ORRVILLE, Ohio, Aug. 27,
2019 /PRNewswire/ -- The J. M. Smucker Company (NYSE: SJM) today
announced results for the first quarter ended July 31, 2019,
of its 2020 fiscal year. Financial results include the contribution
from Ainsworth Pet Nutrition, LLC ("Ainsworth"), which was acquired
on May 14, 2018, and reflect the
divestiture of the Company's U.S. baking business on August 31, 2018. All comparisons are to the first
quarter of the prior fiscal year, unless otherwise noted.
EXECUTIVE SUMMARY
- Net sales decreased $123.6
million, or 6 percent. Comparable net sales decreased 4
percent.
- Net income per diluted share was $1.36. Adjusted earnings per share was
$1.58, a decrease of 11 percent.
- Cash from operations was $221.5
million, a decrease of 9 percent. Free cash flow was
$148.5 million in the quarter,
compared to $141.7 million in the
prior year.
- The Company updated its full-year fiscal 2020 net sales and
adjusted earnings per share outlook.
CHIEF EXECUTIVE OFFICER REMARKS
"Our first quarter performance fell short of our expectations
primarily due to the timing of shipments and deflationary pricing
in the coffee and peanut butter categories, as well as competitive
activity in the premium dog food category," said Mark Smucker, Chief Executive Officer.
"We have continued momentum in many key product categories, and
we are already taking decisive actions and prioritizing initiatives
that strengthen our business. We remain confident in our strategy,
which includes a continued focus on our growth imperatives to lead
in the best categories, build brands consumers love, and be
everywhere, combined with a relentless focus on operating with
financial discipline, all of which will enhance shareholder value
for the long term."
FIRST QUARTER CONSOLIDATED RESULTS
|
Three Months Ended
July 31,
|
|
2019
|
|
2018
|
|
% Increase
(Decrease)
|
|
(Dollars and shares
in millions, except per share data)
|
|
|
|
|
|
|
Net
sales
|
$1,778.9
|
|
$1,902.5
|
|
(6%)
|
|
|
|
|
|
|
Operating
income
|
$257.6
|
|
$226.9
|
|
14%
|
Adjusted operating
income
|
290.7
|
|
317.1
|
|
(8%)
|
|
|
|
|
|
|
Net income per
common share – assuming dilution
|
$1.36
|
|
$1.17
|
|
16%
|
Adjusted earnings per
share – assuming dilution
|
1.58
|
|
1.78
|
|
(11%)
|
|
|
|
|
|
|
Weighted-average
shares outstanding – assuming dilution
|
113.9
|
|
113.7
|
|
—
|
Net Sales
Net sales decreased 6 percent, reflecting the impact of
$73.1 million of net sales in the
prior year attributed to the divested U.S. baking business,
partially offset by an incremental $25.4
million contribution from the Ainsworth acquisition.
Excluding items impacting comparability, net sales decreased
$75.9 million, or 4 percent. Lower
volume/mix reduced sales by 3 percentage points driven primarily by
declines for private label pet food offerings and coffee. Net price
realization reduced net sales by 1 percentage point, mostly due to
lower pricing for coffee and peanut butter, partially offset by
higher pricing for pet food and snacks. Foreign currency exchange
was neutral.
Operating Income
Gross profit increased $21.4
million, or 3 percent, primarily driven by a favorable net
impact of lower prices and lower costs and the noncomparable
benefit of the Ainsworth acquisition, partially offset by a decline
in volume/mix and the impact of the U.S. baking business
divestiture. The favorable net impact of price and cost was mostly
driven by a favorable change in derivative gains and losses.
Operating income increased $30.7
million, or 14 percent, reflecting the increase in gross
profit and decreases in other special project costs, selling,
distribution, and administrative expenses (\"SD&A"), and
amortization.
On a non-GAAP basis, adjusted gross profit decreased
$29.6 million, or 4 percent, with the
primary difference from GAAP results being the exclusion of
unallocated derivative gains and losses, which resulted in a
$51.0 million favorable change as
compared to the prior year. Adjusted operating income decreased
$26.4 million, or 8 percent, further
reflecting the exclusion of special project costs.
Interest Expense, Other Income (Expense), and Income
Taxes
Net interest expense decreased $4.2
million, reflecting the benefit of reduced debt due to net
repayments of $934.0 million during
the last twelve months.
