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ANNUAL REPORT — 2004— FINANCIAL HIGHLIGHTS — The J. M. Smucker Company — Year Ended April 30, (Dollars in thousands, except per share data) 2004 2003 Net sales $1,417,011 $1,311,744 Net income and net income per common share: Net income $ 111,350 $ 96,342 Net income per common share – assuming dilution $ 2.21 $ 2.02 Income and income per common share before restructuring and merger and integration costs: (1) Income $ 121,993 $ 104,432 Income per common share – assuming dilution $ 2.42 $ 2.19 Common shares outstanding at year end 50,174,707 49,767,540 Number of employees 2,950 2,775 (1)Reconciliation to net income: Income before income taxes $ 178,819 $ 155,390 Merger and integration costs 1,266 10,511 Cost of products sold – restructuring 8,464 1,256 Other restructuring costs 7,362 1,281 Income before income taxes, restructuring, and merger and integration costs $ 195,911 $ 168,438 Income taxes 73,918 64,006 Income before restructuring and merger and integration costs $ 121,993 $ 104,432 CONTENTS ON OUR COVER Letter to Shareholders 1 “Freedom from Want,” by Norman Rockwell Five-Year Summary of Selected Financial Data 10 Created for the March 6, 1943, issue of Summary of Quarterly Results of Operations 11 the Saturday Evening Post Stock Price Data 11 In honoring us as America’s best place to work, Fortune Management’s Discussion and Analysis 12 magazine observed that The J. M. Smucker Company is Report of Registered Public Accounting Firm 20 “...a throwback to a simpler time. If Norman Rockwell were Consolidated Financial Statements 21 to design a corporation, this would be it.” This year’s cover Notes to Consolidated Financial Statements 26 represents what our “Family of Brands” is all about… Management’s Report on Responsibility for bringing generations of friends and families together to Financial Reporting 47 celebrate the goodness of homemade meals. Directors, Officers, and General Managers 48 Properties 48 © 1943 SEPS: Licensed by Curtis Publishing, Indianapolis, IN All rights reserved. www.curtispublishing.com Shareholder Information 49 DEAR SHAREHOLDERS AND FRIENDS: Fiscal 2004 was remarkable in the history of The J. M. Smucker Company. It was a year of many achievements that will contribute to our Company’s strength and success for a long time to come. Each of our 2004 accomplishments is significant in its own right. The fact that we marked so many milestones in a single year is testimony to the foresight, hard work, and dedication of the entire Smucker team. Most notably, in 2004: acquisitions will increase our adherence to our Company’s found- sales by more than 50 percent and ing principles and the atmosphere ✸ We completed our first full year grow our earnings per share over we foster. of ownership of the Jif and Crisco the next several years. Our “Basic Beliefs”— Quality, brands, which helped contribute People, Ethics, Growth, and to another year of record sales ✸ The J. M. Smucker Company Independence — are the foundation and profits. topped Fortune magazine’s annual on which we base all of our decisions list of “The 100 Best Companies ✸ We announced our purchase and actions. Our employees’ dedica- to Work For.” of International Multifoods tion to these beliefs earned us this Corporation, which, in the We begin our discussion of the year’s award. And while being U.S., includes the icon brands year’s highlights by expressing our named number one is a tremendous Pillsbury, Hungry Jack, and gratitude for being chosen “The Best honor, we remain committed to Martha White, and in Canada, Company to Work For.” While we doing what’s right every day, Robin Hood and Bick’s. These did not actively pursue this recogni- regardless of formal recognition. tion, we believe it is the result of our 1 Smucker’s, Jif, and Crisco are the heart of our U.S. Retail business and exemplify our commitment to providing products that are “convenient, good and good for you, and that make you smile.” H opportunities to create new products International Multifoods under our other Canadian brands, Acquisition including Smucker’s, Jif, Crisco, I Double Fruit, Map-O-Spread, and Shirriff. We were very pleased in 2004 In the United States, our owner- to come to an agreement to pur- ship of Crisco, Pillsbury, and Martha chase International Multifoods White — all sold in the baking Corporation. This acquisition sup- aisle — along with Hungry Jack, ports our strategy to own and market Smucker’s, and Jif, creates for us North American icon brands that many opportunities to enhance our are sold in the center of the store and consumer and trade promotions, that hold the number-one market particularly during the all-important position or have the potential to do so. holiday baking season. In Canada, Robin