<PAGE> 1
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No. 1 of 9 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 January 31, 1996
-------------------------------
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 14,387,639 Class A Common Shares and 14,782,339 Class B Common
Shares outstanding on January 31, 1996.
The Exhibit Index is located at Sequential Page No. 9.
<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 Nine Months Ended
January 31, January 31
-------------------------------- --------------------------
1996 1995 1996 1995
---------- ----------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Net Sales $159,681 $157,348 $486,798 $486,034
Cost of products sold 104,544 100,600 319,582 315,791
-------- -------- -------- --------
55,137 56,748 167,216 170,243
Selling, distribution, and administration 42,467 41,841 121,501 119,341
Interest income 454 108 1,031 473
Other income - net 82 749 1,833 2,772
Interest expense (1,795) (1,299) (4,800) (3,423)
Loss on disposal of foreign subsidiary --- --- (6,996) ---
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 11,411 14,465 36,783 50,724
Income taxes 5,074 5,776 11,506 20,494
-------- -------- -------- --------
NET INCOME $ 6,337 $8,689 $25,277 $30,230
-------- -------- -------- --------
Net income per Common Share* $ .22 $ .30 $ .87 $ 1.04
-------- -------- -------- --------
Dividends declared on Class A Common Shares $ .13 $ .125 $ .39 $ .375
-------- -------- -------- --------
Dividends declared on Class B Common Shares $ .13 $ .125 $ .39 $ .375
-------- -------- -------- --------
* Computed on the weighted average number
of Class A Common Shares and Class B
Common Shares outstanding, namely: 29,167,391 29,167,667 29,164,865 29,157,201
</TABLE>
See notes to condensed, consolidated financial statements.
<PAGE> 3
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No. 3
THE J. M. SMUCKER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 31,1996 April 30, 1995
(Unaudited) (Audited)
ASSETS ----------- ---------
CURRENT ASSETS (Dollars in Thousands)
<S> <C> <C>
Cash and cash equivalents $ 15,661 $ 11,244
Trade receivables, less allowances 53,702 53,600
Inventories:
Finished products 47,206 49,825
Raw materials, containers, and supplies 76,608 60,849
-------- --------
123,814 110,674
Other current assets 14,488 16,318
-------- --------
Total Current Assets 207,665 191,836
PROPERTY, PLANT, AND EQUIPMENT
Land and land improvements 13,344 14,260
Buildings and fixtures 72,568 72,079
Machinery and equipment 155,514 144,141
Construction in progress 7,875 5,605
------- -------
249,301 236,085
Less allowances for depreciation (106,338) (95,960)
--------- --------
Total Property, Plant and Equipment 142,963 140,125
OTHER NONCURRENT ASSETS
Goodwill 39,751 40,621
Trademarks and patents 39,002 40,019
Other assets 9,911 8,416
------- --------
Total Other Noncurrent Assets 88,664 89,056
-------- --------
$439,292 $421,017
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 33,936 $ 40,527
Notes payable 7,000 0
Salaries, wages, and additional compensation 9,330 10,235
Accrued marketing and merchandising 18,483 14,260
Other current liabilities 12,162 14,821
------- -------
Total Current Liabilities 80,911 79,843
NONCURRENT LIABILITIES 84,188 83,182
SHAREHOLDERS' EQUITY
Class A Common Shares, outstanding shares: 3,597 3,596
14,387,639 at stated value
Class B Common Shares (Non-voting), out- 3,696 3,695
standing shares: 14,782,339 at stated value
Additional capital 11,239 10,963
Retained income 268,889 254,854
Less:
Deferred compensation (868) (1,292)
Amount due from ESOP Trust (10,251) (10,441)
Currency translation adjustment (2,109) (3,383)
--------- ---------
Total Shareholders' Equity 274,193 257,992
-------- --------
$439,292 $421,017
======== ========
</TABLE>
See notes to condensed, consolidated financial statements.
