The J.M. Smucker Company 10-K

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SMUCKER J M CO 10-K 2008
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0000950152-08-005018.txt : 20080627
0000950152-08-005018.hdr.sgml : 20080627
20080627163226
ACCESSION NUMBER:		0000950152-08-005018
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		36
CONFORMED PERIOD OF REPORT:	20080430
FILED AS OF DATE:		20080627
DATE AS OF CHANGE:		20080627

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SMUCKER J M CO
		CENTRAL INDEX KEY:			0000091419
		STANDARD INDUSTRIAL CLASSIFICATION:	CANNED, FRUITS, VEG & PRESERVES, JAMS & JELLIES [2033]
		IRS NUMBER:				340538550
		STATE OF INCORPORATION:			OH
		FISCAL YEAR END:			0430

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-05111
		FILM NUMBER:		08922990

	BUSINESS ADDRESS:	
		STREET 1:		STRAWBERRY LN
		CITY:			ORRVILLE
		STATE:			OH
		ZIP:			44667
		BUSINESS PHONE:		3306823000

	MAIL ADDRESS:	
		STREET 1:		STRAWBERRY LANE, P.O. BOX 280
		CITY:			ORRVILLE
		STATE:			OH
		ZIP:			44667


10-K
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THE J.M. SMUCKER COMPANY   10-K



The J.M. Smucker Company    10-K



Table of Contents




 

 







UNITED STATES SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549


FORM 10-K














                 
    þ           ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the fiscal year ended April 30, 2008



or














                 
    o           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the transition period from            to           



Commission file number 001-5111


THE J. M. SMUCKER COMPANY


(Exact name of registrant as specified in its charter)





























                 
    Ohio

(State or other jurisdiction of incorporation or organization)
          34-0538550

(I.R.S. Employer Identification No.)
                 
    One Strawberry Lane 

Orrville, Ohio

(Address of principal executive offices)
          

44667-0280

(Zip code)



Registrant’s telephone number, including area code (330) 682-3000


Securities registered pursuant to Section 12(b) of the Act:





























                 
    Title of each class           Name of each exchange on which registered
    Common shares, no par value
          New York Stock Exchange
    Rights to purchase preferred shares
          New York Stock Exchange



Securities registered pursuant to Section 12(g) of the Act: None


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
 Yes þ No o


Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.

Yes o No þ


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
 Yes þ No o


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. þ


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):









Large accelerated filer þ Accelerated filer o  Non-accelerated filer o

(Do not check if a smaller reporting company) Smaller reporting company o


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
 Yes o No þ


The aggregate market value of the common shares held by nonaffiliates of the registrant at October
31, 2007, was $2,771,180,344. As of June 23, 2008, 54,767,534 common shares of The J. M. Smucker
Company were issued and outstanding.


DOCUMENTS INCORPORATED BY REFERENCE


Certain sections of the registrant’s definitive Proxy Statement to be filed in connection with its
Annual Meeting of Shareholders to be held on August 21, 2008, are incorporated by reference into
Part III of this Report, and certain sections of the registrant’s 2008 Annual Report to
Shareholders are incorporated by reference into Parts I and II of this Report.


The
exhibit index for this Report begins on page 18.



 

 






 









TABLE OF CONTENTS


















































	 	 	 	 	 	 	 	 	
PART I
Item 1. Business.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties.
Item 3. Legal Proceedings.
Item 4. Submissions of Matters to a Vote of Security Holders.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Item 6. Selected Financial Data.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Item 8. Financial Statements and Supplementary Data.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Item 9A. Controls and Procedures.
Item 9B. Other Information.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Item 13. Certain Relationships and Related Transactions.
Item 14. Principal Accountant Fees and Services.
PART IV
Item 15. Exhibits and Financial Statement Schedules.
SIGNATURES
INDEX OF EXHIBITS
EX-10.43
EX-10.44
EX-13
EX-21
EX-23
EX-24
EX-31.1
EX-31.2
EX-31.3
EX-32




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PART I





Item 1. Business.



     The Company. The J. M. Smucker Company (the “Company”) was established in 1897 and
was incorporated in Ohio in 1921. The Company, often referred to as Smucker’s (a registered
trademark), operates principally in one industry, the manufacturing and marketing of branded food
products on a worldwide basis, although the majority of the Company’s sales are in the United
States. The Company’s operations outside the United States are principally in Canada although
products are exported to other countries as well. Sales outside the United States represent
approximately 13 percent of total consolidated Company sales for fiscal 2008.


     The Company has two reportable segments: U.S. retail market and special markets. The
Company’s U.S. retail market segment, comprising over 74 percent of the Company’s net sales,
includes the consumer and consumer oils and baking businesses and represents a large portion of the
strategic focus area for the Company — the sale of branded food products with leadership positions
to consumers through retail outlets in North America. The special markets segment represents the
aggregation of the foodservice, beverage, Canada, and international businesses.


     Principal Products. The principal products of the Company, which are sold in both the
Company’s U.S. retail market segment and special markets segment, are peanut butter, shortening and
oils, fruit spreads, canned milk, baking mixes and ready-to-spread frostings, flour and baking
ingredients, juices and beverages, frozen sandwiches, dessert toppings, syrups, pickles and
condiments, and potato side dishes.


     Product sales information for the years 2008, 2007, and 2006 is incorporated herein by
reference to information set forth in the Company’s 2008 Annual Report to Shareholders, on pages 44
through 46 under “Note E: Reportable Segments.”


     In the U.S. retail market segment, the Company’s products are primarily sold through brokers
to food retailers, food wholesalers, club stores, mass merchandisers, discount stores, and military
commissaries. In the special markets segment, the Company’s products are distributed domestically
and in foreign countries through retail channels, foodservice distributors and operators (i.e.,
restaurants, schools and universities, healthcare operators), health and natural foods stores and
distributors.


     Sources and Availability of Raw Materials. The raw materials used by the Company in
each of its segments are primarily commodities and agricultural-based products. Glass, plastic,
caps, carton board, and corrugate are the principal packaging materials used by the Company. The
fruit and vegetable raw materials used by the Company in the production of its food products are
purchased from independent growers and suppliers. Sweeteners, peanuts, oils, milk, wheat and
flour, corn, and other ingredients are obtained from various suppliers. The cost and availability
of many of these commodities have fluctuated, and may continue to fluctuate, over time. The
Company also uses commodity futures and options to manage some of its costs. Raw materials are
available from numerous sources, and the Company believes that it will continue to be able to
obtain adequate supplies. The Company has not historically encountered shortages of key raw
materials. The Company considers its relationship with key raw material suppliers to be good.


     Trademarks and Patents. The Company’s products are produced under certain patents and
marketed under numerous trademarks owned by the Company or one of its subsidiaries. Major
trademarks, utilized primarily in the U.S. retail market segment, include: Smucker’s, Jif, Crisco,
Eagle Brand, Mary Ellen, Dutch Girl, Martha White, LaPina, White Lily, Hungry Jack, Uncrustables,
Simply Jif, Golden Temple, Softasilk, Dickinson’s, Crosse & Blackwell, Funfetti, Adams, Laura
Scudder’s, Goober, Pet, Magic Shell, and Simple Measures. Major trademarks primarily utilized in
the special markets segment include: Smucker’s, Jif, Crisco, Plate Scapers, Bick’s, Five Roses,
Robin Hood, Carnation, Europe’s Best, R. W. Knudsen Family, Santa Cruz Organic, Double Fruit,
Simply Nutritious, Recharge, and Red River. Pillsbury, the Pillsbury Barrelhead logo, and
Pillsbury Doughboy are trademarks of The


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Pillsbury Company, used by the Company under a 20-year, perpetually renewable, royalty-free
license. Carnation is a trademark of Societe des Produits Nestle S.A., used under license. Borden
and the Elsie design are trademarks used under license. In addition, the Company or one of its
subsidiaries licenses the use of several other trademarks, none of which individually is material
to the Company’s business.


     Slogans or designs considered to be important trademarks include (without limitation) the
slogan, “With A Name Like Smucker’s, It Has To Be Good,” “Choosy Moms Choose Jif,” “Purely The
Finest,” “Kids Bake It Fun,” “Start Something Good with Crisco,” “We’ve Got Ice Cream Covered,”
“Everybody’s Happy When It’s Hungry Jack,” “Goodness Gracious, It’s Good,” the Smucker’s banner,
the Crock Jar shape, the Gingham design, and the Strawberry logo.


     The Company considers all of these trademarks and the Pillsbury license to be essential to its
business.


     Seasonality. The Company’s consumer oils and baking business is moderately seasonal
around the “fall bake” period, which generally impacts sales and profits in the Company’s second
and third quarters. The overall impact of seasonal trends, however, is not considered significant.


     Working Capital. Working capital requirements are greatest during the first half of
the Company’s fiscal year mainly due to the timing of fruit and vegetable procurement and the
buildup of inventories necessary to support the “fall bake” season.


     Customers. Sales to Wal-Mart Stores, Inc., and its subsidiaries amounted to
approximately 20 percent, 20 percent, and 18 percent of net sales in 2008, 2007, and 2006,
respectively. These sales are primarily included in the U.S. retail market segment. No other
customer exceeded 10 percent of net sales during 2008, 2007, and 2006.


     Orders. Generally, orders are filled within a few days of receipt, and the backlog of
unfilled orders at any particular time has not been material on a historical basis.


     Government Business. No material portion of the Company’s business is subject to
negotiation of profits or termination of contracts at the election of the government.


     Competition. The Company is the branded market leader in the peanut butter,
shortening and oils, sweetened condensed milk, fruit spreads, dessert toppings, and health and
natural foods beverages categories. The Company’s business is highly competitive as all of its
brands compete for retail shelf space with other advertised and branded products as well as
unadvertised and private label products.


     The Jif brand has been a leader in the peanut butter category for over 20 years, while the
Company’s natural peanut butter business, sold under the Smucker’s, Adam’s, and Laura Scudder’s
brands, maintains a strong leadership position in the natural peanut butter category. Crisco has
been a leader in the shortening and cooking oils categories for over 50 years. Crisco holds a
leading position among branded competitors in both the oils and shortening categories. The oils
category in which Crisco competes is a more competitive category due to a larger private label
presence and volatile commodity pricing. The Company’s fruit spread brands, including Smucker’s
and Dickinson’s, hold the leading position in the category and compete with one major branded line
of fruit spreads and many private label brands. The competing brands exist on both a national and
a regional level.


     The Company competes in the dessert and baking mixes (“DBM”) market that includes mixes for
cakes, cookies, brownies, muffins, and quick breads, as well as ready-to-spread frostings and
ingredients used in scratch baking such as flour. Within the DBM category, the Company competes
primarily with two major national and many private label brands. The Company’s Hungry Jack brand
competes in three primary market categories: pancake mix, potato side dishes, and table syrup. The
Company competes with several major national as well private label brands in these categories.


     The Company competes in the canned milk category with both branded and nonbranded products.


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The Company is the branded market leader in the sweetened condensed category with over 50 percent
market share with its Eagle Brand and Magnolia brands. In the evaporated milk category, the
Company has a significant presence with its production of private label brands where it competes
primarily with one major national brand.


     The continued growth of alternative store formats, product and packaging innovations,
technological advances, and new industry techniques are all issues for companies in the food
industry to consider in order to remain competitive. The primary ways in which products are
distinguished are product quality, price, packaging, new product introductions, nutritional value,
convenience, customer service, advertising, and promotion. Positive factors pertaining to the
Company’s competitive position include well-recognized brands, superior product quality,
experienced brand management, a single national grocery broker in the United States, varied product
offerings, product innovation, and a strong distribution network.


     Research and Development. The Company predominantly utilizes in-house resources to
both develop new products and improve existing products in each of its business areas. Amounts
expensed for product development were $9,547,000, $9,680,000, and $10,781,000 in 2008, 2007, and
2006, respectively.


     Environmental Matters. Compliance with the provisions of federal, state, and local
environmental regulations regarding either the discharge of materials into the environment or the
protection of the environment is not expected to have a material effect upon the Company’s capital
expenditures, earnings, or competitive position.


     Employees. At April 30, 2008, the Company had approximately 3,250 full-time
employees, worldwide. Approximately 31 percent of these employees, located at nine facilities, are
covered by union contracts. These contracts vary in term depending on the location. The Company
believes its relations with its current employees are good.



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     Financial Information About Industry Segments and Geographical Areas. The financial
information required to be included in this item concerning reportable industry segments and
international operations for the years 2008, 2007, and 2006 is incorporated herein by reference to
information set forth in the Company’s 2008 Annual Report to Shareholders, on pages 44 through 46,
under “Note E: Reportable Segments.” The Company’s international operations are primarily in
Canada with risks similar to those associated with the U.S. retail market segment. The Company’s
Canada sales primarily represent the sale of Canadian produced products to Canadian customers.


     Forward-Looking Statements. This report includes forward-looking statements that are
based on current expectations and are subject to a number of risks and uncertainties that could
cause actual results to differ materially from expected or projected results. The descriptions of
risks and uncertainties relating to forward-looking statements is incorporated herein by reference
to information set forth in the Company’s 2008 Annual Report to Shareholders under the caption
“Forward-Looking Statements” on page 26.


     Available Information. Access to all Securities and Exchange Commission (“SEC”)
filings made by the Company, including its annual report on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act, is provided, free of charge, on the Company’s Web site
(www.smuckers.com/fc/investor/) as soon as reasonably practicable after such reports are
electronically filed with, or furnished to, the SEC.




Item 1A. Risk Factors



     The Company’s business, operations, and financial condition are subject to various risks and
uncertainties. The risk factors described below should be carefully considered, together with the
other information contained or incorporated by reference in the Annual Report on Form 10-K and in
the Company’s other filings with the SEC, in connection with evaluating the Company, its business
and the forward-looking statements contained in this Report. Additional risks and uncertainties
not presently known to the Company or that the Company currently deems immaterial also may affect
the Company. The occurrence of any of these known or unknown risks could have a material adverse
impact on the Company’s business, financial condition, and results of operations.







































          •           The Company operates in the competitive food industry and relies on continued demand for
the Company’s products.
     
                      The Company faces competition across its product lines from other food companies with the
primary methods and factors in competition being product quality, price, packaging, new
product introductions, nutritional value, convenience, customer service, advertising, and
promotion. In order to generate future revenues and profits, the Company must continue to
sell products that appeal to the Company’s customers and consumers. Specifically, there are
a number of trends in consumer preferences that may impact the Company and the food industry
as a whole including convenience, consumer dietary trends, and obesity, health and
nutritional concerns. Continued success is dependent on product innovation, the ability to
secure and maintain adequate retail shelf space, and effective trade merchandising,
advertising, and marketing programs. Some of the Company’s competitors have substantial
financial, marketing, and other resources, and competition with them in the Company’s various
markets and product lines could cause the Company to reduce prices, increase marketing or
other expenditures, or lose category share. Category share and growth could be adversely
impacted if the Company is not successful in introducing new products.
     
          •           The Company’s operations are subject to the general risks of the food industry.
     
                      The food industry is subject to risks posed by food spoilage and contamination, product
tampering, product recall, and consumer product liability claims. The Company’s operations
could be impacted by both genuine and fictitious claims regarding the Company’s and
competitors’


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                      products. In the event of product contamination or tampering, the Company may need to recall
some of its products. A widespread product recall could result in significant loss due to
the cost of conducting a product recall, including destruction of inventory and the loss of
sales resulting from the unavailability of product for a period of time. The Company could
also suffer losses from a significant product liability judgment against it. Either a
significant product recall or a product liability judgment, involving either the Company or
its competitors, could also result in a loss of consumer confidence in the Company’s food
products or the food category, and an actual or perceived loss of value of the Company’s
brands, materially impacting consumer demand.
     
          •           Certain of the Company’s products are sourced from single manufacturing sites.
     
                      The Company has consolidated its production capacity for certain products into single
manufacturing sites. It is possible the Company could experience a production disruption at
these or any of its manufacturing sites resulting in a reduction or elimination of the
availability of some of the Company’s products. Should the Company not be able to obtain
alternate production capability in a timely manner, a negative impact on the Company’s
operations could result.
     
          •           Impairment in the carrying value of acquired goodwill or other intangible assets could
negatively affect the Company’s consolidated operating results and net worth.
     
                      A significant portion of the Company’s assets is goodwill and other intangible assets, the
majority of which are not amortized but are reviewed at least annually for impairment. If
the carrying value of these assets exceeds the current fair value, the asset is considered
impaired and is reduced to fair value resulting in a noncash charge to earnings. Events and
conditions that could result in impairment include increased competition or loss of market
share, product innovation or obsolescence, or product claims that result in a significant
loss of sales or profitability over the product life. At April 30, 2008, the carrying value
of goodwill and other intangible assets totaled approximately $1.7 billion, compared to total
assets of approximately $3.1 billion and total shareholders’ equity of approximately $1.8
billion.
     
          •           The results of the Company may be adversely impacted as a result of limited availability
and increases in the price of raw materials, including agricultural commodities and fuel.
     
                      The Company utilizes many different commodities and agricultural products in the
manufacturing of its products including peanuts, corn sweeteners, edible oils, sugar, fruit,
wheat, milk, and cocoa. In addition, natural gas and fuel oil are necessary components of
the manufacturing process, packaging, and distribution of the Company’s products. These
commodities and agricultural products are subject to price volatility caused by commodity
market fluctuations, the quality and availability of supply, weather, currency fluctuations,
speculative influences, trade agreements, political unrest, consumer demand, and changes in
governmental agricultural programs. Although the Company utilizes forward contracts and
commodity futures contracts to manage commodity prices in some instances, commodity price
increases ultimately result in corresponding increases in the Company’s raw material and
energy costs. The Company may be limited in its ability to pass these cost increases on in
the form of price increases or may incur a loss in sales volume to the extent pricing
increases are taken.
     
          •           The results of the Company may be adversely impacted by the growth in alternative energy
markets.
     
                      The Company competes for certain raw materials, notably corn and soy-based agricultural
products, with the emerging bio-fuels industry. As this industry grows, the supply of these
particular raw materials may be limited. Additionally, farm acreage currently devoted to
other agricultural products utilized by the Company, may be converted to corn or soy
resulting in higher cost for other agricultural products utilized by the Company.


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          •           The Company may be unable to maintain or improve its profit margins in the face of a
consolidating retail environment. In addition, the loss of the Company’s largest customer
could negatively impact its sales and profits.
     
                      Sales to Wal-Mart Stores, Inc. and its subsidiaries amounted to approximately 20 percent of
the Company’s net sales in 2008. These sales are primarily included in the U.S. retail
market segment. Trade receivables at April 30, 2008, included amounts due from Wal-Mart
Stores, Inc. and its subsidiaries of $34,210,000. During 2008, the Company’s top 10
customers, collectively, accounted for approximately 53 percent of consolidated net sales.
The bankruptcy or loss of any large customer for an extended length of time could negatively
impact the Company’s operations.
     
          •           Changes in tax, environmental, or other regulations and laws or failure to comply with
existing licensing, trade, and other regulations and laws could have a material adverse
effect on the Company’s consolidated financial condition.
     
                      The Company’s operations are subject to regulation by the U.S. Departments of Agriculture,
Commerce, and Labor, the U.S. Food and Drug Administration, the U.S. Federal Trade
Commission, as well as similar and other authorities of Canada, various state, provincial and
local governments, and voluntary regulatory and trade associations.
     
                      The manufacturing, marketing, and distribution of food products is subject to governmental
regulation that is increasingly extensive, encompassing such matters as ingredients,
advertising, relations with distributors and retailers, health, safety, and the environment.
     
                      Additionally, the Company is routinely subject to new or modified tax and securities
regulations, other laws and regulation, and accounting and reporting standards. The
Company’s failure or inability to comply with these requirements could subject the Company to
civil remedies, including fines, injunctions, recalls or seizures, as well as potential
criminal sanctions.
     
          •           The results of the Company may be adversely impacted as a result of changes in defined
benefit pension and other postretirement plan factors or regulations.
     
                      The Company has defined benefit pension plans covering certain of its U.S. and Canadian
employees. In addition to the defined benefit pension plans, the Company sponsors several
unfunded, defined postretirement plans. The Company’s obligations and expense associated
with these plans are recorded in the Company’s financial statements based on assumptions
related to inflation, investment returns, mortality, employee turnover, rate of compensation
increases, medical costs, and discount rates. Changes in any of these assumptions, as well as
changes in regulations governing these plans, can cause volatility in recorded assets,
liabilities, expense, and future funding requirements.
     
          •           The Company’s operations are subject to the general risks associated with acquisitions.
     
                      The Company’s stated long-term strategy is to own and
market leading North American food brands
sold in the center of the store. The Company has historically made strategic acquisitions of
brands and businesses and will continue to do so in the future in support of this strategy.
The success of past and future acquisitions is dependent on the Company’s ability to
successfully integrate acquired and existing operations. If the Company is unable to
integrate acquisitions successfully, its financial results could suffer. Additional
potential risks associated with acquisitions are the diversion of management’s attention from
other business concerns, additional debt leverage, the loss of key employees and customers of
the acquired business, the assumption of unknown liabilities, disputes with sellers, and the
inherent risk associated with the Company entering a line of business in which it has no
prior experience.


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          •           The Folgers combination will expose the Company to risks inherent in the retail coffee
business.
     
                      On June 4, 2008, the Company entered into various agreements with The Procter & Gamble
Company providing for the business combination of the Folgers coffee business (“Folgers”)
and the Company in an all-stock reverse Morris Trust transaction. Upon
completion of the transactions, Folgers will represent the Company’s largest single brand
and the Company will be subject to a variety of risks associated with the coffee business.
These risks include changes in consumer preferences, volatility in the prices of raw
materials, the business’s reliance on a small number of key retail customers, consumer
perceptions of the Folgers brand, competition in the retail coffee market, and other risks.
     
          •           The integration of Folgers may not be successful or anticipated benefits from the
transaction may not be realized.
     
                      In addition to risks associated with the coffee business, the Company will also face the
challenge of successfully integrating Folgers operations into its own. The integration
process will require the Company to significantly expand the scope of its operations and
financial systems. The Company’s management will be required to devote a significant
amount of time and attention to the process of integrating the
operations of the Company’s
business and the coffee business. There is a significant degree of difficulty and
management involvement inherent in that process. The Company may not be able to
successfully or cost-effectively integrate the coffee business. The process of integrating
the coffee business into the Company’s operations may cause an interruption of, or loss of
momentum in, the activities of the Company’s business. If the Company’s management is not
able to effectively manage the integration process, or if any significant business
activities are interrupted as a result of the integration process, the Company’s business
could suffer and its results of operations and financial condition may be harmed.
     
                      Even if the Company is able to successfully combine the two business operations, it may not
be possible to realize the full benefits of the increased sales volume and other benefits
that are currently expected to result from the transactions, or realize these benefits
within the time frame that is currently expected. For example, the elimination of
duplicative costs may not be possible or may take longer than anticipated, or the benefits
from the Folgers transaction may be offset by costs incurred or delays in integrating the
companies. In addition, the benefits of the Folgers transaction may be offset by operating
losses relating to changes in commodity or energy prices, or in increased competition, or
by other risks and uncertainties. If the Company fails to realize the benefits it
anticipates from the Folgers transaction, the Company’s results of operations may be adversely
affected.



8






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Item 1B. Unresolved Staff Comments



     None.




Item 2. Properties.



     The table below lists all of the Company’s manufacturing and processing facilities at April
30, 2008. All of the Company’s properties are maintained and updated on a regular basis, and the
Company continues to make investments for expansion and technological improvements. The Company
believes that existing capacity at these facilities is sufficient to sustain current operations and
anticipated near-term growth.


     The properties listed below are owned, except for the West Fargo, North Dakota, facility that
is leased. Other than customary lease terms and rental payment obligations, there are no material
performance obligations associated with the properties listed below. The Company’s corporate
headquarters are located in Orrville, Ohio, and the Company’s Canadian headquarters are located in
Markham, Ontario.
































































































                 
    Domestic Locations           Products Produced/Processed
     
    Chico, California
          Fruit and vegetable juices, beverages
    Cincinnati, Ohio
          Shortening and oils
    El Paso, Texas
          Canned milk
    Grandview, Washington
          Grapes, red tart cherries, strawberries,
cranberries, apples, boysenberries,
blackberries, red raspberries, black
raspberries, blueberries, and red currants
    Havre de Grace, Maryland
          Fruit and vegetable juices, beverages
    Lexington, Kentucky
          Peanut butter
    Memphis, Tennessee
          Fruit spreads, toppings, syrups
    New Bethlehem, Pennsylvania
          Peanut butter and Goober products
    Orrville, Ohio
          Fruit spreads, toppings, syrups
    Oxnard, California
          Strawberries
    Ripon, Wisconsin
          Fruit spreads, toppings, syrups, condiments
    Scottsville, Kentucky
          Uncrustables sandwiches
    Seneca, Missouri
          Canned milk
    Toledo, Ohio
          Bakery mixes and frostings
    West Fargo, North Dakota
          Uncrustables sandwiches and Snack’n
Waffles ready-to-eat waffles











































                 
    International Locations           Products Produced/Processed
     
    Delhi Township, Ontario, Canada
          Pickles
    Dunnville, Ontario, Canada
          Pickles and relish condiments
    Sherbrooke, Quebec, Canada
          Canned milk
    Ste. Marie, Quebec, Canada
          Fruit spreads, sweet spreads, industrial

products






Item 3. Legal Proceedings.



     None.


9 




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Item 4. Submissions of Matters to a Vote of Security Holders.



     None.


Executive Officers of the Registrant.



     The names, ages as of July 1, 2008, and current positions of the executive officers of the
Company are listed below. All executive officers serve at the pleasure of the Board of Directors,
with no fixed term of office. Unless otherwise indicated, each individual has served as an
executive officer of the Company for more than five years.






























































































































































































































































































                                                     
                            Years with                       Served as an
    Name           Age           Company           Position           Officer Since
     
                                                     
    Timothy P. Smucker           64           39           Chairman and Co-Chief Executive Officer           1973
    Richard K. Smucker           60           35           President and Co-Chief Executive Officer           1974
    Dennis J. Armstrong           53           29           Vice President, Logistics and
Operational Support (1)           2007
    Mark R. Belgya           47           23           Vice President, Chief Financial Officer and Treasurer (2)           1997
    Vincent C. Byrd           53           31           Senior Vice President, Consumer Market (3)           1988
    John W. Denman           51           29           Vice President and Controller (4)           2005
    Barry C. Dunaway           45           21           Vice President, Corporate Development           2001
    M. Ann Harlan           48           9           Vice President, General Counsel and Secretary (5)           2002
    Donald D. Hurrle, Sr.           59           31           Vice President, Sales, Grocery Market           2001
    John F. Mayer           52           28           Vice President, Customer Development (6)           2004
    Kenneth A. Miller           59           28           Vice President, Alternate Channels (7)           2007
    Steven Oakland           47           25           Vice President and General Manager, Consumer Oils and            
                                        Baking           1999
    Andrew G. Platt           52           25           Vice President, Information Services and Chief            
                                        Information Officer (8)           2004
    Christopher P. Resweber           46           20           Vice President, Marketing Services (9)           2004
    Julia L. Sabin           48           24           Vice President and General Manager, Smucker Quality            
                                        Beverages, Inc. (10)           2007
    Mark T. Smucker           38           10           Vice President, International (11)           2001
    Paul Smucker Wagstaff           38           12           Vice President, Foodservice and Beverage Markets (12)           2001
    Albert W. Yeagley           60           34           Vice President, Quality Assurance (13)           2007






 
















































            
    *           Included pursuant to Instruction 3 to Item 401(b) of Regulation S-K.
 
    (1)           Mr. Armstrong was elected to his present position in February 2007, having served as
Director, Corporate Operations since April 2006. Prior to that time he served as Director,
Scottsville Operations since December 2004, and Director, Supply Chain Initiatives since July
2002.
 
    (2)           Mr. Belgya was elected to his present position in January 2005, having served as Vice
President and Treasurer from February 2004 to December 2004, and as Treasurer since June 2001.
 
    (3)           Mr. Byrd was elected to his present position in February 2004, having served as Vice
President and General Manager, Consumer Market since January 1995.
 
