ORRVILLE, Ohio, Dec. 5, 2023
/PRNewswire/ -- The J.M. Smucker Co. (NYSE: SJM) today
announced results for the second quarter ended October 31,
2023, of its 2024 fiscal year. Financial results for the second
quarter of fiscal year 2024 reflect the divestiture of certain pet
food brands on April 28, 2023. All
comparisons are to the second quarter of the prior fiscal year,
unless otherwise noted.
EXECUTIVE SUMMARY
- Net sales decreased $266.5
million, or 12 percent. Net sales excluding the divestiture
and foreign currency exchange increased 7 percent.
- Net income per diluted share was $1.90. Adjusted earnings per share was
$2.59, an increase of 8 percent.
- Cash provided by operations was $176.9
million compared to $205.0
million in the prior year. Free cash flow was $28.2 million, compared to $102.9 million in the prior year.
- The Company updated its full-year fiscal 2024 financial
outlook, which reflects the acquisition of Hostess Brands, Inc.
("Hostess Brands").
CHIEF EXECUTIVE OFFICER REMARKS
"Our second quarter results reflect the continued demand for our
iconic brands, our focus on executing with excellence, and the
talent of our employees," said Mark
Smucker, Chair of the Board, President and Chief Executive
Officer. "Our continued business momentum gives us confidence in
our ability to achieve our sales and earnings expectations for this
fiscal year."
"We also advanced our portfolio reshape activities, including
the acquisition of the Hostess® sweet baked
snacks and Voortman® cookie brands. We are
confident in our ability to capitalize on synergies and growth
opportunities across snacking, while also continuing to support our
other growth platforms in coffee and pet. Our transformed portfolio
improves our ability to deliver long-term sustainable growth and
shareholder value."
SECOND QUARTER CONSOLIDATED RESULTS
|
Three Months Ended
October 31,
|
|
2023
|
|
2022
|
|
% Increase
(Decrease)
|
|
(Dollars and shares in
millions, except per share data)
|
|
|
|
|
|
|
Net
sales
|
$1,938.6
|
|
$2,205.1
|
|
(12) %
|
|
|
|
|
|
|
Operating
income
|
$298.9
|
|
$293.4
|
|
2 %
|
Adjusted operating
income
|
385.4
|
|
379.6
|
|
2 %
|
|
|
|
|
|
|
Net income per
common share – assuming dilution
|
$1.90
|
|
$1.79
|
|
6 %
|
Adjusted earnings per
share – assuming dilution
|
2.59
|
|
2.40
|
|
8 %
|
|
|
|
|
|
|
Weighted-average
shares outstanding – assuming dilution
|
102.4
|
|
106.9
|
|
(4) %
|
Net Sales
Net sales decreased $266.5
million, or 12 percent. Excluding noncomparable net sales in
the prior year of $385.0 million from
the divested pet food brands, as well as $2.5 million of unfavorable foreign currency
exchange, net sales increased $121.0
million, or 7 percent.
The increase in comparable net sales reflects a 4 percentage
point increase from volume/mix, primarily driven by
Smucker's® Uncrustables® frozen
sandwiches and contract manufacturing sales related to the divested
pet food brands, partially offset by Jif® peanut
butter. Comparable net sales growth was also supported by a 3
percentage point increase from net price realization, primarily due
to list price increases for the U.S. Retail Pet Foods and U.S.
Retail Consumer Foods segments and for International and Away From
Home, partially offset by a net price decline for the U.S. Retail
Coffee segment.
Operating Income
Gross profit increased $23.1
million, or 3 percent. The increase primarily reflects
higher net price realization, lower green coffee costs, and
favorable volume/mix. Gross profit also reflects the unfavorable
impact from the divested pet food brands. Operating income
increased $5.5 million, or 2 percent,
primarily reflecting the increase in gross profit, a $20.8 million decrease in selling, distribution,
and administrative ("SD&A") expenses, and a $16.0 million reduction in amortization expense
as a result of the divested pet food brands. These benefits were
mostly offset by a $48.3 million
increase for net other operating expense, primarily driven by a
$39.1 million unfavorable impact
related to the termination of a supplier agreement and an estimated
net pre-tax loss on assets held for sale.
Adjusted gross profit increased $19.5
million, or 3 percent. The difference between adjusted gross
profit and generally accepted accounting principles ("GAAP")
results primarily reflects the exclusion of the change in net
cumulative unallocated derivative gains and losses. Adjusted
operating income, which further reflects the exclusion of
amortization, the estimated net pre-tax loss on assets held for
sale, and special project costs as compared to GAAP operating
income, increased $5.8 million, or 2
percent.
Interest Expense, Other Debt Costs, and Income Taxes
Net interest expense decreased $4.6
million, primarily due to an increase in interest income,
reflecting an increase in our cash investments and higher interest
rates as compared to the prior year, and a decrease in interest
expense related to the Company's commercial paper program, as there
was no balance outstanding at the end of the quarter. The decrease
in net interest expense also includes interest expense related to
the new Senior Notes issued during the quarter to fund the
acquisition of Hostess Brands.
Other debt costs were $19.5
million in the quarter, reflecting financing fees for the
acquisition of Hostess Brands.
The effective income tax rate was 21.9 percent, compared to 24.4
percent in the prior year. The adjusted effective income tax rate
was 24.3 percent, compared to 24.4 percent in the prior year. The
change in effective income tax rates was primarily due to the
impact of state income taxes, partially offset by a tax benefit
related to the divestiture of Sahale Snacks®.
