Annual Reports

 
Quarterly Reports

  • 10-Q (Aug 31, 2017)
  • 10-Q (Feb 24, 2017)
  • 10-Q (Nov 22, 2016)
  • 10-Q (Aug 30, 2016)
  • 10-Q (Mar 3, 2016)
  • 10-Q (Dec 4, 2015)

 
8-K

 
Other

SMUCKER J M CO 10-Q 2007

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-31.3
  5. Ex-32
  6. Ex-32
The J.M. Smucker Company 10-Q
 

 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
     
þ   QUARTERLY REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2007
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 1-5111
THE J. M. SMUCKER COMPANY
(Exact name of registrant as specified in its charter)
     
Ohio   34-0538550
(State or other jurisdiction of incorporation or   (I.R.S. Employer Identification No.)
organization)    
     
One Strawberry Lane    
Orrville, Ohio   44667-0280
(Address of principal executive offices)   (Zip code)
Registrant’s telephone number, including area code: (330) 682-3000
N/A
(Former name, former address and former fiscal year, if changed since last report)
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 at least the past 90 days. Yes þ    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ      Accelerated filer o      Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act of 1934.
Yes o    No þ
The Company had 56,618,947 common shares outstanding on February 28, 2007.
The Exhibit Index is located at Page No. 26.
 
 

 


 

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
SIGNATURES
INDEX OF EXHIBITS
EX-31.1
EX-31.2
EX-31.3
EX-32
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
                                 
    Three Months Ended     Nine Months Ended  
    January 31,     January 31,  
    2007     2006     2007     2006  
    (Dollars in thousands, except per share data)  
Net sales
  $ 523,081     $ 536,453     $ 1,654,545     $ 1,653,048  
Cost of products sold
    349,425       371,981       1,122,412       1,120,193  
Cost of products sold — restructuring
    689       618       9,981       865  
 
                       
Gross Profit
    172,967       163,854       522,152       531,990  
Selling, distribution, and administrative expenses
    108,789       103,610       333,274       334,259  
Other restructuring (credits) costs
    (199 )     4,783       1,337       8,248  
Merger and integration costs
          7,764             14,784  
 
                       
Operating Income
    64,377       47,697       187,541       174,699  
Interest income
    2,629       1,709       6,625       4,858  
Interest expense
    (5,656 )     (5,984 )     (17,681 )     (18,116 )
Other (expense) income — net
    (902 )     6,150       (1,210 )     6,269  
 
                       
Income Before Income Taxes
    60,448       49,572       175,275       167,710  
Income taxes
    20,021       18,260       60,555       60,057  
 
                       
Net Income
  $ 40,427     $ 31,312     $ 114,720     $ 107,653  
 
                       
 
                               
Earnings per common share:
                               
Net Income
  $ 0.72     $ 0.54     $ 2.03     $ 1.85  
 
                       
 
                               
Net Income — Assuming Dilution
  $ 0.71     $ 0.54     $ 2.01     $ 1.83  
 
                       
 
                               
Dividends declared per common share
  $ 0.28     $ 0.27     $ 0.84     $ 0.81  
 
                       
See notes to unaudited condensed consolidated financial statements.

2


 

THE J. M. SMUCKER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
                 
    January 31, 2007     April 30, 2006  
    (Dollars in thousands)  
ASSETS
               
CURRENT ASSETS
               
Cash and cash equivalents
  $ 152,168     $ 71,956  
Marketable securities
          14,882  
Trade receivables, less allowances
    117,619       148,014  
Inventories:
               
Finished products
    181,485       190,302  
Raw materials
    95,804       88,786  
 
           
 
    277,289       279,088  
Assets held for sale
          90,250  
Other current assets
    34,850       38,648  
 
           
Total Current Assets
    581,926       642,838  
PROPERTY, PLANT, AND EQUIPMENT
               
Land and land improvements
    41,215       38,165  
Buildings and fixtures
    173,384       170,057  
Machinery and equipment
    527,259       513,593  
Construction in progress
    23,543       19,923  
 
           
 
    765,401       741,738  
Accumulated depreciation
    (312,127 )     (285,184 )
 
           
Total Property, Plant, and Equipment
    453,274       456,554  
OTHER NONCURRENT ASSETS
               
Goodwill
    988,797       940,967  
Other intangible assets, net
    476,720       472,915  
Marketable securities
    46,984       34,107  
Other assets
    108,177       102,363  
 
           
Total Other Noncurrent Assets
    1,620,678       1,550,352  
 
           
 
  $ 2,655,878     $ 2,649,744  
 
           
 
               
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
CURRENT LIABILITIES
               
Accounts payable
  $ 80,619     $ 88,963  
Notes payable
          28,620  
Current portion of long-term debt
    33,000        
Other current liabilities
    133,876       117,857  
 
           
Total Current Liabilities
    247,495       235,440  
NONCURRENT LIABILITIES
               
Long-term debt
    393,383       428,602  
Deferred income taxes
    150,632       155,579  
Other noncurrent liabilities
    108,977       102,064  
 
           
Total Noncurrent Liabilities
    652,992       686,245  
SHAREHOLDERS’ EQUITY
               
Common shares
    14,140       14,237  
Additional capital
    1,204,664       1,212,598  
Retained income
    528,180       489,067  
Less:
               
Deferred compensation
          (8,527 )
Amount due from ESOP
    (6,017 )     (6,525 )
Accumulated other comprehensive income
    14,424       27,209  
 
           
Total Shareholders’ Equity
    1,755,391       1,728,059  
 
           
 
  $ 2,655,878     $ 2,649,744  
 
           
See notes to unaudited condensed consolidated financial statements.

