ORRVILLE, Ohio, Nov. 22,
2019 /PRNewswire/ -- The J. M. Smucker Company (NYSE: SJM) today
announced results for the second quarter ended October 31,
2019, of its 2020 fiscal year. Financial results reflect the
divestiture of the Company's U.S. baking business on August 31, 2018. All comparisons are to the
second quarter of the prior fiscal year, unless otherwise
noted.
EXECUTIVE SUMMARY
- Net sales decreased $63.7
million, or 3 percent. Net sales excluding the noncomparable
divested business and foreign currency exchange decreased 1
percent.
- Net income per diluted share was $1.85. Adjusted earnings per share was
$2.26, an increase of 4 percent.
- Cash from operations was $224.0
million, an increase of 10 percent. Free cash flow was
$160.6 million in the quarter,
compared to $125.1 million in the
prior year.
- The Company updated its full-year fiscal 2020 net sales,
adjusted earnings per share, and free cash flow outlook.
CHIEF EXECUTIVE OFFICER REMARKS
"While our second quarter sales performance did not meet our
expectations, we delivered EPS growth ahead of our projection,
reflecting our commitment to maintain financial discipline and
strengthen our bottom line," said Mark
Smucker, President and Chief Executive Officer.
"Despite continuing softness for our premium dog food offerings,
we were pleased with the performance for the balance of our
portfolio, as the momentum for our cat food and pet snacks
businesses continued with year over year sales increases, our high
growth coffee brands improved household penetration and market
share, and Smucker's®
Uncrustables® grew 19 percent, helping accelerate
growth in snacking. Looking ahead, the actions we are taking across
the Company, including the recently announced leadership changes,
position us well for future long-term growth and shareholder value
creation."
SECOND QUARTER CONSOLIDATED RESULTS
|
Three Months Ended
October 31,
|
|
2019
|
|
|
2018
|
|
|
% Increase
(Decrease)
|
|
(Dollars and shares
in millions, except per share data)
|
|
|
|
|
|
|
Net
sales
|
$1,957.8
|
|
|
$2,021.5
|
|
|
(3%)
|
|
|
|
|
|
|
Operating
income
|
$329.8
|
|
|
$330.5
|
|
|
—
|
Adjusted operating
income
|
391.0
|
|
|
415.7
|
|
|
(6%)
|
|
|
|
|
|
|
Net income per
common share – assuming dilution
|
$1.85
|
|
|
$1.66
|
|
|
11%
|
Adjusted earnings per
share – assuming dilution
|
2.26
|
|
|
2.17
|
|
|
4%
|
|
|
|
|
|
|
Weighted-average
shares outstanding – assuming dilution
|
114.1
|
|
|
113.7
|
|
|
—
|
Net Sales
Net sales decreased 3 percent, including the impact of
$32.8 million of net sales in the
prior year attributed to the divested U.S. baking business.
Excluding the noncomparable baking results and $1.8 million of unfavorable foreign currency
exchange, net sales decreased $29.1
million, or 1 percent. Net price realization reduced net
sales by 1 percentage point, primarily driven by lower net pricing
for coffee and peanut butter, partially offset by higher pricing
for pet food and pet snacks. Volume/mix impact was neutral as
decreases for dog food and shortening and oils were mostly offset
by increases for coffee and Smucker's®
Uncrustables®.
Operating Income
Gross profit decreased $17.3
million, or 2 percent, primarily driven by the impact of the
U.S. baking business divestiture and the net impact of lower prices
in excess of lower costs, partially offset by favorable volume/mix.
Operating income was comparable to the prior year, as the impact of
a $26.6 million pre-tax gain related
to the sale of the U.S. baking business in the prior year and the
decrease in gross profit were mostly offset by decreases in special
project costs and selling, distribution, and administrative
("SD&A") expenses.
Adjusted gross profit decreased $18.3
million, or 2 percent. Adjusted operating income decreased
$24.7 million, or 6 percent, with the
primary difference from generally accepted accounting principles
("GAAP") results being the exclusion of other special project
costs, which decreased $22.1 million
compared to the prior year.
Interest Expense, Other Income (Expense), and Income
Taxes
Net interest expense decreased $4.5
million, reflecting the benefit of reduced debt due to net
repayments of $566.9 million during
the past twelve months.
