The J. M. Smucker Co. announced results for the third quarter ended Jan. 31, 2012, of its 2012 fiscal year. Results for the quarter and nine months ended Jan. 31, 2012, include the operations of Rowland Coffee Roasters, Inc. and the North American foodservice coffee and hot beverage business acquired from Sara Lee Corp. since the completion of each acquisition on May 16, 2011 and Jan. 3, 2012, respectively.
Non-GAAP income per diluted share was $1.22 and $1.27 for the third quarters of 2012 and 2011, and $3.63 and $3.69 for the first nine months of 2012 and 2011, respectively, a decrease of 4 percent and 2 percent for the quarter and the first nine months, respectively. GAAP and non-GAAP results include the impact of an $11.3 million loss on the sale of business in the first nine months of 2012, and a noncash impairment charge of $17.2 million in the third quarter and first nine months of 2011, both related to the Europe's Best® frozen fruit and vegetable business.
A greater-than-anticipated decline in overall sales volume was the primary driver of the decrease in income per diluted share in the third quarter of 2012, compared to 2011.
Non-GAAP income per diluted share excludes restructuring and merger and integration costs ("special project costs") of $0.19 and $0.16 per diluted share in the third quarters of 2012 and 2011, and $0.51 and $0.46 for the first nine months of 2012 and 2011, respectively.
"Although sales increased 12 percent for the quarter, we were disappointed with overall volume and its impact on earnings," said Vince Byrd, president and chief operating officer in a prepared statement. "Despite having strong merchandising programs in place for the holiday period, our volume was lower than expected as a result of our higher price points coupled with lower consumer demand across the food industry. Looking forward, we are encouraged that our share of market remains strong and that commodity costs are moderating, providing opportunities to adjust pricing and promotional activities to better meet the needs of our consumers."
"While it was a difficult quarter, we remain confident in the strength of our #1 brands and our strategy to position the company for continued growth," continued Richard Smucker, chief executive officer. "Our focus remains on the long term and making strides in growing through product innovations, acquisitions, brand building, and productivity initiatives. We see economic indicators improving, and believe this will further consumer confidence, ultimately allowing consumers to adjust to market conditions."
Net sales increased 12 percent in the third quarter of 2012, as compared to the third quarter of 2011, driven primarily by the impact of prior pricing actions and acquisitions. The addition of the Rowland Coffee brands earlier in the fiscal year and the Sara Lee business during the most recent quarter contributed $33.0 million and $26.9 million to net sales in the third quarter of 2012, respectively, and combined represented 5 percentage points of the net sales increase. The overall impact of sales mix was favorable primarily due to K-Cups®.
Overall volume, as measured in tonnage, was down 10 percent in the third quarter of 2012, compared to the third quarter of 2011, primarily driven by Crisco® shortening and oils, Folgers® coffee, and Jif® peanut butter. Shipments measured by units were down 8 percent. While the company entered the Fall Bake and Holiday period with a solid mix of merchandising and marketing programs, consumer takeaway across the food industry was lower during the quarter than in the prior year. Additionally, the company's volume decline was attributed to four primary reasons:
Retail price points were significantly higher in the third quarter of 2012, compared to the prior year.
Consumer pantry loading of peanut butter during the second quarter of 2012 was higher than originally estimated and resulted in lower volume during the third quarter.