Why We Are,
Who We Are...
Our Culture
A culture of dotting the i’s and
crossing the t’s…
Of doing the right things and
doing things right…
A culture of growth –
individual and as a company.
It’s who we are. It’s because of who we are.
It’s a result of living our Basic Beliefs…
Our Commitment to Each Other.
To our consumers and to our customers.
As we look to the future of
unlimited possibilities,
we recognize the principles that are
instrumental to our success…
A culture deeply rooted in our
Basic Beliefs…
Guideposts for decisions at every level…
Why we are who we are.
A culture that encourages commitment
to each other…
Clear communication and collaboration…
Vision…A culture of appreciation.
A family-sense of sharing in a
job well done…
Where every person makes a difference.
our Brands
For more than 115 years, The J. M. Smucker Company
has been committed to offering consumers quality
products that help bring families together to share
memorable meals and moments.
Knott’s Buff
Black
PMS 871
Our PurPOse
Helping to bring families together to
share memorable meals and moments.
Contents
U.S. Retail Coffee 6 | U.S. Retail Consumer Foods 10 | International, Foodservice,
and Natural Foods 14 | Sustainability at Smucker 18 | Financial Review 21
Management’s Discussion and Analysis 24 | Consolidated Financial Statements 41
Notes to Consolidated Financial Statements 46
Our family of brands
We are honored to own and market trusted
iconic food brands and greatly appreciate
consumers including our portfolio of products
as part of their family meals.
2 The J. M. Smucker Company
Dear ShareholDerS anD FrienDS,
We are privileged to be a part of the vitally important
food industry. Our family of nearly 5,000 employees
recognizes we can have a positive and meaningful
impact on society through our continued focus on
Our Purpose of helping to bring families together to
share memorable meals and moments.
We are honored that consumers choose our iconic
brands and portfolio of trusted products as part of their
everyday meals, snacks shared with friends, and family
celebrations. It is through these times that we connect
with each other, nurture relationships, build meaningful
traditions, and create lasting bonds with those most
special to us.
At Smucker, we have always believed that how we do
things is as important as what we do, and by seeking to
fulfill Our Purpose, sales and earnings will follow. Our
shared Purpose, combined with the implementation of
our clear Strategy, enables us to best serve our constituents
and has ensured that we continue to deliver strong results,
as we delivered record sales, earnings, and cash flow in
fiscal 2013.
These innovative offerings include our Folgers Gourmet
Selections ® and Millstone® K-Cup® pack product lines,
which generated sales of nearly $290 million in fiscal 2013. In addition, Folgers® Fresh Breaks®, a premium,
single-serve instant coffee with a more roast-and-ground taste; Jif ® Hazelnut, our first specialty nut spread offering;
new Pillsbury ® seasonal baking products; new Dunkin’
Donuts® seasonal coffee flavors; and a line of Smucker’s ®
Natural fruit spreads were introduced.
We also have a robust innovation lineup heading into
fiscal 2014. We look forward to introducing the Dunkin’
Donuts ® Bakery Series™ of flavored coffees, the 100 percent
UTZ Certified premium coffee line under the Life is good®
brand, and expanding our presence in the peanut butter
and specialty nut butter segment through Jif Whips and
Jif Almond and Jif Cashew butters. The success of our product innovations is the result of a strong commitment to quality and innovative marketing
programs. Our marketing initiatives strive to connect with
consumers at the right time and where they are, which is
increasingly online. Digital efforts make up approximately
15 percent of our total U.S. Retail marketing spending.
Among the highlights of our record fiscal year:
• Net sales were up 7 percent to $5.9 billion.
• Non-GAAP earnings per share rose 14 percent to $5.37.
• Cash generated from operations increased 17 percent to $856 million, with free cash flow increasing to almost $650 million.
• We repurchased nearly 4 percent of our shares, utilizing nearly $360 million in cash.
• The annual dividend paid per share increased approximately 9 percent.
These results were achieved while introducing a number of innovative new products, successfully capitalizing
on new businesses, and making significant investments
toward our future growth.
Innovating for Consumers
Our commitment to innovation allows us to continue
to meet the ever-changing needs of consumers. New products introduced in the past three years delivered
net sales of $530 million in fiscal 2013. This includes more than 60 new products launched in fiscal 2012 and 70 new products in fiscal 2013. 4 The J. M. Smucker Company
Traditional marketing vehicles, such as television advertising, consumer promotions, and sponsorships,
remain a strong focus as well. Twenty-five new television commercials were developed in fiscal 2013. An exciting
new marketing initiative is the sponsorship of the 2014 Winter and 2016 Summer U.S. Olympic and Paralympic teams. We are honored to be associated with, and help
support, the dreams of U.S. athletes. Related initiatives
will span TV advertising, retailer and consumer promotions, product packaging, and digital support behind
our participating brands – Folgers, Jif, Smucker’s, and
Smucker’s ® Uncrustables ®.
Investing in Our Future
Our record financial results were achieved while also
making significant investments toward future growth at
our manufacturing facilities and within our supply chain.
Restructuring of coffee and fruit spreads operations was
largely completed in fiscal 2013, with a goal of making
us as efficient and agile as possible. This restructuring is expected to yield $60 million in run-rate savings in fiscal 2014 and is on track to achieve the full $70 million in fiscal 2015.
financial highlights
(Dollars in millions, except per share data)
Net sales
Net income and net income per common share:
Net income
Net income per common share – assuming dilution
Income and income per common share excluding special project costs:(1)
Income
Income per common share – assuming dilution
Common shares outstanding at year end
Number of employees
2013
$ 5,897.7
Year Ended April 30,
2012
$5,525.8
$ 544.2
$ 5.00
$ 459.7
$ 4.06
$ 584.8
$ 5.37
106,486,935
4,875
$ 535.6
$ 4.73
110,284,715
4,850
(1) Refer to “Non-GAAP Measures” located on page 32 in the “Management’s Discussion and Analysis” section for a reconciliation to the comparable GAAP financial measure.
Acquisitions have also been proven strategic growth
drivers that have contributed to sustained growth in
recent years. We spent much of fiscal 2013 integrating
the Sara Lee foodservice coffee and hot beverage
business — that was acquired in January 2012.
Our achievements demonstrate that our commitment
to “doing the right things and doing things right” as we
seek to fulfill Our Purpose benefits all our constituents —
consumers, customers, employees, suppliers, communities,
and shareholders.
The Sara Lee foodservice coffee and hot beverage acquisition has provided the scale necessary for our
Foodservice business to generate additional opportunities.
One of these is a multiyear licensing and distribution
agreement with Cumberland Packing Corp. for its line of tabletop sweeteners including Sweet’N Low ® and
Sugar In The Raw ®. These products will complement our Foodservice beverage business in the U.S. and
Canada, while also expanding our tabletop presence. The addition of these brands also adds to our retail presence in Canada.
The confidence to grow our business and deliver shareholder value is based on our unique culture, guided
by our Basic Beliefs — Quality, People, Ethics, Growth,
and Independence. Our Basic Beliefs help us preserve
a culture where collaboration is valued, meaningful
relationships are built, and the ability to implement
with excellence is expected and recognized.
Moving Forward
Looking ahead, we expect to continue to invest in our
business to build our iconic brands. We will also continue
to look for acquisitions that fit our Strategy and contribute
to long-term growth. These initiatives should enable us to continue returning value to our shareholders.
In addition to continuing our steady history of dividend
growth, we also repurchased approximately 12 percent
of our shares outstanding during the past three years.
In total, more than $2 billion has been returned to our shareholders since fiscal 2008.
We especially want to thank our dedicated employees,
whose unwavering commitment is an essential element
to our success. Additionally, we greatly appreciate the
loyalty of our consumers, customers, suppliers, and
communities, and are thankful for the continued
support from you, our shareholders.
Sincerely,
Tim Smucker Richard Smucker
June 19, 2013
2013 Annual Report 5
U.S. retail coFFee
As the market leader in the U.S. at-home
coffee category, Smucker competes in all key
segments of retail coffee. With a diverse portfolio
of brands, product types, packaging forms, and
price points, we are able to meet the evolving
needs of coffee consumers and to capitalize
on growth opportunities. The at-home category
has grown into an $8 billion market recognizing
significant growth from the single-serve
coffee segment.
oUr branDS
6
The J. M. Smucker Company
2013 Annual Report
7
Offering Consumers Variety and Convenience
As the U.S. retail coffee market continues to evolve
and expand, the depth and breadth of our coffee
portfolio provides consumers with choices to meet
every taste and need. In fiscal 2013, our U.S. Retail
Coffee segment net sales were comparable to the prior year at $2.3 billion, while segment profit grew 12 percent to $608 million. A moderation in green coffee costs provided the opportunity to lower
pricing during the year. This, along with our brandbuilding initiatives, contributed to a 4 percent increase in volume for the year.
The Folgers brand enjoyed solid performance with
volume increasing 3 percent during the year. The strength and relevance of this iconic brand was
recently underscored when Folgers was named
“Coffee Brand of the Year” in the 2013 Harris Poll EquiTrend Rankings. Mainstream roast and ground remains the core of the at-home coffee business, and we sell more mainstream coffee
than all other brands combined.
We are focused on building upon our leading
market position in mainstream roast and ground
coffee. This effort includes the introduction of our Hispanic brands, Café Bustelo® and Café Pilon®,
into new markets.
Smucker participates in the premium roast and
ground coffee category with our Dunkin’ Donuts,
Folgers Gourmet Selections, and Millstone brands.
Volume for the Dunkin’ Donuts brand grew 11
percent during the year, driven by lower pricing,
brand building, and the introduction of new
seasonal offerings. During fiscal 2014, we will also launch the year-round Dunkin’ Donuts
Bakery Series, inspired by the brand’s bakery
heritage. This series features five unique flavors and expands our total Dunkin’ Donuts offerings
to nearly 20 varieties.
Our presence in the premium segment of the
coffee market will expand in fiscal 2014 with the launch of the Life is good coffee brand. This licensed brand appeals to new consumer groups, including
millennials. Its simple message of “the power of
optimism” ties in well with our sustainability focus
and, as our first brand sourced from 100 percent
UTZ Certified coffee, will expand our green coffee sustainability initiatives.
Finally, we recently completed the $70 million expansion of two of our New Orleans coffee manufacturing facilities and look forward to
the growth opportunities these expansions
will provide.
Much of the growth in the at-home coffee market is occurring as a result of the popularity of singleserve coffee, especially K-Cup® packs. Our K-Cup®
pack net sales approached $290 million in fiscal 2013. During the year we expanded our K-Cup®
pack product line to 10 varieties, with plans to
add two more in fiscal 2014. Segment aS a Percentage oF net SaleS
coFFee ServeD yoUr way
Smucker competes in all key coffee segments and forms across a variety of price points.
 U.S. RETAIL COFFEE
39%
Folgers
Classic Roast ®
8
The J. M. Smucker Company
Folgers ®
Instant
Folgers ®
Instant Sticks
Dunkin’ Donuts ®
Coffee
Folgers ®
Fresh Breaks ®
U.S. Retail Coffee is our largest
segment in terms of net sales
and segment profit.
Folgers Gourmet
Selections ® K-Cup® Packs
2013 Annual Report
9
U.S. retail
conSUmer FooDS
Our consumer foods business competes in
a number of large and consumer-relevant
categories including peanut butter, fruit spreads,
baking mixes and frostings, oils, and sweetened
condensed milk. Led by the Jif brand, we hold
the #1 position in the $2 billion peanut butter
category. Pillsbury also competes in a $2 billion
category. Our namesake, Smucker’s fruit spreads,
competes in a $1 billion category, holding the
leading market position.
oUr branDS
10
The J. M. Smucker Company
2013 Annual Report
11
Discovering New Takes on Family Favorites
Innovation continues to be a key focus for the
U.S. Retail Consumer Foods segment. Net sales grew 6 percent to $2.2 billion in fiscal 2013, while segment profit increased 6 percent to $415 million. To build upon Jif’s position as consumers’ favorite
peanut butter brand, we introduced new products,
as well as new flavors. Jif® To Go® , a convenient
snacking alternative to peanut butter in a jar,
continued to grow during the year, with significant
growth coming from the successful launch of
Natural and Chocolate Silk varieties. We will further leverage our convenient snack offerings through
the upcoming introduction of Jif Whips, a line of
peanut butter products that is lighter and fluffier
for easier dipping and spreading.
We entered the rapidly growing specialty nut
spreads category in fiscal 2013 with Jif Hazelnut
spreads. In fiscal 2014, we will expand our presence with the launch of Jif Almond and Jif Cashew butters. These innovations within the Jif brand
strengthen our position as a category leader
participating in all nut butter segments.
Expansion through new products extends to the fruit spreads category, where we introduced
Smucker’s Natural fruit spreads. This new line consisting of four flavors with all-natural ingredients, sweetened with sugar, and with no preservatives,
provides an additional platform from which to
grow our namesake brand.
Segment aS a Percentage oF net SaleS
Building on the iconic Smucker’s brand, the
continued growth of our Smucker’s Uncrustables
sandwiches remains a key focus of growth. Net sales of these convenient, easy-to-serve peanut butter and jelly sandwiches grew 23 percent
within the U.S. Retail Consumer Foods segment in fiscal 2013.
We are also making capital investments in our
peanut butter and fruit spreads businesses to
support future growth.
A new fruit spreads plant in our hometown of
Orrville, Ohio, is now operational. Looking ahead,
we will also be converting our fruit spreads
facility in Memphis, Tennessee, to a peanut butter manufacturing facility that will result
in increased peanut butter capacity. We also
are expanding our Scottsville, Kentucky, manufacturing plant to accommodate the growing
popularity of Smucker’s Uncrustables
sandwiches.
In the baking aisle, innovation and creativity are
generating strong momentum for our Pillsbury
brand, which has launched approximately 60 new items during the past three years. Pillsbury’s line
of seasonal offerings has been especially wellreceived and has helped drive growth in the baking
aisle for our retail customers.
PeanUt bUtter never lookeD So gooD
Smucker offers an unmatched breadth of peanut butter and specialty nut butter offerings.
Stabilized
38%
 U.S. RETAIL
CONSUMER FOODS
With a portfolio of leading brands,
U.S. Retail Consumer Foods
comprises more than one-third
of consolidated sales.
Specialty
Nut Butter
Natural
Stabilized
Reduced
Fat
Convenience
Natural
Chocolate Hazelnut Peanut Butter Pinwheel Cookies recipe can be found on jif.com under recipes.
Fortified
12
The J. M. Smucker Company
Combination
PB&J
Organic
Whipped
2013 Annual Report
13
international,
FooDService, anD
natUral FooDS
Our International, Foodservice, and Natural Foods
businesses encompass sales outside of the
U.S. retail markets. Our International operations
consist of our Canadian business as well as
operations in Mexico and a presence in China.
In addition, we are a leading supplier to North
American foodservice operators, with a growing
line of products. Our R.W. Knudsen Family ®
and Santa Cruz Organic ® brands also continue
to be leaders in the natural foods category.
oUr branDS
14
The J. M. Smucker Company
2013 Annual Report
15
Extending Our Reach and Capabilities
Net sales for our International, Foodservice, and Natural Foods segment increased 21 percent to $1.4 billion, and segment profit grew 18 percent to $198 million driven by the additional eight months of the acquired Sara Lee foodservice
coffee and hot beverage business. With the
business integrated, our priority has shifted to
growing our liquid coffee concentrate business.
This includes the introduction of the trusted Folgers brand into the liquid coffee concentrate
foodservice market, which should position us to
grow our Foodservice business.
In the International area, our minority interest
in Seamild, a leader in China’s expanding oats category and our partner since fiscal 2012,
extended our presence beyond North America and provided us with an entry into this rapidly
growing region. Like Smucker, Seamild invests
in growth through innovation. It has recently
constructed a new state-of-the-art manufacturing campus in northern China to accommodate growth in and around Beijing.
international
The Seamild collaboration offers the opportunity for us to educate ourselves about the important
Chinese market as we seek to identify future categories for expansion, either through acquisitions, additional joint ventures, or by importing
our products into China. As part of this learning process, we have established offices in Shanghai
and Beijing to facilitate expansion. In Canada, the majority of our categories achieved volume and share growth during
the year. Our coffee business was particularly
strong, with our K-Cup® pack offerings in Canada continuing to gain market share in the singleserve segment. Our Canadian baking business also experienced solid growth as consumers
turn to trusted brands, like Robin Hood ® flour,
to support their baking needs.
Within Natural Foods, natural and organic beverages sold in the U.S. also enjoyed another
year of solid growth, driven by new products
and single-fruit offerings like the R.W. Knudsen
Family ® Just Juice® line.
FooDService
natUral FooDS
Segment aS a Percentage oF net SaleS
23%
 INTERNATIONAL, FOODSERVICE,
AND NATURAL FOODS
This segment represents
leading brands sold outside
U.S. retail markets.
The majority of our categories in
Canada achieved volume and
share growth during the year.
16
The J. M. Smucker Company
Our acquisition of the Sara Lee
foodservice coffee and hot beverage
business was key to growth in
fiscal 2013.
Leading natural and organic brands
enjoyed another year of solid growth.
2013 Annual Report
17
EMISSIONS INTENSITY
(tonnes CO2 e/1,000 EU)
SUStainability at SmUcker
Create a better tomorrow by focusing on preserving
our culture, ensuring our long-term Economic
viability, limiting our Environmental impact, and
being Socially responsible.
meaSUring
oUr imPact
Responsibility and citizenship have defined Smucker
since our founding. Today, we are pleased to report
ongoing and positive progress relating to our
Economic, Environmental, and Social impacts.
In fiscal 2013, we became the largest U.S. purchaser
of UTZ Certified green coffee, expanded our
participation in the Carbon Disclosure Project,
measured our progress toward our 2014
sustainability goals, and helped achieve an
industry goal to remove a combined 1.5 trillion
calories from products as a member of the
Healthy Weight Commitment Foundation. Read
about these accomplishments and more in our
2013 Corporate Responsibility Report available
at smuckers.com/investors.
18
The J. M. Smucker Company
1.27
2009
1.28
2010
1.21
2011
1.25
2012
Emissions intensity broken down by year. Data does
not include emissions (or water or energy) from the
Rowland Coffee Roasters facility. Equivalent Unit (EU)
is an internal measure of volume based on tonnage.
W A TE R I N T E N S I T Y
(gallons/1,000 EU)
4.59
2009
4.61
2010
4.45
2011
4.40
2012
Water intensity broken down by year. Data does not
include emissions (or water or energy) from the
Rowland Coffee Roasters facility. Equivalent Unit (EU)
is an internal measure of volume based on tonnage.
W A S TE D I V E R TE D
FROM LANDFILL
(percent)
79.5
2009
73.5
2010
76.1
2011
85.1
2012
Complete information from all facilities is not
currently available. Waste surveys in 2013 will
complete the data.
2013 Annual Report
19
BERRIES & CREAM PANCAKE SKEWERS
DirectorS anD oFFicerS
The J. M. Smucker Company
Directors
execUtive oFFicers
Vincent c. byrd
President and Chief Operating Officer
the J. M. smucker company
timothy P. smucker
Chairman of the Board
r. douglas cowan a
Director and Retired Chairman and
Chief Executive Officer
the Davey tree expert company
Kent, ohio
Kathryn W. dindo a, E
Retired Vice President and
Chief Risk Officer
Firstenergy corp.
Akron, ohio
Paul J. dolan E
Chairman and Chief Executive Officer
cleveland indians
cleveland, ohio
Elizabeth Valk long a, E
Former Executive Vice President
time inc.
New York, New York
nancy lopez Knight g
Founder
Nancy Lopez Golf company
Auburn, Alabama
gary a. Oatey g
Executive Chairman
oatey co.
cleveland, ohio
alex shumate g
Managing Partner, North America
squire sanders (Us) LLP
columbus, ohio
mark t. smucker
President, U.S. Retail Coffee
the J. M. smucker company
richard K. smucker
Chief Executive Officer
the J. M. smucker company
timothy P. smucker
chairman of the Board
the J. M. smucker company
William h. steinbrink g
Principal
Unstuk LLc
shaker Heights, ohio
Paul smucker Wagstaff
President, U.S. Retail Consumer Foods
the J. M. smucker company
20
The J. M. Smucker Company
richard K. smucker
Chief Executive Officer
dennis J. armstrong
Senior Vice President, Logistics and
Operations Support
mark r. belgya
Senior Vice President and
Chief Financial Officer
James a. brown
Vice President, U.S. Grocery Sales
Vincent c. byrd
President and Chief Operating Officer
John W. denman
Vice President, Controller and
Chief Accounting Officer
barry c. dunaway
Senior Vice President and
Chief Administrative Officer
tamara J. fynan
Vice President, Marketing Services
Jeannette l. Knudsen
Vice President, General Counsel and
Corporate Secretary
david J. lemmon
Vice President and Managing Director,
Canada
BRAZILIAN COFFEE
mark t. smucker
President, U.S. Retail Coffee
Paul smucker Wagstaff
President, U.S. Retail Consumer Foods
ProPerties
corporate Office:
orrville, ohio
domestic manufacturing locations:
chico, california
cincinnati, ohio
el Paso, texas
Grandview, Washington
Harahan, Louisiana
Havre de Grace, Maryland
Lexington, Kentucky
Memphis, tennessee
Miami, Florida
New Bethlehem, Pennsylvania
New orleans, Louisiana (2)
orrville, ohio
oxnard, california
ripon, Wisconsin
scottsville, Kentucky
seneca, Missouri
suffolk, virginia
toledo, ohio
PASTA PRIMAVERA WITH LEMON-CAPER SAUCE
COLD STRAWBERRY & BASIL SOUP
RASPBERRY LEMONADE BARS
ASIAN ORANGE GLAZED SALMON
international manufacturing locations:
sherbrooke, Quebec, canada
ste. Marie, Quebec, canada
John f. mayer
Vice President, U.S. Retail Sales
Kenneth a. miller
Vice President and General Manager,
Foodservice
steven Oakland
President, International, Foodservice,
and Natural Foods
andrew g. Platt
Vice President, Enterprise Analytics
and Insights
christopher P. resweber
Senior Vice President, Corporate
Communications and Public Affairs
Julia l. sabin
Vice President, Industry and
Government Affairs
Audit committee Member
executive compensation
committee Member
G
Nominating and corporate
Governance committee Member
A
e
T h e J. M. S mu cke r C o mp any
2 012 A nnu al Rep o r t
21
BRAZILIAN COFFEE
PREP TIME: 10 MIN
• 1/3 cup unsweetened cocoa
• 1/4 teaspoon salt
• 1 teaspoon ground cinnamon
• 1 (14 oz.) can eagle Brand®
Sweetened Condensed Milk
BERRIES & CREAM PANCAKE SKEWERS
MAKES: 2 qUARTS
• 5 cups water
• 1 1/3 cups strong brewed Folgers
Classic roast ® Coffee
direCtionS
1. COMBINE cocoa, salt and cinnamon in 3-quart saucepan. Add sweetened
condensed milk; mix well.
PreP Time: 30 min
• Crisco Original No-Stick Cooking Spray
• 1 cup Hungry Jack® Complete Buttermilk
Pancake & waffle mix (Just add water)
• 3/4 cup water
• 1 (8 oz.) container mascarpone cheese
softened or 1 (8 oz.) package cream
cheese softened
• 1/4 cup powdered sugar
®
makes: 16 skewers
• 1 teaspoon vanilla extract
• 16 medium strawberries sliced into
3 pieces
• 16 blueberries
• 16 (5 to 6 in.) decorative skewers
• Hungry Jack® Original Syrup
direCtionS
2. SLOWLY stir in water and coffee over medium heat; heat thoroughly but do not boil.
Serve warm.
1. COaT griddle or large skillet with no-stick cooking spray. Heat to medium heat (325°F).
3. Brazilian coffee may be stored in refrigerator up to 5 days. Mix well and reheat
before serving.
2. STIR together pancake mix and water in medium bowl until smooth. Let stand 3 minutes.
Pour 1 teaspoon batter on hot griddle. Cook 1 minute; flip. Cook additional 30 seconds.
Repeat to make 45 mini pancakes.
3. BEAT mascarpone, powdered sugar and vanilla in medium bowl with electric mixer
on medium speed until smooth. Spread mascarpone mixture evenly onto one side of
each pancake. Stack strawberry slice on top of mascarpone. Place another pancake
on strawberry. Repeat to make three layers. Top with blueberry. Insert skewer through
blueberry into pancake stack. repeat to make 16 pancake skewers. serve with syrup.
©/® The J. M. Smucker Company
©/® The J. M. Smucker Company
COLD STRAWBERRY & BASIL SOUP
PreP Time: 10 min
• 2 pints strawberries
• 2 cups vanilla Greek yogurt
• 1 cup Smucker’s ® Sugar Free Seedless
Strawberry Jam or 1 cup Smucker’s ®
Low Sugar™ Reduced Sugar Strawberry
Preserves
PASTA PRIMAVERA WITH LEMON-CAPER SAUCE
makes: 6 TO 8 servinGs
• 1 cup Smucker’s ® Sugar Free Orange
Marmalade
• 1 1/2 tablespoons minced fresh basil
• 1/8 teaspoon salt
• 1/8 teaspoon ground black pepper
direCtionS
1. BLEND together strawberries, yogurt, jam and orange marmalade in an electric blender
until smooth.
