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The J.M. Smucker Company Reports Operating Results (10-Q)

March 11, 2011 | About:
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10qk

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The J.M. Smucker Company (SJM) filed Quarterly Report for the period ended 2011-01-31.

Smucker Company has a market cap of $8.36 billion; its shares were traded at around $70.22 with a P/E ratio of 14.7 and P/S ratio of 1.8. The dividend yield of Smucker Company stocks is 2.5%. Smucker Company had an annual average earning growth of 9.9% over the past 10 years. GuruFocus rated Smucker Company the business predictability rank of 2.5-star.

Highlight of Business Operations:

The Companys net income per diluted share was $1.11 and $1.14 for the third quarters of 2011 and 2010, and $3.23 and $3.14 for the first nine months of 2011 and 2010, respectively. The Companys income per diluted share, excluding special project costs, was $1.27 and $1.17 for the third quarters of 2011 and 2010, and $3.69 and $3.30 for the first nine months of 2011 and 2010, respectively, an increase of nine percent and 12 percent, respectively.

Gross profit increased $16.1 million in the third quarter of 2011, compared to 2010, as the increase in net sales offset the impact of overall higher raw material costs and $16.9 million of special project costs included in cost of products sold, primarily accelerated depreciation. Excluding special project costs, gross profit increased $33.0 million, or seven percent, yet decreased as a percent of net sales from 38.0 percent in the third quarter of 2010, to 37.4 percent in the third quarter of 2011. Raw material cost increases were most significant for green coffee, milk, sugar, and soybean oil, and more than offset lower costs for peanuts. Coffee price increases taken earlier in the year offset higher green coffee costs and contributed over one-half of the gross profit increase in the third quarter of 2011, but did not result in an overall gross margin gain. Gross margin was further impacted by price declines taken on oils during the second quarter in response to competitive dynamics. Unrealized mark-to-market adjustments on commodity instruments in the third quarter of 2011 were not material.

Operating income increased $3.1 million, or one percent, in the third quarter of 2011, compared to 2010, despite an overall increase in special project costs of approximately $23.3 million. Excluding the impact of special project costs in both periods, operating income increased $26.4 million, or 12 percent, and improved from 17.8 percent of net sales in 2010, to 18.4 percent in 2011. Additionally, noncash impairment charges of $17.2 million and $9.8 million, primarily related to the Europes Best® intangible assets in Canada, reduced the Companys overall operating margin by 1.3 and 0.8 percentage points in the third quarters of 2011 and 2010, respectively. The carrying value of the remaining intangible assets of the Europes Best® business is approximately $11.0 million after the 2011 impairment charge.

For the first nine months of 2011, gross profit increased $20.9 million but decreased to 37.9 percent of net sales, compared to 38.4 percent of net sales in the first nine months of 2010. The first nine months of 2011 includes the impact of $38.4 million of special project costs in cost of products sold, primarily accelerated depreciation. Excluding special project costs, gross profit increased $59.3 million, or four percent, and increased as a percent of net sales from 38.4 percent in the first nine months of 2010, to 38.9 percent in the first nine months of 2011. Gross profit for the first nine months of 2011 included higher costs for green coffee, milk, sugar, and soybean oil while costs for peanuts and flour were lower, compared to the first nine months of 2010. Coffee price increases taken during the year more than offset higher green coffee costs and contributed

Interest expense increased $3.9 million during the third quarter and $2.5 million for the first nine months of 2011, compared to 2010, due to higher average debt outstanding. Debt repayments made during fiscal 2010 totaled $625.0 million, most of which were made in the third quarter, and were offset by the issuance of $400.0 million in Senior Notes on June 15, 2010.

The Company expects to incur restructuring costs of approximately $235.0 million, of which $79.0 million has been incurred through January 31, 2011 including $25.3 million and $73.2 million in the third quarter and first nine months of 2011, respectively. The restructuring is proceeding as planned and the balance of the costs is anticipated to be incurred over the next four fiscal years as the facilities are closed.

Read the The complete Report

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