3


 

THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
                 
    Nine Months Ended January 31,  
    2007     2006  
    (Dollars in thousands)  
OPERATING ACTIVITIES
               
Net income
  $ 114,720     $ 107,653  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation
    42,387       47,133  
Amortization
    1,186       74  
Asset impairments and other restructuring charges
    10,089       865  
Share-based compensation expense
    8,282       5,889  
Gain on the sale of assets
          (5,638 )
Change in assets and liabilities, net of effect from businesses acquired:
               
Trade receivables
    29,668       26,133  
Inventories
    (1,864 )     (30,316 )
Accounts payable and accrued items
    (8,040 )     (63,415 )
Other adjustments
    15,614       36,202  
 
           
Net cash provided by operating activities
    212,042       124,580  
 
               
INVESTING ACTIVITIES
               
Businesses acquired
    (60,488 )      
Proceeds from sale of business
    84,054       8,754  
Additions to property, plant, and equipment
    (42,903 )     (42,715 )
Purchase of marketable securities
    (20,000 )     (5,000 )
Sale and maturities of marketable securities
    23,195       28,908  
Disposals of property, plant, and equipment
    882       1,804  
Other — net
    (1,826 )     7,609  
 
           
Net cash used for investing activities
    (17,086 )     (640 )
 
               
FINANCING ACTIVITIES
               
Repayments of long-term debt
          (17,000 )
Revolving credit arrangements — net
    (28,310 )     835  
Dividends paid
    (47,820 )     (47,044 )
Purchase of treasury shares
    (51,943 )     (30,122 )
Other — net
    16,655       793  
 
           
Net cash used for financing activities
    (111,418 )     (92,538 )
Effect of exchange rate changes
    (3,326 )     (241 )
 
           
 
               
Net increase in cash and cash equivalents
    80,212       31,161  
Cash and cash equivalents at beginning of period
    71,956       58,085  
 
           
Cash and cash equivalents at end of period
  $ 152,168     $ 89,246  
 
           
( ) Denotes use of cash
See notes to unaudited condensed consolidated financial statements.

4


 

THE J. M. SMUCKER COMPANY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
Note A — Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three-month and nine-month periods ended January 31, 2007, are not necessarily indicative of the results that may be expected for the year ending April 30, 2007. For further information, reference is made to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended April 30, 2006.
Note B — Share-Based Payments
In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised), Share-Based Payments (“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 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 $2,596 and $1,348 for the three months ended January 31, 2007 and 2006, and $7,862 and $5,889 for the nine months ended January 31, 2007 and 2006, respectively. The related tax benefit recognized in the Condensed Statements of Consolidated Income was $857 and $500 for the three months ended January 31, 2007 and 2006, and $2,716 and $2,108 for the nine months ended January 31, 2007 and 2006, respectively. Compensation expense recognized related to the grant of deferred share units to nonemployee directors was $420 for the nine months ended January 31, 2007. The related tax benefit recognized in the Condensed Statements of Consolidated Income was $145 for the nine months ended January 31, 2007. No compensation expense was capitalized related to share-based awards during the nine months ended January 31, 2007 or 2006. As a result of adopting SFAS 123R on May 1, 2006, the Company’s income before income taxes and net income were $549 and $367 lower for the three months ended January 31, 2007, and $1,474 and $965 lower for the nine months ended January 31, 2007, respectively, than if it had continued to account for share-based compensation under APB 25. The impact of adopting SFAS 123R for the nine months ended January 31, 2007, was approximately $0.02 on both earnings per common share and earnings per common share — assuming dilution.

5


 

Had the Company applied the fair value recognition provisions of SFAS 123 to share-based compensation for the three months and nine months ended January 31, 2006, the effect on net income and earnings per common share would have been as follows:
                 
    Three Months   Nine Months
    Ended January 31, 2006
 
Net income, as reported
  $ 31,312     $ 107,653  
Add: Total share-based compensation expense included in the determination of net income as reported, net of tax benefit
    848       3,781  
Less: Total share-based compensation expense determined under fair value-based methods for all awards, net of tax benefit
    (1,408 )     (5,790 )
 
Net income, as adjusted
  $ 30,752     $ 105,644  
 
 
               
Earnings per common share:
               
Net income, as reported
  $ 0.54     $ 1.85  
Add: Total share-based compensation expense included in the determination of net income as reported, net of tax benefit
    0.01       0.07  
Less: Total share-based compensation expense determined under fair value-based methods for all awards, net of tax benefit
    (0.02 )     (0.10 )
 
