PART I
Item 1. Business.
The Company. The J. M. Smucker Company (the “Company”) was established in 1897
and was incorporated in Ohio in 1921. The Company, often referred to as Smucker’s (a registered
trademark), operates principally in one industry, the manufacturing and marketing of branded food
products on a worldwide basis, although the majority of the Company’s sales are in the U.S. The
Company’s operations outside the U.S. are principally in Canada although products are exported to
other countries as well. Sales outside the U.S. represented approximately 10 percent of
consolidated Company sales for fiscal 2011. The Company’s branded food products include a strong
portfolio of trusted, iconic, market-leading brands that are sold to consumers through retail
outlets in North America.
On November 6, 2008, the Company completed a merger transaction with The Folgers Coffee
Company (“Folgers”), a subsidiary of The Procter & Gamble Company (“P&G”). The value of the
transaction was approximately $3.7 billion, including the issuance of common shares of the Company
in connection with the merger and $350 million of Folgers debt. Under the terms of the transaction
agreements, P&G distributed common shares of Folgers to participating P&G shareholders which were
then automatically converted into the right to receive common shares of the Company in the merger.
Immediately following the merger, P&G shareholders and pre-merger Company shareholders owned
approximately 53.5 percent and 46.5 percent, respectively, of the Company’s approximately 118
million common shares outstanding. The merger was accounted for as a purchase business
combination, with the Company treated as the acquiring entity.
The Company has four reportable segments: U.S. Retail Coffee Market, U.S. Retail Consumer
Market, U.S. Retail Oils and Baking Market, and Special Markets. The Company’s three U.S. retail
market segments in total comprised over 80 percent of the Company’s net sales in 2011 and represent
a major portion of the strategic focus area for the Company — the sale of branded food products
with leadership positions to consumers through retail outlets in North America. The Special
Markets segment represents sales outside of the U.S. retail market and includes the Company’s
Canada, foodservice, natural foods, and international business areas.
Principal Products. The principal products of the Company, which are sold across the
Company’s U.S. retail market segments and Special Markets
segment are coffee, peanut butter, fruit spreads, shortening and
oils, baking mixes and ready-to-spread frostings, canned milk, flour
and baking ingredients, juices and beverages, frozen sandwiches, toppings, syrups, and
pickles and condiments.
Product sales information for the years 2011, 2010, and 2009 is incorporated herein by
reference to information set forth in the Company’s 2011 Annual Report to Shareholders, on pages 48
through 50 under “Note E: Reportable Segments.”
In each of the U.S. retail market segments, the Company’s products are primarily sold through
a combination of direct sales and through brokers to food retailers, food wholesalers, drug stores,
club stores, mass merchandisers, discount and dollar stores, and military commissaries. In the
Special Markets segment, the Company’s products are distributed domestically and in foreign
countries through retail channels, foodservice distributors and operators (e.g., restaurants,
schools and universities, and health care operators), health and natural foods stores and
distributors.
Sources and Availability of Raw Materials. The raw materials used by the Company in
each of its segments are primarily commodities and agricultural-based products. Green coffee,
peanuts, edible oils, sweeteners, milk, flour, corn, and other ingredients are obtained from
various suppliers. The availability, quality, and costs of many of these commodities have
fluctuated, and may continue to fluctuate, over time. The Company uses basis contracts and
commodity futures and options to manage price volatility for a significant portion of its commodity
costs. 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, and
political and economic conditions in the source countries. Fruit and vegetable raw materials used
by the Company in the production of its food products are purchased from independent growers and
suppliers. Glass, plastic, steel cans, caps, carton board, and corrugate are the principal
packaging materials used by the Company.
Raw materials are generally available from numerous sources although the Company has elected
to source certain plastic packaging materials from single sources of supply pursuant to long-term
contracts. While availability may vary year-to-year, the Company believes that it will continue to
be able to obtain adequate supplies and that alternatives to single-sourced materials are
available. The Company has not historically encountered significant shortages of key raw
materials. The Company considers its relationship with key raw material suppliers to be good.
Trademarks and Patents. The Company’s products are produced under certain patents and
marketed under numerous trademarks owned or licensed by the Company or one of its subsidiaries.