    (4)           Mr. Denman was elected to his present position in August 2005, having served as Assistant
Controller since May 2005. Prior to that time, he served as Chief Financial Officer, Canada
since May 2004, and Assistant Controller since June 2001.



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    (5)           Ms. Harlan was elected Vice President in February 2004. She was elected Secretary in June
2003, having served as Assistant Secretary since August 2000. She was elected General Counsel
in April 2002.
 
    (6)           Mr. Mayer was elected to his present position in August 2004, having served as Director,
Customer Development since September 1993.
 
    (7)           Mr. Miller was elected to his present position in February 2007, having served as General
Manager, Alternate Channels since September 2005. Prior to that time, he served as Director,
Marketing/Sales Alternate Channels since November 2001.
 
    (8)           Mr. Platt was elected to his present position in February 2004, having served as Director,
Business Technology from August 2002 to January 2004. Prior to that time, he served as
Director, Customer Service since February 1997.
 
    (9)           Mr. Resweber was elected to his present position in August 2004, having served as Director,
Marketing Services and Consumer Direct since April 2001.
 
    (10)           Ms. Sabin was elected to her present position in February 2007, having served as General
Manager, Smucker Quality Beverages, Inc. since February 1998.
 
    (11)           Mr. Mark Smucker was elected to his present position in July 2007, having served as Vice
President, International and Managing Director, Canada since May 2006. Prior to that time, he
served as Vice President and Managing Director, Canada since June 2004 and as Vice President
and General Manager, International Market since November 2001.
 
    (12)           Mr. Wagstaff was elected to his present position in May 2006, having served as Vice President
and General Manager, Foodservice Market, since November 2001.
 
    (13)           Mr. Yeagley was elected to his present position in February 2007, having served as Director,
Corporate Quality Assurance since July 2001.





11 






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PART II





Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.



     (a) The information pertaining to the market for the Company’s common shares and other related
shareholder information is incorporated herein by reference to the information set forth in the
Company’s 2008 Annual Report to Shareholders under the caption “Stock Price Data” on page 15 and
the caption “Comparison of Five-Year Cumulative Total Shareholder Return” on page 16.


     (b) Not applicable.


     (c) Issuer Purchases of Equity Securities
























































































































































































































































                                                                                                     
                (a)                 (b)                 (c)                 (d)      
                                                                                        Maximum number (or      
                                                                Total number of                 approximate dollar      
                                                                shares purchased as                 value) of shares      
                                                                part of publicly                 that may yet be      
                Total number of                 Average price                 announced plans or                 purchased under the      
    Period           shares purchased                 paid per share                 programs                 plans or programs      
     
                                                                                                     
February 1,
2008 — February 28, 2008                 313,800                 $     50.84                       313,800                       4,727,022      
March 1,
2008 — March 31, 2008                 982,862                 $     51.14                       982,800                       3,744,222      
April 1,
2008 — April 30, 2008                 —                       —                       —                       3,744,222      
     
    Total                 1,296,662                 $     51.07                       1,296,600                       3,744,222      
     













                Information set forth in the table above represents activity in the Company’s fourth
fiscal quarter.






















          (a)           Shares in this column include shares repurchased as part of publicly
announced plans as well as shares repurchased from stock plan recipients in lieu of
cash payments.
     
          (d)           Since August 2004, the Company’s Board of Directors has authorized
management to repurchase up to 10 million common shares as presented in the
following table.














































































                             
                Common shares      
    Date of Board           authorized for      
    authorizations           repurchase      
     
    August 2004                 1,000,000      
    January 2006                 2,000,000      
    April 2006                 2,000,000      
    January 2008                 5,000,000      
     
    Total                 10,000,000      
     














                      The buyback program will be implemented at management’s discretion with no established
expiration date. The Company has repurchased a total of 6,255,778 common shares from
November 2004 through April 30, 2008, under the buyback program authorized by the
Company’s Board of Directors. At April 30, 2008, 3,744,222 common shares remain
available for repurchase under this program.


12 




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Item 6. Selected Financial Data.



     Five-year summaries of selected financial data for the Company and discussions of items
which materially affect the comparability of the selected financial data are incorporated herein by
reference to the information set forth in the Company’s 2008 Annual Report to Shareholders under
the following captions and page numbers: “Five-Year Summary of Selected Financial Data” on
page 14, “Note A: Accounting Policies” on pages 36 through
40, “Note C: Acquisitions” on pages 41
and 42, and “Note D: “Restructuring” on pages 43 and 44.




Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.



     Management’s discussion and analysis of financial condition and results of operations,
including a discussion of liquidity and capital resources, and critical accounting estimates and
policies, is incorporated herein by reference to the information set forth in the Company’s 2008
Annual Report to Shareholders under the caption “Management’s Discussion and Analysis,” on pages 17
through 26.




Item 7A. Quantitative and Qualitative Disclosures About Market Risk.



     Quantitative and qualitative disclosures about market risk are incorporated herein by
reference to the information set forth in the Company’s 2008 Annual Report to Shareholders under
the caption “Derivative Financial Instruments and Market Risk” on pages 24 and 25.




Item 8. Financial Statements and Supplementary Data.



     Consolidated financial statements of the Company at April 30, 2008 and 2007, and for each of
the years in the three-year period ended April 30, 2008, with the report of independent registered
public accounting firm and selected unaudited quarterly financial data, are incorporated herein by
reference to the information set forth in the Company’s 2008 Annual Report to Shareholders under
the caption “Summary of Quarterly Results of Operations” on page 15 and beginning with “Report of
Management on Internal Control Over Financial Reporting” on page 27 through “Note R: Common Shares”
on page 63. The related financial statement schedule is filed as part of this Form 10-K on
Schedule II.




Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.



     None.




Item 9A. Controls and Procedures.



     Evaluation of Disclosure Controls and Procedures. The Company’s management, including
the Company’s principal executive officers and principal financial officer, evaluated the
effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or
15d-15(e) under the Securities Exchange Act of 1934 as amended (the “Exchange Act”)) as of April
30, 2008, (the “Evaluation Date”). Based on that evaluation, the Company’s principal executive
officers and principal financial officer have concluded that as of the Evaluation Date, the
Company’s disclosure controls and procedures were effective in ensuring that information required
to be disclosed by the Company in reports that it files or submits under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified in SEC rules and
forms.


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     Changes in Internal Controls. There were no changes in the Company’s internal
controls over financial reporting that occurred during the fourth quarter ended April 30, 2008,
that have materially affected, or are reasonably likely to materially affect, the Company’s
internal control over financial reporting.


     Management’s report on internal control over financial reporting and the attestation report of
the Company’s independent registered public accounting firm are set forth in the Company’s 2008
Annual Report to Shareholders under the heading “Report of Management on Internal Control Over
Financial Reporting” on page 27, and under the heading “Report of Independent Registered Public
Accounting Firm on Internal Control Over Financial Reporting” on page 28, which reports are
incorporated herein by reference.




Item 9B. Other Information.



     None.


14 




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PART III





Item 10. Directors and Executive Officers of the Registrant.



     The information required by this Item as to the directors of the Company, the Audit Committee,
the Audit Committee financial expert, and compliance with Section 16(a) of the Exchange Act is
incorporated herein by reference to the information set forth under the captions “Election of
Directors,” “Board and Committee Meetings,” and “Ownership of Common Shares” in the Company’s
definitive Proxy Statement for the Annual Meeting of Shareholders to be held on August 21, 2008.
Information required by Item 10 as to the executive officers of the Company is included in Part I
of this Annual Report on Form 10-K as permitted by Instruction 3 to Item 401(b) of Regulation S-K.


     The Company’s Board of Directors has adopted a Policy on Ethics and Conduct, last revised
April 2005, which applies to the Company’s directors, principal executive officers, principal
financial officer, and principal accounting officer. The Company’s Board of Directors has adopted
charters for each of the Audit, Executive Compensation, and Nominating and Corporate Governance
committees and has also adopted Corporate Governance Guidelines. The Corporate Governance
Guidelines reflect “Independent Directors” standards under the final rules of the New York Stock
Exchange (NYSE Rule 303A.02). Copies of these documents are available on the Company’s Web site
(www.smuckers.com).




Item 11. Executive Compensation.



     The information required by this Item is incorporated by reference to the information set
forth under the captions “Executive Compensation,” “Board and Committee Meetings,” and “Executive
Compensation Committee Interlocks and Insider Participation” in the Company’s definitive Proxy
Statement for the Annual Meeting of Shareholders to be held on August 21, 2008.




Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.



     The information required by this Item is incorporated by reference to the information set
forth under the captions “Ownership of Common Shares,” and “Equity Compensation Plan Information”
in the Company’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held on
August 21, 2008.




Item 13. Certain Relationships and Related Transactions.



     The information required by this Item is incorporated by reference to the information set
forth under the caption “Related Party Transactions” in the Company’s definitive Proxy Statement
for the Annual Meeting of Shareholders to be held on August 21, 2008.




Item 14. Principal Accountant Fees and Services.



     The information required by this Item is incorporated by reference to the information set
forth under the captions “Service Fees Paid to the Independent Registered Public Accounting Firm,”
and “Audit Committee Preapproval Policies and Procedures” in the Company’s definitive Proxy
Statement for the Annual Meeting of Shareholders to be held on August 21, 2008.


15 




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PART IV





Item 15. Exhibits and Financial Statement Schedules.




































































                 
    (a)(1)
          Financial Statements
                 
     
          See the Index to Financial Statements and Financial Statement Schedule, which is included on
page F-1 of this Report.
                 
    (a)(2)
          Financial Statement Schedule
                 
     
          The following financial statement schedule, located at page F-2 of this Report, is included
in Part II, Item 8 of this Report: Schedule II — Valuation and Qualifying Accounts.
                 
    (a)(3)
          Exhibits
                 
     
          See the Index of Exhibits at page
number 18 of this Report.




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SIGNATURES



     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

































                             
    Date: June 27, 2008      The J. M. Smucker Company

       
          By:       /s/   Mark R. Belgya
       
                Mark R. Belgya       
                Vice President, Chief Financial Officer and Treasurer       
     



     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.


















































































































































































































































































                             
    Signature           Title           Date
                             
    *
                         
    Timothy P. Smucker
          Chairman, Co-Chief Executive Officer, and Director
(Principal Executive Officer)
          June 27, 2008
                             
    *
                         
    Richard K. Smucker
          President, Co-Chief Executive Officer, and Director
(Principal Executive Officer)
          June 27, 2008
                             
    /s/ Mark R. Belgya
                         
    Mark R. Belgya
          Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
          June 27, 2008
                             
    *

                         
    John W. Denman
          Vice President and Controller (Principal Accounting Officer)
          June 27, 2008
                             
    *
                         
    Vincent C. Byrd
          Director
          June 27, 2008
                             
    *
                         
    R. Douglas Cowan
          Director
          June 27, 2008
                             
    *
                         
    Kathryn W. Dindo
          Director
          June 27, 2008
                             
    *
                         
    Paul J. Dolan
          Director
          June 27, 2008
                             
    *
                         
    Elizabeth Valk Long
          Director
          June 27, 2008
                             
    *
                         
    Nancy Lopez Knight
          Director
          June 27, 2008
                             
    *
                         
    Gary A. Oatey
          Director
          June 27, 2008
                             
    *
                         
    William H. Steinbrink
          Director
          June 27, 2008






 
















            
    *           The undersigned, by signing her name hereto, does sign and execute this report pursuant to
the powers of attorney executed by the above-named officers and directors of the registrant,
which are being filed herewith with the Securities and Exchange Commission on behalf of such
officers and directors.

































                             
                 
    Date: June 27, 2008      By:       /s/   M. Ann Harlan
       
                M. Ann Harlan       
                Attorney-in-Fact       


17 




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INDEX OF EXHIBITS


















































































































































                 
    Exhibit No.           Description
                 
    2.1
          Asset Purchase Agreement, dated July 19, 2006, by and between
horizon Milling G.P., as Purchaser, and Smucker Foods of
Canada Co., as Seller incorporated herein by reference to the
Company’s Quarterly Report on Form 10-Q for the quarter ended
July 31, 2006 (Commission File 001-5111).
                 
    2.2
          Agreement and Plan of Merger, dated March 31, 2007, by and
among The J. M. Smucker Company, EF Acquisition Company, Eagle
Family Foods Holdings, Inc., and Craig Steinke, as
Stockholders’ Representative incorporated herein by reference
to the Company’s Annual Report on Form 10-K for the year ended
April 30, 2007 (Commission File 001-5111).
                 
2.3
          Transaction Agreement, dated June 4, 2008, by and among The Procter &
Gamble Company, The Folgers Coffee Company, The J. M. Smucker Company,
and Moon Merger Sub, Inc. incorporated herein by reference to the
Company’s Current Report on Form 8-K filed on June 5, 2008.
                 
2.4
          Separation Agreement, dated June 4, 2008, by and among The Procter &
Gamble Company, The Folgers Coffee Company, and The J. M. Smucker
Company incorporated herein by reference to the Company’s Current
Report on Form 8-K filed on June 5, 2008.
                 
    3.1
          Amended Articles of Incorporation incorporated herein by
reference to Amendment No. 3 to the Company’s Registration
Statement on Form S-4 filed on February 28, 2002 (Commission
File 001-5111).
                 
    3.2
          Amended Regulations incorporated herein by reference to the
Company’s Quarterly Report on Form 10-Q for the quarter ended
October 31, 2000 (Commission File 001-5111).
                 
    4
          Amended and Restated Rights Agreement, dated as of August 28,
2000, by and between the Company and Computershare Investor
Services, LLC (successor to Harris Trust and Savings Bank)
incorporated herein by reference to the Company’s Registration
Statement on Form 8-A filed on August 28, 2000, as amended by
Amendment No. 1 thereto, dated as of October 9, 2001,
incorporated herein by reference to the Company’s Registration
Statement on Form 8-A filed on October 22, 2001 (Commission
File 001-5111).
                 
    10.1
          1987 Stock Option Plan incorporated herein by reference to the
Company’s Annual Report on Form 10-K for the year ended April
30, 1994 (Commission File No. 001-5111). *
                 
    10.2
          Management Incentive Plan incorporated herein by reference to
the Company’s Annual Report on Form 10-K for the year ended
April 30, 1996 (Commission File No. 001-5111). *
                 
    10.3
          Nonemployee Director Stock Plan dated January 1, 1997
incorporated herein by reference to the Company’s Annual
Report on Form 10-K for the year ended April 30, 1997
(Commission File No. 001-5111). *
                 
    10.4
          1998 Equity and Performance Incentive Plan (as amended and
restated effective as of June 6, 2005) incorporated herein by
reference to the Company’s Current Report on Form 8-K filed on
June 9, 2005 (Commission File No. 001-5111). *
                 
    10.5
          Form of Restricted Shares Agreement incorporated herein by
reference to the Company’s Current Report on Form 8-K filed on
June 9, 2005 (Commission File No. 001-5111). *




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    Exhibit No.           Description
                 
    10.6
          Form of Deferred Shares Agreement incorporated herein by
reference to the Company’s Current Report on Form 8-K filed on
June 9, 2005 (Commission File No. 001-5111). *
                 
    10.7
          Top Management Supplemental Retirement Benefit Plan (May 1,
1999 Restatement) incorporated herein by reference to the
Company’s Quarterly Report on Form 10-Q for the quarter ended
July 31, 1999 (Commission File No. 001-5111). *
                 
    10.8
          Consulting and Noncompete Agreements incorporated herein by
reference to the Company’s Quarterly Report on Form 10-Q for
the quarter ended July 31, 2002 (Commission File 001-5111). *
                 
    10.9
          Voluntary Deferred Compensation Plan incorporated herein by
reference to the Company’s Annual Report on Form 10-K
Amendment No. 1 for the year ended April 30, 2003 (Commission
File 001-5111). *
                 
    10.10
          Amended and Restated 1997 Stock-Based Incentive Plan
incorporated herein by reference to the Company’s Annual
Report on Form 10-K for the year ended April 30, 2005
(Commission File 001-5111). *
                 
    10.11
          Amended and Restated Nonemployee Director Stock Option Plan,
effective August 19, 2005, incorporated herein by reference to
the Company’s Current Report on Form 8-K filed on August 24,
2005 (Commission File No. 001-5111). *
                 
    10.12
          The J. M. Smucker Company 2006 Equity Compensation Plan,
effective August 17, 2006, incorporated herein by reference to
the Company’s Current Report on Form 8-K filed on August 21,
2006 (Commission File 001-5111). *
                 
    10.13
          Form of Restricted Stock Agreement incorporated herein by
reference to the Company’s Current Report on Form 8-K filed on
April 20, 2007 (Commission File No. 001-5111). *
                 
    10.14
          Form of Deferred Stock Units Agreement incorporated herein by
reference to the Company’s Current Report on Form 8-K filed on
April 20, 2007 (Commission File No. 001-5111). *
                 
    10.15
          The J. M. Smucker Company Nonemployee Director Deferred
Compensation Plan, effective January 1, 2007, incorporated
herein by reference to the Company’s Current Report on Form
8-K filed on October 30, 2006 (Commission File 001-5111).*
                 
    10.16
          Defined Contribution Supplemental Executive Retirement Plan,
effective May 1, 2008, incorporated herein by reference to the
Company’s Quarterly Report on Form 10-Q for the quarter ended
October 31, 2007 (Commission File 001-5111). *
                 
    10.17
          Amended and Restated Asset Purchase and Sale Agreement, dated
as of October 24, 2001, by and among General Mills, Inc., The
Pillsbury Company, and International Multifoods Corporation
incorporated herein by reference to International Multifoods
Corporation Current Report on Form 8-K dated November 13, 2001
(Commission File No. 001-6699).
                 
    10.18
          Retail Trademark License Agreement, dated November 13, 2001,
between The Pillsbury Company and International Multifoods
Corporation incorporated herein by reference to International
Multifoods Corporation Quarterly Report on Form 10-Q for the
quarter ended December 1, 2001 (Commission File No. 001-6699).




19 




Table of Contents

















































































































































                 
    Exhibit No.           Description
                 
    10.19
          Amendment to Retail Trademark License Agreement, dated
December 23, 2002, between The Pillsbury Company and
International Multifoods Corporation incorporated herein by
reference to International Multifoods Corporation Annual
Report on Form 10-K for the year ended March 1, 2003
(Commission File No. 001-6699).
                 
    10.20
          Closing Agreement, dated as of November 13, 2001, by and among
General Mills, Inc., The Pillsbury Company, and International
Multifoods Corporation, incorporated herein by reference to
International Multifoods Corporation Current Report on Form
8-K dated November 13, 2001 (Commission File No. 001-6699).
                 
    10.21
          Omnibus Amendment Agreement, dated as of January 16, 2003, by
and among General Mills, Inc., The Pillsbury Company,
International Multifoods Corporation, and Sebesta Blomberg &
Associates, Inc. incorporated herein by reference to
International Multifoods Corporation Current Report on Form
8-K dated January 27, 2003 (Commission File No. 001-6699).
                 
    10.22
          Note Purchase Agreement, dated as of June 16, 1999,
incorporated herein by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended July 31, 1999
(Commission File No. 001-5111).
                 
    10.23
          First Amendment, dated as of November 30, 2001, to Note
Purchase Agreement, dated as of June 16, 1999, incorporated
herein by reference to the Company’s Annual Report on Form
10-K for the year ended April 30, 2004 (Commission File
001-5111).
                 
    10.24
          Second Amendment, dated May 27, 2004, to Note Purchase
Agreement, dated as of June 16, 1999, incorporated herein by
reference to the Company’s Quarterly Report on Form 10-Q for
the quarter ended July 31, 2007 (Commission File 001-5111).
                 
    10.25
          Third Amendment, dated May 31, 2007, to Note Purchase
Agreement, dated as of June 16, 1999, incorporated herein by
reference to the Company’s Quarterly Report on Form 10-Q for
the quarter ended July 31, 2007 (Commission File 001-5111).
                 
    10.26
          Note Purchase Agreement, dated as of August 23, 2000,
incorporated herein by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended October 31, 2000
(Commission File 001-5111).
                 
    10.27
          First Amendment, dated as of November 30, 2001, to Note
Purchase Agreement, dated as of August 23, 2000, incorporated
herein by reference to the Company’s Annual Report on Form
10-K for the year ended April 30, 2004 (Commission File
001-5111).
                 
    10.28
          Second Amendment, dated May 27, 2004, to Note Purchase
Agreement, dated as of August 23, 2000, incorporated herein by
reference to the Company’s Quarterly Report on Form 10-Q for
the quarter ended July 31, 2007 (Commission File 001-5111).
                 
    10.29
          Third Amendment, dated May 31, 2007, to Note Purchase
Agreement, dated as of August 23, 2000, incorporated herein by
reference to the Company’s Quarterly Report on Form 10-Q for
the quarter ended July 31, 2007 (Commission File 001-5111).
                 
    10.30
          Note Purchase Agreement, dated as of May 27, 2004, by and
among The J. M. Smucker Company and each of the Purchasers
signatory thereto incorporated herein by reference to the
Company’s Quarterly Report on Form 10-Q for the quarter ended
July 31, 2004 (Commission File 001-5111).




20




Table of Contents
















































































































                 
    Exhibit No.           Description
                 
    10.31
          First Amendment, dated May 31, 2007, to Note Purchase
Agreement, dated as of May 27, 2004, incorporated herein by
reference to the Company’s Quarterly Report on Form 10-Q for
the quarter ended July 31, 2007 (Commission File 001-5111).
                 
    10.32
          Credit Agreement, dated as of June 18, 2004, by and among The
J. M. Smucker Company, as U.S. Borrower, J.M. Smucker (Canada)
Inc., as Canadian Borrower, the lenders named therein, as
lenders, KeyBank National Association, as Lead Arranger and
Administrative Agent, and Bank of Montreal, as Canadian
Funding Agent and Document Agent incorporated herein by
reference to the Company’s Quarterly Report on Form 10-Q for
the quarter ended July 31, 2004 (Commission File 001-5111).
                 
    10.33
          First Amendment, dated as of January 31, 2006, to Credit
Agreement, dated as of June 18, 2004, by and among The J. M.
Smucker Company, as U.S. Borrower, Smucker Foods of Canada
Co., as Canadian Borrower, the lenders named therein, as
lenders, KeyBank National Association, as lead Arranger and
Administrative Agent, and Bank of Montreal, as Canadian
Funding Agent and Syndication Agent incorporated herein by
reference to the Company’s Quarterly Report on Form 10-Q for
the quarter ended January 31, 2006 (Commission File 001-5111).
                 
    10.34
          Second Amendment, dated as of April 25, 2007, to Credit
Agreement, dated as of June 18, 2004, by and among The J. M.
Smucker Company, as Borrower, Smucker Foods of Canada Co., as
Canadian Borrower, the lenders named therein, as lenders,
KeyBank National Association, as lead Arranger and
Administrative Agent, and Bank of Montreal, as Canadian
Funding Agent and Syndication Agent incorporated herein by
reference to the Company’s Current Report on Form 8-K filed
April 30, 2007 (Commission File 001-5111).
                 
    10.35
          Third Amendment, dated as of May 31, 2007, to Credit
Agreement, dated as of June 18, 2004, by and among The J. M.
Smucker Company, as Borrower, Smucker Foods of Canada Co., as
Canadian Borrower, the lenders named therein, as lenders,
KeyBank National Association, as lead Arranger and
Administrative Agent, and Bank of Montreal, as Canadian
Funding Agent and Syndication Agent, incorporated herein by
reference to the Company’s Quarterly Report on Form 10-Q for
the quarter ended July 31, 2007 (Commission File 001-5111).
                 
    10.36
          Note Purchase Agreement, dated as of May 31, 2007, by and
among The J. M. Smucker Company and each of the Purchasers
signatory thereto, incorporated herein by reference to the
Company’s Quarterly Report on Form 10-Q for the quarter ended
July 31, 2007 (Commission File 001-5111).
                 
    10.37
          Fiscal Agency Agreement, dated as of December 17, 2001, among
International Multifoods Corporation, as Issuer, Diageo plc,
as Guarantor, JP Morgan Chase Bank, as Fiscal Agent and
Principal Paying Agent, and J.P. Morgan Bank Luxembourg S.A.,
as Paying Agent incorporated herein by reference to
International Multifoods Corporation Quarterly Report on Form
10-Q for the quarter ended December 1, 2001 (Commission File
No. 001-6699).
                 
    10.38
          Stock Purchase Agreement, dated as of July 29, 2002, between
International Multifoods Corporation and Wellspring
Distribution Corp. incorporated herein by reference to
International Multifoods Corporation Current Report on Form
8-K dated July 30, 2002 (Commission File No. 001-6699).
                 
    10.39
          Share Sale Agreement related to shares in HJF Acquisition
Corporation, dated as of May 12, 2004, between The J. M.
Smucker Company and SPC Ardmona Limited incorporated herein by
reference to the Company’s Quarterly Report on Form 10-Q for
the quarter ended July 31, 2004 (Commission File 001-5111).




21




Table of Contents

































































































































































                 
    Exhibit No.           Description
                 
    10.40
          Deed of Variation to Share Sale Agreement related to shares in
HJF Acquisition Corporation, dated as of June 16, 2004,
between The J. M. Smucker Company and SPC Ardmona Limited
incorporated herein by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended July 31, 2004
(Commission File 001-5111).
                 
    10.41
          Purchase Agreement, dated January 13, 2005, by and among
International Multifoods Corporation, Multifoods Brands, Inc.,
Fantasia Confections, Inc., Robin Hood Multifoods Corporation,
The J. M. Smucker Company, Value Creation Partners, Inc., Best
Brands Corp., and IMCB Corp. incorporated herein by reference
to the Company’s Annual Report on Form 10-K for the year ended
April 30, 2005 (Commission File 001-5111).
                 
    10.42
          Letter Agreement, dated January 24, 2005, and Amendment to
Purchase Agreement, dated February 18, 2005, by and among
International Multifoods Corporation, Multifoods Brands, Inc.,
Fantasia Confections, Inc., Smucker Foods of Canada Co.
(formerly known as Robin Hood Multifoods Corporation), The J.
M. Smucker Company, Value Creation Partners, Inc., Best Brands
Corp., and IMCB Corp. incorporated herein by reference to the
Company’s Annual Report on Form 10-K for the year ended April
30, 2005 (Commission File 001-5111).
                 
    10.43
          Consulting Agreement, dated June 30, 2007, by and among The J.
M. Smucker Company and John D. Milliken (Commission File
001-5111). *
                 
    10.44
          Consulting Agreement, dated August 1, 2007, by and among The
J. M. Smucker Company and Richard F. Troyak (Commission File
001-5111). *
                 
    10.45
          Consulting Agreement, dated December 21, 2007, by and among
The J. M. Smucker Company and Robert E. Ellis incorporated
herein by reference to the Company’s Current Report on Form
8-K filed December 21, 2007 (Commission File 001-5111). *
                 
    13
          Excerpts from 2008 Annual Report to Shareholders. Such Annual
Report, except those portions thereof that are expressly
incorporated herein by reference, is furnished for the
information of the Commission only and is not deemed to be
filed as part of this Annual Report on Form 10-K.
                 
    21
          Subsidiaries of the Registrant
                 
    23
          Consent of Independent Registered Public Accounting Firm
                 
    24
          Powers of Attorney
                 
    31.1
          Certifications of Timothy P. Smucker pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act
                 
    31.2
          Certifications of Richard K. Smucker pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act
                 
    31.3
          Certifications of Mark R. Belgya pursuant to Rule 13a-14(a)
and Rule 15d-14(a) of the Securities Exchange Act
                 
    32
          Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of The Sarbanes-Oxley Act of 2002






 
















            
    *           Management contract or compensatory plan or arrangement.



22




Table of Contents









THE J. M. SMUCKER COMPANY



ANNUAL REPORT ON FORM 10-K



INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE














































































































































































































                                                     
                Form                 Annual      
                10-K                 Report to      
                Report                 Shareholders      
                 
                                                     
    Data incorporated by reference to the 2008 Annual Report
to Shareholders of The J. M. Smucker Company:                                                
    Report of Management on Internal Control Over Financial Reporting                                         27      
    Report of Independent Registered Public Accounting Firm on
Internal Control Over Financial Reporting                                         28      
    Report of Independent Registered Public Accounting Firm on
the Consolidated Financial Statements                                         29      
    Consolidated Balance Sheets at April 30, 2008 and 2007                                         32—33      
    For the years ended April 30, 2008, 2007, and 2006:                                                
    Statements of Consolidated Income                                         31      
    Statements of Consolidated Cash Flows                                         34      
    Statements of Consolidated Shareholders’ Equity                                         35      
    Notes to Consolidated Financial Statements                                         36—63      
                                                     
    Consolidated financial statement schedule at April 30, 2008,
or for the years ended April 30, 2008, 2007, and 2006:                                                
    II. Valuation and qualifying accounts                 F-2                              




     All other schedules are omitted because they are not applicable or because the information
required is included in the Consolidated Financial Statements or the notes thereto.


