second quarter and first six months, primarily due to
larger cash balances in Australia and Canada. Income earned by the Company on
non-operating activities decreased from last year due to lower profitability on
the sale of excess frozen fruit inventories.
The tax benefit associated with the Elsenham divestiture resulted in a net tax
credit (see footnote C) for the second quarter and significantly reduced the
effective tax rate for the first half of the year to 25.4%. Excluding the
impact of the Elsenham transaction the tax rate would have been 41.0% for the
quarter which is consistent with last year's second quarter rate.
<PAGE> 8
Sequential Page
No. 8
Financial Condition - Liquidity and Capital Resources
- -----------------------------------------------------
The Company's financial position continues to be strong despite the
increase in debt since April 30, 1995. This increase was primarily to fund the
seasonal procurement of fruit and finance the building of pie inventories in
preparation for Mrs. Smith's fall and holiday season. The majority of fruit
purchases occur during the first half of the year. Other significant uses of
cash during both the quarter and six-month period were capital expenditures and
the payment of dividends. During the quarter, the Company's borrowing
requirements exceeded by a minor amount the $125 million maximum level
available on its revolving credit line. To supplement the credit revolver, the
Company borrowed against a $25 million uncommitted line of credit established
with Society National Bank of Cleveland.
The pending sale of the Mrs. Smith's pie business (see footnote C) is
anticipated to be completed during the third quarter. The Company expects that
the combination of proceeds from the sale and cash generated from continuing
operations will be sufficient to pay off or significantly reduce the level of
outstanding debt by the end of the fiscal year, assuming no other significant
investment opportunities or expenditures are identified.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The annual meeting of shareholders of the Company was held on August
15, 1995. At the meeting, the names of Russell G. Mawby, Richard K. Smucker,
and William H. Steinbrink were placed in nomination for the Board of Directors
to serve three-year terms ending in 1998. All three nominees were elected with
the results as follows:
<TABLE>
<CAPTION>
Votes For Votes Withheld
--------- --------------
<S> <C> <C>
Russell G. Mawby 63,218,548 382,648
Richard K. Smucker 63,223,545 377,651
William H. Steinbrink 63,148,757 452,439
</TABLE>
The shareholders also voted on the ratification of the appointment of
Ernst & Young LLP as the Company's independent auditors for the 1996 fiscal
year. The measure was approved as follows:
Votes For Votes Against Abstentions
--------- ------------- -----------
63,281,976 170,473 148,747
No broker non-votes were identified with regard to either matter submitted to
the shareholders.
<PAGE> 9
Sequential Page
No. 9
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
See the Index of Exhibits that appears on Sequential
Page No. 10 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.
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.
December 13, 1995 THE J. M. SMUCKER COMPANY
BY STEVEN J. ELLCESSOR
Secretary
AND RICHARD K. SMUCKER
President
<PAGE> 10
Sequential Page
No. 10
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) 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,
incorporated by reference to the Quarterly Report on
Form 10-Q for the period ended July 31, 1994.
(c) First Amendment to the 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 25, 1995, incorporated by reference to the
Annual Report on Form 10-K for the period ended April
30, 1995.
27 Financial data schedules pursuant to Article 5
in Regulation S-X.
* Exhibits 2, 10, 11, 15, 18, 19, 22, 23, and 24 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.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> OCT-31-1995
<CASH> 13,419
<SECURITIES> 0
<RECEIVABLES> 94,893
<ALLOWANCES> 2,947
<INVENTORY> 143,181
<CURRENT-ASSETS> 263,259
<PP&E> 250,811
<DEPRECIATION> 103,790
<TOTAL-ASSETS> 500,049
<CURRENT-LIABILITIES> 141,776
<BONDS> 0
<COMMON> 7,291
0
0
<OTHER-SE> 267,320
<TOTAL-LIABILITY-AND-EQUITY> 500,049
<SALES> 327,117
<TOTAL-REVENUES> 327,117
<CGS> 215,038
<TOTAL-COSTS> 215,038
<OTHER-EXPENSES> 79,034
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,005
<INCOME-PRETAX> 25,372
<INCOME-TAX> 6,432
<INCOME-CONTINUING> 18,940
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,940
<EPS-PRIMARY> .65
<EPS-DILUTED> .65
</TABLE>