Cash Flow and Debt
Cash provided by operating activities was $176.9 million, compared to $205.0 million in the prior year, primarily
reflecting timing differences of income tax payments and financing
fees for the acquisition of Hostess Brands, partially offset by
less cash required to fund working capital. Free cash flow was
$28.2 million, compared to
$102.9 million in the prior year,
reflecting a $46.6 million increase
in capital expenditures and the decrease in cash provided by
operating activities.
FULL-YEAR OUTLOOK
The Company updated its full-year fiscal 2024 guidance, as
summarized below, which reflects the anticipated impact of the
acquisition of Hostess Brands:
|
|
Current
|
|
Previous
|
Comparable net sales
increase vs prior year (A)
|
|
8.5% - 9.0%
|
|
8.5% - 9.5%
|
Adjusted earnings per
share
|
|
$9.25 - $9.65
|
|
$9.45 - $9.85
|
Free cash flow (in
millions)
|
|
$530
|
|
$650
|
Capital expenditures
(in millions)
|
|
$610
|
|
$550
|
Adjusted effective
income tax rate
|
|
24.3 %
|
|
24.0 %
|
(A)
Comparable net sales excludes sales in the prior year related to
the divestitures of certain pet food brands and Sahale
Snacks®, and also
excludes sales in the current year related to the acquisition of
Hostess Brands. Net sales are expected to decrease 3.0% to 3.5%
compared to
the prior year, including the acquisition of Hostess
Brands.
|
Comparable net sales are expected to increase 8.5 to 9.0 percent
compared to the prior year. This reflects favorable volume/mix from
underlying business momentum, as well as higher net pricing. Net
sales are expected to decrease 3.0 to 3.5 percent compared to
the prior year, reflecting approximately $8.25 billion at the mid-point of the guidance
range. The net sales decrease reflects $1.5
billion of net sales in the prior year related to the
divested pet food brands, $23.7
million of net sales in the prior year related to the
divested Sahale Snacks® business, and
$650.0 million of anticipated net
sales in the current fiscal year related to the acquisition of
Hostess Brands.
Adjusted earnings per share is expected to range from
$9.25 to $9.65. This range reflects the benefits of
favorable volume/mix and higher net pricing actions, partially
offset by increased SD&A expenses. The adjusted earnings per
share range also reflects a net unfavorable impact of approximately
$0.60 related to stranded overhead
from the pet food divestiture, inclusive of income and
reimbursements from transition services and contract manufacturing
agreements. The adjusted earnings per share range now reflects a
net unfavorable impact of approximately $0.40 related to the Hostess Brands acquisition,
including incremental profits from the new Sweet Baked Snacks
reportable segment, more than offset by incremental administrative
expense related to the acquisition, incremental interest expense
related to new debt to fund the acquisition, incremental tax
expense related to a change in the effective income tax rate, and
additional common shares issued in connection with the
transaction.
This guidance assumes an adjusted gross profit margin of
approximately 37.5 percent, an adjusted effective income tax rate
of 24.3 percent, and 104.4 million weighted-average common shares
outstanding, inclusive of the effect of the Hostess Brands
acquisition. Free cash flow is expected to be approximately
$530.0 million with capital
expenditures of $610.0 million. The
change in free cash flow and capital expenditure guidance, compared
to previous expectations, is primarily due to $135.0 million of transaction and integration
costs and $60.0 million of capital
expenditures associated with the Hostess Brands acquisition.
The updated guidance for items related to the Hostess Brands
acquisition includes preliminary estimates that could differ
materially as the Company continues to evaluate the impact of
purchase accounting adjustments.
SECOND QUARTER SEGMENT RESULTS
(Dollar amounts in the segment tables below are reported in
millions.)
U.S. Retail Coffee
|
|
Net
Sales
|
|
Segment
Profit
|
|
Segment
Profit Margin
|
FY24 Q2
Results
|
|
$685.7
|
|
$171.0
|
|
24.9 %
|
Increase (decrease) vs
prior year
|
|
(3) %
|
|
(9) %
|
|
-150bps
|
Net sales decreased $24.1 million,
or 3 percent. Net price realization reduced net sales by 4
percentage points, primarily driven by list price decreases,
partially offset by reduced trade spend. Volume/mix was neutral in
the quarter, as increases for the Café Bustelo®
and Dunkin'® brands were mostly offset by the
Folgers® brand.
Segment profit decreased $16.7 million, primarily reflecting the
$39.1 million unfavorable impact
related to the termination of a supplier agreement. Excluding this
item, segment profit increased, primarily driven by a favorable net
impact of decreased commodity costs and lower net price
realization.
U.S. Retail Consumer Foods
|
|
Net
Sales
|
|
Segment
Profit
|
|
Segment
Profit Margin
|
FY24 Q2
Results
|
|
$464.3
|
|
$128.5
|
|
27.7 %
|
Increase (decrease) vs
prior year
|
|
7 %
|
|
28 %
|
|
450bps
|
Net sales increased $32.1 million,
or 7 percent. Higher net price realization increased net sales by 7
percentage points, primarily reflecting a favorable impact of
lapping customer returns and fees related to the
Jif® peanut butter product recall in the prior
year and a list price increase for Jif®
peanut butter. Volume/mix was neutral to net sales, as an increase
for Smucker's® Uncrustables® frozen
sandwiches was mostly offset by a decrease for
Jif® peanut butter.
Segment profit increased $28.2
million, primarily reflecting higher net price realization
and lower costs, inclusive of a favorable impact of lapping
the recall, partially offset by increased marketing
investments.
