<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, 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
(330) 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 14,375,149 Class A Common Shares and 14,782,339 Class B Common
Shares outstanding on October 31, 1996.
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,
--------------------------- ---------------------------
1996 1995 1996 1995
---------- ----------- ----------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $ 142,844 $ 142,563 $ 276,998 $ 276,460
Cost of products sold (94,157) (93,183) (180,040) (178,478)
------------ ------------ ------------ ------------
48,687 49,380 96,958 97,982
Selling, distribution, and
administrative expenses (35,111) (34,205) (70,153) (67,049)
------------ ------------ ------------ ------------
13,576 15,175 26,805 30,933
Other income (expense)
Interest income 550 421 987 577
Interest expense (669) (993) (1,419) (1,383)
Provision for disposal of foreign
subsidiary -0- (6,996) -0- (6,996)
Other - net (126) 123 (211) 550
------------ ------------ ------------ ------------
Income before income taxes 13,331 7,730 26,162 23,681
Income taxes (credit) 5,513 (905) 10,855 5,662
------------ ------------ ------------ ------------
Income from continuing operations 7,818 8,635 15,307 18,019
Income from discontinued operations,
net of income taxes -0- 781 -0- 921
------------ ------------ ------------ ------------
Net income $ 7,818 $ 9,416 $ 15,307 $ 18,940
------------ ------------ ------------ ------------
Income per Common Share*
Continuing operations $ .26 $ .29 $ .52 $ .62
Discontinued operations, net
of income taxes* -- .03 -- .03
------------ ------------ ------------ ------------
Net income per Common Share* $ .26 $ .32 $ .52 $ .65
------------ ------------ ------------ ------------
Dividends declared on Class A
and Class B Common Shares ** $ .13 $ -- $ .26 $ .13
------------ ------------ ------------ ------------
* Computed on the weighted average
number of Class A Common Shares
and Class B Common Shares out-
standing, namely 29,157,488 29,163,532 29,161,628 29,163,606
============ ============ ============ ============
<FN>
** The Board of Directors declared a $.13 dividend on both Class A and Class B
Common Shares on November 13, 1995.
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 3
THE J. M. SMUCKER COMPANY Sequential Page
CONDENSED CONSOLIDATED BALANCE SHEETS No. 3
(Unaudited)
<TABLE>
<CAPTION>
October 31, 1996 April 30, 1996
---------------- --------------
(Dollars in Thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 11,794 $ 17,647
Trade receivables, less allowances 48,023 40,241
Inventories:
Finished products 41,422 37,381
Raw materials, containers, and supplies 79,477 58,114
--------- ---------
120,899 95,495
Assets of discontinued operations - net 8,121 42,250
Other current assets 13,099 18,829
--------- ---------
Total Current Assets 201,936 214,462
PROPERTY, PLANT, AND EQUIPMENT
Land and land improvements 13,794 13,719
Buildings and fixtures 73,557 73,400
Machinery and equipment 165,559 163,078
Construction in progress 3,100 2,615
--------- ---------
Less allowances for depreciation 256,010 252,812
(117,877) (109,728)
--------- ---------
Total Property, Plant and Equipment 138,133 143,084
OTHER NONCURRENT ASSETS
Intangible assets 43,219 44,098
Assets of discontinued operations - net -0- 13,875
Notes receivable 13,845 -0-
Other assets 9,557 9,433
--------- ---------
Total Other Noncurrent Assets 66,621 67,406
--------- ---------
$ 406,690 $ 424,952
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 30,925 $ 37,211
Other current liabilities 34,169 30,299
--------- ---------
Total Current Liabilities 65,094 67,510
NONCURRENT LIABILITIES
Long-term debt 36,200 60,800
Other noncurrent liabilities 20,637 20,301
--------- ---------
56,837 81,101
SHAREHOLDERS' EQUITY
Class A Common Shares 3,594 3,597
Class B Common Shares (Non-Voting) 3,696 3,696
Additional capital 11,467 11,469
Retained income 276,537 269,036
Less:
Deferred compensation (527) (727)
Amount due from ESOP Trust (10,027) (10,251)
Currency translation adjustment 19 (479)
--------- ---------
Total Shareholders' Equity 284,759 276,341
--------- ---------
$ 406,690 $ 424,952
========= =========
</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)
1996 1995
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income from continuing operations $ 15,307 $ 18,019
Adjustments (18,710) (23,437)
-------- --------
NET CASH USED FOR OPERATING ACTIVITIES (3,403) (5,418)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant, and (4,307) (15,447)
equipment
Proceeds from the sale of property,
plant, and equipment 261 193
Proceeds from the sale of assets
of discontinued operations 33,997 -0-
Other - net -0- 1,015
-------- --------
NET CASH PROVIDED BY (USED FOR)
INVESTING ACTIVITIES 29,951 (14,239)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in long-term debt (24,600) -0-
Proceeds from short-term debt -0- 55,700
Dividends paid (7,566) (3,779)
Other - net (21) 908
-------- --------
NET CASH (USED FOR) PROVIDED BY
FINANCING ACTIVITIES (32,187) 52,829
Cash flows (used for) provided by
continuing operations (5,639) 33,172
Cash flows used for discontinued
operations (277) (31,338)
Effect of exchange rate changes 63 341
-------- --------
Net (decrease)/increase in cash
and cash equivalents (5,853) 2,175
Cash and cash equivalents at
beginning of period 17,647 11,244
-------- --------
Cash and cash equivalents at
end of period $ 11,794 $ 13,419
======== ========
<FN>
( ) Denotes use of cash
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 5
Sequential Page
No. 5
THE J. M. SMUCKER COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
---------------------
The accompanying unaudited, condensed, consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they 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. Operating results for the six-month period
ended October 31, 1996, are not necessarily indicative of the results that may
be expected for the year ended April 30, 1997. 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, 1996.
