THE JM SMUCKER COMPANY ORRVILLE, Ohio, June 9, 2016 /PRNewswire/ -- The J. M. Smucker Company (NYSE: SJM) today announced results for the fourth quarter ended April 30, 2016, of its 2016 fiscal year. All comparisons are to the fourth quarter of the prior fiscal year, unless otherwise noted.
EXECUTIVE SUMMARY
-- Net sales increased 25 percent in the fourth quarter, reflecting the
incremental contribution from Big Heart Pet Brands ("Big Heart"),
acquired during the fourth quarter of fiscal 2015, and growth within the
U.S. Retail Coffee segment. Net sales adjusted for noncomparable items
increased 5 percent.
-- Net income per diluted share increased to $1.61 in the fourth quarter,
including a noncash deferred tax benefit of $50.5 million, or $0.42 per
share. This compares to a net loss per diluted share of $0.82 in the
prior year, which was impacted by financing activities and purchase
accounting adjustments related to the Big Heart acquisition. For the
full year, net income per diluted share was $5.76.
-- Non-GAAP income per diluted share was $1.86 in the fourth quarter,
compared to a non-GAAP loss per diluted share of $0.41 in the prior
year. For the full year, non-GAAP income per diluted share was $6.57.
Both current year measures include the $0.42 per share deferred tax
benefit. The full-year measure also includes the $0.15 per share gain
on the U.S. canned milk divestiture that occurred in the third quarter.
-- Cash provided by operating activities was $335.5 million in the fourth
quarter, compared to $221.6 million in the prior year.
-- The Company provided its fiscal 2017 net sales and earnings outlook,
with net sales expected to decrease 1 percent. Adjusted non-GAAP income
per diluted share is expected to range from $7.60 to $7.75. This
measure is not comparable to the non-GAAP income per diluted share
measure above, as it excludes amortization expense.
EXECUTIVE LEADERSHIP REMARKS
"We concluded 2016 with a strong fourth quarter, as the Company achieved record sales, earnings, and cash flow for the full fiscal year," said Richard Smucker, Executive Chairman. "We are proud of the numerous accomplishments this past year. These include the successful introduction of Dunkin' Donuts(®) K-Cup(®) pods and other on-trend products, providing lower pricing on Folgers(®) coffee, expanding distribution for the Natural Balance(®) brand, completing a seamless integration of the Big Heart acquisition, and exceeding our synergy and working capital targets. These achievements reflect the Company's long-term focus, strong brand portfolio, the dedication of our employees, and our ability to execute."
"As we start the new fiscal year, we look to continue our momentum and are confident in achieving another year of strong earnings growth," added Mark Smucker, Chief Executive Officer. "We are excited about our plans for fiscal 2017, which include building on our product innovation activities and sponsoring the U.S. Olympic and Paralympic Teams as they prepare for the 2016 Olympic Games in Rio. We have clear visibility to achieving incremental $100 million in synergies this fiscal year. Behind these and other initiatives, we are well-positioned to continue our history of delivering long-term growth and shareholder value."
FOURTH QUARTER CONSOLIDATED RESULTS
Three Months Ended April 30,
----------------------------
2016 2015 % Increase
---- ---- ----------
(Dollars and shares in millions, except per share data)
Net sales $1,807.6 $1,447.1 25%
Operating income $246.1 $70.5 249%
Non-GAAP operating income 280.8 139.0 102%
Net income (loss) per common share - assuming dilution $1.61 $(0.82) n/m
Non-GAAP income (loss) per common share - assuming dilution 1.86 (0.41) n/m
Adjusted non-GAAP income (loss) per common share - assuming dilution 2.23 (0.20) n/m
Weighted-average shares outstanding - assuming dilution 118.8 109.6 8%
Results for the three months ended April 30, 2016 and 2015, include the operations of Big Heart, since the completion of the acquisition on March 23, 2015. Results for the three months ended April 30, 2015, include the Company's former U.S. canned milk business which was
divested on December 31, 2015. Adjusted non-GAAP income (loss) per diluted share excludes the impact of amortization, a noncash item.
