-- Net sales increase 19 percent with all business areas contributing
-- EPS up 8 percent, and up 12 percent excluding charges
-- Folgers transaction completed November 6, 2008
ORRVILLE, Ohio, Nov. 21 /PRNewswire-FirstCall/ -- The J. M. Smucker
Company (NYSE: SJM) today announced results for the second quarter ended
October 31, 2008, of its 2009 fiscal year.
Second Quarter Results
Three months ended
October 31, %
2008 2007 Increase
(Dollars in millions, except per share data)
Net sales $843.1 $707.9 19%
Net income:
Income $51.5 $50.2 3%
Income per diluted share $0.94 $0.87 8%
Net sales increased 19 percent in the second quarter of 2009 compared to
the second quarter of 2008. Net sales growth was broad based with all major
brands and strategic business areas contributing. The Carnation(R), Europe's
Best(R) and Knott's Berry Farm(R) acquisitions contributed approximately $35.8
million in net sales to the quarter while the foreign exchange impact of the
weakening Canadian dollar reduced net sales by approximately $8.2 million.
Excluding acquisitions and foreign exchange, net sales increased 15 percent.
Over the last year, the Company has implemented price increases necessary
to offset rising costs. While pricing was the primary driver of the net sales
increase, volume gains also contributed. Most categories experienced volume
gains, including Smucker's(R) fruit spreads, Pillsbury(R) baking mixes and
frostings, Hungry Jack(R) potatoes and pancakes, Eagle Brand(R) sweetened
condensed milk, and Crisco(R) shortening and oils, while declines were
primarily limited to flour and industrial oils.
Net income per diluted share for the quarter was $0.94, an increase of 8
percent compared to last year's second quarter. Included in net income for
the second quarter of 2009 were restructuring and merger and integration costs
of $0.08 per diluted share, while net income for the second quarter of 2008
included restructuring and merger and integration costs of $0.04 per diluted
share. Excluding restructuring and merger and integration costs in both
years, the Company's income per diluted share was $1.02 in the second quarter
of 2009, and $0.91 in the second quarter of 2008, an increase of 12 percent.
'The number of meals prepared and consumed at home, as recent market data
indicate, continues to be trending upward in this challenging economic
environment, and is currently at levels not seen since 1994,' commented Tim
Smucker, Chairman of the Board and Co-Chief Executive Officer. 'Our brands
are considered by many families to be essential items in any pantry, and we
are well positioned to meet the needs of those consumers looking to do more
for their families by enjoying meals together at home.'
'We are excited about the closing of the Folgers transaction,' added
Richard Smucker, Executive Chairman and Co-Chief Executive Officer. 'Folgers
is an excellent fit with our strategy to own and market number one food brands
in North America. Along with our Smucker's, Jif, Crisco, Pillsbury, Eagle
Brand, Hungry Jack, Robin Hood and Bick's brands, the Folgers brands enhance
our opportunities to meet our consumers needs as we focus on our consumer with
the theme 'Meals Together, Memories Forever'.'
Six-Month Results
Six months ended
October 31, %
2008 2007 Increase
(Dollars in millions, except per share data)
Net sales $1,506.8 $1,269.4 19%
Net income:
Income $93.7 $90.9 3%
Income per diluted share $1.71 $1.58 8%
Net sales increased 19 percent in the first six months of 2009 compared to
the first six months of 2008. Acquisitions contributed approximately $66.8
million of the increase. Excluding acquisitions net sales increased 13
percent.
Net income per diluted share for the first six months of 2009 was $1.71,
an increase of 8 percent over last year's first six months. Net income for
the first six months of 2009 and 2008 included restructuring and merger and
integration costs of $0.13 and $0.05 per diluted share, respectively.
Excluding these costs in both years, the Company's income per diluted share
was $1.84 in the first six months of 2009, and $1.63 in the first six months
of 2008, an increase of 13 percent.
The Company uses income and income per diluted share, excluding
restructuring and merger and integration costs, as key measures of results of
operations for purposes of evaluating performance internally. These non-GAAP
measures are not intended to replace the presentation of financial results in
accordance with U.S. GAAP. Rather, the presentation of results excluding such
charges is consistent with the way management internally evaluates its
businesses, facilitates the comparison of past and present operations, and
provides management a more comprehensive understanding of the financial
results. A reconciliation of non-GAAP measures to net income for the current
quarter and six-month period is included in the 'Unaudited Financial
Highlights' table.
Margins
Three months ended Six months ended
October 31, October 31,
2008 2007 2008 2007
(% of net sales)
Gross profit 28.9% 30.9% 29.9% 31.9%
Selling, distribution, and
administrative expenses:
Marketing and selling 9.6% 9.7% 9.9% 10.1%
Distribution 3.3% 3.4% 3.4% 3.4%
General and administrative 5.0% 5.5% 5.5% 6.0%
17.9% 18.6% 18.8% 19.5%
Restructuring and merger and
integration costs 0.8% 0.4% 0.6% 0.4%
Other operating expense (income) 0.0% 0.1% 0.0% (0.1%)
Operating income 10.2% 11.8% 10.5% 12.1%
Overall, gross profit increased $24.9 million in the second quarter of
2009 compared to the second quarter of 2008, despite higher raw material costs
for soybean oil, peanuts, wheat, fruit and, to a lesser extent, other
commodities. Price increases taken to date along with the impact of recent
acquisitions and plant operating efficiencies have offset these higher raw
material costs and have contributed to the gross profit increase. However,
the Company's hedging activities resulted in mark-to-market charges of
approximately $24.4 million on nonqualifying commodity hedges reflecting the
sharp decline in soybean oil and wheat commodity markets during the quarter.
As a result, gross margin declined from 30.9 percent to 28.9 percent.
Selling, distribution, and administrative ('SD&A') expenses increased 15
percent for the second quarter of 2009 compared to 2008, resulting primarily
from increased marketing investment and distribution expenses. Most SD&A
expenses, particularly selling and corporate overhead, increased at a lesser
rate than net sales resulting in an overall decrease in SD&A from 18.6 percent
of net sales to 17.9 percent, providing some offset to the decline in gross
margin.
Operating income increased 3 percent compared to the second quarter of
2008 and decreased from 11.8 percent to 10.2 percent of net sales.
Restructuring and merger and integration costs were $3.2 million higher in the
second quarter of 2009 compared to 2008, reducing operating margin by 0.4
percentage points.
Segment Performance
Three months ended Six months ended
October 31, October 31,
% %
2008 2007 increase 2008 2007 increase
(Dollars in millions)
Net sales:
U.S. retail market $635.0 $535.2 19% $1,107.1 $953.4 16%
Special markets $208.2 $172.7 21% $399.7 $316.0 26%
Segment profit:
U.S. retail market $99.0 $98.4 1% $186.8 $177.2 5%
Special markets $26.5 $20.8 27% $47.2 $42.4 11%
U.S. Retail Market
U.S. retail market segment net sales for the quarter were up 19 percent,
with pricing accounting for the majority of the increase.
