<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 January 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 14,374,013 Class A Common Shares and 14,784,203 Class B Common
Shares outstanding on January 31, 1997.
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,
------------------------------- -----------------------------
1997 1996 1997 1996
------------- ------------- ------------ -------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $ 124,479 $ 121,207 $ 401,477 $ 397,667
Cost of products sold (80,383) (76,373) (260,423) (254,851)
------------ ------------ ------------ ------------
44,096 44,834 141,054 142,816
Selling, distribution, and
administrative expenses (33,090) (33,390) (103,243) (100,439)
------------ ------------ ------------ ------------
11,006 11,444 37,811 42,377
Other income (expense)
Interest income 529 454 1,516 1,031
Interest expense (371) (983) (1,790) (2,367)
Provision for disposal of foreign
subsidiary -0- -0- -0- (6,996)
Other - net (177) (330) (388) 329
------------ ------------ ------------ ------------
Income before income taxes 10,987 10,585 37,149 34,374
Income taxes 4,454 4,729 15,309 10,499
------------ ------------ ------------ ------------
Income from continuing operations 6,533 5,856 21,840 23,875
Income from discontinued operations,
net of income taxes -0- 481 -0- 1,402
------------ ------------ ------------ ------------
Net income $ 6,533 $ 6,337 $ 21,840 $ 25,277
============ ============ ============ ============
Income per Common Share*
Continuing operations $ .23 $ .20 $ .75 $ .82
Discontinued operations, net
of income taxes -- .02 -- .05
------------ ------------ ------------ ------------
Net income per Common Share* $ .23 $ .22 $ .75 $ .87
============ ============ ============ ============
Dividends declared on Class A
and Class B Common Shares $ .13 $ .13 $ .39 $ .39
============ ============ ============ ============
* Computed on the weighted average
number of Class A Common Shares
and Class B Common Shares out-
standing, namely 29,157,741 29,167,391 29,160,335 29,164,865
============ ============ ============ ============
</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>
January 31, 1997 April 30, 1996
---------------- --------------
(Dollars in Thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 12,196 $ 17,647
Trade receivables, less allowances 43,234 40,241
Inventories:
Finished products 38,923 37,381
Raw materials, containers, and supplies 67,040 58,114
--------- ---------
105,963 95,495
Assets of discontinued operations - net 1,928 42,250
Other current assets 14,321 18,829
--------- ---------
Total Current Assets 177,642 214,462
PROPERTY, PLANT, AND EQUIPMENT
Land and land improvements 13,804 13,719
Buildings and fixtures 74,068 73,400
Machinery and equipment 165,791 163,078
Construction in progress 4,782 2,615
--------- ---------
258,445 252,812
Less allowances for depreciation (121,580) (109,728)
--------- ---------
Total Property, Plant and Equipment 136,865 143,084
OTHER NONCURRENT ASSETS
Intangible assets 42,496 44,098
Assets of discontinued operations - net -0- 13,875
Notes receivable 13,601 -0-
Other assets 9,227 9,433
--------- ---------
Total Other Noncurrent Assets 65,324 67,406
--------- ---------
$ 379,831 $ 424,952
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 23,006 $ 37,211
Other current liabilities 33,715 30,299
--------- ---------
Total Current Liabilities 56,721 67,510
NONCURRENT LIABILITIES
Long-term debt 15,600 60,800
Other noncurrent liabilities 20,840 20,301
--------- ---------
36,440 81,101
SHAREHOLDERS' EQUITY
Class A Common Shares 3,594 3,597
Class B Common Shares (Non-Voting) 3,696 3,696
Additional capital 11,585 11,469
Retained income 279,286 269,036
Less:
Deferred compensation (448) (727)
Amount due from ESOP Trust (10,027) (10,251)
Currency translation adjustment (1,016) (479)
--------- ---------
Total Shareholders' Equity 286,670 276,341
--------- ---------
$ 379,831 $ 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>
Nine Months Ended
January 31,
---------------------------
(Dollars in Thousands)
1997 1996
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income from continuing operations $ 21,840 $ 23,875
Adjustments (3,220) (1,732)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 18,620 22,143
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant, and
equipment (8,174) (21,261)
Proceeds from the sale of property,
plant, and equipment 588 668
Proceeds from the sale of assets
of discontinued operations 40,434 -0-
Other - net -0- 1,494
-------- --------
NET CASH PROVIDED BY (USED FOR)
INVESTING ACTIVITIES 32,848 (19,099)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in long-term debt (45,200) -0-
Proceeds from short-term debt -0- 7,000
Dividends paid (11,346) (11,337)
Other - net 96 1,172
-------- --------
NET CASH USED FOR FINANCING ACTIVITIES (56,450) (3,165)
Cash flows used for continuing operations (4,982) (121)
Cash flows (used for) provided by discontinued (277) 4,497
operations
Effect of exchange rate changes (192) 41
-------- --------
Net (decrease) increase in cash
and cash equivalents (5,451) 4,417
Cash and cash equivalents at
beginning of period 17,647 11,244
-------- --------
Cash and cash equivalents at
end of period $ 12,196 $ 15,661
======== ========
<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 considered necessary for a fair presentation have been included.