Net sales increased $360.5 million, reflecting a $336.9 million noncomparable contribution from Big Heart. Excluding the impact of noncomparable Big Heart sales, foreign currency exchange, and the U.S. canned milk divestiture, net sales increased $67.2 million, or 5 percent. Favorable volume/mix contributed 5 percentage points to net sales, primarily attributable to Dunkin' Donuts(®) K-Cup(®) pods. Net price realization was slightly lower, reflecting lower net pricing on coffee, which was mostly offset by increases in several other categories.
Gross profit increased $257.4 million, or 60 percent, primarily due to the incremental contribution from Big Heart and the prior year unfavorable impact of a $47.0 million fair value purchase accounting adjustment to acquired Big Heart inventory. Excluding these items, gross profit increased, as the impact of lower net pricing was more than offset by a reduction in commodity costs, primarily attributed to green coffee. Favorable volume/mix also contributed.
Selling, distribution, and administrative expenses increased $63.6 million, or 22 percent, primarily driven by the incremental impact of Big Heart and higher incentive compensation costs. Amortization expense also increased.
Operating income increased $175.6 million, or 249 percent, including the incremental contribution from Big Heart and the impact of the prior year purchase accounting adjustment related to inventory.
On a non-GAAP basis, gross profit increased $221.9 million, or 48 percent, and operating income increased $141.8 million, or 102 percent.
Net interest expense increased $11.0 million, due to the incremental impact of acquisition-related debt issued in the fourth quarter of 2015. Prior year results also included other debt costs of $173.3 million, primarily related to the early redemption of the Company's senior private placement notes. Income taxes increased $58.7 million due to an increase in income before income taxes, partially offset by the $50.5 million noncash deferred tax benefit related to the integration of Big Heart.
Cash provided by operating activities was $335.5 million, compared to $221.6 million in the prior year. The change in operating cash flow was primarily attributed to an increase in net income, adjusted for noncash items, notably depreciation and amortization.
FISCAL 2017 OUTLOOK
The Company provided its fiscal 2017 guidance as summarized below:
Net sales (year-over-year
change) -1%
Adjusted non-GAAP income per
common share - assuming
dilution $7.60 - $7.75
Free cash flow $1.0 billion
Capital expenditures $240 million
Effective tax rate 34.0%
Net sales are expected to decrease 1 percent from fiscal 2016, reflecting the U.S. canned milk divesture. Excluding the impact of the divesture, net sales are expected to increase 1 percent. Adjusted non-GAAP income per diluted share is expected to range from $7.60 to $7.75, based on 116.6 million shares outstanding, reflecting the Company's repurchase of 3.4 million shares in the fourth quarter of fiscal 2016. Included in earnings guidance is $100 million of incremental synergies in fiscal 2017. Amortization expense of $208 million, or $1.18 per diluted share, is excluded from earnings guidance.
FOURTH QUARTER SEGMENT RESULTS
Dollar amounts in the segment tables below are reported in millions.
U.S. Retail Coffee
Net Segment Segment
Sales Profit Profit Margin
----- ------ -------------
FY16 Q4 Results $512.6 $153.2 29.9%
Change vs prior year 9% 39% 650bps
Segment net sales increased $44.0 million. Favorable volume/mix contributed 13 percentage points of growth, driven by the Dunkin' Donuts(®) brand. The Folgers(®) brand also contributed to favorable volume/mix, as growth for mainstream roast and ground offerings more than offset declines in Folgers(® )K-Cup(®) pods. Favorable volume/mix for the segment was slightly offset by lower net price realization for the Folgers(®) brand. Segment profit increased $43.3 million reflecting the net benefit of lower commodity costs and pricing and the contribution from Dunkin' Donuts(®) K-Cup(®) pods. These factors were slightly offset by an increase in marketing expense.
