Orrville, Ohio, Feb. 25 - The J. M. Smucker Company today announced results for the third quarter ended January 31, 2009, of its 2009 fiscal year. Results for the three-month and nine-month periods ended January 31, 2009, include the operations of The Folgers Coffee Company since the completion of the merger on November 6, 2008.
Highlights
- Net sales increased 78 percent led by Folgers
- Net income increased 84 percent
- EPS down 9 percent due to Folgers merger and integration charges, EPS up 11 percent excluding charges
- Company updates fiscal 2009 outlook and confirms long-term strategic objectives
We delivered strong financial performance this quarter with solid results in our core Smucker business and the addition of Folgers," commented Richard Smucker, Executive Chairman and Co-Chief Executive Officer. "The Folgers merger was completed early in the quarter and contributed to margin expansion and significantly increased cash flow. The integration remains on track and we appreciate the commitment of our employees both in integrating Folgers, and maintaining their focus on the core business."
"In difficult economic times, families look for reassurance, comfort, consistency and quality -- all hallmarks of our brands," added Tim Smucker, Chairman of the Board and Co-Chief Executive Officer. "We are able to meet our consumers' needs by providing choices within our product offerings, a steady stream of innovation, consumer value and products they can trust. As a result, we are well-positioned to navigate today's tough economic times and, more importantly, our focus on the long-term will position us for future growth."
With the addition of Folgers, the Company added the U.S. retail coffee market reportable segment representing the domestic sales of Folgers(R), Millstone(R), and Dunkin' Donuts(R) branded coffee to retail customers. Coffee sales to other than domestic retail customers are included in the special markets segment.
U.S. Retail Market
U.S. retail market segment net sales for the quarter were up 9 percent, with pricing accounting for the majority of the increase. Net sales in the consumer strategic business area increased 9 percent, with gains in Smucker's(R) fruit spreads, Jif(R) and Hungry Jack(R). Acquisitions contributed approximately one-quarter of the consumer increase. Net sales in the consumer oils and baking strategic business area were also up 9 percent, with increases in Pillsbury(R), Crisco(R) and Eagle Brand(R) canned milk, primarily due to the effect of price increases. Volume gains were realized in baking mixes, frostings, and canned milk. While total volume in the business area was down 11 percent most of the decline was expected and reflects the impact of last year's price increases in oils and flour.
For the first nine months of 2009, U.S. retail market segment net sales increased 14 percent compared to the first nine months of 2008 with net sales up 12 percent in the consumer strategic business area, and up 15 percent in the consumer oils and baking strategic business area.
U.S. retail market segment profit increased 39 percent for the quarter, sharply ahead of the increase in net sales, and 16 percent for the first nine months of 2009 compared to the same periods in 2008. Much of the gain was in the oils and baking area with almost half of the segment profit increase attributable to improvements in the canned milk business. A better match of prices to costs this year compared to last year accounted for most of the remainder of the profit increase.
U.S. Retail Coffee Market
The U.S. retail coffee market segment contributed $442.9 million to net sales and $90.2 million in segment profit for the third quarter of 2009. On a pro forma basis, net sales increased 4 percent for the quarter as growth in Dunkin' Donuts(R) contributed to net sales and margin growth. Integration of the Folgers business is proceeding as planned as the Company completed its customer facing activities at the beginning of February, achieving a key milestone.
Special Markets
Net sales in the third quarter for the special markets segment increased 17 percent. Canada strategic business area net sales were flat, as the impact of the Europe's Best(R) acquisition and pricing gains were offset by unfavorable foreign exchange. In local currency, Canada net sales increased 3 percent excluding acquisitions. Net sales increased in the foodservice business area by 64 percent, as the acquisition of Folgers added $25.6 million of the increase and the Knott's Berry Farm(R) acquisition also contributed. The gains from acquisitions accounted for most of the increase, and more than offset declines in the portion control business resulting from a decrease in away-from-home dining. Net sales in the beverage business area were down 7 percent. For the first nine months of 2009, special markets segment net sales are up 23 percent, primarily due to acquisitions.
Special markets segment profit increased 7 percent for the quarter and 10 percent for the first nine months of 2009 compared to the same periods in 2008, again resulting from the impact of recent acquisitions.
Other Financial Results and Measures
For the third quarter of 2009, EBITDA was $179 million, or 15.1 percent of net sales, compared to $85.6 million, or 12.9 percent of net sales in the third quarter of 2008, reflecting better margin on the Company's core brands and the impact of the Folgers merger. Cash provided by operating activities increased $138.4 million to $280.3 million during the quarter resulting from the completion of the Fall Bake season, and the contribution from Folgers. As a result, the Company had $359.9 million in cash and cash equivalents on hand at January 31, 2009.
Outlook
The Company estimates net sales for fiscal 2009 to range from $3.6 to $3.7 billion, down from a previous range of $3.8 to $4.0 billion. Non-GAAP income per diluted share, excluding restructuring and merger and integration costs, is estimated to range from $3.15 to $3.30. The new income per share range includes the incremental noncash amortization expense related to Folgers and the anticipated impact from ongoing pressure in the peanut butter category. The effect of lost peanut butter sales and margins, along with the related additional advertising and consumer communication costs, and unrecovered overhead are expected to result in a negative impact in the range of $0.05 to $0.07 per diluted share. The Company remains committed to its long-term strategic objectives of 6 percent annual sales growth and greater than 8 percent earnings per share growth.