The effective income tax rate was 25.2 percent compared to 23.2
percent in the prior year. The effective income tax rate in the
prior year included a non-recurring deferred tax benefit related to
the Ainsworth acquisition.
Cash Flow and Debt
Cash provided by operating activities was $221.5 million, compared to $243.0 million in the prior year reflecting an
increase in working capital, partially offset by the increase in
net income adjusted for noncash items. Free cash flow was
$148.5 million, compared to
$141.7 million in the prior year, as
a $28.3 million reduction in capital
expenditures more than offset the decrease in cash provided by
operating activities. Net debt repayments in the quarter totaled
$130.0 million.
FULL-YEAR OUTLOOK
The Company provided updated full-year fiscal 2020 guidance as
summarized below:
|
|
Current
|
|
Previous
|
Net sales increase
(decrease) vs prior year
|
|
(1%) - 0%
|
|
1% - 2%
|
Adjusted earnings per
share
|
|
$8.35 -
$8.55
|
|
$8.45 -
$8.65
|
Free cash flow (in
millions)
|
|
$875 -
$925
|
|
$875 -
$925
|
Capital expenditures
(in millions)
|
|
$300 -
$320
|
|
$300 -
$320
|
Effective tax
rate
|
|
24.5% -
25.0%
|
|
24.5% -
25.0%
|
Net sales are expected to range from down 1 percent to flat
compared to the prior year, which includes the loss of $105.9 million of sales in the first 4 months of
fiscal 2019 related to the divested U.S. baking business and
$25.4 million of incremental
noncomparable sales for Ainsworth. On a comparable basis, net sales
are expected to range from flat to up 1 percent.
Adjusted earnings per share is expected to range from
$8.35 to $8.55, based on 114.0 million shares outstanding.
Earnings guidance reflects the reduced contribution from sales,
gross profit margin of approximately 38.5 percent, and SD&A
expenses declining slightly compared to the prior year.
FIRST QUARTER SEGMENT RESULTS
Dollar amounts in the segment tables below are reported in
millions.
U.S. Retail Pet Foods
|
|
Net
Sales
|
|
Segment
Profit
|
|
Segment
Profit Margin
|
FY20 Q1
Results
|
|
$669.9
|
|
$120.1
|
|
17.9%
|
Increase (decrease)
vs prior year
|
|
—
|
|
20%
|
|
290bps
|
Segment net sales decreased $1.3
million, including the $25.4
million contribution from Ainsworth related to the first two
weeks of the fiscal year. Excluding the noncomparable Ainsworth
sales, net sales declined $26.7
million, reflecting a $26.3
million decrease related to private label products. The
decline in private label sales was inclusive of both planned exits
on low margin items and soft trends at certain retailers.
Volume/mix reduced net sales by 6 percentage points, primarily
driven by private label and the Natural Balance®
brand. Net price realization increased 2 percentage points driven
by the Meow Mix®, Milk-Bone®, and
Kibbles 'n Bits® brands, which resulted from list
price increases across most brands effective in the second half of
the prior fiscal year, partially offset by increased trade
spend.
Segment profit increased $19.7
million, including benefits from a $10.9 million negative fair value purchase
accounting adjustment in the prior year and incremental Ainsworth
sales for the noncomparable period. Profit improvement was also
driven by synergy realization and favorable net pricing, partially
offset by higher input costs and lower volume/mix.
U.S. Retail Coffee
|
|
Net
Sales
|
|
Segment
Profit
|
|
Segment
Profit Margin
|
FY20 Q1
Results
|
|
$465.7
|
|
$128.9
|
|
27.7%
|
Increase (decrease)
vs prior year
|
|
(5%)
|
|
(13%)
|
|
-250bps
|
Segment net sales decreased $23.8
million, which included lower net price realization of 3
percentage points. Net pricing reflected planned promotional
activity across all brands in the segment resulting from
significantly lower green coffee costs. Net sales were further
reduced by 2 percentage points due to lower volume/mix, primarily
attributable to the Folgers® brand. Retailer
inventory adjustments across all brands accounted for a portion of
the reduced volume/mix.
Segment profit decreased $18.9
million, primarily due to reduced volume/mix and the net
impact of lower pricing and green coffee costs.