Net income, as adjusted
  $ 0.53     $ 1.82  
 
 
               
Net income, as reported — assuming dilution
  $ 0.54     $ 1.83  
Add: Total share-based compensation expense included in the determination of net income as reported, net of tax benefit — assuming dilution
    0.01       0.07  
Less: Total share-based compensation expense determined under fair value-based methods for all awards, net of tax benefit — assuming dilution
    (0.02 )     (0.10 )
 
Net income, as adjusted — assuming dilution
  $ 0.53     $ 1.80  
 
As of January 31, 2007, total compensation cost related to nonvested share-based awards not yet recognized was approximately $15,459. The weighted-average period over which this amount is expected to be recognized is approximately 3.1 years.
SFAS 123R also provides that any 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, will be

6


 

presented in the Condensed Statement of Consolidated Cash Flows as a financing activity, rather than an operating activity. Realized excess tax benefits are credited to additional capital in the Condensed Consolidated Balance Sheet. 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 was permitted to calculate 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 the nine months ended January 31, 2007.
The Company received cash from the exercise of stock options of $16,363 and $2,671 for the nine months ended January 31, 2007 and 2006, respectively. For the nine months ended January 31, 2007, the actual tax deductible benefit realized from share-based compensation was $2,042, including $2,366 of excess tax benefits realized upon exercise or vesting of share-based compensation, and classified as a financing activity on the Condensed Statement of Consolidated Cash Flows.
Note C — Restructuring
During 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 icon brands sold in the center of the store.
To date, the Company 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 grain-based foodservice and industrial 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 Company has announced plans to continue to operate its West Fargo, North Dakota, location that was intended to be closed as part of the initial announced restructuring initiative.
The Canadian grain-based divestiture was completed on September 22, 2006. The sale and related restructuring activities are expected to result in pretax expense of approximately $15 million, which will be reported as a restructuring charge. Costs will include noncash, long-lived asset charges, as well as transaction, legal, severance, and pension costs. During the first nine months of 2007, charges of approximately $10.6 million were recognized related to the Canadian restructuring, consisting primarily of the noncash write down of long-lived assets to their estimated fair market value.
The following table summarizes the carrying values of the Canadian grain-based assets held for sale included in the Condensed Consolidated Balance Sheet at April 30, 2006.
         
Assets held for sale:
       
Inventories
  $ 18,533  
Property, plant, and equipment — net
    71,182  
Other assets
    535  
 
Total assets held for sale
  $ 90,250  
 

7


 

The restructurings resulted in the reduction of approximately 410 full-time positions.
The Company expects to incur total restructuring costs of approximately $61 million related to these initiatives, of which $53.0 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 $8.0 million and $8.3 million, respectively, are primarily related to the Canadian restructuring and will mostly be incurred through 2008.
The following table summarizes the activity with respect to the restructuring and related long-lived asset charges recorded and reserves established and the total amount expected to be incurred.
                                         
            Long-Lived                    
    Employee     Asset     Equipment              
    Separation     Charges     Relocation     Other Costs     Total  
 
Total expected restructuring charge
  $ 16,900     $ 19,500     $ 6,900     $ 17,700     $ 61,000  
 
Balance at May 1, 2005
  $ 3,222     $     $     $     $ 3,222  
Charge to expense:
                                       
Three months ended July 31, 2005
    993       84       469       75       1,621  
Three months ended October 31, 2005
    521       113       699       758       2,091  
Three months ended January 31, 2006
    1,077       618       2,329       1,377       5,401  
Three months ended April 30, 2006
    393       884       (1,083 )     678       872  
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:
                                       
Three months ended July 31, 2006
    458       7,173       28       245       7,904  
Three months ended October 31, 2006
    (85 )     2,119       5       885       2,924  
Three months ended January 31, 2007
    (43 )                 533       490  
Cash payments
    (1,387 )           (33 )     (974 )     (2,394 )
Noncash utilization
    (108 )     (9,292 )           (689 )     (10,089 )
 
Balance at January 31, 2007
  $ 529     $     $     $     $ 529  
 
Remaining expected restructuring charge
  $ 500     $ 300     $     $ 7,200     $ 8,000  
 
Approximately $689 and $618 of the total net restructuring charges of $490 and $5,401 recorded in the three months ended January 31, 2007 and 2006, respectively, and $9,981 and $865 of the total restructuring charges of $11,318 and $9,113 recorded in the nine months ended January 31, 2007 and 2006, respectively, were reported in cost of products sold in the accompanying Condensed Statements of Consolidated Income, while the remaining charges were reported in other restructuring costs. The restructuring costs included in costs of products sold include long-lived asset charges and inventory disposition costs. 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 other current liabilities in the Condensed 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.

8


 

Note D — Common Shares
At January 31, 2007, 150,000,000 common shares were authorized. There were 56,560,560 and 56,949,044 shares outstanding at January 31, 2007, and April 30, 2006, respectively. Shares outstanding are shown net of 8,717,356 and 8,185,015 treasury shares at January 31, 2007, and April 30, 2006, respectively.
Note E — Operating 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, 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.
The following tables sets forth reportable segment information.
                                 