U.S. Retail Pet Foods
|
|
Net
Sales
|
|
Segment
Profit
|
|
Segment
Profit Margin
|
FY24 Q2
Results
|
|
$464.0
|
|
$97.2
|
|
20.9 %
|
Increase (decrease) vs
prior year
|
|
(39) %
|
|
(19) %
|
|
520bps
|
Net sales decreased $301.2
million, or 39 percent. Excluding $377.8 million of noncomparable net sales in
the prior year related to the divested pet food brands, net sales
increased $76.6 million, or 20
percent. Volume/mix increased net sales by 12 percentage points,
primarily driven by $38.4 million of
contract manufacturing sales related to the divestiture and growth
for dog snacks, primarily driven by the
Milk-Bone® brand. Higher net price
realization increased net sales by 8 percentage points, primarily
reflecting list price increases across the portfolio.
Segment profit decreased $22.9
million, reflecting the noncomparable segment profit in the
prior year related to the divested pet food brands. Excluding the
impact of the divestiture, segment profit increased, primarily
driven by a favorable net impact of higher net price realization
and increased costs and favorable volume/mix, partially offset by
increased distribution costs.
International and Away From Home
|
|
Net
Sales
|
|
Segment
Profit
|
|
Segment
Profit Margin
|
FY24 Q2
Results
|
|
$324.6
|
|
$60.2
|
|
18.5 %
|
Increase (decrease) vs
prior year
|
|
9 %
|
|
45 %
|
|
460bps
|
Net sales increased $26.7 million,
or 9 percent. Excluding $7.2 million
of noncomparable net sales in the prior year related to the
divested pet food brands and $2.5
million of unfavorable foreign currency exchange, net sales
increased $36.4 million, or 13
percent. Volume/mix increased net sales by 7 percentage points for
the combined businesses, primarily driven by
Smucker's® Uncrustables® frozen
sandwiches and coffee products. Net price realization contributed a
5 percentage point increase to net sales, primarily driven by list
price increases across the majority of the portfolio, partially
offset by increased trade spend.
Segment profit increased $18.7
million, primarily reflecting higher net price realization
and favorable volume/mix.
Financial Results Discussion and Webcast
At approximately 7:00 a.m. Eastern
Time today, the Company will post to its website at
investors.jmsmucker.com a pre-recorded management discussion of its
fiscal 2024 second quarter financial results, a transcript of the
discussion, and supplemental materials. At 9:00 a.m. Eastern Time today, the Company will
webcast a live question and answer session with Mark Smucker, Chair of the Board, President and
Chief Executive Officer, and Tucker
Marshall, Chief Financial Officer. The live webcast and
replay can be accessed at investors.jmsmucker.com.
The J.M. Smucker Co. 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 Company's
ability to successfully integrate Hostess Brands' operations and
employees and to implement plans and achieve financial forecasts
with respect to the Hostess Brands' business; the Company's ability
to realize the anticipated benefits, including synergies and cost
savings, related to the Hostess Brands acquisition, including the
possibility that the expected benefits will not be realized or will
not be realized within the expected time period; disruption from
the acquisition of Hostess Brands by diverting the attention of the
Company's management and making it more difficult to maintain
business and operational relationships; the negative effects of the
acquisition of Hostess Brands on the market price of the Company's
common shares; the amount of the costs, fees, expenses, and charges
and the risk of litigation related to the acquisition of Hostess
Brands; the effect of the acquisition of Hostess Brands on the
Company's business relationships, operating results, ability to
hire and retain key talent, and business generally; the effect of
the sale of certain pet food brands on the Company's ability to
retain key personnel and to maintain relationships with customers,
suppliers, and other business partners; disruptions or
inefficiencies in the Company's operations or supply chain,
including any impact caused by product recalls, political
instability, terrorism, armed hostilities (including the ongoing
conflict between Russia and
Ukraine), extreme weather
conditions, natural disasters, pandemics (including the novel
coronavirus), work stoppages or labor shortages, or other
calamities; risks related to the availability, and cost inflation
in, supply chain inputs, including labor, raw materials,
commodities, packaging, and transportation; the impact of food
security concerns involving either the Company's products or its
competitors' products, including changes in consumer preference,
consumer litigation, actions by the U.S. Food and Drug
Administration or other agencies, and product recalls; risks
associated with derivative and purchasing strategies the Company
employs to manage commodity pricing and interest rate risks; the
availability of reliable transportation on acceptable terms; the
ability to achieve cost savings related to restructuring and cost
management programs in the amounts and within the time frames
currently anticipated; the ability to generate sufficient cash flow
to continue operating under the Company's capital deployment model,
including capital expenditures, debt repayment to meet our
deleveraging objectives, dividend payments, and share repurchases;
a change in outlook or downgrade in the Company's public credit
ratings by a rating agency below investment grade; 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 Company's
businesses, including product innovation; general competitive
activity in the market, including competitors' pricing practices
and promotional spending levels; the Company's ability to attract
and retain key talent; 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 Company's ability to manage and maintain key
relationships; impairments in the carrying value of goodwill, other
intangible assets, or other long-lived assets or changes in the
useful lives of other intangible assets or other long-lived assets;
the impact of new or changes to existing governmental laws and
regulations and their application; the outcome of tax examinations,
changes in tax laws, and other tax matters; a disruption, failure,
or security breach of the Company or their suppliers' information
technology systems, including, but not limited to, ransomware
attacks; foreign currency exchange rate 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 Co.