Hood flour and Our brands have similar histories, Bick’s pickles and condiments both are enjoyed at family occasions, and hold leadership positions in their are found in almost every American respective markets and categories. home. These brands support our Combining the Multifoods business vision of providing our consumers We welcome these brands to and reflect increased shares out- Our Company’s strong performance with Smucker’s existing business in with products that are convenient, our family and believe they provide Record Results standing as a result of the Jif and was broad-based, with all of our primary Canada gives us significant critical good and good for you, and that a foundation to add shareholder I Crisco merger. brands — Smucker’s, Jif, Crisco, and mass in the market, with total sales, bring smiles to families at every value for many years. For the next Market capitalization of our R.W. Knudsen Family — achieving in U.S. dollars, of approximately We achieved record results in meal occasion. 12 months, we will concentrate on Company has increased from record sales and earning levels. $400 million. It also enhances our fiscal 2004, creating a strong base for The brands acquired from facilitating a successful, smooth $850 million two years ago to Following is a discussion of key future growth. Sales were $1.4 billion, Multifoods will add more than integration, and we will invest in the $2.6 billion today, and our shares points in each of our business areas. up eight percent. Earnings were 50 percent to our sales, and the brands to achieve sales growth. We outstanding have grown from $111 million, up 16 percent. Our synergies the Multifoods acquisition expect to obtain $40 to $60 million in 25 million to 50 million, giving our earnings number is significant, as it provide will add to our profits, benefits during the next three years, shareholders the greatest liquidity is more than three times greater than beginning in the first year, but pri- mostly from leveraging our sales and in the history of our Company. it was just two years ago. Earnings marily in the second and third years distribution network and through This is important as we continue per share were $2.21, up nine percent, after the close of the transaction. overhead reductions. to execute our growth strategy. 2 3 Smucker’s, Jif, and Crisco are the heart of our U.S. Retail business and exemplify our commitment to providing products that are “convenient, good and good for you, and that make you smile.” H opportunities to create new products International Multifoods under our other Canadian brands, Acquisition including Smucker’s, Jif, Crisco, I Double Fruit, Map-O-Spread, and Shirriff. We were very pleased in 2004 In the United States, our owner- to come to an agreement to pur- ship of Crisco, Pillsbury, and Martha chase International Multifoods White — all sold in the baking Corporation. This acquisition sup- aisle — along with Hungry Jack, ports our strategy to own and market Smucker’s, and Jif, creates for us North American icon brands that many opportunities to enhance our are sold in the center of the store and consumer and trade promotions, that hold the number-one market particularly during the all-important position or have the potential to do so. holiday baking season. In Canada, Robin Hood flour and Our brands have similar histories, Bick’s pickles and condiments both are enjoyed at family occasions, and hold leadership positions in their are found in almost every American respective markets and categories. home. These brands support our Combining the Multifoods business vision of providing our consumers We welcome these brands to and reflect increased shares out- Our Company’s strong performance with Smucker’s existing business in with products that are convenient, our family and believe they provide Record Results standing as a result of the Jif and was broad-based, with all of our primary Canada gives us significant critical good and good for you, and that a foundation to add shareholder I Crisco merger. brands — Smucker’s, Jif, Crisco, and mass in the market, with total sales, bring smiles to families at every value for many years. For the next Market capitalization of our R.W. Knudsen Family — achieving in U.S. dollars, of approximately We achieved record results in meal occasion. 12 months, we will concentrate on Company has increased from record sales and earning levels. $400 million. It also enhances our fiscal 2004, creating a strong base for The brands acquired from facilitating a successful, smooth $850 million two years ago to Following is a discussion of key future growth. Sales were $1.4 billion, Multifoods will add more than integration, and we will invest in the $2.6 billion today, and our shares points in each of our business areas.