U.S. Retail Consumer Foods
Net Segment Segment
Sales Profit Profit Margin
----- ------ -------------
FY16 Q4 Results $473.7 $89.0 18.8%
Change vs prior year (2%) (6%) -80bps
Segment net sales decreased $9.5 million, reflecting the impact of $31.5 million of noncomparable net sales in the prior year related to the divested U.S. canned milk business. Excluding the impact of the divestiture, net sales increased 5 percent. Net price realization was higher, primarily attributable to the Jif(®) and Pillsbury(®) brands. Favorable volume/mix contributed 2 percentage points of growth, driven by Jif(®) peanut butter and Smucker's(®) Uncrustables(® )frozen sandwiches. Segment profit decreased $5.8 million, primarily reflecting the loss of U.S. canned milk profits.
U.S. Retail Pet Foods
Net Segment Segment
Sales Profit Profit Margin
----- ------ -------------
FY16 Q4 Results $562.9 $116.6 20.7%
Segment net sales of $562.9 million represented an approximate 3 percent increase compared to the fourth quarter of the prior year, including Big Heart's sales occurring prior to the completion of the acquisition. The net sales increase was primarily driven by growth in the Natural Balance(®) brand and pet snacks, partially offset by declines in mainstream dog food. Segment profit margin of 20.7 percent represented a sequential 370 basis point increase compared to the third quarter of fiscal 2016, primarily reflecting a decrease in marketing expense.
International and Foodservice
Net Segment Segment
Sales Profit Profit Margin
----- ------ -------------
FY16 Q4 Results $258.4 $33.0 12.8%
Change vs prior year 1% 8% 90bps
Segment net sales increased $2.2 million. Volume/mix was favorable, contributing 4 percentage points of growth to net sales, primarily attributed to Foodservice. This was mostly offset by an unfavorable $7.0 million impact of foreign currency exchange and a slight decline in net price realization. Noncomparable sales in the current year of $6.1 million related to Big Heart were mostly offset by $5.1 million of noncomparable sales in the prior year related to the divested U.S. canned milk business. Segment profit increased $2.4 million, benefiting from favorable volume/mix, partially offset by higher costs attributed to sourcing certain products from the U.S., reflecting the impact of a weaker Canadian dollar compared to a year ago.
Conference Call
The Company will conduct an earnings conference call and webcast today, June 9, 2016, beginning at 8:30 a.m. Eastern time. To access the webcast, please visit jmsmucker.com/investor-relations.
The J. M. Smucker Company Forward-Looking Statements
This press release contains forward-looking statements, such as projected net sales, operating results, earnings, and cash flows that are subject to risks and uncertainties that could cause actual results to differ materially from future results expressed or implied by those forward-looking statements. The risks, uncertainties, important factors, and assumptions listed and discussed in this press release, which could cause actual results to differ materially from those expressed, include: the ability to achieve synergies and cost savings related to the Big Heart acquisition in the amounts and within the time frames currently anticipated and to effectively manage the related integration costs; the ability to generate sufficient cash flow to meet the Company's deleveraging objectives; volatility of commodity, energy, and other input costs; risks associated with derivative and purchasing strategies employed to manage commodity pricing risks; the availability of reliable transportation on acceptable terms; the ability to implement and realize the full benefit of price changes, and the impact of the timing of the price changes to profits and cash flow in a particular period; the success and cost of marketing and sales programs and strategies intended to promote growth in the businesses, including the introduction of new products; general competitive activity in the market, including competitors' pricing practices and promotional spending levels; the impact of food security concerns involving either the Company's or its competitors' products; the impact of accidents, extreme weather, and natural disasters; the concentration of certain of the Company's businesses with key customers and suppliers, including single-source suppliers of certain raw materials and finished goods, and the ability to manage and maintain key relationships; the timing and amount of capital expenditures and share repurchases; 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 outcome of tax examinations, changes in tax laws, and other tax matters; foreign currency and interest rate fluctuations; and risks related to other factors described under "Risk Factors" in other reports and statements filed with the Securities and Exchange Commission, including the most recent Annual Report on Form 10-K. The Company undertakes no obligation to update or revise these forward-looking statements, which speak only as of the date made, to reflect new events or circumstances.