U.S. Retail Consumer Foods
|
|
Net
Sales
|
|
Segment
Profit
|
|
Segment
Profit Margin
|
FY20 Q1
Results
|
|
$402.2
|
|
$81.0
|
|
20.1%
|
Increase (decrease)
vs prior year
|
|
(17%)
|
|
(17%)
|
|
—
|
Segment net sales decreased $81.1
million, reflecting $70.2
million of noncomparable net sales in the prior year related
to the divested U.S. baking business. Excluding the noncomparable
results, net sales decreased 3 percent. Lower net pricing,
primarily on the Jif® brand resulting from a
list price decline taken in the fourth quarter of the prior year,
impacted sales by 4 percentage points. Favorable volume/mix
contributed 1 percentage point, primarily attributed to
Smucker's® Uncrustables®, partially
offset by the Jif® brand.
Segment profit decreased $16.3
million, reflecting $8.9
million of noncomparable segment profit in the prior year
related to the divested U.S. baking business. Excluding the impact
of the divestiture, segment profit decreased 8 percent, partially
attributable to the net impact of lower pricing and lower input
costs and increased expenses related to the construction and
startup of the Smucker's®
Uncrustables® production facility in Longmont, Colorado.
International and Away From Home
|
|
Net
Sales
|
|
Segment
Profit
|
|
Segment
Profit Margin
|
FY20 Q1
Results
|
|
$241.1
|
|
$32.3
|
|
13.4%
|
Increase (decrease)
vs prior year
|
|
(7%)
|
|
(26%)
|
|
-340bps
|
Segment net sales decreased $17.4
million, including the impact of $2.9
million of noncomparable net sales in the prior year related
to the divested U.S. baking business and $1.8 million of unfavorable foreign currency
exchange. Lower volume/mix reduced net sales by 3 percentage
points, primarily driven by declines for the
Folgers® brand. Lower net pricing across multiple
brands reduced sales by 2 percentage points.
Segment profit decreased $11.1
million primarily reflecting lower pricing and the decline
in volume/mix.
Conference Call
The Company will conduct an earnings conference call and webcast
today, August 27, 2019, beginning at 8:30 a.m. Eastern time. Speaking on the call will
be Mark Smucker, President and Chief
Executive Officer and Mark Belgya,
Vice Chair and Chief Financial Officer. To access the webcast,
please visit jmsmucker.com/investor-relations.
The J. M. Smucker Company Forward-Looking Statements
This press release contains forward-looking statements, such as
projected net sales, operating results, earnings, and cash flows
that are subject to risks and uncertainties that could cause actual
results to differ materially from future results expressed or
implied by those forward-looking statements. The risks,
uncertainties, important factors, and assumptions listed and
discussed in this press release, which could cause actual results
to differ materially from those expressed, include: the ability to
achieve synergies and cost savings related to the Ainsworth
acquisition in the amounts and within the time frames currently
anticipated; the ability to achieve cost savings related to cost
management programs in the amounts and within the time frames
currently anticipated; the ability to generate sufficient cash flow
to meet the Company's cash deleveraging objectives; volatility of
commodity, energy, and other input costs; risks associated with
derivative and purchasing strategies employed to manage commodity
pricing and interest rate risks; the availability of reliable
transportation on acceptable terms; the ability to implement and
realize the full benefit of price changes, and the impact of the
timing of the price changes to profits and cash flow in a
particular period; the success and cost of marketing and sales
programs and strategies intended to promote growth in the
businesses, including product innovation; general competitive
activity in the market, including competitors' pricing practices
and promotional spending levels; the impact of food security
concerns involving either the Company's or its competitors'
products; the impact of accidents, extreme weather, and natural
disasters; the concentration of certain of the Company's businesses
with key customers and suppliers, including single-source suppliers
of certain key raw materials and finished goods, and the ability to
manage and maintain key relationships; the timing and amount of
capital expenditures and share repurchases; impairments in the
carrying value of goodwill, other intangible assets, or other
long-lived assets or changes in useful lives of other intangible
assets; the impact of new or changes to existing governmental laws
and regulations and their application, including tariffs; the
outcome of tax examinations, changes in tax laws, and other tax
matters; foreign currency and interest rate fluctuations; and risks
related to other factors described under "Risk Factors" in other
reports and statements filed with the Securities and Exchange
Commission, including the Company's most recent Annual Report on
Form 10-K. The Company undertakes no obligation to update or revise
these forward-looking statements, which speak only as of the date
made, to reflect new events or circumstances.