2. STIR in basil, salt and pepper. Chill for 2 hours.
PreP Time: 30 min
• 1/4 cup Crisco ® Pure Olive Oil
• 1 large red or yellow onion, chopped
• 1 pound fresh asparagus spears,
trimmed, cut into 1-inch pieces
• 1 medium yellow squash or zucchini,
quartered lengthwise, sliced 1/4-inch
thick
• 1/4 teaspoon salt
• 1/2 teaspoon coarsely ground pepper
• 8 ounces uncooked linguine pasta
• 1 cup frozen peas and carrots
makes: 4 servinGs
Lemon-Caper Sauce
• 1/4 cup butter
• 2 tablespoons Pillsbury BeSt® All
Purpose Flour
• 1 1/2 teaspoons minced fresh garlic
• 1 (14 1/2 oz.) can chicken broth
• 3 tablespoons Santa Cruz organic ® Pure
Lemon Juice
• 1/4 cup Crosse & Blackwell® Capers
drained
• 1/4 cup minced fresh parsley
• 1 cup finely shredded Parmesan cheese
direCtionS
3. SERVE chilled with a dollop of yogurt and sprig of basil.
1. HEAT oil in large skillet over medium heat. Add onion. Cook over medium-low heat
7 minutes or until soft. add asparagus, yellow squash, salt and pepper. Cook an
additional 5 minutes or until crisp-tender.
2. COOK pasta in salted water according to package directions, adding frozen peas and
carrots during last 5 minutes of cooking time. Drain.
3. HEAT butter in medium saucepan over medium heat. Stir in flour and garlic until blended.
Gradually stir in chicken broth until smooth. Bring to a boil over high heat, stirring
constantly. Reduce heat to low; simmer 5 minutes. Stir in lemon juice and capers.
4. COMBINE pasta, vegetable and sauce mixtures in pasta pot. Add parsley; stir until blended.
Sprinkle individual servings with cheese.
©/® The J. M. Smucker Company
©/® The J. M. Smucker Company
Pillsbury BEST is a trademark of The Pillsbury Company, LLC, used under license.
RASPBERRY LEMONADE BARS
ASIAN ORANGE GLAZED SALMON
PreP Time: 10 min
• 3/4 cup Smucker’s ® Simply Fruit ® Orange
Marmalade Spreadable Fruit
• 1/4 cup soy sauce
• 1/4 cup honey
• 2 tablespoons fresh lemon juice
• 1 teaspoon garlic powder
makes: 4 servinGs
• 1/2 teaspoon ground ginger
• 4 (6 oz.) salmon, tuna or swordfish fillets
about 3/4-inch thick
• Cooked white rice
PREP TIME: 15 MIN
• Crisco ® Original No-Stick Cooking Spray
• 1 (17.5 oz.) package Pillsbury® Pink
Lemonade Flavored Cookie Mix
• 1/2 cup butter softened
• 1/3 cup Smucker’s ® Seedless Red
Raspberry Jam
MAKES: 30 BARS
• 1 (8 oz.) package cream cheese
• 1/4 cup sugar
• 1 large egg
direCtionS
direCtionS
1. COMBINE orange marmalade, soy sauce, honey, lemon juice, garlic powder and ginger
in 8-inch square glass baking dish. Add fish and turn to coat. Marinate in refrigerator
1 to 2 hours, turning occasionally.
1. HEAT oven to 350°F. Line 9-inch square baking pan with foil, extending foil over edge
of pan. Coat with no-stick cooking spray.
2. HEAT broiler. Remove fish from marinade. Place on broiler pan. Place marinade in small
saucepan and boil one minute. Broil fish about 6-inches from heat, 4 to 6 minutes
per side until just opaque in center, basting occasionally with marinade. Place fish on
plates. Serve with rice.
2013 Financial review
The J. M. Smucker Company
Five-Year SummarY oF Selected Financial data
the following table presents selected financial data for each of the five years in the period ended april 30, 2013. the selected financial data should be
read in conjunction with the “results of operations” and “Financial condition” sections of “management’s discussion and analysis” and the consolidated financial statements and notes thereto.
Year ended April 30,
2012
2011
2010
2009
statements of income:
Net sales
Gross profit
% of net sales
operating income
% of net sales
Net income
$ 5,897.7
$ 2,027.6
34.4%
$ 910.4
15.4%
$ 544.2
$5,525.8
$ 1,845.2
33.4%
$ 778.3
14.1%
$ 459.7
$4,825.7
$ 1,798.5
37.3%
$ 784.3
16.3%
$ 479.5
$4,605.3
$ 1,786.7
38.8%
$ 790.9
17.2%
$ 494.1
$3,757.9
$1,251.4
33.3%
$ 452.3
12.0%
$ 266.0
financial Position:
cash and cash equivalents
total assets
total long-term debt, including current portion
shareholders’ equity
$ 256.4
9,031.8
2,017.8
5,148.8
$ 229.7
9,115.2
2,070.5
5,163.4
$ 319.8
8,324.6
1,304.0
5,292.3
$ 283.6
7,974.9
910.0
5,326.3
$ 456.7
8,192.2
1,536.7
4,939.9
$ 855.8
206.5
649.3
222.8
364.2
$ 730.9
274.2
456.7
213.7
315.8
$ 391.6
180.1
211.5
194.0
389.1
$ 713.5
137.0
576.5
166.2
5.6
$ 447.0
108.9
338.1
110.7
4.0
1,161.6
1,028.0
1,023.9
978.9
569.9
108,827,897
113,263,951
118,165,751
118,951,434
85,448,592
108,851,153
$ 2.08
113,313,567
$ 1.92
118,276,086
$ 1.68
119,081,445
$ 1.45
85,547,530
$ 6.31
liquidity:
Net cash provided by operating activities
capital expenditures
Free cash flow (1)
Quarterly dividends paid
Purchase of treasury shares
earnings before interest, taxes, depreciation,
and amortization (2)
share data:
Weighted-average shares outstanding
Weighted-average shares outstanding –
assuming dilution
Dividends declared per common share
Earnings per common share:
Net income
Net income – assuming dilution
$
Other non-gaaP measures: (2)
Gross profit excluding special project costs
% of net sales
operating income excluding special project costs
% of net sales
income and income per common share
excluding special project costs:
income
income per common share – assuming dilution
5.00
5.00
$
4.06
4.06
$
4.06
4.05
$
4.15
4.15
$
3.11
3.11
$ 2,039.1
34.6%
$ 971.4
16.5%
$ 1,888.4
34.2%
$ 894.0
16.2%
$ 1,852.6
38.4%
$ 897.5
18.6%
$ 1,790.6
38.9%
$ 830.3
18.0%
$1,251.4
33.3%
$ 535.2
14.2%
$ 584.8
$ 5.37
$ 535.6
$ 4.73
$ 555.1
$ 4.69
$ 520.8
$ 4.37
$ 321.6
$ 3.76
(1) Refer to “Liquidity” located on page 30 in the “Management’s Discussion and Analysis” section for a reconciliation to the comparable GAAP financial measure.
(2) Refer to “Non-GAAP Measures” located on page 32 in the “Management’s Discussion and Analysis” section for a reconciliation to the comparable GAAP financial measure.
NON-GAAP
INCOME PER COMMON SHARE–
ASSUMING DILUTION ( 2)
NET SALES
(Dollars in billions)
2. COMBINE cookie mix and butter in large bowl with fork until mixture resembles coarse
crumbs. Reserve 3/4 cup crumbs for topping. Press remaining mixture evenly into
bottom of prepared baking pan. Bake 10 minutes.
3. SPREAD jam evenly over partially baked crust. Beat cream cheese, sugar and egg in
medium bowl with electric mixer until smooth. Spoon over jam to cover. Sprinkle with
reserved crumbs.
2013
(Dollars in millions, except per share data)
$5.5
$4.6
$5.9
$4.8
$3.8
$3.76
$4.37
$4.69
$4.73
ASSETS
(Dollars in billions)
$9.1
$5.37
$8.2
$9.0
$8.3
$8.0
4. BAKE 20 to 25 minutes. Cool completely. Chill 1 hour. Remove from pan using edges
of foil. Peel away foil from sides. Cut into bars.
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
2013 Annual Report
©/® The J. M. Smucker Company
©/® The J. M. Smucker Company
21
Summary of Quarterly reSultS of operationS
compariSon of five-year cumulative
total ShareholDer return
The J. M. Smucker Company
The J. M. Smucker Company
The following is a summary of unaudited quarterly results of operations for the years ended April 30, 2013 and 2012.
2012
Net Income per
Common Share –
Assuming Dilution
Quarter Ended
Net Sales
Gross Profit
Net Income
Net Income per
Common Share
July 31, 2012
October 31, 2012
January 31, 2013
April 30, 2013
$1,369.7
1,628.7
1,559.6
1,339.7
$469.8
541.9
536.2
479.7
$110.9
148.8
154.2
130.3
$1.00
1.36
1.42
1.22
$1.00
1.36
1.42
1.22
July 31, 2011
October 31, 2011
January 31, 2012
April 30, 2012
$1,188.9
1,513.9
1,467.6
1,355.4
$431.1
498.7
465.7
449.7
$111.5
127.2
116.8
104.2
$0.98
1.12
1.03
0.93
$0.98
1.12
1.03
0.93
(Dollars in millions, except per share data)
2013
Among The J. M. Smucker Company, the S&P Packaged Foods & Meats Index, and the S&P 500 Index
$300
$250
$200
$150
$100
Annual net income per common share may not equal the sum of the individual quarters due to differences in the average number
of shares outstanding during the respective periods.
$50
$0
4/08
Stock price Data
4/09
4/10
4/11
4/12
4/13
The J. M. Smucker Company
S&P Packaged Foods & Meats
Our common shares are listed on the New York Stock Exchange – ticker symbol SJM. The table below presents the high and low
market prices for the shares and the quarterly dividends declared. There were approximately 360,200 shareholders of record as of
June 14, 2013, of which approximately 49,500 were registered holders of common shares.
2013
2012
Quarter Ended
High
Low
Dividends
July 31, 2012
October 31, 2012
January 31, 2013
April 30, 2013
$ 80.31
87.81
90.31
105.18
$73.20
74.60
81.60
88.38
$0.52
0.52
0.52
0.52
July 31, 2011
October 31, 2011
January 31, 2012
April 30, 2012
$ 80.26
78.62
81.40
81.97
$73.76
66.43
71.24
70.50
$0.48
0.48
0.48
0.48
S&P 500
April 30,
The J. M. Smucker Company
S&P Packaged Foods & Meats
S&P 500
2008
2009
2010
2011
2012
2013
$100.00
100.00
100.00
$89.12
79.15
64.69
$142.02
110.82
89.81
$179.35
128.84
105.28
$195.00
145.67
110.29
$259.16
186.51
128.91
The above graph compares the cumulative total shareholder return for the five years ended April 30, 2013, for our common shares,
the S&P Packaged Foods & Meats Index, and the S&P 500 Index. These figures assume all dividends are reinvested when received
and are based on $100 invested in our common shares and the referenced index funds on April 30, 2008.
Copyright © 2013 Standard & Poor’s, a division of The McGraw-Hill Companies Inc. All rights reserved.
www.researchdatagroup.com/S&P.htm
22
The J. M. Smucker Company
2013 Annual Report
23
management’S DiScuSSion anD analySiS
management’S DiScuSSion anD analySiS
The J. M. Smucker Company
The J. M. Smucker Company
E x ECuTiv E SuMMary
STr aTEgiC El EMEnTS
For more than 115 years, The J. M. Smucker Company (“Company,”
“ we,” “us,” or “our”) headquartered in Orrville, Ohio, has been
committed to offering consumers quality products that bring
families together to share memorable meals and moments.
Today, we are a leading marketer and manufacturer of fruit
spreads, retail packaged coffee, peanut butter, shortening and
oils, ice cream toppings, sweetened condensed milk, and health
and natural foods beverages in North America.
We remain rooted in our Basic Beliefs of Quality, People, Ethics,
Growth, and Independence, established by our founder and
namesake, Jerome Smucker, more than a century ago. Today,
these Basic Beliefs are the core of our unique corporate culture
and serve as a foundation for decision making and actions. We
have been led by four generations of family leadership, having
had only five chief executive officers in 116 years. This continuity
of management and thought extends to the broader leadership
team that embodies the values and embraces the business
practices that have contributed to our consistent growth.
Our family of brands includes Smucker’s®, Folgers®, Dunkin’
Donuts®, Jif®, Crisco®, Pillsbury®, Eagle Brand®, R.W. Knudsen
Family®, Hungry Jack®, Café Bustelo®, Café Pilon®, White Lily®,
and Martha White® in the United States, along with Robin Hood®,
Five Roses®, Carnation®, and Bick’s® in Canada. In addition to
these brands, we market products under numerous other
brands, including Millstone®, Dickinson’s®, Laura Scudder’s®,
Adams®, Double Fruit® (Canada), and Santa Cruz Organic®.
We have three reportable segments: U.S. Retail Coffee, U.S.
Retail Consumer Foods, and International, Foodservice, and
Natural Foods. The two U.S. retail market segments in total
comprised over 75 percent of net sales in 2013 and represent a
major portion of our strategic focus – the sale of branded food
products with leadership positions to consumers through retail
outlets in North America. The International, Foodservice, and
Natural Foods segment represents sales outside of the U.S. retail
market segments, and has grown over the past year, primarily
due to the full-year contribution from the acquisition of the
majority of the North American foodservice coffee and hot
beverage business from Sara Lee Corporation (“Sara Lee
foodservice business”) in 2012.
In both of the U.S. retail market segments, our products are
sold primarily to food retailers, food wholesalers, drug stores,
club stores, mass merchandisers, discount and dollar stores,
and military commissaries. In the International, Foodservice,
and Natural Foods segment, our products are distributed
domestically and in foreign countries through retail channels,
foodservice distributors and operators (e.g., restaurants,
lodging, schools and universities, health care operators),
and health and natural foods stores and distributors.
24
The J. M. Smucker Company
Our strategic vision is to own and market food brands which hold
the #1 market position in their category, with an emphasis on
North America while embracing a global perspective.
Our strategic long-term growth objectives are to increase net sales
by 6 percent and earnings per share by greater than 8 percent
annually on average. While the net sales contribution from
acquisitions will vary from year to year, we expect organic
growth, including new products, to add 3 to 4 percent per
year and acquisitions to contribute the remainder over the
long term.
(Dollars in millions, unless otherwise noted, except per share data)
rESulTS of opEr aTionS
On January 3, 2012, we completed the acquisition of the
Sara Lee foodservice business. The acquisition was accounted
for as a purchase business combination and the results of the
Sara Lee foodservice business are included in our consolidated
financial statements from the date of acquisition. Because the
transaction closed during the third quarter of 2012, incremental
Sara Lee foodservice business, approximating eight months of
operations, is included in 2013.
Year Ended April 30,
2013
Net sales
Gross profit
% of net sales
Operating income
% of net sales
Net income:
Net income
Net income per common share – assuming dilution
Gross profit excluding special project costs (1)
% of net sales
Operating income excluding special project costs (1)
% of net sales
Income excluding special project costs: (1)
Income
Income per common share – assuming dilution
2012
2011
2013
% Increase
(Decrease)
2012
% Increase
(Decrease)
$5,897.7
$2,027.6
34.4%
$  910.4
15.4%
$5,525.8
$1,845.2
33.4%
$  778.3
14.1%
$4,825.7
$1,798.5
37.3%
$  784.3
16.3%
7%
10%
15 %
3%
17%
(1)%
$  544.2
$   5.00
$2,039.1
34.6%
$  971.4
16.5%
$  459.7
$   4.06
$1,888.4
34.2%
$  894.0
16.2%
$  479.5
$   4.05
$1,852.6
38.4%
$  897.5
18.6%
18%
23%
8%
(4)%
—%
2%
9%
—%
$  584.8
$   5.37
$  535.6
$   4.73
$  555.1
$   4.69
9%
14%
(4)%
1%
(1) Refer to “Non-GAAP Measures” located on page 32 in the “Management’s Discussion and Analysis” section for a reconciliation to the comparable GAAP financial measure.
Summary of 2013
Net sales in 2013 increased 7 percent, compared to 2012, due
to the contribution from the acquired Sara Lee foodservice
business and favorable sales mix. Operating income increased
17 percent in 2013, compared to 2012, and increased 9 percent
excluding the impact of restructuring, merger and integration,
and certain pension settlement costs (“special project costs”).
Included in 2012 GAAP and non-GAAP results was an $11.3
loss on divestiture related to the Europe’s Best frozen fruit and
vegetable business, which was sold in October 2011. Net income
per diluted share increased 23 percent in 2013, compared to
2012, and increased 14 percent excluding special project costs.
Both measures reflect the benefit of a decrease in weightedaverage common shares outstanding as a result of our share
repurchase activities during 2013 and 2012.
Summary of 2012
Net sales in 2012 increased 15 percent, compared to 2011,
as the impact of price increases and the contribution from
acquisitions more than offset a 5 percent decline in volume.
While the net effect of price increases more than offset overall
higher raw material costs, the decrease in volume, along with
increased selling and general and administrative expenses,
resulted in a 1 percent decline in operating income for 2012,
compared to 2011. GAAP and non-GAAP results include the
impact of an $11.3 loss on divestiture in 2012 and a noncash
impairment charge of $17.2 in 2011, both related to Europe’s
Best. Net income per diluted share was flat in 2012, compared
to 2011, and increased 1 percent excluding special project
costs, reflecting the benefit of a decrease in weighted-average
common shares outstanding as a result of our share repurchase
activities during 2012 and the second half of 2011.
2013 Annual Report
25
ManageMent’s Discussion anD analysis
ManageMent’s Discussion anD analysis
The J. M. Smucker Company
The J. M. Smucker Company
Net Sales
2013 Compared to 2012
Year Ended April 30,
2013
Increase
2012 (Decrease) %
Net sales
$5,897.7 $5,525.8 $ 371.9 7%
Adjust for certain
noncomparable items:
Acquisition
(237.1)
—
(237.1) (4)
Divestiture
—
(8.0)
8.0 —
Foreign exchange
2.3
—
2.3 —
Net sales adjusted for the
noncomparable impact of
acquisition, divestiture,
and foreign exchange (1)
$5,662.9 $5,517.8 $ 145.1 3%
(1) Net sales adjusted for the noncomparable impact of acquisition, divestiture, and
foreign exchange is a non-GAAP measure used in evaluating performance internally.
This measure provides useful information to investors because it enables comparison
of results on a year-over-year basis.
Net sales for 2013 increased $371.9, or 7 percent, compared to
2012, due primarily to the incremental impact of the acquired
Sara Lee foodservice business and favorable sales mix. Favorable
sales mix for 2013 was driven by volume growth in our coffee
brands, including K-Cups®. Overall net price realization was
1 percent lower for 2013, compared to 2012, as the impact of
coffee price declines taken in 2013 and 2012 more than offset
the net impact of pricing actions taken on peanut butter during
2013 and 2012. Overall volume, based on weight and excluding
acquisition, was flat for 2013, compared to 2012. Volume gains
were realized in Jif peanut butter and Folgers and Dunkin’ Donuts
coffee but were offset by volume declines in Pillsbury baking mixes
and Bick’s pickles.
2012 Compared to 2011
Year Ended April 30,
2012
Increase
2011 (Decrease) %
Net sales
$5,525.8 $4,825.7
Adjust for certain
noncomparable items:
Acquisitions
(239.5)
—
Divestiture
—
(16.7)
Foreign exchange
(6.5)
—
Net sales adjusted for the
noncomparable impact
of acquisitions, divestiture,
and foreign exchange (1)
$5,279.8 $4,809.0
$700.1 15%
(239.5) (5)
16.7 —
(6.5) —
$470.8 10%
(1) Net sales adjusted for the noncomparable impact of acquisitions, divestiture, and
foreign exchange is a non-GAAP measure used in evaluating performance internally.
This measure provides useful information to investors because it enables comparison
of results on a year-over-year basis.
26
The J. M. Smucker Company
Net sales for 2012 increased $700.1, or 15 percent, compared to
2011, driven primarily by the impact of higher realized prices and
acquisitions. The acquisitions of the Sara Lee foodservice business
and the coffee brands and business operations of Rowland Coffee
Roasters, Inc. (“Rowland Coffee”) contributed $124.2 and $115.3,
respectively, to 2012 net sales. Excluding acquisitions, the Europe’s
Best divestiture, and the impact of foreign exchange, net sales were
up 10 percent in 2012, compared to 2011, and volume decreased
5 percent, driven by Crisco oils, Folgers coffee, Jif peanut butter,
and Pillsbury flour. The volume decline resulted from lower
consumer purchases due mostly to significantly higher retail
prices and a competitive environment.
Operating Income
The following table presents the components of operating
income as a percentage of net sales.
Year Ended April 30,
Gross profit
Selling, distribution, and
administrative expenses:
Marketing
Advertising
Selling
Distribution
General and administrative
Total selling, distribution, and
administrative expenses
Amortization
Impairment charges
Other restructuring, merger
and integration, and special
project costs
Loss on divestiture
Other operating (income)
expense – net
Operating income
2013
2012
2011
34.4%
33.4%
37.3%
2.8%
2.2
3.3
2.7
5.5
2.7%
2.2
3.3
2.8
5.2
3.4%
2.4
3.3
3.2
5.6
16.5%
1.6
—
16.2%
1.6
0.1
17.9%
1.5
0.4
0.8
—
1.3
0.2
1.2
—
(0.1)
15.4%
—
14.1%
—
16.3%
Amounts may not add due to rounding.
2013 Compared to 2012
Gross profit increased $182.4, or 10 percent, in 2013, compared
to 2012, and increased as a percentage of net sales from
33.4 percent to 34.4 percent over the same period. The increase
in gross profit was primarily due to favorable mix, the incremental
impact of the Sara Lee foodservice business, a decline in special
project costs included in cost of products sold, and a $15.2
increase in the benefit of unrealized mark-to-market adjustments
on derivative contracts, which was a gain of $6.6 in 2013, compared to a loss of $8.6 in 2012. Overall commodity costs were
lower for 2013, compared to 2012, driven by lower green coffee
costs which were partially offset by higher costs for peanuts.
Lower green coffee costs were mostly offset by lower net price
realization as a result of coffee price declines taken during 2013
and 2012. Despite a peanut butter price decline taken in the
third quarter of 2013, net price realization was higher, driven
by price increases taken on peanut butter during 2012, and
mostly offset higher costs. Excluding special project costs, gross
profit increased $150.7, or 8 percent, and improved to 34.6 percent
of net sales in 2013, compared to 34.2 percent in 2012.
Selling, distribution, and administrative expenses (“SD&A”)
increased 9 percent in 2013, compared to 2012, but increased
only slightly as a percentage of net sales. Marketing expense
increased 10 percent, driven mainly by an increase in brand
building investments, primarily in support of our coffee brands.
Selling expense increased 8 percent, driven by the incremental
impact of the Sara Lee foodservice business in 2013. General and
administrative expenses increased 13 percent, primarily due to
increased incentive compensation and employee benefit costs.
Higher amortization expense was recognized in 2013, compared
to 2012, due to the intangible assets associated with the Sara
Lee foodservice business acquisition.
Operating income increased $132.1, or 17 percent, in 2013,
compared to 2012, and increased as a percentage of net sales
from 14.1 percent to 15.4 percent over the same period. Special
project costs decreased $54.7 in 2013, compared to 2012,
reflecting substantial progress made on the related projects,
with the majority of costs having been incurred in prior years.
Excluding the impact of special project costs in both periods,
operating income increased $77.4, or 9 percent, and was
16.5 percent of net sales in 2013, compared to 16.2 percent
in 2012. Both operating income measures include a loss on
divestiture of $11.3 in 2012.
2012 Compared to 2011
Gross profit increased $46.7, or 3 percent, in 2012, compared to
2011, due to the contribution from acquisitions and a decrease
in special project costs included in cost of products sold. Excluding
these special project costs in both periods, gross profit increased
$35.8. Raw material costs were higher in 2012, compared to
2011, most significantly for green coffee, edible oils, peanuts,
flour, milk, and sweetener. Higher prices in place during the
year more than offset these higher costs, most significantly on
peanut butter, but did not offset the overall impact of volume
declines. Gross profit as a percentage of net sales contracted
from 38.4 percent in 2011 to 34.2 percent in 2012, excluding
special project costs.
SD&A increased 3 percent in 2012, compared to 2011, yet
decreased as a percentage of net sales from 17.9 percent to
16.2 percent, reflecting the impact of price increases on net
sales. Total marketing expense decreased 3 percent in 2012,
compared to 2011, although the portion allocated to advertising
increased during the same period. A portion of the marketing
expense decline was redeployed to trade and consumer
promotions during 2012, which were reflected as a reduction of
sales. Selling expenses and general and administrative expenses
increased 15 percent and 6 percent, respectively, primarily
due to the Sara Lee foodservice business and Rowland Coffee
acquisitions. Distribution expenses decreased 1 percent.
Noncash impairment charges of $4.6 and $17.6 were recognized
in 2012 and 2011, respectively. The 2012 impairment charge
related to a regional canned milk trademark, while the majority
of the 2011 charge resulted from the write-down to estimated
fair value of the intangible assets of the Europe’s Best business.