At The J.M. Smucker Co., it is our privilege to make food people
and pets love by offering a diverse portfolio family of brands
available across North America. We
are proud to lead in the coffee, peanut butter, fruit spreads,
frozen handheld, sweet baked goods, dog snacks, and cat food
categories by offering brands consumers trust for themselves and
their families each day, including Folgers®,
Dunkin'®, Café Bustelo®, Jif®,
Smucker's® Uncrustables®,
Smucker's®, Hostess®, Voortman®,
Milk-Bone®, and Meow Mix®. Through
our unwavering commitment to producing quality products, operating
responsibly and ethically and delivering on our Purpose, we will
continue to grow our business while making a positive impact on
society. For more information, please visit jmsmucker.com.
The J.M. Smucker Co. is the owner of all trademarks referenced
herein, except for Dunkin'®, which is a trademark
of DD IP Holder LLC. The Dunkin'® brand is
licensed to The J.M. Smucker Co. for packaged coffee products sold
in retail channels such as grocery stores, mass merchandisers, club
stores, e-commerce and drug stores, and in certain away from home
channels. This information does not pertain to products for sale in
Dunkin'® restaurants.
The J.M. Smucker
Co.
Unaudited Condensed
Consolidated Statements of Income
|
|
|
|
|
|
Three Months Ended
October 31,
|
|
Six Months Ended
October 31,
|
|
2023
|
|
2022
|
|
% Increase
(Decrease)
|
|
2023
|
|
2022
|
|
% Increase
(Decrease)
|
|
(Dollars and shares in
millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$1,938.6
|
|
$2,205.1
|
|
(12) %
|
|
$3,743.8
|
|
$4,078.1
|
|
(8) %
|
Cost of products
sold
|
1,214.4
|
|
1,504.0
|
|
(19) %
|
|
2,364.8
|
|
2,824.5
|
|
(16) %
|
Gross
Profit
|
724.2
|
|
701.1
|
|
3 %
|
|
1,379.0
|
|
1,253.6
|
|
10 %
|
Gross
margin
|
37.4 %
|
|
31.8 %
|
|
|
|
36.8 %
|
|
30.7 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, distribution,
and administrative expenses
|
333.5
|
|
354.3
|
|
(6) %
|
|
647.1
|
|
698.1
|
|
(7) %
|
Amortization
|
39.6
|
|
55.6
|
|
(29) %
|
|
79.4
|
|
111.2
|
|
(29) %
|
Other special project
costs
|
6.8
|
|
0.7
|
|
n/m
|
|
6.8
|
|
2.1
|
|
n/m
|
Other operating expense
(income) – net
|
45.4
|
|
(2.9)
|
|
n/m
|
|
43.3
|
|
(30.9)
|
|
n/m
|
Operating
Income
|
298.9
|
|
293.4
|
|
2 %
|
|
602.4
|
|
473.1
|
|
27 %
|
Operating
margin
|
15.4 %
|
|
13.3 %
|
|
|
|
16.1 %
|
|
11.6 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense –
net
|
(35.1)
|
|
(39.7)
|
|
(12) %
|
|
(67.2)
|
|
(78.8)
|
|
(15) %
|
Other debt
costs
|
(19.5)
|
|
—
|
|
n/m
|
|
(19.5)
|
|
—
|
|
n/m
|
Other income (expense)
– net
|
5.1
|
|
(0.8)
|
|
n/m
|
|
(27.9)
|
|
(0.3)
|
|
n/m
|
Income Before Income
Taxes
|
249.4
|
|
252.9
|
|
(1) %
|
|
487.8
|
|
394.0
|
|
24 %
|
Income tax
expense
|
54.5
|
|
61.8
|
|
(12) %
|
|
109.3
|
|
93.1
|
|
17 %
|
Net
Income
|
$194.9
|
|
$191.1
|
|
2 %
|
|
$378.5
|
|
$300.9
|
|
26 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per
common share
|
$1.91
|
|
$1.79
|
|
7 %
|
|
$3.70
|
|
$2.82
|
|
31 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per
common share – assuming dilution
|
$1.90
|
|
$1.79
|
|
6 %
|
|
$3.69
|
|
$2.82
|
|
31 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
per common share
|
$1.06
|
|
$1.02
|
|
4 %
|
|
$2.12
|
|
$2.04
|
|
4 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares
outstanding
|
102.1
|
|
106.6
|
|
(4) %
|
|
102.3
|
|
106.6
|
|
(4) %
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares
outstanding – assuming dilution
|
102.4
|
|
106.9
|
|
(4) %
|
|
102.6
|
|
106.8
|
|
(4) %
|
The J.M. Smucker
Co.