About The J. M. Smucker Company
Inspired by more than 120 years of business success and five
generations of family leadership, The J. M. Smucker Company makes
food that people and pets love. The Company's portfolio of 40+
brands, which are found in 90 percent of U.S. homes and countless
restaurants, include iconic products consumers have always loved
such as Folgers®, Jif®, and
Milk-Bone® plus new favorites like Café
Bustelo®, Smucker's®
Uncrustables®, and Rachael Ray™ Nutrish®.
Over the past two decades, the Company has grown rapidly by
thoughtfully acquiring leading and emerging brands, while ensuring
the business has a positive impact on its 7,000+ employees, the
communities it is a part of, and the planet. For more information
about The J. M. Smucker Company, visit jmsmucker.com.
The J. M. Smucker Company is the owner of all
trademarks referenced herein, except for the following, which
are used under license: Dunkin'
Donuts® is a registered trademark of DD IP
Holder LLC, and Rachael
Ray® is a registered trademark of Ray Marks
Co. LLC.
Dunkin' Donuts® brand is licensed to The
J. M. Smucker Company for packaged coffee products sold in retail
channels such as grocery stores, mass merchandisers, club stores,
and drug stores. This information does not pertain to
Dunkin' Donuts® coffee or other products for sale
in Dunkin' Donuts® restaurants.
The J. M. Smucker
Company
Unaudited Condensed
Consolidated Statements of Income
|
|
|
|
|
|
Three Months Ended
July 31,
|
|
|
2019
|
|
2018
|
|
% Increase
(Decrease)
|
|
|
(Dollars and shares
in millions, except per share data)
|
|
|
|
Net sales
|
|
$1,778.9
|
|
$1,902.5
|
|
(6%)
|
Cost of products
sold
|
|
1,079.3
|
|
1,224.3
|
|
(12%)
|
Gross
Profit
|
|
699.6
|
|
678.2
|
|
3%
|
Gross
margin
|
|
39.3%
|
|
35.6%
|
|
|
|
|
|
|
|
|
|
Selling,
distribution, and administrative expenses
|
|
380.5
|
|
383.3
|
|
(1%)
|
Amortization
|
|
58.8
|
|
60.5
|
|
(3%)
|
Other special project
costs
|
|
3.3
|
|
7.7
|
|
(57%)
|
Other operating
expense (income) – net
|
|
(0.6)
|
|
(0.2)
|
|
n/m
|
Operating
Income
|
|
257.6
|
|
226.9
|
|
14%
|
Operating
margin
|
|
14.5%
|
|
11.9%
|
|
|
|
|
|
|
|
|
|
Interest expense –
net
|
|
(49.4)
|
|
(53.6)
|
|
(8%)
|
Other income
(expense) – net
|
|
(1.5)
|
|
(0.2)
|
|
n/m
|
Income Before
Income Taxes
|
|
206.7
|
|
173.1
|
|
19%
|
Income tax
expense
|
|
52.1
|
|
40.1
|
|
30%
|
Net
Income
|
|
$154.6
|
|
$133.0
|
|
16%
|
|
|
|
|
|
|
Net income per
common share
|
|
$1.36
|
|
$1.17
|
|
16%
|
|
|
|
|
|
Net income per
common share – assuming dilution
|
|
$1.36
|
|
$1.17
|
|
16%
|
|
|
|
|
|
Dividends declared
per common share
|
|
$0.88
|
|
$0.85
|
|
4%
|
|
|
|
|
|
Weighted-average
shares outstanding
|
|
113.9
|
|
113.7
|
|
—
|
|
|
|
|
|
Weighted-average
shares outstanding – assuming dilution
|
|
113.9
|
|
113.7
|
|
—
|
The J. M. Smucker
Company
Unaudited Condensed
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
July 31,
2019
|
|
April 30,
2019
|
|
|
(Dollars in
millions)
|
Assets
|
|
|
|
|
Current
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$48.8
|
|
|
$101.3
|
|