F-1



 




Table of Contents







THE J. M. SMUCKER COMPANY



SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS



YEARS ENDED APRIL 30, 2008, 2007, and 2006



(Dollars in Thousands)

















































































































































































































































































































































































































































































                                                                                                                             
                Balance at                 Charged to                 Charged to                                         Balance at      
                Beginning                 Costs and                 Other                 Deductions                 End of      
    Classification           of Year                 Expenses                 Accounts                 (A)                 Year      
     
                                                                                                                             
    2008:                                                                                                                        
    Valuation allowance for
deferred tax assets           $     16,626                 $     (6,736     )           $     —                 $     —                 $     9,890      
    Allowance for doubtful accounts                 821                       233                       —                       143                       911      
                 
                $     17,447                 $     (6,503     )           $     —                 $     143                 $     10,801      
                 
                                                                                                                             
    2007:                                                                                                                        
    Valuation allowance for
deferred tax assets           $     24,024                 $     (7,607     )           $     209                 $     —                 $     16,626      
    Allowance for doubtful accounts                 1,210                       (415     )                 —                       (26     )                 821      
                 
                $     25,234                 $     (8,022     )           $     209                 $     (26     )           $     17,447      
                 
                                                                                                                             
    2006:                                                                                                                        
    Valuation allowance for
deferred tax assets           $     24,280                 $     688                 $     (944     )           $     —                 $     24,024      
    Allowance for doubtful accounts                 976                       (1,375     )                 —                       (1,609     )                 1,210      
                 
                $     25,256                 $     (687     )           $     (944     )           $     (1,609     )           $     25,234      
                 






 
















            
    (A)           Uncollectible accounts written off, net of recoveries.







F-2 









EX-10.43
2
l32070aexv10w43.htm
EX-10.43



EX-10.43






Exhibit 10.43



CONSULTING AGREEMENT



     The J. M. SMUCKER COMPANY, an Ohio corporation with its principal place of business at
Strawberry Lane, Orrville, Ohio 44667 (“JMS”), and John D. Milliken, 2333 Autumn Run, Wooster, Ohio
44691, (“Consultant”), hereby agree as follows:


     1. Recitals. Consultant has substantial experience and knowledge relating to JMS’s
business, and specifically, its fruit processing, procurement and logistics operations as well as
business integration matters generally. Because of Consultant’s experience, JMS desires to engage
him on a consulting basis to provide advice in these areas. Consultant is agreeable to providing
those services, and it is the purpose of this Agreement to set forth the terms and conditions upon
which those services will be rendered.


     2. Retention and Description of Services. JMS retains Consultant to furnish JMS with
Consultant’s unique expertise, advice, consulting and personal services in connection with special
projects relating to the Consultant’s area of expertise or general business integration matters, in
each case, consistent with the terms of this Agreement (“Consulting Services”). The Consultant
will provide Consulting Services to JMS on an as needed basis during the Term. The actual
Consulting Services to be provided by Consultant will be as designated by: (i) the Chairman or
President of JMS or (ii) any other person designated by the Board of Directors. Consultant shall
perform all Consulting Services on behalf of JMS in a timely, diligent and professional manner in
accordance with the highest commercial industry standards.


     3. Term of Agreement. This Agreement commences as of July 1, 2007 and will terminate
on June 30, 2008 (the “Term”).


     4. Place of Performance. It is understood and agreed by JMS and Consultant that the
nature of the services to be rendered under this Agreement by Consultant may necessitate a
reasonable amount of travel by him and attendance by him at meetings with JMS personnel and others
that may be located at various locations in the United States.


     5. Compensation. On or before July 1, 2007, JMS will pay Consultant a lump sum fee of
One Hundred Thousand and no/100 Dollars ($100,000) for his services under this Agreement.


     6. Reimbursement of Expenses. JMS will reimburse Consultant for all reasonable and
necessary out-of-pocket expenses incurred by Consultant in connection with the rendition of
services under this Agreement with regard to specific, preapproved activities, including, but not
limited to, expenses of travel (other than the cost of travel between Consultant’s home and office,
if any). Reimbursement of expenses hereunder shall be on a basis consistent with JMS’s standard
corporate expense and travel policies, including, but not limited to, the required use of JMS’s
designated travel agency for all travel. Consultant understands that expenses to be reimbursed by
JMS under this Agreement will not include costs and expenses that would be considered normally
incident to the conduct by Consultant of his business. Any and all reimbursement of expenses
hereunder will be made solely on the basis of itemized statements submitted by Consultant to JMS’s
Corporate Controller, including actual bills, receipts, or other evidence of expenditures, in
accordance with JMS’s corporate policies.


 




 




     7. Consultant an Independent Contractor. Consultant will furnish services hereunder
as an independent contractor and not as an employee or agent of JMS or of any company affiliated
with JMS. Consultant shall have no power or authority to act on behalf of, represent, or bind JMS
or any company affiliated with JMS in any manner. Consultant is not entitled to any medical
coverage, life insurance, participation in any benefit plan, or any other benefits generally
accorded to employees of JMS or its affiliates.


     8. No Conflicting Activities. Consultant covenants that during the term of this
Agreement, he will not, either directly or indirectly, himself or through any affiliate, carry on,
or be engaged in, concerned with, or interested in, in any manner whatsoever, the development or
marketing of fruit spreads, peanut butter, baking mixes, toppings, beverages, or other products
produced or distributed by JMS anywhere in the United States or Canada (except for an equity share
investment in a public company whose shares are listed on a stock exchange or in an
over-the-counter market where such share investment does not in the aggregate exceed five percent
of the issued equity shares of such company), or represent, manufacture for, or distribute such
products for any person who does so manufacture or market. Consultant agrees that any breach of
this covenant will result in JMS’s suffering a loss which cannot adequately be compensated for in
damages and that JMS will be entitled to injunctive or other equitable relief.


     9. Confidentiality and Nondisclosure. Consultant hereby specifically agrees to be
bound by the nondisclosure provisions set forth in EXHIBIT “A” attached hereto and
incorporated herein by reference.


     10. Restrictions on Use of Inside Information. In the course of the performance of
his duties under this Agreement, it is expected that Consultant may receive information that is
considered material inside information within the meaning and intent of the securities laws of the
United States. Consultant will not disclose this information to others except as authorized by JMS
and will not use such information directly or indirectly for his own benefit or as a basis for
advice to any other party concerning any decision to buy, sell, or otherwise deal in the stock of
JMS.


     11. Survival of Obligations. The obligations of Consultant under paragraphs 9 and 10
above shall survive termination of this Agreement.


     12. Default; Termination. If either party fails to fulfill any of its obligations
under this Agreement, that shall constitute default. In the event of a default by any party that
is not cured within 30 days of notice thereof to the defaulting party, the party not in default may
terminate this Agreement effective immediately upon notice to the defaulting party.


     13. Notices. Notices under this Agreement shall be given by certified or registered
mail, postage prepaid, return receipt requested, or by hand delivery, addressed in either case to
the address for the party set forth above or to such other address as may be provided for in a
notice given as provided in this paragraph 13. Notices under this paragraph 13 shall be deemed
given upon receipt.


     14. Entire Agreement. This Agreement, together with EXHIBIT “A” attached,
constitutes the entire agreement and understanding between the parties and supersedes all prior
agreements and understandings between them with respect to its subject matter. It may not be
modified or assigned without the express permission of both parties in a writing referring


2




 






to this Agreement.


     15. Severability. The invalidity or unenforceability of any portion of this Agreement
shall not affect the validity, force, or effect of the remaining portions hereof. If it is ever
held that any restriction hereunder is too broad to permit enforcement of such restriction to its
fullest extent, each party agrees that a court of competent jurisdiction may enforce such
restriction to the maximum extent permitted by law, and each party hereby consents and agrees that
such scope may be judicially modified accordingly in any proceeding brought to enforce such
restriction.


     16. Governing Law. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Ohio, without reference to choice of law principles.


Dated: June 30, 2007





































































                                         
    The J. M. SMUCKER COMPANY                       CONSULTANT
                                         
    By:
          /s/ Timothy P. Smucker
                      /s/ John D. Milliken
     
           
                       
     
          Timothy P. Smucker
                      John D. Milliken
     
          Chairman and Co-Chief Executive Officer                        




3




 




EXHIBIT “A”



NONDISCLOSURE PROVISIONS



     1. Nondisclosure Obligation. Consultant shall hold in confidence and not disclose to
third parties, or make commercial or other use of, any trade secrets or other information that he
may have received during his employment with JMS and/or its subsidiaries or that he may receive or
acquire from JMS during the term of the Consulting Agreement concerning JMS’s products, equipment,
processes, designs, packaging, methods of distribution, capabilities, systems, technology,
specifications, data, operating instructions, customers, marketing and sales, business plans, or
any other private matters, whether or not related to the project in which it is involved (all such
information shall be referred to below as the “Confidential Information” without JMS’s prior
written permission.


     2. Ownership of Materials. Any and all tangible representations of the Confidential
Information, including but not limited to any and all lists, notes, memoranda, schedules, data
sheets, written formulae, drawings, diagrams, blueprints, still or moving photographic or video
pictures, models, machinery, equipment, and packaging, provided to or obtained by Consultant
directly or indirectly by or from JMS, or developed by the Consultant during the term of the
Consulting Agreement, and all copies thereof are and shall be the exclusive property of JMS and
must be returned to JMS upon the first to occur of a specific request therefor by JMS or the
termination of the Consulting Agreement.


     3. Limits on Nondisclosure Agreement. Nothing herein contained shall deprive
Consultant of the right:



     A. to use any information which is now generally known to the trade or the public or
to use any other information from and after the time it becomes so known as long as it
becomes so known through no fault of Consultant; and



     B. to use any information received by Consultant lawfully and in good faith from a
third party who is under no obligation with regard thereto to JMS, either directly or
indirectly.


     4. No Other Rights. The Confidential Information shall remain the exclusive property
of JMS, and no license of or other right to utilize the Confidential Information or any patent,
trademark, invention, copyright or other intellectual property of JMS, either express or implied,
is conveyed or shall be deemed to have been conveyed hereby. Insofar as Consultant’s participation
in projects under the Consulting Agreement results in improvements or modifications to JMS’s
processes or products, such improvements or modifications shall be the property solely of JMS.
Consultant hereby waives any and all claims to and transfers, assigns, and conveys any and all
right, title, and interest in and to any Confidential Information. Without limiting the foregoing,
Consultant transfers, assigns, and conveys to JMS any and all patent rights, including patent
applications, which may result from projects on which it is involved under the Consulting
Agreement. Consultant will cooperate with JMS as it may require to assist it in obtaining,
defending, or enforcing any patent rights relating to or resulting from such projects worldwide and
will execute any papers necessary to effect such patent rights.


 




 




     5. Damages. Consultant recognizes the competitive value and confidential nature of
the Confidential Information and that any breach or threatened breach of these nondisclosure
provisions by Consultant may cause JMS irreparable injury for which monetary damages may be an
inadequate remedy. Therefore, Consultant agrees that, in addition to any monetary damages to which
it may be entitled, JMS shall be entitled to temporary and permanent injunctions restraining such
breach or threatened breach.


     6. Survival of Provisions. These nondisclosure provisions generally will expire two
years after the expiration of the Consulting Agreement; provided, however, that Consultant’s
obligations hereunder will continue in effect with respect to individual items of Confidential
Information for as long as those items remain confidential.


 







EX-10.44
3
l32070aexv10w44.htm
EX-10.44



EX-10.44






Exhibit 10.44



CONSULTING AGREEMENT



     The J. M. SMUCKER COMPANY, an Ohio corporation with its principal place of business at
Strawberry Lane, Orrville, Ohio 44667 (“JMS”), and Richard F. Troyak, 6780 Glengarry Avenue,
Canton, Ohio 44718, (“Consultant”), hereby agree as follows:


     1. Recitals. Consultant has substantial experience and knowledge relating to JMS’s
business, and specifically, its operations as well as business integration matters generally.
Because of Consultant’s experience, JMS desires to engage him on a consulting basis to provide
advice in these areas. Consultant is agreeable to providing those services, and it is the purpose
of this Agreement to set forth the terms and conditions upon which those services will be rendered.


     2. Retention and Description of Services. JMS retains Consultant to furnish JMS with
Consultant’s unique expertise, advice, consulting and personal services in connection with special
projects relating to the Consultant’s area of expertise or general business integration matters, in
each case, consistent with the terms of this Agreement (“Consulting Services”). The Consultant
will provide Consulting Services to JMS on an as needed basis during the Term. The actual
Consulting Services to be provided by Consultant will be as designated by: (i) the Chairman or
President of JMS or (ii) any other person designated by the Board of Directors. Consultant shall
perform all Consulting Services on behalf of JMS in a timely, diligent and professional manner in
accordance with the highest commercial industry standards.


     3. Term of Agreement. This Agreement commences as of August 1, 2007 and will
terminate on July 31, 2008 (the “Term”).


     4. Place of Performance. It is understood and agreed by JMS and Consultant that the
nature of the services to be rendered under this Agreement by Consultant may necessitate a
reasonable amount of travel by him and attendance by him at meetings with JMS personnel and others
that may be located at various locations in the United States.


     5. Compensation. On or before August 1, 2007, JMS will pay Consultant a lump sum fee
of One Hundred Thousand and no/100 Dollars ($100,000) for his services under this Agreement.


     6. Reimbursement of Expenses. JMS will reimburse Consultant for all reasonable and
necessary out-of-pocket expenses incurred by Consultant in connection with the rendition of
services under this Agreement with regard to specific, preapproved activities, including, but not
limited to, expenses of travel (other than the cost of travel between Consultant’s home and office,
if any). Reimbursement of expenses hereunder shall be on a basis consistent with JMS’s standard
corporate expense and travel policies, including, but not limited to, the required use of JMS’s
designated travel agency for all travel. Consultant understands that expenses to be reimbursed by
JMS under this Agreement will not include costs and expenses that would be considered normally
incident to the conduct by Consultant of his business. Any and all reimbursement of expenses
hereunder will be made solely on the basis of itemized statements submitted by Consultant to JMS’s
Corporate Controller, including actual bills, receipts, or other evidence of expenditures, in
accordance with JMS’s corporate policies.


 




 




     7. Consultant an Independent Contractor. Consultant will furnish services hereunder
as an independent contractor and not as an employee or agent of JMS or of any company affiliated
with JMS. Consultant shall have no power or authority to act on behalf of, represent, or bind JMS
or any company affiliated with JMS in any manner. Consultant is not entitled to any medical
coverage, life insurance, participation in any benefit plan, or any other benefits generally
accorded to employees of JMS or its affiliates.


     8. No Conflicting Activities. Consultant covenants that during the term of this
Agreement, he will not, either directly or indirectly, himself or through any affiliate, carry on,
or be engaged in, concerned with, or interested in, in any manner whatsoever, the development or
marketing of fruit spreads, peanut butter, baking mixes, toppings, beverages, or other products
produced or distributed by JMS anywhere in the United States or Canada (except for an equity share
investment in a public company whose shares are listed on a stock exchange or in an
over-the-counter market where such share investment does not in the aggregate exceed five percent
of the issued equity shares of such company), or represent, manufacture for, or distribute such
products for any person who does so manufacture or market. Consultant agrees that any breach of
this covenant will result in JMS’s suffering a loss which cannot adequately be compensated for in
damages and that JMS will be entitled to injunctive or other equitable relief.


     9. Confidentiality and Nondisclosure. Consultant hereby specifically agrees to be
bound by the nondisclosure provisions set forth in EXHIBIT “A” attached hereto and
incorporated herein by reference.


     10. Restrictions on Use of Inside Information. In the course of the performance of
his duties under this Agreement, it is expected that Consultant may receive information that is
considered material inside information within the meaning and intent of the securities laws of the
United States. Consultant will not disclose this information to others except as authorized by JMS
and will not use such information directly or indirectly for his own benefit or as a basis for
advice to any other party concerning any decision to buy, sell, or otherwise deal in the stock of
JMS.


     11. Survival of Obligations. The obligations of Consultant under paragraphs 9 and 10
above shall survive termination of this Agreement.


     12. Default; Termination. If either party fails to fulfill any of its obligations
under this Agreement, that shall constitute default. In the event of a default by any party that
is not cured within 30 days of notice thereof to the defaulting party, the party not in default may
terminate this Agreement effective immediately upon notice to the defaulting party.


     13. Notices. Notices under this Agreement shall be given by certified or registered
mail, postage prepaid, return receipt requested, or by hand delivery, addressed in either case to
the address for the party set forth above or to such other address as may be provided for in a
notice given as provided in this paragraph 13. Notices under this paragraph 13 shall be deemed
given upon receipt.


     14. Entire Agreement. This Agreement, together with EXHIBIT “A” attached,
constitutes the entire agreement and understanding between the parties and supersedes all prior
agreements and understandings between them with respect to its subject matter. It may not be
modified or assigned without the express permission of both parties in a writing referring


2




 






to this Agreement.


     15. Severability. The invalidity or unenforceability of any portion of this Agreement
shall not affect the validity, force, or effect of the remaining portions hereof. If it is ever
held that any restriction hereunder is too broad to permit enforcement of such restriction to its
fullest extent, each party agrees that a court of competent jurisdiction may enforce such
restriction to the maximum extent permitted by law, and each party hereby consents and agrees that
such scope may be judicially modified accordingly in any proceeding brought to enforce such
restriction.


     16. Governing Law. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Ohio, without reference to choice of law principles.


Dated: August 1, 2007





































































                                         
    The J. M. SMUCKER COMPANY                       CONSULTANT
                                         
    By
          /s/ Timothy P. Smucker
                      /s/ Richard F. Troyak
     
           
                       
     
          Timothy P. Smucker
                      Richard F. Troyak
     
          Chairman and Co-Chief Executive Officer                        





3




 







EXHIBIT “A”



NONDISCLOSURE PROVISIONS



     1. Nondisclosure Obligation. Consultant shall hold in confidence and not disclose to
third parties, or make commercial or other use of, any trade secrets or other information that he
may have received during his employment with JMS and/or its subsidiaries or that he may receive or
acquire from JMS during the term of the Consulting Agreement concerning JMS’s products, equipment,
processes, designs, packaging, methods of distribution, capabilities, systems, technology,
specifications, data, operating instructions, customers, marketing and sales, business plans, or
any other private matters, whether or not related to the project in which it is involved (all such
information shall be referred to below as the “Confidential Information” without JMS’s prior
written permission.


     2. Ownership of Materials. Any and all tangible representations of the Confidential
Information, including but not limited to any and all lists, notes, memoranda, schedules, data
sheets, written formulae, drawings, diagrams, blueprints, still or moving photographic or video
pictures, models, machinery, equipment, and packaging, provided to or obtained by Consultant
directly or indirectly by or from JMS, or developed by the Consultant during the term of the
Consulting Agreement, and all copies thereof are and shall be the exclusive property of JMS and
must be returned to JMS upon the first to occur of a specific request therefor by JMS or the
termination of the Consulting Agreement.


     3. Limits on Nondisclosure Agreement. Nothing herein contained shall deprive
Consultant of the right:



     A. to use any information which is now generally known to the trade or the public or
to use any other information from and after the time it becomes so known as long as it
becomes so known through no fault of Consultant; and



     B. to use any information received by Consultant lawfully and in good faith from a
third party who is under no obligation with regard thereto to JMS, either directly or
indirectly.


     4. No Other Rights. The Confidential Information shall remain the exclusive property
of JMS, and no license of or other right to utilize the Confidential Information or any patent,
trademark, invention, copyright or other intellectual property of JMS, either express or implied,
is conveyed or shall be deemed to have been conveyed hereby. Insofar as Consultant’s participation
in projects under the Consulting Agreement results in improvements or modifications to JMS’s
processes or products, such improvements or modifications shall be the property solely of JMS.
Consultant hereby waives any and all claims to and transfers, assigns, and conveys any and all
right, title, and interest in and to any Confidential Information. Without limiting the foregoing,
Consultant transfers, assigns, and conveys to JMS any and all patent rights, including patent
applications, which may result from projects on which it is involved under the Consulting
Agreement. Consultant will cooperate with JMS as it may require to assist it in obtaining,
defending, or enforcing any patent rights relating to or resulting from such projects worldwide and
will execute any papers necessary to effect such patent rights.


 




 




     5. Damages. Consultant recognizes the competitive value and confidential nature of
the Confidential Information and that any breach or threatened breach of these nondisclosure
provisions by Consultant may cause JMS irreparable injury for which monetary damages may be an
inadequate remedy. Therefore, Consultant agrees that, in addition to any monetary damages to which
it may be entitled, JMS shall be entitled to temporary and permanent injunctions restraining such
breach or threatened breach.


     6. Survival of Provisions. These nondisclosure provisions generally will expire two
years after the expiration of the Consulting Agreement; provided, however, that Consultant’s
obligations hereunder will continue in effect with respect to individual items of Confidential
Information for as long as those items remain confidential.


 







EX-13
4
l32070aexv13.htm
EX-13



EX-13






Exhibit 13







 




 




Financial Highlights



The J. M. Smucker Company










































































































































































































































                                                     
                Year Ended April 30,
    (Dollars in thousands, except per share data)           2008           2007
     
    Net sales           $     2,524,774                 $     2,148,017      
    Net income and net income per common share:                                                
    Net income           $     170,379                 $     157,219      
    Net income per common share – assuming dilution           $     3.00                 $     2.76      
    Income and income per common share before restructuring
and merger and integration costs: ⁽¹⁾
                                               
    Income           $     178,881                 $     165,152      
    Income per common share – assuming dilution           $     3.15                 $     2.89      
    Common shares outstanding at year end                 54,622,612                       56,779,850      
    Number of employees                 3,250                       3,025      
     
    (1) Reconciliation to net income:                                                
    Income before income taxes           $     254,788                 $     241,004      
    Merger and integration costs                 7,967                       61      
    Cost of products sold – restructuring                 1,510                       9,981      
    Other restructuring costs                 3,237                       2,120      
     
    Income before income taxes, restructuring, and merger
and integration costs           $     267,502                 $     253,166      
    Income taxes                 88,621                       88,014      
     
    Income before restructuring and merger and integration costs           $     178,881                 $     165,152      
     








~ On Our Cover ~



“Apple Butter Season” © 2008 Will
Moses



In the
painting commissioned for this year’s cover, artist

Will Moses, great-grandson of legendary painter

Grandma Moses, transports us to an earlier time at

J. M. Smucker’s Orrville home, where families are 
gathered to celebrate the goodness of the
harvest.



~ Contents ~






















































































































































































































































                             
    Letter to Shareholders                 2      
                             
    Business Overview                 6      
                             
    Recipes                 11      
                             
    Five-Year Summary of Selected Financial Data                 14      
                             
    Summary of Quarterly Results of Operations                 15      
                             
    Stock Price Data                 15      
                             
    Comparison of Five-Year Cumulative
Total Shareholder Return                 16      
                             
    Management’s Discussion and Analysis                 17      
                             
    Report of Management on Internal Control
Over Financial Reporting                 27      
                             
    Report of Independent Registered Public Accounting
Firm on Internal Control Over Financial Reporting                 28      
                             
    Report of Independent Registered Public Accounting
Firm on the Consolidated Financial Statements                 29      
                             
    Report of Management on Responsibility
for Financial Reporting                 30      
                             
    Consolidated Financial Statements                 31      
                             
    Notes to Consolidated Financial Statements                 36      
                             
    Directors, Officers, and General Managers                 64      
                             
    Properties                 64      
                             
    Corporate and Shareholder Information                 65      




 




 










Why We Are, Who We Are






...Our Culture






A culture of dotting the
Of doing the right things and doing things right...
A culture of growth — individual and as a company.
It’s because of who we are.
It’s






Our Commitment to Each Other. To our customers,






and to our consumers.






As we look to the future of unlimited possibilities,






we recognize the principles that are instrumental






to our success...






A culture deeply rooted in our Basic Beliefs...






Guideposts for decisions at every level...
Why we are who we are.
A culture that encourages commitment to each other...






Clear communication and collaboration...






Vision...A culture of appreciation.
A family -sense of sharing in a job well done...






Where every person makes a difference.




 




 








 




 








Dear Shareholders and Friends:



* * *



Fiscal 2008 was another record year for The J. M.
Smucker Company. This is especially gratifying in
light of the year’s challenging economic environment and unprecedented commodity-driven cost
increases, which impacted all of our businesses.






































                 
    
          Sales, excluding divested businesses, were up
22 percent, and net income grew eight percent.
                 
    
          Net income per share was $3.00, up from $2.76
last year, a nine percent increase.
                 
    
          Cash flow from operations exceeded $190 million,
allowing for a dividend increase for the 28th time
in the last 31 years.



We attribute our fiscal 2008 success to:
















































                 
    
          Our loyal consumers and customers, who trust
the Smucker family of brands to deliver on the
promise of quality, taste, and value;
                 
    
          Our talented and dedicated employees, who
continue to focus on our core business, while
embracing change as we grow;
                 
    
          A clear strategy of owning and marketing leading
food brands in North America; and
                 
    
          Our long-term commitment to investing in our
brands, developing new products, and acquiring
strategic businesses.



In fiscal 2008, we repurchased 2.9 million shares,
totaling almost $150 million. This action
demonstrates our confidence in our Company and is an
effective means for continuing to create shareholder
value.



~ Long-Term Performance ~


While we are proud of our fiscal 2008 results, they are
only a snapshot of a single year. We believe that
success is best
measured over the long term, and we are pleased to
report that our compounded net sales and earnings per
share grew over the past decade by 16 percent and 10
percent, respectively.



     Just as important, we measure success by more than a
financial yardstick. Our long-held values and
philosophies tell the true story of who we are—and with
whom you, as a shareholder, have entrusted your
investment.


~ Our Purpose and Strategy ~


Our Company, brands, and people are about more than making and marketing products.



     At Smucker, our purpose is to help families share memorable meals and moments. Key to
achieving our
purpose is our strategic vision of owning and marketing #1 food brands in North America. The
Smucker family
of brands is a trusted part of everyday meals, casual get-togethers, and special occasions—all of
which foster family connections and lasting memories.


     Bringing families together is best accomplished by employees who feel like family themselves.
At Smucker, we maintain a unique family feeling by genuinely living our Basic Beliefs: Quality,
People, Ethics, Growth, and Independence.


     Our purpose is what brings Smucker employees to work every day. Our strategy is what guides
our organization in a common direction and is the framework for serving our consumers, customers,
employees, suppliers, communities, and shareholders.


~ 2 ~



 




 








~ Serving Our Constituents ~


Consumers Meeting consumers’ needs is the heart of
all we do. We always seek to understand what consumers
want and to meet their needs with quality products that
are “good and good for you,” “easy for you,” and that
“make you smile.” That commitment, along with
responsible marketing, helps establish a bond between
our brands and consumers. Consumer trust, which takes
years to build, is something we never take for granted.


Customers We strive to satisfy our customers by
delivering outstanding service, offering fair prices,
and creating jointly developed business plans that
promise mutual benefits. Our emphasis on ethics,
fairness, and quality is vital to long-term,
productive customer relationships.



     A recent industry initiative called New Ways of
Working Together aims to eliminate business
disruptions, so that—as a team—retailers and
manufacturers can focus more closely on satisfying
consumers and growing business. While this is not a
new objective for us, we have taken a leadership
position in this initiative, because we believe it
will benefit everyone: retailers, manufacturers, and
ultimately, consumers.

Employees Smucker employees are quality people,
each of whom brings important talents, perspectives,
and skills to our Company. We believe that every
employee makes a difference.


Suppliers Achieving our strategy depends on dedicated
suppliers and business partners who share our
willingness to go the extra mile in the name of
quality and service.