    Three Months Ended   Nine Months Ended
    January 31,   January 31,
    2007   2006   2007   2006
 
Net sales:
                               
U.S. retail market
  $ 393,797     $ 375,750     $ 1,181,556     $ 1,147,240  
Special markets
    129,284       160,703       472,989       505,808  
 
Total net sales
  $ 523,081     $ 536,453     $ 1,654,545     $ 1,653,048  
 
 
                               
Segment profit:
                               
U.S. retail market
  $ 77,751     $ 72,122     $ 236,796     $ 234,287  
Special markets
    17,230       16,313       52,448       51,199  
 
Total segment profit
  $ 94,981     $ 88,435     $ 289,244     $ 285,486  
 
Interest income
    2,629       1,709       6,625       4,858  
Interest expense
    (5,656 )     (5,984 )     (17,681 )     (18,116 )
Amortization expense
    (118 )     (25 )     (1,186 )     (74 )
Restructuring costs
    (490 )     (5,401 )     (11,318 )     (9,113 )
Merger and integration costs
          (7,764 )           (14,784 )
Corporate administrative expenses
    (29,780 )     (26,682 )     (89,024 )     (86,392 )
Other unallocated (expense) income
    (1,118 )     5,284       (1,385 )     5,845  
 
Income before income taxes
  $ 60,448     $ 49,572     $ 175,275     $ 167,710  
 

9


 

                                 
    Three Months Ended   Nine Months Ended
    January 31,   January 31,
    2007   2006   2007   2006
 
Net sales:
                               
Domestic
  $ 459,296     $ 436,999     $ 1,383,760     $ 1,345,369  
International:
                               
Canada
  $ 52,672     $ 89,758     $ 235,718     $ 278,525  
All other international
    11,113       9,696       35,067       29,154  
 
Total international
  $ 63,785     $ 99,454     $ 270,785     $ 307,679  
 
Total net sales
  $ 523,081     $ 536,453     $ 1,654,545     $ 1,653,048  
 
                 
    January 31, 2007     April 30, 2006  
 
Assets:
               
Domestic
  $ 2,171,993     $ 2,101,109  
International:
               
Canada
  $ 472,489     $ 539,750  
All other international
    11,396       8,885  
 
Total international
  $ 483,885     $ 548,635  
 
Total assets
  $ 2,655,878     $ 2,649,744  
 
 
               
Long-lived assets:
               
Domestic
  $ 1,725,551     $ 1,662,389  
International:
               
Canada
  $ 342,383     $ 339,490  
All other international
    6,018       5,027  
 
Total international
  $ 348,401     $ 344,517  
 
Total long-lived assets
  $ 2,073,952     $ 2,006,906  
 

10


 

Note F – Earnings Per Share
The following table sets forth the computation of earnings per common share and earnings per common share – assuming dilution.
                                 
    Three Months Ended     Nine Months Ended  
    January 31,     January 31,  
    2007     2006     2007     2006  
 
Numerator:
                               
Net income
  $ 40,427     $ 31,312     $ 114,720     $ 107,653  
 
 
                               
Denominator:
                               
Weighted-average shares
    56,185,039       57,944,604       56,494,799       58,106,913  
Effect of dilutive securities:
                               
Stock options
    386,558       417,419       372,089       481,774  
Restricted shares
    216,003       124,389       193,330       119,522  
 
Weighted-average shares – assuming dilution
    56,787,600       58,486,412       57,060,218       58,708,209  
 
 
                               
Net income per common share
  $ 0.72     $ 0.54     $ 2.03     $ 1.85  
 
Net income per common share – assuming dilution
  $ 0.71     $ 0.54     $ 2.01     $ 1.83  
 

11


 

Note G – Pensions and Other Postretirement Benefits
The components of the Company’s net periodic benefit cost for defined benefit pension plans and other postretirement benefits are shown below.
                                 
    Three Months Ended January 31,  
                    Other  
    Defined Benefit     Postretirement  
    Pension Plans     Benefits  
    2007     2006     2007     2006  
 
Service cost
  $ 1,632     $ 2,262     $ 475     $ 529  
Interest cost
    5,891       5,624       722       837  
Expected return on plan assets
    (7,993 )     (7,112 )            
Recognized net actuarial loss (gain)
    403       695       (13 )     38  
Other
    466       326       (51 )     6  
 
Net periodic benefit cost
  $ 399     $ 1,795     $ 1,133     $ 1,410  
 
                                 
    Nine Months Ended January 31,  
                    Other  
    Defined Benefit     Postretirement  
    Pension Plans     Benefits  
    2007     2006     2007     2006  
Service cost
  $ 5,850     $ 6,728     $ 1,528     $ 1,582  
Interest cost
    17,899       16,748       2,342       2,493  
Expected return on plan assets
    (24,128 )     (21,168 )            
Recognized net actuarial loss
    1,021       2,082       49       115  
Other
    1,180       978       (153 )     18  
 