On May 31, 1996, the Company completed the sale of its Mrs. Smith's
frozen pie business to Flowers Industries, Inc. As a result, Mrs. Smith's has
been reflected as a discontinued operation in the accompanying financial
statements. Accordingly, the accompanying notes and financial statements for all
periods presented exclude amounts related to the discontinued business.
Note B - Common Shares
-------------
At October 31, 1996, 35,000,000 Class A Common Shares and 35,000,000
Class B Common Shares were authorized. At October 31, 1996, there were
14,375,149 and 14,782,339 outstanding shares of Class A Common and Class B
Common, respectively, while 14,387,639 Class A and 14,782,339 Class B Common
Shares were outstanding at April 30, 1996. Outstanding shares of each class are
shown net of 1,837,139 Class A and 1,429,949 Class B treasury shares at October
31, 1996, and 1,824,649 Class A and 1,429,949 Class B treasury shares at April
30, 1996.
Note C - 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.
Note D - Divestitures
------------
As noted above, the Company completed the sale of its Mrs. Smith's
frozen pie business during the first quarter for a combination of cash and notes
receivable. In connection with this divestiture, the Company entered into
agreements to lease certain property, plant, and equipment to a subsidiary of
Flowers Industries, Inc. Mrs. Smith's revenues for the three-month and six-month
periods ended October 31, 1995 were $14,068,000 and $50,657,000, respectively,
and income tax expense allocated to the discontinued operations was $101,000 and
$770,000, respectively. Mrs. Smith's recorded revenue of $2,926,000 in the first
quarter of fiscal 1997, prior to the sale.
<PAGE> 6
Sequential Page
No. 6
The net assets relating to the Mrs. Smith's business have been reported
in the accompanying balance sheets as assets of discontinued operations and are
classified as current and noncurrent based on the timing of the consideration to
be received. At October 31, 1996, the current portion of assets of discontinued
operations consisted of the remaining raw material and finished good inventories
to be purchased by Flowers Industries, Inc. The notes receivable relating to the
divestiture are classified in the Company's balance sheets based upon the
repayment terms.
********* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
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, 1996 and 1995. On May 31, 1996, the Company
completed the sale of its Mrs. Smith's frozen pie business to Flowers
Industries, Inc. As a result, Mrs. Smith's has been reflected as a discontinued
operation in the accompanying financial statements. Therefore, this discussion
and analysis refers to only the continuing businesses of the Company.
Results of Operations
- ---------------------
Sales for the second quarter ended October 31, 1996, were $142,844,000,
up slightly over the same period last year. The Consumer, Foodservice,
Industrial, and Beverage business areas all reported sales increases for the
second quarter. The Industrial area recorded the largest percentage gain (19%
increase over last year), based predominately on sales of new products to
existing customers. Consumer area sales were up approximately 1% over the second
quarter of last year as a result of increases in sales of fruit spreads and
reduced fat peanut butter. Sales of dessert toppings were down for the same
period due to strong competitive activity in the toppings category.
In the International area, sales were 16% behind last year's second
quarter. The absence of sales from Elsenham Quality Foods Ltd., the Company's
former U.K. subsidiary that was divested at the beginning of the third quarter
last year, accounted for the majority of the decline. Despite the decrease in
sales, the overall contribution of the International area to profits was up over
last year.
Sales for the first six months of the fiscal year were $276,998,000,
compared to $276,460,000 during the first half of last year. The Industrial and
Foodservice areas recorded sales growth of 13% and 6%, respectively, during the
first half of the fiscal year. Consumer area sales were down 1% primarily in
fruit spreads and dessert toppings. International area sales were down almost 8%
from last year, due mostly to the impact of the Elsenham divestiture.
Income for continuing operations for the second quarter was $7,818,000,
or $.26 per share, compared to income from continuing operations of $8,635,000,
or $.29 per share, for the same period last year. Year-to-date income from
continuing operations was $.52 per share, compared to $.62 per share for the
same period last year.
<PAGE> 7
Sequential Page
No. 7
Costs of products sold increased from last year as a percentage of net
sales during the second quarter and for the first six months of fiscal 1997. The
increase was the result of a general increase in the overall cost of fruit raw
materials. This factor likely will impact earnings throughout the remainder of
the current fiscal year as the Company has elected, with limited exceptions, not
to increase prices to cover increased costs.