We view our suppliers and business partners as extended
family, and we treat them accordingly. Whether it is
the brokers who stock the retail
shelves, the drivers who deliver our products, the
farmers who supply our raw materials, or the people who
create our advertising— each supplier or partner plays
a key role that we appreciate and acknowledge.


Communities We take seriously our responsibility to be
good environmental stewards. Sustainability, a term
now popular throughout the industry, describes
what we have been doing for many years. We realize
that sustainability begins at home—in the 20 North
American communities in which we have offices and
manufacturing plants—and that our local efforts fan
out in concentric circles that ultimately impact the
world.


Shareholders In the final analysis, we are confident
that if we do a good job of serving our consumers,
customers, employees, suppliers, and communities, we
will ultimately deliver good returns for our
shareholders.


It is clear to us that to achieve lasting, measurable
results, we must serve each of our constituents with
sincerity, trust, creativity, and unwavering
dedication to doing what is right. This is a
longstanding commitment on the part of thousands of
thoughtful, capable people, working with shared
purpose in an atmosphere of collaboration—people who
strive every day to help families create memorable
meals and moments together.


All of us at The J. M. Smucker Company thank you for
your continued support and dedication.



Sincerely,




















                 

 
Tim Smucker
      
 
Richard Smucker




~ 3 ~



 




 











 




 








 




 




Business Overview

***



~ U.S. Retail Segment ~


Sales and profits within our U.S. Retail segment grew
by 21 percent and four percent, respectively, in
fiscal 2008. Contributing to this growth were our core
business, new products, and the first full year of
sales and profits from the Eagle Brand acquisition. We
are especially pleased with the performance of our
U.S. Retail segment, given another year of record-high
commodity costs that impacted all of our businesses.



     During uncertain economic times, the Smucker
family of brands steadfastly provides consumers with
highly proven, deeply trusted products.
Smucker’s, Jif, Pillsbury, Crisco, Eagle Brand, Hungry Jack, Martha
White, and White Lily are well-loved parts of the
everyday meals and special occasions that bring
families together.


     We are passionate about serving our consumers and
customers, and we always seek better ways to meet their
needs. In January 2008, we appointed Advantage Sales
and Marketing as our single national broker for all of
our grocery business within the U.S. Retail segment.
This decision represents a major milestone in our
go-to-market strategy. It will help us further improve
customer service, realize a number of near-term
efficiencies, and position our Company for future
growth.




Fruit Spreads & Peanut Butter Our Smucker’s and Jif
brands delivered record market-share growth in fiscal
2008. Consumers continue to reach for our many fruit
spread varieties and peanut butter products, enjoying each on its own
or pairing them to create the “Great American PB&J.”



     Our Smucker’s Organic fruit
spreads and Smucker’s Sugar
Free fruit spreads
sweetened with
Splenda^®
continue to perform
well and now include
even more
varieties for consumers to choose from.


     This past year, we reintroduced “The Boys”
television advertising campaign, featuring a young Tim
and Richard Smucker. Through a series of three new
television spots, consumers are reminded of the
heritage of the Smucker’s brand and the quality
ingredients we select for every jar of fruit spread.


     Peanut butter, our largest category, sustained
impressive growth in fiscal 2008, as increasing
numbers of consumers include this “good for you” and
affordable protein in their pantries. We produced
record volumes of Jif peanut butter to satisfy growing
consumer demand and to help meet Customers’ need as a
result of a competitor’s supply disruption.





     In fiscal 2008, we extended the
Jif brand to the snack nuts
category. Just as “choosy moms” and
“choosy dads” have trusted Jif
peanut butter for generations,
consumers who crave the
finest-quality peanuts, cashews, and
mixed nuts are drawn to Jif snack
nuts. New television advertising
reminds snack nut consumers, “We
have to be choosy.
We’re Jif.”

Uncrustables Sandwiches Smucker’s Uncrustables
sandwiches, which offer a convenient and fun way to
enjoy a peanut butter and jelly sandwich, continue to
bring smiles to the faces of consumers. Demand
remains strong, and the introduction this past year
of white whole wheat Smucker’s Uncrustables
sandwiches in strawberry and grape varieties affords
consumers another better-for-you alternative and
broadens our presence in the frozen aisle.






~ 6 ~



 




 









Ice
Cream Toppings Nothing says “celebration” like
Smucker’s
ice cream toppings. The introduction in fiscal
2008 of Smucker’s Triple Berry topping and Smucker’s Sugar
Free Chocolate and Sugar Free Caramel Sundae Syrups
heightens the fun and further expands our
better-for-you alternatives in this category.


Potatoes, Pancakes, and Syrup This past year, we
extended the reach of our Hungry Jack brand by
continuing to focus on new products and expanding our
product distribution and print and radio advertising.
We began testing several products that will offer
consumers even greater convenience. Included are
Hungry Jack refrigerated potatoes, Hungry Jack frozen
biscuits, and Hungry
Jack Snack’n Waffles ready-to-eat, pre-sweetened
waffles.





Baking and Oils We continued to strengthen and expand
our U.S. baking aisle leadership position in fiscal
2008. Through our portfolio of baking brands,
including Pillsbury, Eagle Brand, PET, Martha White,
and White Lily, we offer consumers products that meet
nearly all of their everyday and special-occasion
baking needs.






     We enjoyed the first full year of sales
from brands that joined our portfolio as part of the
Eagle acquisition. The addition of Eagle Brand
sweetened condensed milk, Eagle Brand evaporated milk,
Eagle Brand dessert baking mixes, and Magnolia
sweetened condensed milk further broadened our
cross-promotional activities during the busy fall and
spring holiday baking periods. 

     
Consumers often look
for something exceptional to serve to family and
friends on special occasions. Our newly introduced,
simple-to-prepare Pillsbury Mint Chocolate Brownies,
Pillsbury Pumpkin Caramel Delight, and Eagle Brand
Magic Cookie Bar and Decadent Fudge dessert kits
answer this desire with impossible-to-resist
convenience.


     Consumers continue to respond positively to our
better-for-you baking alternatives, including
Pillsbury Reduced Sugar cake mixes and frostings,
Pillsbury Reduced Sugar brownies, and Martha White
whole-grain muffins and sweet yellow cornbread.


     Our Crisco olive oil products, which offer
consumers a trusted brand in the “good for you” olive
oil category, are a growing success. Thanks to ongoing
momentum
and expanded distribution, these products will be
offered in the western United States in fiscal 2009.


     Our introduction of Crisco Puritan canola oil
with Omega-3 DHA means consumers now have another
smart choice for adding nutritional value to their
meals.





     Unprecedented soybean, wheat, and milk commodity
costs significantly challenged our Baking and Oils
business in fiscal 2008. It is expected that these
costs will continue to rise in the foreseeable future,
making the always-vital need for cost and price
management more critical than ever.


~ 7 ~



 




 












 




 











 




 








~Special Markets Segment~


Our
Special Markets segment saw another record year. Compared to fiscal 2007, sales in this segment,
excluding divested businesses, were up 25 percent. Profits increased 26 percent.


Canada Excluding divested businesses, our Canadian business experienced a 35 percent growth in
sales in fiscal 2008. This significant increase was driven largely by a full year of Eagle Brand
sales and our acquisition of Carnation, the #1 evaporated milk in Canada. Late in the fiscal year,
we also acquired Europe’s Best frozen fruits and vegetables.



     Carnation
and Europe’s Best join our already strong portfolio of #1 brands in Canada,
including Smucker’s, Robin Hood, and Bick’s. The
Carnation  acquisition further strengthens our
leadership position in the baking aisle, and Europe’s Best adds premium frozen fruits and
vegetables to our product portfolio.


     Adding to a recent string of award-winning innovations in the baking category, we introduced
Robin Hood frozen muffins this past year. Together,
Europe’s best frozen fruits and vegetables and
Robin Hood frozen muffins enhance our presence in Canada’s retail freezer aisles.

Foodservice
Our Foodservice and Schools business grew by 27 percent in fiscal 2008. Key
contributors were our core portion control business, Smucker’s Uncrustables sandwiches, and recent
acquisitions of Eagle Brand and the Snack’n
Wiffles brand. Snack’n Waffles ready-to-eat,
pre-sweetened waffles offer consumers a convenient, handheld waffle to enjoy while away from home.


Beverage Our Beverage group continues to meet consumer desire for products that are “good and
good for you” and made in a sustainable manner. This business,
driven by our R. W. Knudsen Family
and Santa Cruz Organic brands, grew in sales by nine percent in fiscal 2008. We introduced new
products, including R. W. Knudsen Family Organic Pomegranate
Nectar, R. W. Knudsen Family Organic
Black Currant Nectar, and Sensible Sippers—juice boxes that provide parents with a convenient
alternative for offering children organic juice, blended with just the right amount of water, while
at home or on the go.



     Our Beverage business is an industry sustainability leader, receiving the California Waste
Reductions Award for the eighth consecutive year.





International Consumers Consumers in more than
50 countries beyond the United States and Canada continue to enjoy our brands and products. The
International group remains focused on Mexico and the Caribbean, with business growing in these
markets by six percent and 66 percent, respectively, in fiscal 2008.






We are
pleased to welcome these additions to the Smucker family of brands: Snack’n Waffles
ready-to-eat, pre-sweetened waffles; king kelly California Orange Marmalade; and, in Canada,
Carnation evaporated milk and Europe’s best frozen fruits and vegetables.



~ 10 ~



 




 













A Touch of Orange
Apple Pie






Prep time: 25
minutes Cook time:
45 minutes Ready
in: 2 hours Makes 8
servings






Thai Peanut Butter
Chicken Wraps






Prep time: 10
minutes Ready in:
10 minutes Makes 4
wraps






Grilled Seafood
Salad






Prep time: 40
minutes Cook time:
15 minutes Ready
in: 1 hour Makes 6
servings






Mocha Walnut Pie






Prep time: 30
minutes Cook time:
45 minutes Ready
in: 1 hour 45
minutes Makes 8
servings






Ingredients
1/2 cup Jif ^{^®}Creamy Peanut Butter
or Jif ^{^®}Extra Crunchy Peanut Butter






1/2 cup pad thai sauce*

1/2 cup chopped green
onions 4 burrito size
tortillas






1 (6 oz.) package fully cooked,
grilled chicken breast strips,
cut into bite-size pieces or 1
1/3 cups cooked chicken 2 cups
shredded lettuce






*Pad thai sauce is often
located in the Asian foods
section of many grocery
stores.






Ingredients
Marinade Juice of 1 lime






2 tablespoons Crisco^{^®}Pure Olive Oil
1/4 teaspoon salt
1/8 teaspoon cayenne pepper
1/2 pound fresh sea scallops, 10 to
20 count size 1/2 pound fresh tail-on
shrimp, 21 to 25 count size






1 (6 oz.) package sliced portobello
mushrooms Dressing 1/4 cup balsamic
vinegar 1/2 teaspoon Dijon mustard Salt
and pepper to taste 1 tablespoon chopped
fresh herbs (basil, oregano, thyme) 1/2
cup Crisco^{^®}Pure Olive Oil
Crisco^{^®}Original No-Stick
Cooking Spray






Salad 12 cups fresh mixed baby
greens 1 cup baby grape
tomatoes






1 medium cucumber, halved
lengthwise, sliced 1/2 each red and
yellow bell peppers, cut in julienne
strips 1/4 cup shredded carrots
Freshly grated Parmesan cheese
(optional)






Ingredients
1 (9-inch) single Classic Crisco^{^®}Pie Crust






(recipe available at Crisco.com)






2 (1 oz.) squares unsweetened
chocolate 1/4 cup butter or
margarine






1 1/2 tablespoons Kava^{^®}Coffee, dissolved in 1/4
cup hot water






1 (14 oz.) can Eagle
Brand^{^®}Sweetened
Condensed Milk






2 large eggs, well
beaten 1 teaspoon
vanilla extract 1 cup
chopped walnuts






Whipped cream or frozen
whipped topping, thawed
(optional)






Sweet Southwestern Dip






Prep time: 5
minutes Ready in: 2
hours

Makes approximately 2 cups






Brownie Bites with
Caramel Fluff






Prep time: 20
minutes Bake time:
30 minutes Ready
in: 1 hour 30
minutes Makes 12
servings






Orange Pecan

Waffles with Sweet
Waffles






Orange Syrup






Prep time: 8
minutes Cook time:
10 minutes Ready
in: 30 minutes
Makes 8 waffles






Fruit Kabobs with
Creamy Cherry
Peanut Butter Dip






Prep time: 15
minutes Ready in:
15 minutes Makes 8
servings






Ingredients

1 jar ^{^®}Sweet Pepper &
Onion Relish






1-2 tablespoons ^{^®}Lime
Curd 1/2 cup mayonnaise 1/2 cup
sour cream 1/2 teaspoon chili
powder (optional) Corn chips or
tortilla chips






VARIATION Zesty
Pepper

Ingredients






1 (8 oz.) package cream cheese, softened 1 jar ^{^®}Sweet Pepper & Onion Relish






Assorted crackers
Ingredients
Crisco^{^®}Original No-Stick Cooking Spray
1 (12.35 oz.) package Pillsbury^{^®}






Reduced Sugar Chocolate Fudge Brownie Mix 1/3 cup Crisco^{^®}Pure Vegetable Oil






3 tablespoons water
1 large egg

1/3 cup ^{^®}Sugar Free Caramel
Topping






2 cups sugar free frozen
whipped topping, thawed 2
teaspoons mini semi-sweet
chocolate chips Additional






^{^®}Sugar Free Caramel Topping (optional)






Ingredients






2 cups Hungry Jack^{^®}Buttermilk Complete
Pancake & Waffle Mix






1/2 cup finely chopped pecans or walnuts 1/4 cup s^{^®}Sweet Orange Marmalade






1 1/4 cups water
1/4 cup Crisco^{^®}Pure Vegetable Oil
1 large egg






1 1/4 cups ^{^®}Sweet Orange
Marmalade






1/4 teaspoon ground cinnamon






Whipped cream or frozen
whipped topping, thawed






Ingredients

1 cup lowfat vanilla yogurt






1/4 cup ^{^®}Creamy Natural
Peanut Butter 1/3 cup ^{^®}Cherry Sugar Free Preserves
or any ^® Sugar Free or Low
Sugar^TMflavor of your
choice 4 cups fresh fruit such as
pineapple chunks, sliced kiwi,
melon balls, grapes, assorted whole
berries




 




 







Sweet ‘n’ Hot Southwestern Dip(Pictured on page 4)

Directions

STIR together all ingredients in small serving bowl.

COVER and chill 2 hours. Serve with corn chips or tortilla chips.

TIP: This is a great sandwich and hamburger spread too!



Zesty Pepper ‘n’Onion Dip

Directions


BEAT cream cheese in medium bowl until smooth.
Gradually mix in relish. Spoon into small serving
bowl.


COVER and
chill at least 1 hour. Serve with crackers.

TIP: For an easier option, unwrap the block of cream
cheese and place on a decorative plate. Pour relish over
top. Serve with a small knife and crackers.


















                 
    ^©/^® The J. M. Smucker Company
          dickinsonsfamily.com




Brownie Bites with Caramel Fluff (Pictured on page 5)

Directions


HEAT oven to 350°F Coat an 8 x 8-inch baking pan lightly with no-stick cooking spray.


COMBINE brownie mix, oil, water and egg in
medium bowl. Stir 50 strokes with spoon. Spread
evenly in prepared pan.


BAKE 30 to 32 minutes. Cool completely. Cut into
cubes. Place half of cubes in 1 1/2-quart serving
dish.


STIR caramel topping in small bowl until smooth. Whisk
in whipped topping until blended. Spread half on top of
brownie cubes in dish. Make another layer of remaining
brownie cubes and topping.
Sprinkle with mini chocolate chips. Drizzle with
additional caramel topping, if desired.





























                 
    ^©/^® The J. M. Smucker Company
          crisco.com
Pillsbury is a trademark of The Pillsbury Company, LLC used under license.
          pillsburybaking.com
    
          smuckers.com




Orange Pecan Waffles with Sweet Orange Syrup (Pictured on page 8)

Directions


HEAT
waffle iron according to manufacturers instructions.

COMBINE pancake mix, nuts, 1/4 cup marmalade, water, oil
and egg in medium bowl. Stir until large lumps disappear.
Bake in hot waffle iron until steaming stops and waffle
is golden brown.


PLACE 1 1/4 cups marmalade in microwave-safe bowl.
Microwave on HIGH (100% power) 1 minute. Add cinnamon;
stir.


SERVE waffles with orange syrup and whipped cream or
whipped topping.




























                 
     
          crisco.com
     
          hungryjack.com
    ^©/^® The J. M. Smucker Company
          smuckers.com




Fruit Kabobs with Creamy Cherry Peanut Butter Dip (Pictured on page 9)

Directions


WHISK together yogurt, peanut butter and preserves in
small bowl until thoroughly mixed. Spoon into small
serving dish.


THREAD pieces of fruit onto wooden skewers. Arrange
skewers and dip on serving platter.


















                 
    ^©/ TM/^® The J. M. Smucker Company
          smuckers.com




A Touch of Orange Apple Pie (Pictured on page 4)

Directions


PREPARE recipe for double crust pie. Roll out dough for
bottom crust; place in 9-inch pie plate. Press to fit
without stretching dough. Trim even with pie plate. Heat
oven to 400ºF.


COMBINE sugar, cornstarch, cinnamon, orange peel, salt and
nutmeg in small bowl. Place apples in unbaked pie crust.
Sprinkle sugar mixture over apples. Dot with butter.
Moisten pastry edge with water.


ROLL out dough for top crust. Place onto filled pie. Trim
1/2-inch beyond edge. Fold top crust under bottom crust
edge to seal. Crimp and flute edges. Cut slits in top crust
or perforate with fork to allow steam to escape. 
BAKE 35
minutes. Remove pie from oven. Brush with milk. Sprinkle
with sugar. Cover edge of pie with foil, if necessary, to
prevent overbrowning. Bake an additional 10 minutes or
until filling in center is bubbly and crust is golden
brown. Cool completely on wire rack.


















                 
    ^©/^® The J. M. Smucker Company
          crisco.com




Thai Peanut Butter Chicken Wraps (Pictured on page 5)

Directions


STIR together peanut butter, pad thai sauce and
green onions in medium bowl.


PLACE tortilla on microwave-safe plate. Spread 1/4
peanut butter mixture on tortilla to about 1/2-inch
of edge. Microwave on HIGH (100% power) 20 seconds.


LAYER with 1/4 chicken; top with 1/2 cup lettuce. Wrap
burrito style: Fold one edge of tortilla up about 1 inch
over filling; fold right and left sides over folded
edge; roll up, ending with loose edge on bottom. Cut in
half diagonally.


REPEAT with remaining tortillas.


















                 
    ^©/^® The J. M. Smucker Company
          jif.com




Grilled Seafood Salad (Pictured on page 8 )

Directions


WHISK together lime juice, oil, salt and cayenne pepper in
shallow dish. instructions. Add scallops, shrimp and
sliced mushrooms; turn to coat. Cover and refrigerate 30
minutes.


COMBINE vinegar, mustard, salt, pepper and herbs in
blender or food processor. Process on high speed until
mixture is well blended. With the motor running, carefully
pour in olive oil in a steady stream. Set aside.


SPRAY grill pan or sauté pan with no-stick cooking spray;
heat to medium high heat. Remove seafood and mushrooms
from marinade; discard marinade. Cook shrimp and scallops
2 to 3 minutes per side or until seafood is cooked through
and has browned highlights. Remove from pan; set aside.
Add mushrooms to pan; grill 4 to 5 minutes, turning once.
Remove from pan.


ARRANGE salad ingredients on medium platter. Top with
grilled seafood and mushrooms. Drizzle dressing as desired
over salad. Top with Parmesan cheese, if desired.


















                 
    ^©/^® The J. M. Smucker Company
          crisco.com




Mocha Walnut Pie (Pictured on page 8 )

Directions


PREPARE recipe for single crust pie. Roll out dough;
place in 9-inch pie plate. Press to fit without
stretching dough. Trim edge of dough, leaving a 3/4-inch
overhang. Fold edge under; flute dough as desired. Heat
oven to 350ºF.


MELT chocolate and butter in medium saucepan over low
heat. Stir in dissolved coffee, sweetened condensed
milk, eggs and vanilla; mix well. Pour into pie crust.
Top with walnuts.

BAKE 40 to 45 minutes or until center is set. Cool
slightly. Serve warm or chilled, topped with whipped
cream or whipped topping, if desired.




























                 
     
          crisco.com
     
          eaglebrand.com
    ^©/^® The J. M. Smucker Company
          kavacoffee.com




 



 




 











Financial Review

***












































































































































































































                             
    Five-Year Summary of Selected Financial Data                 14      
                             
    Summary of Quarterly Results of Operations                 15      
                             
    Stock Price Data                 15      
                             
    Comparison of Five-Year Cumulative
Total Shareholder Return                 16      
                             
    Management’s Discussion and Analysis                 17      
                             
    Report of Management on Internal Control
Over Financial Reporting                 27      
                             
    Report of Independent Registered Public Accounting
Firm on Internal Control Over Financial Reporting                 28      
                             
    Report of Independent Registered Public Accounting
Firm on the Consolidated Financial Statements                 29      
                             
    Report of Management on Responsibility
for Financial Reporting                 30      
                             
    Consolidated Financial Statements                 31      
                             
    Notes to Consolidated Financial Statements                 36      
                             
    Directors, Officers, and General Managers                 64      
                             
    Properties                 64      
                             
    Corporate and Shareholder Information                 65      







~ 13 ~




 





Five-Year Summary of Selected Financial Data

***


The following table presents selected financial data for each of the five years in the period ended
April 30, 2008. The selected financial data was derived from the consolidated financial statements
and should be read in conjunction with “Management’s Discussion and Analysis of Results of Operations and
Liquidity and Capital Resources” and the consolidated financial statements and notes thereto.
































































































































































































































































































































































































































































































































































































































































































































                                                                                                                             
        Year Ended April 30,
     
    (Dollars in thousands, except per share data)           2008           2007           2006           2005           2004
     
    Statements of Income:                                                                                                                        
    Net sales           $     2,524,774                 $     2,148,017                 $     2,154,726                 $     2,043,877                 $     1,369,556      
    Income from continuing operations           $     170,379                 $     157,219                 $     143,354                 $     130,460                 $     111,298      
    Discontinued operations                 —                       —                       —                       (1,387     )                 52      
     
    Net income           $     170,379                 $     157,219                 $     143,354                 $     129,073                 $     111,350      
     
                                                                                                                             
    Financial Position:                                                                                                                        
    Total assets           $     3,129,881                 $     2,693,823                 $     2,649,744                 $     2,635,894                 $     1,684,125      
    Cash and cash equivalents                 184,175                       200,119                       71,956                       58,085                       104,551      
    Long-term debt                 789,684                       392,643                       428,602                       431,560                       135,000      
    Shareholders’ equity                 1,799,853                       1,795,657                       1,728,059                       1,690,800                       1,210,693      
     
                                                                                                                             
    Other Data:                                                                                                                        
    Capital expenditures           $     76,430                 $     57,002                 $     63,580                 $     87,576                 $     97,721      
    Common shares repurchased                 2,927,600                       1,067,400                       1,892,100                       368,678                       —      
    Weighted-average shares                 56,226,206                       56,432,839                       57,863,270                       57,086,734                       49,816,926      
    Weighted-average shares — assuming dilution                 56,720,645                       57,056,421                       58,425,361                       57,748,780                       50,395,747      
    Earnings per common share:                                                                                                                        
    Income from continuing operations           $     3.03                 $     2.79                 $     2.48                 $     2.29                 $     2.23      
    Discontinued operations                 —                       —                       —                       (0.03     )                 0.01      
     
    Net income           $     3.03                 $     2.79                 $     2.48                 $     2.26                 $     2.24      
     
                                                                                                                             
    Income from continuing operations -
assuming dilution           $     3.00                 $     2.76                 $     2.45                 $     2.26                 $     2.21      
    Discontinued operations — assuming dilution                 —                       —                       —                       (0.02     )                 —      
     
    Net income — assuming dilution           $     3.00                 $     2.76                 $     2.45                 $     2.24                 $     2.21      
     
                                                                                                                             
    Dividends declared per common share           $     1.22                 $     1.14                 $     1.09                 $     1.02                 $     0.94      
     




~ 14 ~




 







 




Summary of Quarterly Results of Operations

***


The following is a summary of unaudited quarterly results of operations for the years ended April
30, 2008 and 2007.
































































































































































































































































































































                                                                                                                                                     
    (Dollars in thousands, except per share data)      
                                                                                                                                        Earnings per      
                                                                                        Net                 Earnings per                 Common Share -      
                Quarter Ended                 Net Sales                 Gross Profit                 Income                 Common Share                 Assuming Dilution      
     
    2008           July 31, 2007           $     561,513                 $     185,984                 $     40,761                 $     0.72                 $     0.71      
                October 31, 2007                 707,890                       218,488                       50,166                       0.88                       0.87      
                January 31, 2008                 665,373                       195,453                       42,401                       0.75                       0.75      
                April 30, 2008                 589,998                       182,239                       37,051                       0.68                       0.67      
     
    2007           July 31, 2006           $     526,509                 $     157,994                 $     28,724                 $     0.51                 $     0.50      
                October 31, 2006                 604,955                       191,191                       45,569                       0.80                       0.80      
                January 31, 2007                 523,081                       172,967                       40,427                       0.72                       0.71      
                April 30, 2007                 493,472                       179,903                       42,499                       0.76                       0.75      
     


Annual earnings per share may not equal the sum of the individual quarters due to differences in
the average number of shares outstanding during the respective periods.



Stock Price Data

***


The Company’s common shares are listed on the New York Stock Exchange — ticker symbol SJM. The
table below presents the high and low market prices for the shares and the quarterly dividends
declared. There were approximately 267,380 shareholders as of June 17, 2008, of which 78,959 were
registered holders of common shares.




























































































































































































                                                                                                     
                Quarter Ended                 High                 Low                 Dividends      
     
    2008           July 31, 2007           $     64.32                 $     55.60                 $     0.30      
                October 31, 2007                 58.09                       50.79                       0.30      
                January 31, 2008                 53.70                       42.75                       0.30      
                April 30, 2008                 52.59                       46.84                       0.32      
     
    2007           July 31, 2006           $     47.25                 $     39.11                 $     0.28      
                October 31, 2006                 49.14                       43.00                       0.28      
                January 31, 2007                 49.98                       45.00                       0.28      
                April 30, 2007                 57.43                       46.97                       0.30      
     



~ 15 ~




 





Comparison of Five-Year Cumulative Total Shareholder Return

***


























































































































































                                                                                                                                                     
                April 30,      
                2003                 2004                 2005                 2006                 2007                 2008      
     
    The J. M. Smucker Company           $     100.00                 $     147.38                 $     142.81                 $     115.66                 $     168.57                 $     154.05      
    S&P 500                 100.00                       122.88                       130.66                       150.81                       173.79                       165.66      
    S&P Packaged Foods & Meats                 100.00                       129.21                       138.28                       133.81                       159.84                       156.94      
     



The above graph compares the cumulative total shareholder return for the five years ended April 30,
2008, for the Company’s common shares, the S&P 500, and the S&P Packaged Foods and Meats index.
These figures assume all dividends are reinvested when received and are based on $100 invested in
the Company’s common shares and the referenced index funds on April 30, 2003.



Copyright (C) 2008, Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. All rights reserved.

www.researchdatagroup.com/S&P.htm



~ 16 ~




 




Management’s Discussion and Analysis

***



Executive Summary

***


The J. M. Smucker Company (the “Company”), headquartered in Orrville, Ohio, is the leading
marketer and manufacturer of fruit spreads, peanut butter, shortening and oils, ice cream
toppings, sweetened condensed milk, and health and natural foods beverages in North America.


The Company’s strategy is to own and market leading food brands found in the center of the store
and sold throughout North America. Its family of brands includes Smucker’s, Jif, Crisco,
Pillsbury, Eagle Brand, R.W. Knudsen Family, Hungry Jack, White Lily, and Martha White in the
United States, along with Robin Hood, Five Roses, Carnation, Europe’s Best, and
Bick’s in Canada. In addition to these brands, the Company
markets products under numerous other brands, including
Dickinson’s, Laura Scudder’s, Adams, Double Fruit (Canada), and Santa Cruz Organic. The Company is
widely known and trusted for quality food products.


