The J. M. Smucker Co. announced results for the first quarter ended July 31, 2011, of its 2012 fiscal year. Results for the quarter ended July 31, 2011, include the operations of Rowland Coffee Roasters, Inc. since the completion Non-GAAP (Generally Accepted Accounting Principles) income per diluted share was $1.12 and $1.04 for the first quarters of 2012 and 2011, respectively, an increase of 8 percent.
Non-GAAP income per diluted share excludes restructuring and merger and integration costs ("special project costs") of $0.14 and $0.18 per diluted share, in the first quarters of 2012 and 2011, respectively.
Results for the first quarter of 2012 were impacted by a higher effective tax rate of 33.2 percent, compared to 31.3 percent in the first quarter of 2011.
Income per diluted share in the first quarter of 2012 benefited from a decrease in weighted-average common shares outstanding, as a result of the company's share repurchase activity during the second half of fiscal 2011.
"We delivered strong sales and earnings growth this quarter, with net price realization across most categories and contributions from the recently acquired Rowland Coffee business," commented Richard Smucker, chief executive officer in a prepared statement. "While the market place remains very competitive, we are confident in our team's ability to respond swiftly in the current environment to meet the needs of our consumers. Additionally, we are encouraged that costs have moderated in the green coffee markets. As a result, we are confident in confirming our earnings outlook for the fiscal year. Further, we remain committed to building our brands for the long-term."
Gross profit increased $22.6 million, or 6 percent, in the first quarter of 2012, compared to 2011, as the increase in net sales more than offset overall higher raw material costs. Excluding special project costs, gross profit increased $23.6 million, or 6 percent. Price increases taken over the past year, predominantly in the coffee category, to offset higher commodity costs contributed to incremental gross profit, but margin contracted as expected. Gross margin declined from 39.9 percent in the first quarter of 2011 to 37.1 percent in the first quarter of 2012, excluding special project costs. Significantly higher costs were realized for green coffee in the first quarter of 2012, compared to 2011. While green coffee costs have moderated from 34-year highs earlier in the calendar year, the company expects that it will continue to recognize considerably higher green coffee costs in 2012, compared to 2011, most notably in its second quarter. Costs were also higher for flour, soybean oil, and other raw materials in the first quarter of 2012, compared to 2011. While the net unfavorable impact of a $3.2 million change in unrealized mark-to-market adjustments on derivative contracts in the first quarter of 2012, compared to 2011, was not significant to the overall company, the impact by segment varied.
Selling, distribution, and administrative (SD&A) expenses in the first quarter of 2012 increased 7 percent, compared to the first quarter of 2011, but decreased as a percentage of net sales from 19.4 percent to 18.2 percent. Marketing expenses decreased 1 percent in the first quarter of 2012, compared to the first quarter of 2011. A transfer of marketing funds to trade promotions in the U.S. retail consumer foods segment more than offset increased marketing expenses in the company's two other segments. Over the same period, selling and general and administrative expenses both increased 13 percent while distribution expenses increased 4 percent. The addition of the Rowland Coffee business during the quarter represented slightly more than one-third of the overall increase in SD&A expenses. In addition, higher amortization expense was recognized in the first quarter of 2012, compared to 2011, primarily related to the intangible assets associated with the Rowland Coffee acquisition.