Major trademarks, utilized primarily in the U.S. retail market segments, include: Folgers®, Dunkin’
Donuts®, and Millstone® in the U.S. Retail Coffee segment; Smucker’s®, Jif®, Hungry Jack®,
Uncrustables®, Snack’n Waffles, Dickinson’s®, Crosse & Blackwell®, Adams®, Laura Scudder’s®,
Goober®, Golden Temple® and Magic Shell® in the U.S. Retail Consumer Market segment; and Crisco®,
Pillsbury®, Eagle Brand®, Borden® and Elsie design, Martha White®, LaPina®, White Lily®,
Softasilk®, Funfetti®, and Pet® in the U.S. Retail Oils and Baking Market segment.
Major trademarks utilized in the Special Markets segment include: Folgers®, Smucker’s®, Jif®,
Crisco®, Plate Scapers®, Bick’s®, Five Roses®, Robin Hood®, Carnation®, Europe’s Best®, R. W.
Knudsen Family®, Santa Cruz Organic®, Double Fruit®, Recharge®, and Red River®.
Dunkin’ Donuts® is a registered trademark of DD IP Holder LLC used by the Company under
license (the “Dunkin’ License”) for packaged coffee products sold in retail channels such as
grocery stores, mass merchandisers, club stores, and drug stores. The Dunkin’ License does not
pertain to Dunkin’ Donuts® coffee or other products for sale in Dunkin’ Donuts® restaurants. The
terms of the Dunkin’ License include the payment of royalties to DD IP Holder LLC and other
financial commitments by the Company. The Dunkin’ License is in effect until January 1, 2034.
Pillsbury®, the Barrelhead logo, and the Doughboy character are trademarks of The Pillsbury
Company, LLC and are used by the Company under a 20-year, perpetually renewable, royalty-free
license. Borden® and the Elsie design are trademarks used by the Company on certain products under
a perpetual, exclusive, and royalty-free license. Carnation® is a trademark of Société des
Produits Nestlé S.A. used by the Company’s Canadian subsidiary for certain canned milk products in
certain territories under an exclusive and royalty-free license with an initial term of 10 years,
renewable by the Company for two successive five-year terms and which becomes perpetual at the end
of the renewal terms under certain circumstances. In addition, the Company or one of its
subsidiaries licenses the use of several other trademarks, none of which are individually material
to the Company’s business.
Slogans or designs considered to be important trademarks include, without limitation, “With A
Name Like Smucker’s, It Has To Be Good,” “The Best Part of Wakin’ Up Is Folgers In Your Cup,” “Wake
Up Special Every Day,” “Mountain Grown,” “Choosy Moms Choose Jif,” “Purely The Finest,” “Crisco is
Cooking,” “Everybody’s Happy When It’s Hungry Jack,” “Goodness Gracious, It’s Good,” the Smucker’s
banner, the Crock Jar shape, the Gingham design, and the Strawberry logo.
The Company owns several hundred patents worldwide in addition to proprietary trade secrets,
technology, know-how processes and other intellectual property rights that are not registered.
The Company considers all of its intellectual property and the Pillsbury®, Dunkin’ Donuts®,
Borden® and Elsie design, and Carnation® licenses, taken as a whole, to be essential to its
business.
Seasonality. The Company’s U.S. Retail Coffee Market and U.S. Retail Oils and Baking
Market segments are particularly seasonal around the “Fall Bake” and holiday period, which
generally results in higher sales and profits in the Company’s second and third quarters. The
Company’s success in
promoting and merchandising its baking and coffee brands during the “Fall Bake” and holiday period
has a significant impact on its results for a fiscal year. The back-to-school period and the
spring holiday season are two other important promotional periods for the Company, although their
impact to the Company is not as significant as the “Fall Bake” and holiday period.
Working Capital. Working capital requirements are greatest during the first half of
the Company’s fiscal year mainly due to the timing of the buildup of coffee, oil, and baking
inventories necessary to support the “Fall Bake” and holiday period and the additional buildup of
coffee inventory in advance of the Atlantic hurricane season.
Customers. Sales to Wal-Mart Stores, Inc. and its subsidiaries amounted to
approximately 26 percent, 27 percent, and 24 percent of net sales in 2011, 2010, and 2009,
respectively. These sales are primarily included in the U.S. retail market segments. No other
customer exceeded 10 percent of net sales during 2011, 2010, and 2009.
During 2011, the Company’s top 10 customers, collectively, accounted for approximately 55
percent of consolidated net sales. Although the loss of any large customer for an extended length
of time could negatively impact the Company’s sales and profits, the Company does not anticipate
that this will occur to a significant extent due to strong consumer demand for the Company’s
products.