About The J. M. Smucker Company
For nearly 120 years, The J. M. Smucker Company has been committed to offering consumers quality products that bring families together to share memorable meals and moments. Today, Smucker is a leading marketer and manufacturer of consumer food and beverage products and pet food and pet snacks in North America. In consumer foods and beverages, its brands include Smucker's(®), Folgers(®), Jif(®), Dunkin' Donuts(®), Crisco(®), Pillsbury(®), R.W. Knudsen Family(®), Hungry Jack(®), Café Bustelo(®), Martha White(®), truRoots(®), Sahale Snacks(®), Robin Hood(®), and Bick's(®). In pet food and pet snacks, its brands include Meow Mix(®), Milk-Bone(®), Kibbles 'n Bits(®), Natural Balance(®), and 9Lives(®). The Company remains rooted in the Basic Beliefs of Quality, People, Ethics, Growth, and Independence established by its founder and namesake more than a century ago. For more information about the Company, visit jmsmucker.com.
The J. M. Smucker Company is the owner of all trademarks referenced herein, except for the following, which are used under license: Pillsbury(®) is a trademark of The Pillsbury Company, LLC and Dunkin' Donuts(®) is a registered trademark of DD IP Holder, LLC.
Dunkin' Donuts(®) brand is licensed to The J. M. Smucker Company for packaged coffee products sold in retail channels such as grocery stores, mass merchandisers, club stores, and drug stores. This information does not pertain to Dunkin' Donuts(®) coffee or other products for sale in Dunkin' Donuts(®) restaurants. K-Cup(®) is a trademark of Keurig Green Mountain, Inc., used with permission.
The J. M. Smucker Company
Unaudited Condensed Consolidated Statements of Income
Three Months Ended April 30, Year Ended April 30,
---------------------------- --------------------
% Increase % Increase
2016 2015 (Decrease) 2016 2015 (Decrease)
---- ---- --------- ---- ---- ---------
(Dollars in millions, except per share data)
Net sales $1,807.6 $1,447.1 25% $7,811.2 $5,692.7 37%
Cost of products sold 1,119.6 1,016.5 10% 4,843.4 3,724.0 30%
Gross Profit 688.0 430.6 60% 2,967.8 1,968.7 51%
Gross margin 38.1% 29.8% 38.0% 34.6%
Selling, distribution, and administrative expenses 351.8 288.2 22% 1,510.3 1,031.3 46%
Amortization 50.2 35.6 41% 208.4 110.9 88%
Other special project costs 41.0 39.3 4% 135.9 56.6 140%
Other operating income - net (1.1) (3.0) (63%) (32.1) (2.1) n/m
---- ---- ---- ----- ---- ---
Operating Income 246.1 70.5 249% 1,145.3 772.0 48%
Operating margin 13.6% 4.9% 14.7% 13.6%
Interest expense - net (40.5) (29.5) 37% (171.1) (79.9) 114%
Other debt costs - (173.3) (100%) - (173.3) (100%)
Other income - net 4.6 2.5 84% 3.7 4.2 (12%)
--- --- --- --- --- ----
Income (Loss) Before Income Taxes 210.2 (129.8) n/m 977.9 523.0 87%
Income tax expense (benefit) 19.2 (39.5) (149%) 289.2 178.1 62%
---- ----- ----- ----- ----- ---
Net Income (Loss) $191.0 $(90.3) n/m $688.7 $344.9 100%
====== ====== === ====== ====== ===
Net income (loss) per common share $1.61 $(0.82) n/m $5.77 $3.33 73%
==================================
Net income (loss) per common share -
assuming dilution $1.61 $(0.82) n/m $5.76 $3.33 73%
=================
Dividends declared per common share $0.67 $0.64 5% $2.68 $2.56 5%
===== ===== === ===== ===== ===
Weighted-average shares outstanding 118,755,584 109,568,885 8% 119,436,199 103,691,978 15%
