J. M. Smucker Co. Reports 14 Percent Net Sales Gain In Fourth Quarter

The J. M. Smucker Co. announced results for the fourth quarter and year ended April 30, 2012. Results for the quarter and year ended April 30, 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 $1.10 and $1.00 for the fourth quarters of 2012 and 2011, and $4.73 and $4.69 for the years ended April 30, 2012 and 2011, respectively, an increase of 10 percent and 1 percent for the quarter and full year, respectively.

GAAP and non-GAAP results include the impact, related to the Europe's Best® frozen fruit and vegetable business, of an $11.3 million loss on the sale of business in the year ended April 30, 2012, and a noncash impairment charge of $17.2 million in the year ended April 30, 2011.

Non-GAAP income per diluted share excludes restructuring and merger and integration costs ("special project costs") of $0.17 and $0.18 per diluted share in the fourth quarters of 2012 and 2011, and $0.67 and $0.64 for the years ended April 30, 2012 and 2011, respectively.

"We are pleased to have delivered another year of record sales and year-over-year earnings per share growth in a complex macroeconomic environment," commented Richard Smucker, chief executive officer in a prepared statement. "As we look ahead, we will continue to invest in our portfolio of trusted brands, build upon our recent acquisitions, advance our extensive pipeline of innovation, further our supply chain productivity initiatives, and build upon the foundation being laid in China. We are well-positioned for continued growth."

"While higher food prices continue to pose a challenge to consumers, we believe that softening commodity costs should provide some relief to improve volume. We remain committed to price leadership as demonstrated by our recent six percent price decrease on coffee," said Vince Byrd, president and chief operating officer. "In this economic environment, it is important to continue to build our brands for the long term while maintaining our ability to quickly adjust our marketing tactics to meet ever-changing consumer needs."

Net sales increased 14 percent in the fourth quarter of 2012, compared to the fourth quarter of 2011, driven primarily by the impact of acquisitions and higher realized prices. The Sara Lee foodservice business and Rowland Coffee acquisitions during the year contributed $97.4 million and $28.4 million to net sales in the fourth quarter of 2012, respectively, and combined represented 11 percentage points of the net sales increase. The impact of sales mix was favorable primarily due to K-Cups®.

Overall volume, excluding acquisitions, was down 7 percent in the fourth quarter of 2012, compared to the fourth quarter of 2011, primarily driven by Jif® peanut butter, Pillsbury® baking mixes, and Folgers® coffee. The overall volume decline, compared to last year's fourth quarter, was generally in line with the company's expectation of continued weak consumer purchases, attributed mostly to significantly higher retail prices and the competitive environment.

Gross profit increased $28.8 million, or 7 percent, in the fourth quarter of 2012, compared to 2011, and increased $20.0 million, excluding special project costs, due to acquisitions. During the fourth quarter of 2012, commodity costs were higher, compared to the fourth quarter of 2011, most significantly for green coffee and peanuts. The impact of lower volume in the base business more than offset the net benefit of higher prices taken in response to higher costs. Included in overall higher costs, the net effect of the change in unrealized mark-to-market adjustments on derivative contracts was $5.9 million unfavorable and primarily related to coffee. Gross margin contracted from 36.8 percent in the fourth quarter of 2011 to 33.7 percent in the fourth quarter of 2012, excluding special project costs.