Net periodic benefit cost
  $ 1,822     $ 5,368     $ 3,766     $ 4,208  
 
Note H – Comprehensive Income
During the three-month periods ended January 31, 2007 and 2006, total comprehensive income was $26,236 and $36,844, respectively. Total comprehensive income for the nine-month periods ended January 31, 2007 and 2006, was $101,935 and $120,027, respectively. Comprehensive income consists of net income, foreign currency translation adjustments, minimum pension liability adjustments, unrealized gains and losses on available-for-sale securities, and unrealized gains and losses on commodity hedging activity, net of income taxes.
Note I – Commitments and Contingencies
In September 2002, International Multifoods Corporation (“Multifoods”) sold its foodservice distribution business to Wellspring Distribution Corporation (“Wellspring”) while continuing to guarantee certain real estate and tractor-trailer fleet lease obligations of the business. As a result of the Company’s acquisition of Multifoods, the Company now is obligated under these guarantees. The guarantees require the lessor to pursue collection and other remedies against Wellspring before demanding payment from the Company. The tractor-trailer fleet lease guarantee expired in September 2006 and the real estate guarantee will expire in September 2010.

12


 

The possibility that the Company would be required to honor the contingent liabilities under the real estate guarantee is largely dependent upon the future operations of Wellspring and the value of the underlying leased properties. The Company currently has no liability recorded related to the guarantee. Should a reserve be required in the future, it would be recorded at the time the obligation was considered to be probable. At January 31, 2007, the Company’s guarantee outstanding related to the real estate lease was $6,955.
Note J – Stock Benefit Plans
The Company provides for equity-based incentives to be awarded to key employees and nonemployee directors. Currently, these incentives consist of restricted shares, restricted share units, deferred shares, deferred share units, performance units, performance shares, 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, restricted share 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. At January 31, 2007, there were 2,491,220 shares available for future issuance under this plan. The deferred share units granted to nonemployee directors vest immediately.
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, restricted share units, performance shares, and performance units. As a result of the adoption of the 2006 Equity Compensation Plan, no further awards may be granted under this plan except for the potential conversion of performance units and performance shares granted in June 2006, into restricted shares once such performance units and performance shares are earned. Options granted under this plan become exercisable at the rate of one-third per year, beginning one year after the date of grant. The contractual term of the options is ten 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 Payments (“SFAS 123R”), restricted shares, deferred shares, performance units, and performance shares are charged to expense over a one-year performance period plus the defined forfeiture period. Performance units and performance shares are granted to a limited number of executives. At the beginning of each fiscal year, performance criteria are established for the restricted shares, deferred shares, performance shares, and performance units to be earned during the year. At the end of the one-year performance period, the earned restricted shares and deferred shares are granted and the earned 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 and the average market value of the shares over the defined trading period.

13


 

     1987 Stock Option Plan: Options granted under this plan become 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 ten 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 become 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 ten 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. As a result of the adoption of the 2006 Equity Compensation Plan, there are no common shares available for future grant under this plan. The maximum contractual term on options issued under this plan is ten years.
As a result of the 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 share program. No stock options were issued during the nine-month period ended January 31, 2007 and 12,000 stock options were issued to nonemployee directors during the nine-month period ended January 31, 2006, with a grant date fair value of $11.45. Management estimates the fair value of stock option awards on the date of grant using the Black-Scholes option-pricing model. The main inputs into the model are estimated by management based on historical performance and management’s expectation of future results. The following assumptions were used to estimate the fair value of the options granted in the nine-month period ending January 31, 2006.
         
    Nine Months
    Ended
    January 31,2006
 
Average expected term (years)
    5.25  
Risk-free interest rate
    3.85 %
Dividend yield
    2.00 %
Volatility
    25.50 %
 
Fair value of options granted
  $ 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

14


 

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 will not incur pretax compensation expense of approximately $2.7 million and $1.0 million in 2007 and 2008, respectively, that otherwise would have been required to be recognized in the respective periods upon adoption of SFAS 123R related to these options.
A summary of the Company’s stock option activity and related information follows:
                                 
                    Weighted-        
                    Average        
            Weighted-     Remaining        
            Average     Contractual     Aggregate  
            Exercise     Term     Intrinsic  
    Options     Price     (years)     Value  
 
Outstanding at May 1, 2006
    2,938,112     $ 36.03       5.8     $ 9,484  
Granted
                           
Exercised
    (527,234 )     33.95               7,270  
Forfeited
    (28,779 )     51.47                  
 
Outstanding at January 31, 2007
    2,382,099     $ 36.31       5.3     $ 26,640  
 
 
                               
Exercisable at January 31, 2007
    2,382,099     $ 36.31       5.3     $ 26,640  
 
The total intrinsic value of options exercised during the nine-month period ending January 31, 2007 and 2006, was approximately $7,270 and $2,103, respectively.
Other Equity Awards
A summary of the Company’s restricted shares, deferred shares, deferred share units, performance shares, and performance unit activity, follows:
                                 
    Restricted                    
    and     Weighted-              
    Deferred     Average     Performance     Weighted-  
    Shares and     Grant Date     Shares and     Average  
    Units     Fair Value     Units     Fair Value  
 
Outstanding at May 1, 2006
    301,350     $ 44.03       63,310     $ 39.26  
Granted
    172,669       40.80       69,915       40.41  
Converted
    63,310       40.41       (63,310 )     40.41  
Unrestricted
    (91,990 )     41.40              
Forfeited
    (7,054 )     44.45              
 
Outstanding at January 31, 2007
    438,285     $ 42.97       69,915     $ 47.49  
 
The total fair value of equity awards other than stock options vesting in each of the nine months ended January 31, 2007 and 2006, respectively, was approximately $3,808 and $3,700. The weighted-average grant date fair value of restricted shares, deferred shares, and deferred share units is the average of the high and the low share price on the date of grant.