Net other expense decreased by $5.9
million, primarily due to legal expenses incurred in the
prior year.
The effective income tax rate was 24.3 percent compared to 30.0
percent in the prior year. The effective income tax rate in the
prior year included increased income tax expense associated with
the sale of the U.S. baking business.
Cash Flow and Debt
Cash provided by operating activities was $224.0 million, compared to $202.9 million in the prior year, primarily
reflecting the increase in net income adjusted for noncash items,
partially offset by an increase in cash required to fund working
capital. Free cash flow was $160.6
million, compared to $125.1
million in the prior year, reflecting the increase in cash
provided by operating activities and a $14.4
million reduction in capital expenditures. Net debt
repayments in the quarter totaled $72.9
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
|
|
(3%)
|
|
(1%) - 0%
|
Adjusted earnings per
share
|
|
$8.10 -
$8.30
|
|
$8.35 -
$8.55
|
Free cash flow (in
millions)
|
|
$850
|
|
$875 -
$925
|
Capital expenditures
(in millions)
|
|
$300 -
$320
|
|
$300 -
$320
|
Effective tax
rate
|
|
24.5%
|
|
24.5% -
25.0%
|
Net sales are expected to be down 3 percent compared to the
prior year, which included 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 Pet Nutrition, LLC ("Ainsworth").
On a comparable basis, net sales are expected to be down 2 percent.
The revision versus previous guidance includes the impact of second
quarter sales results and greater than anticipated softness in the
back half of the fiscal year, primarily for certain brands within
the U.S. Retail Pet Foods segment.
Adjusted earnings per share is expected to range from
$8.10 to $8.30, 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 approximately 2 percent compared to the prior
year. Free cash flow is expected to be approximately $850 million.
SECOND 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 Q2
Results
|
|
$709.9
|
|
$137.0
|
|
19.3%
|
Increase (decrease)
vs prior year
|
|
(2%)
|
|
11%
|
|
230bps
|
Segment net sales decreased $18.2
million, reflecting a $19.5
million decline in private label sales due to both planned
exits and softness at certain retailers. Volume/mix reduced net
sales by 4 percentage points, primarily driven by declines for
private label products and the Natural Balance®
brand, partially offset by gains for the
Milk-Bone® and Rachael
Ray™ Nutrish® brands. Net price
realization increased 1 percentage point reflecting list price
increases taken during the second half of the prior fiscal year
across most brands, partially offset by increased trade spend.
Segment profit increased $13.1
million, reflecting the increase in net pricing, synergy
realization, and reduced marketing expense, partially offset by
increased input costs and the decline from volume/mix.
U.S. Retail Coffee
|
|
Net
Sales
|
|
Segment
Profit
|
|
Segment
Profit Margin
|
FY20 Q2
Results
|
|
$543.4
|
|
$182.5
|
|
33.6%
|
Increase (decrease)
vs prior year
|
|
—
|
|
5%
|
|
160bps
|
Segment net sales decreased $1.5
million. Lower net price realization on the
Folgers® and Dunkin' Donuts®
brands reduced sales by 4 percentage points. The net pricing
reflected promotional activity resulting from lower green coffee
costs. Volume/mix increased sales by 4 percentage points, primarily
due to growth of the Dunkin' Donuts® and Café
Bustelo® brands.
Segment profit increased $8.2
million, primarily due to the favorable volume/mix.
U.S. Retail Consumer Foods
|
|
Net
Sales
|
|
Segment
Profit
|
|
Segment
Profit Margin
|
FY20 Q2
Results
|
|
$426.1
|
|
$91.4
|
|
21.5%
|
Increase (decrease)
vs prior year
|
|
(8%)
|
|
(32%)
|
|
-760bps
|
Segment net sales decreased $35.8
million, reflecting $32.0
million of noncomparable net sales in the prior year related
to the divested U.S. baking business. Excluding the noncomparable
results, net sales decreased 1 percent. Lower net pricing reduced
sales by 3 percentage points, attributable to the
Jif® brand. Favorable volume/mix contributed
2 percentage points, primarily driven by the
Smucker's® Uncrustables® and
Jif® brands, partially offset by the
Crisco® brand.
