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 2017

Documents found in this filing:

  1. 10-Q
  2. Ex-12.1
  3. Ex-31.1
  4. Ex-31.2
  5. Ex-32
  6. Ex-32
Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________________________ 
FORM 10-Q
___________________________________________________ 
ý
QUARTERLY REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2017
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 organization)
(I.R.S. Employer
Identification No.)
 
 
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  ý    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  ý    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
ý
Accelerated filer
 
o
 
 
 
 
Non-accelerated filer
 
o  (Do not check if a smaller reporting company)
Smaller Reporting Company
 
o
 
 
 
 
 
 
Emerging growth company
 
o
 
 
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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  ý
The Company had 113,584,620 common shares outstanding on August 24, 2017.

 
 
 


TABLE OF CONTENTS
 

1



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
 
Three Months Ended July 31,
Dollars in millions, except per share data
2017
 
2016
Net sales
$
1,748.9

 
$
1,815.8

Cost of products sold
1,086.8

 
1,093.1

Gross Profit
662.1

 
722.7

Selling, distribution, and administrative expenses
350.2

 
356.0

Amortization
51.5

 
51.7

Other special project costs (A)
27.1

 
22.2

Other operating expense (income) – net
(0.5
)
 
(1.0
)
Operating Income
233.8

 
293.8

Interest expense – net
(42.0
)
 
(41.5
)
Other income (expense) – net
(2.8
)
 
1.1

Income Before Income Taxes
189.0

 
253.4

Income taxes
62.2

 
83.4

Net Income
$
126.8

 
$
170.0

Earnings per common share:
 
 
 
Net Income
$
1.12

 
$
1.46

Net Income – Assuming Dilution
$
1.12

 
$
1.46

Dividends Declared per Common Share
$
0.78

 
$
0.75

 
(A)
Other special project costs includes integration and restructuring costs. For more information, see Note 4: Integration and Restructuring Costs.
See notes to unaudited condensed consolidated financial statements.

2



THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended July 31,
Dollars in millions
2017
 
2016
Net income
$
126.8

 
$
170.0

Other comprehensive income (loss):
 
 
 
Foreign currency translation adjustments
35.0

 
(15.0
)
Cash flow hedging derivative activity, net of tax
1.6

 
0.1

Pension and other postretirement benefit plans activity, net of tax
(0.2
)
 
17.2

Available-for-sale securities activity, net of tax
0.3

 
0.2

Total Other Comprehensive Income (Loss)
36.7

 
2.5

Comprehensive Income
$
163.5

 
$
172.5

See notes to unaudited condensed consolidated financial statements.

3



THE J. M. SMUCKER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
July 31, 2017
 
April 30, 2017
Dollars in millions
 
 
 
ASSETS
Current Assets
 
 
 
Cash and cash equivalents
$
183.2

 
$
166.8

Trade receivables, less allowance for doubtful accounts
433.7

 
438.7

Inventories:
 
 
 
Finished products
640.2

 
562.4

Raw materials
341.1

 
343.3

Total Inventory
981.3

 
905.7

Other current assets
93.9

 
130.6

Total Current Assets
1,692.1

 
1,641.8

Property, Plant, and Equipment
 
 
 
Land and land improvements
121.3

 
115.6

Buildings and fixtures
791.2

 
766.2

Machinery and equipment
2,001.4

 
1,983.0

Construction in progress
98.7

 
116.9

Gross Property, Plant, and Equipment
3,012.6

 
2,981.7

Accumulated depreciation
(1,416.9
)
 
(1,364.2
)
Total Property, Plant, and Equipment
1,595.7

 
1,617.5

Other Noncurrent Assets
 
 
 
Goodwill
6,092.1

 
6,077.1

Other intangible assets – net
6,104.3

 
6,149.9

Other noncurrent assets
157.4

 
153.4

Total Other Noncurrent Assets
12,353.8

 
12,380.4

Total Assets
$
15,641.6

 
$
15,639.7

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
 
 
 
Accounts payable
$
477.6

 
$
477.2

Accrued trade marketing and merchandising
162.4

 
106.0

Current portion of long-term debt
499.3

 
499.0

Short-term borrowings
283.9

 
454.0

Other current liabilities
327.7

 
296.4

Total Current Liabilities
1,750.9

 
1,832.6

Noncurrent Liabilities
 
 
 
Long-term debt, less current portion
4,444.8

 
4,445.5

Deferred income taxes
2,170.1

 
2,167.0

Other noncurrent liabilities
343.9

 
344.4

Total Noncurrent Liabilities
6,958.8

 
6,956.9

Total Liabilities
8,709.7

 
8,789.5

Shareholders’ Equity
 
 
 
Common shares
28.4

 
28.4

Additional capital
5,732.4

 
5,724.7

Retained income
1,277.8

 
1,240.5

Accumulated other comprehensive income (loss)
(106.7
)
 
(143.4
)
Total Shareholders’ Equity
6,931.9

 
6,850.2

Total Liabilities and Shareholders’ Equity
$
15,641.6

 
$
15,639.7

See notes to unaudited condensed consolidated financial statements.

4



THE J. M. SMUCKER COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
 
Three Months Ended July 31,
Dollars in millions
2017
 
2016
Operating Activities
 
 
 
Net income
$
126.8

 
$
170.0

Adjustments to reconcile net income to net cash provided by (used for) operations:
 
 
 
Depreciation
54.5

 
54.0

Amortization
51.5

 
51.7

Share-based compensation expense
6.6

 
8.1

Other noncash adjustments
0.8

 
0.7

Defined benefit pension contributions
(0.8
)
 
(0.8
)
Changes in assets and liabilities, net of effect from businesses acquired:
 
 
 
Trade receivables
7.3

 
(74.3
)
Inventories
(71.2
)
 
(117.3
)
Other current assets
4.3

 
20.1

Accounts payable
35.3

 
18.2

Accrued liabilities
52.5

 
34.7

Income and other taxes
35.9

 
45.1

Other – net
0.8

 
28.7

Net Cash Provided by (Used for) Operating Activities
304.3

 
238.9

Investing Activities
 
 
 