Operating results for the nine-month period ended January 31, 1997, 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 January 31, 1997, 35,000,000 Class A Common Shares and 35,000,000
Class B Common Shares were authorized. At January 31, 1997, there were
14,374,013 and 14,784,203 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 1,838,275 Class A and 1,428,085 Class B treasury shares at January
31, 1997, 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 Flowers
Industries, Inc. Mrs. Smith's revenues for the three-month and nine-month
periods ended January 31, 1996 were $38,474,000 and $89,131,000, respectively,
and income tax expense allocated to the discontinued operations was $345,000 and
$1,006,000, 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 January 31, 1997, 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
nine-month periods ended January 31, 1997 and 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. Therefore, this discussion
and analysis refers to only the continuing businesses of the Company.
Results of Operations
- ---------------------
Sales for the third quarter ended January 31, 1997, were $124,479,000,
up 3% over the same period last year. The Industrial, Beverage, Foodservice, and
Specialty Foods business areas all reported sales increases for the third
quarter. The Industrial area recorded the largest dollar and percentage growth,
based predominately on sales of new products, introduced earlier in the fiscal
year, to existing customers. The Beverage area also recorded a substantial third
quarter increase, due primarily to volume increases on Knudsen & Sons brands.
The Foodservice area continued to grow steadily during the third quarter, and
the Specialty Foods area began to rebound somewhat from a slow first half of the
year.
Consumer area sales were slightly down from the third quarter last year
due primarily to lower sales in the Company's mass retail market. Although fruit
spreads volume was down slightly for the period, dollar share of market in this
category is trending more positively. Sales of toppings, Goober, and natural
peanut butter all increased during the quarter. In the International area, sales
were behind last year both for the quarter and year-to-date, due primarily to
the absence of sales from Elsenham Quality Foods, the Company's United Kingdom
subsidiary that was divested during the third quarter last year.
Sales for the first nine months of the fiscal year were $401,477,000,
compared to $397,667,000 during the same period last year. The Industrial area
has recorded double-digit sales growth during the first three quarters of the
fiscal year, and the Foodservice and Beverage areas each have recorded more
modest sales increases. Consumer area sales were down slightly due primarily to
fruit spreads and dessert toppings. International area sales were down from last
year due mostly to the impact of the Elsenham divestiture.
<PAGE> 7
Sequential Page
No. 7
Income from continuing operations for the third quarter was $6,533,000,
or $.23 per share, compared to income from continuing operations of $5,856,000,
or $.20 per share, for the same period last year. Year-to-date income from
continuing operations was $.75 per share, compared to $.82 per share for the
same period last year.
Costs of products sold increased from last year as a percentage of net
sales during the third quarter and for the first nine 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. Sweetener costs, on the other hand,
are expected to be lower during the fourth quarter than during the first part of
the year, and this will offset to some extent the higher fruit costs.
Selling, distribution, and administrative costs were down approximately
1% for the third quarter due primarily to lower distribution costs and other
cost reduction efforts. In addition, last year's third quarter included
consulting costs associated with the Company's strategy and operations project.
On a year-to-date basis, however, selling, distribution, and administrative
costs have increased 3% as a result of increased marketing expenditures and
costs associated with the Company's strategic initiatives.
Interest expense was $371,000 for the third quarter of fiscal 1997,
compared to $983,000 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 of interest earned on the note receivable from Flowers Industries, Inc.
The tax rate was 40.5% in the third quarter, compared to 44.7% last
year. During the quarter the Company revised its estimated effective federal tax
rate for the year, resulting in a nine-month retroactive adjustment to tax
expense. The tax rate for the first nine months of fiscal 1997 was 41.2%,
compared to 30.5% for the same period last year. The substantially lower rate
last year was due to a tax benefit associated with the divestiture of Elsenham
Quality Foods Ltd. that was recognized during the second quarter last 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 have allowed the
Company to reduce its debt balance from $60,800,000 at April 30, 1996, to
$15,600,000 at January 31, 1997. The Company has received to-date in fiscal 1997
approximately $40,000,000 from the sale of the Mrs. Smith's business.
Significant uses of cash during the third quarter and year-to-date were capital
expenditures and the payment of dividends.
In the Company's second quarter 10-Q, it was stated that approximately
$8,000,000 would be spent during the remainder of fiscal 1997 to support
projects identified as part of a company-wide strategy review undertaken during
the latter half of fiscal 1996. It now appears that some portion of that
$8,000,000 will instead be expended during the first quarter of fiscal 1998. In
either event, however, the Company expects cash generated from continuing
operations to be sufficient to meet all cash requirements during the fourth
quarter and to retire a majority of the remaining debt balance by April 30,
1997.
<PAGE> 8
Sequential Page
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 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
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) 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, 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> 9-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 12,196
<SECURITIES> 0
<RECEIVABLES> 43,855
<ALLOWANCES> 621
<INVENTORY> 105,963
<CURRENT-ASSETS> 177,642
<PP&E> 258,445
<DEPRECIATION> 121,580
<TOTAL-ASSETS> 379,831
<CURRENT-LIABILITIES> 56,721
<BONDS> 0
<COMMON> 7,290
0
0
<OTHER-SE> 279,380
<TOTAL-LIABILITY-AND-EQUITY> 379,831
<SALES> 401,477
<TOTAL-REVENUES> 401,477
<CGS> 260,423
<TOTAL-COSTS> 260,423
<OTHER-EXPENSES> 103,243
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,790
<INCOME-PRETAX> 37,149
<INCOME-TAX> 15,309
<INCOME-CONTINUING> 21,840
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,840
<EPS-PRIMARY> .75
<EPS-DILUTED> .75
</TABLE>