In 2012, we recognized an $11.3 loss on the sale of Europe’s Best.
Operating income decreased $6.0, or 1 percent, in 2012, compared
to 2011. Special project costs increased $2.5 in 2012, compared
to 2011, as a decrease in restructuring costs due to the closure
of several facilities was offset by an increase in integration costs
related to the Sara Lee foodservice business and Rowland Coffee
acquisitions. Excluding the impact of special project costs in
both periods, operating income decreased from 18.6 percent
of net sales in 2011 to 16.2 percent in 2012.
Interest Expense – Net
Net interest expense increased $13.6 during 2013, compared to
2012, primarily due to an incremental five and one-half months
of interest expense during 2013, related to the October 2011
public issuance of $750.0 in Senior Notes.
Net interest expense increased $12.7 during 2012, compared to
2011, due to higher average debt outstanding as a result of the
October 2011 public debt issuance. The increased borrowing
costs were somewhat offset by the benefit of interest rate swap
activities and higher capitalized interest associated with capital
expenditures. During the second quarter of 2012, two interest
rate swaps were terminated, resulting in a net settlement gain of
$17.7 to be recognized over the remaining life of the underlying
debt instruments, including $1.7 in 2012.
Income Taxes
Income taxes increased 13 percent in 2013, compared to 2012,
primarily as a result of a 17 percent increase in income before
income taxes. The effective tax rate decreased to 33.4 percent
in 2013 from 34.4 percent in 2012, primarily due to lower state
income taxes in 2013.
Income taxes increased 2 percent in 2012, compared to 2011,
despite a 2 percent decrease in income before income taxes
during the same period. The effective tax rate increased to
34.4 percent in 2012 from 33.1 percent in 2011, primarily due to
decreased tax benefits related to the domestic manufacturing
deduction and slightly higher state income taxes in 2012.
2013 Annual Report
27
ManageMent’s Discussion anD analysis
ManageMent’s Discussion anD analysis
The J. M. Smucker Company
The J. M. Smucker Company
Restructuring
In calendar 2010, plans were announced to restructure our
coffee, fruit spreads, and Canadian pickle and condiments
operations as part of our ongoing efforts to enhance the longterm strength and profitability of our leading brands. The
initiative is a long-term investment to optimize production
capacity and lower our overall cost structure, and includes capital
investments for a new state-of-the-art food manufacturing facility
in Orrville, Ohio; consolidation of coffee production in New
Orleans, Louisiana; and the transition of pickle and condiments
production to third-party manufacturers.
In addition, during 2013, we announced plans to expand capacity
in order to support our growth objectives for the peanut and
other nut butter businesses, including efforts to grow the Jif
brand. Production expansion will include converting the
Memphis, Tennessee fruit spreads facility into a peanut butter
plant. The Memphis facility was originally scheduled to close
as part of the fruit spreads portion of the restructuring plan.
Upon completion of the conversion of the Memphis facility, we
intend to relocate natural peanut butter production, currently
produced at the New Bethlehem, Pennsylvania facility to the
Memphis facility. The New Bethlehem facility will then be
converted to produce specialty nut butters, which are currently
produced by third-party manufacturers. The total capital
investment for this peanut and nut butter project is estimated
at approximately $70.0. Additional restructuring costs will
approximate $15.0, increasing the total estimated restructuring
costs to approximately $260.0. We expect the majority of the
expenditures related to this initiative to occur through 2015.
Upon completion, the restructuring plan will result in a reduction
of approximately 850 full-time positions. As of April 30, 2013,
approximately 80 percent of the 850 full-time positions have been
reduced and the Sherman, Texas; Dunnville, Ontario; Delhi
Township, Ontario; and Kansas City, Missouri facilities have been
closed. The Ste. Marie, Quebec facility is anticipated to close in
2014. Pickle and condiments production was transitioned to
third-party manufacturers during 2012. The consolidation of
coffee production in New Orleans related to these restructuring
initiatives is complete. The majority of retail fruit spreads volume
is being produced at the new manufacturing facility in Orrville,
while production of foodservice fruit spreads is expected to be
transitioned to the new facility by the end of calendar 2013.
Through 2013, the overall restructuring initiative has delivered
almost two-thirds of the $70.0 in annual savings originally
estimated. We expect to realize the remainder of the savings
by the end of 2015.
Cumulative costs of $227.6 have been incurred through April 30,
2013, including $38.8 in 2013 consisting primarily of $13.4 of
site preparation and equipment relocation costs and $10.8 of
production start-up costs. The majority of the remaining costs
are anticipated to be recognized through 2015.
28
The J. M. Smucker Company
Commodities Overview
The raw materials we use are primarily commodities, agriculturalbased products, and packaging materials. The most significant
of these materials are green coffee, peanuts, edible oils, plastic,
and wheat. Green coffee, edible oils, and wheat are traded on
active exchanges and the price of these commodities fluctuates
based on market conditions. Derivative instruments, including
futures and options, are used to minimize price volatility for
these commodities.
We source green coffee from more than 20 coffee producing
countries. Its price is subject to high volatility due to factors
such as weather, global supply and demand, pest damage,
investor speculation, and political and economic conditions
in the source countries.
We source peanuts, edible oils, and wheat mainly from North
America. We are one of the largest procurers of peanuts in the
U.S. and frequently enter into long-term purchase contracts for
various periods of time to mitigate the risk of a shortage of this
key commodity. The edible oils we purchase are mainly soybean
and canola. The price of peanuts, edible oils, and wheat are
driven primarily by weather, which impacts crop sizes and
yield, as well as global demand, especially from large importing
countries such as China and India. In addition, edible oil prices
have been impacted by soybean and canola demand from the
biofuels industry.
We frequently enter into long-term contracts to purchase plastic
containers, which are sourced mainly from within the U.S. Plastic
resin is made from petrochemical feedstock and natural gas
feedstock, and the price can be influenced by feedstock, energy,
and crude oil prices, as well as global economic conditions.
In 2013, our overall commodity costs were lower than in 2012,
driven primarily by lower green coffee costs, which were partially
offset by higher costs for peanuts.
Segment Results
We have three reportable segments: U.S. Retail Coffee, U.S. Retail
Consumer Foods, and International, Foodservice, and Natural
Foods. The U.S. Retail Coffee segment primarily represents the
domestic sales of Folgers, Dunkin’ Donuts, Millstone, Café
Bustelo, and Café Pilon branded coffee; the U.S. Retail Consumer
Foods segment primarily includes domestic sales of Jif, Smucker’s,
Pillsbury, Crisco, Martha White, Hungry Jack, and Eagle Brand
branded products; and the International, Foodservice, and
Natural Foods segment is comprised of products distributed
domestically and in foreign countries through retail channels,
foodservice distributors and operators (e.g., restaurants, lodging,
schools and universities, health care operators), and health and
natural foods stores and distributors.
Year Ended April 30,
Net sales:
U.S. Retail Coffee
U.S. Retail Consumer Foods
International, Foodservice, and Natural Foods
Segment profit:
U.S. Retail Coffee
U.S. Retail Consumer Foods
International, Foodservice, and Natural Foods
Segment profit margin:
U.S. Retail Coffee
U.S. Retail Consumer Foods
International, Foodservice, and Natural Foods
U.S. Retail Coffee
Net sales for the U.S. Retail Coffee segment were flat in 2013,
compared to 2012, as favorable sales mix driven primarily by
K-Cups and increased volume offset the impact of price declines
taken during 2013 and 2012. Segment volume increased 4 percent
in 2013, compared to 2012, as the Folgers, Dunkin’ Donuts,
and Café Bustelo brands increased 3 percent, 11 percent, and
16 percent, respectively. Net sales of K-Cups increased $108.0, or
61 percent, compared to 2012, and contributed 5 percentage
points of growth to segment net sales, while representing only
1 percentage point of volume growth. Segment profit increased
12 percent in 2013, compared to 2012, while segment profit
margin increased to 26.3 percent from 23.6 percent in 2012.
The increase in segment profit was primarily due to volume
growth and favorable mix, partially offset by increased marketing expense. Green coffee costs were lower in 2013, compared to
2012, but were mostly offset by lower net price realization and
did not contribute significantly to the increase in segment profit.
Net sales for the U.S. Retail Coffee segment increased 19 percent
in 2012, compared to 2011, including the net realization of price
increases. The acquisition of Rowland Coffee contributed $99.3
to segment net sales, representing 5 percentage points of the
increase. Excluding Rowland Coffee, segment volume decreased
8 percent. Volume declined for the Folgers brand in line with
the overall segment, and was primarily attributed to consumer
response to higher prices and aggressive private label price
points by certain key retailers. Additionally, volume decreased
5 percent for Dunkin’ Donuts packaged coffee. Contributing to
favorable sales mix in 2012, net sales of K-Cups totaled $178.2, an
increase of $125.2, compared to 2011, and represented 6 percentage points of segment net sales growth, but contributed only
1 percentage point growth to volume. Segment profit increased
1 percent in 2012, compared to 2011, despite volume declines,
due to the Rowland Coffee acquisition, while segment profit
2013
% Increase
(Decrease)
2012
% Increase
(Decrease)
2013
2012
2011
$2,306.5
2,214.8
1,376.4
$2,297.7
2,094.5
1,133.6
$1,930.9
1,953.0
941.8
—%
6
21
19%
7
20
$ 607.5
415.3
198.2
$ 543.0
393.3
168.6
$ 536.1
406.5
159.6
12%
6
18
1%
(3)
6
26.3%
18.8
14.4
23.6%
18.8
14.9
27.8%
20.8
16.9
margin declined to 23.6 percent from 27.8 percent in 2011. Price
increases realized during the year more than offset higher green
coffee costs and, along with a decrease in segment marketing
and distribution expenses, also contributed to segment profit.
U.S. Retail Consumer Foods
Net sales for the U.S. Retail Consumer Foods segment increased
6 percent in 2013, compared to 2012, due primarily to higher
net price realization and favorable sales mix, offset partially
by a 1 percent decline in segment volume. Jif brand net sales
increased 21 percent in 2013, compared to 2012, reflecting
overall higher net price realization and an 8 percent increase
in volume. The overall higher net price realization resulted from
price increases taken during 2012, which were only partially
offset by a price decline taken in the third quarter of 2013.
Smucker’s fruit spreads net sales were down 1 percent, while
volume was flat. Net sales and volume of Smucker’s Uncrustables®
frozen sandwiches increased 24 percent and 23 percent,
respectively, in 2013, compared to 2012, benefiting from new
distribution. Crisco brand net sales and volume decreased
5 percent and 3 percent, respectively, in 2013, compared to
2012, resulting from declines at a key retailer. For the same
period, net sales for the Pillsbury brand increased 8 percent,
while volume decreased 4 percent mainly due to the tonnage
impact of a cake mix downsizing made early in 2013. Segment
profit increased 6 percent in 2013, compared to 2012, while
segment profit margin was 18.8 percent of net sales in both
periods. The increase in segment profit was primarily due to
favorable mix and a decrease in marketing expense. Overall raw
material costs were higher for 2013, driven by peanuts, but were
mostly offset by higher net price realization. The peanut butter
price decline in the third quarter of 2013 was taken in anticipation
of lower peanut costs in 2014, and resulted in higher peanut costs
not being fully recovered during 2013.
2013 Annual Report
29
ManageMent’s Discussion anD analysis
ManageMent’s Discussion anD analysis
The J. M. Smucker Company
The J. M. Smucker Company
Net sales for the U.S. Retail Consumer Foods segment increased
7 percent in 2012, compared to 2011, as the impact of price
increases more than offset a 6 percent decline in segment volume.
Jif peanut butter net sales increased 16 percent in 2012, compared
to 2011, reflecting price increases taken during 2012, somewhat
offset by a 6 percent volume decline. The overall decline in peanut
butter volume was due to consumer response to significantly
higher retail prices, lost peanut butter distribution with a key
retailer during the year, and competitive activity. Smucker’s
fruit spreads net sales increased 1 percent and volume was down
4 percent during the same period, primarily due to competitive
activity, as well as fewer cross-promotional activities with peanut
butter. Crisco brand net sales, including the realization of higher
prices, increased 5 percent, while volume was down 15 percent
as the brand experienced substantial price competition with
private label offerings by certain retailers. For the same period,
net sales for the Pillsbury brand increased 9 percent and volume
was flat, as declines in flour were offset by increases in baking
mixes. Canned milk net sales increased 3 percent and volume
decreased 4 percent during 2012, compared to 2011. Segment
profit decreased 3 percent in 2012, compared to 2011, primarily
due to an impairment charge of approximately $4.6 related to a
regional canned milk trademark and higher segment distribution
and selling expenses. Price increases taken during 2012, most
notably on peanut butter, essentially offset both higher commodity costs and the volume decline. Segment profit margin was
18.8 percent in 2012, compared to 20.8 percent in 2011.
International, Foodservice, and Natural Foods
Net sales for the International, Foodservice, and Natural Foods
segment increased 21 percent in 2013, compared to 2012, due to
the impact of the additional eight months of the acquired Sara
Lee foodservice business, which contributed $237.1, representing
virtually all of the net sales growth. Excluding the impact of the
acquisition, the Europe’s Best divestiture in Canada, and foreign
exchange, segment net sales and volume both increased 1 percent
over the same period last year. Volume gains were realized in
nonbranded beverages and the Robin Hood and Five Roses
Canadian flour brands, while volume declines were realized in
Bick’s pickles. Segment profit increased 18 percent in 2013,
compared to 2012, while segment profit margin declined to
14.4 percent from 14.9 percent over the same period. Excluding
an $11.3 loss on divestiture in 2012, segment profit increased
10 percent, driven primarily by the incremental impact of the
Sara Lee foodservice business, price increases, and favorable mix.
During the second quarter of 2013, we announced our plan to
exit the private label roast and ground coffee portion of the
acquired Sara Lee foodservice business which is expected to
reduce annual net sales by approximately $100.0. Although the
exit began in the third quarter, it did not have a material impact
on 2013 results. We expect to complete the exit during 2014.
30
The J. M. Smucker Company
During the fourth quarter of 2013, we began our planned exit of
a portion of the Smucker’s Uncrustables frozen sandwich schools
business. We anticipate the exit will reduce annual net sales
for the International, Foodservice, and Natural Foods segment
by approximately $25.0 to $35.0, although we expect that a
portion of this decrease will eventually be offset by increased
sales of Smucker’s Uncrustables in the U.S. Retail Consumer
Foods segment.
Also during the fourth quarter of 2013, we entered into a multiyear licensing and distribution agreement with Cumberland
Packing Corp. (“Cumberland”) whereby, beginning in July 2013,
we will market and distribute Cumberland’s branded tabletop
sweeteners (“Cumberland products”) to foodservice customers
in the U.S. and to retail and foodservice customers in Canada.
The Cumberland products include the Sweet‘N Low®, NatraTaste®,
Sugar In The Raw®, and other “In The Raw” brands. On a fullyear basis, net sales of Cumberland products are expected to
approximate $40.0 million.
Net sales for the International, Foodservice, and Natural Foods
segment increased 20 percent in 2012, compared to 2011. The
acquisition of the Sara Lee foodservice business contributed
$124.2 to segment net sales, while Rowland Coffee contributed
$16.0. In total, the impact of the acquisitions represented
15 percentage points of the increase in segment net sales.
Excluding the impact of acquisitions, divestiture, and foreign
exchange, segment net sales increased 7 percent compared to
the same period last year and volume declined 2 percent. Segment
profit increased 6 percent, but declined to 14.9 percent of net
sales in 2012 from 16.9 percent of net sales in 2011, partially
reflecting the acquisition of the lower-margin Sara Lee foodservice
business. An $11.3 loss was recognized on the Europe’s Best
divestiture in 2012, while a $17.2 noncash impairment charge
related to Europe’s Best intangible assets was recognized in 2011.
finanCial C ondiTion
Liquidity
Our principal source of funds is cash generated from operations,
supplemented by borrowings against our revolving credit facility.
Total cash and cash equivalents increased to $256.4 at April 30,
2013, compared to $229.7 at April 30, 2012.
We typically expect a significant use of cash to fund working
capital requirements during the first half of each fiscal year,
primarily due to seasonal fruit procurement, the buildup of
inventories to support the Fall Bake and Holiday period, and
the additional increase of coffee inventory in advance of the
Atlantic hurricane season. We expect cash provided by operations in the second half of the fiscal year to significantly exceed
the amount in the first half of the year, upon completion of the
Fall Bake and Holiday period.
The following table presents selected cash flow information.
Year Ended April 30,
2013
Net cash provided by
operating activities
Net cash used for investing
activities
Net cash (used for) provided
by financing activities
Net cash provided by
operating activities
Additions to property, plant,
and equipment
Free cash flow
(1)
2012
2011
$ 855.8 $  730.9 $ 391.6
(185.6) (1,035.9)
(192.9)
(641.0)
(170.4)
219.6
$ 855.8 $  730.9 $ 391.6
(206.5)
(274.2)
(180.1)
$ 649.3 $  456.7 $ 211.5
(1) Free cash flow is a non-GAAP measure used by management to evaluate the amount
of cash available for debt repayment, dividend distribution, acquisition opportunities,
share repurchases, and other corporate purposes.
Cash provided by operating activities was $855.8, $730.9, and
$391.6 in 2013, 2012, and 2011, respectively. The increase in
cash provided by operating activities in 2013, compared to
2012, was primarily due to higher net income in 2013 and a
reduction in the use of cash required to fund inventory. This
reduction in the use of cash was mainly the result of lower green
coffee costs and a reduction in inventory levels. The increase in
cash provided by operating activities in 2012, compared to 2011,
was primarily related to a decrease in working capital requirements due to lower inventory levels and a decrease in income
tax payments. Additionally, as the Easter holiday occurred later
in 2011, more of the collection cycle occurred during 2012 than
it did during 2011.
Cash used for investing activities was $185.6, $1,035.9, and $192.9
in 2013, 2012, and 2011, respectively. In 2013, cash used for
investing activities consisted mainly of $206.5 in capital expenditures, including approximately $43.5 related to expenditures
associated with the restructuring program. Cash used for investing
activities in 2012 consisted primarily of $737.3 related to the
Sara Lee foodservice business and Rowland Coffee acquisitions
and $274.2 in capital expenditures, including approximately
$134.2 related to expenditures associated with the restructuring
program. In 2011, cash used for investing activities consisted
primarily of $180.1 in capital expenditures and the purchase
of $75.6 of marketable securities.
Cash used for financing activities during 2013 was $641.0,
consisting of the purchase of treasury shares for $364.2, primarily
representing the repurchase of 4.0 million common shares
available under Board of Directors’ authorizations, quarterly
dividend payments of $222.8, and a Senior Notes principal
payment of $50.0. Cash provided by financing activities during
2012 was $219.6. Proceeds of $748.6 related to the October 2011
public debt issuance were partially offset by quarterly dividend
payments of $213.7 and the purchase of treasury shares for
$315.8, primarily representing the repurchase of approximately
4.1 million common shares. Cash used for financing activities
during 2011 was $170.4. The issuance of $400.0 in Senior Notes
was more than offset by quarterly dividend payments of $194.0
and the purchase of treasury shares for $389.1, including the
repurchase of approximately 5.7 million common shares.
Capital Resources
The following table presents our capital structure.
April 30,
2013
2012
Current portion of long-term debt
Long-term debt
$   50.0
1,967.8
$   50.0
2,020.5
Total long-term debt
Shareholders’ equity
$2,017.8
5,148.8
$2,070.5
5,163.4
Total capital
$7,166.6
$7,233.9
We have available a $1.0 billion revolving credit facility with a group
of nine banks that matures in July 2016. There was no balance
outstanding under the revolving credit facility at April 30, 2013.
Our debt instruments contain certain financial covenant restrictions including consolidated net worth, a leverage ratio, and an
interest coverage ratio. We are in compliance with all covenants.
During 2013, we repurchased 4.0 million common shares for
$359.4. At April 30, 2013, approximately 4.9 million common
shares were available for repurchase under the Board of
Directors’ most recent authorization.
Subsequent to April 30, 2013, we repurchased approximately
0.6 million common shares for $60.8, utilizing proceeds of $29.0
from our revolving credit facility. Approximately 4.3 million
shares remain available for repurchase as of June 18, 2013.
There is no guarantee as to the exact number of shares that
may be repurchased or when such purchases may occur.
Cash requirements for 2014 will include capital expenditures
of approximately $270.0, including amounts related to the
restructuring program, quarterly dividend payments of
approximately $220.0 based on current rates and common
shares outstanding, and interest and principal payments on
debt obligations of approximately $95.0 and $50.0, respectively.
Absent any further acquisitions or other significant investments,
we believe that cash on hand, combined with cash provided by
operations and borrowings available under our credit facility,
will be sufficient to meet cash requirements for the next
12 months. As of April 30, 2013, approximately $147.2 of total cash
and cash equivalents was held by our international subsidiaries.
We do not intend to repatriate these funds to meet these obligations. Should we repatriate these funds, we will be required to
provide taxes based on the applicable U.S. tax rates net of any
foreign tax credit consideration.
2013 Annual Report
31
ManageMent’s Discussion anD analysis
ManageMent’s Discussion anD analysis
The J. M. Smucker Company
The J. M. Smucker Company
non - g a ap ME a SurES
We use non-GAAP financial measures including: net sales adjusted
for the noncomparable impact of acquisition, divestiture, and
foreign exchange; gross profit, operating income, income, and
income per diluted share, excluding special project costs; earnings
before interest, taxes, depreciation, and amortization; and free
cash flow, as key measures for purposes of evaluating performance
internally. We believe that these measures provide useful information to investors because they are the measures we use to
evaluate performance on a comparable year-over-year basis.
The special project costs relate to specific restructuring, merger
and integration, and pension settlement projects that are each
nonrecurring in nature and can significantly affect the year-overyear assessment of operating results. These non-GAAP financial
measures are not intended to replace the presentation of
financial results in accordance with U.S. generally accepted
accounting principles (“GAAP”). Rather, the presentation of
these non-GAAP financial measures supplements other metrics
we use to internally evaluate our businesses and facilitate
the comparison of past and present operations and liquidity.
These non-GAAP financial measures may not be comparable
to similar measures used by other companies and may exclude
certain nondiscretionary expenses and cash payments. The
following table reconciles certain non-GAAP financial measures
to the comparable GAAP financial measure. See page 26 for a
reconciliation of net sales adjusted for the noncomparable
impact of acquisition, divestiture, and foreign exchange
to the comparable GAAP financial measure. See page 31 for
a reconciliation of free cash flow to the comparable GAAP
financial measure.
off- Bal anCE ShEE T arr angEMEnTS and
C onTr aCTual oBlig aTionS
We do not have material off-balance sheet arrangements,
financings, or other relationships with unconsolidated entities
or other persons, also known as variable interest entities.
Transactions with related parties are in the ordinary course
of business, conducted on an arm’s length basis, and not
material to our results of operations, financial condition,
or cash flows.
The following table summarizes our contractual obligations
by fiscal year at April 30, 2013.
Total
2014
2015–2016
2017–2018
2019 and
beyond
Long-term debt obligations, including current portion
Interest payments
Operating lease obligations
Purchase obligations
Other liabilities
$2,017.8
652.0
104.9
1,125.5
318.0
$   50.0
94.9
24.5
1,095.5
31.4
$199.0
176.1
32.7
30.0
35.8
$ 75.0
161.2
28.2
—
23.6
$1,693.8
219.8
19.5
—
227.2
Total
$4,218.2
$1,296.3
$473.6
$288.0
$2,160.3
Year Ended April 30,
Reconciliation to gross profit:
Gross profit
Cost of products sold – restructuring and merger
and integration
Gross profit excluding special project costs
Reconciliation to operating income:
Operating income
Cost of products sold – restructuring and merger
and integration
Other restructuring and merger and integration costs
Other special project costs
Operating income excluding special project costs
Reconciliation to net income:
Net income
Income taxes
Cost of products sold – restructuring and merger
and integration
Other restructuring and merger and integration costs
Other special project costs
Income before income taxes excluding special project costs
Income taxes, as adjusted
Income excluding special project costs
Weighted-average shares – assuming dilution
Income per common share excluding special
project costs – assuming dilution
Reconciliation to net income:
Net income
Income taxes
Interest expense – net
Depreciation
Depreciation – restructuring and merger and integration
Amortization
Earnings before interest, taxes, depreciation, and amortization
32
The J. M. Smucker Company
2013
2012
2011
2010
2009
$2,027.6
$1,845.2
$1,798.5
$1,786.7
$1,251.4
11.5
43.2
54.1
3.9
—
$2,039.1
$1,888.4
$1,852.6
$1,790.6
$1,251.4
$  910.4
$  778.3
$  784.3
$  790.9
$  452.3
11.5
42.8
6.7
43.2
72.5
—
54.1
59.1
—
3.9
35.5
—
—
82.9
—
$  971.4
$  894.0
$  897.5
$  830.3
$  535.2
$  544.2
273.1
$  459.7
241.5
$  479.5
237.7
$  494.1
236.6
$  266.0
130.1
11.5
42.8
6.7
43.2
72.5
—
54.1
59.1
—
3.9
35.5
—
—
82.9
—
$  878.3
293.5
$  816.9
281.3
$  830.4
275.3
$  770.1
249.3
$  479.0
157.4
$  584.8
$  535.6
$  555.1
$  520.8
108,851,153 113,313,567 118,276,086 119,081,445
$  321.6
85,547,530
$   5.37
$   4.73
$   4.69
$   4.37
$   3.76
$  544.2
273.1
93.4
143.7
10.4
96.8
$  459.7
241.5
79.8
120.4
38.5
88.1
$  479.5
237.7
67.1
112.2
53.6
73.8
$  494.1
236.6
62.4
108.2
3.9
73.7
$  266.0
130.1
55.5
79.5
—
38.8
$1,161.6
$1,028.0
$1,023.9
$  978.9
$  569.9
Purchase obligations in the above table include agreements that
are enforceable and legally bind us to purchase goods or services.