Additions to property, plant, and equipment
(69.6
)
 
(50.2
)
Other – net
31.5

 
(12.3
)
Net Cash Provided by (Used for) Investing Activities
(38.1
)
 
(62.5
)
Financing Activities
 
 
 
Short-term borrowings (repayments) – net
(170.1
)
 
22.0

Repayments of long-term debt

 
(100.0
)
Quarterly dividends paid
(84.9
)
 
(77.8
)
Purchase of treasury shares
(6.6
)
 
(18.1
)
Other – net
1.5

 
0.7

Net Cash Provided by (Used for) Financing Activities
(260.1
)
 
(173.2
)
Effect of exchange rate changes on cash
10.3

 
(3.4
)
Net increase (decrease) in cash and cash equivalents
16.4

 
(0.2
)
Cash and cash equivalents at beginning of period
166.8

 
109.8

Cash and Cash Equivalents at End of Period
$
183.2

 
$
109.6

( ) Denotes use of cash
See notes to unaudited condensed consolidated financial statements.

5



THE J. M. SMUCKER COMPANY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, unless otherwise noted, except per share data)
Note 1: Basis of Presentation
The unaudited interim condensed consolidated financial statements of The J. M. Smucker Company (“Company,” “we,” “us,” or “our”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) 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 notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments of a normal recurring nature considered necessary for a fair presentation have been included.
Operating results for the three months ended July 31, 2017, are not necessarily indicative of the results that may be expected for the year ending April 30, 2018. For further information, reference is made to the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended April 30, 2017.
Note 2: Recently Issued Accounting Standards
In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-07, Compensation – Retirement Benefits (Topic 715) Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires the service cost component of the net periodic pension cost to be presented separately from the other components of the net periodic pension cost in the income statement. Additionally, only the service cost component of the net periodic pension cost is eligible for capitalization. ASU 2017-07 will be effective for us on May 1, 2019, with the option to early adopt at any time prior to the effective date, and will require adoption on a retrospective basis. We do not anticipate that the adoption of this ASU will have a material impact on our financial statements and disclosures.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment, which eliminates Step 2 from the goodwill impairment test and requires an impairment charge to be recorded based on the excess of a reporting unit's carrying value over its fair value. ASU 2017-04 will be effective for us on May 1, 2020, with the option to early adopt for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017, and will require adoption on a prospective basis.
In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740) Intra-Entity Transfers of Assets Other Than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs rather than deferring such recognition until the asset is sold to an outside party. ASU 2016-16 is effective for us on May 1, 2018, and it will require adoption on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We do not anticipate that the adoption of this ASU will have a material impact on our financial statements and disclosures.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments, which will make changes to how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 will be effective for us on May 1, 2018, and it will require adoption on a retrospective basis. We do not anticipate that the adoption of this ASU will have a material impact on the presentation of our financial statements and disclosures.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which will require lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. ASU 2016-02 will be effective for us on May 1, 2019, with the option to early adopt at any time prior to the effective date, and will require a modified retrospective application for leases existing at, or entered into after, the beginning of the earliest comparative period presented and will exclude any leases that expired before the date of initial application. We are currently evaluating the impact the application of ASU 2016-02 will have on our financial statements and disclosures.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 requires either retrospective application to each prior reporting period presented or retrospective application with the cumulative effect of initially applying the standard recognized at the date of adoption. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date, which extends the standard effective date by one year. As a result of this issuance, the standard will be effective for us on May 1, 2018. We have performed a detailed review of the new guidance as compared to our current accounting policies, and a review of customer contracts is nearly complete. To

6



date, we have not identified any accounting changes that would materially impact our results of operations or financial position. During the first half of 2018, we plan to finalize our review and determine our method of adoption.
Note 3: Acquisition
On May 30, 2017, we announced a definitive agreement to acquire the Wesson® oil brand from Conagra Brands, Inc. (“Conagra”). The all-cash transaction, which is expected to be funded primarily with debt, is valued at approximately $285.0, subject to a post-closing working capital adjustment. We anticipate the addition of the Wesson brand will add annual net sales of approximately $230.0.
Following the close of the transaction, Conagra will continue to manufacture products sold under the Wesson brand and provide certain other transition services for up to one year. After the transition period, we expect to consolidate Wesson production into our existing oils manufacturing facility in Cincinnati, Ohio. The closing of the transaction is subject to the fulfillment of customary closing conditions, including receipt of regulatory approvals.
Note 4: Integration and Restructuring Costs
Integration and restructuring costs primarily consist of employee-related costs, outside service and consulting costs, and other costs related to certain acquisition or restructuring activities. Employee-related costs include severance, retention bonuses, and relocation costs. Severance costs and retention bonuses are recognized over the estimated future service period of the affected employees, and relocation costs are expensed as incurred. Other costs include professional fees, information systems costs, and other miscellaneous expenditures associated with the integration or restructuring activities, which are expensed as incurred. These one-time costs are not allocated to segment profit, and the majority of these costs are reported in other special project costs in the Condensed Statements of Consolidated Income. The obligation related to employee separation costs is included in other current liabilities in the Condensed Consolidated Balance Sheets.
Integration Costs: Total one-time costs related to the acquisition of Big Heart Pet Brands (“Big Heart”) at the end of 2015 are anticipated to be approximately $290.0, and will be incurred through 2018. Of the total anticipated one-time costs, we expect to incur $105.0$115.0, and $70.0 in employee-related costs, outside service and consulting costs, and other costs, respectively.
The following table summarizes our one-time costs incurred in relation to the Big Heart acquisition.
 