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No. 4
THE J. M. SMUCKER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
January 31
----------------------
(Dollars in Thousands)
1996 1995
-------- --------
<S> <C> <C>
NET CASH PROVIDED FROM OPERATING ACTIVITIES $26,640 $ 26,228
CASH FLOWS FROM INVESTING ACTIVITIES
Business acquired - net of cash -0- (28,780)
Additions to property, plant, and
equipment (21,261) (12,766)
Proceeds from the sale of property,
plant, and equipment 668 -0-
Insurance proceeds to replace property, 1,494 -0-
plant, and equipment
Other - net -0- (728)
-------- --------
NET CASH USED FOR INVESTING ACTIVITIES (19,099) (42,274)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term debt 7,000 15,198
Proceeds from long-term debt -0- 7,501
Dividends paid (11,337) (10,900)
Other - net 1,172 404
------- -------
NET CASH (USED FOR) PROVIDED BY
FINANCING ACTIVITIES (3,165) 12,203
Effect of exchange rate changes 41 169
Net Increase/(Decrease) in Cash and
Cash Equivalents 4,417 (3,674)
Cash and Cash Equivalents at
Beginning of Period 11,244 14,059
------- --------
Cash and Cash Equivalents at
End of Period $15,661 $ 10,385
======= ========
</TABLE>
( ) Denotes use of cash
See notes to condensed, consolidated financial statements.
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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 January 31, 1996, 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 1,824,649 Class A and 1,429,949 Class B treasury shares at January
31, 1996, and 1,827,449 Class A and 1,433,449 Class B treasury shares at April
30, 1995.
Note C- Divestitures
------------
On March 1, 1996, the Company announced that it had reached an
agreement in principle to sell its Mrs. Smith's frozen pie business to ConAgra
Frozen Foods, a ConAgra, Inc. company. The previously announced agreement to
sell the Mrs. Smith's business to a subsidiary of SBI Brands Inc. was no longer
in effect and had expired prior to the Company beginning discussion with
ConAgra. The sale, which the Company hopes to complete by the end of the
fiscal year, is expected to result in a loss to the Company. The exact amount
of the loss cannot be determined until the transaction is completed. Based
upon current information, however, the Company does not expect it to be
significant in relation to its total investment.
On December 15, 1995, the Company completed the divestiture of its
English subsidiary, Elsenham Quality Foods Ltd. The acquisition by Cheergrey
Limited, an English specialty foods holding company, resulted in a pretax loss
of $6,996,000. A tax benefit of $6,870,000 was recognized associated with this
transaction and, therefore, the after-tax impact is not material.
Note D - Accounting Reclassifications
----------------------------
Certain prior year amounts have been reclassified to conform to
current year classifications.
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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 nine-month periods ended January 31, 1996 and 1995, respectively.
Results of Operations
- ---------------------
Sales for the third quarter ended January 31, 1996 were $159,681,000,
representing an increase of approximately 1% over the same period last year.
Sales were up in the Mrs. Smith's, Foodservice, Specialty, and International
business areas but down in the Consumer, Beverage, and Industrial areas. Mrs.
Smith's third quarter sales were up approximately 5% over the same period last
year due to a shift in the timing of marketing and promotional spending to
later in the holiday season. In the Foodservice area, continued volume growth
in the portion control category contributed to that area's sales increase.
In the Consumer business area, sales of fruit spreads continue behind the prior
year, both as a result of soft demand in the category generally and continued
private label activity in the grocery market.
On a year-to-date basis, Company sales were even with the sales reported for
the first three quarters of fiscal year 1995. Mrs. Smith's sales were
approximately 10% behind the prior year due primarily to the Company's
discontinuation of the SmartStyle line, which was in national distribution last
year. In the Consumer area, sales were down approximately two percentage
points. Year-to-date sales in all other business areas remained well ahead of
last year.
Earnings for the quarter were $6,337,000, or $.22 per share, compared to
$8,689,000, or $.30 per share for the same period last year. The decline in
earnings is attributable to the reduction in earnings contribution from Mrs.
Smith's and the shortfall in Consumer fruit spread sales. The decrease in
contribution from Mrs. Smith's for the quarter was primarily due to the impact
of new marketing and sales initiatives implemented for this year's holiday
season. Year-to-date earnings are $.87 per share compared to $1.04 per share
last year.