Included in this category are certain obligations related to normal,
ongoing purchase obligations in which we have guaranteed
payment to ensure availability of raw materials and packaging
supplies. We expect to receive consideration for these purchase
obligations in the form of materials. These purchase obligations
do not represent the entire anticipated purchases in the future,
but represent only those items for which we are contractually
obligated. Other liabilities in the above table mainly consist of
projected commitments associated with our defined benefit
pension plans and other postretirement benefits. The table excludes
the liability for unrecognized tax benefits and tax-related net
interest and penalties of approximately $31.7 under Financial
Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 740, Income Taxes, since we are unable to
reasonably estimate the timing of cash settlements with the
respective taxing authorities.
CriTiCal aCCounTing ESTiMaTES and poliCiES
The preparation of financial statements in conformity with U.S.
GAAP requires that we make estimates and assumptions that in
certain circumstances affect amounts reported in the accompanying consolidated financial statements. In preparing these financial
statements, we have made our best estimates and judgments of
certain amounts included in the financial statements, giving due
consideration to materiality. We do not believe there is a great
likelihood that materially different amounts would be reported
under different conditions or using different assumptions related
to the accounting policies described below. However, application
of these accounting policies involves the exercise of judgment and
use of assumptions as to future uncertainties and, as a result,
actual results could differ from these estimates.
Revenue Recognition: We recognize revenue when all of the
following criteria have been met: a valid customer order with a
determinable price has been received; the product has been
shipped and title has transferred to the customer; there is no
further significant obligation to assist in the resale of the
product; and collectibility is reasonably assured. Trade marketing
and merchandising programs are classified as a reduction of sales.
A provision for estimated returns and allowances is recognized
as a reduction of sales at the time revenue is recognized.
Trade Marketing and Merchandising Programs: In order
to support our products, various promotional activities are
conducted through retail trade, distributors, or directly with
consumers, including in-store display and product placement
programs, feature price discounts, coupons, and other similar
activities. We regularly review and revise, when we deem
necessary, estimates of costs for these promotional programs
based on estimates of what will be redeemed by retail trade,
distributors, or consumers. These estimates are made using
various techniques including historical data on performance of
similar promotional programs. Differences between estimated
expenditures and actual performance are recognized as a change
in estimate in a subsequent period. As the total promotional
expenditures, including amounts classified as a reduction of
sales, represented approximately 25 percent of net sales in 2013,
the possibility exists of materially different reported results if
factors such as the level and success of the promotional programs
or other conditions differ from expectations.
Income Taxes: The future tax benefit arising from the net
deductible temporary differences and tax carryforwards is
approximately $160.9 and $154.1 at April 30, 2013 and 2012,
respectively. We believe that the earnings during the periods when
the temporary differences become deductible will be sufficient
to realize the related future income tax benefits. For those
jurisdictions where the expiration date of tax carryforwards or
the projected operating results indicate that realization is not
likely, a valuation allowance has been provided.
2013 Annual Report
33
ManageMent’s Discussion anD analysis
ManageMent’s Discussion anD analysis
The J. M. Smucker Company
The J. M. Smucker Company
In assessing the need for a valuation allowance, we estimate
future taxable income, considering the viability of ongoing tax
planning strategies and the probable recognition of future tax
deductions and loss carryforwards. Valuation allowances related
to deferred tax assets can be affected by changes in tax laws,
statutory tax rates, and projected future taxable income levels.
Changes in estimated realization of deferred tax assets would
result in an adjustment to income in the period in which that
determination is made.
In the ordinary course of business, we are exposed to uncertainties
related to tax filing positions and periodically assess these tax
positions for all tax years that remain subject to examination,
based upon the latest information available. For uncertain tax
positions, we have recognized a liability for unrecognized tax
benefits, including any applicable interest and penalty charges.
Long-Lived Assets: Long-lived assets, except goodwill and
indefinite-lived intangible assets, are reviewed for impairment
whenever events or changes in circumstances indicate that
the carrying amount of the asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the assets to future net
undiscounted cash flows estimated to be generated by such
assets. If such assets are considered to be impaired, the impairment to be recognized is the amount by which the carrying
amount of the assets exceeds the estimated fair value of the
assets. However, determining fair value is subject to estimates
of both cash flows and discount rates and different estimates
could yield different results. There are no events or changes in
circumstances of which we are aware that indicate the carrying value of our long-lived assets may not be recoverable at
April 30, 2013.
Goodwill and Other Indefinite-Lived Intangible Assets: We are
required to test goodwill for impairment annually and more often
if indicators of impairment exist. To test for goodwill impairment,
we estimate the fair value of each of our six reporting units using
both a discounted cash flow valuation technique and a marketbased approach. The impairment test incorporates estimates of
future cash flows, allocations of certain assets, liabilities, and
cash flows among reporting units, future growth rates, terminal
value amounts, and the applicable weighted-average cost of capital
used to discount those estimated cash flows. The estimates and
projections used in the calculation of fair value are consistent
with our current and long-range plans, including anticipated
changes in market conditions, industry trends, growth rates,
and planned capital expenditures. Changes in forecasted operations and other estimates and assumptions could impact the
assessment of impairment in the future.
At April 30, 2013, goodwill totaled $3.1 billion. Goodwill is
substantially concentrated within the U.S. Retail Coffee and
U.S. Retail Consumer Foods segments. No goodwill impairment
was recognized as a result of the annual evaluation performed
as of February 1, 2013. The estimated fair value of each reporting
34
The J. M. Smucker Company
unit was substantially in excess of its carrying value as of the
annual test date.
Other indefinite-lived intangible assets, consisting entirely of
trademarks, are also tested for impairment annually and whenever events or changes in circumstances indicate their carrying
value may not be recoverable. To test these assets for impairment,
we estimate the fair value of each asset based on a discounted
cash flow model using various inputs, including projected
revenues, an assumed royalty rate, and a discount rate.
Changes in these estimates and assumptions could impact
the assessment of impairment in the future.
At April 30, 2013, other indefinite-lived intangible assets totaled
$1.8 billion. Trademarks that represent our leading, iconic
brands comprise more than 90 percent of the total carrying
value of other indefinite-lived intangible assets. Each of these
trademarks had an estimated fair value substantially in excess
of its carrying value as of the annual test date, with the exception
of the Crisco trademark. A sensitivity analysis was performed
on the Crisco trademark and yielded an estimated fair value
slightly below carrying value resulting from a hypothetical
50 basis point increase in the discount rate and a 50 basis point
decrease in the expected long-term growth rate. The Crisco
trademark represents less than 10 percent of total other
indefinite-lived intangible assets.
Pension and Other Postretirement Benefit Plans: To determine
the ultimate obligation under our defined benefit pension plans
and other postretirement benefit plans, we must estimate the
future cost of benefits and attribute that cost to the time period
during which each covered employee works. Various actuarial
assumptions must be made in order to predict and measure
costs and obligations many years prior to the settlement date,
the most significant being the interest rates used to discount
the obligations of the plans, the long-term rates of return on
the plans’ assets, assumed pay increases, and the health care
cost trend rates. We, along with third-party actuaries and
investment managers, review all of these assumptions on an
ongoing basis to ensure that the most reasonable information
available is being considered. For 2014 expense recognition, we
will use a weighted-average discount rate of 3.99 percent and
3.65 percent, and a rate of compensation increase of 4.12 percent
and 3.00 percent for the U.S. and Canadian plans, respectively.
We anticipate using an expected rate of return on plan assets of
6.75 percent for U.S. plans. For the Canadian plans, we anticipate
using an expected rate of return on plan assets of 6.00 percent
for the hourly plan and 6.25 percent for all other plans.
dErivaTiv E finanCial inSTruMEnTS and
Mark E T riSk
The following discussions about our market risk disclosures involve
forward-looking statements. Actual results could differ from
those projected in the forward-looking statements. We are exposed
to market risk related to changes in interest rates, foreign
currency exchange rates, and commodity prices.
Interest Rate Risk: The fair value of our cash and cash equivalents
at April 30, 2013, approximates carrying value. Exposure to
interest rate risk on our long-term debt is mitigated due to
fixed-rate maturities.
We utilize derivative instruments to manage changes in the fair
value of our debt. Interest rate swaps 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 swap are deferred and
included as a component of accumulated other comprehensive
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
swap would be recognized at fair value on the balance sheet
and changes in the fair value would be recognized in interest
expense. Generally, changes in the fair value of the derivative
are equal to changes in the fair value of the underlying debt
and have no impact on earnings. We did not have any interest
rate swaps outstanding at April 30, 2013 and 2012.
Based on our overall interest rate exposure as of and during
the year ended April 30, 2013, including derivatives and other
instruments sensitive to interest rates, a hypothetical 10 percent
movement in interest rates would not materially affect our results
of operations. In measuring interest rate risk by the amount
of net change in the fair value of our financial liabilities, a
hypothetical 1 percent decrease in interest rates at April 30,
2013, would increase the fair value of our long-term debt by
approximately $104.1.
Foreign Currency Exchange Risk: We have operations outside the
U.S. with foreign currency denominated assets and liabilities,
primarily denominated in Canadian currency. Because we have
foreign currency denominated assets and liabilities, financial
exposure may result, primarily from the timing of transactions
and the movement of exchange rates. The foreign currency
balance sheet exposures as of April 30, 2013, are not expected to
result in a significant impact on future earnings or cash flows.
We utilize foreign currency exchange forwards and options
contracts to manage the price volatility of foreign currency
exchange fluctuations on future cash payments primarily related
to purchases of certain raw materials, finished goods, and fixed
assets in Canada. The contracts generally have maturities of less
than one year. Instruments currently used to manage foreign
currency exchange exposures do not meet the requirements for
hedge accounting treatment and the change in value of these
instruments is immediately recognized in cost of products sold.
If the contract qualifies for hedge accounting treatment, to
the extent the hedge is deemed effective, the associated
mark-to-market gains and losses are deferred and included
as a component of accumulated other comprehensive loss.
These gains or losses are reclassified to earnings in the period the
contract is executed. The ineffective portion of these contracts is
immediately recognized in earnings. Based on our hedged foreign
currency positions as of April 30, 2013, a hypothetical 10 percent
change in exchange rates would not result in a material loss
of fair value.
Revenues from customers outside the U.S., subject to foreign
currency exchange, represented 8 percent of net sales during
2013. Thus, certain revenues and expenses have been, and
are expected to be, subject to the effect of foreign currency
fluctuations, and these fluctuations may have an impact on
operating results.
Commodity Price Risk: We use certain raw materials and other
commodities that are subject to price volatility caused by supply
and demand conditions, political and economic variables, weather,
investor speculation, and other unpredictable factors. To manage
the volatility related to anticipated commodity purchases, we
use futures and options with maturities of generally less than
one year. Certain of these instruments are designated as cash
flow hedges. The mark-to-market gains or losses on qualifying
hedges are included in accumulated other comprehensive loss to
the extent effective and reclassified to cost of products sold in the
period during which the hedged transaction affects earnings.
The mark-to-market gains or losses on nonqualifying, excluded,
and ineffective portions of hedges are recognized in cost of
products sold immediately.
The following sensitivity analysis presents our potential loss of
fair value resulting from a hypothetical 10 percent change in
market prices related to raw material commodities.
Year Ended April 30,
High
Low
Average
2013
2012
$34.0
7.6
20.7
$28.0
6.4
14.6
The estimated fair value was determined using quoted market
prices and was based on our net derivative position by commodity
at each quarter end during the fiscal year. The calculations are not
intended to represent actual losses in fair value that we expect
to incur. In practice, as markets move, we actively manage our
risk and adjust hedging strategies as appropriate. The commodities
hedged have a high inverse correlation to price changes of the
derivative commodity instrument; thus, we would expect that
any gain or loss in the estimated fair value of its derivatives
would generally be offset by an increase or decrease in the
estimated fair value of the underlying exposures.
2013 Annual Report
35
management’S DiScuSSion anD analySiS
The J. M. Smucker Company
report of management on internal control
over financial reporting
The J. M. Smucker Company
forward - lo ok ing STaTEMEnTS
Certain statements included in this Annual Report contain
forward-looking statements within the meaning of federal
securities laws. The forward-looking statements may include
statements concerning our 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. We are 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 our
control and could cause actual results to differ materially from
such statements and from our historical results and experience.
These risks and uncertainties include, but are not limited to,
those set forth under the caption “Risk Factors” in our Annual
Report on Form 10-K, as well as the following:
• volatility of commodity markets from which raw materials,
particularly green coffee beans, peanuts, soybean oil,
wheat, milk, corn, and sugar, are procured and the related
impact on costs;
• risks associated with derivative and purchasing strategies
we employ to manage commodity pricing risks, including
the risk that such strategies could result in significant
losses and adversely impact our liquidity;
• crude oil price trends and their impact on transportation,
energy, and packaging costs;
• our ability to successfully implement and realize the full
benefit of price changes that are intended to fully recover
cost including the competitive, retailer, and consumer
response, and the impact of the timing of the price changes
to profits and cash flow in a particular period;
• the success and cost of introducing new products and the
competitive response;
• the success and cost of marketing and sales programs and
strategies intended to promote growth in our businesses;
• general competitive activity in the market, including
competitors’ pricing practices and promotional
spending levels;
• our ability to successfully integrate acquired and merged
businesses in a timely and cost-effective manner;
36
The J. M. Smucker Company
• the successful completion of our restructuring programs
and the ability to realize anticipated savings and other
potential benefits within the time frames currently
contemplated;
• the impact of food security concerns involving either our
products or our competitors’ products;
• the impact of accidents and natural disasters, including
crop failures and storm damage;
• the concentration of certain of our businesses with key
customers and suppliers, including single-source suppliers
of certain key raw materials, such as packaging for our
Folgers coffee products, and finished goods, such as K-Cups,
and the ability to manage and maintain key relationships;
• the loss of significant customers, a substantial reduction
in orders from these customers, or the bankruptcy of any
such customer;
• changes in consumer coffee preferences and other factors
affecting the coffee business, which represents a substantial
portion of our business;
• a change in outlook or downgrade in our public credit rating
by a rating agency;
• our ability to obtain any required financing on a timely
basis and on acceptable terms;
• the timing and amount of capital expenditures, share
repurchases, and restructuring costs;
• impairments in the carrying value of goodwill, other
intangible assets, or other long-lived assets or changes
in useful lives of other intangible assets;
• the impact of new or changes to existing governmental
laws and regulations and their application;
• the impact of future legal, regulatory, or market measures
regarding climate change;
• the outcome of current and future tax examinations,
changes in tax laws, and other tax matters, and their
related impact on our tax positions;
• foreign currency and interest rate fluctuations;
• political or economic disruption;
• other factors affecting share prices and capital markets
generally; and
• risks related to other factors described under “Risk Factors”
in other reports and statements we have filed with the
Securities and Exchange Commission.
Shareholders
The J. M. Smucker Company
Management is responsible for establishing and maintaining adequate accounting and internal control systems over financial
reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934, as amended.
Our internal control system is designed to provide reasonable assurance that we have the ability to record, process, summarize,
and report reliable financial information on a timely basis.
Our management, with the participation of the principal financial and executive officers, assessed the effectiveness of the
internal control over financial reporting as of April 30, 2013. In making this assessment, we used the criteria established in
Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“the COSO criteria”).
Based on our assessment of internal control over financial reporting under the COSO criteria, we concluded the internal control
over financial reporting was effective as of April 30, 2013.
Ernst & Young LLP, an independent registered public accounting firm, audited the effectiveness of our internal control over
financial reporting as of April 30, 2013, and their report thereon is included on page 38 of this report.
Richard K. Smucker
Chief Executive Officer
Mark R. Belgya
Senior Vice President and
Chief Financial Officer
Readers are cautioned not to unduly rely on such forward-looking
statements, which speak only as of the date made, when evaluating the information presented in this Annual Report. We do not
undertake any obligation to update or revise these forward-looking
statements to reflect new events or circumstances.
2013 Annual Report
37
report of inDepenDent regiStereD public accounting
firm on internal control over financial reporting
report of inDepenDent regiStereD public accounting
firm on the conSoliDateD financial StatementS
The J. M. Smucker Company
The J. M. Smucker Company
Board of Directors and Shareholders
The J. M. Smucker Company
Board of Directors and Shareholders
The J. M. Smucker Company
We have audited The J. M. Smucker Company’s internal control over financial reporting as of April 30, 2013, based on criteria
established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“the COSO criteria”). The J. M. Smucker Company’s management is responsible for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included
in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our audit.
We have audited the accompanying consolidated balance sheets of The J. M. Smucker Company as of April 30, 2013 and 2012,
and the related statements of consolidated income, comprehensive income, shareholders’ equity, and cash flows for each of the
three years in the period ended April 30, 2013. These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial
position of The J. M. Smucker Company at April 30, 2013 and 2012, and the consolidated results of its operations and its cash flows for
each of the three years in the period ended April 30, 2013, in conformity with U.S. generally accepted accounting principles.
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board (United States),
The J. M. Smucker Company’s internal control over financial reporting as of April 30, 2013, based on criteria established in
Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated June 18, 2013, expressed an unqualified opinion thereon.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, The J. M. Smucker Company maintained, in all material respects, effective internal control over financial reporting
as of April 30, 2013, based on the COSO criteria.
Akron, Ohio
June 18, 2013
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of The J. M. Smucker Company as of April 30, 2013 and 2012, and the related statements of consolidated
income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended April 30, 2013,
and our report dated June 18, 2013, expressed an unqualified opinion thereon.
Akron, Ohio
June 18, 2013
38
The J. M. Smucker Company
2013 Annual Report
39
report of management on reSponSibility
for financial reporting
StatementS of conSoliDateD income
The J. M. Smucker Company
The J. M. Smucker Company
Shareholders
The J. M. Smucker Company
Year Ended April 30,
2013
2012
2011
$5,897.7
3,858.6
11.5
$5,525.8
3,637.4
43.2
$4,825.7
2,973.1
54.1
2,027.6
973.9
96.8
—
42.8
6.7
—
(3.0)
1,845.2
892.7
88.1
4.6
72.5
—
11.3
(2.3)
1,798.5
863.1
73.8
17.6
59.1
—
—
0.6
Operating Income
Interest expense – net
Other income – net
910.4
(93.4)
0.3
778.3
(79.8)
2.7
784.3
(67.1)
—
Income Before Income Taxes
Income taxes
817.3
273.1
701.2
241.5
717.2
237.7
Net Income
$ 544.2
$ 459.7
$ 479.5
Earnings per common share:
Net Income
Net Income – Assuming Dilution
$
$
5.00
5.00
$
$
4.06
4.06
$
$
4.06
4.05
Dividends Declared per Common Share
$
2.08
$
1.92
$
1.68
(Dollars in millions, except per share data)
Management of The J. M. Smucker Company is responsible for the preparation, integrity, accuracy, and consistency of the consolidated
financial statements and the related financial information in this report. Such information has been prepared in accordance with
U.S. generally accepted accounting principles and is based on our best estimates and judgments.
We maintain systems of internal accounting controls supported by formal policies and procedures that are communicated throughout
the Company. There is a program of audits performed by our internal audit staff designed to evaluate the adequacy of and adherence
to these controls, policies, and procedures.
Ernst & Young LLP, an independent registered public accounting firm, has audited our financial statements in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Management has made all financial records
and related data available to Ernst & Young LLP during its audit.
Our audit committee, comprised of three non-employee members of the Board of Directors, meets regularly with the independent
registered public accounting firm and management to review the work of the internal audit staff and the work, audit scope, timing
arrangements, and fees of the independent registered public accounting firm. The audit committee also regularly satisfies itself
as to the adequacy of controls, systems, and financial records. The director of the internal audit department is required to report
directly to the chair of the audit committee as to internal audit matters.
It is our best judgment that our policies and procedures, our program of internal and independent audits, and the oversight activity
of the audit committee work together to provide reasonable assurance that our operations are conducted according to law and in
compliance with the high standards of business ethics and conduct to which we subscribe.
Richard K. Smucker
Chief Executive Officer
Mark R. Belgya
Senior Vice President and
Chief Financial Officer
Net sales
Cost of products sold
Cost of products sold – restructuring and merger and integration
Gross Profit
Selling, distribution, and administrative expenses
Amortization
Impairment charges
Other restructuring and merger and integration costs
Other special project costs
Loss on divestiture
Other operating (income) expense – net
See notes to consolidated financial statements.
StatementS of conSoliDateD comprehenSive income
The J. M. Smucker Company
Year Ended April 30,
(Dollars in millions)
Net income
Other comprehensive income (loss):
Foreign currency translation adjustments
Cash flow hedging derivative activity, net of tax
Pension and other postretirement benefit plans activity, net of tax
Available-for-sale securities activity, net of tax
Total Other Comprehensive Income (Loss)
Comprehensive Income
2013
2012
2011
$544.2
$459.7
$479.5
(5.5)
8.0
2.9
2.0
(14.8)
(25.2)
(48.3)
0.7
24.8
4.0
(5.9)
1.3
7.4
(87.6)
24.2
$551.6
$372.1
$503.7
See notes to consolidated financial statements.
40
The J. M. Smucker Company
2013 Annual Report
41
conSoliDateD balance SheetS
conSoliDateD balance SheetS
The J. M. Smucker Company
The J. M. Smucker Company
ASSETS
LIABILITIES AND ShAREhOLDERS’ EquITy
April 30,
(Dollars in millions)
Current Assets
Cash and cash equivalents
Trade receivables, less allowance for doubtful accounts
Inventories:
Finished products
Raw materials
2013
April 30,
2012
$ 256.4
313.7
$ 229.7
347.5
618.9
326.6
643.5
318.1
Other current assets
945.5
79.6
961.6
104.7
Total Current Assets
1,595.2
1,643.5
(Dollars in millions)
Current Liabilities
Accounts payable
Accrued compensation
Accrued trade marketing and merchandising
Dividends payable
Current portion of long-term debt
Other current liabilities
Total Current Liabilities
2013
2012
$ 285.8
69.5
57.4
55.4
50.0
78.7
$ 274.7
83.3
62.1
52.9
50.0
93.9
596.8
616.9
Noncurrent Liabilities
Long-term debt
Defined benefit pensions
Other postretirement benefits
Deferred income taxes
Other noncurrent liabilities
1,967.8
163.0
67.1
987.2
101.1
2,020.5
147.6
68.8
992.7
105.3
Property, Plant, and Equipment
Land and land improvements
Buildings and fixtures
Machinery and equipment
Construction in progress
98.5
494.4
1,267.5
124.9
89.6
460.2
1,160.3
143.0
1,985.3
(842.8)
1,853.1
(757.0)
Total Noncurrent Liabilities
3,286.2
3,334.9
Accumulated depreciation
Total Liabilities
3,883.0
3,951.8
Total Property, Plant, and Equipment
1,142.5
1,096.1
Other Noncurrent Assets
Goodwill
Other intangible assets – net
Other noncurrent assets
3,052.9
3,089.4
151.8
3,054.6
3,187.0
134.0
—
—
Total Other Noncurrent Assets
6,294.1
6,375.6
$9,031.8
$9,115.2
Shareholders’ Equity
Serial preferred shares – no par value:
Authorized – 6,000,000 shares; outstanding – none
Common shares – no par value:
Authorized – 150,000,000 shares; outstanding – 106,486,935 at April 30, 2013,
and 110,284,715 at April 30, 2012 (net of 22,118,230 and 18,320,450 treasury shares,
respectively), at stated value
Additional capital
Retained income
Amount due from ESOP Trust
Accumulated other comprehensive loss
26.6
4,125.1
1,075.5
(1.8)
(76.6)
27.6
4,261.2
961.2
(2.6)
(84.0)
Total Assets
See notes to consolidated financial statements.
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
5,148.8
5,163.4
$9,031.8
$9,115.2
See notes to consolidated financial statements.