The Company distributes its products through grocery and other retail outlets, foodservice
establishments, schools, specialty and gourmet shops, health and natural foods stores, and
consumer direct vehicles such as the Internet and a showcase store in Orrville, Ohio, and markets
a wide variety of other specialty products throughout North America and in many foreign countries.


Since 1998, the Company has appeared on FORTUNE magazine’s annual listing of the “100 Best
Companies to Work For,” in the United States, ranking number one in 2004.



Results of Operations

***


On May 1, 2007, the Company acquired Eagle Family Foods Holdings, Inc. (“Eagle”) in a transaction
valued at approximately $248 million. The transaction has been accounted for as a purchase
business combination and the results of Eagle are included in the Company’s consolidated financial
statements from the date of acquisition.



~ Summary of 2008 ~


The Company realized strong sales growth in 2008 as the impacts of Eagle and other recent
acquisitions, pricing and volume gains, and favorable foreign currency exchange rates were
realized. Company net sales increased 18 percent to $2,524.8 million in 2008 from $2,148.0 million
in 2007 while net income increased eight percent to $170.4 million in 2008 from $157.2 million in
2007. Net income per common share  — assuming dilution was $3.00 in 2008, an increase of nine
percent from $2.76 in 2007, resulting from the increase in net income combined with a decrease in
common shares outstanding during the year.



~ Net Sales ~















































































































                                                                             
                Year Ended April 30,      
    (Dollars in thousands)           2008                 2007                 2006      
     
    Net sales:                                                                        
    U.S. retail market           $     1,874,547                 $     1,547,064                 $     1,484,873      
    Special markets                 650,227                       600,953                       669,853      
     
    Total net sales           $     2,524,774                 $     2,148,017                 $     2,154,726      
     



2008 Compared to 2007. Net sales increased $376.8 million, or 18 percent, in 2008 from 2007. Net
sales increased 22 percent over the same period, excluding the divested Canadian non-branded,
grain-based foodservice and industrial businesses (“divested Canadian businesses”) sold in
September 2006. The acquired Eagle businesses contributed $236.2 million in net sales in 2008,
accounting for approximately one-half of the increase in net sales excluding the divested Canadian
businesses, while pricing contributed almost one-third of the increase. Also contributing to net
sales growth in 2008 were gains in the Smucker’s, Jif, Crisco, and Hungry Jack brands, the
acquired Carnation canned milk business in Canada, and the impact of favorable foreign exchange
rates.


In the U.S. retail market segment, comprised of the Company’s consumer and consumer oils and
baking strategic business areas, net sales were $1,874.5 million in 2008, up 21 percent compared
to $1,547.1 million in 2007. Net sales in the con-



~ 17 ~




 








sumer strategic business area increased nine percent led by strong sales in peanut butter, fruit
spreads, and Smucker’s Uncrustables sandwiches. Excluding the contribution of $198.9 million from
the acquired Eagle business in 2008, net sales in the oils and baking strategic business area
increased eight percent as sales gains were realized in baking mixes and oils.


The special markets segment is comprised of the foodservice, beverage, Canada, and international
strategic business areas. Net sales in this segment were $650.2 million in 2008, an increase of
eight percent compared to $601.0 million in 2007. Excluding the divested Canadian businesses, net
sales in the special markets segment increased 24 percent in 2008 compared to 2007. Canada
contributed significantly to the increase in special markets segment net sales due to the impacts
of the acquired Eagle and Carnation canned milk businesses and favorable foreign exchange rates.
The acquisition of Europe’s Best brand of premium, all natural, frozen fruit and vegetables during
the fourth quarter of 2008 also contributed slightly to the Canada sales increase. The foodservice
strategic business area net sales increased 27 percent in 2008 compared to 2007, or 14 percent,
excluding the contribution of $21.1 million of Eagle net sales. Contributing to the foodservice
improvement in 2008 was continued growth of Smucker’s Uncrustables sandwiches, which realized a 15
percent increase, and a 12 percent increase in traditional portion control products, primarily
peanut butter. Net sales in the beverage strategic business area increased nine percent in 2008
compared to 2007 resulting from increases in R.W. Knudsen Family, Santa Cruz Organic, and
nonbranded products of seven, 14, and nine percent, respectively. Net sales in the international
strategic business area increased two percent in 2008 despite the divestiture of the Scotland
business during the first quarter of 2008, driven by a 19 percent increase in export sales and a
six percent increase in net sales in Mexico.


2007 Compared to 2006. Net sales in 2007 decreased $6.7 million, or less than one percent, from
2006 reflecting the impact of divestitures. Net sales increased $107.5 million, or five percent
over the same period, excluding the divested Canadian businesses and the U.S. industrial
ingredient business (“divested businesses”). This net sales growth was led primarily by volume
gains in the Jif and Smucker’s brands, strong performance across the businesses in the special
markets segment, and the contribution of approximately $33.4 million from the White Lily and Five
Roses brands acquired during 2007. Price increases were also
taken on most brands during the year.


In the U.S. retail market segment net sales were $1,547.1 million in 2007, up $62.2 million, or
approximately four percent, over 2006. Net sales in the consumer strategic business area were up
seven percent for the year. The consumer increase was led by strong sales of Jif peanut butter,
particularly in the fourth quarter of the fiscal year resulting from increased demand for the
product upon the recall of a competitor’s products. In addition, growth in natural peanut butter,
fruit spreads, toppings, and a 29 percent increase in Smucker’s Uncrustables sandwiches during the
year also contributed. In the consumer oils and baking strategic business area, sales were flat
compared to the prior year as sales gains in retail oils, frosting, flour, and the contribution of
$14.8 million from the White Lily brand acquired in October 2006 offset declines in baking mixes
and a $14.7 million decrease in sales of industrial oils.


Net sales in the special markets segment were $601.0 million in 2007, a decrease of 10 percent,
compared to 2006. Excluding divested businesses, special market net sales increased nine percent
for the same period. All strategic business areas in special markets contributed to the increase.
Foodservice net sales increased 13 percent, due to a 10 percent increase in sales of traditional
portion control products, as well as a 20 percent increase in Smucker’s Uncrustables sandwiches in
the schools market. Beverage net sales increased 11 percent in 2007 compared to 2006, as sales of
R. W. Knudsen Family, Santa Cruz Organic, and nonbranded products increased nine, 21, and 19
percent, respectively. Net sales in Canada increased five percent driven by the contribution of
approximately $18.6 million from the acquisition of the



~ 18 ~




 






Five Roses flour brand during the year and the impact of favorable exchange rates. In the
international strategic business area, net sales increased 14 percent primarily due to continued
growth in export markets.



~ Operating Income ~


The following table presents components of operating income as a percentage of net sales.











































































































































































































                                                                             
                Year Ended April 30,
                2008           2007           2006
     
    Gross profit                 31.0     %                 32.7     %                 32.2     %
    Selling, distribution,
and administrative expenses:                                                                        
    Advertising                 2.2     %                 2.4     %                 2.6     %
    Marketing and selling                 7.5                       7.6                       7.4      
    Distribution                 3.4                       3.5                       3.6      
    General and administrative                 6.3                       7.1                       6.7      
     
    Total selling, distribution,
and administrative expenses                 19.4     %                 20.6     %                 20.3     %
     
    Restructuring and merger
and integration costs                 0.4     %                 0.1     %                 1.3     %
    Other operating (income)
expense — net                 (0.1     %)                 0.2     %                 (0.2     %)
     
    Operating income                 11.3     %                 11.8     %                 10.8     %
     



2008 Compared to 2007. Operating income increased 12 percent in 2008 to $284.2 million, compared
to 2007 while decreasing as a percentage of net sales from 11.8 percent in 2007 to 11.3 percent in
2008. The impact of the lower margin Eagle businesses, record costs for soybean oil and wheat, and
the mix of products sold during the year resulted in a decline in gross profit as a percentage of
net sales from 32.7 percent in 2007 to 31.0 percent in 2008. The margin on the Eagle businesses
was impacted by an increase in milk costs and an unfavorable mix of nonbranded sales during the
year and accounted for approximately one-half of the decrease in gross profit as a percentage of
net sales. The impact of price increases taken during the year across all businesses, while
essentially offsetting higher raw material cost increases of approximately $150 million compared to 2007, was not sufficient to
maintain margins.


Selling, distribution, and administrative (“SD&A”) expenses increased 11 percent from 2007 to
$490.7 million in 2008, resulting from increased marketing spending and additional costs related
to the acquired Eagle businesses. However, corporate overhead expenses increased at a lesser rate
than net sales resulting in SD&A as a percent of net sales improving from 20.6 percent in 2007 to
19.4 percent in 2008. Higher restructuring and merger and integration costs in 2008 compared to
2007 also negatively impacted operating income.


Other operating income — net of $3.9 million was recognized in 2008 resulting from a net insurance
settlement related to storm damage at a third-party distribution and warehouse facility in
Memphis, Tennessee. Other operating expense — net of $2.7 million was recognized in 2007
consisting of losses on disposal of assets.


2007 Compared to 2006. Operating income increased $22.2 million in 2007, or 10 percent, compared
to 2006, and increased from 10.8 percent of net sales in 2006 to 11.8 percent in 2007. The
increase in operating income in 2007 was primarily due to improvements in gross profit and a
decrease in merger and integration costs. Gross profit increased from $692.9 million, or 32.2
percent of net sales in 2006, to $702.1 million, or 32.7 percent of net sales in 2007. The
increase in gross profit occurred, despite a record high commodity price environment, due to the
divestiture of the lower margin Canadian non-branded businesses during the second quarter of 2007
and favorable product mix, particularly in the fourth quarter of 2007. These favorable
contributions to gross profit were offset in part by an increase in restructuring related
impairment charges in 2007 associated with the Canadian divestiture. Although the Company
implemented pricing actions to mitigate commodity cost increases totaling approximately $30
million during the year, these cost increases were not fully offset for the year.



~ 19 ~




 






SD&A expenses increased $4.4 million in 2007, or approximately one percent, from 2006, and
increased from 20.3 percent of net sales in 2006 to 20.6 percent in 2007 due to costs associated
with the Company’s transition to restricted stock-based compensation programs and the related
impact of adopting Statement of Financial Accounting Standards No. 123 (revised), Share-Based
Payment. Selling expenses were also up in 2007 compared to 2006. Marketing and distribution
expense decreased in 2007 from 2006 as the Company actively managed SD&A costs to help offset the
impact of higher raw material costs.


Other operating expense — net of $2.7 million was recognized in 2007 consisting of losses on
disposal of assets. Other operating income — net of $3.4 million was recognized in 2006 as the net
gain on the sale of the Salinas facility of $5.6 million offset losses on disposal of assets
during the year.



~ Interest Income and Expense ~


Interest expense increased $18.8 million in 2008 compared to 2007, resulting from the issuance
of $400 million in senior notes on May 31, 2007, a portion of which was used to repay
short-term debt used in financing the Eagle acquisition. The investment of excess proceeds
resulted in an increase in interest income of $4.0 million during 2008 compared to 2007.


Interest expense decreased $0.7 million in 2007 compared to 2006 as a portion of the proceeds from
the sale of the Canadian nonbranded businesses was utilized to pay off balances outstanding
against the Company’s revolving credit facility during the second quarter of 2007. Also during
2007 interest income increased $2.6 million compared to 2006, primarily related to an increase in
invested funds during the year resulting from the Canadian nonbranded businesses sale and an
overall increase in cash generated from operations.



~ Income Taxes ~


Income taxes in 2008 were $84.4 million, up $0.6 million, or one percent, from 2007. The increase
in income taxes that would have resulted from higher income in 2008 as compared to 2007 was mostly offset by a decrease in the effective tax rate from 34.8 percent in 2007 to
33.1 percent in 2008. The lower effective tax rate for 2008 was primarily attributable to a lower
state tax rate resulting from the favorable resolution of uncertain tax positions.


Income taxes were $83.8 million in 2007, an increase of $11.6 million, or 16 percent, from 2006.
The increase is due primarily to an increase in taxable income, combined with an increase in the
effective tax rate from 33.5 percent in 2006 to 34.8 percent in 2007. The effective tax rate in
2006 included certain one-time benefits of the Company’s legal entity realignment that did not
recur in 2007.



~ Restructuring ~


During 2003, the Company announced plans to restructure
certain operations as part of its ongoing efforts to refine
its portfolio, optimize its production capacity, improve
productivity and operating efficiencies, and improve the
Company’s overall cost base as well as service levels in
support of its long-term strategy. At the end of 2008, these
restructurings were proceeding as planned.


In conjunction with the restructurings, the Company has
recorded total charges of $58.5 million to date, including
$4.7 million in 2008, $12.1 million in 2007, and $10.0
million in 2006. The majority of these charges related to
impairment and accelerated depreciation on buildings and
machinery and equipment, system conversion costs, employee
separation costs, equipment relocation expenses, and the
disposition of inventories.



~ Subsequent Event ~


On June 4, 2008, the Company entered into a definitive
agreement with The Procter & Gamble Company (“P&G”) to merge
P&G’s Folgers coffee business with and into the Company.
Under the terms of the agreement, P&G will distribute the
Folgers business to P&G shareholders in a tax-free
transaction, with a simultaneous merger with and into the
Company. In the merger, current P&G shareholders will receive
approximately



~ 20 ~




 








53.5 percent of the Company’s shares and current Company
shareholders will own approximately 46.5 percent of the
combined company upon closing. Upon closing, the Company will
have approximately 118 million shares outstanding. As part of
the transaction, the Company will assume an estimated $350
million of Folgers debt. The transaction is expected to be
tax free to both companies and P&G shareholders. In addition,
Company shareholders as of the record date, prior to the
merger, will receive a special dividend of $5 per share. The
record date for the special dividend will be determined by
the Company at a future date.



The transaction is expected to close in the fourth quarter of
calendar 2008, subject to customary closing conditions
including regulatory and Company shareholder approvals. The
Company expects to incur approximately $100 million in
one-time costs related to the transaction over the next two
fiscal years.


The merger will be accounted for as a purchase business
combination. For accounting purposes, the Company will be
treated as the acquiring enterprise.



Liquidity and Capital Resources

***





























































































                                                                             
                Year Ended April 30,      
    (Dollars in thousands)           2008                 2007                 2006      
     
    Net cash provided by
operating activities           $     191,577                 $     273,424                 $     198,689      
    Net cash used for
investing activities                 262,486                       27,041                       16,255      
    Net cash provided by
(used for) financing
activities                 49,839                       (117,625     )                 (169,129     )
     



The Company’s principal source of funds is cash generated
from operations, supplemented by borrowings against the
Company’s revolving credit facility. Total cash and
investments at April 30, 2008, were $200.2 million compared
to $244.2 million at April 30, 2007.



~ Operating Activities ~


The Company’s working capital requirements are greatest
during the first half of its fiscal year, primarily due to
the need to build inventory levels in advance of the “fall
bake” season, the seasonal procurement of fruit, and the
purchase of raw materials used in the Company’s pickle and
relish business in Canada. The acquisition of the Eagle
businesses added further to the cash requirements during the
first half of the year.


Cash provided by operating activities was $191.6 million
during 2008, a decrease of $81.8 million, or 30 percent, over
2007. The decrease in cash from operations was primarily due
to an increase in the cash required to support working
capital requirements. Working capital, excluding cash and
cash equivalents, as a percent of net sales increased to 14.0
percent in 2008 from 9.4 percent in 2007 primarily as a
result of higher inventory balances associated with increased
raw material costs.



~ Investing Activities ~


Net cash used for investing activities totaled approximately
$262.5 million in 2008, as $220.9 million was used for
business acquisitions, primarily Eagle, the Carnation canned
milk business in Canada, and Europe’s Best. Capital
expenditures were approximately $76.4 million during 2008, or
three percent of net sales.



~ Financing Activities ~


Net cash provided by financing activities during 2008
consisted primarily of the Company’s issuance of $400 million
in senior notes on May 31, 2007, offset by the repayment of
$148 million of debt, including $115 million assumed in the
Eagle acquisition, $152.5 million used to finance the
repurchases of treasury shares, and $68.1 million in dividend
payments.


The purchase of treasury shares was comprised largely of
2,927,600 common shares, representing approximately five
percent of common shares outstanding at the beginning of
2008.



~ 21 ~




 






The shares were repurchased under the Board of Directors’
authorized share repurchase program, including 2.5 million
common shares under Rule 10b5-1 trading plans announced and
completed during 2008. Since November 2004, the Company has
repurchased 6,255,778 common shares under Board
authorization, leaving 3,744,222 common shares authorized for
repurchase. Due to structuring requirements of the recently
announced Folgers transaction, there are specific conditions
which must be satisfied prior to any share repurchase, and as
a result, the Company does not anticipate that it will
repurchase shares for a period of two years following the
closing of the transaction.


Cash requirements for 2009, excluding funds necessary to
complete the Folgers merger, will include capital
expenditures estimated at approximately $85 million. In
addition, regular quarterly dividends are expected to
approximate $70 million and interest payments on long-term
debt to approximate $46 million for the year.


Assuming there are no other material acquisitions or other
significant investments, the Company believes that cash on
hand and marketable securities, combined with cash provided
by operations, new borrowings anticipated in connection with
the Folgers merger, and borrowings available under the
revolving credit facility, will be sufficient to meet 2009
cash requirements, including capital expenditures, the
payment of the special dividend, the payment of quarterly
dividends, repurchase of common shares, if any, and interest
on existing debt outstanding and any new borrowings.



Off-Balance Sheet Arrangements and

Contractual Obligations

***


The Company does not have off-balance sheet arrangements,
financings, or other relationships with unconsolidated
entities or other persons, also known as variable interest
entities. Transactions with related parties are in the
ordinary course of business, are conducted at an arm’s length
basis, and are not material to the Company’s results of
operations, financial condition, or cash flows.


The following table summarizes the Company’s contractual
obligations at April 30, 2008.










































































































































































































































                                                                                                                             
                                                                                                                More      
                                        Less                 One                 Three                 Than      
                                        Than                 to Three                 to Five                 Five      
    (Dollars in millions)           Total                 One Year                 Years                 Years                 Years      
     
    Long-term
debt obligations           $     789.7                 $     —                 $     289.7                 $     —                 $     500.0      
    Operating lease
obligations                 38.7                       4.7                       8.9                       8.5                       16.6      
    Purchase
obligations                 784.4                       600.6                       171.9                       4.0                       7.9      
    Other long-term
liabilities                 300.9                       —                       —                       —                       300.9      
     
    Total           $     1,913.7                 $     605.3                 $     470.5                 $     12.5                 $     825.4      
     



Purchase obligations in the above table include agreements to
purchase goods or services that are enforceable and legally
binding on the Company. Included in this category are certain
obligations related to normal, ongoing purchase obligations
in which the Company has guaranteed payment to ensure availability of raw materials
and packaging supplies. The Company expects to receive
consideration for these purchase obligations in the form of
materials. The purchase obligations in the above table do not
represent the entire anticipated purchases in the future, but
represent only those items for which the Company is
contractually obligated.



~ 22 ~




 







Critical Accounting Estimates and Policies

***


The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that in
certain circumstances affect amounts reported in the
accompanying consolidated financial statements. In preparing
these financial statements, management has made its best
estimates and judgments of certain amounts included in the
financial statements, giving due consideration to
materiality. The Company does not believe there is a great
likelihood that materially different amounts would be
reported under different conditions or using different
assumptions related to the accounting policies described
below. However, application of these accounting policies
involves the exercise of judgment and use of assumptions as
to future uncertainties and, as a result, actual results
could differ from these estimates.


Revenue Recognition. The Company recognizes revenue when all
of the following criteria have been met: a valid customer
order with a determinable price has been received; the
product has been shipped and title has transferred to the
customer; there is no further significant obligation to
assist in the resale of the product; and collectibility is
reasonably assured. A provision for estimated returns and
allowances is recorded as a reduction of sales at the time
revenue is recognized.


Trade Marketing and Merchandising Programs. In order to
support the Company’s products, various promotional
activities are conducted through the retail trade,
distributors, or directly with consumers, including in-store
display and product placement programs, feature price
discounts, coupons, and other similar activities. The Company
regularly reviews and revises, when it deems necessary,
estimates of costs to the Company for these promotional
programs based on estimates of what will be redeemed by the
retail trade, distributors, or consumers. These estimates are
made using various techniques including historical data on
performance of similar promotional programs. Differences
between estimated expense and actual performance are recognized as a change in management’s estimate in a
subsequent period. As the Company’s total promotional
expenditures, including amounts classified as a reduction of
net sales, represent approximately 26 percent of 2008 net
sales, the likelihood exists of materially different reported
results if factors such as the level and success of the
promotional programs or other conditions differ from
expectations.


Income Taxes. The future tax benefit arising from the net
deductible temporary differences and tax carryforwards is
approximately $59.7 million and $63.2 million, at April 30,
2008 and 2007, respectively. Management believes that the
Company’s earnings during the periods when the temporary
differences become deductible will be sufficient to realize
the related future income tax benefits. For those
jurisdictions where the expiration date of tax carryforwards
or the projected operating results of the Company indicate
that realization is not likely, a valuation reserve has been
provided.


In assessing the need for a valuation allowance, the Company
estimates future taxable income, considering the viability of
ongoing tax planning strategies and the probable recognition
of future tax deductions and loss carryforwards. Valuation
allowances related to deferred tax assets can be affected by
changes in tax laws, statutory tax rates, and projected future taxable income levels. Under
current accounting rules, changes in estimated realization of
deferred tax assets would result in either an adjustment to
goodwill, if the change relates to tax benefits associated
with a business combination, or an adjustment to income, in
the period in which that determination is made.


In the ordinary course of business, the Company is exposed to
uncertainties related to tax filing positions and
periodically assesses these tax positions for all tax years
that remain subject to examination, based upon the latest
information available. For uncertain tax positions, the
Company has recorded tax reserves, including any applicable
interest and penalty charges, in accordance with Financial
Accounting Standards Board Interpretation No. 48.



~ 23 ~




 






Long-Lived Assets. Historically, long-lived assets have been
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset
may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount
of the assets to future net cash flows estimated to be
generated by such assets. If such assets are considered to be
impaired, the impairment to be recognized is the amount by
which the carrying amount of the assets exceeds the fair
value of the assets. However, determining fair value is
subject to estimates of both cash flows and interest rates
and different estimates could yield different results. There
are no events or changes in circumstances of which management
is aware indicating that the carrying value of the Company’s
long-lived assets may not be recoverable.


Goodwill and Indefinite-Lived Intangible Assets. The annual
evaluation of goodwill and indefinite-lived intangible assets
requires the use of estimates about future operating results
for each reporting unit to determine estimated fair value.
Changes in forecasted operations can materially affect these
estimates. Additionally, other changes in the estimates and
assumptions, including the discount rate and expected
long-term growth rate, which drive the valuation techniques
employed to estimate the fair value of the reporting unit
could change and, therefore, impact the assessments of
impairment in the future.


Pension and Other Postretirement Benefit Plans. To determine
the Company’s ultimate obligation under its defined benefit
pension plans and other postretirement benefit plans,
management must estimate the future cost of benefits and
attribute that cost to the time period during which each
covered employee works. Various actuarial assumptions must be
made in order to predict and measure costs and obligations
many years prior to the settlement date, the most significant
being the interest rates used to discount the obligations of
the plans, the long-term rates of return on the plans’
assets, assumed pay increases, and the health care cost trend
rates. Management, along with third-party actuaries and
investment managers, reviews all of these assumptions on an ongoing basis to
ensure that the most reasonable information available is
being considered. For 2009 expense recognition, the Company
will use a discount rate of 6.6 percent and 6.1 percent, and
a rate of compensation increase of 3.8 percent and 4.0
percent, for U.S. and Canadian plans, respectively. The
Company will use an expected rate of return on plan assets of
7.75 percent for U.S. plans. For the Canadian plans, the
Company will use an expected rate of return on plan assets of
7.0 percent for the hourly plan and 7.5 percent for all other
plans.


Recovery of Trade Receivables. In the normal course of
business, the Company extends credit to customers that
satisfy predefined criteria. The Company evaluates the
collectibility of trade receivables based on a combination of
factors. When aware that a specific customer may be unable to
meet its financial obligations, such as in the case of
bankruptcy filings or deterioration in the customer’s
operating results or financial position, the Company records
a specific reserve for bad debt to reduce the related
receivable to the amount the Company reasonably believes is
collectible. The Company also records reserves for bad debt
for all other customers based on a variety of factors,
including the length of time the receivables are past due,
historical collection experience, and an evaluation of
current and projected economic conditions at the balance
sheet date. Actual collections of trade receivables could differ from management’s estimates
due to changes in future economic or industry conditions or
specific customers’ financial conditions.



Derivative Financial Instruments

and Market Risk

***


The following discussions about the Company’s market risk
disclosures involve forward-looking statements. Actual
results could differ from those projected in the
forward-looking statements. The Company is exposed to market
risk related to changes in interest rates, foreign currency
exchange rates, and commodity prices.



~ 24 ~




 






Interest Rate Risk. The fair value of the Company’s cash and
short-term investment portfolio at April 30, 2008,
approximates carrying value. Exposure to interest rate risk
on the Company’s long-term debt is mitigated since it is at a
fixed rate until maturity. Market risk, as measured by the
change in fair value resulting from a hypothetical 10 percent
change in interest rates, is not material. Based on the
Company’s overall interest rate exposure as of and during the
year ended April 30, 2008, including derivative and other
instruments sensitive to interest rates, a hypothetical 10
percent movement in interest rates would not materially
affect the Company’s results of operations. A hypothetical
100 basis point increase in short-term interest rates would
increase the Company’s interest expense by approximately $0.1
million. Interest rate risk can also be measured by
estimating the net amount by which the fair value of the
Company’s financial liabilities would change as a result of
movements in interest rates. Based on a hypothetical,
immediate 100 basis point decrease in interest rates at April
30, 2008, the fair value of the Company’s long-term debt and
interest rate portfolio, in aggregate, would increase by
approximately $41.3 million.


Foreign Currency Exchange Risk. The Company has operations
outside the United States with foreign currency denominated
assets and liabilities, primarily denominated in Canadian
currency. Because the Company has foreign currency
denominated assets and liabilities, financial exposure may
result, primarily from the timing of transactions and the
movement of exchange rates. The foreign currency balance
sheet exposures as of April 30, 2008, are not expected to
result in a significant impact on future earnings or cash
flows.


Revenues from customers outside the United States represented
13 percent of net sales during 2008. Thus, certain revenues
and expenses have been, and are expected to be, subject to
the effect of foreign currency fluctuations and these
fluctuations may have an impact on operating results.


Commodity Price Risk. Raw materials and other commodities
used by the Company are subject to price volatility caused by
supply and demand conditions, political and economic
variables, and other unpredictable factors. To manage the
volatility related to anticipated commodity purchases, the
Company uses futures and options with maturities generally
less than one year. Certain of these instruments are
designated as cash flow hedges. The mark-to-market gains or
losses on qualifying hedges are included in other
comprehensive income to the extent effective, and
reclassified into cost of products sold in the period during
which the hedged transaction affects earnings. The
mark-to-market gains or losses on nonqualifying, excluded,
and ineffective portions of hedges are recognized in cost of
products sold immediately.


The following sensitivity analysis presents the Company’s
potential loss of fair value resulting from a hypothetical 10
percent change in market prices.





















































































                                                     
                Year Ended April 30,      
    (Dollars in thousands)           2008                 2007      
     
    Raw material commodities:                                                
    High           $     13,229                 $     4,514      
    Low                 3,289                       1,333      
    Average                 8,474                       3,105      
     



Fair value was determined using quoted market prices and was
based on the Company’s net derivative position by commodity
at each quarter end during the fiscal year. The calculations
are not intended to represent actual losses in fair value
that the Company expects to incur. In practice, as markets
move, the Company actively manages its risk and adjusts
hedging strategies as appropriate. The commodities hedged
have a high inverse correlation to price changes of the
derivative commodity instrument; thus, the Company would
expect that any gain or loss in fair value of its derivatives
would generally be offset by an increase or decrease in the
fair value of the underlying exposures.