Unaudited Condensed
Consolidated Balance Sheets
|
|
|
|
|
|
October 31,
2023
|
|
April 30,
2023
|
|
(Dollars in
millions)
|
Assets
|
|
|
|
Current
Assets
|
|
|
|
Cash and cash
equivalents
|
$3,623.9
|
|
$655.8
|
Trade receivables –
net
|
587.9
|
|
597.6
|
Inventories
|
1,084.9
|
|
1,009.8
|
Investment in equity
securities
|
432.7
|
|
487.8
|
Other current
assets
|
134.7
|
|
107.7
|
Total Current
Assets
|
5,864.1
|
|
2,858.7
|
|
|
|
|
Property, Plant,
and Equipment – Net
|
2,389.3
|
|
2,239.5
|
|
|
|
|
Other Noncurrent
Assets
|
|
|
|
Goodwill
|
5,213.2
|
|
5,216.9
|
Other intangible
assets – net
|
4,349.3
|
|
4,429.3
|
Other noncurrent
assets
|
307.8
|
|
247.0
|
Total Other
Noncurrent Assets
|
9,870.3
|
|
9,893.2
|
Total
Assets
|
$18,123.7
|
|
$14,991.4
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
Current
Liabilities
|
|
|
|
Accounts
payable
|
$1,250.3
|
|
$1,392.6
|
Other current
liabilities
|
584.1
|
|
594.1
|
Total Current
Liabilities
|
1,834.4
|
|
1,986.7
|
|
|
|
|
Noncurrent
Liabilities
|
|
|
|
Long-term
debt
|
7,771.7
|
|
4,314.2
|
Other noncurrent
liabilities
|
1,428.7
|
|
1,399.7
|
Total Noncurrent
Liabilities
|
9,200.4
|
|
5,713.9
|
|
|
|
|
Total Shareholders'
Equity
|
7,088.9
|
|
7,290.8
|
Total Liabilities
and Shareholders' Equity
|
$18,123.7
|
|
$14,991.4
|
The J.M. Smucker
Co.
Unaudited Condensed
Consolidated Statements of Cash Flow
|
|
|
|
|
|
Three Months Ended
October 31,
|
|
Six Months Ended
October 31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(Dollars in
millions)
|
Operating
Activities
|
|
|
|
|
|
|
|
Net income
|
$194.9
|
|
$191.1
|
|
$378.5
|
|
$300.9
|
Adjustments to
reconcile net income to net cash provided by (used for)
operations:
|
|
|
|
|
|
|
|
Depreciation
|
53.0
|
|
57.1
|
|
103.2
|
|
112.2
|
Amortization
|
39.6
|
|
55.6
|
|
79.4
|
|
111.2
|
Pension settlement
loss (gain)
|
—
|
|
1.7
|
|
3.2
|
|
1.7
|
Unrealized loss (gain)
on investment in equity securities – net
|
(5.9)
|
|
—
|
|
21.5
|
|
—
|
Share-based
compensation expense
|
8.6
|
|
(2.6)
|
|
13.7
|
|
5.3
|
Loss (gain) on
divestitures – net
|
13.8
|
|
—
|
|
12.6
|
|
(1.6)
|
Deferred income tax
expense (benefit)
|
(7.4)
|
|
—
|
|
(16.3)
|
|
—
|
Other noncash
adjustments – net
|
4.2
|
|
8.2
|
|
10.2
|
|
12.3
|
Defined benefit
pension contributions
|
(1.1)
|
|
(1.1)
|
|
(1.8)
|
|
(71.8)
|
Changes in assets and
liabilities, net of effect from divestitures:
|
|
|
|
|
|
|
Trade
receivables
|
2.6
|
|
(6.9)
|
|
8.7
|
|
(87.1)
|
Inventories
|
4.9
|
|
(50.8)
|
|
(76.5)
|
|
(273.8)
|
Other current
assets
|
6.8
|
|
22.4
|
|
2.0
|
|
19.1
|
Accounts
payable
|
(49.1)
|
|
4.4
|
|
(92.9)
|
|
77.5
|
Accrued
liabilities
|
42.4
|
|
11.9
|
|
34.7
|
|
20.8
|
Income and other
taxes
|
(121.3)
|
|
(81.9)
|
|
(64.0)
|
|
(56.3)
|
Other – net
|
(9.1)
|
|
(4.1)
|
|
(21.4)
|
|
(4.4)
|
Net Cash Provided
by (Used for) Operating Activities
|
176.9
|
|
205.0
|
|
394.8
|
|
166.0
|
|
|
|
|
|
|
|
|
Investing
Activities
|
|
|
|
|
|
|
|
Additions to property,
plant, and equipment
|
(148.7)
|
|
(102.1)
|
|
(299.0)
|
|
(190.4)
|
Other – net
|
6.9
|
|
(35.7)
|
|
5.3
|
|
(18.9)
|
Net Cash Provided
by (Used for) Investing Activities
|
(141.8)
|
|
(137.8)
|
|
(293.7)
|
|
(209.3)
|
|
|
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
|
|
|
Short-term borrowings
(repayments) – net
|
—
|
|
(88.8)
|
|
—
|
|
118.2
|
Proceeds from
long-term debt
|
3,485.0
|
|
—
|
|
3,485.0
|
|
—
|
Capitalized debt
issuance costs
|
(28.9)
|
|
—
|
|
(28.9)
|
|
—
|
Quarterly dividends
paid
|
(108.0)
|
|
(108.4)
|
|
(213.2)
|
|
(213.5)
|
Purchase of treasury
shares
|
(0.4)
|
|
(0.1)
|
|
(372.4)
|
|
(7.9)
|
Proceeds from stock
option exercises
|
1.2
|
|
5.2
|
|
1.2
|
|
6.1
|
Other – net
|
0.1
|
|
1.4
|
|
(4.0)
|
|
(1.7)
|
Net Cash Provided
by (Used for) Financing Activities
|
3,349.0
|
|
(190.7)
|
|
2,867.7
|
|
(98.8)
|
Effect of exchange
rate changes on cash
|
(1.3)
|
|
(1.0)
|
|
(0.7)
|
|
(0.7)
|
Net increase
(decrease) in cash and cash equivalents
|
3,382.8
|
|
(124.5)
|
|
2,968.1
|
|
(142.8)
|
Cash and cash
equivalents at beginning of period
|
241.1
|
|
151.6
|
|
655.8
|
|
169.9
|
Cash and Cash
Equivalents at End of Period
|
$3,623.9
|
|
$27.1
|
|
$3,623.9
|
|
$27.1
|
The J.M. Smucker
Co.