42
The J. M. Smucker Company
2013 Annual Report
43
StatementS of conSoliDateD caSh flowS
StatementS of conSoliDateD ShareholDerS’ eQuity
The J. M. Smucker Company
The J. M. Smucker Company
Year Ended April 30,
2013
2012
2011
459.7
$ 479.5
143.7
10.4
96.8
—
21.3
(0.7)
4.8
—
(15.6)
120.4
38.5
88.1
4.6
21.7
8.0
3.4
11.3
(17.2)
112.2
53.6
73.8
17.6
24.0
8.5
2.9
—
(59.8)
33.2
15.2
4.6
11.2
(6.7)
—
(40.0)
3.5
29.9
9.3
(48.2)
3.0
35.8
36.9
17.7
(11.4)
(3.0)
(47.7)
(102.6)
(204.2)
(33.4)
54.3
30.4
—
(16.8)
(78.4)
30.0
855.8
730.9
391.6
Investing Activities
Businesses acquired, net of cash acquired
Additions to property, plant, and equipment
Equity investment in affiliate
Proceeds from divestiture
Purchases of marketable securities
Sales and maturities of marketable securities
Proceeds from disposal of property, plant, and equipment
Other – net
—
(206.5)
—
—
—
—
3.3
17.6
(737.3)
(274.2)
(35.9)
9.3
—
18.6
4.0
(20.4)
—
(180.1)
—
—
(75.6)
57.1
5.8
(0.1)
Net Cash used for Investing Activities
(185.6)
(1,035.9)
(192.9)
Financing Activities
Repayments of long-term debt
Proceeds from long-term debt – net
Quarterly dividends paid
Purchase of treasury shares
Proceeds from stock option exercises
Other – net
(50.0)
—
(222.8)
(364.2)
2.2
(6.2)
—
748.6
(213.7)
(315.8)
2.8
(2.3)
(10.0)
400.0
(194.0)
(389.1)
14.5
8.2
Net Cash (used for) Provided by Financing Activities
Effect of exchange rate changes on cash
(641.0)
(2.5)
219.6
(4.7)
(170.4)
7.9
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
26.7
229.7
(90.1)
319.8
36.2
283.6
229.7
$ 319.8
(Dollars in millions)
Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operations:
Depreciation
Depreciation – restructuring and merger and integration
Amortization
Impairment charges
Share-based compensation expense
Other restructuring activities
Loss on sale of assets – net
Loss on divestiture
Deferred income tax benefit
Changes in assets and liabilities, net of effect from businesses acquired:
Trade receivables
Inventories
Other current assets
Accounts payable
Accrued liabilities
Proceeds from settlement of interest rate swaps – net
Defined benefit pension contributions
Accrued and prepaid taxes
Other – net
Net Cash Provided by Operating Activities
Cash and Cash Equivalents at End of year
$ 544.2
$ 256.4
$
$
Common
Shares
Outstanding
Common
Shares
Additional
Capital
Retained
Income
Balance at May 1, 2010
Net income
Other comprehensive income
Comprehensive Income
Purchase of treasury shares
Stock plans (includes tax
benefit of $7.3)
Cash dividends declared
Other
119,119,152
$29.8
$4,575.1
$ 746.1
479.5
Balance at April 30, 2011
Net income
Other comprehensive income
Comprehensive Income
Purchase of treasury shares
Stock plans (includes tax
benefit of $4.8)
Cash dividends declared
Other
114,172,122
Balance at April 30, 2012
Net income
Other comprehensive income
Comprehensive Income
Purchase of treasury shares
Stock plans (includes tax
benefit of $2.9)
Cash dividends declared
Other
110,284,715
Balance at April 30, 2013
106,486,935
(Dollars in millions)
Accumulated
Amount
Other
Due from Comprehensive
ESOP Trust
(Loss) Income
$(4.1)
$(20.6)
24.2
(5,832,423)
(1.5)
(225.6)
885,393
0.2
47.1
(162.0)
0.8
4,396.6
866.9
459.7
(3.3)
3.6
(87.6)
(4,236,430)
(1.1)
(165.6)
349,023
0.2
30.2
(149.1)
0.7
4,261.2
961.2
544.2
(2.6)
(84.0)
7.4
(4,062,682)
(1.0)
264,902
(158.5)
(204.7)
22.4
0.8
$4,125.1
$1,075.5
$(1.8)
5,163.4
544.2
7.4
551.6
(364.2)
22.4
(225.2)
0.8
(225.2)
$26.6
5,292.3
459.7
(87.6)
372.1
(315.8)
30.4
(216.3)
0.7
(216.3)
27.6
$5,326.3
479.5
24.2
503.7
(389.1)
47.3
(196.7)
0.8
(196.7)
28.5
Total
Shareholders’
Equity
$(76.6)
$5,148.8
See notes to consolidated financial statements.
( ) Denotes use of cash
See notes to consolidated financial statements.
44
The J. M. Smucker Company
2013 Annual Report
45
Notes to CoNsolidated FiNaNCial statemeNts
Notes to CoNsolidated FiNaNCial statemeNts
The J. M. Smucker Company
The J. M. Smucker Company
(Dollars in millions, unless otherwise noted, except per share data)
As of April 30, 2013, total unrecognized share-based compensation cost related to nonvested share-based awards was $31.4.
The weighted-average period over which this amount is expected to be recognized is 2.9 years.
Note 1
ACCounTing PoliCieS
Principles of Consolidation: The consolidated financial statements include the accounts of the Company, its wholly-owned
subsidiaries, and its majority-owned investments, if any. Intercompany transactions and accounts are eliminated in consolidation.
use of Estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP requires that we make certain
estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
Significant estimates in these consolidated financial statements include: allowances for doubtful trade receivables, estimates of
future cash flows associated with assets, asset impairments, useful lives and residual values for depreciation and amortization, net
realizable value of inventories, accruals for trade marketing and merchandising programs, income taxes, and the determination of
discount and other rate assumptions for defined benefit pension and other postretirement benefit expenses. Actual results could
differ from these estimates.
Revenue Recognition: We recognize revenue, net of estimated returns and allowances, when all of the following criteria have been
met: a valid customer order with a determinable price has been received; the product has been shipped and title has transferred to
the customer; there is no further significant obligation to assist in the resale of the product; and collectability is reasonably assured.
Trade marketing and merchandising programs are classified as a reduction of sales. A provision for estimated returns and allowances
is recognized as a reduction of sales at the time revenue is recognized.
Major Customer: Sales to Wal-Mart Stores, Inc. and subsidiaries amounted to 26 percent of net sales in 2013, 2012, and 2011. These
sales are primarily included in the two U.S. retail market segments. No other customer exceeded 10 percent of net sales for any year.
Trade receivables at April 30, 2013 and 2012, included amounts due from Wal-Mart Stores, Inc. and subsidiaries of $92.0 and
$84.1, respectively.
Shipping and handling Costs: Shipping and handling costs are included in cost of products sold.
Trade Marketing and Merchandising Programs: In order to support our products, various promotional activities are conducted
through retail trade, distributors, or directly with consumers, including in-store display and product placement programs, feature
price discounts, coupons, and other similar activities. We regularly review and revise, when we deem necessary, estimates of costs
for these promotional programs based on estimates of what will be redeemed by retail trade, distributors, or consumers. These
estimates are made using various techniques including historical data on performance of similar promotional programs. Differences
between estimated expenditures and actual performance are recognized as a change in estimate in a subsequent period. As the
total promotional expenditures, including amounts classified as a reduction of sales, represented 25 percent of net sales in 2013,
a possibility exists of materially different reported results if factors such as the level and success of the promotional programs or
other conditions differ from expectations.
Advertising Expense: Advertising costs are expensed as incurred. Advertising expense was $131.6, $119.6, and $115.1 in 2013,
2012, and 2011, respectively.
Research and Development Costs: Total research and development costs were $24.7, $21.9, and $21.0 in 2013, 2012,
and 2011, respectively.
Share-Based Payments: Share-based compensation expense is recognized on a straight-line basis over the requisite service period,
which includes a one-year performance period plus the defined forfeiture period, which is typically four years of service or the
attainment of a defined age and years of service.
The following table summarizes amounts related to share-based payments.
Year Ended April 30,
2013
2012
2011
$20.5
$19.3
$19.9
0.8
2.5
4.4
Total share-based compensation expense
$21.3
$21.8
$24.3
Related income tax benefit
$ 7.1
$ 7.5
$ 8.1
Share-based compensation expense included in selling,
distribution, and administrative expenses
Share-based compensation expense included in other restructuring
and merger and integration costs
46
The J. M. Smucker Company
Corporate income tax benefits realized upon exercise or vesting of an award in excess of that previously recognized in earnings,
referred to as excess tax benefits, are presented in the Statements of Consolidated Cash Flows as a financing activity. Realized
excess tax benefits are credited to additional capital in the Consolidated Balance Sheets. Realized shortfall tax benefits, amounts
which are less than that previously recognized in earnings, are first offset against the cumulative balance of excess tax benefits,
if any, and then charged directly to income tax expense. For 2013, 2012, and 2011, the actual tax-deductible benefit realized from
share-based compensation was $2.9, $4.8, and $7.3, respectively, including $2.9, $4.8, and $7.0, respectively, of excess tax benefits
realized upon exercise or vesting of share-based compensation, and classified as other – net, under financing activities in the
Statements of Consolidated Cash Flows.
Defined Contribution Plans: We offer employee savings plans for domestic and Canadian employees. Our contributions under
these plans are based on a specified percentage of employee contributions. Charges to operations for these plans in 2013, 2012,
and 2011 were $18.6, $16.1, and $16.4, respectively. For information on our defined benefit plans, see Note 8: Pensions and Other
Postretirement Benefits.
Income Taxes: We account for income taxes using the liability method. Accordingly, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in the applicable tax rate is recognized in income or expense in the period that the change is
effective. A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax asset will not be
realized. A tax benefit is recognized when it is more likely than not to be sustained.
We account for the financial statement recognition and measurement criteria of a tax position taken or expected to be taken in a
tax return under FASB ASC 740, Income Taxes. FASB ASC 740 also provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, and disclosure.
In accordance with the requirements of FASB ASC 740, uncertain tax positions have been classified in the Consolidated Balance
Sheets as long term, except to the extent payment is expected within one year. We recognize net interest and penalties related to
unrecognized tax benefits in income tax expense.
Cash and Cash Equivalents: We consider all short-term, highly-liquid investments with a maturity of three months or less when
purchased to be cash equivalents.
Trade Receivables: In the normal course of business, we extend credit to customers. Trade receivables, less allowance for doubtful
accounts, reflect the net realizable value of receivables and approximate fair value. We evaluate our trade receivables and establish
an allowance for doubtful accounts based on a combination of factors. When aware that a specific customer has been impacted by
circumstances such as bankruptcy filings or deterioration in the customer’s operating results or financial position, potentially making
it unable to meet its financial obligations, we record a specific reserve for bad debt to reduce the related receivable to the amount
we reasonably believe is collectible. We also record reserves for bad debt for all other customers based on a variety of factors, including
the length of time the receivables are past due, historical collection experience, and an evaluation of current and projected economic
conditions at the balance sheet date. Trade receivables are charged off against the allowance after we determine the potential for
recovery is remote. At April 30, 2013 and 2012, the allowance for doubtful accounts was $1.3 and $1.7, respectively. The net provision
for the allowance for doubtful accounts decreased $0.4 and $0.2 in 2013 and 2012, respectively, and increased $0.4 in 2011. We
believe there is no concentration of risk with any single customer whose failure or nonperformance would materially affect results
other than as discussed in Major Customer.
Inventories: Inventories are stated at the lower of cost or market. Cost for all inventories is determined using the first-in, first-out
method applied on a consistent basis.
The cost of finished products and work-in-process inventory includes materials, direct labor, and overhead. Work-in-process is included
in finished products in the Consolidated Balance Sheets and was $64.0 and $78.3 at April 30, 2013 and 2012, respectively.
2013 Annual Report
47
Notes to CoNsolidated FiNaNCial statemeNts
Notes to CoNsolidated FiNaNCial statemeNts
The J. M. Smucker Company
The J. M. Smucker Company
Derivative Financial Instruments: We utilize derivative instruments such as basis contracts, commodity futures and options contracts,
foreign currency forwards and options, and interest rate swaps to manage exposures in commodity prices, foreign currency exchange
rates, and interest rates. We have policies in place that define acceptable instrument types we may enter into and establish controls
to limit our market risk exposure. We account for these derivative instruments in accordance with FASB ASC 815, Derivatives and
Hedging, which requires all derivative instruments to be recognized in the financial statements and measured at fair value regardless
of the purpose or intent for holding them. For derivatives designated as a cash flow hedge that are used to hedge an anticipated
transaction, changes in fair value are deferred and recognized in shareholders’ equity as a component of accumulated other
comprehensive loss to the extent the hedge is effective and then recognized in the Statements of Consolidated Income in the period
during which the hedged transaction affects earnings. Hedge effectiveness is measured at inception and on a monthly basis. Any
ineffectiveness associated with the hedge or changes in fair value of derivatives that are nonqualifying are recognized immediately
in the Statements of Consolidated Income. Derivatives designated as fair value hedges that are used to hedge against changes in
the fair value of the underlying long-term debt are recognized at fair value on the Consolidated Balance Sheets. Changes in the fair
value of the derivative are recognized in the Statements of Consolidated Income and are offset by the change in the fair value of the
underlying long-term debt. For additional information, see Note 12: Derivative Financial Instruments.
We also maintain funds for the payment of benefits associated with nonqualified retirement plans. These funds include investments
considered to be available-for-sale marketable securities. At April 30, 2013 and 2012, the fair value of these investments was
$48.8 and $36.2, respectively, and was included in other noncurrent assets. Included in accumulated other comprehensive loss at
April 30, 2013 and 2012, were unrealized gains of $7.1 and $4.0, respectively. The related tax expense recognized in accumulated
other comprehensive loss was $2.6 and $1.5 at April 30, 2013 and 2012, respectively.
Property, Plant, and Equipment: Property, plant, and equipment is recognized at cost and is depreciated on a straight-line basis
over the estimated useful life of the asset (3 to 20 years for machinery and equipment, 3 to 7 years for capitalized software costs,
and 5 to 40 years for buildings, fixtures, and improvements). Coffee brew equipment is included in machinery and equipment in
the Consolidated Balance Sheets and was $39.2 and $37.1 at April 30, 2013 and 2012, respectively.
We lease certain land, buildings, and equipment for varying periods of time, with renewal options. Rent expense in 2013, 2012,
and 2011 totaled $59.2, $56.5, and $57.6, respectively. As of April 30, 2013, our minimum operating lease obligations were as
follows: $24.5 in 2014, $16.6 in 2015, $16.1 in 2016, $14.5 in 2017, and $13.7 in 2018.
In accordance with FASB ASC 360, Property, Plant, and Equipment, long-lived assets, except goodwill and indefinite-lived intangible
assets, are reviewed for impairment when circumstances indicate the carrying value of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net undiscounted cash
flows we estimate to be generated by such assets. If such assets are considered to be impaired, the impairment to be recognized is
the amount by which the carrying amount of the assets exceeds their estimated fair value. Assets to be disposed of by sale are
recognized as held for sale at the lower of carrying value or estimated net realizable value.
Goodwill and Other Intangible Assets: Goodwill is the excess of the purchase price paid over the estimated fair value of the net
assets of a business acquired. In accordance with FASB ASC 350, Intangibles – Goodwill and Other, goodwill and other indefinite-lived
intangible assets are not amortized but are reviewed at least annually for impairment. We conduct our annual test for impairment
of goodwill and other indefinite-lived intangible assets as of February 1 of each year. A discounted cash flow valuation technique is
utilized to estimate the fair value of our reporting units and indefinite-lived intangible assets. We also use a market-based approach
to estimate the fair value of our reporting units. For annual impairment testing purposes, we have six reporting units. The discount
rates utilized in the cash flow analyses are developed using a weighted-average cost of capital methodology. In addition to the
annual test, we test for impairment if events or circumstances occur that would more likely than not reduce the fair value of a
reporting unit below its carrying amount. Finite-lived intangible assets are amortized on a straight-line basis over their estimated
useful lives. For additional information, see Note 7: Goodwill and Other Intangible Assets.
Marketable Securities and Other Investments: Under our investment policy, we may invest in debt securities deemed to be investment
grade at the time of purchase for general corporate purposes. We determine the appropriate categorization of debt securities at the
time of purchase and reevaluate such designation at each balance sheet date. We typically categorize all debt securities as available
for sale, as we have the intent to convert these investments into cash if and when needed. Classification of available-for-sale
marketable securities as current or noncurrent is based on whether the conversion to cash is expected to be necessary for operations
in the upcoming year, which is consistent with the security’s maturity date, if applicable.
Securities categorized as available for sale are stated at fair value, with unrealized gains and losses reported as a component of
accumulated other comprehensive loss. All available-for-sale marketable securities had matured or were sold prior to April 30, 2012,
other than the funds associated with nonqualified retirement plans discussed below. Proceeds of $18.6 and $57.1 were realized
upon maturity or sale of available-for-sale marketable securities in 2012 and 2011, respectively. We use specific identification to
determine the basis on which securities are sold.
48
The J. M. Smucker Company
Foreign Currency Translation: Assets and liabilities of foreign subsidiaries are translated using the exchange rates in effect at the
balance sheet date, while income and expenses are translated using average rates. Translation adjustments are reported as a
component of shareholders’ equity in accumulated other comprehensive loss. Included in accumulated other comprehensive loss
at April 30, 2013 and 2012, were foreign currency gains of $61.5 and $67.0, respectively.
Recently Issued Accounting Standards: In June 2011, the FASB issued Accounting Standards Update (“ASU”) 2011-05, Presentation
of Comprehensive Income, which eliminated the option to present the components of other comprehensive income as part of the
statement of shareholders’ equity and required the presentation of net income and other comprehensive income to be in a single
continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 did not change the
components that are recognized in net income or other comprehensive income. ASU 2011-05 was effective in 2013, and we elected
to present net income and other comprehensive income in two separate but consecutive statements. In February 2013, the FASB
issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. ASU 2013-02 requires
reclassification adjustments for items that are reclassified from accumulated other comprehensive income to net income be presented
on the financial statements or in a note to the financial statements. ASU 2013-02 becomes effective in 2014 and will be applied
prospectively. We do not anticipate that the adoption of ASU 2013-02 will impact our financial statements, but will expand our
disclosures related to amounts reclassified out of accumulated other comprehensive income.
In December 2011, the FASB issued ASU 2011-11, Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 requires the
disclosure of both gross and net information about financial instruments and transactions eligible for offset in the consolidated
balance sheet. In January 2013, the FASB issued ASU 2013-01, Scope Clarification of Disclosures about Offsetting Assets and
Liabilities, which limits the scope of ASU 2011-11 to derivatives, repurchase and reverse repurchase agreements, and securities
borrowing and lending transactions. ASU 2011-11, as clarified by ASU 2013-01, will be effective for us on May 1, 2013, and will
require retrospective application. We do not anticipate that the adoption of ASU 2011-11, as clarified by ASU 2013-01, will impact
our financial statements, but will expand our disclosures related to financial instruments.
The FASB issued ASU 2011-08, Testing Goodwill for Impairment, and ASU 2012-02, Intangibles – Goodwill and Other (Topic 350):
Testing Indefinite-Lived Intangible Assets for Impairment, in September 2011 and July 2012, respectively. ASU 2011-08 and
ASU 2012-02 simplify the guidance for testing impairment of goodwill and indefinite-lived intangible assets by allowing the option
to perform a qualitative test to assess the likelihood that the estimated fair value is less than the carrying amount. ASU 2011-08
was effective for our February 1, 2013 annual impairment test. ASU 2012-02 will be effective for our February 1, 2014 annual
impairment test, but early adoption is permitted. The adoption of ASU 2011-08 did not change the process for our February 1, 2013
impairment test and did not impact our financial statements or related disclosures. We do not anticipate that the adoption of
ASU 2012-02 will change the process for our February 1, 2014 impairment test.
Risks and uncertainties: The raw materials we use are primarily commodities, agricultural-based products, and packaging materials.
The principal packaging materials we use are glass, plastic, steel cans, caps, carton board, and corrugate. The fruit and vegetable
raw materials used in the production of our food products are purchased from independent growers and suppliers. Green coffee,
peanuts, edible oils, sweeteners, milk, flour, corn, and other ingredients are obtained from various suppliers. The availability, quality,
and cost of many of these commodities have fluctuated, and may continue to fluctuate, over time. Green coffee is sourced solely
from foreign countries and its supply and price are subject to high volatility due to factors such as weather, global supply and demand,
pest damage, speculative influences, and political and economic conditions in the source countries. Raw materials are generally
available from numerous sources, although we have elected to source certain plastic packaging materials from single sources of
supply pursuant to long-term contracts. While availability may vary year to year, we believe that we will continue to be able to obtain
adequate supplies and that alternatives to single-sourced materials are available. We have not historically encountered significant
shortages of key raw materials. We consider our relationships with key material suppliers to be good.
Of our total employees, 28 percent are covered by union contracts at nine locations. The contracts vary in term depending on the
location, with four contracts expiring in 2014, representing 8 percent of our total employees.
2013 Annual Report
49
Notes to CoNsolidated FiNaNCial statemeNts
Notes to CoNsolidated FiNaNCial statemeNts
The J. M. Smucker Company
The J. M. Smucker Company
We insure our business and assets in each country against insurable risks, to the extent that we deem appropriate, based upon an
analysis of the relative risks and costs.
The purchase price allocated to the identifiable intangible assets acquired is as follows:
Reclassifications: Certain prior year amounts have been reclassified to conform to current year classifications.
Note 2
ACquiSiTionS
On January 3, 2012, we completed the acquisition of a majority of the North American foodservice coffee and hot beverage business
of Sara Lee Corporation, including a liquid coffee manufacturing facility in Suffolk, Virginia, for $420.6 in an all-cash transaction.
Utilizing proceeds from the 3.50 percent Senior Notes issued in October 2011, we paid Sara Lee Corporation, renamed The Hillshire
Brands Company, $375.6, net of a working capital adjustment, and will pay an additional $50.0 in declining installments through
June 2021, to a subsidiary of D.E Master Blenders 1753 N.V., an independent public company separated from The Hillshire Brands
Company. The additional $50.0 obligation was included in other current liabilities and other noncurrent liabilities in the Consolidated
Balance Sheets and was recognized at a present value of $45.0 as of the date of acquisition. During 2013, $10.0 was paid and included
in other – net financing on the Statement of Consolidated Cash Flows.
Total one-time costs related to the acquisition are estimated to be approximately $28.0, consisting primarily of transition services
provided by Sara Lee Corporation and employee separation and relocation costs, nearly all of which are cash related. We have incurred
one-time costs of $25.5 through April 30, 2013, directly related to the merger and integration of the acquired business, and the charges
were reported in other restructuring and merger and integration costs in the Statements of Consolidated Income. We incurred onetime costs of $11.3 in 2013 and we expect the remainder of the costs to be incurred through 2014.
The acquisition included the market-leading liquid coffee concentrate business sold under the licensed Douwe Egberts® brand,
along with a variety of roast and ground coffee, cappuccino, tea, and cocoa products, sold through foodservice channels in North
America. Liquid coffee concentrate adds a unique, high-quality, and technology-driven form of coffee to our existing foodservice
product offering.
The purchase price was allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at
the date of acquisition. We determined the estimated fair values based on independent appraisals, discounted cash flow analyses,
and our own estimates. The purchase price exceeded the estimated fair value of the net identifiable tangible and intangible assets
acquired, and, as such, the excess was allocated to goodwill. The amount allocated to goodwill was primarily attributable to anticipated
synergies and market expansion.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date.
Assets acquired:
Cash and cash equivalents
Other current assets
Property, plant, and equipment
Goodwill
Intangible assets
Other noncurrent assets
$
1.2
42.6
92.8
149.9
138.9
0.9
Total assets acquired
$426.3
Liabilities assumed:
Current liabilities
Noncurrent liabilities
$
3.6
2.1
Total liabilities assumed
$
5.7
Net assets acquired
$420.6
Of the total goodwill assigned to the International, Foodservice, and Natural Foods segment, $133.6 is deductible for income
tax purposes.
Intangible assets with finite lives:
Customer relationships (10-year useful life)
Technology (10-year useful life)
Trademarks (6-year weighted-average useful life)
$ 92.0
23.8
23.1
Total intangible assets
$138.9
On May 16, 2011, we completed the acquisition of the coffee brands and business operations of Rowland Coffee Roasters, Inc.
(“Rowland Coffee”), a privately-held company headquartered in Miami, Florida, for $362.8. The acquisition included a manufacturing,
distribution, and office facility in Miami. We utilized cash on hand and borrowed $180.0 under our revolving credit facility to fund
the transaction. In addition, we incurred one-time costs of $13.4 through April 30, 2013, directly related to the merger and integration
of Rowland Coffee, which includes approximately $6.0 in noncash expense items that were reported in cost of products sold –
restructuring and merger and integration. The remaining charges were reported in other restructuring and merger and integration costs in the Statements of Consolidated Income. Total one-time costs related to the acquisition are estimated to be approximately
$25.0, including approximately $10.0 of noncash charges, primarily accelerated depreciation, associated with consolidating coffee
production currently in Miami into our existing facilities in New Orleans, Louisiana. We incurred one-time costs of $2.7 in 2013 and
we expect the remainder of the costs to be incurred through 2015.
The acquisition of Rowland Coffee, a leading producer of espresso coffee in the U.S., strengthens and broadens our leadership in
the U.S. retail coffee category by adding the leading Hispanic brands, Café Bustelo and Café Pilon, to our portfolio of brands.