Trade receivables,
less allowance for doubtful accounts
|
|
473.7
|
|
|
503.8
|
|
Inventories
|
|
1,013.3
|
|
|
910.3
|
|
Other current
assets
|
|
77.7
|
|
|
109.8
|
|
Total Current
Assets
|
|
1,613.5
|
|
|
1,625.2
|
|
|
|
|
|
|
Property, Plant,
and Equipment - Net
|
|
1,909.2
|
|
|
1,912.4
|
|
|
|
|
|
|
Other Noncurrent
Assets:
|
|
|
|
|
Goodwill
|
|
6,313.3
|
|
|
6,310.9
|
|
Other intangible
assets – net
|
|
6,661.1
|
|
|
6,718.8
|
|
Other noncurrent
assets
|
|
294.5
|
|
|
144.0
|
|
Total Other
Noncurrent Assets
|
|
13,268.9
|
|
|
13,173.7
|
|
Total
Assets
|
|
$16,791.6
|
|
|
$16,711.3
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Accounts
payable
|
|
$503.1
|
|
|
$591.0
|
|
Current portion of
long-term debt
|
|
799.0
|
|
|
798.5
|
|
Short-term
borrowings
|
|
295.9
|
|
|
426.0
|
|
Other current
liabilities
|
|
692.8
|
|
|
526.0
|
|
Total Current
Liabilities
|
|
2,290.8
|
|
|
2,341.5
|
|
|
|
|
|
|
Noncurrent
Liabilities
|
|
|
|
|
Long-term debt, less
current portion
|
|
4,685.3
|
|
|
4,686.3
|
|
Other noncurrent
liabilities
|
|
1,807.8
|
|
|
1,713.0
|
|
Total Noncurrent
Liabilities
|
|
6,493.1
|
|
|
6,399.3
|
|
|
|
|
|
|
Total
Shareholders' Equity
|
|
8,007.7
|
|
|
7,970.5
|
|
Total Liabilities
and Shareholders' Equity
|
|
$16,791.6
|
|
|
$16,711.3
|
|
The J. M. Smucker
Company
Unaudited Condensed
Consolidated Statements of Cash Flow
|
|
|
|
|
|
Three Months Ended
July 31,
|
|
|
2019
|
|
2018
|
|
|
(Dollars in
millions)
|
Operating
Activities
|
|
|
|
|
Net income
|
|
$154.6
|
|
|
$133.0
|
|
Adjustments to
reconcile net income to net cash provided by (used for)
operations:
|
|
|
|
|
Depreciation
|
|
50.8
|
|
|
51.4
|
|
Amortization
|
|
58.8
|
|
|
60.5
|
|
Share-based
compensation expense
|
|
6.2
|
|
|
4.6
|
|
Other noncash
adjustments – net
|
|
0.2
|
|
|
1.1
|
|
Defined benefit
pension contributions
|
|
|
|
|
Changes in assets and
liabilities, net of effect from acquisition:
|
|
|
|
|
Trade
receivables
|
|
30.4
|
|
|
(52.7)
|
|
Inventories
|
|
(102.1)
|
|
|
(65.7)
|
|
Other current
assets
|
|
6.4
|
|
|
21.8
|
|
Accounts
payable
|
|
(61.0)
|
|
|
0.8
|
|
Accrued
liabilities
|
|
63.6
|
|
|
52.6
|
|
Income and other
taxes
|
|
21.8
|
|
|
58.9
|
|
Other –
net
|
|
(8.2)
|
|
|
(23.3)
|
|
Net Cash Provided
by (Used for) Operating Activities
|
|
221.5
|
|
|
243.0
|
|
|
|
|
|
|
Investing
Activities
|
|
|
|
|
Business acquired,
net of cash acquired
|
|
—
|
|
|
(1,905.0)
|
|
Additions to
property, plant, and equipment
|
|
(73.0)
|
|
|
(101.3)
|
|
Other –
net
|
|
20.9
|
|
|
(25.2)
|
|
Net Cash Provided
by (Used for) Investing Activities
|
|
(52.1)
|
|
|
(2,031.5)
|
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
Short-term borrowings
(repayments) – net
|
|
(130.0)
|
|
|
386.0
|
|
Proceeds from
long-term debt
|
|
—
|
|
|
1,500.0
|
|
Quarterly dividends
paid
|
|
(96.5)
|
|
|
(88.4)
|
|
Purchase of treasury
shares
|
|
(2.9)
|
|
|
(4.7)
|
|
Proceeds from stock
option exercises
|
|
7.0
|
|
|
—
|
|
Other –
net
|
|
(0.2)
|
|
|
(2.4)
|
|
Net Cash Provided
by (Used for) Financing Activities
|
|
(222.6)
|
|
|
1,790.5
|
|
Effect of exchange
