<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 July 31, 1997
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 14,381,155 Class A Common Shares and 14,746,479 Class B Common
Shares outstanding on July 31, 1997.
The Exhibit Index is located at Sequential Page No. 9.
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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
July 31,
---------------------------------
1997 1996
---- ----
(Dollars in thousands, except per share data)
<S> <C> <C>
Net sales $ 147,389 $ 129,629
Cost of products sold 95,993 85,883
------------ ------------
51,396 43,746
Selling, distribution, and administrative expenses 35,390 30,517
------------ ------------
16,006 13,229
Other income (expense)
Interest income 698 437
Interest expense (5) (750)
Other - net 126 (85)
------------ ------------
Income before income taxes 16,825 12,831
Income taxes 6,852 5,342
============ ============
Net Income $ 9,973 $ 7,489
============ ============
Net income per Common Share* $ .34 $ .26
============ ============
Dividends declared on Class A and Class B Common Shares $ .13 $ .13
============ ============
* Computed on the weighted average number of Class A
Common Shares and Class B Common Shares
outstanding, namely 29,167,890 29,165,770
============ ============
</TABLE>
See notes to condensed consolidated financial statements
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No. 3
THE J. M. SMUCKER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 31, 1997 April 30,1997
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 14,954 $ 24,091
Trade receivables, less allowances 51,417 48,140
Inventories:
Finished products 37,711 39,054
Raw materials, containers, and supplies 77,636 55,052
--------- ---------
115,347 94,106
Other current assets 10,660 12,135
--------- ---------
Total Current Assets 192,378 178,472
PROPERTY, PLANT, AND EQUIPMENT
Land and land improvements 13,961 13,820
Buildings and fixtures 75,902 74,709
Machinery and equipment 171,349 170,160
Construction in progress 13,543 6,881
--------- ---------
274,755 265,570
Less allowances for depreciation (129,933) (125,935)
--------- ---------
Total Property, Plant and Equipment 144,822 139,635
OTHER NONCURRENT ASSETS
Intangible assets 44,553 45,393
Other assets 22,180 21,273
--------- ---------
Total Other Noncurrent Assets 66,733 66,666
--------- ---------
$ 403,933 $ 384,773
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 46,899 $ 36,582
Other current liabilities 41,605 35,434
--------- ---------
Total Current Liabilities 88,504 72,016
NONCURRENT LIABILITIES
Other noncurrent liabilities 21,260 20,866
SHAREHOLDERS' EQUITY
Class A Common Shares 3,595 3,606
Class B Common Shares (Non-Voting) 3,687 3,696
Additional capital 13,753 12,439
Retained income 287,697 284,605
Less:
Deferred compensation (2,637) (1,396)
Amount due from ESOP (10,027) (10,027)
Currency translation adjustment (1,899) (1,032)
--------- ---------
Total Shareholders' Equity 294,169 291,891
--------- ---------
$ 403,933 $ 384,773
========= =========
</TABLE>
See notes to condensed financial statements
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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,
--------------------------
1997 1996
---- ----
(Dollars in Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 9,973 $ 7,489
Adjustments (2,295) (7,645)
-------- --------
NET CASH PROVIDED BY (USED FOR) OPERATING
ACTIVITIES 7,678 (156)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of assets of discontinued
operations --- 19,589
Additions to property, plant, and equipment (10,076) (2,683)
Proceeds from the sale of property, plant, and
equipment 136 160
Other - net 291 ---
-------- --------
NET CASH (USED FOR) PROVIDED BY
INVESTING ACTIVITIES (9,649) 17,066
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in long-term debt --- (17,700)
Proceeds from short-term debt - net 96 ---
Purchase of common shares (3,224) ---
Dividends paid (3,798) (3,783)
Other - net 41 (617)
-------- --------
NET CASH USED FOR FINANCING ACTIVITIES (6,885) (22,100)
Cash flows used in continuing operations (8,856) (5,190)
Cash flows used in discontinuing operations --- (277)
Effect of exchange rate changes (281) 63
-------- --------
Net decrease in cash and cash equivalents (9,137) (5,404)
Cash and cash equivalents at beginning of period 24,091 17,647
-------- --------
Cash and cash equivalents at end of period $ 14,954 $ 12,243
======== ========
</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 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 considered necessary for a fair presentation have been included.
Operating results for the three-month period ended July 31, 1997, are not
necessarily indicative of the results that may be expected for the year ended
April 30, 1998. 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, 1997.
Note B - Common Shares
-------------
At July 31, 1997, 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 1,831,133 Class A and 1,465,809 Class B treasury shares at July 31, 1997, and
1,789,162 Class A and 1,427,085 Class B treasury shares at April 30, 1997.
Note C - Income Per Share
----------------
Income per share has been computed based on the weighted average number
of shares of the Class A and Class B Common Shares considered outstanding during
the period.
Note D - Accounting Reclassifications
----------------------------
Certain prior year amounts have been reclassified to conform to current
year classifications.
Note E - Software Costs
--------------
The Company capitalizes significant costs associated with the
development and installation of internal use software. Amounts deferred are
amortized over the estimated useful lives of the software beginning with the
project's completion. Net deferred internal use software costs as of July 31,
1997 and April 30, 1997 were $8,742,000 and $4,976,000, respectively.
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No. 6
Note F - Recently Issued Accounting Standards
------------------------------------
In the first half of calendar 1997, the Financial Accounting Standards
Board issued final statements that change the method for calculating and
reporting earnings per share (EPS), that require the disclosure of total
comprehensive income, and that change the method for determining and reporting
business segment information. The Company will adopt Statement of Financial
Accounting Standards (SFAS) No. 128, Earnings Per Share, in fiscal 1998. Basic
EPS will be consistent with previously reported EPS and the Company does not
expect diluted EPS to be materially different. The Company will adopt the
disclosure requirements of SFAS No. 130, Reporting Comprehensive Income, and
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, in fiscal 1999.