Orders. Generally, orders are filled within a few days of receipt, and the backlog of
unfilled orders at any particular time has not been material on a historical basis.
Government Business. No material portion of the Company’s business is subject to
renegotiation of profits or termination of contracts at the election of the government.
Competition. The Company is the branded market leader in the coffee, peanut butter,
shortening, sweetened condensed milk, fruit spreads, ice cream toppings, and natural foods
beverages categories in the U.S. The Company’s business is highly competitive as all of its U.S.
retail market segments’ brands compete for retail shelf space with other branded products as well
as private label products.
The continued growth of alternative store formats, product and packaging innovations,
technological advances, and new industry techniques are all issues for companies in the food
industry to consider in order to remain competitive. The primary ways in which products are
distinguished are product quality, price, packaging, new product introductions, nutritional value,
convenience, advertising, and promotion. Positive factors pertaining to the Company’s competitive
position include well-recognized brands, superior product quality and trust, experienced brand
management, a single national grocery broker in the U.S., varied product offerings, product
innovation, excellent customer service, and a strong distribution network.
The Company historically has seen accelerated private label growth during periods of general
economic disruption. The Company estimates that, during the period following the economic
recession of the late 2000’s, private label grew more than during past periods partly due to the
run up in commodity costs, increased emphasis of store brands by retailers, and improvements in
private label quality. The Company believes that both private label and leading brands play an
important role in all of the food categories in which it competes, appealing to different consumer
segments. The Company closely monitors the price gap or price premium between its brands and
private label brands, with the view that value is about more than price and the expectation that
number one brands will continue to be an integral part of consumers’ shopping baskets.
In the U.S. Retail Coffee Market segment, the Folgers® brand competes in the highly
competitive U.S. packaged roast and ground coffee market with other retail coffee roasters such as
Maxwell House, Yuban, and Nescafe. The Company competes in the premium coffee market with its
Millstone® and Folgers® Gourmet Selections® brands, as well as through sales of Dunkin’
Donuts® retail packaged coffee products, with other brands such as Starbucks, Eight O’Clock, and
Seattle’s Best. In 2010, the
Company
expanded its presence in the single-serve coffee market, entering
into an agreement with Green Mountain Coffee Roasters, Inc. and Keurig, Inc. for the manufacturing and distribution of
premium coffees through Keurig’s innovative K-Cup® coffee system. The Company’s Folgers® Gourmet
Selections® and Millstone® premium coffees K-Cup® products were introduced in the second quarter of
2011 and represent the most successful new product launch in the Company’s history.
In the U.S. Retail Consumer Market segment, the Jif® brand has been the leader in the peanut
butter category for over 20 years, while the Company’s natural peanut butter business, sold under
the Smucker’s®, Adam’s®, Laura Scudder’s® and Jif® brands, maintains a strong leadership position
in the natural peanut butter category. The Company’s fruit spread brands, including Smucker’s®,
Dickinson’s®, and Knott’s Berry Farm®, hold the leading position in the fruit spreads category and
compete with Welch’s branded line of fruit spreads and many private label brands. The competing
brands exist on both a national and a regional level. The Company’s Hungry Jack® brand competes in
the pancake mix and table syrup category. The Company competes with several major national as well
as private label brands in these categories. During 2010, the Company divested its potato side
dish product line and entered into a licensing agreement with the purchaser for their use of the
Hungry Jack® brand. The Company maintains ownership of the brand.
In the U.S. Retail Oils and Baking Market segment, Crisco® has historically been a leader in
the shortening and cooking oils categories. Crisco® holds the leading branded position in the
shortening category and competes with other branded competitors for the leading branded position in
the oils category. The oils category in which Crisco® competes is highly competitive with private
label competitors maintaining the largest share of the category. The category is also
significantly impacted by volatile commodity pricing. The Company’s Pillsbury® brand competes in
the dessert and baking mixes (“DBM”) market that includes mixes for cakes, cookies, brownies,
muffins, and quick breads, as well as ready-to-spread frostings and ingredients used in scratch
baking such as flour. Within the DBM category, the Company competes primarily with the Betty
Crocker and Duncan Hines brands and many private label and regional brands. The Company competes
in the canned milk category with both branded and nonbranded products. The Company is the branded
market leader in the sweetened condensed category with its Eagle Brand® and Magnolia® brands and
has significant sales with production of private label brands. In the evaporated milk category,
the Company has a significant presence with its production of private label brands and the Pet®
brand where it competes primarily with one major national brand.
