J.M. Smucker Co. Reports Second Quarter And Six Month Loss

The J. M. Smucker Co. announced results for the second quarter ended Oct. 31, 2011, of its 2012 fiscal year. Results for the quarter and six months ended Oct. 31, 2011, include the operations of Rowland Coffee Roasters, Inc. since the completion of the acquisition on May 16, 2011.

GAAP and non-GAAP results for the second quarter and first six months of 2012 include a loss of approximately $11.3 million on the company's divestiture of the Europe's Best® frozen fruit and vegetable business.

Non-GAAP income per diluted share was $1.29 and $1.38 for the second quarters of 2012 and 2011, and $2.41 and $2.42 for the first six months of 2012 and 2011, respectively, a decrease of 7 percent for the quarter and flat for the first six months.

Non-GAAP income per diluted share excludes restructuring and merger and integration costs ("special project costs") of $0.17 and $0.13 per diluted share in the second quarters of 2012 and 2011, and $0.32 and $0.31 for the first six months of 2012 and 2011, respectively.

Results for the second quarter of 2012 were impacted by a higher effective tax rate of 34.1 percent, compared to 32.5 percent in the second quarter of 2011.

Income per diluted share in the second quarter and first six months of 2012 benefited from a decrease in weighted-average common shares outstanding, as a result of the company's share repurchase activities.

"We delivered record sales growth in the quarter including robust contributions from product innovation such as our K-Cups® and seasonal offerings. As we head into the key holiday period, our strong leading brands are trusted and remain well positioned to meet the varying needs of our consumers, including helping to bring their families together to share memorable meals and moments," commented Richard Smucker, chief executive officer in a prepared statement. "Additionally, we are effectively managing this period of significant cost inflation, where our cost of goods sold increased approximately 30 percent for the quarter, yet, we posted gross profit growth. As always, our focus remains on effectively managing the balance between volume, market share, and profitability, while continuing to invest in our brands."

Net sales in the second quarter of 2012 increased $235.0 million, or 18 percent, compared to the second quarter of 2011, due primarily to net price realization across many of the company's brands. The Rowland Coffee brands acquired earlier in the year contributed approximately 2 percent to net sales for the second quarter of 2012 and, combined with the favorable impact of foreign exchange rates, offset a 1 percent decline in volume, compared to the second quarter of 2011. Volume gains were realized in Pillsbury® baking mixes and Jif® peanut butter, but were more than offset by declines in nonbranded beverages, Crisco® oils, Folgers® coffee, and Pillsbury® flour. The overall impact of sales mix was favorable.

Gross profit increased $4.0 million, or 1 percent, in the second quarter of 2012, compared to 2011, and increased $4.6 million, excluding special project costs. Price increases taken over the past year effectively offset higher commodity costs and contributed to gross profit, while margin contracted as expected. Gross margin declined from 39.6 percent in the second quarter of 2011 to 33.8 percent in the second quarter of 2012, excluding special project costs. Significantly higher costs were realized for green coffee in the second quarter of 2012, compared to 2011. Costs were also higher for edible oils, flour, milk, sweetener, peanuts, and other raw materials. The net unfavorable impact of a $4.3 million change in unrealized mark-to-market adjustments on derivative contracts in the second quarter of 2012, compared to 2011, also impacted gross profit.