Unaudited Supplemental
Schedule
|
|
|
|
|
|
Three Months Ended
October 31,
|
|
Six Months Ended
October 31,
|
|
2023
|
|
% of
Net Sales
|
|
2022
|
|
% of
Net Sales
|
|
2023
|
|
% of
Net Sales
|
|
2022
|
|
% of
Net Sales
|
|
(Dollars in
millions)
|
Net sales
|
$1,938.6
|
|
|
|
$2,205.1
|
|
|
|
$3,743.8
|
|
|
|
$4,078.1
|
|
|
Selling, distribution,
and administrative expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing
|
109.4
|
|
5.6 %
|
|
113.3
|
|
5.1 %
|
|
198.0
|
|
5.3 %
|
|
208.9
|
|
5.1 %
|
Selling
|
51.5
|
|
2.7 %
|
|
55.6
|
|
2.5 %
|
|
116.3
|
|
3.1 %
|
|
125.2
|
|
3.1 %
|
Distribution
|
61.0
|
|
3.1 %
|
|
76.5
|
|
3.5 %
|
|
121.9
|
|
3.3 %
|
|
149.3
|
|
3.7 %
|
General and
administrative
|
111.6
|
|
5.8 %
|
|
108.9
|
|
4.9 %
|
|
210.9
|
|
5.6 %
|
|
214.7
|
|
5.3 %
|
Total selling,
distribution, and administrative expenses
|
$333.5
|
|
17.2 %
|
|
$354.3
|
|
16.1 %
|
|
$647.1
|
|
17.3 %
|
|
$698.1
|
|
17.1 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts may not add
due to rounding.
|
|
|
|
|
|
|
|
|
|
|
|
|
The J.M. Smucker
Co.
Unaudited Reportable
Segments
|
|
|
|
|
|
Three Months Ended
October 31,
|
|
Six Months Ended
October 31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(Dollars in
millions)
|
Net sales:
|
|
|
|
|
|
|
|
U.S. Retail
Coffee
|
$685.7
|
|
$709.8
|
|
$1,310.8
|
|
$1,307.7
|
U.S. Retail Consumer
Foods
|
464.3
|
|
432.2
|
|
928.3
|
|
743.3
|
U.S. Retail Pet
Foods
|
464.0
|
|
765.2
|
|
905.0
|
|
1,494.2
|
International and Away
From Home
|
324.6
|
|
297.9
|
|
599.7
|
|
532.9
|
Total net
sales
|
$1,938.6
|
|
$2,205.1
|
|
$3,743.8
|
|
$4,078.1
|
|
|
|
|
|
|
|
|
Segment
profit:
|
|
|
|
|
|
|
|
U.S. Retail
Coffee
|
$171.0
|
|
$187.7
|
|
$341.1
|
|
$333.6
|
U.S. Retail Consumer
Foods
|
128.5
|
|
100.3
|
|
234.2
|
|
155.1
|
U.S. Retail Pet
Foods
|
97.2
|
|
120.1
|
|
178.5
|
|
240.4
|
International and Away
From Home
|
60.2
|
|
41.5
|
|
96.6
|
|
58.1
|
Total segment
profit
|
$456.9
|
|
$449.6
|
|
$850.4
|
|
$787.2
|
Amortization
|
(39.6)
|
|
(55.6)
|
|
(79.4)
|
|
(111.2)
|
Gain (loss) on
divestitures – net
|
(13.8)
|
|
—
|
|
(12.6)
|
|
1.6
|
Interest expense –
net
|
(35.1)
|
|
(39.7)
|
|
(67.2)
|
|
(78.8)
|
Change in net
cumulative unallocated derivative gains and losses
|
(26.3)
|
|
(27.1)
|
|
(15.9)
|
|
(60.9)
|
Cost of products sold
– special project costs
|
—
|
|
(2.8)
|
|
—
|
|
(3.9)
|
Other special project
costs
|
(6.8)
|
|
(0.7)
|
|
(6.8)
|
|
(2.1)
|
Other debt
costs
|
(19.5)
|
|
—
|
|
(19.5)
|
|
—
|
Corporate
administrative expenses
|
(71.5)
|
|
(70.0)
|
|
(133.3)
|
|
(137.6)
|
Other income (expense)
– net
|
5.1
|
|
(0.8)
|
|
(27.9)
|
|
(0.3)
|
Income before income
taxes
|
$249.4
|
|
$252.9
|
|
$487.8
|
|
$394.0
|
|
|
|
|
|
|
|
|
Segment profit
margin:
|
|
|
|
|
|
|
|
U.S. Retail
Coffee
|
24.9 %
|
|
26.4 %
|
|
26.0 %
|
|
25.5 %
|
U.S. Retail Consumer
Foods
|
27.7 %
|
|
23.2 %
|
|
25.2 %
|
|
20.9 %
|
U.S. Retail Pet
Foods
|
20.9 %
|
|
15.7 %
|
|
19.7 %
|
|
16.1 %
|
International and Away
From Home
|
18.5 %
|
|
13.9 %
|
|
16.1 %
|
|
10.9 %
|
Non-GAAP Financial Measures
The Company uses non-GAAP financial measures, including: net
sales excluding divestitures and foreign currency exchange;
adjusted gross profit; adjusted operating income; adjusted income;
adjusted earnings per share; earnings before interest, taxes,
depreciation, amortization, impairment charges related to
intangible assets, and gains and losses on divestitures ("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 financial 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; certain
divestiture, acquisition, integration, and restructuring costs
("special project costs"); gains and losses on divestitures; the
net change in cumulative unallocated gains and losses on commodity
and foreign currency exchange derivative activities ("change in net
cumulative unallocated derivative gains and losses"); and other
infrequently occurring items that do not directly reflect ongoing
operating results. Income taxes, as adjusted is calculated using an
adjusted effective income tax rate that is applied to adjusted
income before income taxes and reflects the exclusion of the
previously discussed items, as well as any adjustments for one-time
tax-related activities, when they occur. While this adjusted
effective income tax rate does not generally differ materially from
the GAAP effective income tax rate, certain exclusions from
non-GAAP financial measures can significantly impact the 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. GAAP.