Research and Development. The Company predominantly utilizes in-house resources to
both develop new products and improve existing products in each of its business areas. Amounts
expensed for product development were $21.0 million, $21.0 million, and $14.5 million in 2011,
2010, and 2009, respectively.
Environmental Matters. The Company considers environmental sustainability to be its
responsibility as a good corporate citizen and a key strategic focus area for the Company. The
Company has implemented and manages a variety of programs, including the utilization of renewable
energy technology, improved wastewater management, increased usage of sustainable raw materials,
and reuse of resources rather than consuming new ones, in support of its commitment to
environmental sustainability. The Company continues to evaluate and modify its processes on an
ongoing basis to further reduce its impact on the environment and reduce waste.
Compliance with the provisions of enacted or pending federal, state, and local environmental
regulations regarding either the discharge of materials into the environment or the protection of
the environment is not expected to have a material effect upon the Company’s capital expenditures,
earnings, or competitive position in 2012.
Employees. At April 30, 2011, the Company had approximately 4,500 full-time
employees, worldwide. Approximately 32 percent of these employees, located at 10 facilities, are
covered by union contracts. These contracts vary in term depending on the location. The Company
believes its relations with its current employees are good.
Financial
Information about Industry Segments and Geographical Areas. The financial information required to be included in this item concerning reportable industry segments and
international operations for the years 2011, 2010, and 2009 is incorporated herein by reference to
information set forth in the Company’s 2011 Annual Report to Shareholders, on pages 48 through 50,
under “Note E: Reportable Segments.” The Company’s international operations are primarily in
Canada with risks similar to those associated with the U.S. retail markets. More than one-half of
the Company’s Canada sales represent the sale of Canadian produced products to Canadian customers.
The remaining Canada sales represent the sale of products produced in the U.S. to Canadian
customers, primarily Folgers® coffee, and Crisco® oils.
Forward-Looking Statements. This report includes forward-looking statements that are
based on current expectations and are subject to a number of risks and uncertainties that could
cause actual results to differ materially from expected or projected results. The descriptions of
risks and uncertainties relating to forward-looking statements is incorporated herein by reference
to information set forth in the Company’s 2011 Annual Report to Shareholders under the caption
“Forward-Looking Statements” on page 32.
Available Information. Access to all Securities and Exchange Commission (“SEC”)
filings made by the Company, including its annual report on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is
provided, free of charge, on the Company’s Web site (www.smuckers.com) as soon as reasonably
practicable after such reports are electronically filed with, or furnished to, the SEC.
Item 1A. Risk Factors.
The Company’s business, operations, and financial condition are subject to various risks
and uncertainties. The risk factors described below should be carefully considered, together with
the other information contained or incorporated by reference in this Report and in the Company’s
other filings with the SEC, in connection with evaluating the Company, its business and the
forward-looking statements contained in this Report. Additional risks and uncertainties not
presently known to the Company or that the Company currently deems immaterial also may affect the
Company. The occurrence of any of these known or unknown risks could have a material adverse
impact on the Company’s business, financial condition, and results of operations.