15


 

During the nine months ended January 31, 2007, the Company granted 235,979 restricted shares, deferred shares, and deferred share units. Included in the grant is 13,500 deferred shares and 213,750 restricted shares, with 63,310 of these representing the conversion of performance shares and performance units into restricted shares, all with a grant date fair value of $40.41 and a total fair value of $9,183 to employees, and 8,729 deferred share units granted to nonemployee directors with a grant date fair value of $48.12 and a total fair value of $420. Also during the nine months ended January 31, 2007, the Company granted performance units and performance shares that correspond to approximately 69,915 common shares with a grant date fair value of $40.41 and a total fair value of $2,825 on the date of grant. The actual number of performance units and performance shares earned may vary from the date of grant until the conversion to restricted shares based on actual Company performance and the average market value of the shares over the defined trading period. The grant date fair value of these awards was the average of the high and low share price on the date of grant.
Note K – Recently Issued Accounting Standards
In July 2006, the Financial Accounting Standards Board issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), which is an interpretation of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. FIN 48 is effective for fiscal years beginning after December 15, 2006, (May 1, 2007, for the Company). The Company is currently assessing the impact of FIN 48 on the consolidated financial statements.
In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 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 on the consolidated financial statements.
In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (“SFAS 158”). SFAS 158 is effective for fiscal years ending after December 15, 2006, (the current fiscal year for the Company). The Company will be required to recognize the funded status of the defined benefit and postretirement plans and provide the required disclosures as outlined in SFAS 158 in the 2007 annual report. The Company does not expect the impact of adopting SFAS 158 to have a material impact on its results of operations or financial position.
Note L – Reclassifications
Certain prior year amounts have been reclassified to conform to current year classifications.

16


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This discussion and analysis deals with comparisons of material changes in the unaudited condensed consolidated financial statements for the three-month and nine-month periods ended January 31, 2007 and 2006, respectively.
Net Sales
Company net sales were $523.1 million for the third quarter of fiscal 2007, a decrease of two percent compared to $536.5 million in the third quarter of fiscal 2006. Net sales for the third quarter of 2007 increased six percent compared to 2006, excluding the Canadian nonbranded, grain-based foodservice and industrial businesses sold in September 2006 and the U.S. industrial ingredient business (“divested businesses”). Sales growth was led primarily by volume with some pricing gains in the Smucker’s, Jif, and Crisco brands, strong performance across the special markets segment, and the contribution of approximately $13.2 million from previously acquired brands.
Net sales for the nine-month period ended January 31, 2007, were $1,654.5 million, flat compared to $1,653.0 million for the first nine months of 2006. Net sales were up five percent for the first nine months of 2007 over 2006 after excluding divested businesses, and including approximately $24.9 million of sales contributed by brands acquired during 2007.
U.S. retail market segment sales for the third quarter of 2007 were $393.8 million, up five percent, compared to $375.8 million in 2006 with sales in the consumer strategic business area up four percent and sales in the consumer oils and baking strategic business area up five percent. Increases in the consumer strategic business area were led by gains in peanut butter, fruit spreads, toppings, and Uncrustables. In the consumer oils and baking strategic business area, sales gains in retail oils, frostings, baking ingredients, and the contribution of the White Lily brand acquired earlier in the year, offset declines in sales of industrial oils and baking mixes.
U.S. retail market segment sales were $1,181.6 million for the first nine months of 2007, an increase of three percent compared to $1,147.2 million for the same period in 2006. For the first nine months of 2007, net sales in the consumer strategic business area were up five percent, and sales in the oils and baking strategic business area were flat compared to the first nine months of 2006.
Net sales in the third quarter of 2007 for the special markets segment were $129.3 million, a decrease of 20 percent, compared to $160.7 million in the third quarter of 2006. Excluding divested businesses, special market segment net sales increased 11 percent for the same period. All strategic business areas in special markets contributed to the net sales increase in the third quarter of 2007 with foodservice up 15 percent, Canada up 10 percent, beverage up eight percent, and international up 15 percent. Increased sales of traditional portion control products, as well as increases in Uncrustables in the schools market contributed to the foodservice improvement. The increase in Canada was driven by the acquisition of the Five Roses flour brand earlier in the year, the impact of favorable exchange rates, and growth in pickles and relishes.
Net sales in the special markets segment for the first nine months of 2007 were $473.0 million compared to $505.8 million for the first nine months of 2006, a decrease of six percent. Excluding divested businesses, special market segment net sales increased 11 percent for the first nine months of 2007 compared to 2006.