Selling, distribution, and administrative costs increased 3% during the
second quarter and 5% year-to-date. Costs associated with the discontinuation of
the Company's truck fleet and expenses associated with the Company's strategic
initiatives were the key factors in the quarter-to-quarter increase.
Interest expense was $669,000 for the second quarter of fiscal 1997,
compared to interest expense of $993,000 for the same period last year,
primarily due to lower average debt levels. Interest income for the quarter and
year-to-date was up as a result interest earned on the note receivable from
Flowers Industries, Inc.
The tax benefit associated with the divestiture of the Elsenham
subsidiary resulted in a net tax credit for the second quarter of fiscal 1996.
Excluding the impact of this transaction, the tax rate would have been 40.5%
in the second quarter of last year, compared to 41.4% in the current year.
Financial Condition - Liquidity and Capital Resources
- -----------------------------------------------------
The overall financial position remains strong as the Company continues
to reduce its debt balances. Cash proceeds to-date from the sale of the Mrs.
Smith's business together with cash from continuing operations has allowed the
Company to reduce its debt balance from $60,800,000 at April 30, 1996, to
$36,200,000 at October 31, 1996. This decrease occurred despite the fact the
Company borrowed against its revolving credit line during the first two quarters
to finance seasonal procurement of fruit. Other significant uses of cash during
the quarter and six-month periods were capital expenditures and the payment of
dividends.
The Company has received to-date in fiscal 1997 approximately
$34,000,000 from the sale of the Mrs. Smith's business and expects to receive
additional cash proceeds of approximately $8,000,000 during the remainder of the
fiscal year.
At the Company's annual shareholders' meeting in August, management
announced the results of a company-wide strategy review undertaken during the
latter half of fiscal 1996. During the second quarter, the Company determined
that approximately $8,000,000 in expenditures during the remainder of fiscal
1997 will be necessary to support projects identified as part of the strategy
review. The Company expects the combination of cash still to be received from
the sale of the Mrs. Smith's business and cash generated from continuing
operations to be sufficient both to meet all cash requirements and to retire a
majority of the remaining debt balance by April 30, 1997.
<PAGE> 8
Sequential Page
No. 8
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The annual meeting of shareholders of the Company was held on August
14, 1996. At the meeting, the names of Lena C. Bailey, Robert R. Morrison, Paul
H. Smucker, and William Wrigley, Jr. were placed in nomination for the Board of
Directors to serve three-year terms ending in 1999. All four nominees were
elected with the results as follows:
<TABLE>
<CAPTION>
Votes For Votes Withheld
---------- --------------
<S> <C> <C>
Lena C. Bailey 61,333,643 699,673
Robert R. Morrison 61,417,190 616,126
Paul H. Smucker 61,424,520 608,796
William Wrigley, Jr. 61,369,996 663,320
</TABLE>
The shareholders also voted on the ratification of the appointment of Ernst &
Young LLP as the Company's independent auditors for the 1997 fiscal year. The
measure was approved as follows:
Votes For Votes Against Abstentions
--------- ------------- -----------
61,506,136 195,612 331,568
No broker non-votes were identified with regard to either matter submitted to
the shareholders. In September 1996, an open board position was created with
the resignation of Dr. Lena C. Bailey due to ill health. Dr. Bailey, the former
dean of the College of Human Ecology at The Ohio State University, had worked
with the Company for many years as a consultant and had served as a member of
the Board of Director since 1986. The Company has elected not to fill the open
position at this time.
<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, 1996 THE J. M. SMUCKER COMPANY
/s/ Steven J. Ellcessor
-----------------------
BY STEVEN J. ELLCESSOR
Vice President-Administration, Secretary,
and General Counsel
/s/ Richard K. Smucker
----------------------
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
<TABLE>
<CAPTION>
Assigned Sequential
Exhibit No. * Description Page No.
- -------------------------------------------------------------------------------------------------
<S> <C>
4 (a) 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.
(b) Second Amendment Agreement further extending the term of
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 26, 1996, incorporated by
reference to the Annual Report on Form 10-K for the
period ended April 30, 1996.
27 Financial data schedules pursuant to Article 5 in
Regulation S-X.
<FN>
* Exhibits 2, 3, 10, 11, 15, 18, 19, 22, 23, and 24 are either inapplicable to
the Company or require no answer.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 11,794
<SECURITIES> 0
<RECEIVABLES> 48,613
<ALLOWANCES> 590
<INVENTORY> 120,899
<CURRENT-ASSETS> 201,936
<PP&E> 256,010
<DEPRECIATION> 117,877
<TOTAL-ASSETS> 406,690
<CURRENT-LIABILITIES> 65,094
<BONDS> 0
<COMMON> 7,290
0
0
<OTHER-SE> 277,469
<TOTAL-LIABILITY-AND-EQUITY> 406,690
<SALES> 276,998
<TOTAL-REVENUES> 276,998
<CGS> 180,040
<TOTAL-COSTS> 180,040
<OTHER-EXPENSES> 70,153
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,419
<INCOME-PRETAX> 26,162
<INCOME-TAX> 10,855
<INCOME-CONTINUING> 15,307
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,307
<EPS-PRIMARY> .52
<EPS-DILUTED> .52
</TABLE>