| |
• |
|
The Company operates in the competitive food industry and relies on continued demand for
the Company’s products. |
| |
| |
|
|
The Company faces competition across its product lines from other food companies with the
primary methods and factors in competition being product quality, price, packaging, new
product introductions, nutritional value, convenience, customer service, advertising, and
promotion. In order to generate future revenues and profits, the Company must continue to
sell products that appeal to its customers and consumers. Specifically, there are a number
of trends in consumer preferences that may impact the Company and the food industry as a
whole including convenience, taste, consumer dietary trends, and obesity, health, and
nutritional concerns. |
| |
| |
|
|
In particular, consumers, public health officials, and government officials are becoming
increasingly concerned about the public health consequences associated with weight
management, particularly among young people. Prolonged negative perceptions concerning the
health implications of certain food products could influence consumer preferences and
acceptance of some of the Company’s products and marketing programs. Although the Company
strives to respond to consumer preferences and social expectations, it may not be successful
in these efforts. Increasing public concern regarding health issues and failure to satisfy
consumer preferences could decrease demand for certain of the Company’s products and
adversely affect the Company’s profitability. |
| |
|
|
Continued success is dependent on product innovation, the ability to secure and maintain
adequate retail shelf space, and effective trade merchandising, advertising, and marketing
programs. Some of the Company’s competitors have substantial financial, marketing, and other
resources, and competition with them in the Company’s various markets and product lines could
cause the Company to reduce prices, increase marketing or other expenditures, or lose
category share. Category share and growth could be adversely impacted if the Company is not
successful in introducing new products. |
| |
| |
• |
|
The success of the Company’s business depends substantially on consumer perceptions of
its brands. |
| |
| |
|
|
The Company believes that maintaining and continually enhancing the value of its brands is
critical to the success of its business. Brand value is based in large part on consumer
perceptions. Success in promoting and enhancing brand value depends in large part on the
Company’s ability to provide high quality products. Brand value could diminish significantly
as a result of a number of factors, such as if the Company fails to preserve the quality of
its products, if the Company is perceived to act in an irresponsible manner, if the Company
or its brands otherwise receive negative publicity, if the brands fail to deliver a
consistently positive consumer experience, or if the products become unavailable to
consumers. The growing use of social and digital media by consumers increases the speed and
extent that information and opinions can be shared. If the Company’s brand values are
diminished, the Company’s revenues and operating results could be materially adversely
affected. In addition, anything that harms the Pillsbury, Carnation, Borden, or Dunkin’
Donuts brands could adversely affect the success of the Company’s exclusive licensing
agreements with the owners of these brands. |
| |
| |
• |
|
The Company’s operations are subject to the general risks of the food industry. |
| |
| |
|
|
The food industry is subject to risks posed by food spoilage and contamination, product
tampering, product recall, and consumer product liability claims. The Company’s operations
could be impacted by both genuine and fictitious claims regarding the Company’s and its
competitors’ products. In the event of product contamination or tampering, the Company may
need to recall some of its products. A widespread product recall could result in significant
loss due to the cost of conducting a product recall, including destruction of inventory and
the loss of sales resulting from the unavailability of product for a period of time. The
Company could also suffer losses from a significant product liability judgment against it. A
significant product recall or a product liability judgment, involving either the Company or
its competitors, could also result in a loss of consumer confidence in the Company’s food
products or the food category, and an actual or perceived loss of value of the Company’s
brands, materially impacting consumer demand. |
| |
| |
• |
|
The Company could be subject to adverse publicity or claims from consumers. |
| |
| |
|
|
Certain of the Company’s products contain caffeine and other ingredients, the health effects
of which are the subject of increasing public scrutiny, including the suggestion that
consumption may have adverse health effects. An unfavorable report on the health effects of
caffeine or other ingredients present in the Company’s products, product recalls or negative
publicity or litigation arising from other health risks could significantly reduce the demand
for the Company’s products. |
| |
| |
|
|
The Company may also be subject to complaints from or litigation by consumers who allege food
and beverage-related illness, or other quality, health or operational concerns. Adverse
publicity resulting from such allegations could materially adversely affect the Company,
regardless of whether such allegations are true or whether the Company is ultimately held
liable. A lawsuit or claim could result in an adverse decision against the Company, which
could have a material adverse effect on its business, financial condition, and results of
operations. |
| |
• |
|
The Company may be unable to grow market share of its products. |
| |
| |
|
|
The Company operates in the competitive food industry whose growth potential is generally
correlated to population growth. The Company’s success depends in part on its ability to
grow its brands faster than the population in general. The Company considers its ability to
build and sustain the equity of its brands critical to its market share growth. If the
Company does not succeed in these efforts, its market share growth may slow, which could have
a material impact on its results of operations. |
| |
| |
• |
|
The Company’s proprietary brands, packaging designs, and manufacturing methods are
essential to the value of its business and the inability to protect these could harm the
value of its brands and adversely affect the Company’s sales and profitability. |
| |
| |
|
|
The success of the Company’s business depends significantly on its brands, know-how, and
other intellectual property. The Company relies on a combination of trademarks, service
marks, trade secrets, patents, copyrights, and similar rights to protect its intellectual
property. The success of the Company’s growth strategy depends on its continued ability to
use its existing trademarks and service marks in order to maintain and increase brand