Segment profit decreased $42.9
million, primarily reflecting $35.4
million of noncomparable segment profit included in the
prior year related to the divested U.S. baking business, including
the $26.6 million pre-tax gain on
sale. Excluding the impact of the divestiture, segment profit
decreased 8 percent, reflecting the impact of net pricing and
costs, partially offset by favorable volume/mix and reduced
SD&A costs.
International and Away From Home
|
|
Net
Sales
|
|
Segment
Profit
|
|
Segment
Profit Margin
|
FY20 Q2
Results
|
|
$278.4
|
|
$50.4
|
|
18.1%
|
Increase (decrease)
vs prior year
|
|
(3%)
|
|
(11%)
|
|
-170bps
|
Segment net sales decreased $8.2
million, primarily reflecting a 2 percentage point decline
from volume/mix resulting from increased shipments in the prior
year related to the closing of facilities in Mexico and transition to a distributor export
model. Net sales were also reduced due to $1.8 million of unfavorable foreign currency
exchange and the impact of $0.8
million of noncomparable net sales in the prior year related
to the divested U.S. baking business. Net price realization was
neutral.
Segment profit decreased $6.3
million, primarily reflecting the impact of volume/mix and
increased input costs, partially offset by lower SD&A
costs.
Conference Call
The Company will conduct an earnings conference call and webcast
today, November 22, 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'™ and Dunkin'
Donuts® are trademarks of DD IP Holder
LLC, and Rachael Ray™ is a
trademark of Ray Marks II LLC.
The Dunkin'™ and Dunkin' Donuts® brands
are 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 products for sale in Dunkin'™
restaurants.
|
The J. M. Smucker
Company
Unaudited Condensed
Consolidated Statements of Income
|
|
|
Three Months Ended
October 31,
|
|
Six Months
Ended October 31,
|
|
2019
|
|
2018
|
|
% Increase
(Decrease)
|
|
2019
|
|
2018
|
|
% Increase
(Decrease)
|
|
(Dollars and shares
in millions, except per share data)
|
|
|
Net sales
|
$1,957.8
|
|
$2,021.5
|
|
(3%)
|
|
$3,736.7
|
|
|
$3,924.0
|
|
(5%)
|
Cost of products
sold
|
1,203.8
|
|
1,250.2
|
|
(4%)
|
|
2,283.1
|
|
|
2,474.5
|
|
(8%)
|
Gross
Profit
|
754.0
|
|
771.3
|
|
(2%)
|
|
1,453.6
|
|
|
1,449.5
|
|
—
|
Gross
margin
|
38.5%
|
|
38.2%
|
|
|
38.9%
|
|
|
36.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
distribution, and administrative
expenses
|
361.5
|
|
382.4
|
|
(5%)
|
|
742.0
|
|
|
765.7
|
|
(3%)
|
Amortization
|
58.8
|
|
59.7
|
|
(2%)
|
|
117.6
|
|
|
120.2
|
|
(2%)
|
Other special project
costs
|
3.3
|
|
25.4
|
|
(87%)
|
|
6.6
|
|
|
33.1
|
|
(80%)
|
Other operating
expense (income) – net
|
0.6
|
|
(26.7)
|
|
(102%)
|
|
—
|
|
|
(26.9)
|
|
(100%)
|
Operating
Income
|
329.8
|
|
330.5
|
|
—
|
|
587.4
|
|
|
557.4
|
|
5%
|
Operating
margin
|
16.8%
|
|
16.3%
|
|
|
15.7%
|
|
|
14.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense –
net
|
(49.1)
|
|
(53.6)
|
|
(8%)
|
|
(98.5)
|
|
|
(107.2)
|
|
(8%)
|
Other income
(expense) – net
|
(1.6)
|
|
(7.5)
|
|
(79%)
|
|
(3.1)
|
|
|
(7.7)
|
|
(60%)
|
Income Before
Income Taxes
|
279.1
|
|