~ 25 ~




 











Forward-Looking Statements

***


Certain statements included in this Annual Report contain
forward-looking statements within the meaning of federal
securities laws. The forward-looking statements may include
statements concerning the Company’s current expectations,
estimates, assumptions, and beliefs concerning future events,
conditions, plans, and strategies that are not historical
fact. Any statement that is not historical in nature is a
forward-looking statement and may be identified by the use of
words and phrases such as “expects,” “anticipates,”
“believes,” “will,” “plans,” and similar phrases.


Federal securities laws provide a safe harbor for
forward-looking statements to encourage companies to provide
prospective information. The Company is providing this
cautionary statement in connection with the safe harbor
provisions. Readers are cautioned not to place undue reliance
on any forward-looking statements as such statements are by
nature subject to risks, uncertainties, and other factors,
many of which are outside of the Company’s control and could
cause actual results to differ materially from such
statements and from the Company’s historical results and
experience. These risks and uncertainties include, but are
not limited to, those set forth under the caption “Risk
Factors” in the Company’s Annual Report on Form 10-K, as well
as the following:








































































































                 

          general economic conditions in the U.S.;
    
          the volatility of commodity markets from which raw materials are procured and the related impact
on costs;
    
          crude oil price trends and its impact on transportation, energy, and packaging costs;
    
          the ability of the Company to successfully implement price changes;
    
          the success and cost of introducing new products and the competitive response;
    
          the success and cost of marketing and sales programs and strategies intended to promote growth in the Company’s
businesses, and in their respective markets;
    
          general competitive activity in the market, including competitors’ pricing practices and promotional spending levels;
    
          the concentration of certain of the Company’s businesses with key customers;
    
          the ability of the Company to manage and maintain key customer, supplier, and employee relationships;
    
          the loss of significant customers or a substantial reduction in orders from these customers or the bankruptcy of any such customer;
    
          the ability of the Company to obtain any required financing;
    
          the timing and amount of capital expenditures and restructuring, and merger and integration costs;
    
          the outcome of current and future tax examinations and other tax matters, and their related impact on the Company’s tax
positions;
    
          the ability of the Company to obtain regulatory and shareholders’ approval of the
Folgers merger without unexpected delays or conditions;
    
          the ability of the Company to integrate acquired and merged businesses in a timely and cost effective manner;
    
          foreign currency exchange and interest rate fluctuations;
    
          the timing and cost of acquiring common shares under the Company’s share repurchase authorizations, if any; and
    
          other factors affecting share prices and capital markets generally.




~ 26 ~




 




Report of Management on Internal Control Over Financial Reporting

***



Shareholders

The J. M. Smucker Company


Management of The J. M. Smucker Company is responsible for establishing and maintaining adequate
accounting and internal control systems over financial reporting for the Company. The Company’s
internal control system is designed to provide reasonable assurance that the Company has the
ability to record, process, summarize, and report reliable financial information on a timely basis.


The Company’s management assessed the effectiveness of the Company’s internal control over
financial reporting as of April 30, 2008. In making this assessment, management used the criteria
established in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“the COSO criteria”).


Based on the Company’s assessment of internal control over financial reporting under the COSO
criteria, management concluded the Company’s internal control over financial reporting was
effective as of April 30, 2008.


Ernst & Young LLP, independent registered public accounting firm, audited the effectiveness of the
Company’s internal control over financial reporting as of April 30, 2008, and their report thereon
is included on page 28 of this report.











































                             
    Timothy P. Smucker
          Richard K. Smucker
          Mark R. Belgya
    Chairman and
          President and
          Vice President,
    Co-Chief Executive Officer
          Co-Chief Executive Officer
          Chief Financial Officer
     
                      and Treasurer




~ 27 ~




 






Report of Independent Registered Public Accounting Firm on

Internal Control Over Financial Reporting

***



Board of Directors and Shareholders

The J. M. Smucker Company


We have audited The J. M. Smucker Company’s internal control over financial reporting as of April
30, 2008, based on criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“the COSO criteria”). The J. M.
Smucker Company’s management is responsible for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting included in the accompanying Report of Management on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the company’s internal control over
financial reporting based on our audit.


We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.


A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.


Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.


In our opinion, The J. M. Smucker Company maintained, in all material respects, effective internal
control over financial reporting as of April 30, 2008, based on the COSO criteria.


We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of The J. M. Smucker Company as of April 30,
2008 and 2007, and the related statements of consolidated income, shareholders’ equity, and cash
flows for each of the three years in the period ended April 30, 2008, and our report dated June 19,
2008, expressed an unqualified opinion thereon.



















                 
     
      




Akron, Ohio 
June 19,
2008



~ 28 ~




 





Report of Independent Registered Public Accounting Firm on the

Consolidated Financial Statements

***



Board of Directors and Shareholders

The J. M. Smucker Company


We have audited the accompanying consolidated balance sheets of The J. M. Smucker Company as of
April 30, 2008 and 2007, and the related statements of consolidated income, shareholders’ equity,
and cash flows for each of the three years in the period ended April 30, 2008. These financial
statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.


We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of The J. M. Smucker Company at April 30,
2008 and 2007, and the consolidated results of its operations and its cash flows for each of the
three years in the period ended April 30, 2008, in conformity with U.S. generally accepted
accounting principles.


As discussed in Note P, effective May 1, 2007, the Company adopted FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes. Also, as discussed in Note I,
effective April 30, 2007, the Company adopted Statement of Financial Accounting Standards (“SFAS”)
No. 158, Employees Accounting for Defined Benefit Pension and Other Postretirement Plans, an
amendment of FASB Statement Nos. 87, 88, 106, and 132(R); and as discussed in Note A, effective May
1, 2006, the Company adopted SFAS 123(R), Share-Based Payment.


We also have audited in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the effectiveness of The J. M. Smucker Company’s internal control over
financial reporting as of April 30, 2008, based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated June 19, 2008, expressed an unqualified opinion thereon.



















                 
     
      




Akron, Ohio 
June 19,
2008



~ 29 ~




 




Report of Management on Responsibility for Financial Reporting

***



Shareholders

The J. M. Smucker Company


Management of The J. M. Smucker Company is responsible for the preparation, integrity, accuracy,
and consistency of the consolidated financial statements and the related financial information in
this report. Such information has been prepared in accordance with U.S. generally accepted
accounting principles and is based on our best estimates and judgments.


The Company maintains systems of internal accounting controls supported by formal policies and
procedures that are communicated throughout the Company. There is a program of audits performed by
the Company’s internal audit staff designed to evaluate the adequacy of and adherence to these
controls, policies, and procedures.


Ernst & Young LLP, independent registered public accounting firm, has audited the Company’s
financial statements in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Management has made all financial records and related data available to
Ernst & Young LLP during its audit.


The Company’s audit committee, comprised of three nonemployee members of the Board of Directors,
meets regularly with the independent registered public accounting firm and management to review the
work of the internal audit staff and the work, audit scope, timing arrangements, and fees of the
independent registered public accounting firm. The audit committee also regularly satisfies itself
as to the adequacy of controls, systems, and financial records. The manager of the internal audit
department is required to report directly to the chair of the audit committee as to internal audit
matters.


It is the Company’s best judgment that its policies and procedures, its program of internal and
independent audits, and the oversight activity of the audit committee work together to provide
reasonable assurance that the operations of the Company are conducted according to law and in
compliance with the high standards of business ethics and conduct to which the Company subscribes.











































                             
    Timothy P. Smucker
          Richard K. Smucker
          Mark R. Belgya
    Chairman and
          President and
          Vice President,
    Co-Chief Executive Officer
          Co-Chief Executive Officer
          Chief Financial Officer
     
                      and Treasurer




~ 30 ~




 




Statements of Consolidated Income


The J. M. Smucker Company















































































































































































































































































































































































                                                                             
                Year Ended April 30,      
    (Dollars in thousands, except per share data)           2008                 2007                 2006      
     
    Net sales           $     2,524,774                 $     2,148,017                 $     2,154,726      
    Cost of products sold                 1,741,100                       1,435,981                       1,459,611      
    Cost of products sold — restructuring                 1,510                       9,981                       2,263      
     
    Gross Profit                 782,164                       702,055                       692,852      
    Selling, distribution, and administrative expenses                 490,665                       442,814                       438,457      
    Merger and integration costs                 7,967                       61                       17,934      
    Other restructuring costs                 3,237                       2,120                       7,722      
    Other operating (income) expense — net                 (3,879     )                 2,689                       (3,386     )
     
    Operating Income                 284,174                       254,371                       232,125      
    Interest income                 13,259                       9,225                       6,630      
    Interest expense                 (42,145     )                 (23,363     )                 (24,026     )
    Other (expense) income — net                 (500     )                 771                       841      
     
    Income Before Income Taxes                 254,788                       241,004                       215,570      
    Income taxes                 84,409                       83,785                       72,216      
     
    Net Income           $     170,379                 $     157,219                 $     143,354      
     
                                                                             
    Earnings per common share:                                                                        
                                                                             
    Net Income           $     3.03                 $     2.79                 $     2.48      
     
    Net Income — Assuming Dilution           $     3.00                 $     2.76                 $     2.45      
     





See notes to consolidated financial statements.




~ 31 ~






 




Consolidated Balance Sheets

The J. M. Smucker Company



~ Assets ~









































































































































































































































































































































                                                     
                April 30,      
    (Dollars in thousands)           2008                 2007      
     
    Current Assets                                                
    Cash and cash equivalents           $     184,175                 $     200,119      
    Trade receivables, less allowance for doubtful accounts                 162,426                       124,048      
    Inventories:                                                
    Finished products                 280,568                       196,177      
    Raw materials                 99,040                       89,875      
     
                      379,608                       286,052      
    Other current assets                 49,998                       29,147      
     
    Total Current Assets                 776,207                       639,366      
     
    Property, Plant, and Equipment                                                
    Land and land improvements                 45,461                       41,456      
    Buildings and fixtures                 202,564                       176,950      
    Machinery and equipment                 586,502                       536,825      
    Construction in progress                 39,516                       25,284      
     
                      874,043                       780,515      
    Accumulated depreciation                 (377,747     )                 (326,487     )
     
    Total Property, Plant, and Equipment                 496,296                       454,028      
     
    Other Noncurrent Assets                                                
    Goodwill                 1,132,476                       990,771      
    Other intangible assets, net                 614,000                       478,194      
    Marketable securities                 16,043                       44,117      
    Other noncurrent assets                 94,859                       87,347      
     
    Total Other Noncurrent Assets                 1,857,378                       1,600,429      
     
                $     3,129,881                 $     2,693,823      
     




~ 32 ~




 





~ Liabilities and Shareholders’ Equity ~




































































































































































































































































































































































                                                     
                April 30,      
    (Dollars in thousands)           2008                 2007      
     
    Current Liabilities                                                
    Accounts payable           $     119,844                 $     93,500      
    Salaries, wages, and additional compensation                 35,808                       32,580      
    Accrued trade marketing and merchandising                 32,350                       24,672      
    Income taxes                 1,164                       7,265      
    Dividends payable                 17,479                       17,034      
    Current portion of long-term debt                 —                       33,000      
    Other current liabilities                 32,752                       28,417      
     
    Total Current Liabilities                 239,397                       236,468      
     
    Noncurrent Liabilities                                                
    Long-term debt                 789,684                       392,643      
    Defined benefit pensions                 47,978                       45,881      
    Postretirement benefits other than pensions                 41,583                       46,349      
    Deferred income taxes                 175,950                       158,418      
    Other noncurrent liabilities                 35,436                       18,407      
     
    Total Noncurrent Liabilities                 1,090,631                       661,698      
     
    Shareholders’ Equity                                                
    Serial preferred shares — no par value:                                                
    Authorized — 3,000,000 shares; outstanding — none                 —                       —      
    Common shares — no par value:                                                
    Authorized — 150,000,000 shares; outstanding —
54,622,612 in 2008 and 56,779,850 in 2007 (net of 10,807,615
and 8,619,519 treasury shares, respectively), at stated value                 13,656                       14,195      
    Additional capital                 1,181,645                       1,216,091      
    Retained income                 567,419                       553,631      
    Amount due from ESOP Trust                 (5,479     )                 (6,017     )
    Accumulated other comprehensive income                 42,612                       17,757      
     
    Total Shareholders’ Equity                 1,799,853                       1,795,657      
     
                $     3,129,881                 $     2,693,823      
     




See notes to consolidated financial statements.



~ 33 ~




 




Statements of Consolidated Cash Flows

The J. M. Smucker Company














































































































































































































































































































































































































































































































































































































































































                                                                             
                Year Ended April 30,      
    (Dollars in thousands)           2008                 2007                 2006      
     
    Operating Activities                                                                        
    Net income           $     170,379                 $     157,219                 $     143,354      
    Adjustments to reconcile net income to net cash
provided by operations:                                                                        
    Depreciation                 58,497                       57,346                       62,452      
    Amortization                 4,122                       1,528                       190      
    Asset impairments and other restructuring charges                 1,510                       10,089                       2,263      
    Share-based compensation expense                 11,531                       11,257                       7,255      
    Gain on sale of assets                 (1,903     )                 —                       (5,638     )
    Deferred income tax expense                 18,215                       22,530                       33,124      
    Changes in assets and liabilities, net of effect from
businesses acquired:                                                                        
    Trade receivables                 (17,599     )                 23,848                       1,444      
    Inventories                 (35,022     )                 (8,146     )                 (6,601     )
    Other current assets                 (16,208     )                 5,218                       (24,369     )
    Accounts payable and accrued items                 6,988                       1,034                       (64,019     )
    Income taxes                 (22,302     )                 (15,079     )                 44,756      
    Other — net                 13,369                       6,580                       4,478      
     
    Net Cash Provided by Operating Activities                 191,577                       273,424                       198,689      
     
    Investing Activities                                                                        
    Businesses acquired, net of cash acquired                 (220,949     )                 (60,488     )                 —      
    Additions to property, plant, and equipment                 (76,430     )                 (57,002     )                 (63,580     )
    Proceeds from sale of businesses                 3,407                       84,054                       8,754      
    Purchase of marketable securities                 (229,405     )                 (20,000     )                 (5,000     )
    Sale and maturities of marketable securities                 257,536                       26,272                       31,101      
    Disposal of property, plant, and equipment                 3,532                       2,313                       3,747      
    Other — net                 (177     )                 (2,190     )                 8,723      
     
    Net Cash Used for Investing Activities                 (262,486     )                 (27,041     )                 (16,255     )
     
    Financing Activities                                                                        
    Proceeds from long-term debt                 400,000                       —                       —      
    Repayments of long-term debt                 (148,000     )                 —                       (17,000     )
    Revolving credit arrangements — net                 —                       (28,144     )                 (8,434     )
    Dividends paid                 (68,074     )                 (63,632     )                 (62,656     )
    Purchase of treasury shares                 (152,521     )                 (52,125     )                 (81,717     )
    Proceeds from stock option exercises                 17,247                       25,766                       3,783      
    Other — net                 1,187                       510                       (3,105     )
     
    Net Cash Provided by (Used for) Financing Activities                 49,839                       (117,625     )                 (169,129     )
    Effect of exchange rate changes on cash                 5,126                       (595     )                 566      
     
    Net (decrease) increase in cash and cash equivalents                 (15,944     )                 128,163                       13,871      
    Cash and cash equivalents at beginning of year                 200,119                       71,956                       58,085      
     
    Cash and Cash Equivalents at End of Year           $     184,175                 $     200,119                 $     71,956      
     




( ) Denotes use of cash



See notes to consolidated financial statements.



~ 34 ~




 




Statements of Consolidated Shareholders’ Equity

The J. M. Smucker Company





























































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































                                                                                                                                                                                                     
                                                                                                                                                                Accumulated                        
                Common                                                                                         Deferred                 Amount                 Other                 Total      
    (Dollars in thousands,           Shares                 Common                 Additional                 Retained                 Compen-                 Due from                 Comprehensive                 Shareholders’      
    except per share data)           Outstanding                 Shares                 Capital                 Income                 sation                 ESOP Trust                 Income (Loss)                 Equity      
     
    Balance at May 1, 2005                 58,540,386                 $     14,635                 $     1,240,110                 $     447,831                 $     (4,573     )           $     (7,044     )           $     (159     )           $     1,690,800      
                                                                                                                                                                                                     
    Net income                                                                                         143,354                                                                                               143,354      
    Foreign currency
translation adjustment                                                                                                                                                                 19,512                       19,512      
    Minimum pension liability
adjustment                                                                                                                                                                 8,710                       8,710      
    Unrealized loss on
available-for-sale securities                                                                                                                                                                 (650     )                 (650     )
    Unrealized loss on cash
flow hedging derivatives                                                                                                                                                                 (204     )                 (204     )
                                                                                                                                                                                               
    Comprehensive Income                                                                                                                                                                                         170,722      
                                                                                                                                                                                                     
    Purchase of treasury shares                 (1,936,423     )                 (484     )                 (41,910     )                 (39,323     )                                                                                         (81,717     )
    Stock plans                 345,081                       86                       12,753                                               (3,954     )                                                                 8,885      
    Cash dividends declared —
$1.09 per share                                                                                         (62,795     )                                                                                         (62,795     )
    Tax benefit of stock plans                                                                 1,645                                                                                                                       1,645      
    Other                                                                                                                                         519                                               519      
     
    Balance at April 30, 2006                 56,949,044                       14,237                       1,212,598                       489,067                       (8,527     )                 (6,525     )                 27,209                       1,728,059      
                                                                                                                                                                                                     
    Net income                                                                                         157,219                                                                                               157,219      
    Foreign currency
translation adjustment                                                                                                                                                                 2,437                       2,437      
    Minimum pension liability
adjustment                                                                                                                                                                 427                       427      
    Unrealized gain on
available-for-sale securities                                                                                                                                                                 1,644                       1,644      
    Unrealized gain on cash
flow hedging derivatives                                                                                                                                                                 138                       138      
                                                                                                                                                                                               
    Comprehensive Income                                                                                                                                                                                         161,865      
                                                                                                                                                                                                     
    Purchase of treasury shares                 (1,100,194     )                 (275     )                 (23,915     )                 (27,935     )                                                                                         (52,125     )
    Stock plans                 931,000                       233                       24,247                                               8,527                                                                       33,007      
    Cash dividends declared —
$1.14 per share                                                                                         (64,720     )                                                                                         (64,720     )
    Adjustments to initially
apply Statement of
Financial Accounting
Standards No. 158,
net of tax of $7,377                                                                                                                                                                 (14,098     )                 (14,098     )
    Tax benefit of stock plans                                                                 3,161                                                                                                                       3,161      
    Other                                                                                                                                         508                                               508      
     
    Balance at April 30, 2007                 56,779,850                       14,195                       1,216,091                       553,631                       —                       (6,017     )                 17,757                       1,795,657      
                                                                                                                                                                                                     
    Net income                                                                                         170,379                                                                                               170,379      
    Foreign currency
translation adjustment                                                                                                                                                                 20,861                       20,861      
    Pensions and other
postretirement liabilities                                                                                                                                                                 (2,920     )                 (2,920     )
    Unrealized loss on
available-for-sale securities                                                                                                                                                                 (379     )                 (379     )
    Unrealized gain on cash
flow hedging derivatives                                                                                                                                                                 7,293                       7,293      
                                                                                                                                                                                               
    Comprehensive Income                                                                                                                                                                                         195,234      
                                                                                                                                                                                                     
    Purchase of treasury shares                 (2,991,920     )                 (748     )                 (66,075     )                 (85,698     )                                                                                         (152,521     )
    Stock plans                 834,682                       209                       20,398                                                                                                                       20,607      
    Cash dividends declared —
$1.22 per share                                                                                         (68,519     )                                                                                         (68,519     )
    Adjustments to initially
apply Financial Accounting
Standards Board
Interpretation No. 48                                                                                         (2,374     )                                                                                         (2,374     )
    Tax benefit of stock plans                                                                 11,231                                                                                                                       11,231      
    Other                                                                                                                                         538                                               538      
     
    Balance at April 30, 2008                 54,622,612                 $     13,656                 $     1,181,645                 $     567,419                 $     —                 $     (5,479     )           $     42,612                 $     1,799,853      
     




See notes to consolidated financial statements.



~ 35 ~




 




Notes to Consolidated Financial Statements

The J. M. Smucker Company



(Dollars in thousands, except per share data)



Note A: Accounting Policies

***



Principles of Consolidation: The consolidated financial statements include the accounts of the
Company, its wholly-owned subsidiaries, and any majority-owned investment. Intercompany
transactions and accounts are eliminated in consolidation.


Use of Estimates: The preparation of consolidated financial statements in conformity with U.S.
generally accepted accounting principles requires management to make certain estimates and
assumptions that affect the amounts reported in the consolidated financial statements and
accompanying notes. Significant estimates in these consolidated financial statements include:
allowances for doubtful trade receivables, estimates of future cash flows associated with assets,
asset impairments, useful lives for depreciation and amortization, loss contingencies, net
realizable value of inventories, accruals for trade marketing and merchandising programs, income
taxes, and the determination of discount and other rate assumptions for defined benefit pension and
other postretirement benefit expenses. Actual results could differ from these estimates.


Revenue Recognition: The Company recognizes revenue, net of estimated returns and allowances, when
all of the following criteria have been met: a valid customer order with a determinable price has
been received; the product has been shipped and title has transferred to the customer; there is no
further significant obligation to assist in the resale of the product; and collectibility is
reasonably assured.


Major Customer: Sales to Wal-Mart Stores, Inc. and subsidiaries amounted to approximately 20
percent, 20 percent, and 18 percent of net sales in 2008, 2007, and 2006, respectively. These sales
are primarily included in the U.S. retail market segment. No other customer exceeded 10 percent of
net sales for any year. Trade receivables at April 30, 2008 and 2007, included amounts due from
Wal-Mart Stores, Inc. and subsidiaries of $34,210 and $28,274, respectively.


Shipping and Handling Costs: Shipping and handling costs are included in cost of products sold.


Trade Marketing and Merchandising Programs: In order to support the Company’s products, various
promotional activities are conducted through the retail trade, distributors, or directly with
consumers, including in-store display and product placement programs, feature price discounts,
coupons, and other similar activities. The Company regularly reviews and revises, when it deems
necessary, estimates of costs to the Company for these promotional programs based on estimates of
what will be redeemed by the retail trade, distributors, or consumers. These estimates are made
using various techniques including historical data on performance of similar promotional programs.
Differences between estimated expense and actual performance are recognized as a change in
management’s estimate in a subsequent period. As the Company’s total promotional expenditures,
including amounts classified as a reduction of net sales, represent approximately 26 percent of
2008 net sales, the likelihood exists of materially different reported results if factors such as
the level and success of the promotional programs or other conditions differ from expectations.
Operating results for the year ended April 30, 2006, include an increase of approximately $6.7
million to net sales reflecting a change in estimate of the expected liability for trade
merchandising programs.


Advertising Expense: Advertising costs are expensed as incurred. Advertising expense was $55,522,
$51,446, and $56,647 in 2008, 2007, and 2006, respectively.


Product Development Cost: Total product development costs including research and development costs
and product formulation costs were $9,547, $9,680, and $10,781 in 2008, 2007, and 2006,
respectively.


Share-Based Payments: In December 2004, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 (revised), Share-Based Payment (“SFAS 123R”). SFAS 123R
is a revision of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (“SFAS 123”), supersedes Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees (“APB 25”), and also amends Statement of Financial
Accounting Standards No. 95, Statement of Cash Flows. SFAS 123R requires that the cost of
transactions involving share-based payments be recognized in the


~ 36 ~




 






financial statements based on a fair value-based measurement. The Company adopted SFAS 123R on May
1, 2006, using the modified prospective method. Under this method of adoption, prior year’s
financial information was not restated. Prior to the adoption of SFAS 123R, the Company accounted
for share-based payments to employees using the intrinsic value method of APB 25. Under APB 25,
because the exercise price of the Company’s employee stock options equaled the market price of the
underlying shares on the date of grant, no compensation expense was recognized. Compensation
expense recognized related to other share-based awards was $11,531, $11,257, and $7,255 in 2008,
2007, and 2006, respectively. The related tax benefit recognized in the Statements of Consolidated
Income was $3,820, $3,913, and $2,430 in 2008, 2007, and 2006, respectively. Upon adoption of SFAS
123R, compensation expense is recognized over the requisite service period, which includes a
one-year performance period plus the defined forfeiture period, which is typically four years of
service or the attainment of a defined age and years of service. No compensation expense was
capitalized related to share-based awards in 2008, 2007, and 2006.


As a result of adopting SFAS 123R on May 1, 2006, the Company’s income before income taxes and net
income were $1,923 and $1,255 lower in 2007, respectively, than if it had continued to account for
share-based compensation under APB 25. The impact of adopting SFAS 123R in 2007 was approximately
$0.02 on both net income per common share and net income per common share —assuming dilution.


Had the Company applied the fair value recognition provisions of SFAS 123 to share-based
compensation for the period ended April 30, 2006, the effect on net income and earnings per common
share would have been as follows:











































































































































                             
                Year Ended      
                April 30, 2006      
     
    Net income, as reported           $     143,354      
    Add: Total share-based compensation expense included in the
determination of net income as reported, net of tax benefit                 4,825      
    Less: Total share-based compensation expense determined under
fair value-based methods for all awards, net of tax benefit                 (9,177     )
     
    Net income, as adjusted           $     139,002      
     
    Earnings per common share:                        
    Net income, as reported           $     2.48      
    Add: Total share-based compensation expense included in the
determination of net income as reported, net of tax benefit                 0.08      
    Less: Total share-based compensation expense determined under
fair value-based methods for all awards, net of tax benefit                 (0.16     )
     
    Net income, as adjusted           $     2.40      
     
    Net income, as reported — assuming dilution           $     2.45      
    Add: Total share-based compensation expense included in the
determination of net income as reported, net of tax
benefit — assuming dilution                 0.09      
    Less: Total share-based compensation expense determined under
fair value-based methods for all awards, net of tax
benefit — assuming dilution                 (0.16     )
     
    Net income, as adjusted — assuming dilution           $     2.38      
     




Management estimated the fair value of stock option awards on the date of grant or modification
using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model was developed
for use in estimating the fair value of traded options that have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of highly subjective
assumptions, including the expected share price volatility and average expected term. The main
inputs into the model are estimated by management based on historical performance and management’s
expectation of future results on the date of grant or


~ 37 ~




 




modification. The fair value of each option grant was estimated at the date of grant or
modification using the following weighted-average assumptions:







































































                             
                Year Ended      
                April 30, 2006      
     
    Average expected term (years)                 5.71      
    Risk-free interest rate                 4.90     %
    Dividend yield                 2.00     %
    Volatility                 25.20     %
     
    Fair value of options granted           $     8.76      
     




As of April 30, 2008, total compensation cost related to nonvested share-based awards not yet
recognized was approximately $14,133. The weighted-average period over which this amount is
expected to be recognized is approximately three years.


Corporate income tax benefit realized upon exercise or vesting of an award in excess of that
previously recognized in earnings, referred to as an excess tax benefit, is presented in the
Statements of Consolidated Cash Flows as a financing activity. Realized excess tax benefits are
credited to additional capital in the Consolidated Balance Sheets. Realized shortfall tax benefits,
amounts which are less than that previously recognized in earnings, are first offset against the
cumulative balance of excess tax benefits, if any, and then charged directly to income tax expense.
Under the transition rules for adopting SFAS 123R using the modified prospective method, the
Company calculated a cumulative balance of excess tax benefits from post-1995 years for the purpose
of accounting for future shortfall tax benefits and, as a result, has sufficient cumulative excess
tax benefits to absorb arising shortfalls, such that earnings were not affected in 2008 or 2007.
For 2008 and 2007, the actual tax deductible benefit realized from share-based compensation was
$11,231 and $3,161, including $11,107 and $3,346, respectively, of excess tax benefits realized
upon exercise or vesting of share-based compensation, and classified as other-net under financing
activities on the Statement of Consolidated Cash Flows.


Income Taxes: The Company accounts for income taxes using the liability method. Accordingly,
deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change
in the tax rate is recognized in income or expense in the period that the change is effective. A
valuation allowance is established when it is more likely than not that all or a portion of a
deferred tax asset will not be realized. A tax benefit is recognized when it is more likely than
not to be sustained.