awareness and further develop its brand. If the Company’s efforts to protect its intellectual
property are not adequate, or if any third party misappropriates or infringes on its
intellectual property, the value of the Company’s brand may be harmed, which could have a
material adverse effect on its business. From time to time, the Company is engaged in
litigation to protect its intellectual property, which could result in substantial costs to
the Company as well as diversion of management attention. |
| |
| |
|
|
In particular, the Company considers its proprietary coffee roasting methods essential to the
consistent flavor and richness of its coffee products and, therefore, essential to its coffee
brands. Because many of the roasting methods used by the Company are not protected by
patents, it may be difficult for the Company to prevent competitors from copying its roasting
methods if such methods become known. The Company also believes that its packaging
innovations, such as brick packaging technology and its AromaSealTM canisters, are
important to the coffee business’ marketing and operational efforts. If the Company’s
competitors copy its roasting or packaging methods or develop more advanced roasting or
packaging methods, the value of the Company’s coffee brands may be diminished, and the
Company could lose customers to its competitors. |
| |
| |
• |
|
The Company uses a single national broker to represent a significant portion of the
Company’s branded products to the retail grocery trade and any failure by the broker to
effectively represent the Company would adversely affect the Company’s business. |
| |
| |
|
|
The Company uses a single national broker to represent a significant portion of branded
products to the retail grocery trade. The Company’s business would suffer substantial
disruption if this broker were to default in the performance of its obligations to perform
brokerage services or if this broker fails to effectively represent the Company to the retail
grocery trade. |
| |
| |
• |
|
The Company may be unable to maintain or improve its profit margins in the concentrated
retail environment. In addition, the loss of the Company’s largest customer could
negatively impact its sales and profits. |
| |
| |
|
|
Sales to Wal-Mart Stores, Inc. and its subsidiaries amounted to approximately 26 percent of
the Company’s net sales in 2011. These sales are primarily included in the three U.S. retail
market segments. Trade receivables at April 30, 2011, included amounts due from Wal-Mart
Stores, Inc. and its subsidiaries of approximately $87.6 million. During 2011, the Company’s
top 10 customers, collectively, accounted for approximately 55 percent of consolidated net
sales. The Company expects that a significant portion of its revenues will continue to be
derived from a small number of customers. The Company’s customers are generally not
contractually obligated to purchase from the Company. These customers make purchase
decisions based on a combination of price, product quality, consumer demand, customer service performance, their |
| |
|
|
desired inventory levels, and other factors. Changes in customers’ strategies, including a
reduction in the number of brands they carry or a shift of shelf space to private label
products, may adversely affect sales. Additionally, the Company’s customers may face
financial or other difficulties that may impact their operations and their purchases from the
Company, which could adversely affect results of operations. Customers also may respond to
price increases by reducing distribution, resulting in reduced sales of the Company’s
products. If sales of products to one or more of these customers are reduced, this reduction
may have a material adverse effect on the Company’s business, financial condition, and
results of operations. Bankruptcy or other business disruption of a significant customer
could adversely affect the Company’s results of operations. |
| |
| |
• |
|
Loss or interruption of supply from single-source suppliers of raw materials and
finished goods could have a disruptive effect on the Company’s business and adversely
affect its results of operations. |
| |
| |
|
|
The Company has elected to source certain raw materials, such as packaging for its most
popular Folgers® coffee products, as well as its Jif® peanut butter and Crisco® oil products,
and finished goods from single sources of supply. While the Company believes that alternative
sources of these raw materials and finished goods could be obtained on commercially
reasonable terms, loss or an extended interruption in supplies from a single-source supplier
would result in additional costs, could have a disruptive short-term effect on the Company’s
business, and could adversely affect its results of operations. |
| |
| |
• |
|
The results of the Company may be adversely impacted as a result of increased cost,
limited availability and/or insufficient quality of raw materials, including commodities
and agricultural products. |
| |
| |
|
|
The Company and its business partners purchase and use large quantities of many different
commodities and agricultural products in the manufacturing of the Company’s products
including green coffee, peanuts, corn sweeteners, edible oils, sugar, fruit, wheat, milk, and
cocoa. In addition, the Company and its business partners utilize significant quantities of
plastic, glass, and cardboard to package the Company’s products and natural gas and fuel oil
to manufacture, package, and distribute the Company’s products. These commodities,
agricultural products, and other materials are subject to price volatility and can fluctuate
due to conditions that are difficult to predict, including global supply and demand,
commodity market fluctuations, crop sizes and yield fluctuations, weather, currency
fluctuations, speculative influences, trade agreements, political unrest, consumer demand,
and changes in governmental agricultural programs. For example, in late fiscal 2011, costs
to acquire peanuts increased, in part, due to adverse weather conditions. Although the
Company utilizes forward contracts and commodity futures and option contracts to manage
commodity price volatility in some instances, commodity price increases ultimately result in
corresponding increases in the Company’s raw material and energy costs. |
| |
| |
|
|
In particular, the price of green coffee has recently been subject to significant volatility
and, in fiscal 2011, green coffee commodity prices increased significantly. In mid-March
2011, green coffee commodity prices reached a 34-year high at a level approximately 50
percent higher than they were eight months earlier and over 100 percent higher than they were
a year earlier. The Company expects the green coffee commodity market to continue to be
challenging as the market continues to be influenced by worldwide demand, the weakness of the
dollar, speculative trading, and weather and as producers in Brazil-the world’s largest
coffee producing country-enter a cyclically low production year in its biennial crop cycle.