Three Months Ended July 31,
 
Total Costs Incurred to Date at July 31, 2017
 
2017
 
2016
 
Employee-related costs
$
3.7

 
$
6.9

 
$
85.8

Outside service and consulting costs
5.8

 
6.1

 
111.8

Other costs
1.6

 
7.2

 
58.8

Total one-time costs
$
11.1

 
$
20.2

 
$
256.4

Noncash charges of $1.3 and $5.6 were included in the one-time costs incurred during the three months ended July 31, 2017 and 2016, respectively, and primarily consisted of share-based compensation and accelerated depreciation. Noncash charges included in total one-time costs incurred to date were $29.1. The obligation related to severance costs and retention bonuses was $2.0 and $5.3 at July 31, 2017 and April 30, 2017, respectively.
Restructuring Costs: An organization optimization program was approved by the Board of Directors during the fourth quarter of 2016. Under this program, we identified opportunities to reduce costs and optimize the organization, which we expect to achieve by the end of 2018. Related projects include an organizational redesign and the optimization of our manufacturing footprint. During the third quarter of 2017, we exited two leased facilities in Livermore, California, and consolidated all ancient grains and pasta production into our facility in Chico, California. Additionally, we will consolidate all coffee production at our Harahan, Louisiana, facility into one of our facilities in New Orleans, Louisiana, by December 31, 2017. Upon completion of these initiatives, the organization optimization program will result in total headcount reductions of approximately 275 full-time positions, of which approximately 80 percent were reduced as of July 31, 2017.
Upon completion of this program in 2018, total restructuring costs are expected to be approximately $45.0, of which the majority represents employee-related costs, while the remainder primarily consists of site preparation, equipment relocation, and production start-up costs at the impacted facilities.

7



The following table summarizes our one-time costs incurred in relation to the organization optimization program.
 
Three Months Ended July 31,
 
Total Costs Incurred to Date at July 31, 2017
 
2017
 
2016
 
Employee-related costs
$
10.4

 
$
4.0

 
$
24.1

Outside service and consulting costs
0.1

 
1.1

 
1.9

Other costs
6.2

 
0.9

 
10.6

Total one-time costs
$
16.7

 
$
6.0

 
$
36.6

Noncash charges of $6.1 and $0.9 were included in the one-time costs incurred during the three months ended July 31, 2017 and 2016, respectively, and primarily consisted of accelerated depreciation. Noncash charges included in total one-time costs incurred to date were $8.2. The obligation related to severance costs and retention bonuses was $5.4 and $3.3 at July 31, 2017 and April 30, 2017, respectively.
Note 5: Reportable Segments
We operate in one industry: the manufacturing and marketing of food and beverage products. We have three reportable segments: U.S. Retail Coffee, U.S. Retail Consumer Foods, and U.S. Retail Pet Foods. Within our segment results, International and Away From Home, previously referred to as International and Foodservice, represents a combination of the strategic business areas not included in the U.S. retail market segments. The U.S. Retail Coffee segment primarily includes the domestic sales of Folgers®, Dunkin’ Donuts®, and Café Bustelo® branded coffee; the U.S. Retail Consumer Foods segment primarily includes the domestic sales of Jif®, Smucker’s®, Crisco®, and Pillsbury® branded products; and the U.S. Retail Pet Foods segment primarily includes the domestic sales of Meow Mix®, Milk-Bone®, Natural Balance®, Kibbles ’n Bits®, 9Lives®, Pup-Peroni®, and Nature’s Recipe® branded products. International and Away From Home is comprised of products distributed domestically and in foreign countries through retail channels and foodservice distributors and operators (e.g., restaurants, lodging, schools and universities, health care operators).
Segment profit represents net sales, less direct and allocable operating expenses, and is consistent with the way in which we manage our segments. However, we do not represent that the segments, if operated independently, would report operating profit equal to the segment profit set forth below as segment profit excludes certain expenses such as corporate administrative expenses, amortization expense and impairment charges related to intangible assets, integration and restructuring costs, as well as unallocated gains and losses on commodity and foreign currency exchange derivative activities.
Commodity and foreign currency exchange derivative gains and losses are reported in unallocated derivative gains and losses outside of segment operating results until the related inventory is sold. At that time, we reclassify the hedge gains and losses from unallocated derivative gains and losses to segment profit, allowing our segments to realize the economic effect of the hedge without experiencing any mark-to-market volatility. We would expect that any gain or loss in the estimated fair value of the derivatives would generally be offset by a change in the estimated fair value of the underlying exposures.

8



 
Three Months Ended July 31,
 
2017
 
2016
Net sales:
 
 
 
U.S. Retail Coffee
$
480.8

 
$
513.3

U.S. Retail Consumer Foods
492.4

 
537.0

U.S. Retail Pet Foods
521.7

 
519.5

International and Away From Home
254.0

 
246.0

Total net sales
$
1,748.9

 
$
1,815.8

Segment profit:
 
 
 
U.S. Retail Coffee
$
123.8

 
$
173.8

U.S. Retail Consumer Foods
110.9

 
111.4

U.S. Retail Pet Foods
98.3

 
122.2

International and Away From Home
38.3

 
39.5

Total segment profit
$
371.3

 
$
446.9

Amortization
(51.5
)
 
(51.7
)
Interest expense – net
(42.0
)
 
(41.5
)
Unallocated derivative gains (losses)
12.6

 
7.7

Cost of products sold – special project costs (A)
(0.7
)
 
(4.0
)
Other special project costs (A)
(27.1
)
 
(22.2
)
Corporate administrative expenses
(70.8
)
 
(82.9
)
Other income (expense) – net
(2.8
)
 
1.1

Income before income taxes
$
189.0

 
$
253.4

(A)
Special project costs includes integration and restructuring costs. For more information, see Note 4: Integration and Restructuring Costs.
Note 6: Earnings per Share
The following table sets forth the computation of net income per common share and net income per common share – assuming dilution under the two-class method.
 