=========== =========== === =========== =========== ===
Weighted-average shares outstanding -
assuming dilution 118,845,157 109,577,740 8% 119,477,312 103,697,261 15%
=========== =========== === =========== =========== ===
The J. M. Smucker Company
Unaudited Condensed Consolidated Balance Sheets
April 30, 2016 April 30, 2015
-------------- --------------
(Dollars in millions)
Assets
Current Assets:
Cash and cash
equivalents $109.8 $125.6
Trade
receivables,
less allowance
for doubtful
accounts 450.1 430.1
Inventories 899.4 1,163.6
Other current
assets 114.1 264.6
----------
Total Current Assets 1,573.4 1,983.9
Property, Plant, and Equipment -
Net 1,627.7 1,678.3
Other Noncurrent Assets:
Goodwill 6,091.1 6,011.6
Other intangible
assets -net 6,494.4 6,950.3
Other noncurrent
assets 197.5 182.2
----------
Total Other Noncurrent Assets 12,783.0 13,144.1
-------- --------
Total Assets $15,984.1 $16,806.3
========= =========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $459.4 $402.8
Short-term
borrowings 284.0 226.0
Other current
liabilities 469.6 393.8
----------
Total Current Liabilities 1,213.0 1,022.6
Noncurrent Liabilities:
Long-term debt 5,146.0 5,944.9
Other noncurrent
liabilities 2,616.6 2,751.9
----------
Total Noncurrent Liabilities 7,762.6 8,696.8
Shareholders' Equity 7,008.5 7,086.9
------- -------
Total Liabilities and
Shareholders' Equity $15,984.1 $16,806.3
========= =========
The J. M. Smucker Company
Unaudited Condensed Consolidated Statements of Cash Flow
Three Months Ended April 30, Year Ended April 30,
---------------------------- --------------------
2016 2015 2016 2015
---- ---- ---- ----
(Dollars in millions)
Operating Activities
Net income (loss) $191.0 $(90.3) $688.7 $344.9
Adjustments to
reconcile net
income (loss) to
net cash
provided by
operations:
Depreciation 56.2 43.4 221.7 157.5
Amortization 50.2 35.6 208.4 110.9
Share-based
compensation
expense 7.7 7.6 34.6 23.5
Gain on
divestiture - - (25.3) -
Loss on
disposal of
assets -net 1.8 1.7 5.6 6.0
Deferred income
tax (benefit)
expense (95.2) 7.7 (95.2) 7.7
Other noncash
adjustments (0.7) (11.4) (2.2) (12.0)
Make-whole
payments
included in
financing
activities - 163.3 - 163.3
Defined benefit
pension
contributions (6.2) (11.4) (8.6) (15.7)
Changes in
assets and
liabilities,
net of effect
from businesses
acquired:
Trade receivables 57.1 87.1 (21.9) 21.8
Inventories 48.0 41.8 240.1 25.3
Accounts payable and accrued
items (44.8) (36.3) 48.5 (165.7)
Proceeds from settlement of
interest rate swaps -net - - - 53.5
Income and other taxes 77.5 (49.8) 144.2 (41.6)
Other - net (7.1) 32.6 19.7 53.8
---- ---- ---- ----
Net Cash Provided by Operating Activities 335.5 221.6 1,458.3 733.2
Investing Activities
Business acquired,
net of cash
acquired - (1,240.0) 7.9 (1,320.5)
Equity investment
in affiliate - - (16.0) -
Additions to
property, plant,
and equipment (40.6) (85.6) (201.4) (247.7)
Proceeds from
divestiture - - 193.7 -
Proceeds from
disposal of
property, plant,
and equipment 3.8 1.0 4.0 2.6
Other - net 27.8 (18.1) 33.5 (30.1)
----
Net Cash (Used for) Provided by Investing
Activities (9.0) (1,342.7) 21.7 (1,595.7)
Financing Activities
Short-term
borrowings
(repayments) -
net 146.0 (38.0) 58.0 (22.4)
Proceeds from long-
term debt - 5,382.5 - 5,382.5
Repayments of long-
term debt,
including make-