rate changes on cash
|
|
0.7
|
|
|
(2.6)
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
(52.5)
|
|
|
(0.6)
|
|
Cash and cash
equivalents at beginning of period
|
|
101.3
|
|
|
192.6
|
|
Cash and Cash
Equivalents at End of Period
|
|
$48.8
|
|
|
$192.0
|
|
The J. M. Smucker
Company
Unaudited
Supplemental Schedule
|
|
|
|
|
|
Three Months Ended
July 31,
|
|
|
2019
|
|
% of
Net Sales
|
|
2018
|
|
% of
Net Sales
|
|
|
(Dollars in
millions)
|
Net sales
|
|
$1,778.9
|
|
|
|
$1,902.5
|
|
|
Selling,
distribution, and administrative expenses:
|
|
|
|
|
|
|
|
|
Marketing
|
|
132.9
|
|
7.5%
|
|
139.9
|
|
7.4%
|
Selling
|
|
68.5
|
|
3.9%
|
|
67.1
|
|
3.5%
|
Distribution
|
|
64.0
|
|
3.6%
|
|
66.0
|
|
3.5%
|
General and
administrative
|
|
115.1
|
|
6.5%
|
|
110.3
|
|
5.8%
|
Total selling,
distribution, and administrative expenses
|
|
$380.5
|
|
21.4%
|
|
$383.3
|
|
20.1%
|
|
Amounts may not add
due to rounding.
|
The J. M. Smucker
Company
Unaudited Reportable
Segments
|
|
|
|
|
|
Three Months Ended
July 31,
|
|
|
2019
|
|
2018
|
|
|
(Dollars in
millions)
|
Net sales:
|
|
|
|
|
U.S. Retail Pet
Foods
|
|
$669.9
|
|
$671.2
|
U.S. Retail
Coffee
|
|
465.7
|
|
489.5
|
U.S. Retail Consumer
Foods
|
|
402.2
|
|
483.3
|
International and
Away From Home
|
|
241.1
|
|
258.5
|
Total net
sales
|
|
$1,778.9
|
|
$1,902.5
|
|
|
|
|
|
Segment
profit:
|
|
|
|
|
U.S. Retail Pet
Foods
|
|
$120.1
|
|
$100.4
|
U.S. Retail
Coffee
|
|
128.9
|
|
147.8
|
U.S. Retail Consumer
Foods
|
|
81.0
|
|
97.3
|
International and
Away From Home
|
|
32.3
|
|
43.4
|
Total segment
profit
|
|
$362.3
|
|
$388.9
|
Amortization
|
|
(58.8)
|
|
(60.5)
|
Interest expense –
net
|
|
(49.4)
|
|
(53.6)
|
Unallocated
derivative gains (losses)
|
|
29.0
|
|
(22.0)
|
Other special project
costs
|
|
(3.3)
|
|
(7.7)
|
Corporate
administrative expenses
|
|
(71.6)
|
|
(71.8)
|
Other income
(expense) – net
|
|
(1.5)
|
|
(0.2)
|
Income before income
taxes
|
|
$206.7
|
|
$173.1
|
|
|
|
|
|
Segment profit
margin:
|
|
|
|
|
U.S. Retail Pet
Foods
|
|
17.9%
|
|
15.0%
|
U.S. Retail
Coffee
|
|
27.7%
|
|
30.2%
|
U.S. Retail Consumer
Foods
|
|
20.1%
|
|
20.1%
|
International and
Away From Home
|
|
13.4%
|
|
16.8%
|
Non-GAAP Financial Measures
The Company uses non-GAAP financial measures, including: net
sales excluding acquisition, divestiture, and foreign currency
exchange; adjusted gross profit; adjusted operating income;
adjusted income; adjusted earnings per share; earnings before
interest, taxes, depreciation, amortization, and impairment charges
related to intangible assets ("EBITDA (as adjusted)"); and free
cash flow, as key measures for purposes of evaluating performance
internally. The Company believes that investors' understanding of
its performance is enhanced by disclosing these performance
measures. Furthermore, these non-GAAP financial measures are used
by management in preparation of the annual budget and for the
monthly analyses of its operating results. The Board of Directors
also utilizes certain non-GAAP financial measures as components for
measuring performance for incentive compensation purposes.