269.4
|
|
4%
|
|
485.8
|
|
|
442.5
|
|
10%
|
Income tax
expense
|
67.9
|
|
80.9
|
|
(16%)
|
|
120.0
|
|
|
121.0
|
|
(1%)
|
Net
Income
|
$211.2
|
|
$188.5
|
|
12%
|
|
$365.8
|
|
|
$321.5
|
|
14%
|
|
|
|
|
|
|
|
|
|
|
Net income per
common share
|
$1.85
|
|
$1.66
|
|
11%
|
|
$3.21
|
|
|
$2.83
|
|
13%
|
|
|
|
|
|
|
|
|
|
|
Net income per
common share –
assuming dilution
|
$1.85
|
|
$1.66
|
|
11%
|
|
$3.21
|
|
|
$2.83
|
|
13%
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
per common share
|
$0.88
|
|
$0.85
|
|
4%
|
|
$1.76
|
|
|
$1.70
|
|
4%
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares
outstanding
|
114.1
|
|
113.7
|
|
—
|
|
114.0
|
|
|
113.7
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares
outstanding – assuming dilution
|
114.1
|
|
113.7
|
|
—
|
|
114.0
|
|
|
113.7
|
|
—
|
The J. M. Smucker
Company
Unaudited Condensed
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
October 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
|
|
522.4
|
|
|
503.8
|
|
Inventories
|
|
1,013.3
|
|
|
910.3
|
|
Other current
assets
|
|
74.7
|
|
|
109.8
|
|
Total Current
Assets
|
|
1,659.2
|
|
|
1,625.2
|
|
|
|
|
|
|
Property, Plant,
and Equipment - Net
|
|
1,915.5
|
|
|
1,912.4
|
|
|
|
|
|
|
Other Noncurrent
Assets:
|
|
|
|
|
Goodwill
|
|
6,313.6
|
|
|
6,310.9
|
|
Other intangible
assets – net
|
|
6,602.7
|
|
|
6,718.8
|
|
Other noncurrent
assets
|
|
300.0
|
|
|
144.0
|
|
Total Other
Noncurrent Assets
|
|
13,216.3
|
|
|
13,173.7
|
|
Total
Assets
|
|
$16,791.0
|
|
|
$16,711.3
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Accounts
payable
|
|
$521.8
|
|
|
$591.0
|
|
Current portion of
long-term debt
|
|
799.5
|
|
|
798.5
|
|
Short-term
borrowings
|
|
327.9
|
|
|
426.0
|
|
Other current
liabilities
|
|
660.9
|
|
|
526.0
|
|
Total Current
Liabilities
|
|
2,310.1
|
|
|
2,341.5
|
|
|
|
|
|
|
Noncurrent
Liabilities
|
|
|
|
|
Long-term debt, less
current portion
|
|
4,584.5
|
|
|
4,686.3
|
|
Other noncurrent
liabilities
|
|
1,801.1
|
|
|
1,713.0
|
|
Total Noncurrent
Liabilities
|
|
6,385.6
|
|
|
6,399.3
|
|
|
|
|
|
|
Total
Shareholders' Equity
|
|
8,095.3
|
|
|
7,970.5
|
|
Total Liabilities
and Shareholders' Equity
|
|
$16,791.0
|
|
|
$16,711.3
|
|
The J. M. Smucker
Company
Unaudited Condensed
Consolidated Statements of Cash Flow
|
|
|
|
|
|
Three Months Ended
October 31,
|
|
Six Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(Dollars in
millions)
|
Operating
Activities
|
|
|
|
|
|
|
|
Net income
|
$211.2
|
|
|
$188.5
|
|
|
$365.8
|
|
|
$321.5
|
|
Adjustments to
reconcile net income to net cash
provided by (used for) operations:
|
|
|
|
|
|
|
|
Depreciation
|
52.6
|
|
|
51.5
|
|
|
103.4
|
|
|
102.9
|
|
Amortization
|
58.8
|
|
|
59.7
|
|
|
117.6
|
|
|
120.2
|
|
Share-based
compensation expense
|
7.5
|
|
|
5.9
|
|
|
13.7
|
|
|
10.5
|
|
Gain on
divestiture
|
—
|
|
|
(26.6)
|
|
|
—
|
|
|
(26.6)
|
|
Other noncash
adjustments – net
|
6.4
|
|
|
1.9
|
|
|
6.6
|
|
|
3.0
|
|
Changes in assets and
liabilities, net of effect from
acquisition and divestiture:
|
|
|
|
|
|
|
|
Trade
receivables
|
(48.6)
|
|
|
(58.5)
|
|
|
(18.2)
|