Three Months Ended July 31,
 
2017
 
2016
Net income
$
126.8

 
$
170.0

Less: Net income allocated to participating securities
0.6

 
0.8

Net income allocated to common stockholders
$
126.2

 
$
169.2

Weighted-average common shares outstanding
112.9

 
115.8

Add: Dilutive effect of stock options
0.1

 
0.1

Weighted-average common shares outstanding – assuming dilution
113.0

 
115.9

Net income per common share
$
1.12

 
$
1.46

Net income per common share – assuming dilution
$
1.12

 
$
1.46


9



Note 7: Debt and Financing Arrangements
Long-term debt consists of the following:
 
July 31, 2017
 
April 30, 2017
 
Principal
Outstanding
 
Carrying
Amount (A)
 
Principal
Outstanding
 
Carrying
Amount (A)
1.75% Senior Notes due March 15, 2018
$
500.0

 
$
499.3

 
$
500.0

 
$
499.0

2.50% Senior Notes due March 15, 2020
500.0

 
496.9

 
500.0

 
496.6

3.50% Senior Notes due October 15, 2021
750.0

 
780.8

 
750.0

 
782.6

3.00% Senior Notes due March 15, 2022
400.0

 
396.8

 
400.0

 
396.6

3.50% Senior Notes due March 15, 2025
1,000.0

 
993.8

 
1,000.0

 
993.6

4.25% Senior Notes due March 15, 2035
650.0

 
642.8

 
650.0

 
642.6

4.38% Senior Notes due March 15, 2045
600.0

 
585.0

 
600.0

 
584.9

Term Loan Credit Agreement due March 23, 2020
550.0

 
548.7

 
550.0

 
548.6

Total long-term debt
$
4,950.0

 
$
4,944.1

 
$
4,950.0

 
$
4,944.5

Current portion of long-term debt
500.0

 
499.3

 
500.0

 
499.0

Total long-term debt, less current portion
$
4,450.0

 
$
4,444.8

 
$
4,450.0

 
$
4,445.5

 
(A)
Represents the carrying amount included in the Condensed Consolidated Balance Sheets, which includes the impact of terminated interest rate swaps, offering discounts, and capitalized debt issuance costs.
In June 2017, we entered into a treasury lock, with a notional value of $300.0, to manage our exposure to interest rate volatility associated with anticipated debt financing in 2018. This interest rate contract is designated as a cash flow hedge, and as a result, the mark-to-market gains or losses on the contract are deferred and included as a component of accumulated other comprehensive income (loss) to the extent effective, and reclassified to interest expense in the period during which the hedged transaction affects earnings. At July 31, 2017, an unrealized gain of $2.5 was deferred in accumulated other comprehensive income (loss) for this derivative instrument. For additional information, see Note 9: Derivative Financial Instruments.
In March 2015, we entered into a senior unsecured delayed-draw Term Loan Credit Agreement (“Term Loan”) with a syndicate of banks and an available commitment amount of $1.8 billion. Borrowings under the Term Loan bear interest on the prevailing U.S. Prime Rate or London Interbank Offered Rate (“LIBOR”), based on our election, and is payable either on a quarterly basis or at the end of the borrowing term. The weighted-average interest rate on the Term Loan at July 31, 2017, was 2.48 percent. The Term Loan requires quarterly amortization payments of 2.50 percent of the original principal amount. Voluntary prepayments are permitted without premium or penalty and are applied to the schedule of required quarterly minimum payment obligations in direct order of maturity. As of July 31, 2017, we have prepaid $1.2 billion on the Term Loan to date. No payments were made in the first quarter of 2018, and no additional payments are required until final maturity of the loan agreement on March 23, 2020.
Also in March 2015, we completed an offering of $3.7 billion in Senior Notes due beginning March 15, 2018 through March 15, 2045. The proceeds from the offering, along with the Term Loan, were used to partially finance the Big Heart acquisition, pay off the debt assumed as part of the acquisition, and prepay our privately placed Senior Notes.
All of our Senior Notes outstanding at July 31, 2017, are unsecured and fully and unconditionally guaranteed, as further described in Note 15: Guarantor and Non-Guarantor Financial Information. Interest is paid semiannually and there are no required scheduled principal payments on our Senior Notes. We may prepay at any time all or part of the Senior Notes at 100 percent of the principal amount thereof, together with the accrued and unpaid interest, and any applicable make-whole amount.
During 2014, we entered into an interest rate swap designated as a fair value hedge of the 3.50 percent Senior Notes due October 15, 2021, which was subsequently terminated in 2015. At July 31, 2017, the remaining benefit of $34.4 was recorded as an increase in the long-term debt balance and will be recognized ratably as a reduction to future interest expense over the remaining life of the related debt. For additional information, see Note 9: Derivative Financial Instruments.
We have available a $1.5 billion revolving credit facility with a group of 11 banks that matures in September 2018. Borrowings under the revolving credit facility bear interest based on the prevailing U.S. Prime Rate, Canadian Base Rate, LIBOR, or Canadian Dealer Offered Rate, based on our election. Interest is payable either on a quarterly basis or at the end of the borrowing term. We did not have a balance outstanding under the revolving credit facility at July 31, 2017 and April 30, 2017.

10



We participate in a commercial paper program under which we can issue short-term, unsecured commercial paper not to exceed $1.0 billion at any time. The commercial paper program is backed by our revolving credit facility and reduces what we can borrow under the revolving credit facility by the amount of commercial paper outstanding. Commercial paper will be used as a continuing source of short-term financing for general corporate purposes. As of July 31, 2017 and April 30, 2017, we had $283.9 and $454.0 of short-term borrowings outstanding, respectively, which were issued under our commercial paper program at weighted-average interest rates of 1.42 percent and 1.15 percent, respectively.
Interest paid totaled $4.6 and $3.6 for the three months ended July 31, 2017 and 2016, respectively. This differs from interest expense due to the timing of payments, effect of interest rate contracts, amortization of debt issuance costs, and capitalized interest.
Our debt instruments contain certain financial covenant restrictions, including a leverage ratio and an interest coverage ratio. We are in compliance with all covenants.
Note 8: Pensions and Other Postretirement Benefits
The components of our net periodic benefit cost for defined benefit pension and other postretirement benefit plans are
shown below.
 