17


 

Operating Income
The following table presents components of operating income as a percentage of net sales.
                                 
    Three Months Ended     Nine Months Ended  
    January 31,     January 31,  
    2007     2006     2007     2006  
 
Gross profit
    33.1 %     30.5 %     31.6 %     32.2 %
Selling, distribution, and administrative:
                               
Marketing and selling
    10.2 %     9.5 %     9.9 %     10.2 %
Distribution
    3.6       3.7       3.5       3.5  
General and administrative
    7.0       6.1       6.7       6.5  
 
Total selling, distribution, and administrative
    20.8 %     19.3 %     20.1 %     20.2 %
 
Restructuring and merger and integration
    0.0 %     2.3 %     0.2 %     1.4 %
 
Operating income
    12.3 %     8.9 %     11.3 %     10.6 %
 
Operating income for the third quarter of 2007 increased $16.7 million, or 35 percent, from the third quarter of 2006, and increased from 8.9 percent of net sales to 12.3 percent. The increase in operating income was primarily due to improvements in gross profit. The impact of the Canadian divestiture earlier in the year, combined with favorable product mix, accounted for the majority of the improvement in gross profit. Pricing actions taken to date have also contributed to the improvement. The Company continues to incur high commodity costs impacting both raw material and freight and continues to take pricing actions to offset a portion of the increased costs. Due to the timing of these pricing actions, all cost increases have not been fully offset.
Selling, distribution, and administrative (“SD&A”) expenses increased $5.2 million, or five percent from the third quarter of 2006, and increased as a percentage of net sales from 19.3 percent to 20.8 percent, primarily due to higher marketing and administrative expenses compared to the same period last year. Distribution expenses decreased from the prior year.
Year-to-date operating income increased $12.8 million, or seven percent, from last year and to 11.3 percent of net sales from 10.6 percent. Gross profit declined from 32.2 percent of net sales to 31.6 percent for the nine-month period due to an increase in restructuring and raw material costs. For the first nine months of 2007, SD&A as a percentage of net sales was 20.1 percent compared to 20.2 percent for the comparable period in 2006, primarily due to lower marketing expenses.
On May 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised), Share-Based Payments (“SFAS 123R”), using the modified prospective method. The impact of SFAS 123R was not material to the Company’s results of operations for the three-month or the nine-month period ended January 31, 2007.
Other
Interest income increased 54 percent for the third quarter and 36 percent for the first nine months of 2007 compared to the same periods in 2006 primarily related to an increase in invested funds combined with an increase in investment returns. During the same time periods, interest expense decreased slightly as proceeds from the sale of the Canadian grain-based foodservice and industrial businesses were utilized to pay down the outstanding revolving credit balance during the second quarter of 2007.

18


 

Other income during the third quarter and first nine months of 2006 includes a gain on the sale of the Company’s Salinas, California, facility of approximately $5.6 million.
Income Taxes
The Company’s earnings for the third quarter were favorably impacted by a reduction in the effective tax rate from 36.8 percent in 2006, to 33.1 percent this quarter, reflecting an adjustment to the effective tax rate for the year-to-date period to 34.5 percent. The Company expects the 2007 full year tax rate to be approximately 34.5 percent compared to 33.5 percent for the year ended April 30, 2006.
Financial Condition – Liquidity and Capital Resources
                 
    Nine Months Ended January 31,  
(Dollars in thousands)   2007     2006  
 
Net cash provided by operating activities
  $ 212,042     $ 124,580  
Net cash used for investing activities
  $ (17,086 )   $ (640 )
Net cash used for financing activities
  $ (111,418 )   $ (92,538 )
 
The Company’s principal source of funds is cash generated from operations, supplemented by borrowings against the Company’s revolving credit instrument. Total cash and investments at January 31, 2007, were $199.2 million compared to $120.9 million at April 30, 2006.
Historically, 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.
Cash provided by operating activities was approximately $212.0 million during the first nine months of 2007. The positive cash generated by operations resulted primarily from net income plus noncash charges, and the collection of trade receivables associated with the Canadian grain-based foodservice and industrial business divested earlier in the year.
Net cash used for investing activities was approximately $17.1 million in the first nine months of 2007 as $84.1 million of proceeds from the sale of the Canadian nonbranded, grain-based foodservice and industrial business, were offset by $60.5 million used for business acquisitions, and capital expenditures of approximately $42.9 million.
Cash used for financing activities during the first nine months of 2007 consisted primarily of $51.9 million to finance the repurchase of common shares, $47.8 million in dividend payments, and $28.3 million used to payoff the revolving credit facility, offset by proceeds from the exercise of stock options.
On August 22, 2006, The Company entered into a Rule 10b5-1 trading plan (“the Plan”) to facilitate the repurchase of up to one million common shares under its previously announced share repurchase authorization. The share purchase period commenced on August 22, 2006, and the Plan was fulfilled on November 29, 2006. Outside the Plan, the Company has 1,671,822 common shares remaining under the share repurchase authorization as of January 31, 2007.
Absent any material acquisitions or other significant investments, the Company believes that cash on hand and investments, combined with cash provided by operations, and borrowings available under the revolving credit facility, will be sufficient to meet 2007 cash requirements, including the payment of dividends, repurchase of common shares, and interest on debt outstanding.