Rather, the presentation of these non-GAAP financial measures
supplements other metrics used by management to internally evaluate
its businesses and facilitate 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 year 2024 outlook.
The J.M. Smucker
Co.
Unaudited Non-GAAP
Financial Measures
|
|
|
|
|
|
Three Months Ended
October 31,
|
|
Six Months Ended
October 31,
|
|
2023
|
|
2022
|
|
Increase
(Decrease)
|
|
%
|
|
2023
|
|
2022
|
|
Increase
(Decrease)
|
|
%
|
|
(Dollars in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
reconciliation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$1,938.6
|
|
$2,205.1
|
|
($266.5)
|
|
(12) %
|
|
$3,743.8
|
|
$4,078.1
|
|
($334.3)
|
|
(8) %
|
Pet food brands
divestiture
|
—
|
|
(385.0)
|
|
385.0
|
|
17
|
|
—
|
|
(759.1)
|
|
759.1
|
|
19
|
Foreign currency
exchange
|
2.5
|
|
—
|
|
2.5
|
|
—
|
|
6.3
|
|
—
|
|
6.3
|
|
—
|
Net sales excluding
divestiture and
foreign currency exchange
|
$1,941.1
|
|
$1,820.1
|
|
$121.0
|
|
7 %
|
|
$3,750.1
|
|
$3,319.0
|
|
$431.1
|
|
13 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts may not add
due to rounding.
|
|
|
|
|
|
|
|
|
|
|
The J.M. Smucker
Co.
Unaudited Non-GAAP
Financial Measures
|
|
|
|
|
|
Three Months Ended
October 31,
|
|
Six Months Ended
October 31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(Dollars in millions,
except per share data)
|
Gross profit
reconciliation:
|
|
|
|
|
|
|
|
Gross
profit
|
$724.2
|
|
$701.1
|
|
$1,379.0
|
|
$1,253.6
|
Change in net
cumulative unallocated derivative
gains and losses
|
26.3
|
|
27.1
|
|
15.9
|
|
60.9
|
Cost of products sold
– special project costs
|
—
|
|
2.8
|
|
—
|
|
3.9
|
Adjusted gross
profit
|
$750.5
|
|
$731.0
|
|
$1,394.9
|
|
$1,318.4
|
% of net
sales
|
38.7 %
|
|
33.2 %
|
|
37.3 %
|
|
32.3 %
|
|
|
|
|
|
|
|
|
Operating income
reconciliation:
|
|
|
|
|
|
|
|
Operating
income
|
$298.9
|
|
$293.4
|
|
$602.4
|
|
$473.1
|
Amortization
|
39.6
|
|
55.6
|
|
79.4
|
|
111.2
|
Loss (gain) on
divestitures – net
|
13.8
|
|
—
|
|
12.6
|
|
(1.6)
|
Change in net
cumulative unallocated derivative
gains and losses
|
26.3
|
|
27.1
|
|
15.9
|
|
60.9
|
Cost of products sold
– special project costs
|
—
|
|
2.8
|
|
—
|
|
3.9
|
Other special project
costs
|
6.8
|
|
0.7
|
|
6.8
|
|
2.1
|
Adjusted operating
income
|
$385.4
|
|
$379.6
|
|
$717.1
|
|
$649.6
|
% of net
sales
|
19.9 %
|
|
17.2 %
|
|
19.2 %
|
|
15.9 %
|
|
|
|
|
|
|
|
|
Net income
reconciliation:
|
|
|
|
|
|
|
|
Net income
|
$194.9
|
|
$191.1
|
|
$378.5
|
|
$300.9
|
Income tax
expense
|
54.5
|
|
61.8
|
|
109.3
|
|
93.1
|
Amortization
|
39.6
|
|
55.6
|
|
79.4
|
|
111.2
|
Loss (gain) on
divestitures – net
|
13.8
|
|
—
|
|
12.6
|
|
(1.6)
|
Change in net
cumulative unallocated derivative
gains and losses
|
26.3
|
|
27.1
|
|
15.9
|
|
60.9
|
Cost of products sold
– special project costs
|
—
|
|
2.8
|
|
—
|
|
3.9
|
Other special project
costs
|
6.8
|
|
0.7
|
|
6.8
|
|
2.1
|
Other debt costs –
special project costs
|
19.5
|
|
—
|
|
19.5
|
|
—
|
Other expense –
special project costs
|
0.4
|
|
—
|
|
0.4
|
|
—
|
Other infrequently
occurring items:
|
|
|
|
|
|
|
|
Unrealized loss (gain)
on investment in equity
securities – net (A)
|
(5.9)
|
|
—
|
|
21.5
|
|
—
|
Pension plan
termination settlement charge (B)
|
—
|
|
—
|
|
3.2
|
|
—
|
Adjusted income before
income taxes
|
$349.9
|
|
$339.1
|
|
$647.1
|
|
$570.5
|
Income taxes, as
adjusted
|
84.9
|
|
82.9
|
|
155.1
|
|
136.2
|
Adjusted
income
|
$265.0
|
|
$256.2
|
|
$492.0
|
|
$434.3
|
Weighted-average
shares outstanding – assuming dilution
|
102.4
|
|
106.9
|
|
102.6
|
|
106.8
|
Adjusted earnings per
share – assuming dilution
|
$2.59
|
|
$2.40
|
|
$4.80
|
|
$4.07
|
|
|
|
|
|
|
|
|
(A) Net
unrealized loss (gain) on investment in equity securities includes
unrealized gains and losses on the change in fair value on
the Company's investment in Post common
stock and the related equity forward contract.