whole payments - (4,093.9) (800.0) (4,193.9)
Quarterly dividends
paid (80.1) (65.0) (316.6) (254.0)
Purchase of
treasury shares (433.3) (9.0) (441.1) (24.3)
Other - net 0.9 (35.0) 3.5 (24.7)
---
Net Cash (Used for) Provided by Financing
Activities (366.5) 1,141.6 (1,496.2) 863.2
Effect of exchange rate changes on cash 9.3 (6.6) 0.4 (28.6)
--- ---- --- -----
Net (decrease) increase in cash and cash
equivalents (30.7) 13.9 (15.8) (27.9)
Cash and cash equivalents at beginning of
period 140.5 111.7 125.6 153.5
----- ----- ----- -----
Cash and Cash Equivalents at End of Period $109.8 $125.6 $109.8 $125.6
====== ====== ====== ======
The J. M. Smucker Company
Unaudited Supplemental Schedule
Three Months Ended April 30, Year Ended April 30,
---------------------------- --------------------
% of % of % of % of
2016 Net Sales 2015 Net Sales 2016 Net Sales 2015 Net Sales
---- --------- ---- --------- ---- --------- ---- ---------
(Dollars in millions)
Net sales $1,807.6 $1,447.1 $7,811.2 $5,692.7
Selling, distribution, and
administrative expenses:
Marketing 83.2 4.6% 77.3 5.3% 441.7 5.7% 282.4 5.0%
Selling 69.2 3.8% 55.5 3.8% 314.1 4.0% 209.3 3.7%
Distribution 44.9 2.5% 45.8 3.2% 230.2 2.9% 163.4 2.9%
General and administrative 154.5 8.5% 109.6 7.6% 524.3 6.7% 376.2 6.6%
-----
$351.8 19.5% $288.2 19.9% $1,510.3 19.3% $1,031.3 18.1%
Total selling, distribution, and
administrative expenses
Amounts may not add due to rounding.
The J. M. Smucker Company
Unaudited Reportable Segments
Three Months Ended April 30, Year Ended April 30,
---------------------------- --------------------
2016 2015 2016 2015
---- ---- ---- ----
(Dollars in millions)
Net sales:
U.S. Retail Coffee $512.6 $468.6 $2,239.2 $2,076.1
U.S. Retail Consumer Foods 473.7 483.2 2,269.7 2,330.8
U.S. Retail Pet Foods 562.9 239.1 2,250.4 239.1
International and Foodservice 258.4 256.2 1,051.9 1,046.7
Total net sales $1,807.6 $1,447.1 $7,811.2 $5,692.7
======== ======== ======== ========
Segment profit (loss):
U.S. Retail Coffee $153.2 $109.9 $645.9 $549.2
U.S. Retail Consumer Foods 89.0 94.8 459.9 459.2
U.S. Retail Pet Foods 116.6 (15.3) 392.0 (15.3)
International and Foodservice 33.0 30.6 156.8 140.4
Total segment profit $391.8 $220.0 $1,654.6 $1,133.5
====== ====== ======== ========
Interest expense - net (40.5) (29.5) (171.1) (79.9)
Other debt costs - (173.3) - (173.3)
Unallocated derivative gains
(losses) 9.3 (24.1) 12.0 (24.5)
Cost of products sold -special
project costs (3.0) (5.1) (12.2) (6.2)
Other special project costs (41.0) (39.3) (135.9) (56.6)
Corporate administrative expenses (111.0) (81.0) (373.2) (274.2)
Other income - net 4.6 2.5 3.7 4.2
Income (loss) before income
taxes $210.2 $(129.8) $977.9 $523.0
====== ======= ====== ======
Segment profit (loss) margin:
U.S. Retail Coffee 29.9% 23.4% 28.8% 26.5%
U.S. Retail Consumer Foods 18.8% 19.6% 20.3% 19.7%
U.S. Retail Pet Foods 20.7% (6.4%) 17.4% (6.4%)
International and Foodservice 12.8% 11.9% 14.9% 13.4%
Non-GAAP Measures