Three Months Ended July 31,
 
Defined Benefit Pension Plans
 
Other Postretirement Benefits
 
2017
 
2016
 
2017
 
2016
Service cost
$
1.7

 
$
4.1

 
$
0.5

 
$
0.6

Interest cost
5.4

 
6.7

 
0.5

 
0.7

Expected return on plan assets
(7.2
)
 
(7.3
)
 

 

Amortization of net actuarial loss (gain)
2.9

 
3.7

 
(0.1
)
 

Amortization of prior service cost (credit)
0.2

 
0.3

 
(0.3
)
 
(0.4
)
Settlement loss

 
0.1

 

 

Net periodic benefit cost
$
3.0

 
$
7.6

 
$
0.6

 
$
0.9


As of April 30, 2017, we changed the approach utilized to estimate the service and interest cost components of net periodic benefit cost for our defined benefit pension and other postretirement benefit plans. Historically, we estimated the service and interest cost components using a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. As of April 30, 2017, we utilized a spot rate approach for the estimation of service and interest cost for our plans by applying specific spot rates along the yield curve to the relevant projected cash flows, to provide a better estimate of service and interest costs. This approach does not affect the measurement of the total benefit obligations, and has been accounted for as a change in estimate that is effected by a change in accounting principle. As such, we accounted for this change in methodology on a prospective basis beginning May 1, 2017. Service and interest costs on the obligation are expected to be $4.3 lower in 2018, primarily related to the defined benefit pension plans, as a result of using the spot rate approach compared to the historical approach.

During the first quarter of 2017, we announced our plans to harmonize our retirement benefits and freeze our non-union U.S. defined benefit pension plans by December 31, 2017. The amendments resulted in an immaterial net settlement loss and a decrease in accumulated other comprehensive income (loss) of $25.2 at July 31, 2016. Upon completion of the plan changes by the end of the calendar year, we expect to realize additional future savings as a result of the plan changes.
Note 9: Derivative Financial Instruments
We are exposed to market risks, such as changes in commodity prices, foreign currency exchange rates, and interest rates. To manage the volatility related to these exposures, we enter into various derivative transactions. We have policies in place that define acceptable instrument types we may enter into and establish controls to limit our market risk exposure.
Commodity Price Management: We enter into commodity derivatives to manage the price volatility and reduce the variability of future cash flows related to anticipated inventory purchases of key raw materials, notably green coffee, edible oils, corn, wheat, and soybean meal. We also enter into commodity derivatives to manage price risk for energy input costs, including diesel fuel and natural gas. Our derivative instruments generally have maturities of less than one year.


11



We do not qualify commodity derivatives for hedge accounting treatment and, as a result, the derivative gains and losses are immediately recognized in earnings. Although we do not perform the assessments required to achieve hedge accounting for derivative positions, we believe all of our commodity derivatives are economic hedges of our risk exposure.
The commodities hedged have a high inverse correlation to price changes of the derivative commodity instrument. Thus, we would expect that over time any gain or loss in the estimated fair value of the derivatives would generally be offset by an increase or decrease in the estimated fair value of the underlying exposures.
Foreign Currency Exchange Rate Hedging: We utilize foreign currency derivatives to manage the effect of foreign currency exchange fluctuations on future cash payments primarily related to purchases of certain raw materials and finished goods. The contracts generally have maturities of less than one year. We do not qualify instruments used to manage foreign currency exchange exposures for hedge accounting treatment.
Interest Rate Hedging: We utilize derivative instruments to manage changes in the fair value of our debt. Interest rate contracts mitigate the risk associated with the underlying hedged item. At the inception of the contract, the instrument is evaluated and documented for hedge accounting treatment. If the contract is designated as a cash flow hedge, the mark-to-market gains or losses on the contract are deferred and included as a component of accumulated other comprehensive income (loss) to the extent effective, and reclassified to interest expense in the period during which the hedged transaction affects earnings. If the contract is designated as a fair value hedge, the contract is recognized at fair value on the balance sheet and changes in the fair value are recognized in interest expense. Generally, changes in the fair value of the contract are equal to changes in the fair value of the underlying debt and have no impact on earnings.
In June 2017, we entered into a treasury lock, with a notional value of $300.0, to manage our exposure to interest rate volatility associated with anticipated debt financing in 2018. This interest rate contract is designated as a cash flow hedge, and as a result, an unrealized gain of $2.5 was deferred in accumulated other comprehensive income (loss) at July 31, 2017.
In 2015, we terminated the interest rate swap on the 3.50 percent Senior Notes due October 15, 2021, which was designated as a fair value hedge and used to hedge against the changes in the fair value of the debt. As a result of the early termination, we received $58.1 in cash, which included $4.6 of accrued and prepaid interest. The gain on termination was deferred and is being recognized over the remaining life of the underlying debt as a reduction of interest expense. To date, we have recognized $19.1, of which $1.9 was recognized during the three months ended July 31, 2017. The remaining gain will be recognized as follows: $5.9 through the remainder of 2018, $8.0 in 2019, $8.1 in 2020, $8.4 in 2021, and $4.0 in 2022. For additional information, see Note 7: Debt and Financing Arrangements.
The following tables set forth the gross fair value amounts of derivative instruments recognized in the Condensed Consolidated Balance Sheets.
 
July 31, 2017
 
Other
Current
Assets
 
Other
Current
Liabilities
 
Other
Noncurrent
Assets
 
Other
Noncurrent
Liabilities
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
Interest rate contract
$
2.5

 
$

 
$

 
$

Total derivatives designated as hedging instruments
$
2.5

 
$

 
$

 
$

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
Commodity contracts
$
16.7

 
$
5.8

 
$

 
$

Foreign currency exchange contracts
0.4

 
7.3

 

 

Total derivatives not designated as hedging instruments
$
17.1

 
$
13.1

 
$

 
$

Total derivative instruments
$
19.6

 
$
13.1

 
$

 
$

 
April 30, 2017
 
Other
Current
Assets
 
Other
Current
Liabilities
 
Other
Noncurrent
Assets
 
Other
Noncurrent
Liabilities
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
Commodity contracts
$
5.2

 
$
21.2

 
$

 
$

Foreign currency exchange contracts
3.2

 
0.1

 

 

Total derivative instruments
$
8.4

 
$
21.3

 
$

 
$


12



We have elected to not offset fair value amounts recognized for our exchange-traded commodity derivative instruments and our cash margin accounts executed with the same counterparty that are generally subject to enforceable netting agreements. We are required to maintain cash margin accounts in connection with funding the settlement of our open positions. At July 31, 2017 and April 30, 2017, we maintained cash margin account balances of $10.4 and $41.8, respectively, included in other current assets in the Condensed Consolidated Balance Sheets. The change in the cash margin account balances is included in other – net, investing activities in the Condensed Statements of Consolidated Cash Flows. In the event of default and immediate net settlement of all of our open positions with individual counterparties, all of our derivative liabilities would be fully offset by either our derivative asset positions or margin accounts based on the net asset or liability position with our individual counterparties.
During the three-month period ended July 31, 2017, an unrealized gain of $2.5 was deferred in accumulated other comprehensive income (loss) for the interest rate contract entered into in June 2017. During both of the three-month periods ended July 31, 2017 and 2016, we recognized $0.1 in pre-tax losses related to the termination of prior interest rate swaps. Included as a component of accumulated other comprehensive income (loss) at July 31, 2017 and April 30, 2017, were deferred net pre-tax losses of $4.4 and $7.0, respectively, related to the active and terminated interest rate contracts. The related net tax benefit recognized in accumulated other comprehensive income (loss) was $1.6 and $2.6 at July 31, 2017 and April 30, 2017, respectively. Approximately $0.5 of the net pre-tax loss will be recognized over the next 12 months primarily related to the terminated interest rate swaps.
The following table presents the net gains and losses recognized in cost of products sold on derivatives not designated as hedging instruments.
 
Three Months Ended 
 July 31,
 
2017
 
2016
Gains (losses) on commodity contracts
$
16.4

 
$
(7.8
)
Gains (losses) on foreign currency exchange contracts
(9.5
)
 
5.8

Total gains (losses) recognized in cost of products sold
$
6.9

 
$
(2.0
)
Commodity and foreign currency exchange derivative gains and losses are reported in unallocated derivative gains and losses outside of segment operating results until the related inventory is sold. At that time, we reclassify the hedge gains and losses from unallocated derivative gains and losses to segment profit, allowing our segments to realize the economic effect of the hedge without experiencing any mark-to-market volatility. The following table presents the activity in unallocated derivative gains and losses.
 
Three Months Ended 
 July 31,
 
2017
 
2016
Net gains (losses) on mark-to-market valuation of unallocated derivative positions
$
6.9

 
$
(2.0
)
Net losses (gains) on derivative positions reclassified to segment operating profit
5.7

 
9.7

Unallocated derivative gains (losses)
$
12.6

 
$
7.7

The net cumulative unallocated derivative losses at July 31, 2017 and April 30, 2017, were $23.0 and $35.6, respectively.
The following table presents the gross contract notional value of outstanding derivative contracts.
 
July 31, 2017
 
April 30, 2017
Commodity contracts
$
521.9

 
$
704.9

Foreign currency exchange contracts
206.6

 
195.4

Interest rate contract
300.0

 

Note 10: Other Financial Instruments and Fair Value Measurements
Financial instruments, other than derivatives, that potentially subject us to significant concentrations of credit risk consist principally of cash investments, short-term borrowings, and trade receivables. The carrying value of these financial instruments approximates fair value. Our remaining financial instruments, with the exception of long-term debt, are recognized at estimated fair value in the Condensed Consolidated Balance Sheets.

13



The following table provides information on the carrying amounts and fair values of our financial instruments.
 
July 31, 2017
 
April 30, 2017
 
Carrying
Amount
 
Fair Value
 
Carrying
Amount
 
Fair Value
Marketable securities and other investments
$
47.4

 
$
47.4

 
$
47.3

 
$
47.3

Derivative financial instruments – net
6.5

 
6.5

 
(12.9
)
 
(12.9
)
Long-term debt
(4,944.1
)
 
(5,087.7
)
 
(4,944.5
)
 
(5,023.8
)
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions.
The following tables summarize the fair values and the levels within the fair value hierarchy in which the fair value measurements fall for our financial instruments.
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Fair Value at
July 31, 2017
Marketable securities and other investments: (A)
 
 
 
 
 
 
 
Equity mutual funds
$
11.7

 
$

 
$

 
$
11.7

Municipal obligations

 
34.9

 

 
34.9

Money market funds
0.8

 

 

 
0.8

Derivative financial instruments: (B)
 
 
 
 
 
 
 
Commodity contracts – net
10.1

 
0.8

 

 
10.9

Foreign currency exchange contracts – net
(0.9
)
 
(6.0
)
 

 
(6.9
)
Interest rate contract

 
2.5

 

 
2.5

Long-term debt (C)
(4,537.1
)
 
(550.6
)
 

 
(5,087.7
)
Total financial instruments measured at fair value
$
(4,515.4
)
 
$
(518.4
)
 
$

 
$
(5,033.8
)
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Fair Value at
April 30, 2017
Marketable securities and other investments: (A)
 
 
 
 
 
 
 
Equity mutual funds
$
1.1

 
$

 
$

 
$
1.1

Municipal obligations

 
34.7

 

 
34.7

Money market funds
11.5

 

 

 
11.5

Derivative financial instruments: (B)
 
 
 
 
 
 
 
Commodity contracts – net
(15.8
)
 
(0.2
)
 

 
(16.0
)
Foreign currency exchange contracts – net
0.3

 
2.8

 

 
3.1

Long-term debt (C)
(4,473.2
)
 
(550.6
)
 

 
(5,023.8
)
Total financial instruments measured at fair value
$
(4,476.1
)
 
$
(513.3
)
 
$

 
$
(4,989.4
)
 
(A)
Marketable securities and other investments consist of funds maintained for the payment of benefits associated with nonqualified retirement plans. The funds include equity securities listed in active markets, municipal obligations valued by a third party using valuation techniques that utilize inputs that are derived principally from or corroborated by observable market data, and money market funds with maturities of three months or less. Based on the short-term nature of these money market funds, carrying value approximates fair value. As of July 31, 2017, our municipal obligations are scheduled to mature as follows: $0.6 in 2018, $2.3 in 2019, $2.1 in 2020, $5.1 in 2021, and the remaining $24.8 in 2022 and beyond.
(B)
Level 1 commodity and foreign currency exchange derivatives are valued using quoted market prices for identical instruments in active markets. Level 2 commodity and foreign currency exchange derivatives are valued using quoted prices for similar assets or liabilities in active markets. The Level 2 interest rate contract is valued using standard valuation techniques, the income approach, and observable Level 2 market expectations at the measurement date to convert future amounts to a single discounted present value. Level 2 inputs for the interest rate contract valuation are