19


 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company is exposed to market risk related to changes in interest rates, commodity prices, and foreign currency exchange rates. For further information, reference is made to the Company’s Annual Report on Form 10-K for the year ended April 30, 2006.
Certain Forward-Looking Statements
Certain statements included in this quarterly 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:
    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;
 
    raw material and ingredient cost trends;
 
    the ability to successfully implement price changes, particularly in the consumer oils and baking business;
 
    the success and cost of introducing new products and the competitive response, particularly in the consumer oils and baking area;
 
    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;
 
    the concentration of certain of the Company’s businesses with key customers and the ability to manage and maintain key customer relationships;
 
    the loss of significant customers or a substantial reduction in orders from these customers or the bankruptcy of any such customer;
 
    the timing and amount of capital expenditures and restructuring costs;
 
    foreign currency exchange and interest rate fluctuations;
 
    the timing and cost of acquiring common shares under the Company’s share repurchase authorizations;
 
    general competitive activity in the market, including competitors’ pricing practices and promotional spending levels; and
 
    other factors affecting share prices and capital markets generally.

20


 

Item 4. 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 January 31, 2007, (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.
     Changes in Internal Controls. There were no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended January 31, 2007, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

21


 

PART II. OTHER INFORMATION
Item 1A. Risk Factors.
The Company’s business, operations, and financial condition are subject to various risks and uncertainties. The risk factors described below and in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended April 30, 2006, should be carefully considered, together with the other information contained or incorporated by reference in the Quarterly Report on Form 10-Q 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’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’ 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.
 
    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.

22


 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
     (a) Not applicable.
     (b) Not applicable.
     (c) Issuer Purchases of Equity Securities
                                 
    (a)     (b)     (c)     (d)  
                            Maximum  
                            Number (or  
                    Total Number of     Approximate  
                    Shares     Dollar Value) of  
                    Purchased as     Shares That  
                    Part of Publicly     May Yet Be  
    Total Number of             Announced     Purchased  
    Shares     Average Price     Plans or     Under the Plans  
Period   Purchased     Paid Per Share     Programs     or Programs  
 
November 1, 2006 – November 30, 2006
    254,600     $ 47.30       254,600       1,739,222  
December 1, 2006 – December 31, 2006
    67,400       47.76       67,400       1,671,822  
January 1, 2007 – January 31, 2007
                      1,671,822  
     
Total
    322,000     $ 47.40       322,000       1,671,822  
     
    Information set forth in the table above represents activity in the Company’s third fiscal quarter of 2007.
 
(a)   Since August 2004, the Company’s Board of Directors has authorized management to repurchase up to five million common shares as presented in the following table.
         
    Number of  
    Common  
Board of   Shares  
Directors   Authorized for  
Authorizations   Repurchase  
 
August 2004
    1,000,000  
January 2006
    2,000,000  
April 2006
    2,000,000  
 
Total
    5,000,000  
 
    The buyback program will be implemented at management’s discretion with no established expiration date. Shares in this column include shares repurchased as part of this publicly announced plan as well as shares repurchased from stock plan recipients in lieu of cash payments.
(d)   The Company has repurchased a total of 3,328,178 shares from August 2004 through January 31, 2007, under the buyback program authorized by the Company’s Board of Directors, including 1,000,000 common shares under the Company’s February 2006 Rule 10b5-1 trading plan and 1,000,000 common shares under the Company’s August 2006 Rule 10b5-1 trading plan. At January 31, 2007, 1,671,822 common shares remain available for repurchase under this program.

23


 

Item 6. Exhibits.
See the Index of Exhibits that appears on Page No. 26 of this report.

24


 

SIGNATURES
     Pursuant to the requirements 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.
                     
March 9, 2007       THE J. M. SMUCKER COMPANY
 
                   
 
          /s/ Timothy P. Smucker
 
BY TIMOTHY P. SMUCKER
       
 
          Chairman and Co-Chief Executive Officer        
 
                   
 
          /s/ Richard K. Smucker
 
BY RICHARD K. SMUCKER
       
 
          President and Co-Chief Executive Officer        
 
                   
 
          /s/ Mark R. Belgya
 
BY MARK R. BELGYA
       
 
          Vice President, Chief Financial Officer and Treasurer        

25


 

INDEX OF EXHIBITS
     
Assigned    
Exhibit    
No.*   Description
 
 
31.1
  Certification of Timothy P. Smucker pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act
 
   
31.2
  Certification of Richard K. Smucker pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act
 
   
31.3
  Certification of Mark R. Belgya pursuant to Rule 13a-14(a) or 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
 
*   Exhibits 2, 3, 10, 11, 15, 18, 19, 22, 23, 24, and 99 are either inapplicable to the Company or require no answer.

26

Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki