<PAGE> 1
Sequential Page
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 July 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 July 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)
<TABLE>
<CAPTION>
Item 1. Financial Statements
--------------------
Three Months Ended
July 31,
---------------------------
1996 1995
------------ ------------
(Dollars in thousands,
except per share data)
<S> <C> <C>
Net Sales $134,154 $133,897
Cost of products sold 85,883 85,295
------------ -----------
48,271 48,602
Selling, distribution, and
administrative expenses 35,042 32,844
------------ ----------
13,229 15,758
Other income (expense)
Interest income 437 157
Interest expense (750) (390)
Other - net (85) 426
----------- -----------
Income Before Income Taxes 12,831 15,951
Income taxes 5,342 6,567
----------- -----------
Income from continuing operations 7,489 9,384
Income from discontinued operations,
net of income taxes --- 140
----------- -----------
Net income $ 7,489 $ 9,524
----------- -----------
Income per Common Share*
Continuing Operations $ .26 $ .33
Discontinued Operations, net
of income taxes --- ---
----------- -----------
Net income per Common Share $ .26 $ .33
----------- -----------
Dividends declared on
Class A Common Shares $ .13 $ .13
----------- -----------
Dividends declared on
Class B Common Shares $ .13 $ .13
----------- -----------
* Computed on the weighted average
number of Class A Common Shares
and Class B Common Shares out-
standing, namely 29,165,770 29,163,678
=========== ===========
</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>
July 31, 1996 April 30, 1996
(Unaudited) (Audited)
----------- ----------
ASSETS (Dollars in Thousands)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $12,243 $ 17,647
Trade receivables, less allowances 45,614 40,241
Inventories:
Finished products 40,836 37,381
Raw materials, containers, and supplies 72,843 58,114
--------- ---------
113,679 95,495
Assets of discontinued operations - net 22,131 42,250
Other current assets 18,569 18,829
--------- ---------
Total Current Assets 212,236 214,462
PROPERTY, PLANT, AND EQUIPMENT
Land and land improvements 13,729 13,719
Buildings and fixtures 73,268 73,400
Machinery and equipment 164,805 163,078
Construction in progress 2,836 2,615
--------- ---------
254,638 252,812
Less allowances for depreciation (113,805) (109,728)
--------- ---------
Total Property, Plant and Equipment 140,833 143,084
OTHER NONCURRENT ASSETS
Intangible assets 43,426 44,098
Assets of discontinued operations - net -0- 13,875
Notes receivable 13,859 -0-
Other assets 8,708 9,433
--------- ---------
Total Other Noncurrent Assets 65,993 67,406
--------- ---------
$419,062 $424,952
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 40,388 $ 37,211
Other current liabilities 36,183 30,299
--------- ---------
Total Current Liabilities 76,571 67,510
NONCURRENT LIABILITIES
Long-term debt 43,100 60,800
Other noncurrent liabilities 20,475 20,301
--------- ---------
Total Noncurrent Liabilities 63,575 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 272,501 269,036
Less:
Deferred compensation (606) (727)
Amount due from ESOP Trust (10,251) (10,251)
Currency translation adjustment (1,485) (479)
--------- --------
Total Shareholders' Equity 278,916 276,341
--------- ---------
$419,062 $424,952
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 4
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No. 4
THE J. M. SMUCKER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
July 31
----------------------
(Dollars in Thousands)
1996 1995
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income from continuing operations $ 7,489 $ 9,384
Adjustments (7,645) (7,132)
--------- ---------
NET CASH (USED FOR) PROVIDED BY
OPERATING ACTIVITIES (156) 2,252
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant, and
equipment (2,683) (8,697)
Proceeds from the sale of property,
plant, and equipment 160 121
Proceeds from the sale of assets
of discontinued operations 19,589 -0-
--------- ---------
NET CASH PROVIDED BY (USED FOR)
INVESTING ACTIVITIES 17,066 (8,576)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in long-term debt (17,700) -0-
Proceeds from short-term debt -0- 24,500
Dividends paid (3,783) (3,779)
Other - net (617) 159
--------- ---------
NET CASH (USED FOR) PROVIDED BY
FINANCING ACTIVITIES (22,100) 20,880
Cash flows (used for) provided by
continuing operations (5,190) 14,556
Cash flows used for discontinued
operations (277) (11,376)
Effect of exchange rate changes 63 40
--------- ---------
Net (Decrease)/Increase in cash
and cash equivalents (5,404) 3,220
Cash and cash equivalents at
beginning of period 17,647 11,244
--------- ---------
Cash and cash equivalents at
end of period $12,243 $14,464
========= =========
</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 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 financial 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 three-month
period ended July 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 July 31, 1996, 35,000,000 Class A Common Shares and 35,000,000 Class B
Common Shares were authorized. At July 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 July 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, notes
receivable, and assumption of certain liabilities. 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 quarters ended July 31, 1996 and 1995 were $2,926,000 and
$14,068,000, respectively. Income tax expense allocated to the discontinued
operations was $101,000 in fiscal 1996.
<PAGE> 6
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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 July 31, 1996, the current portion of assets of
discontinued operations consists 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 periods ended
July 31, 1996 and 1995, respectively.