................................................................................
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 period
ended July 31, 1997.
Results of Operations
- ---------------------
Sales for the first quarter ended July 31, 1997, were $147,389,000, up
14% over the same period last year. The Consumer, Industrial, Foodservice,
Beverage, and Specialty business areas all reported sales increases for the
first quarter, with Consumer and Industrial contributing more than 90% of the
overall increase.
In the Consumer area, sales were up in all markets. The grocery and
mass retail markets reported the largest dollar gains. Much of the growth in the
Consumer area was the result of improved sales of fruit spreads, particularly
traditional preserves and jelly products. The addition of the Kraft retail fruit
spreads business, acquired during the fourth quarter of fiscal 1997, also
contributed. During the period, the Company's share of the fruit spreads
category increased to near record levels. Sales of dessert toppings, natural
peanut butter, and Goober products were also up over the prior year.
In the Industrial area, the sales growth came from a combination of new
and existing products in the bakery and yogurt categories. Growth in R.W.
Knudsen Family brand beverages accounted for the increase in the Beverage area.
International sales were down approximately 3%, due primarily to the impact of
unfavorable exchange rates. The International area's contribution to profits,
however, was up over last year.
Cost of products sold decreased from last year as a percentage of net
sales during the first quarter of fiscal 1998. The decrease was the result of
the mix of products sold as well sweetener costs which began to decline during
the latter half of fiscal 1997. Improved plant efficiencies also contributed to
reduced costs.
Selling, distribution, and administrative costs increased at a slightly
greater rate than sales due mostly to an increase in marketing expenditures and
corporate administrative expenses. The increase in marketing expenses was due
primarily to additional programs in
<PAGE> 7
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No. 7
support of retail fruit spreads, while most of the increase in administrative
costs resulted from the Company's information technology reengineering project.
The Company's interest expense decreased significantly from the first
quarter of last year due to the repayment during fiscal 1997 of all long-term
debt. The Company's improved cash position resulted in a 60% increase in
interest income for the quarter.
Financial Condition - Liquidity and Capital Resources
- -----------------------------------------------------
The financial position of the Company remains strong despite the
reduction in cash and cash equivalents of $9,137,000 during the first quarter.
Historically, the first quarter results in a net cash outflow due to
expenditures required for the seasonal procurement of fruit inventories. In
addition to the fruit purchases, other significant uses of cash during the
quarter were capital expenditures, which included capitalized software and
consulting costs, and the payment of dividends. The Company also repurchased
approximately 150,000 shares of Class A and Class B Common shares during the
quarter as part of its previously announced stock repurchase program.
During the second quarter, the Company will continue to borrow against
its lines of credit in order to finance remaining seasonal fruit purchases and
other working capital requirements. Assuming that there are no additional
acquisitions or other investments requiring cash outlays and that the results of
operations are as anticipated, the Company expects cash provided from operations
and borrowings to be sufficient to meet cash requirements and all short-term
borrowing to be repaid by April 30, 1998.
Recently Issued Accounting Standards
- ------------------------------------
In the first half of calendar 1997, the Financial Accounting Standards
Board issued final statements that change the method for calculating and
reporting earnings per share (EPS), that require the disclosure of total
comprehensive income, and that change the method for determining and reporting
business segment information. The Company will adopt Statement of Financial
Accounting Standards (SFAS) No. 128, Earnings Per Share, in fiscal 1998. Basic
EPS will be consistent with previously reported EPS and the Company does not
expect diluted EPS to be materially different. The Company will adopt the
disclosure requirements of SFAS No. 130, Reporting Comprehensive Income, and
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, in fiscal 1999.
Certain Forward-Looking Statements
- ----------------------------------
This quarterly report includes certain forward-looking statements that
are based on current expectations and are subject to a number of risks and
uncertainties. Actual results may differ depending on a number of factors
including: the success of the Company's fruit spreads marketing program during
the year; competitive activity, including private label; the mix of products
sold and level of marketing expenditures needed to generate those sales; an
increase in fruit costs or costs of any other significant ingredients; the
ability of the Company to maintain and/or improve sales and earnings of its
non-retail business areas; and the successful implementation of the Company's
information technology project.
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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.
September 12, 1997 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
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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>
27 Financial data schedules pursuant to Article 5 in
Regulation S-X.
<FN>
* Exhibits 2, 3, 4, 10, 11, 15, 18, 19, 22, 23, 24, and 99 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-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> JUL-31-1997
<CASH> 14,954
<SECURITIES> 0
<RECEIVABLES> 51,819
<ALLOWANCES> 402
<INVENTORY> 115,347
<CURRENT-ASSETS> 192,378
<PP&E> 274,755
<DEPRECIATION> 129,933
<TOTAL-ASSETS> 403,933
<CURRENT-LIABILITIES> 88,504
<BONDS> 0
0
0
<COMMON> 7,282
<OTHER-SE> 286,887
<TOTAL-LIABILITY-AND-EQUITY> 403,933
<SALES> 147,389
<TOTAL-REVENUES> 147,389
<CGS> 95,993
<TOTAL-COSTS> 95,993
<OTHER-EXPENSES> 35,390
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5
<INCOME-PRETAX> 16,825
<INCOME-TAX> 6,852
<INCOME-CONTINUING> 9,973
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,973
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