|
|
(111.2)
|
|
Inventories
|
0.1
|
|
|
5.3
|
|
|
(102.0)
|
|
|
(60.4)
|
|
Other current
assets
|
6.9
|
|
|
(4.2)
|
|
|
13.3
|
|
|
17.6
|
|
Accounts
payable
|
19.7
|
|
|
14.4
|
|
|
(41.3)
|
|
|
15.2
|
|
Accrued
liabilities
|
(37.9)
|
|
|
7.8
|
|
|
25.7
|
|
|
60.4
|
|
Income and other
taxes
|
(54.4)
|
|
|
(40.4)
|
|
|
(32.6)
|
|
|
18.5
|
|
Other –
net
|
1.7
|
|
|
(2.4)
|
|
|
(6.5)
|
|
|
(25.7)
|
|
Net Cash Provided
by (Used for) Operating Activities
|
224.0
|
|
|
202.9
|
|
|
445.5
|
|
|
445.9
|
|
|
|
|
|
|
|
|
|
Investing
Activities
|
|
|
|
|
|
|
|
Business acquired,
net of cash acquired
|
—
|
|
|
2.0
|
|
|
—
|
|
|
(1,903.0)
|
|
Additions to
property, plant, and equipment
|
(63.4)
|
|
|
(77.8)
|
|
|
(136.4)
|
|
|
(179.1)
|
|
Proceeds from
divestiture
|
—
|
|
|
372.1
|
|
|
—
|
|
|
372.1
|
|
Other –
net
|
11.3
|
|
|
16.3
|
|
|
32.2
|
|
|
(8.9)
|
|
Net Cash Provided
by (Used for) Investing Activities
|
(52.1)
|
|
|
312.6
|
|
|
(104.2)
|
|
|
(1,718.9)
|
|
|
|
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
|
|
|
Short-term borrowings
(repayments) – net
|
27.1
|
|
|
(140.0)
|
|
|
(102.9)
|
|
|
246.0
|
|
Proceeds from
long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
1,500.0
|
|
Repayments of
long-term debt
|
(100.0)
|
|
|
(300.0)
|
|
|
(100.0)
|
|
|
(300.0)
|
|
Quarterly dividends
paid
|
(100.1)
|
|
|
(96.5)
|
|
|
(196.6)
|
|
|
(184.9)
|
|
Purchase of treasury
shares
|
(0.6)
|
|
|
(0.3)
|
|
|
(3.5)
|
|
|
(5.0)
|
|
Proceeds from stock
option exercises
|
—
|
|
|
—
|
|
|
7.0
|
|
|
—
|
|
Other –
net
|
1.0
|
|
|
2.5
|
|
|
0.8
|
|
|
0.1
|
|
Net Cash Provided
by (Used for) Financing Activities
|
(172.6)
|
|
|
(534.3)
|
|
|
(395.2)
|
|
|
1,256.2
|
|
Effect of exchange
rate changes on cash
|
0.7
|
|
|
(2.0)
|
|
|
1.4
|
|
|
(4.6)
|
|
Net increase
(decrease) in cash and cash equivalents
|
—
|
|
|
(20.8)
|
|
|
(52.5)
|
|
|
(21.4)
|
|
Cash and cash
equivalents at beginning of period
|
48.8
|
|
|
192.0
|
|
|
101.3
|
|
|
192.6
|
|
Cash and Cash
Equivalents at End of Period
|
$48.8
|
|
|
$171.2
|
|
|
$48.8
|
|
|
$171.2
|
|
The J. M. Smucker
Company
Unaudited Supplemental Schedule
|
|
|
Three Months Ended
October 31,
|
|
Six Months Ended
October 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
% of
Net sales
|
|
2018
|
|
% of
Net Sales
|
|
2019
|
|
% of
Net Sales
|
|
2018
|
|
% of
Net Sales
|
|
(Dollars in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$1,957.8
|
|
|
|
$2,021.5
|
|
|
|
$3,736.7
|
|
|
|
$3,924.0
|
|
|
Selling,
distribution, and
administrative
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing
|
123.2
|
|
6.3%
|
|
137.7
|
|
6.8%
|
|
256.1
|
|
6.9%
|
|
277.6
|
|
7.1%
|
Selling
|
62.5
|
|
3.2%
|
|
65.9
|
|
3.3%
|
|
131.0
|
|
3.5%
|
|
133.0
|
|
3.4%
|
Distribution
|
69.8
|
|
3.6%
|
|
65.7
|
|
3.3%
|
|
133.8
|
|
3.6%
|
|
131.7
|
|
3.4%
|
General and
administrative
|
106.0
|
|
5.4%
|
|
113.1
|
|
5.6%
|
|
221.1
|
|
5.9%
|
|
223.4
|
|
5.7%
|
Total selling,
distribution,
and administrative
expenses
|
$361.5
|
|
18.5%
|
|
$382.4
|
|
18.9%
|
|
$742.0
|
|
19.9%
|
|
$765.7
|
|
19.5%
|
|
Amounts may not add
due to rounding.