Results of Operations
- ---------------------
Sales for the first quarter ended July 31, 1996, were $134,154,000, up
slightly over the same period last year. Sales were up over the prior year in
the Foodservice, Industrial, International, and Specialty Foods business areas.
The Foodservice area recorded the largest dollar gain with sales up 6% for the
quarter, primarily on continued growth in sales of portion control items. The
Industrial area also realized a 6% increase over last year, due mostly to sales
of new formulated fruit products to existing customers.
Consumer area sales were down approximately 3% from the first quarter of
last year due to decreased sales of fruit spreads and dessert toppings. The
fruit spreads category in general remained soft during the first quarter and
private label growth continued. The Company's share-of-market declines began
to level off during the quarter, however, and showed some signs of
strengthening. The decline in fruit spreads and dessert toppings was offset
somewhat by increased sales of peanut butter as the Company continued the
introduction of its reduced fat peanut butter products. Sales also were down
slightly from last year in the Beverage area due in part to a continued
shortage of raw materials for organic juice products.
Earnings for the quarter were $7,489,000, or $.26 per share, compared to
$9,524,000, or $.33 per share for the same period last year. The decrease in
earnings is due in part to increased marketing expenditures in support of fruit
spreads sales. Also playing a part were higher costs for fruit raw materials
and higher administrative expenses in connection with the strategy initiative
mentioned below under "Financial Condition - Liquidity and Capital Resources".
<PAGE> 7
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No. 7
Costs of products sold during the quarter increased from 63.7% of net
sales last year to 64.0% in the first quarter of fiscal 1997. The increase was
the result of a general increase in the overall cost of fruit raw materials.
The impact of the increase in fruit costs likely will impact earnings
throughout the remainder of the current fiscal year.
Selling, distribution, and administrative costs increased approximately 7%
over the same quarter last year. Marketing expenditures were up approximately
$1,500,000 and accounted for two-thirds of the increase in SD & A costs.
Interest expense was up over the same period last year despite lower
average outstanding debt balances. A significant portion of the fiscal 1996
first quarter interest expense was allocated to the Mrs. Smith's business and
is therefore included in the discontinued operations line on the income
statement. When the fiscal 1996 interest allocated to Mrs. Smith's is taken
into consideration, fiscal 1997 interest expense is down approximately 38% from
last year. The increase in interest income over last year's first quarter is
primarily attributable to interest income recognized on the Company's
outstanding note receivable from Flowers Industries, Inc.
Income taxes increased at a slightly greater rate than income before tax
due to increased state and local taxes.
Financial Condition - Liquidity and Capital Resources
- -----------------------------------------------------
The overall financial position remains strong as the Company continues to
reduce its outstanding long-term debt balance. Cash received to-date from the
sale of the Mrs. Smith's business and from continuing operations has allowed
the Company to reduce its debt balance from $60,800,000 at April 30, 1996, to
$43,100,000 at July 31, 1996. This decrease occurred despite the fact the
Company borrowed against its revolving credit line during the quarter to
finance seasonal procurement of fruit. Other significant uses of cash during
the quarter were capital expenditures and the payment of dividends.
During the second quarter, the Company will continue to borrow against its
credit line in order to finance the remaining seasonal fruit purchases and
other working capital requirements. The Company expects to receive cash
proceeds of approximately $24,500,000 relating to the sale of the Mrs. Smith's
business 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 project undertaken during the
latter half of fiscal 1996. This project resulted in the identification of a
new strategic direction for the Company which is expected to cause the launch
of several new ventures in the near future. As a result, higher levels of
investment spending are anticipated during the remainder of the fiscal year and
next year to support the ventures. Although the Company has not determined the
precise level of investment spending that will be required, it expects the
combination of cash received from the sale of the Mrs. Smith's business and
cash generated from continuing operations to be sufficient to meet the
investment needs and to retire a majority of the remaining debt balance by
April 30, 1997.
<PAGE> 8
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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
-------------------
On June 14, 1996, the Company filed a current Report on Form 8-K
with the Securities and Exchange Commission reporting that the
Company was selling its Mrs. Smith's pie business to a subsidiary
of Flowers Industries, Inc.
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.
September 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> 9
Sequential Page
No. 9
INDEX OF EXHIBITS
That are filed with the Commission and
the New York Stock Exchange
<TABLE>
<CAPTION>
Assigned
Exhibit No. * Description
- --------------------------------------------------------------------
<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.
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, 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> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUL-31-1996
<CASH> 12,243
<SECURITIES> 0
<RECEIVABLES> 48,580
<ALLOWANCES> 601
<INVENTORY> 113,679
<CURRENT-ASSETS> 212,236
<PP&E> 254,638
<DEPRECIATION> 113,805
<TOTAL-ASSETS> 419,062
<CURRENT-LIABILITIES> 76,571
<BONDS> 0
<COMMON> 7,290
0
0
<OTHER-SE> 271,626
<TOTAL-LIABILITY-AND-EQUITY> 491,062
<SALES> 134,154
<TOTAL-REVENUES> 134,154
<CGS> 85,883
<TOTAL-COSTS> 85,883
<OTHER-EXPENSES> 35,042
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 750
<INCOME-PRETAX> 12,831
<INCOME-TAX> 5,342
<INCOME-CONTINUING> 7,489
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,489
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