The Company uses non-GAAP financial measures including: net sales excluding the noncomparable impact of acquisitions, divesture, and foreign currency exchange; non-GAAP gross profit, operating income, income (loss), and income (loss) per diluted share; adjusted non-GAAP income (loss) and income (loss) per diluted share; earnings before interest, taxes, depreciation, and amortization ("EBITDA"); and free cash flow as key measures for purposes of evaluating performance internally. The Company believes that these measures provide useful information to investors because they are the measures used to evaluate performance on a comparable year-over-year basis. Non-GAAP profit measures exclude certain items affecting comparability which include merger and integration and restructuring costs ("special project costs") and unallocated gains and losses on commodity and foreign currency exchange derivatives ("unallocated derivative gains and losses"). The special project costs relate to specific merger and integration and restructuring projects that are each nonrecurring in nature and can significantly affect the year-over-year assessment of operating results. Unallocated derivative gains and losses reflect the changes in fair value of the Company's commodity and foreign currency exchange contracts and also affect comparability on a year-over-year basis. Adjusted non-GAAP income per diluted share further excludes the noncash impact of intangible amortization. The Company believes this provides investors an additional metric to evaluate performance and the ability to generate cash necessary to achieve its deleveraging objectives. 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 used by management to internally evaluate its businesses, and facilitates 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. A reconciliation of certain non-GAAP financial measures to the comparable GAAP financial measure for the current and prior year periods is included in the "Unaudited Non-GAAP Financial Measures" tables. The Company has also provided a reconciliation of non-GAAP financial measures for its fiscal 2017 outlook. As the amount of unallocated derivative gains and losses varies depending on market conditions and levels of derivative transactions with respect to a particular fiscal year, it is not determinable on a forward-looking basis and no guidance has been provided.
The J. M. Smucker Company
Unaudited Non-GAAP Financial Measures
Three Months Ended April 30, Year Ended April 30,
---------------------------- --------------------
Increase Increase
2016 2015 (Decrease) % 2016 2015 (Decrease) %
---- ---- --------- --- ---- ---- --------- ---
(Dollars in millions)
Net sales reconciliation:
Net sales $1,807.6 $1,447.1 $360.5 25% $7,811.2 $5,692.7 $2,118.5 37%
Big Heart acquisition (336.9) - (336.9) (23%) (2,055.2) - (2,055.2) (36%)
Sahale acquisition - - - - (12.0) - (12.0) -
Milk divestiture - (36.6) 36.6 3% - (47.6) 47.6 1%
Net sales
excluding
acquisitions
and
divestiture $1,470.7 $1,410.5 $60.2 4% $5,744.0 $5,645.1 $98.9 2%
Foreign currency exchange 7.0 - 7.0 - 59.8 - 59.8 1%
--- --- --- ---- --- ---- ---
Net sales
excluding
acquisitions,
divestiture,
and foreign
currency
exchange $1,477.7 $1,410.5 $67.2 5% $5,803.8 $5,645.1 $158.7 3%
============
Amounts may not add due to rounding.
Net sales excluding acquisitions and divestiture have been adjusted for the noncomparable impact of the Big Heart and Sahale Snacks, Inc. ("Sahale") acquisitions and the U.S. canned milk divestiture. Big Heart was acquired on March 23, 2015, Sahale was acquired on September 2, 2014, and the U.S. canned milk business was divested on
December 31, 2015.