Non-GAAP measures exclude certain items affecting comparability
that can significantly affect the year-over-year assessment of
operating results, which include amortization expense and
impairment charges related to intangible assets, integration and
restructuring costs ("special project costs"), and unallocated
gains and losses on commodity and foreign currency exchange
derivatives ("unallocated derivative gains and losses"), as well as
the related tax impact of these exclusions. The special project
costs relate to specific integration and restructuring projects,
and the unallocated derivative gains and losses reflect the changes
in fair value of the Company's commodity and foreign currency
exchange contracts. Additionally, income taxes,as adjusted is
calculated using an adjusted effective income tax rate that is
applied to adjusted income before income taxes. While this adjusted
effective income tax rate does not generally differ materially from
our GAAP effective income tax rate, certain items can significantly
impact our adjusted effective income tax rate.
These non-GAAP financial measures are not intended to replace
the presentation of financial results in accordance with U.S.
generally accepted accounting principles ("GAAP"). Rather, the
presentation of these non-GAAP financial measures supplements other
metrics used by management to internally evaluate its businesses
and facilitates the comparison of past and present operations and
liquidity. These non-GAAP financial measures may not be comparable
to similar measures used by other companies and may exclude certain
nondiscretionary expenses and cash payments. A reconciliation of
certain non-GAAP financial measures to the comparable GAAP
financial measure for the current and prior year periods is
included in the "Unaudited Non-GAAP Financial Measures" tables. The
Company has also provided a reconciliation of non-GAAP financial
measures for its fiscal 2020 outlook.
The J. M. Smucker
Company
Unaudited Non-GAAP
Financial Measures
|
|
|
|
|
|
Three Months Ended
July 31,
|
|
|
2019
|
|
2018
|
|
Increase
(Decrease)
|
|
%
|
|
|
(Dollars in
millions)
|
|
|
|
|
|
|
|
|
|
Net sales
reconciliation:
|
|
|
|
|
|
|
|
|
Net sales
|
|
$1,778.9
|
|
$1,902.5
|
|
($123.6)
|
|
(6%)
|
Ainsworth
acquisition
|
|
(25.4)
|
|
—
|
|
(25.4)
|
|
(1%)
|
Baking
divestiture
|
|
—
|
|
(73.1)
|
|
73.1
|
|
4%
|
Net sales excluding
acquisition and divestiture
|
|
1,753.5
|
|
1,829.4
|
|
(75.9)
|
|
(4%)
|
Foreign currency
exchange
|
|
1.8
|
|
—
|
|
1.8
|
|
—
|
Net sales excluding
acquisition, divestiture, and foreign currency exchange
|
|
$1,755.3
|
|
$1,829.4
|
|
($74.1)
|
|
(4%)
|
|
|
|
|
|
|
|
|
|
Amounts may not add
due to rounding.