14



limited to prices that are observable for the asset or liability. For additional information, see Note 9: Derivative Financial Instruments.
(C)
Long-term debt is comprised of public Senior Notes classified as Level 1 and the Term Loan classified as Level 2. The public Senior Notes are traded in an active secondary market and valued using quoted prices. The value of the Term Loan is based on the net present value of each interest and principal payment calculated, utilizing an interest rate derived from an estimated yield curve obtained from independent pricing sources for similar types of term loan borrowing arrangements. For additional information, see Note 7: Debt and Financing Arrangements.
Note 11: Income Taxes
During the three-month periods ended July 31, 2017 and July 31, 2016, the effective tax rate varied from the U.S. statutory income tax rate primarily due to the domestic manufacturing deduction, offset by state income taxes.
Within the next 12 months, it is reasonably possible that we could decrease our unrecognized tax benefits by an additional $6.7, primarily as a result of expiring statute of limitations periods.
Note 12: Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss), including the reclassification adjustments for items that are reclassified from accumulated other comprehensive income (loss) to net income, are shown below.
 
Foreign
Currency
Translation
Adjustment
 
Net Gains (Losses)
on Cash Flow
Hedging
Derivatives (A)
 
Pension and
Other
Postretirement
Liabilities (B)
 
Unrealized Gain
on Available-
for-Sale
Securities
 
Accumulated
Other
Comprehensive
Income (Loss)
Balance at May 1, 2017
$
(43.0
)
 
$
(4.4
)
 
$
(100.0
)
 
$
4.0

 
$
(143.4
)
Reclassification adjustments

 
0.1

 
0.1

 

 
0.2

Current period credit (charge)
35.0

 
2.5

 

 
0.4

 
37.9

Income tax benefit (expense)

 
(1.0
)
 
(0.3
)
 
(0.1
)
 
(1.4
)
Balance at July 31, 2017
$
(8.0
)
 
$
(2.8
)
 
$
(100.2
)
 
$
4.3

 
$
(106.7
)
 
Foreign
Currency
Translation
Adjustment
 
Net Gains (Losses)
on Cash Flow
Hedging
Derivatives (A)
 
Pension and
Other
Postretirement
Liabilities (B)
 
Unrealized Gain
on Available-
for-Sale
Securities
 
Accumulated
Other
Comprehensive
Income (Loss)
Balance at May 1, 2016
$
(13.1
)
 
$
(4.8
)
 
$
(134.1
)
 
$
3.6

 
$
(148.4
)
Reclassification adjustments

 
0.1

 
5.0

 

 
5.1

Current period credit (charge)
(15.0
)
 

 
21.8

 
0.3

 
7.1

Income tax benefit (expense)

 

 
(9.6
)
 
(0.1
)
 
(9.7
)
Balance at July 31, 2016
$
(28.1
)
 
$
(4.7
)
 
$
(116.9
)
 
$
3.8

 
$
(145.9
)
 
(A)
The reclassification from accumulated other comprehensive income (loss) to interest expense was related to the termination of prior interest rate swaps. The current period credit relates to the unrealized gain on the interest rate contract entered into in June 2017. For additional information, see Note 9: Derivative Financial Instruments.
(B)
Amortization of net losses was reclassified from accumulated other comprehensive income (loss) to selling, distribution, and administrative expenses.
Note 13: Contingencies
We, like other food manufacturers, are from time to time subject to various administrative, regulatory, and other legal proceedings arising in the ordinary course of business. We are currently a defendant in a variety of such legal proceedings. We cannot predict with certainty the ultimate results of these proceedings or reasonably determine a range of potential loss. Our policy is to accrue losses for contingent liabilities when such liabilities are probable and amounts can be reasonably estimated. Based on the information known to date, we do not believe the final outcome of these proceedings will have a material adverse effect on our financial position, results of operations, or cash flows.

15



Note 14: Common Shares
The following table sets forth common share information.
 
July 31, 2017
 
April 30, 2017
Common shares authorized
300.0

 
300.0

Common shares outstanding
113.6

 
113.4

Treasury shares
32.9

 
33.1

Share repurchases during the first quarter of 2018 consisted of shares repurchased from stock plan recipients in lieu of cash payments. We did not repurchase any common shares during the first quarter of 2018 under a repurchase plan authorized by the Board of Directors (“Board”). At July 31, 2017, we had approximately 3.6 million common shares available for repurchase pursuant to the Boards' authorizations.
Note 15: Guarantor and Non-Guarantor Financial Information
Our Senior Notes are fully and unconditionally guaranteed, on a joint and several basis, by J.M. Smucker LLC and The Folgers Coffee Company (the “subsidiary guarantors”), which are 100 percent wholly-owned subsidiaries of the Company. A subsidiary guarantor will be released from its obligations under the indentures governing the notes (a) with respect to each series of notes, if we exercise our legal or covenant defeasance option with respect to such series of notes or if our obligations under an indenture are discharged in accordance with the terms of such indenture in respect of such series of notes; (b) with respect to all series of notes issued in March 2015, upon the issuance, sale, exchange, transfer, or other disposition (including through merger, consolidation, amalgamation, or otherwise) of the capital stock of the applicable subsidiary guarantor (including any issuance, sale, exchange, transfer, or other disposition following which the applicable subsidiary guarantor is no longer a subsidiary) if such issuance, sale, exchange, transfer, or other disposition is made in a manner not in violation of the indenture in respect of such series of notes; or (c) with respect to all series of notes, upon the substantially simultaneous release or discharge of the guarantee by such subsidiary guarantor of all of our primary senior indebtedness other than through discharges as a result of payment by such guarantor on such guarantees.
Condensed consolidating financial statements for the Company, the subsidiary guarantors, and the other subsidiaries of the Company that are not guaranteeing the indebtedness under the Senior Notes (the “non-guarantor subsidiaries”) are provided below. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions, including transactions with our 100 percent wholly-owned subsidiary guarantors and non-guarantor subsidiaries. We have accounted for investments in subsidiaries using the equity method.
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME                                                         
Three Months Ended July 31, 2017
 