|
The J. M. Smucker
Company
Unaudited Reportable
Segments
|
|
|
|
|
|
|
|
Three Months Ended
October 31,
|
|
Six Months Ended
October 31,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(Dollars in
millions)
|
Net sales:
|
|
|
|
|
|
|
|
|
U.S. Retail Pet
Foods
|
|
$709.9
|
|
|
$728.1
|
|
|
$1,379.8
|
|
|
$1,399.3
|
|
U.S. Retail
Coffee
|
|
543.4
|
|
|
544.9
|
|
|
1,009.1
|
|
|
1,034.4
|
|
U.S. Retail Consumer
Foods
|
|
426.1
|
|
|
461.9
|
|
|
828.3
|
|
|
945.2
|
|
International and
Away From Home
|
|
278.4
|
|
|
286.6
|
|
|
519.5
|
|
|
545.1
|
|
Total net
sales
|
|
$1,957.8
|
|
|
$2,021.5
|
|
|
$3,736.7
|
|
|
$3,924.0
|
|
|
|
|
|
|
|
|
|
|
Segment
profit:
|
|
|
|
|
|
|
|
|
U.S. Retail Pet
Foods
|
|
$137.0
|
|
|
$123.9
|
|
|
$257.1
|
|
|
$224.3
|
|
U.S. Retail
Coffee
|
|
182.5
|
|
|
174.3
|
|
|
311.4
|
|
|
322.1
|
|
U.S. Retail Consumer
Foods
|
|
91.4
|
|
|
134.3
|
|
|
172.4
|
|
|
231.6
|
|
International and
Away From Home
|
|
50.4
|
|
|
56.7
|
|
|
82.7
|
|
|
100.1
|
|
Total segment
profit
|
|
$461.3
|
|
|
$489.2
|
|
|
$823.6
|
|
|
$878.1
|
|
Amortization
|
|
(58.8)
|
|
|
(59.7)
|
|
|
(117.6)
|
|
|
(120.2)
|
|
Interest expense –
net
|
|
(49.1)
|
|
|
(53.6)
|
|
|
(98.5)
|
|
|
(107.2)
|
|
Unallocated
derivative gains (losses)
|
|
0.9
|
|
|
(0.1)
|
|
|
29.9
|
|
|
(22.1)
|
|
Other special project
costs
|
|
(3.3)
|
|
|
(25.4)
|
|
|
(6.6)
|
|
|
(33.1)
|
|
Corporate
administrative expenses
|
|
(70.3)
|
|
|
(73.5)
|
|
|
(141.9)
|
|
|
(145.3)
|
|
Other income
(expense) – net
|
|
(1.6)
|
|
|
(7.5)
|
|
|
(3.1)
|
|
|
(7.7)
|
|
Income before income
taxes
|
|
$279.1
|
|
|
$269.4
|
|
|
$485.8
|
|
|
$442.5
|
|
|
|
|
|
|
|
|
|
|
Segment profit
margin:
|
|
|
|
|
|
|
|
|
U.S. Retail Pet
Foods
|
|
19.3%
|
|
|
17.0%
|
|
|
18.6%
|
|
|
16.0%
|
|
U.S. Retail
Coffee
|
|
33.6%
|
|
|
32.0%
|
|
|
30.9%
|
|
|
31.1%
|
|
U.S. Retail Consumer
Foods
|
|
21.5%
|
|
|
29.1%
|
|
|
20.8%
|
|
|
24.5%
|
|
International and
Away From Home
|
|
18.1%
|
|
|
19.8%
|
|
|
15.9%
|
|
|
18.4%
|
|
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"); 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. 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
October 31,
|
|
Six Months Ended
October 31,
|
|
2019
|
|
2018
|
|
Increase
(Decrease)
|
|
%
|
|
2019
|
|
2018
|
|
Increase
(Decrease)
|
|
%
|
|
(Dollars in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
reconciliation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$1,957.8
|
|
$2,021.5
|
|
($63.7)
|
|
(3%)
|
|
$3,736.7
|
|
$3,924.0
|
|
($187.3)
|
|
(5%)
|
Ainsworth
acquisition
|
—
|
|
—
|
|
—
|
|
—
|
|
(25.4)
|
|
—
|
|
(25.4)
|
|
(1%)
|
Baking
divestiture
|
—
|
|
(32.8)
|
|
32.8
|
|
2%
|
|
—
|
|
(105.9)
|
|
105.9
|
|
3%
|
Net sales
excluding
acquisition and divestiture
|
1,957.8
|
|
1,988.7
|
|
(30.9)
|
|
(2%)
|
|
3,711.3
|
|
3,818.1
|
|
(106.8)
|
|
(3%)
|
Foreign currency
exchange
|
1.8
|
|
—
|
|
1.8
|
|
—
|
|
3.6
|
|
—
|
|
3.6
|
|
—
|
Net sales
excluding
acquisition, divestiture,
and foreign currency
exchange
|
$1,959.6
|
|
$1,988.7
|
|
($29.1)
|
|
(1%)
|
|
$3,714.9
|
|
$3,818.1
|
|
($103.2)
|
|
(3%)
|
|
Amounts may not add
due to rounding.
|
The J. M. Smucker
Company
Unaudited Non-GAAP
Financial Measures
|
|
|
|
|
|
Three Months Ended
October 31,
|
|
Six Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(Dollars in millions,
except per share data)
|
Gross profit
reconciliation:
|
|
|
|
|
|
|
|
Gross
profit
|
$754.0
|
|
|
$771.3
|
|
|
$1,453.6
|
|
|
$1,449.5
|
|
Unallocated
derivative losses (gains)
|
(0.9)
|
|
|
0.1
|
|
|
(29.9)
|
|
|
22.1
|
|
Adjusted gross
profit
|
$753.1
|
|
|
$771.4
|
|
|
$1,423.7
|
|
|
$1,471.6
|
|
% of net
sales
|
38.5%
|
|
|
38.2%
|
|
|
38.1%
|
|
|
37.5%
|
|
|
|
|
|
|
|
|
|
Operating income
reconciliation:
|
|
|
|
|
|
|
|
Operating
income
|
$329.8
|
|
|
$330.5
|
|
|
$587.4
|
|
|
$557.4
|
|
Amortization
|
58.8
|
|
|
59.7
|
|
|
117.6
|
|
|
120.2
|
|
Unallocated
derivative losses (gains)
|
(0.9)
|
|
|
0.1
|
|
|
(29.9)
|
|
|
22.1
|
|
Other special project
costs
|
3.3
|
|
|
25.4
|
|
|
6.6
|
|
|
33.1
|
|
Adjusted operating
income
|
$391.0
|
|
|
$415.7
|
|
|
$681.7
|
|
|
$732.8
|
|
% of net
sales
|
20.0%
|
|
|
20.6%
|
|
|
18.2%
|
|
|
18.7%
|
|
|
|
|
|
|
|
|
|
Net income
reconciliation:
|
|
|
|
|
|
|
|
Net income
|
$211.2
|
|
|
$188.5
|
|
|
$365.8
|
|
|
$321.5
|
|
Income tax
expense
|
67.9
|
|
|
80.9
|
|
|
120.0
|
|
|
121.0
|
|
Amortization
|
58.8
|
|
|
59.7
|
|
|
117.6
|
|
|
120.2
|
|
Unallocated
derivative losses (gains)
|
(0.9)
|
|
|
0.1
|
|
|
(29.9)
|
|
|
22.1
|
|
Other special project
costs
|
3.3
|
|
|
25.4
|
|
|
6.6
|
|
|
33.1
|
|
Adjusted income
before income taxes
|
$340.3
|
|
|
$354.6
|
|
|
$580.1
|
|
|
$617.9
|
|
Income taxes, as
adjusted
|
82.8
|
|
|
108.1
|
|
|
142.9
|
|
|
169.0
|
|
Adjusted
income
|
257.5
|
|
|
$246.5
|
|
|
$437.2
|
|
|
$448.9
|
|