|
|
|
|
|
|
|
|
|
The J. M. Smucker
Company
Unaudited Non-GAAP
Financial Measures
|
|
|
|
|
|
Three Months Ended
July 31,
|
|
|
2019
|
|
2018
|
|
|
(Dollars in millions,
except per share data)
|
Gross profit
reconciliation:
|
|
|
|
|
Gross
profit
|
|
$699.6
|
|
$678.2
|
Unallocated
derivative losses (gains)
|
|
(29.0)
|
|
22.0
|
Adjusted gross
profit
|
|
$670.6
|
|
$700.2
|
% of net
sales
|
|
37.7%
|
|
36.8%
|
|
|
|
|
|
Operating income
reconciliation:
|
|
|
|
|
Operating
income
|
|
$257.6
|
|
$226.9
|
Amortization
|
|
58.8
|
|
60.5
|
Unallocated
derivative losses (gains)
|
|
(29.0)
|
|
22.0
|
Other special project
costs
|
|
3.3
|
|
7.7
|
Adjusted operating
income
|
|
$290.7
|
|
$317.1
|
% of net
sales
|
|
16.3%
|
|
16.7%
|
|
|
|
|
|
Net income
reconciliation:
|
|
|
|
|
Net income
|
|
$154.6
|
|
$133.0
|
Income tax
expense
|
|
52.1
|
|
40.1
|
Amortization
|
|
58.8
|
|
60.5
|
Unallocated
derivative losses (gains)
|
|
(29.0)
|
|
22.0
|
Other special project
costs
|
|
3.3
|
|
7.7
|
Adjusted income
before income taxes
|
|
$239.8
|
|
$263.3
|
Income taxes, as
adjusted
|
|
60.1
|
|
60.9
|
Adjusted
income
|
|
$179.7
|
|
$202.4
|
|
|
|
|
|
Weighted-average
common shares outstanding
|
|
113.3
|
|
113.1
|
Weighted-average
participating shares outstanding
|
|
0.6
|
|
0.6
|
Total
weighted-average shares outstanding
|
|
113.9
|
|
113.7
|
Dilutive effect of
stock options
|
|
—
|
|
—
|
Total
weighted-average shares outstanding - assuming dilution
|
|
113.9
|
|
113.7
|
|
|
|
|
|
Adjusted earnings per
share – assuming dilution
|
|
$1.58
|
|
$1.78
|
The J. M. Smucker
Company
Unaudited Non-GAAP
Financial Measures
|
|
|
|
|
|
Three Months Ended
July 31,
|
|
|
2019
|
|
2018
|
|
|
(Dollars in
millions)
|
EBITDA (as adjusted)
reconciliation:
|
|
|
|
|
Net income
|
|
$154.6
|
|
$133.0
|
Income tax
expense
|
|
52.1
|
|
40.1
|
Interest expense –
net
|
|
49.4
|
|
53.6
|
Depreciation
|
|
50.8
|
|
51.4
|
Amortization
|
|
58.8
|
|
60.5
|
EBITDA (as
adjusted)
|
|
$365.7
|
|
$338.6
|
% of net
sales
|
|
20.6%
|
|
17.8%
|
|
|
|
|
|
Free cash flow
reconciliation:
|
|
|
|
|
Net cash provided by
(used for) operating activities
|
|
$221.5
|
|
$243.0
|
Additions to
property, plant, and equipment
|
|
(73.0)
|
|
(101.3)
|
Free cash
flow
|
|
$148.5
|
|
$141.7
|
|
The following tables
provide a reconciliation of the Company's fiscal 2020 guidance for
estimated adjusted earnings
per share and free cash flow.
|
|
|
Year Ending
April 30, 2020
|
|
|
Low
|
|
High
|
Net income per common
share - assuming dilution reconciliation:
|
|
|
|
|
Net income per common
share - assuming dilution
|
|
$7.01
|
|
$7.21
|
Net cumulative
unallocated (losses) gains (A)
|
|
(0.35)
|
|
(0.35)
|
Special project
costs
|
|
0.13
|
|
0.13
|
Amortization
|
|
1.56
|
|
1.56
|
Adjusted earnings per
share
|
|
$8.35
|
|
$8.55
|
|
|
|
|
|
(A) As unallocated
derivative gains and losses vary each quarter based on market
conditions and derivative positions taken, we do not project
derivative gains or losses on a forward-looking basis. Therefore,
the forward-looking net cumulative unallocated (losses) gains
in the table above reflects the net unallocated (losses) gains
recognized in GAAP results, but not yet allocated to our non-GAAP
results as of July 31, 2019.
|
|
|
|
|
|
|
|
Year Ending
April 30, 2020
|
|
|
Low
|
|
High
|
|
|
(Dollars in
millions)
|
Free cash flow
reconciliation:
|
|
|
|
|
Net cash provided by
operating activities
|
|
$1,195
|
|
$1,225
|
Additions to
property, plant, and equipment
|
|
(320)
|
|
(300)
|
Free cash
flow
|
|
$875
|
|
$925
|
View original content to download
multimedia:http://www.prnewswire.com/news-releases/the-j-m-smucker-company-announces-fiscal-2020-first-quarter-results-300907551.html
SOURCE The J. M. Smucker Company