The J. M. Smucker Company
Unaudited Non-GAAP Financial Measures
Three Months Ended April 30, Year Ended April 30,
---------------------------- --------------------
2016 2015 2016 2015
---- ---- ---- ----
(Dollars in millions, except per share data)
Gross profit reconciliation:
Gross profit $688.0 $430.6 $2,967.8 $1,968.7
Unallocated derivative (gains) losses (9.3) 24.1 (12.0) 24.5
Cost of products sold -special project
costs 3.0 5.1 12.2 6.2
Non-GAAP gross profit $681.7 $459.8 $2,968.0 $1,999.4
======
% of net sales 37.7% 31.8% 38.0% 35.1%
Operating income reconciliation:
Operating income $246.1 $70.5 $1,145.3 $772.0
Unallocated derivative (gains) losses (9.3) 24.1 (12.0) 24.5
Cost of products sold -special project
costs 3.0 5.1 12.2 6.2
Other special project costs 41.0 39.3 135.9 56.6
Non-GAAP operating income $280.8 $139.0 $1,281.4 $859.3
======
% of net sales 15.5% 9.6% 16.4% 15.1%
Net income (loss) reconciliation:
Net income (loss) $191.0 $(90.3) $688.7 $344.9
Income tax expense (benefit) 19.2 (39.5) 289.2 178.1
Unallocated derivative (gains) losses (9.3) 24.1 (12.0) 24.5
Cost of products sold -special project
costs 3.0 5.1 12.2 6.2
Other special project costs 41.0 39.3 135.9 56.6
----
Non-GAAP income (loss) before income
taxes $244.9 $(61.3) $1,114.0 $610.3
Income tax expense (benefit), as
adjusted 23.8 (16.0) 329.4 207.8
Non-GAAP income (loss) $221.1 $(45.3) $784.6 $402.5
======
Non-GAAP income (loss) before income
taxes $244.9 $(61.3) $1,114.0 $610.3
Amortization 50.2 35.6 208.4 110.9
Adjusted non-GAAP income (loss) before
income taxes $295.1 $(25.7) $1,322.4 $721.2
Income tax expense (benefit), as
adjusted 29.8 (3.4) 391.1 245.6
Adjusted non-GAAP income (loss) $265.3 $(22.3) $931.3 $475.6
======
Weighted-average common shares outstanding 118,243,385 109,004,988 118,918,701 103,038,271
Weighted-average participating shares outstanding 512,199 563,897 517,498 653,707
------- ------- ------- -------
Total weighted-average shares outstanding 118,755,584 109,568,885 119,436,199 103,691,978
Dilutive effect of stock options 89,573 8,855 41,113 5,283
------ ----- ------ -----
Total weighted-average shares outstanding - 118,845,157 109,577,740 119,477,312 103,697,261
assuming dilution
Non-GAAP income (loss) per common share - $1.86 $(0.41) $6.57 $3.88
assuming dilution
Adjusted non-GAAP income (loss) per common share - $2.23 $(0.20) $7.79 $4.59
assuming dilution
The J. M. Smucker Company
Unaudited Non-GAAP Financial Measures
Three Months Ended April 30, Year Ended April 30,
---------------------------- --------------------
2016 2015 2016 2015
---- ---- ---- ----
(Dollars in millions)
EBITDA reconciliation:
Net income (loss) $191.0 $(90.3) $688.7 $344.9
Income tax expense (benefit) 19.2 (39.5) 289.2 178.1
Interest expense - net 40.5 29.5 171.1 79.9
Depreciation 56.2 43.4 221.7 157.5
Amortization 50.2 35.6 208.4 110.9
----
Earnings before interest, taxes, depreciation, and
amortization $357.1 $(21.3) $1,579.1 $871.3
======
% of net sales 19.8% (1.5%) 20.2% 15.3%
Free cash flow reconciliation:
Net cash provided by operating activities $335.5 $221.6 $1,458.3 $733.2
Additions to property, plant, and equipment (40.6) (85.6) (201.4) (247.7)
------
Free cash flow $294.9 $136.0 $1,256.9 $485.5
======
The following tables provide a reconciliation of the Company's fiscal 2017 guidance for estimated adjusted non-GAAP income per diluted share and free cash flow.
Year Ending April 30, 2017
--------------------------
Low High
--- ----
Net income per common share
-assuming dilution
reconciliation:
Net income
per common
share -
assuming
dilution $5.85 $6.00
Special
project
costs 0.57 0.57
Amortization 1.18 1.18
Adjusted
non-GAAP
income $7.60 $7.75
=========
Year Ending April 30, 2017
--------------------------
(Dollars in millions)
Free cash flow
reconciliation:
Net cash
provided by
operating
activities $1,240
Additions to
property,
plant, and
equipment (240)
Free cash
flow $1,000
==========
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SOURCE The J.M. Smucker Company
