The J. M. Smucker Company 2010 Annual Report Financial Highlights the J
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The J. M. Smucker Company 2010 Annual Report Financial Highlights The J. M. Smucker Company Year Ended April 30, (Dollars in thousands, except per share data) 2010 2009 Net sales $4,605,289 $3,757,933 Net income and net income per common share: Net income $ 494,138 $ 265,953 Net income per common share - assuming dilution $ 4.15 $ 3.11 Income and income per common share before restructuring and merger and integration costs: (1) Income $ 520,782 $ 321,617 Income per common share - assuming dilution $ 4.37 $ 3.76 Common shares outstanding at year end 119,119,152 118,422,123 Number of employees 4,850 4 ,700 (1) Reconciliation to net income: Income before income taxes $ 730,753 $ 396,065 Merger and integration costs 33,692 72,666 Cost of products sold - restructuring 3,870 — Other restructuring costs 1,841 10,229 Income before income taxes, restructuring, and merger and integration costs $ 770,156 $ 478,960 Income taxes 249,374 157,343 Income before restructuring and merger and integration costs $ 520,782 $ 321,617 Contents Our Culture 1 Letter to Shareholders 2 Business Overview 4 Our Commitment to Sustainability 12 Recipes 13 Five-Year Summary of Selected Financial Data 15 On Our Cover Summary of Quarterly Results of Operations 16 “A Memorable Meal” © 2010 Willa Aylaian Stock Price Data 16 Comparison of Five-Year Cumulative Total A native Californian and mother of five, Willa Aylaian’s Shareholder Return 17 artwork typically features cottages, coastal ocean scenes, Management’s Discussion and Analysis 18 and children on the beach. Her paintings are known Report of Management on Internal Control Over Financial Reporting 30 for being bright and filled with whimsy and delight. Report of Management on Responsibility This year our Annual Report cover captures for Financial Reporting 30 the joy of the family meal. Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting 31 Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements 32 Consolidated Financial Statements 33 Notes to Consolidated Financial Statements 38 Directors and Officers 64 Properties 64 Corporate and Shareholder Information 65 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. Dear Shareholders and Friends: We are pleased to share with you that fiscal 2010 was • Introduced new, better-for-you product alternatives, another record year for The J. M. Smucker Company as including but not limited to Pillsbury sugar-free cake mixes, we continued to focus on Our Purpose of bringing families brownies, and frostings — the first sugar-free alternatives together to share memorable meals and moments. Our in the dessert baking mix category — offering consumers results demonstrate that when our employees focus on a even more ways to enjoy our brands. shared purpose and implementing a clear strategy, strong • Continued our strong commitment to sustainability so financial performance follows: that we can create a better tomorrow through economic, • Sales were $4.6 billion, up 23 percent over last year. environmental, and social programs. • Net income per share was $4.15, up from $3.11 last year, • Enjoyed and preserved the unique Company culture that a 33 percent increase. makes Smucker a great place to work. • Cash flow from operations exceeded $713 million, up We were proud that our Company was once again 60 percent over last year. recognized by FORTUNE magazine’s “100 Best Companies to Work For.” This recognition is a testament to our Strong cash flows provide us with a number of opportu- employees. We thank them for their continued passion nities to create additional shareholder value in the future. and dedication to our business. These opportunities include future growth through acquisi- tions, dividend payments, share repurchase programs, and capital investments. In fact, we recently announced a Long-Term Perspective 14 percent increase in our quarterly dividend. Achieving solid financial results and growing our business Several key strategic accomplishments over the past year were important objectives that we were proud to deliver have contributed to our strong momentum and outstand- this past fiscal year. However, we believe that an even more ing Company results: important measure of success is providing strong results • Achieved market share growth across a number of our and value to our constituents — consumers, customers, core categories. employees, suppliers, communities, and shareholders — • Successfully completed the remaining activities associ- over the long term. ated with integrating the Folgers coffee business with our A commitment to continuous improvement is essential broader portfolio of brands and Company infrastructure. to ensuring our ongoing success. Our employees are committed to continuously improving our brands, prod- Realized the first full year of synergies associated with • ucts, business processes, operational practices, and cost managing the Folgers coffee business as part of The J. M. structure. Smucker Company. Most significantly, we announced this past year the • Grew Dunkin’ Donuts coffee in retail volume, which strategic decision to invest in the long-term strength and represented the fastest growing brand in our Company profitability of our coffee and fruit spreads businesses with portfolio. the largest capital investment in our Company’s history. • Delivered significant sales, profits, and cash flow from This multi-project initiative will help achieve our long-term the coffee business. financial objectives, better allocate capacity and assets across the supply chain, and strengthen our category lead- • Strengthened core brand equities across our entire ership positions. This decision, while right for the ongoing portfolio of brands through an unprecedented level of strength of the businesses, was a difficult one because of investment in print, digital, and television advertising. the impact on many of our employees as a result of the • Leveraged the power of our diverse categories and prod- planned closing of four manufacturing facilities. ucts through multi-brand promotional events that invited Looking to the future, we will continue to strengthen consumers to include even more of our products as part our work environment and unique culture. Over the next of their family meals. few years, we will make significant investments at our 2 corporate headquarters location in Orrville, Ohio, to sup- To best fulfill Our Purpose and deliver sustained results port recent and future growth. We will open a new office we are guided by our strategic vision to own and market building, expand an existing building that will add to our North American food brands that hold the #1 market posi- research and development capabilities, and build a state- tion in their respective category. We remain confident in of-the-art manufacturing facility. this North American focused strategy and will also continue Our culture, emphasis on growth, and focus on continu- to embrace a global perspective. ous improvement have long contributed to our success. Having the right strategic focus is essential, but how we These investments are only the most recent examples of work to fulfill our strategy is what makes The J. M. Smucker our commitment to these areas. Company unique. Our Basic Beliefs — Quality, People, Ethics, Growth, and Independence — are the guideposts for every- Our Purpose thing we do. They are the fabric of our culture and have enabled us to build trust with our constituents for genera- During fiscal 2010, we extended Our Purpose of bringing tions. That trust is the confidence that constituents place families together to share memorable meals and moments in our Company, our brands, and our products. We do not to more consumers than ever before. We continue to take this trust for granted and work to maintain it every believe in the far-reaching benefits of family mealtime. day — one product at a time. Families that eat together are stronger, smarter, healthier, We thank you for your investment in The J. M. Smucker and happier. Company and look forward to our continued partnership. Sincerely, Tim Smucker Richard Smucker Our Purpose is to bring families together to share memorable meals and moments. At Smucker, we have always measured success by more than financial performance and are honored that our brands play a role in helping family and friends enjoy these cherished mealtime moments. Business Overview — U.S. Retail Coffee Market Folgers • Dunkin’ Donuts • Millstone Sales and profits within our U.S. Retail Folgers core products continue to be a popular choice across Coffee Market segment grew by 99 per- the U.S. as families brew and enjoy more coffee at home. Consumers cent and 129 percent, respectively, in believe The Best Part of Wakin’ Up starts with a freshly brewed, fiscal 2010. hot cup of Folgers coffee. That’s why we continue to focus our We are the clear market leader in the investments and efforts on growing Folgers core products and coffee category and the momentum of ensuring the right marketing mix, distribution, and packaging. the business is strong. Since the close We also continue to strengthen our Folgers brand equity through of the Folgers transaction in November our new television advertising, promotions, digital, and in-store 2008, we have realized the first full year of synergies, completed all marketing initiatives.