(B)
Represents the nonrecurring pre-tax settlement charge recognized
during the first quarter of 2024 related to the acceleration of
prior service cost for the portion of
the plan surplus to be allocated to plan members within our
Canadian defined benefit plans,
which is subject to regulatory approval
before a payout can be made.
|
The J.M. Smucker
Co.
Unaudited Non-GAAP
Financial Measures
|
|
|
|
|
|
Three Months Ended
October 31,
|
|
Six Months Ended
October 31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(Dollars in
millions)
|
EBITDA (as adjusted)
reconciliation:
|
|
|
|
|
|
|
|
Net income
|
$194.9
|
|
$191.1
|
|
$378.5
|
|
$300.9
|
Income tax
expense
|
54.5
|
|
61.8
|
|
109.3
|
|
93.1
|
Interest expense –
net
|
35.1
|
|
39.7
|
|
67.2
|
|
78.8
|
Depreciation
|
53.0
|
|
57.1
|
|
103.2
|
|
112.2
|
Amortization
|
39.6
|
|
55.6
|
|
79.4
|
|
111.2
|
Loss (gain) on
divestitures – net
|
13.8
|
|
—
|
|
12.6
|
|
(1.6)
|
EBITDA (as
adjusted)
|
$390.9
|
|
$405.3
|
|
$750.2
|
|
$694.6
|
% of net
sales
|
20.2 %
|
|
18.4 %
|
|
20.0 %
|
|
17.0 %
|
|
|
|
|
|
|
|
|
Free cash flow
reconciliation:
|
|
|
|
|
|
|
|
Net cash provided by
(used for) operating activities
|
$176.9
|
|
$205.0
|
|
$394.8
|
|
$166.0
|
Additions to property,
plant, and equipment
|
(148.7)
|
|
(102.1)
|
|
(299.0)
|
|
(190.4)
|
Free cash
flow
|
$28.2
|
|
$102.9
|
|
$95.8
|
|
($24.4)
|
The following tables provide a reconciliation of the Company's
fiscal 2024 guidance for estimated adjusted earnings per share and
free cash flow.
|
|
Year Ending April 30,
2024
|
|
|
Low
|
|
High
|
Net income per common
share – assuming dilution reconciliation:
|
|
|
|
|
Net income per common
share – assuming dilution (A)
|
|
$6.05
|
|
$6.45
|
Change in net
cumulative unallocated derivative gains and losses
(B)
|
|
0.10
|
|
0.10
|
Amortization
(A)
|
|
1.60
|
|
1.60
|
Special project costs
(A)
|
|
0.98
|
|
0.98
|
Loss on
divestitures
|
|
0.09
|
|
0.09
|
Unrealized loss (gain)
on investment in equity securities – net (C)
|
|
0.15
|
|
0.15
|
Pension plan
termination settlement charge
|
|
0.02
|
|
0.02
|
Adjusted effective
income tax rate impact (A)
|
|
0.26
|
|
0.26
|
Adjusted earnings per
share
|
|
$9.25
|
|
$9.65
|
|
|
|
|
|
(A)
Includes estimates related to the Hostess Brands acquisition,
including amortization, special project costs, and the
effective
income tax rate impact. These are
preliminary estimates that could differ materially as the Company
continues to evaluate the
impact of purchase accounting
adjustments.
(B) We are
unable to project derivative gains and losses on a forward-looking
basis as these will vary each quarter based on market
conditions and derivative positions
taken. The change in unallocated derivative gains and losses in the
table above reflects the net
impact of the gains and losses that
have been recognized in our GAAP results and excluded from non-GAAP
results as of
October 31, 2023, adjusted for the
gains and losses expected to be allocated to non-GAAP results for
the year ended April 30,
2024.
(C) The net
unrealized loss on investment in equity securities in the table
above reflects the forward sale of 5.4 million shares of Post
common stock received from the pet food
divestiture that will settle for $466.3 million during the third
quarter of 2024.
|
|
|
|
|
|
|
|
Year Ending
April 30, 2024
|
|
|
|
|
(Dollars in
millions)
|
|
|
Free cash flow
reconciliation:
|
|
|
|
|
Net cash provided by
operating activities
|
|
$1,140
|
|
|
Additions to property,
plant, and equipment
|
|
(610)
|
|
|
Free cash flow
(A)
|
|
$530
|
|
|
|
|
|
|
|
(A) The
change in free cash flow and capital expenditure guidance, compared
to previous expectations, is primarily due to transaction
and integration costs and capital
expenditures associated with the Hostess Brands
acquisition.
|
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SOURCE The J.M. Smucker Co.