The cost of products sold during both the quarter and the nine-month period
increased as a percentage of sales compared to the same periods last year due
to two key factors. First, margins at Mrs. Smith's continued to be impacted by
the competitive decision to increase the size
<PAGE> 7
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No. 7
of four of its best selling pies. The second factor related to the mix of
products sold during the quarter as the shortfall in Consumer sales was
replaced by sales in business areas that currently earn lower margins. The
percentage increase in selling, distribution, and administration cost for the
quarter was consistent with the increase in sales for the same period.
Interest expense was up for both the quarter and nine-month periods due to an
increase in the average outstanding debt balance and higher interest rates,
which averaged approximately one percentage point higher than during the same
nine-month period in fiscal 1995. Despite the increased borrowing levels, the
Company's interest income was also up over last year's third quarter and first
nine months, primarily due to larger cash balances in Australia and Canada.
Income earned by the Company on non-operating activities was below last year
due to lower profitability on the sale of excess frozen fruit inventories.
Based upon projected year-end results, the estimated effective federal tax rate
increased during the quarter. As a result, a retroactive adjustment to reflect
the higher tax rate for the first nine months was recorded. The overall
effective tax rate for the nine-month period is significantly lower than fiscal
1995 due to the impact of the tax benefit associated with the divestiture of
Elsenham Quality Foods.
Financial Condition - Liquidity and Capital Resources
- -----------------------------------------------------
The Company's financial position continues to be strong despite the modest
increase in debt since April 30, 1995. Cash generated from operations increased
significantly during the third quarter due to the collections of Mrs. Smith's
second quarter receivables and the end of the fruit procurement period. The
major uses of cash during both the quarter and nine-month period were capital
expenditures and the payment of dividends.
The pending sale of the Mrs. Smith's pie business (see footnote C) is
anticipated to be completed during the fourth quarter. The Company expects
that the combination of proceeds from the sale and cash generated from
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.
Subsequent to quarter-end, the Company discovered that apple juice concentrate
supplied to its beverage subsidiary, Smucker Quality Beverages, Inc. ("SQB"),
contained an undeclared sweetener. Although the finished products manufactured
from this concentrate presented no health hazards, the presence of the
undeclared sweetener caused SQB to withdraw product from the marketplace. The
costs associated with SQB's withdrawal of the product have not been finalized
but are expected to be approximately $1,000,000. The loss is not insured and,
although the Company will pursue its options to recover from responsible
parties, it is not possible at this time to assess the likelihood of recovery.
This expense will be charged to earnings during the fourth quarter of fiscal
1996.
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No. 8
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
See the Index of Exhibits that appears on Sequential
Page No. 9 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.
March 15, 1996 THE J. M. SMUCKER COMPANY
BY STEVEN J. ELLCESSOR
Secretary
AND RICHARD K. SMUCKER
President
<PAGE> 9
Sequential Page
No. 9
INDEX OF EXHIBITS
That are filed with the Commission and
the New York Stock Exchange
<TABLE>
<CAPTION>
Assigned Sequential
Exhibit No. * Description Page No.
- ---------------------------------------------------------------------------------
<S> <C> <C>
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.
<FN>
* 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>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JAN-31-1996
<CASH> 15,661
<SECURITIES> 0
<RECEIVABLES> 56,124
<ALLOWANCES> 2,422
<INVENTORY> 123,814
<CURRENT-ASSETS> 207,665
<PP&E> 249,301
<DEPRECIATION> 106,338
<TOTAL-ASSETS> 439,292
<CURRENT-LIABILITIES> 80,911
<BONDS> 0
<COMMON> 7,293
0
0
<OTHER-SE> 266,900
<TOTAL-LIABILITY-AND-EQUITY> 439,292
<SALES> 486,798
<TOTAL-REVENUES> 486,798
<CGS> 319,582
<TOTAL-COSTS> 319,582
<OTHER-EXPENSES> 121,501
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,800
<INCOME-PRETAX> 36,783
<INCOME-TAX> 11,506
<INCOME-CONTINUING> 25,277
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,277
<EPS-PRIMARY> .87
<EPS-DILUTED> .87
</TABLE>