Cash and Cash Equivalents: The Company considers all short-term investments with a maturity of
three months or less when purchased to be cash equivalents.


Trade Receivables: In the normal course of business, the Company extends credit to customers. Trade
receivables, less allowance for doubtful accounts, reflect the net realizable value of receivables,
and approximate fair value. In the domestic markets, the Company’s products are primarily sold
through brokers to food retailers, food wholesalers, club stores, mass merchandisers, discount
stores, military commissaries, health and natural foods stores, foodservice distributors, and chain
operators including: hotels and restaurants, schools and other institutions. The Company’s
operations outside the United States are principally in Canada where the Company’s products are
primarily sold through brokers to a concentration of food retailers and other retail and
foodservice channels similar to those in domestic markets. The Company believes there is no
concentration of risk with any single customer whose failure or nonperformance would materially
affect the Company’s results other than as discussed in Major Customer. On a regular basis, the
Company evaluates its trade receivables and establishes an allowance for doubtful accounts based on
a combination of specific customer circumstances, credit conditions, and historical write-offs and
collections. A receivable is considered past due if payments have not been received within the
agreed upon invoice terms. The allowance for doubtful accounts at April 30, 2008 and 2007, was $911
and $821, respectively. Trade receivables are charged off against the allowance after management
determines the potential for recovery is remote.


~ 38 ~




 




Inventories: Inventories are stated at the lower of cost or market. Cost is determined using the
first-in, first-out method.


Derivative Financial Instruments: The Company utilizes derivative instruments such as commodity
futures and options contracts, interest rate swaps, and foreign currency futures contracts to
manage exposure to changes in commodity prices, interest rates, and foreign currency exchange
rates. The Company accounts for these derivative instruments in accordance with Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities (“SFAS 133”). SFAS 133 requires that all derivative instruments be recognized in the
financial statements and measured at fair value regardless of the purpose or intent for holding
them. For derivatives that are designated as a fair value hedge and used to hedge an existing asset
or liability, both the derivative and hedged item are recognized at fair value with any changes
recognized immediately in the Statements of Consolidated Income. For derivatives designated as a
cash flow hedge that are used to hedge an anticipated transaction, changes in fair value are
deferred and recorded in shareholders’ equity as a component of accumulated other comprehensive
income to the extent the hedge is effective and then recognized in the Statements of Consolidated
Income in the period during which the hedged transaction affects earnings. The Company utilizes
regression analysis to determine correlation between the value of the hedged item and the value of
the derivative instrument utilized to identify instruments that meet the criteria for hedge
accounting. Any ineffectiveness associated with the hedge or changes in fair value of derivatives
that are nonqualifying are recognized immediately in the Statements of Consolidated Income. By
policy, the Company has not historically entered into derivative financial instruments for trading
purposes or for speculation. For additional information, see Note N: Derivative Financial
Instruments.


Property, Plant, and Equipment: Property, plant, and equipment are recorded at cost and are
depreciated on a straight-line basis over the estimated useful lives of the assets (3 to 20 years
for machinery and equipment, and 10 to 40 years for buildings, fixtures, and improvements).


The Company leases certain land, buildings, and equipment for varying periods of time, with renewal
options. Rent expense in 2008, 2007, and 2006 totaled $23,902, $20,261, and $19,866, respectively.


Impairment of Long-Lived Assets: In accordance with Statement of Financial Accounting Standards No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets, except
goodwill and indefinite-lived intangible assets, are reviewed for impairment when circumstances
indicate the carrying value of an asset may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of the assets to future net cash flows
estimated by the Company to be generated by such assets. If such assets are considered to be
impaired, the impairment to be recognized is the amount by which the carrying amount of the assets
exceeds the fair value of the assets. Assets to be disposed of by sale are recorded as held for
sale at the lower of carrying value or estimated net realizable value. During 2007, the Company
recorded impairment of approximately $8.5 million on long-lived assets associated with the Canadian
nonbranded, grain-based foodservice and industrial businesses divested during the year.


Goodwill and Other Intangible Assets: Goodwill is the excess of the purchase price paid over the
fair value of the net assets of the business acquired. In accordance with Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets, goodwill and indefinite-lived
intangible assets are not amortized but are reviewed at least annually for impairment. The Company
conducts its annual test for impairment of goodwill and indefinite-lived intangible assets as of
February 1, of each year. For annual impairment testing purposes, the Company’s reporting units are
its operating segments. In addition, the Company will test for impairment if events or
circumstances occur that would more likely than not reduce the fair value of a reporting unit below
its carrying amount. Finite-lived intangible assets are amortized over their estimated useful
lives.


Other Investments in Securities: The Company maintains funds for the payment of benefits associated
with nonqualified retirement plans. These funds include investments considered to be
available-for-sale marketable securities. The fair value of these investments included in other
assets at April 30, 2008 and 2007, was $31,130 and $31,727, respectively. At April 30, 2008 and
2007, the deferred gain included in accumulated other comprehensive income was $1,404 and $2,089,
respectively.


Foreign Currency Translation: Assets and liabilities of the Company’s foreign subsidiaries are
translated using the exchange rates in effect at the balance sheet date, while income and expenses
are translated using average rates. Translation adjustments are reported as a component of
shareholders’ equity in accumulated other comprehensive income.


~ 39 ~




 




Recently Issued Accounting Standards: In September 2006, the Financial Accounting Standards Board
(“FASB”) issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS
157”). SFAS 157 and related interpretations provide guidance for using fair value to measure assets
and liabilities and only applies when other standards require or permit the fair value measurement
of assets and liabilities. It does not expand the use of fair value measurement. In February 2008,
the FASB issued Staff Position No. 157-2, Effective Date of FASB Statement No. 157 (“FSP SFAS
157-2”). FSP SFAS 157-2 amends SFAS 157 to delay the effective date of the standard, as it relates
to nonfinancial assets and nonfinancial liabilities, to fiscal years beginning after November 15,
2008, (May 1, 2009, for the Company). SFAS 157 for financial assets and financial liabilities is
effective for fiscal years beginning after November 15, 2007, (May 1, 2008, for the Company). The
Company is currently assessing the impact of SFAS 157, and related interpretations and amendments,
on the consolidated financial statements.


In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). SFAS 159 provides
companies with an option to report selected financial assets and liabilities at fair value. The
objective of SFAS 159 is to reduce both complexity in accounting for financial instruments and the
volatility in earnings caused by measuring related assets and liabilities differently. SFAS 159 is
effective for fiscal years beginning after November 15, 2007, (May 1, 2008, for the Company). The
Company is currently assessing the impact of SFAS 159 on the consolidated financial statements.


In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(revised),
Business Combinations (“SFAS 141R”). SFAS 141R continues to require the purchase method of
accounting to be applied to all business combinations, but it significantly changes the accounting
for certain aspects of business combinations. SFAS 141R establishes principles and requirements for
how the Company recognizes the assets acquired and liabilities assumed, recognizes the goodwill
acquired, and determines what information to disclose to enable the evaluation of the nature and
financial effects of the business combination. SFAS 141R is effective for business combinations for
which the acquisition date is on or after the beginning of the first annual reporting period
beginning on or after December 15, 2008, (May 1, 2009, for the Company).


In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133
(“SFAS 161”). SFAS 161 seeks to improve financial reporting of derivative instruments and hedging
activities by requiring enhanced disclosures regarding the impact on financial position, financial
performance, and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning
after November 15, 2008, (February 1, 2009, for the Company).


Risks and Uncertainties: The Company insures its business and assets in each country against
insurable risks, to the extent that it deems appropriate, based upon an analysis of the relative
risks and costs.


The raw materials used by the Company are primarily commodities and agricultural-based products.
Glass, plastic, caps, carton board, and corrugate are the principle packaging materials used by the
Company. The fruit and vegetable raw materials used by the Company in the production of its food
products are purchased from independent growers and suppliers. Sweeteners, peanuts, oils, wheat and
flour, milk, corn, and other ingredients are obtained from various suppliers. The cost and
availability of many of these commodities have fluctuated, and may continue to fluctuate over time.
Raw materials are available from numerous sources and the Company believes that it will continue to
be able to obtain adequate supplies. The Company has not historically encountered shortages of key
raw materials. The Company considers its relationship with key material suppliers to be good.


Approximately 31 percent of the Company’s employees, located at 10 facilities, are covered by union
contracts. The contracts vary in term depending on the location with one contract expiring in 2009.


Reclassifications: Certain prior year amounts have been reclassified to conform to current year
classifications.


~ 40 ~




 




Note B: Subsequent Events

***



On June 4, 2008, the Company entered into a definitive agreement with The Procter & Gamble Company
(“P&G”) to merge P&G’s Folgers coffee business with and into the Company. Under the terms of the
agreement, P&G will distribute the Folgers business to P&G shareholders in a tax-free transaction,
with a simultaneous merger with and into the Company. In the merger, current P&G shareholders will
receive approximately 53.5 percent of the Company’s shares and current Company shareholders will
own approximately 46.5 percent of the combined company upon closing. Upon closing, the Company will
have approximately 118 million shares outstanding. As part of the transaction, the Company will be
assuming an estimated $350 million of Folgers debt. The transaction is expected to be tax free to
both companies and P&G shareholders. In addition, Company shareholders as of the record date, prior
to the merger, will receive a special dividend of $5 per share. The record date for the special
dividend will be determined by the Company at a future date.


The transaction is expected to close in the fourth quarter of calendar 2008, subject to customary
closing conditions including regulatory and Company shareholder approvals. The Company expects to
incur approximately $100 million in one-time costs related to the transaction over the next two
fiscal years.


The merger will be accounted for as a purchase business combination. For accounting purposes, the
Company will be treated as the acquiring enterprise.


In addition, on May 13, 2008, the Company completed an acquisition of the Knott’s Berry Farm food
brand and certain manufacturing equipment from ConAgra Foods, Inc.


Note C: Acquisitions

***



On May 1, 2007, the Company completed its acquisition of Eagle, a privately held company
headquartered in Columbus, Ohio, for $133 million in cash and the assumption of $115 million in
debt, in a transaction valued at approximately $248 million. Eagle is the largest producer of
canned milk in North America, with sales primarily in retail and foodservice channels. The
acquisition expands the Company’s position in the baking aisle and complements the Company’s
strategy, which is to own and market leading North American food brands sold in the center of the
store.


The Company utilized cash on-hand to fund the cash portion of the purchase price. The Company
borrowed $130 million against its revolving credit facility with a weighted-average interest rate
of 5.60 percent, a portion of which was used to deposit $118.8 million in escrow on the date of the
transaction. The escrow deposit was in exchange for a covenant defeasance on Eagle’s $115 million
8.75 percent Senior, subordinated Notes due January 2008, that were assumed on the acquisition
date, as well as accrued interest due through May 31, 2007. On May 31, 2007, the escrow was
distributed to note holders in full payment of the Senior Notes.


The Eagle purchase price was allocated to the underlying assets acquired and liabilities assumed
based upon their fair values at the date of acquisition. The Company determined the estimated fair
values based on independent appraisals, discounted cash flow analyses, quoted market prices, and
estimates made by management. To the extent the purchase price exceeded the fair value of the net
identifiable tangible and intangible assets acquired, such excess was recorded as goodwill.


~ 41 ~




 






The following table summarizes the estimated fair values of the assets acquired and liabilities
assumed at the date of acquisition.






















































































                             
    Assets acquired:                        
    Current assets           $     48,725      
    Property, plant, and equipment                 20,044      
    Intangible assets                 100,070      
    Goodwill                 100,547      
    Other assets                 651      
     
    Total assets acquired           $     270,037      
    Total current liabilities assumed                 21,999      
     
    Net assets acquired           $     248,038      
     




In addition to Eagle, the Company completed a series of smaller acquisitions during 2008 including
Europe’s Best, Inc. (“Europe’s Best”), a privately owned company headquartered in Montreal, Quebec,
and the Canadian Carnation brand canned milk business from Nestlé Canada, for aggregate cash
consideration of approximately $87 million.


The purchase price allocation to the identifiable intangible assets acquired is as follows:































































































































                                                                             
                Eagle                 Other                 Total      
     
    Intangible
assets with finite lives 

    
Customer relationships (20 year estimated useful life)           $     62,400                 $     16,703                 $     79,103      
    Technology (20 year estimated useful life)                 970                       —                       970      
    Intangible assets with indefinite lives                 36,700                       19,643                       56,343      
     
    Total intangible assets           $     100,070                 $     36,346                 $     136,416      
     
    Goodwill           $     100,547                 $     34,660                 $     135,207      
     




Of the total goodwill, $101,147 and $34,060 was assigned to the U.S. retail market and special
markets segments, respectively. For tax purposes, $23,327 is not deductible. The purchase price
allocations of Europe’s Best and the Canadian Carnation brand canned milk business are preliminary
and subject to adjustment following the completion of the valuation process.


The results of the operations of each of the acquired businesses are included in the Company’s
consolidated financial statements from the date of the acquisition. Had the acquisitions occurred
on May 1, 2006, unaudited, pro forma consolidated results for the years ended April 30, 2008 and
2007, would have been as follows:









































































                                                     
                Year Ended April 30,      
                2008                 2007      
     
    Net sales           $     2,602,005                 $     2,451,698      
    Net income           $     173,937                 $     168,488      
    Net income per common share — assuming dilution           $     3.07                 $     2.95      
     




The unaudited, pro forma consolidated results are based on the Company’s historical financial
statements and those of the acquired businesses and do not necessarily indicate the results of
operations that would have resulted had the acquisitions been completed at the beginning of the
applicable period presented, nor is it indicative of the results of operations in future periods.


~ 42 ~




 




Note D: Restructuring

***



In 2003, the Company announced its plan to restructure certain operations as part of its ongoing
efforts to refine its portfolio, optimize its production capacity, improve productivity and
operating efficiencies, and improve the Company’s overall cost base as well as service levels in
support of its long-term strategy. The Company’s strategy is to own and market leading North
American brands sold in the center of the store.


To date, the Company has closed its fruit processing operations at its Watsonville, California, and
Woodburn, Oregon, locations and subsequently sold these facilities; completed the combination of
its two manufacturing facilities in Ripon, Wisconsin, into one expanded site; completed a
restructuring program to streamline operations in Europe and the United Kingdom, including the exit
of a contract packaging arrangement and certain portions of its retail business; completed the sale
of its U.S. industrial ingredient business; completed the realignment of distribution warehouses;
sold the Salinas, California, facility after production was relocated to plants in Orrville, Ohio,
and Memphis, Tennessee; and sold the Canadian nonbranded businesses, which were acquired as part of
International Multifoods Corporation, to Horizon Milling G.P., a subsidiary of Cargill and CHS
Inc., as part of a strategic plan to focus the Canadian operations on its branded consumer retail
and foodservice businesses. The restructurings resulted in the reduction of approximately 410
full-time positions.


The Canadian nonbranded divestiture was completed on September 22, 2006. The sale and related
restructuring activities have resulted in expense of approximately $18.6 million, which was
reported as a restructuring charge. Costs included noncash, long-lived asset charges, as well as
transaction, legal, severance, and pension costs. To date, charges of approximately $16.1 million
were recognized related to the Canadian restructuring.


The Company expects to incur total restructuring costs of approximately $69 million related to
these initiatives, of which $58.5 million has been incurred since the announcement of the
initiative in March 2003. The balance of the costs and remaining cash payments, estimated to be
approximately $10.5 million and $2.5 million, respectively, are related to the Canadian
restructuring and will primarily be incurred through 2009.


The following table summarizes the activity with respect to the restructuring and related asset
impairment charges recorded and reserves established and the total amount expected to be incurred.

















































































































































































































































































































































































































































                                                                                                                             
                Employee                 Long-Lived                 Equipment                 Other                        
                Separation                 Asset Charges                 Relocation                 Costs                 Total      
     
    Total expected restructuring charge           $     16,900                 $     20,700                 $     6,900                 $     24,500                 $     69,000      
     
    Balance at May 1, 2005           $     3,222                 $     —                 $     —                 $     —                 $     3,222      
    Charge to expense                 2,984                       1,699                       2,414                       2,888                       9,985      
    Cash payments                 (4,512     )                 —                       (2,414     )                 (2,323     )                 (9,249     )
    Noncash utilization                 —                       (1,699     )                 —                       (565     )                 (2,264     )
     
    Balance at April 30, 2006           $     1,694                 $     —                 $     —                 $     —                 $     1,694      
    Charge to expense                 357                       9,292                       67                       2,385                       12,101      
    Cash payments                 (1,415     )                 —                       (67     )                 (1,696     )                 (3,178     )
    Noncash utilization                 (108     )                 (9,292     )                 —                       (689     )                 (10,089     )
     
    Balance at April 30, 2007           $     528                 $     —                 $     —                 $     —                 $     528      
    Charge to expense                 53                       1,510                       112                       3,072                       4,747      
    Cash payments                 (176     )                 —                       (112     )                 (3,072     )                 (3,360     )
    Noncash utilization                 —                       (1,510     )                 —                       —                       (1,510     )
     
    Balance at April 30, 2008           $     405                 $     —                 $     —                 $     —                 $     405      
     
    Remaining expected restructuring charge           $     400                 $     —                 $     —                 $     10,100                 $     10,500      
     




~ 43 ~




 







Approximately $1,510, $9,981, and $2,263 of the total restructuring charges of $4,747, $12,101, and
$9,985 in 2008, 2007, and 2006, respectively, were reported in cost of products sold in the
accompanying Statements of Consolidated Income, while the remaining charges were reported in other
restructuring costs. The restructuring costs classified as cost of products sold include long-lived
asset charges and inventory disposition costs. Total expected employee separation costs of
approximately $16,900 are being recognized over the estimated future service period of the related
employees. The obligation related to employee separation costs is included in salaries, wages, and
additional compensation in the Consolidated Balance Sheets.



Long-lived asset charges include impairments and accelerated depreciation related to machinery and
equipment that will be used at the affected production facilities until they close or are sold.
Other costs include miscellaneous expenditures associated with the Company’s restructuring
initiative and are expensed as incurred. These costs include employee relocation, professional
fees, and other closed facility costs.


Note E: Reportable Segments

***



The Company operates in one industry: the manufacturing and marketing of food products. The Company
has two reportable segments: U.S. retail market and special markets. The U.S. retail market segment
includes the consumer and consumer oils and baking strategic business areas. This segment primarily
represents the domestic sales of Smucker’s, Jif, Crisco, Pillsbury, Eagle Brand, Hungry Jack, White
Lily, and Martha White branded products to retail customers. The special markets segment is
comprised of the international, foodservice, beverage, and Canada strategic business areas. Special
markets segment products are distributed domestically and in foreign countries through retail
channels, foodservice distributors and operators (i.e., restaurants, schools and universities,
health care operations), and health and natural foods stores and distributors.



~ 44 ~






 




     The following table sets forth reportable segment and geographical information.



















































































































































































































































































































































































































































































































































































































































































                                                                             
                Year Ended April 30,      
                2008                 2007                 2006      
     
    Net sales:                                                                        
    U.S. retail market           $     1,874,547                 $     1,547,064                 $     1,484,873      
    Special markets                 650,227                       600,953                       669,853      
     
    Total net sales           $     2,524,774                 $     2,148,017                 $     2,154,726      
     
    Segment profit:                                                                        
    U.S. retail market           $     332,827                 $     319,795                 $     305,121      
    Special markets                 92,019                       72,974                       68,033      
     
    Total segment profit           $     424,846                 $     392,769                 $     373,154      
     
    Interest income                 13,259                       9,225                       6,630      
    Interest expense                 (42,145     )                 (23,363     )                 (24,026     )
    Amortization                 (4,122     )                 (1,528     )                 (190     )
    Share-based compensation expense                 (11,531     )                 (11,257     )                 (7,255     )
    Restructuring costs                 (4,747     )                 (12,101     )                 (9,985     )
    Merger and integration costs                 (7,967     )                 (61     )                 (17,934     )
    Corporate administrative expenses                 (115,569     )                 (111,082     )                 (109,223     )
    Other unallocated income (expense)                 2,764                       (1,598     )                 4,399      
     
    Income before income taxes           $     254,788                 $     241,004                 $     215,570      
     
    Net sales:                                                                        
    Domestic           $     2,199,433                 $     1,819,747                 $     1,746,111      
    International:                                                                        
    Canada           $     278,447                 $     282,069                 $     368,017      
    All other international                 46,894                       46,201                       40,598      
     
    Total international           $     325,341                 $     328,270                 $     408,615      
     
    Total net sales           $     2,524,774                 $     2,148,017                 $     2,154,726      
     
    Assets:                                                                        
    Domestic           $     2,604,909                 $     2,198,029                 $     2,101,109      
    International:                                                                        
    Canada           $     516,529                 $     484,641                 $     539,750      
    All other international                 8,443                       11,153                       8,885      
     
    Total international           $     524,972                 $     495,794                 $     548,635      
     
    Total assets           $     3,129,881                 $     2,693,823                 $     2,649,744      
     
    Long-lived assets:                                                                        
    Domestic           $     1,895,500                 $     1,690,755                 $     1,662,389      
    International:                                                                        
    Canada           $     457,344                 $     357,486                 $     339,490      
    All other international                 830                       6,216                       5,027      
     
    Total international           $     458,174                 $     363,702                 $     344,517      
     
    Total long-lived assets           $     2,353,674                 $     2,054,457                 $     2,006,906      
     



Segment profit represents revenue less direct and allocable operating expenses.



~ 45 ~




 






The following table presents product sales information.






















































































































































































































































                                                                             
                Year Ended April 30,      
                2008                 2007                 2006      
     
    Peanut butter                 19     %                 21     %                 19     %
    Shortening and oils                 14                       15                       16      
    Fruit spreads                 13                       14                       14      
    Baking mixes and frostings                 10                       11                       11      
    Canned milk                 10                       —                       —      
    Flour and baking ingredients                 8                       11                       14      
    Portion control                 5                       5                       5      
    Juices and beverages                 5                       5                       4      
    Uncrustables frozen sandwiches                 5                       4                       4      
    Toppings and syrups                 4                       5                       4      
    Pickles and condiments                 3                       3                       3      
    Other                 4                       6                       6      
     
    Total                 100     %                 100     %                 100     %
     



As a result of the pending Folgers merger disclosed in Note B: Subsequent Events, the Company is in
the process of evaluating its current management organization and reporting structure. As part of
this evaluation, the Company will evaluate its reportable segment presentation upon closing of the
pending transaction. If the evaluation results in a change in segment reporting, all historical
information will be retroactively conformed to the new presentation to the extent practical.



Note F: Earnings per Share

***


The following table sets forth the computation of earnings per common share and earnings per common
share – assuming dilution.


















































































































































































































                                                                             
                Year Ended April 30,      
                2008                 2007                 2006      
     
    Numerator:                                                                        
    Net income for earnings per common share and
earnings per common share – assuming dilution           $     170,379                 $     157,219                 $     143,354      
     
    Denominator:                                                                        
    Weighted-average shares                 56,226,206                       56,432,839                       57,863,270      
    Effect of dilutive securities:                                                                        
    Stock options                 231,682                       389,247                       435,361      
    Restricted stock                 262,757                       234,335                       126,730      
     
    Denominator for earnings per common share –
assuming dilution                 56,720,645                       57,056,421                       58,425,361      
     
    Net income per common share           $     3.03                 $     2.79                 $     2.48      
     
    Net income per common share – assuming dilution           $     3.00                 $     2.76                 $     2.45      
     



Options to purchase 24,248 and 200,967 common shares were outstanding during 2007 and 2006,
respectively, but were not included in the computation of earnings per common share – assuming
dilution, as the options’ exercise prices were greater than the average market price of the common
shares and, therefore, the effect would have been antidilutive.





~ 46 ~




 







Note G: Marketable Securities

***


Under the Company’s investment policy, it may invest in debt securities deemed to be investment
grade at time of purchase. Currently, these investments are defined as mortgage-backed obligations,
corporate bonds, municipal bonds, federal agency notes, and commercial paper. However, in light of
current market conditions, the Company has limited its investments primarily to high-quality money
market funds. The Company determines the appropriate categorization of debt securities at the time
of purchase and reevaluates such designation at each balance sheet date. The Company has
categorized all debt securities as available for sale because it currently has the intent to
convert these investments into cash if and when needed. Classification of these available-for-sale
marketable securities as current or noncurrent is based on whether the conversion to cash is
expected to be necessary for current operations, which is currently consistent with the securities
maturity date.


Securities categorized as available for sale are stated at fair value, with unrealized gains and
losses reported as a component of other comprehensive income. Approximately $257,536, $26,272, and
$31,101 of proceeds have been realized upon maturity or sale of available-for-sale marketable
securities in 2008, 2007, and 2006, respectively. The Company uses specific identification to
determine the basis on which securities are sold.


The following table is a summary of available-for-sale marketable securities, consisting entirely
of mortgage-backed securities, at April 30, 2008 and 2007.
























































































                                                     
                Year Ended April 30,      
                2008                 2007      
     
    Cost           $     16,532                 $     44,679      
    Gross unrealized gains                 —                       134      
    Gross unrealized losses                 (489     )                 (696     )
     
    Estimated fair value           $     16,043                 $     44,117      
     



Marketable securities in an unrealized loss position at April 30, 2008, consisted of two securities
for a period of less than twelve months. Based on management’s evaluation at April 30, 2008,
considering the nature of the investments, the credit worthiness of the issuers, and the intent and
ability of the Company to hold the securities for the period necessary to recover the cost of the
securities, the decline in the fair values was determined to be temporary.



Note H: Goodwill and Other Intangible Assets

***


A summary of changes in the Company’s goodwill during the years ended April 30, 2008 and 2007, by
reportable segment is as follows:





































































































































































                                                                             
                U.S. Retail                 Special                        
                Market                 Markets                 Total      
     
    Balance at May 1, 2006           $     902,097                 $     38,870                 $     940,967      
    Acquisitions                 34,800                       15,434                       50,234      
    Other                 (364     )                 (66     )                 (430     )
     
    Balance at April 30, 2007           $     936,533                 $     54,238                 $     990,771      
    Acquisitions                 101,147                       34,060                       135,207      
    Other                 4,331                       2,167                       6,498      
     
    Balance at April 30, 2008           $     1,042,011                 $     90,465                 $     1,132,476      
     



Included in the other category at April 30, 2008 and 2007, were tax adjustments related to various
items recognized in goodwill that are deductible for tax purposes.



~ 47 ~




 






The Company’s other intangible assets and related accumulated amortizations are as follows:


























































































































































































































































































































































                                                                                                                                                     
                April 30, 2008                 April 30, 2007      
                Acquisition                 Accumulated                                         Acquisition                 Accumulated                        
                Cost                 Amortization                 Net                 Cost                 Amortization                 Net      
     
    Finite-lived intangible assets
subject to amortization:                                                                                                                                                
    Patents           $     1,000                 $     592                 $     408                 $     1,000                 $     492                 $     508      
    Technology                 970                       49                       921                       —                       —                       —      
    Customer relationships                 79,103                       3,334                       75,769                       —                       —                       —      
    Trademarks                 6,785                       663                       6,122                       6,592                       251                       6,341      
     
    Total intangible assets
subject to amortization           $     87,858                 $     4,638                 $     83,220                 $     7,592                 $     743                 $     6,849      
     
    Indefinite-lived intangible assets
not subject to amortization:                                                                                                                                                
    Trademarks           $     530,780                 $     —                 $     530,780                 $     471,345                 $     —                 $     471,345      
     
    Total other intangible assets           $     618,638                 $     4,638                 $     614,000                 $     478,937                 $     743                 $     478,194      
     



Amortization expense for finite-lived intangible assets was $3,895, $351, and $100 in 2008, 2007,
and 2006, respectively. The weighted-average useful life of the finite-lived intangible assets is
20 years. Based on the current amount of intangible assets subject to amortization, the estimated
amortization expense for each of the succeeding five years is $4,500.


Pursuant to Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets, the Company is required to review goodwill and indefinite-lived intangible assets at least
annually for impairment. The annual impairment review of all appropriate assets was performed as of
February 1, 2008. Goodwill impairment is tested at the reporting unit levels which are the
Company’s operating segments. No impairment was required to be recorded as a result of the annual
impairment review. Approximately $225 of impairment was recorded related to certain
indefinite-lived intangible assets in 2007.