The purchase price was allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at
the date of acquisition. We determined the estimated fair values based on independent appraisals, discounted cash flow analyses,
and our own estimates. The purchase price exceeded the estimated fair value of the net identifiable tangible and intangible assets
acquired, and, as such, the excess was allocated to goodwill. The amount allocated to goodwill was primarily attributable to anticipated
synergies and market expansion. The following table summarizes the estimated fair values of the assets acquired and liabilities
assumed at the acquisition date.
Assets acquired:
Current assets
Property, plant, and equipment
Goodwill
Intangible assets
$ 34.0
29.2
91.7
213.5
Total assets acquired
$368.4
Liabilities assumed:
Current liabilities
$  5.6
Total liabilities assumed
$  5.6
Net assets acquired
$362.8
Goodwill of $84.8 and $6.9 was assigned to the U.S. Retail Coffee and the International, Foodservice, and Natural Foods segments,
respectively. Of the total goodwill, $82.4 is deductible for income tax purposes.
The purchase price allocated to the identifiable intangible assets acquired is as follows:
Intangible assets with finite lives:
Customer relationships (19-year weighted-average useful life)
Trademark (10-year useful life)
Intangible assets with indefinite lives:
Trademarks
Total intangible assets
50
The J. M. Smucker Company
$147.8
1.6
64.1
$213.5
2013 Annual Report
51
Notes to CoNsolidated FiNaNCial statemeNts
Notes to CoNsolidated FiNaNCial statemeNts
The J. M. Smucker Company
The J. M. Smucker Company
Note 3
equiTy MeThod inveSTMenT
On March 26, 2012, we acquired a 25 percent equity interest in Guilin Seamild Biologic Technology Development Co., Ltd. (“Seamild”),
a privately-owned manufacturer and marketer of oats products headquartered in Guilin in the Guangxi province of China, for $35.9.
Seamild’s products, primarily oatmeal and oat-based cereals, are sold under the leading Seamild brand with distribution in retail
channels throughout China. Seamild’s portfolio of quality, trusted products aligns with our strategy of owning and marketing leading
food brands.
The initial investment in Seamild was recorded at cost and is included in other noncurrent assets in the Consolidated Balance Sheets.
The difference between the carrying amount of the investment and the underlying equity in net assets is primarily attributable to
goodwill and other intangible assets. Under the equity method of accounting, the investment is adjusted for our proportionate
share of earnings or losses, including consideration of basis differences resulting from the difference between the initial carrying
amount of the investment and the underlying equity in net assets. The investment did not have a material impact on the International,
Foodservice, and Natural Foods segment or the consolidated financial statements for the years ended April 30, 2013 and 2012.
Note 4
ReSTRuCTuRing
In calendar 2010, we announced plans to restructure our coffee, fruit spreads, and Canadian pickle and condiments operations as
part of our ongoing efforts to enhance the long-term strength and profitability of our leading brands. The initiative included capital
investments for a new state-of-the-art food manufacturing facility in Orrville, Ohio; consolidation of coffee production in New Orleans,
Louisiana; and the transition of pickle and condiments production to third-party manufacturers.
The following table summarizes the restructuring activity, including the liabilities recorded and the total amount expected to be incurred.
Long-Lived
Asset Charges
Employee
Separation
Site Preparation
and Equipment
Relocation
Production
Start-up
Other Costs
Total
Total expected restructuring charge
$102.0
$ 67.0
$ 42.5
$ 39.0
$ 9.5
$260.0
Balance at May 1, 2010
Charge to expense
Cash payments
Noncash utilization
$
—
53.6
—
(53.6)
$  1.1
36.0
(18.4)
(8.5)
$
—
6.2
(6.2)
—
$
—
5.2
(5.2)
—
$ —
1.0
(1.0)
—
$ 1.1
102.0
(30.8)
(62.1)
Balance at April 30, 2011
Charge to expense
Cash payments
Noncash utilization
$
—
34.2
—
(34.2)
$ 10.2
20.4
(13.8)
(8.0)
$
—
13.0
(13.0)
—
$
—
10.6
(10.6)
—
$ —
2.9
(2.9)
—
$ 10.2
81.1
(40.3)
(42.2)
Balance at April 30, 2012
Charge to expense
Cash payments
Noncash utilization
$
—
8.2
—
(8.2)
$ 8.8
3.4
(4.5)
—
$
$
$ —
3.0
(3.0)
—
$
8.8
38.8
(31.7)
(8.2)
Balance at April 30, 2013
$
—
$ 7.7
$
—
$ —
$
7.7
Remaining expected restructuring charge
$
2.1
$ 6.1
$ 9.5
$ 12.4
$ 2.3
$ 32.4
—
13.4
(13.4)
—
—
—
10.8
(10.8)
—
$
In addition, during 2013, we announced plans to expand capacity in order to support our growth objectives for the peanut and other
nut butter businesses and increased our estimate of total anticipated restructuring costs from approximately $245.0 to $260.0. These
additional costs primarily consist of site preparation and equipment relocation and production start-up costs. Production expansion
will include converting the Memphis, Tennessee fruit spreads facility into a peanut butter plant. The Memphis facility was originally
scheduled to close as part of the fruit spreads portion of the restructuring plan. Cumulative costs of $227.6 have been incurred
through April 30, 2013. The majority of the remaining costs are anticipated to be recognized through 2015.
During the years ended April 30, 2013, 2012, and 2011, total restructuring charges of $38.8, $81.1, and $102.0, respectively, were
reported in the Statements of Consolidated Income. Of the total restructuring charges, $10.0, $38.6, and $54.1 were reported in
cost of products sold – restructuring and merger and integration in the years ended April 30, 2013, 2012, and 2011, respectively.
The remaining charges were reported in other restructuring and merger and integration costs. The restructuring costs classified
as cost of products sold – restructuring and merger and integration primarily include long-lived asset charges for accelerated
depreciation related to property, plant, and equipment that had been used at the affected production facilities prior to closure.
Upon conversion of the Memphis facility, we intend to relocate natural peanut butter production, currently produced at the
New Bethlehem, Pennsylvania facility to the Memphis facility. The New Bethlehem facility will then be converted to produce specialty
nut butters, which are currently produced by third-party manufacturers.
Employee separation costs include severance, retention bonuses, and pension costs. Severance costs and retention bonuses are
being recognized over the estimated future service period of the affected employees. The obligation related to employee separation
costs is included in other current liabilities in the Consolidated Balance Sheets. For additional information on the impact of the
restructuring plan on defined benefit pension and other postretirement benefit plans not reflected in the table above, see Note 8:
Pensions and Other Postretirement Benefits.
Upon completion, the restructuring plan will result in a reduction of approximately 850 full-time positions. As of April 30, 2013,
approximately 80 percent of the 850 full-time positions have been reduced and the Sherman, Texas; Dunnville, Ontario; Delhi
Township, Ontario; and Kansas City, Missouri facilities have been closed. The Ste. Marie, Quebec facility is anticipated to close
in 2014.
Other costs include professional fees, costs related to closing the facilities, and miscellaneous expenditures associated with the
restructuring initiative and are expensed as incurred.
Note 5
RePoRTAble SegMenTS
We operate in one industry: the manufacturing and marketing of food products. We have three reportable segments: U.S. Retail
Coffee, U.S. Retail Consumer Foods, and International, Foodservice, and Natural Foods. The U.S. Retail Coffee segment primarily
represents the domestic sales of Folgers, Dunkin’ Donuts, Millstone, Café Bustelo, and Café Pilon branded coffee; the U.S. Retail
Consumer Foods segment primarily includes domestic sales of Jif, Smucker’s, Pillsbury, Crisco, Martha White, Hungry Jack, and
Eagle Brand branded products; and the International, Foodservice, and Natural Foods segment is comprised of products distributed
domestically and in foreign countries through retail channels, foodservice distributors and operators (e.g., restaurants, lodging,
schools and universities, health care operators), and health and natural foods stores and distributors.
52
The J. M. Smucker Company
2013 Annual Report
53
Notes to CoNsolidated FiNaNCial statemeNts
Notes to CoNsolidated FiNaNCial statemeNts
The J. M. Smucker Company
The J. M. Smucker Company
Segment profit represents revenue, less direct and allocable operating expenses, and is consistent with the way in which we manage
segments. However, we do not represent that the segments, if operated independently, would report the segment profit set forth
below, as segment profit excludes certain operating expenses such as corporate administrative expenses. Segment assets represent
direct and allocable assets, including certain corporate-held assets such as property, plant, and equipment, and are also set forth in
the following table.
The following table presents certain geographical information.
Year Ended April 30,
Net sales:
U.S. Retail Coffee
U.S. Retail Consumer Foods
International, Foodservice, and Natural Foods
2013
2012
2011
$2,306.5
2,214.8
1,376.4
$ 2,297.7
2,094.5
1,133.6
$1,930.9
1,953.0
941.8
Total net sales
$ 5,897.7
$5,525.8
$4,825.7
Segment profit:
U.S. Retail Coffee
U.S. Retail Consumer Foods
International, Foodservice, and Natural Foods
$ 607.5
415.3
198.2
$ 543.0
393.3
168.6
$ 536.1
406.5
159.6
Total segment profit
$ 1,221.0
$1,104.9
$1,102.2
(93.4)
(20.5)
(11.5)
(42.8)
(6.7)
(229.1)
0.3
(79.8)
(19.3)
(43.2)
(72.5)
—
(191.6)
2.7
(67.1)
(19.9)
(54.1)
(59.1)
—
(184.8)
—
Income before income taxes
$ 817.3
$ 701.2
$ 717.2
Assets:
U.S. Retail Coffee
U.S. Retail Consumer Foods
International, Foodservice, and Natural Foods
Unallocated (A)
$4,882.4
2,618.2
1,201.3
329.9
$5,033.6
2,612.7
1,179.6
289.3
$4,830.1
2,416.0
684.4
394.1
Total assets
$9,031.8
$9,115.2
$8,324.6
Interest expense – net
Share-based compensation expense
Cost of products sold – restructuring and merger and integration
Other restructuring and merger and integration costs
Other special project costs
Corporate administrative expenses
Other income – net
Depreciation, amortization, and impairment charges:
U.S. Retail Coffee
U.S. Retail Consumer Foods
International, Foodservice, and Natural Foods
Unallocated (B)
$ 100.7
47.1
63.7
39.4
$ 102.3
46.7
37.7
64.9
$
Total depreciation, amortization, and impairment charges
$ 250.9
$ 251.6
$ 257.2
$
$
$
Additions to property, plant, and equipment:
U.S. Retail Coffee
U.S. Retail Consumer Foods
International, Foodservice, and Natural Foods
Total additions to property, plant, and equipment
46.5
85.1
74.9
$ 206.5
86.9
159.5
27.8
$ 274.2
95.4
43.3
41.7
76.8
59.9
88.2
32.0
$ 180.1
(A) Primarily represents unallocated cash and cash equivalents and corporate-held investments.
Year Ended April 30,
Net sales:
Domestic
International:
Canada
All other international
Total international
Total net sales
Assets:
Domestic
International:
Canada
All other international
2013
2012
2011
$5,355.9
$5,014.7
$4,358.1
$ 459.5
82.3
$ 447.0
64.1
$ 409.7
57.9
$ 541.8
$ 511.1
$ 467.6
$5,897.7
$5,525.8
$4,825.7
$8,585.4
$8,683.5
$ 7,912.3
$ 396.3
50.1
$ 386.0
45.7
$ 406.6
5.7
$ 446.4
$ 431.7
$ 412.3
$9,031.8
$9,115.2
$8,324.6
$1,234.7
$1,164.8
$ 886.0
$
20.6
39.0
$
28.1
37.2
$
48.1
0.7
$
59.6
$
65.3
$
48.8
(A)
Total international
Total assets
Long-lived assets (excluding goodwill and other intangible assets):
Domestic
International:
Canada
All other international
Total international
Total long-lived assets (excluding goodwill and other intangible assets)
$1,294.3
$1,230.1
$ 934.8
(A) Amounts in 2012, previously recognized in domestic, were adjusted to reflect the Seamild equity investment as all other international. See Note 3: Equity Method Investment for
additional information.
The following table presents product sales information.
Year Ended April 30,
2013
Coffee
Peanut butter
Fruit spreads
Shortening and oils
Baking mixes and frostings
Canned milk
Flour and baking ingredients
Juices and beverages
Frozen handheld
Portion control
Toppings and syrups
Other
Total product sales
2012
2011
48%
13
6
6
6
4
4
3
3
2
2
3
48%
12
7
7
6
5
5
2
2
2
2
2
44%
12
8
7
6
5
5
3
2
3
2
3
100%
100%
100%
(B) Primarily represents unallocated depreciation expense included in cost of products sold – restructuring and merger and integration and corporate administrative expense.
54
The J. M. Smucker Company
2013 Annual Report
55
Notes to CoNsolidated FiNaNCial statemeNts
Notes to CoNsolidated FiNaNCial statemeNts
The J. M. Smucker Company
The J. M. Smucker Company
Note 6
Note 7
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.
goodwill And oTheR inTAngible ASSeTS
A summary of changes in goodwill during the years ended April 30, 2013 and 2012, by reportable segment is as follows:
U.S. Retail
Coffee
U.S. Retail
Consumer
Foods
International,
Foodservice, and
Natural Foods
Total
Balance at May 1, 2011
Acquisitions
Other
$1,635.4
84.8
0.1
$1,036.1
—
(0.9)
$141.2
156.8
1.1
$2,812.7
241.6
0.3
Balance at April 30, 2012
Other
$1,720.3
—
$1,035.2
(0.6)
$299.1
(1.1)
$3,054.6
(1.7)
Balance at April 30, 2013
$1,720.3
$1,034.6
$298.0
$3,052.9
Year Ended April 30,
2013
2012
2011
Net income
Net income allocated to participating securities
$544.2
4.7
$459.7
4.2
$479.5
4.7
Net income allocated to common stockholders
$539.5
$455.5
$474.8
Weighted-average common shares outstanding
Dilutive effect of stock options
107,881,519
23,256
112,212,677
49,616
117,009,362
110,335
Weighted-average common shares outstanding – assuming dilution
107,904,775
112,262,293
117,119,697
Net income per common share
$ 5.00
$ 4.06
$ 4.06
Net income per common share – assuming dilution
$ 5.00
$ 4.06
$ 4.05
The other amounts primarily represent foreign currency exchange during April 30, 2013 and 2012.
Other intangible assets and related accumulated amortization and impairment charges are as follows:
April 30, 2013
The following table reconciles the weighted-average common shares used in the basic and diluted earnings per share disclosures to
the total weighted-average shares outstanding.
Accumulated
Amortization/
Acquisition
Impairment
Cost
Charges
Year Ended April 30,
2013
2012
2011
Weighted-average common shares outstanding
Weighted-average participating shares outstanding
107,881,519
946,378
112,212,677
1,051,274
117,009,362
1,156,389
Weighted-average shares outstanding
Dilutive effect of stock options
108,827,897
23,256
113,263,951
49,616
118,165,751
110,335
Weighted-average shares outstanding – assuming dilution
108,851,153
113,313,567
118,276,086
April 30, 2012
Net
Accumulated
Amortization/
Acquisition
Impairment
Cost
Charges
Net
Finite-lived intangible assets
subject to amortization:
Customer and contractual relationships
Patents and technology
Trademarks
$1,415.1
158.8
62.5
$314.8
49.3
26.9
$1,100.3
109.5
35.6
$1,415.1
158.8
62.5
$238.4
36.9
18.9
$1,176.7
121.9
43.6
Total intangible assets
subject to amortization
$1,636.4
$391.0
$1,245.4
$1,636.4
$294.2
$1,342.2
Indefinite-lived intangible assets
not subject to amortization:
Trademarks
$1,855.6
$ 11.6
$1,844.0
$1,855.6
$ 10.8
$1,844.8
Total other intangible assets
$3,492.0
$402.6
$3,089.4
$3,492.0
$305.0
$3,187.0
Amortization expense for finite-lived intangible assets was $96.6, $87.7, and $73.4 in 2013, 2012, and 2011, respectively.
The weighted-average useful lives of the customer and contractual relationships, patents and technology, and trademarks are
19 years, 13 years, and 9 years, respectively. The weighted-average useful life of the total finite-lived intangible assets is 18 years.
Based on the amount of intangible assets subject to amortization at April 30, 2013, the estimated amortization expense is $97.7
for 2014, $96.5 for both 2015 and 2016, $95.9 for 2017, and $91.8 for 2018.
We review goodwill and other indefinite-lived intangible assets at least annually for impairment. The annual impairment review
was performed as of February 1, 2013. Goodwill impairment is tested at the reporting unit level. We have six reporting units. No
goodwill or other indefinite-lived intangible asset impairment was recognized as a result of the annual evaluation performed as of
February 1, 2013. The estimated fair value of each reporting unit and other indefinite-lived intangible asset was substantially in
excess of its carrying value as of the annual test date, with the exception of the Crisco trademark. A sensitivity analysis was performed
on the Crisco trademark and yielded an estimated fair value slightly below carrying value resulting from a hypothetical 50 basis point
increase in the discount rate and a 50 basis point decrease in the expected long-term growth rate. The Crisco trademark represents
less than 10 percent of total other indefinite-lived intangible assets.
Nonrecurring fair value adjustments of $4.6 and $17.6 were recognized related to the impairment of certain intangible assets in 2012
and 2011, respectively. The impairment recognized in 2012 was related to a finite-lived trademark upon evaluation of the historical
performance and future growth of this regional canned milk brand. The majority of the impairment recognized in 2011 was related
to the Europe’s Best trademark and customer relationship. In October 2011, we sold the Europe’s Best frozen fruit and vegetable
business, resulting in a loss of $11.3.
56
The J. M. Smucker Company
2013 Annual Report
57
Notes to CoNsolidated FiNaNCial statemeNts
Notes to CoNsolidated FiNaNCial statemeNts
The J. M. Smucker Company
The J. M. Smucker Company
Note 8
PenSionS And oTheR PoSTReTiReMenT benefiTS
We use a measurement date of April 30 to determine defined benefit pension plans and other postretirement benefits’ assets and
benefit obligations. The following table sets forth the combined status of the plans as recognized in the Consolidated Balance Sheets.
We have defined benefit pension plans covering certain domestic and Canadian employees. Benefits are based on the employee’s years
of service and compensation. Our plans are funded in conformity with the funding requirements of applicable government regulations.
In addition to providing pension benefits, we sponsor several unfunded, defined postretirement plans that provide health care and
life insurance benefits to certain retired domestic and Canadian employees. These plans are contributory, with retiree contributions
adjusted periodically, and contain other cost-sharing features, such as deductibles and coinsurance. Covered employees generally
are eligible for these benefits when they reach age 55 and have attained 10 years of credited service.
Upon completion of the restructuring activity discussed in Note 4: Restructuring, approximately 850 full-time positions will be reduced.
We have included the impact of the reductions in measuring the U.S. and Canadian benefit obligation of the pension plans and other
postretirement plans at April 30, 2013 and 2012. Included in the following tables are charges recognized for termination benefits,
curtailment, and settlement as a result of the restructuring plan.
During 2013, a portion of our terminated pension participants received lump-sum cash settlements in order to reduce our future
pension obligation and administrative costs. The charges related to the lump-sum cash settlements are included below in settlement
loss and were reported in other special project costs in the Statement of Consolidated Income for the year ended April 30, 2013.
The lump-sum offerings in 2013 conclude the pension settlement special project cost activities.
The following table summarizes the components of net periodic benefit cost and the change in accumulated other comprehensive
loss related to the defined benefit pension and other postretirement plans.
Defined Benefit
Pension Plans
2012
2011
2013
2012
2011
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost (credit)
Amortization of net actuarial loss (gain)
Curtailment loss (gain)
Settlement loss
Termination benefit cost
$  8.8
23.9
(25.3)
1.0
13.1
—
6.7
—
$  8.1
26.2
(27.0)
1.1
9.4
1.1
1.1
1.8
$  7.5
25.5
(26.8)
1.1
10.3
4.1
—
8.4
$ 2.5
3.0
—
(0.4)
—
—
—
—
$ 2.3
3.1
—
(0.4)
—
(0.1)
—
2.0
$ 1.6
2.8
—
(0.5)
(0.5)
—
—
2.4
Net periodic benefit cost
$ 28.2
$ 21.8
$ 30.1
$ 5.1
$ 6.9
$ 5.8
Year Ended April 30,
2013
Other
Postretirement Benefits
Other changes in plan assets and benefit liabilities
recognized in accumulated other comprehensive
loss before income taxes:
Prior service (cost) credit arising during the year
Net actuarial loss arising during the year
Amortization of prior service cost (credit)
Amortization of net actuarial loss (gain)
Curtailment loss (gain)
Settlement loss
Foreign currency translation
$ (4.0)
(20.5)
1.0
13.1
2.0
6.7
0.9
$   —
(82.1)
1.1
9.4
1.1
1.1
1.1
$ (0.4)
(13.5)
1.1
10.3
4.1
—
(2.0)
$ 9.6
(4.5)
(0.4)
—
—
—
—
$  —
(4.2)
(0.4)
—
(0.1)
—
(0.1)
$(0.9)
(7.8)
(0.5)
(0.5)
—
—
0.1
Net change for year
$ (0.8)
$(68.3)
$ (0.4)
$ 4.7
$(4.8)
$ (9.6)
Weighted-average assumptions used in determining
net periodic benefit costs:
U.S. plans:
Discount rate
Expected return on plan assets
Rate of compensation increase
Canadian plans:
Discount rate
Expected return on plan assets
Rate of compensation increase
58
The J. M. Smucker Company
4.70%
7.00
4.12
5.50%
7.00
4.14
5.80%
7.50
4.15
4.70%
—
—
5.50%
—
—
5.80%
—
—
4.20%
6.17
4.00
5.00%
6.66
4.00
5.30%
7.08
4.00
4.20%
—
—
5.00%
—
—
5.30%
—
—
Defined Benefit
Pension Plans
April 30,
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Amendments
Actuarial loss
Participant contributions
Benefits paid
Foreign currency translation adjustments
Curtailment
Settlement
Termination benefit cost
Other adjustments
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Company contributions
Participant contributions
Benefits paid
Foreign currency translation adjustments
Settlement
Fair value of plan assets at end of year
2013
Other
Postretirement Benefits
2013
2012
2012
$ 561.7
8.8
23.9
4.2
39.6
0.5
(43.6)
(2.6)
(2.0)
(14.8)
—
—
$ 503.3
8.1
26.2
—
60.0
0.5
(28.5)
(5.1)
0.4
(5.0)
1.8
—
$ 68.8
2.5
3.0
(9.6)
4.5
1.5
(3.7)
(0.2)
—
—
—
0.3
$ 59.8
2.3
3.1
—
4.3
1.4
(3.6)
(0.5)
(0.1)
—
2.0
0.1
$ 575.7
$ 561.7
$ 67.1
$ 68.8
$ 386.5
44.2
40.0
0.5
(43.6)
(2.1)
(14.8)
$ 407.6
5.2
11.4
0.5
(28.5)
(4.7)
(5.0)
$
—
—
2.2
1.5
(3.7)
—
—
$
—
—
2.2
1.4
(3.6)
—
—
$ 410.7
$ 386.5
$
—
$
—
Funded status of the plans
$(165.0)
$(175.2)
$ (67.1)
$(68.8)
Defined benefit pensions
Accrued compensation
Postretirement benefits other than pensions
$(163.0)
(2.0)
—
$ (147.6)
(27.6)
—
$
$
Net benefit liability
$(165.0)
$(175.2)
$(67.1)
—
—
(67.1)
—
—
(68.8)
$(68.8)
The following table summarizes amounts recognized in accumulated other comprehensive loss in the Consolidated Balance Sheets,
before income taxes.
Defined Benefit
Pension Plans
2013
2012
Net actuarial (loss) gain
Prior service (cost) credit
$(202.1)
(6.1)
$(204.4)
(3.0)
$ (2.2)
10.9
$2.3
1.7
Total recognized in accumulated other comprehensive loss
$(208.2)
$(207.4)
$ 8.7
$4.0
April 30,
2013
Other
Postretirement Benefits
2012
The related tax impact recognized in accumulated other comprehensive loss was a benefit of $68.2 and $69.2 at April 30, 2013
and 2012, respectively.
During 2014, we expect to recognize amortization of net actuarial losses and prior service cost of $13.0 and $0.2, respectively,
in net periodic benefit cost.
2013 Annual Report
59
Notes to CoNsolidated FiNaNCial statemeNts
Notes to CoNsolidated FiNaNCial statemeNts
The J. M. Smucker Company
The J. M. Smucker Company
The following table sets forth the weighted-average assumptions used in determining the benefit obligations.
The following table sets forth additional information related to our defined benefit pension plans.
Defined Benefit
Pension Plans
April 30,
U.S. plans:
Discount rate
Rate of compensation increase
Canadian plans:
Discount rate
Rate of compensation increase
Other
Postretirement Benefits
2013
2012
2013
2012
3.99%
4.12
4.70%
4.14
3.80%
—
4.70%
—
3.65%
3.00
4.20%
4.00
3.70%
—
4.20%
—
For 2014, the assumed health care trend rates are 7.5 percent and 6.0 percent for the U.S. and Canadian plans, respectively. The rate
for participants under age 65 is assumed to decrease to 5.0 percent in 2019 and 4.5 percent in 2017 for the U.S. and Canadian plans,
respectively. The health care cost trend rate assumption has a significant effect on the amount of the other postretirement benefits
obligation and periodic other postretirement benefits cost reported.