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding
|
113.4
|
|
|
113.1
|
|
|
113.3
|
|
|
113.1
|
|
Weighted-average
participating shares outstanding
|
0.7
|
|
|
0.6
|
|
|
0.7
|
|
|
0.6
|
|
Total
weighted-average shares outstanding
|
114.1
|
|
|
113.7
|
|
|
114.0
|
|
|
113.7
|
|
Dilutive effect of
stock options
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
weighted-average shares outstanding – assuming dilution
|
114.1
|
|
|
113.7
|
|
|
114.0
|
|
|
113.7
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per
share – assuming dilution
|
$2.26
|
|
|
$2.17
|
|
|
$3.84
|
|
|
$3.95
|
|
|
|
|
|
|
|
|
|
The J. M. Smucker
Company
Unaudited Non-GAAP
Financial Measures
|
|
|
|
|
|
Three Months Ended
October 31,
|
|
Six Months Ended
October 31,
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
(Dollars in
millions)
|
EBITDA
reconciliation:
|
|
|
|
|
|
|
|
Net income
|
$211.2
|
|
|
$188.5
|
|
|
$365.8
|
|
|
$321.5
|
|
Income tax
expense
|
67.9
|
|
|
80.9
|
|
|
120.0
|
|
|
121.0
|
|
Interest expense –
net
|
49.1
|
|
|
53.6
|
|
|
98.5
|
|
|
107.2
|
|
Depreciation
|
52.6
|
|
|
51.5
|
|
|
103.4
|
|
|
102.9
|
|
Amortization
|
58.8
|
|
|
59.7
|
|
|
117.6
|
|
|
120.2
|
|
EBITDA
|
$439.6
|
|
|
$434.2
|
|
|
$805.3
|
|
|
$772.8
|
|
% of net
sales
|
22.5%
|
|
|
21.5%
|
|
|
21.6%
|
|
|
19.7%
|
|
|
|
|
|
|
|
|
|
Free cash flow
reconciliation:
|
|
|
|
|
|
|
|
Net cash provided by
(used for) operating activities
|
$224.0
|
|
|
$202.9
|
|
|
$445.5
|
|
|
$445.9
|
|
Additions to
property, plant, and equipment
|
(63.4)
|
|
|
(77.8)
|
|
|
(136.4)
|
|
|
(179.1)
|
|
Free cash
flow
|
$160.6
|
|
|
$125.1
|
|
|
$309.1
|
|
|
$266.8
|
|
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
|
|
$6.77
|
|
|
$6.97
|
|
Net cumulative
unallocated (losses) gains (A)
|
|
(0.36)
|
|
|
(0.36)
|
|
Special project
costs
|
|
0.13
|
|
|
0.13
|
|
Amortization
|
|
1.56
|
|
|
1.56
|
|
Adjusted earnings per
share
|
|
$8.10
|
|
|
$8.30
|
|
|
|
|
|
|
(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 October 31, 2019.
|
|
|
|
|
|
|
|
Year Ending
April 30, 2020
|
|
|
Low
|
|
High
|
|
|
(Dollars in
millions)
|
Free cash flow
reconciliation:
|
|
|
|
|
Net cash provided by
operating activities
|
|
$1,170
|
|
|
$1,150
|
|
Additions to
property, plant, and equipment
|
|
(320)
|
|
|
(300)
|
|
Free cash
flow
|
|
$850
|
|
|
$850
|
|
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SOURCE The J. M. Smucker Company