Note I: Pensions and Other Postretirement Benefits

***


The Company has pension plans covering certain of its domestic and Canadian employees. Benefits are
based on the employee’s years of service and compensation. The Company’s plans are funded in
conformity with the funding requirements of applicable government regulations.


In addition to providing pension benefits, the Company sponsors several unfunded, defined
postretirement plans that provide health care and life insurance benefits to certain retired
domestic and Canadian employees. These plans are contributory, with retiree contributions adjusted
periodically, and contain other cost-sharing features, such as deductibles and coinsurance. Covered
employees generally are eligible for these benefits when they reach age 55 and have attained 10
years of credited service.


Effective April 30, 2007, the Company adopted Statement of Financial
Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans – an amendment of FASB Statement Nos. 87, 88, 106, and 132(R) (“SFAS 158”).
SFAS 158 requires the recognition of a plan’s funded status as an asset for fully funded plans and
as a liability for unfunded or under-funded plans. Previously unrecognized actuarial gains and
losses and prior service costs are now recorded in accumulated other comprehensive income. The
amounts recorded in accumulated other comprehensive income are modified as actuarial assumptions
and service costs change and such amounts are amortized to expense over a period of time through
the net periodic benefit cost.





~ 48 ~




 






The following table
summarizes the components of net periodic benefit cost and other comprehensive
income related to the defined benefit pension and other postretirement plans.






























































































































































































































































































































































































































































































































































































































































































































































































































































































































                                                                                                                                                     
                Defined Benefit Pension Plans                 Other Postretirement Benefits      
    Year Ended April 30,           2008                 2007                 2006                 2008                 2007                 2006      
     
    Service cost           $     6,925                 $     7,607                 $     9,002                 $     1,291                 $     2,016                 $     2,113      
    Interest cost                 25,900                       23,740                       22,399                       2,516                       3,081                       3,332      
    Expected return on plan assets                 (35,391     )                 (32,008     )                 (28,318     )                 —                       —                       —      
    Amortization of prior service cost (credit)                 1,364                       1,423                       1,381                       (454     )                 (204     )                 24      
    Amortization of initial net asset                 (1     )                 (1     )                 (78     )                 —                       —                       —      
    Amortization of net actuarial loss (gain)                 1,014                       1,393                       2,779                       (523     )                 49                       156      
    Curtailment loss                 68                       111                       —                       —                       —                       —      
     
    Net periodic benefit (credit) cost           $     (121     )           $     2,265                 $     7,165                 $     2,830                 $     4,942                 $     5,625      
     
    Other changes in plan assets and benefit
liabilities recognized in accumulated
other comprehensive income
before income taxes:                                                                                                                                                
    Change prior to adoption of SFAS 158           $     —                 $     826                 $     13,527                 $     —                 $     —                 $     —      
    Change due to adoption of SFAS 158                 —                       (34,272     )                 —                       —                       12,797                       —      
    Change after adoption of SFAS 158:                                                                                                                                                
    Prior service cost arising during
the year                 —                       —                       —                       3,175                       —                       —      
    Net actuarial (losses) gains arising
during the year                 (14,670     )                 —                       —                       4,826                       —                       —      
    Amortization of prior service cost
(credit)                 1,364                       —                       —                       (454     )                 —                       —      
    Amortization of initial net asset                 (1     )                 —                       —                       —                       —                       —      
    Amortization of net actuarial loss
(gain)                 1,014                       —                       —                       (523     )                 —                       —      
    Curtailment                 2,821                       —                       —                       —                       —                       —      
    Foreign currency translation                 (1,212     )                 —                       —                       18                       —                       —      
     
    Net change for the year           $     (10,684     )           $     (33,446     )           $     13,527                 $     7,042                 $     12,797                 $     —      
     
    Weighted-average assumptions used in
determining net periodic benefit costs:                                                                                                                                                
    U.S. plans:                                                                                                                                                
    Discount rate                 6.00     %                 6.30     %                 5.75     %                 6.00     %                 6.30     %                 5.75     %
    Expected return on plan assets                 8.25     %                 8.25     %                 8.50     %                 —                       —                       —      
    Rate of compensation increase                 4.10     %                 4.10     %                 4.40     %                 —                       —                       —      
    Canadian plans:                                                                                                                                                
    Discount rate – before remeasurement                 5.25     %                 5.50     %                 5.50     %                 5.25     %                 5.50     %                 5.50     %
    Discount rate – after remeasurement                 —                       5.00     %                 —                       —                       5.00     %                 —      
    Expected return on plan assets                 8.00     %                 8.00     %                 8.00     %                 —                       —                       —      
    Rate of compensation increase                 4.00     %                 4.00     %                 4.00     %                 —                       —                       —      
     



The Company uses a measurement date of April 30 to determine defined benefit pension plans’ and
other postretirement benefits’ assets and benefit obligations. As a result of the sale of the
Canadian nonbranded businesses in September 2006, a remeasurement of three Canadian plans was
performed.



~ 49 ~




 






The following table sets forth the combined status of the plans as recognized in the Consolidated
Balance Sheets.












































































































































































































































































































































































































































































































































































































                                                                                                     
                Defined Benefit                 Other      
                Pension Plans                 Postretirement Benefits      
                April 30,                 April 30,      
                2008                 2007                 2008                 2007      
     
    Change in benefit obligation:                                                                                                
    Benefit obligation at beginning of the year           $     435,268                 $     406,259                 $     46,349                 $     54,026      
    Service cost                 6,925                       7,607                       1,291                       2,016      
    Interest cost                 25,900                       23,740                       2,516                       3,081      
    Amendments                 —                       2,831                       (3,175     )                 —      
    Divestiture                 —                       (3,983     )                 —                       (4,217     )
    Actuarial (gain) loss                 (22,986     )                 21,755                       (4,799     )                 (6,941     )
    Participant contributions                 371                       628                       1,250                       1,313      
    Benefits paid                 (25,736     )                 (24,443     )                 (3,116     )                 (2,944     )
    Curtailment gain                 (2,752     )                 —                       —                       —      
    Foreign currency translation adjustments                 13,999                       874                       1,267                       15      
     
    Benefit obligation at end of the year           $     430,989                 $     435,268                 $     41,583                 $     46,349      
     
    Change in plan assets:                                                                                                
    Fair value of plan assets at beginning of the year           $     431,000                 $     402,599                 $     —                 $     —      
    Actual return on plan assets                 (2,094     )                 40,257                       —                       —      
    Company contributions                 3,538                       10,955                       1,866                       1,631      
    Participant contributions                 371                       628                       1,250                       1,313      
    Benefits paid                 (25,736     )                 (24,443     )                 (3,116     )                 (2,944     )
    Foreign currency translation adjustments                 14,940                       1,004                       —                       —      
     
    Fair value of plan assets at end of the year           $     422,019                 $     431,000                 $     —                 $     —      
     
    Funded status of the plans           $     (8,970     )           $     (4,268     )           $     (41,583     )           $     (46,349     )
     
    Other assets           $     39,008                 $     41,632                 $     —                 $     —      
    Salaries, wages, and additional compensation                 —                       (19     )                 —                       —      
    Defined benefit pensions                 (47,978     )                 (45,881     )                 —                       —      
    Postretirement benefits other than pensions                 —                       —                       (41,583     )                 (46,349     )
     
    Net benefit liability           $     (8,970     )           $     (4,268     )           $     (41,583     )           $     (46,349     )
     



The following table summarizes amounts recognized in accumulated other comprehensive income at April 30, 2008, before
income taxes.
































































































































































                                                                                                     
                                                                Other      
                Defined Benefit                 Postretirement      
                Pension Plans                 Benefits      
                2008                 2007                 2008                 2007      
     
    Net actuarial (loss) gain           $     (47,743     )           $     (35,650     )           $     15,319                 $     10,999      
    Prior service (cost) credit                 (8,563     )                 (9,973     )                 4,520                       1,798      
    Initial asset                 —                       1                       —                       —      
     
    Total           $     (56,306     )           $     (45,622     )           $     19,839                 $     12,797      
     




During 2009, the Company expects to recognize amortization of net actuarial losses and prior
service cost of $1,358 and $1,296, respectively, in net periodic benefit costs.



~ 50 ~




 






The following table sets forth the assumptions used in determining the benefit obligations.

















































































































































































































                                                                                                     
                Defined Benefit                 Other      
                Pension Plans                 Postretirement Benefits      
                April 30,                 April 30,      
                2008                 2007                 2008                 2007      
     
    Weighted-average assumptions used in
determining benefit obligation:                                                                                                
    U.S. plans:                                                                                                
    Discount rate                 6.60     %                 6.00     %                 6.60     %                 6.00     %
    Rate of compensation increase                 3.84     %                 4.10     %                 —                       —      
    Canadian plans:                                                                                                
    Discount rate                 6.10     %                 5.25     %                 6.10     %                 5.25     %
    Rate of compensation increase                 4.00     %                 4.00     %                 —                       —      
     



The rate of compensation increase is based on multiple graded scales and is weighted based on the
active liability balance. For 2009, the assumed health care trend rates are nine percent and seven
and one-half percent, for U.S. and Canadian plans, respectively. The rate for participants under
age 65 is assumed to decrease to five percent and four and one-half percent in 2014, for U.S. and
Canadian plans, respectively. The health care cost trend rate assumption has a significant effect
on the amount of the other postretirement benefits obligation and periodic other postretirement
benefits cost reported.


A one-percentage point annual change in the assumed health care cost trend rate would have the
following effect as of April 30, 2008:































































                                                     
                One-Percentage Point      
                Increase                 Decrease      
     
    Effect on total service and interest cost components           $     689                 $     (545     )
    Effect on benefit obligation                 2,085                       (1,934     )
     



The following table sets forth selective information pertaining to the Company’s foreign pension
and other postretirement benefit plans.




















































































































































































































































                                                                                                     
                Defined Benefit                 Other      
                Pension Plans                 Postretirement Benefits      
    Year Ended April 30,           2008                 2007                 2008                 2007      
     
    Benefit obligation at end of the year           $     145,348                 $     137,005                 $     12,079                 $     12,473      
    Fair value of plan assets at end of the year                 154,530                       147,284                       —                       —      
     
    Funded status of the plans           $     9,182                 $     10,279                 $     (12,079     )           $     (12,473     )
     
    Service cost           $     1,103                 $     1,696                 $     58                 $     200      
    Interest cost                 8,553                       6,607                       669                       714      
    Company contributions                 1,654                       8,465                       1,090                       802      
    Participant contributions                 371                       628                       —                       —      
    Benefits paid                 (9,406     )                 (7,691     )                 (1,090     )                 (802     )
    Net periodic benefit (credit) cost                 (2,849     )                 (1,710     )                 727                       964      
     




~ 51 ~




 





The following table sets forth additional information related to the Company’s defined benefit
pension plans.






















































































































                                                     
                April 30,      
                2008                 2007      
     
    Accumulated benefit obligation for all pension plans           $     411,478                 $     410,389      
    Plans with an accumulated benefit obligation in excess of plan assets:                                                
    Accumulated benefit obligation                 80,762                       80,324      
    Fair value of plan assets                 37,686                       39,183      
    Plans with a projected benefit obligation in excess of plan assets:                                                
    Projected benefit obligation                 85,596                       85,084      
    Fair value of plan assets                 37,686                       39,183      
     



The Company employs a total return on investment approach for the defined benefit pension plans’
assets. A mix of equities and fixed income investments are used to maximize the long-term rate of
return on assets for the level of risk. The objectives of this strategy are to achieve full funding
of the accumulated benefit obligation, and to achieve investment experience over time that will
minimize pension expense volatility and hold to a feasible minimum the Company’s contributions
required to maintain full funding status. In determining the expected long-term rate of return on
defined benefit pension plans’ assets, management considers the historical rates of return, the
nature of investments, the asset allocation, and expectations of future investment strategies.


The Company’s pension plans’ asset target and actual allocations are as follows:









































































































































                                                                             
                                        Actual Allocation      
                                        April 30,      
                Target                                          
                Allocation                 2008                 2007      
     
    Equity securities                 50     %                 54     %                 54     %
    Debt securities                 40                       40                       40      
    Cash and other investments                 10                       6                       6      
     
                      100     %                 100     %                 100     %
     



Included in equity securities are 317,552 of the Company’s common shares at April 30, 2008 and
2007. The market value of these shares is $15,839 at April 30, 2008. The Company paid dividends of
$381 on these shares during 2008.


The Company expects to contribute approximately $2.1 million to the pension plans in 2009. The
Company expects to make the following benefit payments for all benefit plans: $27 million in 2009,
$27 million in 2010, $35 million in 2011, $30 million in 2012, $30 million in 2013, and $160
million in 2014 through 2018.



Note J: Savings Plans

***


ESOP: The Company sponsors an Employee Stock Ownership Plan and Trust (“ESOP”) for certain
domestic, nonrepresented employees. The Company has entered into loan agreements with the Trustee
of the ESOP for purchases by the ESOP of the Company’s common shares in amounts not to exceed a
total of 1,134,120 unallocated common shares of the Company at any one time. These shares are to be
allocated to participants over a period of not less than 20 years.


ESOP loans bear interest at one-half percentage point over prime, are secured by the unallocated
shares of the plan, and are payable as a condition of allocating shares to participants. Interest
incurred on ESOP debt was $376, $530, and $506 in 2008, 2007, and 2006, respectively. Contributions
to the plan, representing compensation expense, are made annually in amounts sufficient to




~ 52 ~




 






fund ESOP debt repayment and were $690, $684, and $558 in 2008, 2007, and 2006, respectively.
Dividends on unallocated shares are used to reduce expense and were $334, $356, and $380 in 2008,
2007, and 2006, respectively. The principal payments received from the ESOP in 2008, 2007, and 2006
were $538, $508, and $519, respectively.


Dividends on allocated shares are credited to participant accounts and are used to purchase
additional common shares for participant accounts. Dividends on allocated and unallocated shares
are charged to retained income by the Company.


As permitted by Statement of Position 93-6, Employers’ Accounting for Employee Stock Ownership
Plans, the Company will continue to recognize future compensation using the cost basis as all
shares currently held by the ESOP were acquired prior to 1993. At April 30, 2008, the ESOP held
269,398 unallocated and 702,502 allocated shares. All shares held by the ESOP were considered
outstanding in earnings per share calculations for all periods presented.


Defined Contribution Plans: The Company offers employee savings plans for all domestic and Canadian
employees not covered by certain collective bargaining agreements. The Company’s contributions
under these plans are based on a specified percentage of employee contributions. Charges to
operations for these plans in 2008, 2007, and 2006 were $4,943, $4,138, and $4,213, respectively.



Note K: Share-Based Payments

***


The Company provides for equity-based incentives to be awarded to key employees and nonemployee
directors. Currently, these incentives consist of restricted shares, restricted stock units,
deferred shares, deferred stock units, performance units, and stock options. These awards are
administered through various plans, as described in the following paragraphs.


2006 Equity Compensation Plan: In August 2006, the Company’s shareholders approved the 2006 Equity
Compensation Plan. Awards under this plan may be in the form of stock options, stock appreciation
rights, restricted shares, deferred stock units, performance shares, performance units, incentive
awards, and other share-based awards. Awards under this plan may be granted to the Company’s
nonemployee directors, consultants, officers, and other employees. Deferred stock units granted to
nonemployee directors vest immediately. At April 30, 2008, there were 2,352,462 shares available
for future issuance under this plan. As a result of this plan becoming effective in August 2006, no
further awards will be made under the previously existing equity compensation plans listed below,
except for certain defined circumstances included in the new plan.


1998 Equity and Performance Incentive Plan: This plan provides for the issuance of stock options
and restricted shares, which may include performance criteria, as well as stock appreciation
rights, deferred shares, performance shares, and performance units. As a result of the adoption of
the 2006 Equity Compensation Plan, there are no common shares available for grant under this plan.
Options granted under this plan became exercisable at the rate of one-third per year, beginning one
year after the date of grant. The contractual term of the options is 10 years, and the option price
is equal to the market value of the shares on the date of the grant. Restricted shares and deferred
shares issued under this plan are subject to a risk of forfeiture for at least three years in the
event of termination of employment or failure to meet performance criteria, if any. Restricted
shares and deferred shares issued to date under the plan are generally subject to a four-year
forfeiture period, but may provide for the earlier termination of restrictions in the event of
retirement, the attainment of a defined age and service requirements, permanent disability or death
of an employee, or a change in control of the Company.


Upon adoption of Statement of Financial Accounting Standards No. 123 (revised), Share-Based Payment
(“SFAS 123R”), restricted shares, deferred stock units, performance units, and performance shares
are charged to expense over the requisite service period, which includes a one-year performance
period plus the defined forfeiture period. Performance units are granted to a limited
number of executives. At the beginning of each fiscal year, performance criteria are established
for the restricted shares, deferred stock units, and performance units to be earned during the
year. At the end of the one-year performance period, the restricted shares and deferred stock units
are granted and the performance units and performance shares are converted into restricted shares
and all are subject to normal vesting over the remaining forfeiture period. The actual number of
restricted shares issued on the conversion date will depend on the actual performance achieved.




~ 53 ~






 





1987 Stock Option Plan: Options granted under this plan became exercisable at the rate of one-third
per year, beginning one year after the date of grant, and the option price is equal to the market
value of the shares on the date of the grant. The maximum contractual term on options issued under
this plan is 10 years. As a result of the adoption of the 2006 Equity Compensation Plan, there are
no common shares available for future grant under this plan.


Nonemployee Director Stock Option Plan: This plan provides for the issuance of stock options to
nonemployee directors annually. Options granted under this plan became exercisable six months after
the date of grant, and the option price is equal to the market value of the shares on the date of
the grant. The maximum contractual term on options issued under this plan is 10 years. As a result
of the adoption of the 2006 Equity Compensation Plan, there are no common shares available for
future grant under this plan. 


Amended and Restated 1997 Stock-Based Incentive Plan: This plan was
initially adopted by shareholders of International Multifoods Corporation (“Multifoods”) in 1997.
Effective with the Company’s acquisition of Multifoods, the Company assumed the plan. After the
acquisition, only former employees of Multifoods that are employed by the Company were eligible to
receive awards under the plan. The maximum contractual term on options issued under this plan is 10
years. As a result of the adoption of the 2006 Equity Compensation Plan, there are no common shares
available for future grant under this plan.


As a result of the Multifoods acquisition, the Company also assumed two additional stock benefit
plans. However, no common shares are available for future grant under these plans.


Under the 2006 Equity Compensation Plan, the Company has the option to settle share-based awards by
issuing common shares from treasury or issuing new Company common shares. For awards granted from
the Company’s other equity compensation plans, the Company issues common shares from treasury,
except for plans that were acquired as part of the Multifoods acquisition, which are settled by
issuing new Company common shares.


~ Stock Options ~



Beginning in fiscal 2006, the Company replaced its employee stock option incentive program with a
restricted shares program. No stock options were issued to employees during 2008, 2007, and 2006.
During 2006, 12,000 stock options were issued to non-employee directors, with a grant date fair
value of $11.45.


On April 12, 2006, the Executive Compensation Committee of the Company’s Board of Directors
approved accelerating the vesting of previously issued stock options that had exercise prices
greater than $39.31, the closing price of the Company’s common shares on the New York Stock
Exchange on April 11, 2006. As a result, approximately 441,000 stock options with exercise prices
of either $43.38 or $44.17 became immediately exercisable. Approximately 110,000 and 331,000 of
these options would originally have vested in 2007 and 2008, respectively. The Company accelerated
vesting in order to minimize future noncash compensation expense associated with stock options upon
adoption of SFAS 123R on May 1, 2006. By accelerating the vesting of those options, the Company did
not incur compensation expense related to those options of approximately $1.0 million and $2.7
million in 2008 and 2007, respectively, that otherwise would have been required to be recognized in
the respective periods upon adoption of SFAS 123R.


A summary of the Company’s stock option activity, and related information follows:















































































































                                                     
                                        Weighted-      
                                        Average      
                                        Exercise      
                Options                 Price      
     
    Outstanding at May 1, 2007                 2,147,358                 $     35.65      
    Exercised                 (1,007,303     )                 32.36      
    Forfeited                 (21,196     )                 55.60      
     
    Outstanding and exercisable at April 30, 2008                 1,118,859                 $     38.23      
     




At April 30, 2008, the weighted-average remaining contractual term for stock options outstanding
and exercisable was 4.9 years, and the aggregate intrinsic value of these stock options was
$13,036.


The total intrinsic value of options exercised during 2008, 2007, and 2006, was approximately
$28,973, $9,409, and $3,674, respectively.


~ 54 ~




 






~ Other Equity Awards ~



A summary of the Company’s restricted shares, deferred shares, deferred stock units, performance
shares, and performance units activity follows:

































































































































































































































                                                                                                     
                Restricted/                                                            
                Deferred                 Weighted-                                          
                Shares and                 Average                 Performance                 Weighted-      
                Deferred                 Grant Date                 Shares and                 Average      
                Stock Units                 Fair Value                 Units                 Fair Value      
     
    Outstanding at May 1, 2007                 427,845                 $     42.92                       67,440                 $     57.73      
    Granted                 140,290                       57.50                       65,830                       51.37      
    Converted                 67,440                       57.73                       (67,440     )                 57.73      
    Unrestricted                 (192,284     )                 44.45                       —                       —      
    Forfeited                 (4,801     )                 49.65                       —                       —      
     
    Outstanding at April 30, 2008                 438,490                 $     49.12                       65,830                 $     51.37      
     




The total fair value of equity awards other than stock options vesting in 2008, 2007, and 2006, was
approximately $8,547, $4,276, and $3,700, respectively. The weighted-average grant date fair value
of restricted shares, deferred shares, deferred stock units, performance shares, and performance
units is the average of the high and the low share price on the date of grant. The following table
summarizes the weighted-average grant date fair values of the equity awards granted in 2008, 2007,
and 2006.







































































































































































                                                                                                     
                Restricted/                                                                  
                Deferred                 Weighted-                                         Weighted-      
                Shares and                 Average                 Performance                 Average      
                Deferred                 Grant Date                 Shares and                 Grant Date      
    Year Ended April 30,           Stock Units                 Fair Value                 Units                 Fair Value      
     
    2008                 140,290                 $     57.50                       65,830                 $     51.37      
    2007                 172,669                       40.80                       67,440                       57.73      
    2006                 199,640                       50.11                       63,310                       40.41      
     




The performance shares and units column represents the number of restricted shares received by
certain executive officers, subsequent to year end, upon conversion of the performance shares and
units earned during the year. Restricted stock generally vests four years from the date of grant or
upon the attainment of a defined age and years of service.


Note L: Long-Term Debt and Financing Arrangements



***



Long-term debt consists of the following:

















































































































































                                                     
                April 30,      
                2008                 2007      
     
    6.77% Senior Notes due June 1, 2009           $     75,000                 $     75,000      
    7.87% Series B Senior Notes due September 1, 2007                 —                       33,000      
    7.94% Series C Senior Notes due September 1, 2010                 10,000                       10,000      
    4.78% Senior Notes due June 1, 2014                 100,000                       100,000      
    6.60% Senior Notes due November 13, 2009                 204,684                       207,643      
    5.55% Senior Notes due April 1, 2022                 400,000                       —      
     
    Total long-term debt           $     789,684                 $     425,643      
    Current portion of long-term debt                 —                       33,000      
     
    Total long-term debt less current portion           $     789,684                 $     392,643      
     




The notes are unsecured and interest is paid annually on the 6.60 percent Senior Notes and
semiannually on the other notes. The 6.60 percent Senior Notes are guaranteed by Diageo plc. The
guarantee may terminate, in limited circumstances, prior to the


~ 55 ~




 





maturity of the notes. Among other restrictions, the note purchase agreements contain certain
covenants relating to liens, consolidated net worth, and sale of assets as defined in the
agreements. The Company is in compliance with all covenants.


On May 31, 2007, the Company issued $400 million of 5.55 percent Senior Notes, due April 1, 2022,
with required prepayments, the first of which is $50 million on April 1, 2013. Proceeds from this
issuance were used to repay borrowings under the revolving credit facility used in financing the
acquisition of Eagle. Additional proceeds were used to finance other strategic and long-term
initiatives as determined by the Company.


The Company has available a $180 million revolving credit facility with a group of three banks.
Interest on the revolving credit facility is based on prevailing U.S. prime, Canadian Base Rate,
LIBOR, or Canadian CDOR, as determined by the Company, and is payable either on a quarterly basis,
or at the end of the borrowing term. At April 30, 2008, the Company did not have a balance
outstanding under the revolving credit facility. At April 30, 2008, the Company had standby letters
of credit of approximately $9.5 million outstanding.


Interest paid totaled $44,584, $27,580, and $29,374 in 2008, 2007, and 2006, respectively. This
differs from interest expense due to the timing of payments, amortization of the fair value
adjustment on the 6.60 percent Senior Notes, amortization of deferred interest rate swap gains, and
interest capitalized.


Note M: Contingencies



***



The Company, like other food manufacturers, is from time to time subject to various administrative,
regulatory, and other legal proceedings arising in the ordinary course of business. The Company is
not currently party to any pending proceedings which could reasonably be expected to have a
material adverse effect on the Company.


Note N: Derivative Financial Instruments



***



The Company is exposed to market risks, such as changes in interest rates, currency exchange rates,
and commodity pricing. To manage the volatility relating to these exposures, the Company enters
into various derivative transactions.


Commodity Price Management: In connection with the purchase of inventories by the Company’s baking
business in Canada and the consumer oils and baking business in the United States, the Company
enters into commodity futures and options contracts to manage the price volatility and reduce the
variability of future cash flows related to anticipated inventory purchases of flour, milk, and
edible oils. The Company also enters into commodity futures and options related to the delivery of
natural gas to its manufacturing plants in the United States. The derivative instruments generally
have maturities of less than one year. Certain of the derivative instruments associated with the
Company’s oils business meet the hedge criteria according to Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”), and
are accounted for as cash flow hedges. The mark-to-market gains or losses on qualifying hedges are
deferred and included as a component of other comprehensive income to the extent effective, and
reclassified into cost of products sold in the period during which the hedged transaction affects
earnings.


In order to qualify as a hedge of commodity price risk, it must be demonstrated that the changes in
the fair value of the commodities futures contracts are highly effective in hedging price risks
associated with the commodity purchased. Hedge ineffectiveness is measured on a quarterly basis.
The mark-to-market gains or losses on nonqualifying, excluded, and ineffective portions of hedges
are recognized in cost of products sold immediately.


~ 56 ~




 




The fair value of all derivative commodity instruments is included in current assets on the
Consolidated Balance Sheets. As of April 30, 2008 and 2007, the deferred gain, net of tax, included
in accumulated other comprehensive income was $8,046 and $858, respectively. The entire amount at
April 30, 2008, is expected to be recognized in earnings as the related commodity is utilized
during 2009. The impact of commodities futures contracts and options recognized in earnings was a
gain of $18,428, $4,940, and $637 in 2008, 2007, and 2006, respectively. Included in these amounts
are amounts related to nonqualifying, excluded, and ineffective portions of hedges resulting in a
gain of $7,851, $1,552, and $1,742 in 2008, 2007, and 2006, respectively.


Foreign Exchange Rate Hedging: The Company may periodically utilize forward currency exchange
contracts. The contracts generally have maturities of less than one year. These contracts are used
to manage the effect of the foreign exchange fluctuations on future cash payments related to
purchases of certain assets. At the inception of the contract, the derivative is evaluated and
documented for SFAS 133 accounting treatment. If the contract qualifies for hedge accounting
treatment, to the extent the hedge is deemed effective, the associated mark-to-market gains and
losses are deferred and included as a component of other comprehensive income. As of April 30,
2008, the deferred gain, net of tax, included in accumulated other comprehensive income was $105.
These gains or losses are reclassified to earnings in the period the contracts are executed. The
ineffective portion of these contracts is immediately recognized in earnings. Certain instruments
used to manage foreign exchange exposures do not meet the requirements for hedge accounting
treatment and the change in value of these instruments is immediately recognized in earnings.


Note O: Other Financial Instruments



***



Financial instruments, other than derivatives, that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments, marketable securities, and
trade receivables. The Company places its cash investments with high quality financial institutions
and limits the amount of credit exposure to any one institution. The Company’s marketable
securities are in debt securities. Under the Company’s investment policy, it will invest in
securities deemed to be inve