A one percentage point annual change in the assumed health care cost trend rate would have the following effect as of April 30, 2013:
One Percentage Point
Increase
Effect on total service and interest cost components
Effect on benefit obligation
Decrease
$0.2
3.4
April 30,
Accumulated benefit obligation for all pension plans
Plans with an accumulated benefit obligation in excess of plan assets:
Accumulated benefit obligation
Fair value of plan assets
Plans with a projected benefit obligation in excess of plan assets:
Projected benefit obligation
Fair value of plan assets
2013
2012
2013
2012
Benefit obligation at end of year
Fair value of plan assets at end of year
$125.7
107.1
$125.7
104.5
$ 13.5
—
$ 13.3
—
Funded status of the plans
$ (18.6)
$ (21.2)
$(13.5)
$(13.3)
$
1.3
5.0
(6.2)
1.7
—
—
$
1.3
5.6
(7.0)
3.0
—
1.1
$
$
$
1.8
$
4.0
$ 0.6
$ 0.5
$
5.0
0.4
(9.4)
8.7
(2.1)
—
$
6.1
0.5
(9.3)
3.1
(4.7)
(5.0)
$ 0.9
—
(0.9)
—
—
—
$ 0.8
—
(0.8)
—
—
—
Year Ended April 30,
Components of net periodic benefit cost:
Service cost
Interest cost
Expected return on plan assets
Amortization of net actuarial loss
Curtailment gain
Settlement loss
Net periodic benefit cost
Changes in plan assets:
Company contributions
Participant contributions
Benefits paid
Actual return on plan assets
Foreign currency translation
Settlement loss
60
The J. M. Smucker Company
—
0.6
—
—
—
—
—
0.6
—
—
(0.1)
—
$523.6
$539.0
410.7
$523.6
386.5
$575.7
410.7
$561.7
386.5
The following tables summarize the fair value of the major asset classes for the U.S. and Canadian defined benefit pension plans and
the levels within the fair value hierarchy in which the fair value measurements fall.
$0.2
2.9
Other
Postretirement Benefits
2012
$539.0
We employ a total return on investment approach for the defined benefit pension plans’ assets. A mix of equity, fixed-income, and
alternative investments is used to maximize the long-term rate of return on assets for the level of risk. In determining the expected
long-term rate of return on the defined benefit pension plans’ assets, we consider the historical rates of return, the nature of investments, the asset allocation, and expectations of future investment strategies. The actual rate of return was 12.6 percent and 1.9 percent
for the years ended April 30, 2013 and 2012, respectively.
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, 2013
Cash and cash equivalents (A)
Equity securities:
U.S. (B)
International (C)
Fixed-income securities:
Bonds (D)
Fixed income (E)
Other types of investments: (F)
Private equity funds
$  4.4
$  —
$  —
$  4.4
97.2
72.1
16.8
12.9
—
—
114.0
85.0
147.7
44.6
—
—
—
—
147.7
44.6
—
—
15.0
15.0
Total financial assets measured at fair value
$366.0
$29.7
$15.0
$410.7
The following table sets forth selective information pertaining to our Canadian pension and other postretirement benefit plans.
Defined Benefit
Pension Plans
2013
2013 Annual Report
61
Notes to CoNsolidated FiNaNCial statemeNts
Notes to CoNsolidated FiNaNCial statemeNts
The J. M. Smucker Company
The J. M. Smucker Company
The following tables present a rollforward of activity for Level 3 assets.
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, 2012
Cash and cash equivalents (A)
Equity securities:
U.S. (B)
International (C)
Fixed-income securities:
Bonds (D)
Fixed income (E)
Other types of investments: (F)
Hedge funds
Private equity funds
$ 14.0
$  —
$  —
$ 14.0
79.6
65.4
16.9
13.0
—
—
96.5
78.4
82.1
76.9
—
—
—
—
82.1
76.9
—
—
—
—
22.3
16.3
22.3
16.3
Total financial assets measured at fair value
$318.0
$29.9
$38.6
$386.5
(A) This category includes money market holdings with maturities of three months or less and cash held in escrow for less than six months. These assets are classified as Level 1 and
based on their short-term nature, carrying value approximates fair value.
(B) This category is invested primarily in a diversified portfolio of common stocks and index funds that invest in U.S. stocks with market capitalization ranges similar to those found
in the various Russell Indexes and are traded on active exchanges. The Level 1 assets are valued using quoted market prices for identical securities in active markets. The Level 2
assets are funds that consist of equity securities traded on active exchanges.
(C) This category is invested primarily in common stocks and other equity securities traded on active exchanges whose issuers are located outside the U.S. The fund invests primarily
in developed countries, but may also invest in emerging markets. The Level 1 assets are valued using quoted market prices for identical securities in active markets. The Level 2
assets are funds that consist of equity securities traded on active exchanges.
(D) This category seeks to duplicate the return characteristics of high-quality corporate bonds with a duration range of 10 to 13 years. The Level 1 assets are valued using quoted market
prices for identical securities in active markets.
(E) In 2013, this category is comprised of fixed-income funds that invest primarily in government-related bonds of non-U.S. issuers and include investments in the Canadian market as
well as emerging markets. In 2012, this category was comprised of a core fixed-income fund that invested at least 80 percent of its assets in investment-grade U.S. corporate and
government fixed-income securities, including mortgage-backed securities. The Level 1 assets are valued using quoted market prices for identical securities in active markets.
Hedge
Funds
Private
Equity Funds
Total
Balance at May 1, 2012
Purchases and sales – net
Actual return on plan assets sold during the period
Actual return on plan assets still held at reporting date
$ 22.3
(22.8)
0.5
—
$16.3
1.1
—
(2.4)
$ 38.6
(21.7)
0.5
(2.4)
Balance at April 30, 2013
$
—
$15.0
$ 15.0
U.S. Equity
Securities
Hedge
Funds
Private
Equity Funds
Total
Balance at May 1, 2011
Purchases and sales – net
Actual return on plan assets sold during the period
Actual return on plan assets still held at reporting date
$ 4.8
3.0
(7.8)
—
$ 37.4
(13.6)
(0.9)
(0.6)
$13.2
1.1
—
2.0
$ 55.4
(9.5)
(8.7)
1.4
Balance at April 30, 2012
$ —
$ 22.3
$16.3
$ 38.6
The current investment policy is to invest 47 percent of assets in equity securities, 47 percent in fixed-income securities, and 6 percent
in other investments. Included in equity securities were 317,552 of our common shares at April 30, 2013 and 2012. The market value
of these shares was $32.8 at April 30, 2013. We paid dividends of $0.6 on these shares during 2013.
We expect to contribute approximately $6.0 to the defined benefit pension plans in 2014. We expect the following payments to be made
from the defined benefit pension and other postretirement benefit plans: $42.9 in 2014, $36.4 in 2015, $44.0 in 2016, $38.0 in 2017,
$42.3 in 2018, and $211.9 in 2019 through 2023.
(F) The hedge funds category is comprised of hedge funds of funds that invest in equity hedge, directional, relative value, and event-driven funds. The hedge funds have quarterly
liquidity with 65 days’ notice. All hedge funds were sold prior to April 30, 2013. The private equity funds category is comprised of one fund that consists primarily of limited
partnership interests in corporate finance and venture capital funds. The private equity fund cannot be redeemed and return of principal is based on the liquidation of the
underlying assets. Both the hedge funds and the private equity fund are classified as Level 3 assets and are valued based on each fund’s net asset value (“NAV”). NAV is calculated
based on the estimated fair value of the underlying investment funds within the portfolio and is corroborated by our review.
62
The J. M. Smucker Company
2013 Annual Report
63
Notes to CoNsolidated FiNaNCial statemeNts
Notes to CoNsolidated FiNaNCial statemeNts
The J. M. Smucker Company
The J. M. Smucker Company
Note 9
ShARe-bASed PAyMenTS
We provide for equity-based incentives to be awarded to key employees and non-employee directors. Currently, these incentives
consist of restricted shares, restricted stock units (which may also be referred to as deferred stock units), performance units, and
stock options. These awards are administered primarily through the 2010 Equity and Incentive Compensation Plan approved by
our shareholders in August 2010. Awards under this plan may be in the form of stock options, stock appreciation rights, restricted
shares, restricted stock units, performance shares, performance units, incentive awards, and other share-based awards. Awards
under this plan may be granted to our non-employee directors, consultants, officers, and other employees. Deferred stock units
granted to non-employee directors vest immediately, and along with dividends credited on those deferred stock units, are paid out
in the form of common shares upon termination of service as a non-employee director. At April 30, 2013, there were 7,092,083
shares available for future issuance under this plan.
Under the 2010 Equity and Incentive Compensation Plan, we have the option to settle share-based awards by issuing common shares
from treasury, issuing new Company common shares, or issuing a combination of common shares from treasury and new Company
common shares.
Stock Options: The following table is a summary of our stock option activity and related information.
Outstanding at May 1, 2012
Exercised
Outstanding and exercisable at April 30, 2013
Options
Weighted-Average
Exercise Price
124,841
(77,408)
$42.18
40.91
47,433
$44.26
At April 30, 2013, the weighted-average remaining contractual term for stock options outstanding and exercisable was 2.3 years
and the aggregate intrinsic value of these stock options was $2.8.
The total intrinsic value of options exercised during 2013, 2012, and 2011 was $3.4, $2.6, and $13.4, respectively.
Other Equity Awards: The following table is a summary of our restricted shares, deferred stock units, and performance units.
Restricted Shares
and Deferred
Stock Units
Weighted-Average
Grant Date
Fair Value
Performance
Units
Weighted-Average
Conversion Date
Fair Value
Outstanding at May 1, 2012
Granted
Converted
Vested
Forfeited
990,990
109,770
99,455
(199,642)
(15,359)
$55.95
76.37
76.37
59.01
57.36
99,455
106,666
(99,455)
—
—
$ 76.37
100.54
76.37
—
—
Outstanding at April 30, 2013
985,214
$59.64
106,666
$100.54
The total fair value of equity awards other than stock options vested in 2013, 2012, and 2011 was $11.8, $22.7, and $17.7, respectively.
The weighted-average grant date fair value of restricted shares and deferred stock units is the average of the high and the low share
price on the date of grant. The weighted-average conversion date fair value of performance units is the average of the high and the
low share price on the date of conversion to restricted shares. The following table summarizes the weighted-average fair values of
the equity awards granted in 2013, 2012, and 2011.
Year Ended April 30,
2013
2012
2011
Restricted
Shares and
Deferred
Stock Units
WeightedAverage
Grant Date
Fair Value
Performance
Units
WeightedAverage
Conversion Date
Fair Value
109,770
152,180
303,863
$76.37
78.32
58.32
106,666
99,455
125,360
$100.54
76.37
77.53
The performance units column represents the number of restricted shares received by certain executive officers, subsequent to year
end, upon conversion of the performance units earned during the year. Restricted shares and deferred stock units generally vest four
years from the date of grant or upon the attainment of a defined age and years of service, subject to certain retention requirements.
Note 10
debT And finAnCing ARRAngeMenTS
Long-term debt consists of the following:
Year Ended April 30,
2013
2012
4.78% Senior Notes due June 1, 2014
6.12% Senior Notes due November 1, 2015
6.63% Senior Notes due November 1, 2018
3.50% Senior Notes due October 15, 2021
5.55% Senior Notes due April 1, 2022
4.50% Senior Notes due June 1, 2025
$ 100.0
24.0
395.0
748.8
350.0
400.0
$ 100.0
24.0
397.9
748.6
400.0
400.0
Total long-term debt
Current portion of long-term debt
$2,017.8
50.0
$2,070.5
50.0
Total long-term debt, less current portion
$1,967.8
$2,020.5
The 3.50 percent Senior Notes were issued in a public offering and the remaining Senior Notes were privately placed. The Senior Notes
are unsecured and interest is paid semiannually. Scheduled payments are required on the 5.55 percent Senior Notes, of which $50.0 is
due on April 1, 2014, and on the 4.50 percent Senior Notes, the first of which is $100.0 on June 1, 2020. During 2013, $50.0 was paid
on the 5.55 percent Senior Notes as required. We may prepay at any time all or part of the Senior Notes at 100 percent of the principal
amount thereof, together with accrued and unpaid interest, and any applicable make-whole amount. Interest paid totaled $97.7, $86.6, and
$62.1 in 2013, 2012, and 2011, respectively.
We have a $1.0 billion revolving credit facility available with a group of nine banks that matures in July 2016. Our borrowings under
the credit facility bear interest based on the prevailing U.S. Prime Rate, Canadian Base Rate, London Interbank Offered Rate, 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. At April 30, 2013, we did not have a balance outstanding under the revolving credit facility. We had standby letters of credit
of approximately $8.1 outstanding at April 30, 2013.
Our debt instruments contain certain financial covenant restrictions including consolidated net worth, a leverage ratio, and an
interest coverage ratio. We are in compliance with all covenants.
64
The J. M. Smucker Company
2013 Annual Report
65
Notes to CoNsolidated FiNaNCial statemeNts
Notes to CoNsolidated FiNaNCial statemeNts
The J. M. Smucker Company
The J. M. Smucker Company
Note 11
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
costs 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.
Note 12
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 futures and options contracts 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,
and flour. We also enter into commodity futures and options contracts to manage price risk for energy input costs, including natural
gas and diesel fuel. The derivative instruments generally have maturities of less than one year.
Certain of our derivative instruments meet the hedge criteria and are accounted for as cash flow hedges. The mark-to-market gains
or losses on qualifying hedges are deferred and included as a component of accumulated other comprehensive loss to the extent
effective, and reclassified to cost of products sold in the period during which the hedged transaction affects earnings. Cash flows
related to qualifying hedges are classified consistently with the cash flows from the hedged item in the Statements of Consolidated
Cash Flows. In order to qualify as a hedge of commodity price risk, it must be demonstrated that the changes in the fair value of
the commodity’s futures contracts are highly effective in hedging price risks associated with the commodity purchased. Hedge
effectiveness is measured and assessed at inception and on a monthly basis. The mark-to-market gains or losses on nonqualifying
and ineffective portions of commodity hedges are recognized in cost of products sold immediately.
The commodities hedged have a high inverse correlation to price changes of the derivative commodity instrument. Thus, we would
expect that 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 forwards and options contracts to manage the effect of
foreign currency exchange fluctuations on future cash payments primarily related to purchases of certain raw materials, finished
goods, and fixed assets in Canada. The contracts generally have maturities of less than one year. At the inception of the contract,
the derivative is evaluated and documented for hedge accounting treatment. Instruments currently used to manage foreign
currency exchange exposures do not meet the requirements for hedge accounting treatment and the change in value of these
instruments is immediately recognized in cost of products sold. If the contract qualifies for hedge accounting treatment, to the
extent the hedge is deemed effective, the associated mark-to-market gains and losses are deferred and included as a component
of accumulated other comprehensive loss. These gains or losses are reclassified to earnings in the period the contract is executed.
The ineffective portion of these contracts is immediately recognized in earnings.
The following table sets forth the fair value of derivative instruments recognized in the Consolidated Balance Sheets.
April 30, 2013
April 30, 2012
Other
Current
Assets
Other
Current
Liabilities
Other
Current
Assets
Other
Current
Liabilities
Derivatives designated as hedging instruments:
Commodity contracts
$2.1
$2.0
$ 6.6
$19.5
Total derivatives designated as hedging instruments
$2.1
$2.0
$ 6.6
$19.5
Derivatives not designated as hedging instruments:
Commodity contracts
Foreign currency exchange contracts
$3.6
0.7
$2.3
0.2
$ 3.1
0.4
$ 3.6
1.0
Total derivatives not designated as hedging instruments
$4.3
$2.5
$ 3.5
$ 4.6
Total derivative instruments
$6.4
$4.5
$10.1
$24.1
We have elected to not offset fair value amounts recognized for commodity derivative instruments and the cash margin accounts
executed with the same counterparty. We maintained cash margin accounts of $5.5 and $32.5 at April 30, 2013 and 2012,
respectively, that are included in other current assets in the Consolidated Balance Sheets.
The following table presents information on pre-tax commodity contract net gains and losses recognized on derivatives designated
as cash flow hedges.
Year Ended April 30,
2013
2012
Losses recognized in other comprehensive income (loss) (effective portion)
(Losses) gains reclassified from accumulated other comprehensive loss
to cost of products sold (effective portion)
$(27.5)
$(31.8)
(39.6)
1.9
Change in accumulated other comprehensive loss
$ 12.1
$(33.7)
Losses recognized in cost of products sold (ineffective portion)
$ (0.9)
$ (0.9)
Included as a component of accumulated other comprehensive loss at April 30, 2013 and 2012, were deferred pre-tax net losses of
$12.2 and $24.3, respectively, related to commodity contracts. The related tax impact recognized in accumulated other comprehensive
loss was a benefit of $4.4 and $8.8 at April 30, 2013 and 2012, respectively. The entire amount of the deferred net loss included in
accumulated other comprehensive loss at April 30, 2013, is expected to be recognized in earnings within one year as the related
commodity is sold.
Interest Rate hedging: We utilize derivative instruments to manage changes in the fair value of our debt. Interest rate swaps 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 swap
are deferred and included as a component of accumulated other comprehensive 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 swap would be recognized at fair value on the balance sheet and changes in the fair value would be recognized in interest
expense. Generally, changes in the fair value of the derivative are equal to changes in the fair value of the underlying debt and have
no impact on earnings. There were no interest rate swaps outstanding at April 30, 2013 and 2012.
66
The J. M. Smucker Company
2013 Annual Report
67
Notes to CoNsolidated FiNaNCial statemeNts
Notes to CoNsolidated FiNaNCial statemeNts
The J. M. Smucker Company
The J. M. Smucker Company
The following table presents information on the pre-tax losses recognized on the interest rate swap designated as a cash flow hedge.
Year Ended April 30,
2013
2012
Losses recognized in other comprehensive income (loss) (effective portion)
Losses reclassified from accumulated other comprehensive loss
to interest expense (effective portion)
$  —
$(6.2)
(0.5)
(0.3)
Change in accumulated other comprehensive loss
$ 0.5
$(5.9)
Included as a component of accumulated other comprehensive loss at April 30, 2013 and 2012, were deferred pre-tax losses of
$5.4 and $5.9, respectively, related to the interest rate swap that was terminated in October 2011. The related tax benefit recognized
in accumulated other comprehensive loss was $1.9 and $2.1 at April 30, 2013 and 2012, respectively. Approximately $0.6 of the
pre-tax loss will be recognized over the next 12 months.
The following table presents the net realized and unrealized gains and losses recognized in cost of products sold on derivatives not
designated as qualified hedging instruments.
Note 13
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 and trade receivables. The carrying value of these financial instruments approximates fair value. With respect
to trade receivables, we believe there is no concentration of risk with any single customer whose failure or nonperformance would
materially affect our results other than as discussed in Major Customer of Note 1: Accounting Policies. We do not require collateral
from our customers. Our other financial instruments, with the exception of long-term debt, are recognized at estimated fair value in
the Consolidated Balance Sheets.
The following table provides information on the carrying amount and fair value of our financial instruments.
April 30, 2013
Carrying
Amount
Other investments
Derivative financial instruments – net
Long-term debt
$
April 30, 2012
Carrying
Amount
Fair Value
48.8
1.9
(2,017.8)
$
48.8
1.9
(2,388.1)
$
Fair Value
36.2
(14.0)
(2,070.5)
$
36.2
(14.0)
(2,443.5)
Year Ended April 30,
2013
2012
Unrealized gains (losses) on commodity contracts
Unrealized gains (losses) on foreign currency exchange contracts
$ 6.1
0.5
$ (7.8)
(0.8)
Total unrealized gains (losses) recognized in cost of products sold
$ 6.6
$ (8.6)
Realized (losses) gains on commodity contracts
Realized gains on foreign currency exchange contracts
$(1.5)
0.8
$24.1
1.8
Total realized (losses) gains recognized in cost of products sold
$(0.7)
$25.9
Total gains recognized in cost of products sold
$ 5.9
$17.3
The following table presents the gross contract notional value of outstanding derivative contracts.
Year Ended April 30,
Commodity contracts
Foreign currency exchange contracts
2013
2012
$347.6
56.8
$983.4
94.4
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)
Other investments: (A)
Equity mutual funds
Municipal obligations
Other investments
Derivatives: (B)
Commodity contracts – net
Foreign currency exchange contracts – net
Long-term debt (C)
Total financial instruments measured at fair value
68
The J. M. Smucker Company
$
21.6
—
0.6
Significant
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3)
Fair Value at
April 30, 2013
$
21.6
26.6
0.6
—
26.6
—
$ —
—
—
0.7
—
(803.6)
0.7
0.5
(1,584.5)
—
—
—
1.4
0.5
(2,388.1)
$(780.7)
$(1,556.7)
$ —
$(2,337.4)
2013 Annual Report
69
Notes to CoNsolidated FiNaNCial statemeNts
Notes to CoNsolidated FiNaNCial statemeNts
The J. M. Smucker Company
The J. M. Smucker Company
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
Other investments: (A)
Equity mutual funds
Municipal obligations
Other investments
Derivatives: (B)
Commodity contracts – net
Foreign currency exchange contracts – net
Long-term debt (C)
Total financial instruments measured at fair value
$
14.7
—
1.1
Significant
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3)
A reconciliation of the statutory federal income tax rate and the effective income tax rate is as follows:
Fair Value at
April 30, 2012
—
20.4
—
$ —
—
—
$
14.7
20.4
1.1
(12.8)
—
(777.0)
(0.6)
(0.6)
(1,666.5)
—
—
—
(13.4)
(0.6)
(2,443.5)
$(774.0)
$(1,647.3)
$ —
$(2,421.3)
(A) 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 and municipal obligations valued by a third party using valuation techniques that utilize inputs which are derived principally from or corroborated by observable
market data. As of April 30, 2013, our municipal obligations are scheduled to mature as follows: $1.0 in 2014, $2.2 in 2015, $0.6 in 2016, $1.8 in 2017, and the remaining
$21.0 in 2018 and beyond.
(B) Level 1 derivatives are valued using quoted market prices for identical instruments in active markets. The Level 2 derivatives are valued using quoted prices for similar assets or
liabilities in active markets. For additional information, see Note 12: Derivative Financial Instruments.
(C) Long-term debt is comprised of public Senior Notes classified as Level 1 and private Senior Notes classified as Level 2. The public Senior Notes are traded in an active secondary
market and valued using quoted prices. The value of the private Senior Notes is based on the net present value of each interest and principal payment calculated, utilizing an
interest rate derived from a fair market yield curve. For additional information, see Note 10: Debt and Financing Arrangements.
Note 14
inCoMe TAxeS
Year Ended April 30,
Percent of Pretax Income
2013
2012
2011
Statutory federal income tax rate
State and local income taxes, net of federal income tax benefit
Domestic manufacturing deduction
Other items – net
35.0%
1.8
(3.1)
(0.3)
35.0%
2.3
(3.1)
0.2
35.0%
2.2
(3.8)
(0.3)
Effective income tax rate
Income taxes paid
2013
2012
2011
Domestic
Foreign
$791.9
25.4
$706.4
(5.2)
$729.7
(12.5)
Income before income taxes
$817.3
$701.2
$717.2
The components of the provision for income taxes are as follows:
Year Ended April 30,
70
The J. M. Smucker Company
33.1%
$366.0
Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax reporting. Significant components of our deferred tax assets
and liabilities are as follows:
April 30,
Year Ended April 30,
Total income tax expense
34.4%
$257.8
We are a voluntary participant in the Compliance Assurance Process (“CAP”) program offered by the Internal Revenue Service (“IRS”)
and are currently under a CAP examination for the tax year ended April 30, 2013. Through the contemporaneous exchange of
information with the IRS, this program is designed to identify and resolve tax positions with the IRS prior to the filing of a tax
return, which allows us to remain current with our IRS examinations. The IRS has completed the CAP examinations for tax
years ended April 30, 2010, April 30, 2011, and April 30, 2012. Tax years prior to 2010 are no longer subject to U.S. federal tax
examination. With limited exceptions, we are no longer subject to examination for state and local jurisdictions for tax years
prior to 2008 and for tax years prior to 2006 for foreign jurisdictions.
2013
2012
Deferred tax liabilities:
Intangible assets
Property, plant, and equipment
Other
$1,019.6
94.4
9.4
$1,021.9
102.6
8.1
Total deferred tax liabilities
$1,123.4
$1,132.6
Deferred tax assets:
Post-employment and other employee benefits
Tax credit and loss carryforwards
Intangible assets
Other
$  116.3
1.5
5.4
37.7
$  107.5
2.5
3.4
40.7
Total deferred tax assets
$  160.9
$  154.1
Net deferred tax liability
$  962.5
$  978.5
Income (loss) before income taxes is as follows:
Current:
Federal
Foreign
State and local
Deferred:
Federal
Foreign
State and local
33.4%
$279.2
2013
2012
2011
$262.1
6.1
20.5
$228.2
6.8
23.7
$271.4
4.6
21.5
(15.6)
0.9
(0.9)
(10.2)
(6.9)
(0.1)
(51.0)
(7.3)
(1.5)
$273.1
$241.5
$237.7
2013 Annual Report
71
Notes to CoNsolidated FiNaNCial statemeNts
Notes to CoNsolidated FiNaNCial statemeNts
The J. M. Smucker Company
The J. M. Smucker Company
Note 15
The following table summarizes state and foreign loss and credit carryforwards at April 30, 2013.