The J.M. Smucker
Company (Parent)
 
Subsidiary
Guarantors
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$
645.5

 
$
276.1

 
$
2,243.2

 
$
(1,415.9
)
 
$
1,748.9

Cost of products sold
518.8

 
250.1

 
1,736.6

 
(1,418.7
)
 
1,086.8

Gross Profit
126.7

 
26.0

 
506.6

 
2.8

 
662.1

Selling, distribution, and administrative expenses
   and other special project costs
86.0

 
10.2

 
281.1

 

 
377.3

Amortization
3.0

 

 
48.5

 

 
51.5

Other operating expense (income) – net
(0.1
)
 
0.2

 
(0.6
)
 

 
(0.5
)
Operating Income
37.8

 
15.6

 
177.6

 
2.8

 
233.8

Interest income (expense) – net
(42.3
)
 
0.3

 

 

 
(42.0
)
Other income (expense) – net
4.7

 

 
(7.5
)
 

 
(2.8
)
Equity in net earnings of subsidiaries
127.7

 
32.2

 
15.7

 
(175.6
)
 

Income Before Income Taxes
127.9

 
48.1

 
185.8

 
(172.8
)
 
189.0

Income taxes
1.1

 
0.1

 
61.0

 

 
62.2

Net Income
$
126.8

 
$
48.0

 
$
124.8

 
$
(172.8
)
 
$
126.8

Other comprehensive income (loss), net of tax
36.7

 
0.3

 
33.4

 
(33.7
)
 
36.7

Comprehensive Income
$
163.5

 
$
48.3

 
$
158.2

 
$
(206.5
)
 
$
163.5



16



CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME                                                         
Three Months Ended July 31, 2016
 
The J.M. Smucker
Company (Parent)
 
Subsidiary
Guarantors
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$
976.0

 
$
310.6

 
$
2,599.9

 
$
(2,070.7
)
 
$
1,815.8

Cost of products sold
806.6

 
279.9

 
2,062.1

 
(2,055.5
)
 
1,093.1

Gross Profit
169.4

 
30.7

 
537.8

 
(15.2
)
 
722.7

Selling, distribution, and administrative expenses
   and other special project costs
84.9

 
10.1

 
283.2

 

 
378.2

Amortization
2.5

 

 
49.2

 

 
51.7

Other operating expense (income) – net
0.2

 

 
(1.2
)
 

 
(1.0
)
Operating Income
81.8

 
20.6

 
206.6

 
(15.2
)
 
293.8

Interest income (expense) – net
(41.7
)
 
0.3

 
(0.1
)
 

 
(41.5
)
Other income (expense) – net
2.1

 
0.1

 
(1.1
)
 

 
1.1

Equity in net earnings of subsidiaries
134.5

 
34.9

 
20.7

 
(190.1
)
 

Income Before Income Taxes
176.7

 
55.9

 
226.1

 
(205.3
)
 
253.4

Income taxes
6.7

 
0.1

 
76.6

 

 
83.4

Net Income
$
170.0

 
$
55.8

 
$
149.5

 
$
(205.3
)
 
$
170.0

Other comprehensive income (loss), net of tax
2.5

 
0.3

 
(13.5
)
 
13.2

 
2.5

Comprehensive Income
$
172.5

 
$
56.1

 
$
136.0

 
$
(192.1
)
 
$
172.5


CONDENSED CONSOLIDATING BALANCE SHEETS
July 31, 2017
 
The J.M. Smucker
Company (Parent)
 
Subsidiary
Guarantors
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
Current Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
10.9

 
$

 
$
172.3

 
$

 
$
183.2

Inventories

 
149.7

 
828.8

 
2.8

 
981.3

Other current assets
477.5

 
8.4

 
54.9

 
(13.2
)
 
527.6

Total Current Assets
488.4

 
158.1

 
1,056.0

 
(10.4
)
 
1,692.1

Property, Plant, and Equipment – Net
308.5

 
564.8

 
722.4

 

 
1,595.7

Investments in Subsidiaries
15,731.5

 
4,497.1

 
419.0

 
(20,647.6
)
 

Intercompany Receivable

 
525.3

 
2,266.1

 
(2,791.4
)
 

Other Noncurrent Assets
 
 
 
 
 
 
 
 
 
Goodwill
1,494.8

 

 
4,597.3

 

 
6,092.1

Other intangible assets – net
414.6

 

 
5,689.7

 

 
6,104.3

Other noncurrent assets
59.5

 
11.4

 
86.5

 

 
157.4

Total Other Noncurrent Assets
1,968.9

 
11.4

 
10,373.5

 

 
12,353.8

Total Assets
$
18,497.3

 
$
5,756.7

 
$
14,837.0

 
$
(23,449.4
)
 
$
15,641.6

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
Current Liabilities
$
1,264.1

 
$
101.7

 
$
398.3

 
$
(13.2
)
 
$
1,750.9

Noncurrent Liabilities
 
 
 
 
 
 
 
 
 
Long-term debt, less current portion
4,444.8

 

 

 

 
4,444.8

Deferred income taxes
46.5

 

 
2,123.6

 

 
2,170.1

Intercompany payable
5,506.3

 

 

 
(5,506.3
)
 

Other noncurrent liabilities
303.7

 
15.1

 
25.1

 

 
343.9

Total Noncurrent Liabilities
10,301.3

 
15.1

 
2,148.7

 
(5,506.3
)
 
6,958.8

Total Liabilities
11,565.4

 
116.8

 
2,547.0

 
(5,519.5
)
 
8,709.7

Total Shareholders’ Equity
6,931.9

 
5,639.9

 
12,290.0

 
(17,929.9
)
 
6,931.9

Total Liabilities and Shareholders’ Equity
$
18,497.3

 
$
5,756.7

 
$
14,837.0

 
$
(23,449.4
)
 
$
15,641.6


17



CONDENSED CONSOLIDATING BALANCE SHEETS
April 30, 2017
 
The J.M. Smucker
Company (Parent)
 
Subsidiary
Guarantors
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
Current Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
8.5

 
$

 
$
158.3

 
$

 
$