Related Tax
Deduction
Deferred
Tax Asset
Expiration
Date
Tax carryforwards:
State loss carryforwards
State tax credit carryforwards
Foreign jurisdictional tax credit carryforwards
$1.0
—
—
$0.1
1.3
0.1
2014 to 2030
2019
2015
Total tax carryforwards
$1.0
$1.5
Deferred income taxes have not been provided on approximately $250.0 of undistributed earnings of foreign subsidiaries since these
amounts are considered to be permanently reinvested. Any additional taxes payable on the earnings of foreign subsidiaries, if remitted,
would be partially offset by domestic tax deductions or tax credits for foreign taxes paid. It is not practical to estimate the amount of
additional taxes that might be payable on such undistributed earnings.
Our unrecognized tax benefits as of April 30, 2013 and 2012, were $29.7 and $24.0, respectively. Of the unrecognized tax benefits,
$20.6 and $16.4 would affect the effective tax rate, if recognized, as of April 30, 2013 and 2012, respectively. Our accrual for taxrelated net interest and penalties totaled $2.0 and $1.7 as of April 30, 2013 and 2012, respectively. The amount of tax-related net
interest and penalties charged to earnings totaled $0.3 and $0.1 during 2013 and 2012, respectively. Interest credited to earnings
totaled $0.5 during 2011.
Within the next 12 months, it is reasonably possible that we could decrease our unrecognized tax benefits by an estimated $3.1,
primarily as a result of the expiration of statute of limitations periods.
A reconciliation of our unrecognized tax benefits is as follows:
2013
2012
Balance at May 1,
Increases:
Current year tax positions
Prior year tax positions
Foreign currency translation
Decreases:
Prior year tax positions
Settlement with tax authorities
Expiration of statute of limitations periods
$24.0
$20.3
4.8
2.5
—
3.6
2.1
0.2
0.2
1.0
0.4
—
0.3
1.9
Balance at April 30,
$29.7
$24.0
72
The J. M. Smucker Company
guARAnToR And non-guARAnToR finAnCiAl infoRMATion
In October 2011, we filed a registration statement on Form S-3 registering certain securities described therein, including debt
securities which are guaranteed by certain of our subsidiaries. We issued $750.0 of 3.50 percent Senior Notes pursuant to the
registration statement that 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 indenture governing the notes (a) if we exercise our
legal or covenant defeasance option or if our obligations under the indenture are discharged in accordance with the terms
of the indenture or (b) upon delivery of an officer’s certificate to the trustee that the subsidiary guarantor does not guarantee
our obligations under any of our other primary senior indebtedness and that any other guarantees of such primary senior
indebtedness of the subsidiary guarantor have been released other than through discharges as a result of payment by such
guarantor on such guarantees.
Condensed consolidated financial information for the Company, the subsidiary guarantors, and the non-guarantor subsidiaries is
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 STaTEMEnTS of ConSolidaTEd inCoME and
CoMprEhEnSivE inCoME
Year Ended April 30, 2013
The J. M. Smucker
Company (Parent)
Subsidiary
Guarantors
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
$4,447.6
3,957.3
$1,296.4
1,190.6
$5,430.3
4,015.0
$(5,276.6)
(5,292.8)
$5,897.7
3,870.1
Gross Profit
Selling, distribution, and administrative
expenses, restructuring, merger and
integration costs, and other special
project costs
Amortization
Other operating (income) expense – net
490.3
105.8
1,415.3
16.2
2,027.6
199.0
4.8
(2.7)
42.9
—
(2.2)
781.5
92.0
1.9
—
—
—
1,023.4
96.8
(3.0)
Operating Income
Interest (expense) income – net
Other income (expense) – net
Equity in net earnings of subsidiaries
289.2
(94.4)
0.7
408.6
65.1
1.2
1.1
156.7
539.9
(0.2)
(1.5)
66.4
16.2
—
—
(631.7)
910.4
(93.4)
0.3
—
Income Before Income Taxes
Income taxes
604.1
59.9
224.1
0.4
604.6
212.8
(615.5)
—
817.3
273.1
Net Income
Other comprehensive income, net of tax
$  544.2
7.4
$  223.7
9.0
$  391.8
4.1
$  (615.5)
(13.1)
$  544.2
7.4
Comprehensive Income
$  551.6
$  232.7
$  395.9
$  (628.6)
$  551.6
Net sales
Cost of products sold
2013 Annual Report
73
Notes to CoNsolidated FiNaNCial statemeNts
Notes to CoNsolidated FiNaNCial statemeNts
The J. M. Smucker Company
The J. M. Smucker Company
CondEnSEd STaTEMEnTS of ConSolidaTEd inCoME and
CoMprEhEnSivE inCoME
CondEnSEd ConSolidaTEd BalanCE ShEETS
Year Ended April 30, 2012
The J. M. Smucker
Company (Parent)
Subsidiary
Guarantors
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
$ 4,302.7
3,741.0
$1,547.8
1,408.8
$3,822.4
2,682.7
$(4,147.1)
(4,151.9)
$5,525.8
3,680.6
561.7
139.0
1,139.7
4.8
1,845.2
243.4
11.2
(1.3)
61.5
—
(1.3)
660.3
81.5
11.6
—
—
—
965.2
92.7
9.0
308.4
(80.7)
1,404.4
(1,095.0)
78.8
3.0
0.4
184.2
386.3
(2.1)
(3.6)
79.2
4.8
—
(1,398.5)
831.6
778.3
(79.8)
2.7
—
537.1
77.3
266.4
1.2
459.8
163.0
(562.1)
—
701.2
241.5
Net sales
Cost of products sold
Gross Profit
Selling, distribution, and administrative
expenses, restructuring, and merger
and integration costs
Amortization and impairment charges
Other operating (income) expense – net
Operating Income
Interest (expense) income – net
Other income (expense) – net
Equity in net earnings of subsidiaries
Income Before Income Taxes
Income taxes
Net Income
Other comprehensive loss, net of tax
$
459.8
(87.7)
$ 265.2
(23.1)
$ 296.8
(49.8)
$ (562.1)
73.0
$ 459.7
(87.6)
Comprehensive Income
$ 372.1
$ 242.1
$ 247.0
$ (489.1)
$ 372.1
CondEnSEd STaTEMEnTS of ConSolidaTEd inCoME and
CoMprEhEnSivE inCoME
Year Ended April 30, 2011
The J. M. Smucker
Company (Parent)
Subsidiary
Guarantors
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
$ 3,880.9
3,196.8
$2,805.6
2,546.5
$3,759.8
2,884.8
$(5,620.6)
(5,600.9)
$4,825.7
3,027.2
Net sales
Cost of products sold
Gross Profit
Selling, distribution, and administrative
expenses, restructuring, and merger
and integration costs
Amortization and impairment charges
Other operating (income) expense – net
684.1
259.1
875.0
(19.7)
1,798.5
216.7
5.2
(0.7)
79.3
64.6
(2.6)
626.2
21.6
3.9
—
—
—
922.2
91.4
0.6
Operating Income
Interest (expense) income – net
Other (expense) income – net
Equity in net earnings of subsidiaries
462.9
(67.7)
(1.3)
203.1
117.8
3.4
1.7
83.9
223.3
(2.8)
(0.4)
67.3
(19.7)
—
—
(354.3)
784.3
(67.1)
—
—
Income Before Income Taxes
Income taxes
597.0
117.5
206.8
21.8
287.4
98.4
(374.0)
—
717.2
237.7
Net Income
Other comprehensive income (loss), net of tax
$
479.5
24.2
$ 185.0
(45.9)
$ 189.0
30.6
$ (374.0)
15.3
$ 479.5
24.2
Comprehensive Income
$
503.7
$ 139.1
$ 219.6
$ (358.7)
$ 503.7
74
The J. M. Smucker Company
April 30, 2013
The J. M. Smucker
Company (Parent)
ASSETS
Current Assets
Cash and cash equivalents
Inventories
Other current assets
Subsidiary
Guarantors
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
—
(13.6)
—
$ 256.4
945.5
393.3
951.2
466.5
146.6
941.3
(13.6)
—
(11,954.1)
1,238.4
1,595.2
1,142.5
—
—
—
—
13.7
1,970.9
2,579.6
66.1
—
—
—
3,052.9
3,089.4
151.8
1,663.8
13.7
4,616.6
—
6,294.1
$ 7,769.5
$4,869.4
$7,122.2
$(10,729.3)
$9,031.8
$
317.8
$ 104.9
$ 174.1
$
—
$ 596.8
1,967.8
97.5
237.6
—
—
18.1
—
889.7
75.5
—
—
—
1,967.8
987.2
331.2
Total Noncurrent Liabilities
2,302.9
18.1
965.2
—
3,286.2
Total Liabilities
2,620.7
123.0
1,139.3
—
3,883.0
Total Current Assets
Property, Plant, and Equipment – Net
Investments in Subsidiaries
Intercompany
Other Noncurrent Assets
Goodwill
Other intangible assets – net
Other noncurrent assets
$
—
225.9
3.3
$ 148.4
733.2
69.6
428.4
230.9
7,950.9
(2,504.5)
229.2
445.1
3,856.6
324.8
1,082.0
509.8
72.0
Total Other Noncurrent Assets
Total Assets
LIABILITIES AND ShAREhOLDERS’ EquITy
Current Liabilities
Noncurrent Liabilities
Long-term debt
Deferred income taxes
Other noncurrent liabilities
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
108.0
—
320.4
$
$
5,148.8
4,746.4
5,982.9
(10,729.3)
5,148.8
$ 7,769.5
$4,869.4
$7,122.2
$(10,729.3)
$9,031.8
2013 Annual Report
75
Notes to CoNsolidated FiNaNCial statemeNts
Notes to CoNsolidated FiNaNCial statemeNts
The J. M. Smucker Company
The J. M. Smucker Company
CondEnSEd ConSolidaTEd BalanCE ShEETS
ASSETS
Current Assets
Cash and cash equivalents
Inventories
Other current assets
CondEnSEd STaTEMEnTS of ConSolidaTEd CaSh flowS
April 30, 2012
The J. M. Smucker
Company (Parent)
Subsidiary
Guarantors
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
Net Cash Provided by Operating Activities
$
—
(14.9)
—
$ 229.7
961.6
452.2
1,050.9
486.6
104.1
598.5
(14.9)
—
(11,337.3)
709.1
1,643.5
1,096.1
—
—
—
—
11.1
2,073.0
2,751.3
62.9
—
—
—
3,054.6
3,187.0
134.0
1,477.3
11.1
4,887.2
—
6,375.6
$ 7,824.7
$4,806.3
$7,127.3
$(10,643.1)
$9,115.2
$
323.6
$ 101.7
$ 191.6
$
—
$ 616.9
2,020.5
104.8
212.4
—
0.3
20.0
—
887.6
89.3
—
—
—
2,020.5
992.7
321.7
Total Noncurrent Liabilities
2,337.7
20.3
976.9
—
3,334.9
Total Liabilities
2,661.3
122.0
1,168.5
—
3,951.8
Total Current Assets
Property, Plant, and Equipment – Net
Investments in Subsidiaries
Intercompany
Other Noncurrent Assets
Goodwill
Other intangible assets – net
Other noncurrent assets
Total Other Noncurrent Assets
Total Assets
LIABILITIES AND ShAREhOLDERS’ EquITy
Current Liabilities
Noncurrent Liabilities
Long-term debt
Deferred income taxes
Other noncurrent liabilities
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
76
The J. M. Smucker Company
108.3
—
334.2
$
—
161.5
3.5
$ 121.4
815.0
114.5
442.5
220.4
7,544.3
(1,859.8)
165.0
389.1
3,688.9
552.2
981.6
435.7
60.0
$
5,163.4
4,684.3
5,958.8
(10,643.1)
5,163.4
$ 7,824.7
$4,806.3
$7,127.3
$(10,643.1)
$9,115.2
Year Ended April 30, 2013
The J. M. Smucker
Company (Parent)
Subsidiary Non-Guarantor
Guarantors
Subsidiaries
Eliminations
Consolidated
$ 206.6
$ 53.9
$ 595.3
$ —
$ 855.8
Investing Activities
Additions to property, plant, and equipment
Proceeds from disposal of property, plant, and equipment
Other – net
(33.6)
—
(9.5)
(103.1)
0.1
3.4
(69.8)
3.2
23.7
—
—
—
(206.5)
3.3
17.6
Net Cash used for Investing Activities
(43.1)
(99.6)
(42.9)
—
(185.6)
Financing Activities
Repayments of long-term debt
Quarterly dividends paid
Purchase of treasury shares
Proceeds from stock option exercises
Investments in subsidiaries
Intercompany
Other – net
(50.0)
(222.8)
(364.2)
2.2
2.1
465.4
3.5
—
—
—
—
(181.7)
227.4
—
—
—
—
—
179.6
(692.8)
(9.7)
—
—
—
—
—
—
—
(50.0)
(222.8)
(364.2)
2.2
—
—
(6.2)
Net Cash (used for) Provided by Financing Activities
Effect of exchange rate changes on cash
(163.8)
—
45.7
—
(522.9)
(2.5)
—
—
(641.0)
(2.5)
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
(0.3)
108.3
—
—
27.0
121.4
—
—
26.7
229.7
—
$ 148.4
—
$ 256.4
Cash and Cash Equivalents at End of year
$ 108.0
$
$
( ) Denotes use of cash
2013 Annual Report
77
Notes to CoNsolidated FiNaNCial statemeNts
Notes to CoNsolidated FiNaNCial statemeNts
The J. M. Smucker Company
The J. M. Smucker Company
CondEnSEd STaTEMEnTS of ConSolidaTEd CaSh flowS
Net Cash Provided by (used for) Operating Activities
CondEnSEd STaTEMEnTS of ConSolidaTEd CaSh flowS
Year Ended April 30, 2012
The J. M. Smucker
Company (Parent)
$ 1,622.9
Subsidiary Non-Guarantor
Guarantors
Subsidiaries
$
165.0
$(1,057.0)
Eliminations
Consolidated
$ —
$ 730.9
Investing Activities
Businesses acquired, net of cash acquired
Additions to property, plant, and equipment
Equity investment in affiliate
Proceeds from divestiture
Sales and maturities of marketable securities
Proceeds from disposal of property, plant, and equipment
Other – net
—
(53.0)
—
—
18.6
0.2
—
—
(133.6)
—
—
—
0.4
(3.5)
(737.3)
(87.6)
(35.9)
9.3
—
3.4
(16.9)
—
—
—
—
—
—
—
(737.3)
(274.2)
(35.9)
9.3
18.6
4.0
(20.4)
Net Cash used for Investing Activities
(34.2)
(136.7)
(865.0)
—
(1,035.9)
Financing Activities
Proceeds from long-term debt
Quarterly dividends paid
Purchase of treasury shares
Proceeds from stock option exercises
Investments in subsidiaries
Intercompany
Other – net
748.6
(213.7)
(315.8)
2.8
(2,935.4)
1,028.6
(2.3)
—
—
—
—
3,691.9
(3,720.2)
—
—
—
—
—
(756.5)
2,691.6
—
—
—
—
—
—
—
—
748.6
(213.7)
(315.8)
2.8
—
—
(2.3)
Net Cash (used for) Provided by Financing Activities
Effect of exchange rate changes on cash
(1,687.2)
—
(28.3)
—
1,935.1
(4.7)
—
—
219.6
(4.7)
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
(98.5)
206.8
—
—
8.4
113.0
—
—
(90.1)
319.8
—
$ 121.4
Cash and Cash Equivalents at End of year
$
108.3
$
$
—
$
229.7
Year Ended April 30, 2011
The J. M. Smucker
Company (Parent)
Net Cash Provided by Operating Activities
Subsidiary Non-Guarantor
Guarantors
Subsidiaries
Eliminations
Consolidated
$ 212.4
$ 93.0
$ 86.2
$ —
$ 391.6
Investing Activities
Additions to property, plant, and equipment
Purchases of marketable securities
Sales and maturities of marketable securities
Proceeds from disposal of property, plant, and equipment
Other – net
(59.1)
(75.6)
57.1
1.1
—
(53.4)
—
—
0.3
—
(67.6)
—
—
4.4
(0.1)
—
—
—
—
—
(180.1)
(75.6)
57.1
5.8
(0.1)
Net Cash used for Investing Activities
(76.5)
(53.1)
(63.3)
—
(192.9)
Financing Activities
Repayments of long-term debt
Proceeds from long-term debt
Quarterly dividends paid
Purchase of treasury shares
Proceeds from stock option exercises
Investments in subsidiaries
Intercompany
Other – net
(10.0)
400.0
(194.0)
(389.1)
14.5
419.9
(395.7)
7.6
—
—
—
—
—
(17.5)
(22.4)
—
—
—
—
—
—
(402.4)
418.1
0.6
—
—
—
—
—
—
—
—
(10.0)
400.0
(194.0)
(389.1)
14.5
—
—
8.2
Net Cash (used for) Provided by Financing Activities
Effect of exchange rate changes on cash
(146.8)
—
(39.9)
—
16.3
7.9
—
—
(170.4)
7.9
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
(10.9)
217.7
—
—
47.1
65.9
—
—
36.2
283.6
—
$ 113.0
—
$ 319.8
Cash and Cash Equivalents at End of year
$ 206.8
$
$
( ) Denotes use of cash
( ) Denotes use of cash
78
The J. M. Smucker Company
2013 Annual Report
79
Shareholder information
NOTeS TO CONSOlIDATeD FINANCIAl STATeMeNTS
The J. M. Smucker Company
Corporate offiCe
Note 16
The J. M. Smucker Company
One Strawberry Lane
Orrville, Ohio 44667
Telephone: (330) 682-3000
COMMON SHARES
Voting: The Amended Articles of Incorporation (“Articles”) provide that each holder of a common share outstanding is entitled to one vote on
each matter submitted to a vote of the shareholders except for the following specific matters:
• any matter that relates to or would result in the dissolution or liquidation of the Company;
• the adoption of any amendment of our Articles or Amended Regulations, or the adoption of amended Articles, other than the adoption of any amendment or amended Articles that increases the number of votes to which holders of our common shares are entitled or expands the matters
to which time-phased voting applies;
• any proposal or other action to be taken by our shareholders relating to the Rights Agreement, dated as of May 20, 2009, between the Company and Computershare Trust Company, N.A. or any successor plan;
• any matter relating to any stock option plan, stock purchase plan, executive compensation plan, executive benefit plan, or other similar plan, arrangement, or agreement;
• adoption of any agreement or plan of or for the merger, consolidation, or majority share acquisition of us or any of our subsidiaries with or into any other person, whether domestic or foreign, corporate or noncorporate, or the authorization of the lease, sale, exchange, transfer, or other disposition of all, or substantially all, of our assets; • any matter submitted to our shareholders pursuant to Article Fifth (which relates to procedures applicable to certain business combinations) or Article Seventh (which relates to procedures applicable to certain proposed acquisitions of specified percentages of our outstanding common shares) of the Articles, as they may be further amended, or any issuance of our common shares for which shareholder approval is required by applicable stock exchange rules; and
• any matter relating to the issuance of our common shares or the repurchase of our common shares that the Board determines is required or appropriate to be submitted to our shareholders under the Ohio Revised Code or applicable stock exchange rules. StoCk LiSting
Our common shares are listed on the New York Stock Exchange –
ticker symbol SJM.
Corporate WebSite
To learn more about The J. M. Smucker Company, visit smuckers.com.
To access financial information about the Company, visit
smuckers.com/investors.
annuaL Meeting
The annual meeting will be held at 11:00 a.m. Eastern Time, Wednesday,
August 14, 2013, in the Fisher Auditorium at the Ohio Agricultural Research
and Development Center, 1680 Madison Avenue, Wooster, Ohio 44691.
Corporate neWS and reportS
On the matters listed above, common shares are entitled to 10 votes per share if they meet the requirements set forth in the Articles. Common shares which would be entitled to 10 votes per share must meet one of the following criteria:
• common shares for which there has not been a change in beneficial ownership in the past four years; or
• common shares received through our various equity plans which have not been sold or otherwise transferred.
Corporate news releases, annual reports, and Securities and Exchange
Commission filings, including Forms 10-K, 10-Q, and 8-K, are available
free of charge on our website. They are also available without cost to
shareholders who submit a written request to:
The J. M. Smucker Company
Attention: Corporate Secretary
One Strawberry Lane
Orrville, Ohio 44667
In the event of a change in beneficial ownership, the new owner of that common share will be entitled to only one vote with respect to that share on all matters until four years pass without a further change in beneficial ownership of the share.
Shareholders’ Rights Plan: Pursuant to a Shareholders’ Rights Plan adopted by the Board of Directors on May 20, 2009, one share purchase right is associated with each of our outstanding common shares.
Under the plan, the rights will initially trade together with our common shares and will not be exercisable. In the absence of further action by the directors, the rights generally will become exercisable and allow the holder to acquire our common shares at a discounted price if a person or group acquires 10 percent or more of our outstanding common shares. Rights held by persons who exceed the applicable threshold will be void. Shares held by members of the Smucker family are not subject to the threshold. If exercisable, each right entitles the shareholder to buy one common share at a discounted price. Under certain circumstances, the rights will entitle the holder to buy shares in an acquiring entity at a discounted price.
Repurchase Programs: We repurchased 4.0 million common shares for $359.4 in 2013, approximately 4.1 million common shares for $305.3 in 2012, and approximately 5.7 million common shares for $381.5 in 2011.
At April 30, 2013, approximately 4.9 million common shares were available for repurchase under the Board of Directors’ most recent authorization. Subsequent to April 30, 2013, we repurchased approximately 0.6 million common shares for $60.8, utilizing proceeds of $29.0 from our revolving credit facility. Approximately 4.3 million shares remain available for repurchase as of June 18, 2013.
80
The J. M. Smucker Company
WWW.CORPORATEREPORT.COM
Our directors may, at their option, redeem all rights for $0.001 per right, generally at any time prior to the rights becoming exercisable. The rights will expire June 3, 2019, unless earlier redeemed, exchanged, or amended by the directors.
DESIgNED BY: CORPORATE REPORTS INC. ATLANTA, gA
The plan also includes an exchange option. In general, if the rights become exercisable, the directors may, at their option, effect an exchange of part or all of the rights, other than rights that have become void, for common shares. Under this option, we would issue one common share for each right, in each case subject to adjustment in certain circumstances.
CertifiCationS
Our Chief Executive Officer has certified to the New York Stock Exchange that he
is not aware of any violation by the Company of the New York Stock Exchange’s
corporate governance listing standards. We have also filed with the Securities
and Exchange Commission certain certifications relating to the quality of our
public disclosures. These certifications are filed as exhibits to our Annual Report
on Form 10-K.
forWard-Looking StateMentS
This Annual Report includes certain forward-looking statements that are based
on current expectations and are subject to a number of risks and uncertainties.
Please reference “Forward-Looking Statements” located on page 36 in the
“Management’s Discussion and Analysis” section.
independent regiStered pubLiC
aCCounting firM
Ernst & Young LLP
Akron, Ohio
dividendS
Our Board of Directors typically declares a cash dividend each quarter.
Dividends are generally payable on the first business day of March, June,
September, and December. The record date is approximately two weeks
before the payment date. Our dividend disbursement agent is
Computershare Investor Services, LLC.
SharehoLder ServiCeS
Our transfer agent and registrar, Computershare Investor Services, LLC,
is responsible for assisting registered shareholders with a variety of
matters including:
 Shareholder investment program (CIPSM)
– Direct purchase of our common shares
– Dividend reinvestment
– Automatic monthly cash investments
 Book-entry share ownership
 Share transfer matters (including name changes, gifting,
and inheritances)
 Direct deposit of dividend payments
 Nonreceipt of dividend checks
 Lost share certificates
 Changes of address
 Online shareholder account access
 Form 1099 income inquiries (including requests for duplicate copies)
Shareholders may contact Shareholder Services at the corporate offices
regarding other shareholder inquiries.
tranSfer agent and regiStrar
Computershare Investor Services, LLC
250 Royall Street
Canton, MA 02021
Telephone: (800) 456-1169
Telephone outside U.S., Canada, and
Puerto Rico: (312) 360-5254
Website: computershare.com/investor
The J. M. Smucker Company is the owner of all trademarks, except for the following, which are used under license: Pillsbury®, the Barrelhead logo
and the Doughboy character are trademarks of The Pillsbury Company, LLC; Carnation® is a trademark of Société des Produits Nestlé S.A.;
Dunkin’ Donuts® is a registered trademark of DD IP Holder, LLC; Sweet‘N Low ®, NatraTaste®, Sugar In The Raw® and the other “In The Raw”
trademarks are registered trademarks of Cumberland Packing Corp. and its affiliates; Life is good ® is a registered trademark of The Life is good
Company; and Douwe Egberts® and Pickwick ® are registered trademarks of D.E Master Blenders 1753 N.V. Borden ® and Elsie are also trademarks
used under license.
One Strawberry Lane / Orrville, Ohio 44667 / (330) 682-3000
smuckers.com
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