Due to the significance of green coffee to the Company’s coffee business, combined with the
Company’s ability to only partially mitigate future price risk through purchasing practices
and hedging activities, significant increases or decreases in the cost of green coffee could
have an adverse impact on the Company’s profitability. |
| |
• |
|
The Company may be limited in its ability to pass cost increases on to its customers in
the form of price increases or may realize a decrease in sales volume to the extent price
increases are implemented. |
| |
| |
|
|
The Company may not be able to pass some or all of any increases in the price of raw
materials, energy, and other input costs to its customers by raising prices. To the extent
competitors do not also increase their prices, customers and consumers may choose to purchase
competing products or may shift purchases to lower-priced private label or other value
offerings which may adversely affect the Company’s results of operations. |
| |
| |
|
|
Consumers may be less willing or able to pay a price differential for the Company’s branded
products, and may increasingly purchase more lower-priced offerings and may forego some
purchases altogether, especially during economic downturns. Retailers may also increase
levels of promotional activity for lower-priced or value offerings as they seek to maintain
sales volumes during times of economic uncertainty. Accordingly, sales volumes of the
Company’s branded products could be reduced or lead to a shift in sales mix toward its lower
margin offerings. As a result, decreased demand for the Company’s products may adversely affect its results of
operations. |
| |
| |
• |
|
The Company’s efforts to manage commodity and other price volatility through derivative
instruments could adversely affect its results of operations and financial condition. |
| |
| |
|
|
The Company uses derivative instruments, including commodity futures and options, to reduce
the price volatility associated with anticipated commodity purchases. The extent of the
Company’s derivative position at any given time depends on the Company’s assessment of the
markets for these commodities. If the Company fails to take a derivative position and costs
subsequently increase, or if it institutes a position and costs subsequently decrease, the
Company’s costs may be greater than anticipated or higher than its competitors’ costs and
financial results could be adversely affected. In addition, the Company’s liquidity may be
adversely impacted by the cash margin requirements of the commodities exchanges or the
failure of a counterparty to perform in accordance with a contract. |
| |
| |
• |
|
The results of the Company may be adversely impacted by growth in alternative energy
markets. |
| |
| |
|
|
The Company competes for certain raw materials, notably corn and soy-based agricultural
products, with the emerging bio-fuels industry. Growth in the bio-fuels industry, which is
typically linked to increases in gasoline and diesel prices, may limit the supply of certain
raw materials available to the Company. Additionally, farm acreage currently devoted to
other agricultural products utilized by the Company may be converted to corn or soy resulting
in higher cost for other agricultural products utilized by the Company. |
| |
| |
• |
|
Certain of the Company’s products are sourced from single manufacturing sites. |
| |
| |
|
|
The Company has consolidated its production capacity for certain products into single
manufacturing sites. In addition, the Company is proceeding with plans to further
consolidate its coffee, fruit spreads, syrups, and topping production as part of its current
restructuring project. The Company could experience a production disruption at these or any
of its manufacturing sites resulting in a reduction or elimination of the availability of
some of the Company’s products. If the Company is not able to obtain alternate production
capability in a timely manner, a negative impact on the Company’s operations could result. |
| |
• |
|
If there is a significant interruption in the operation of any of the Company’s
facilities, third-party distribution centers, or supplier’s facilities, the Company may not
have the capacity to service its customers in a timely manner, thereby reducing its
revenues and earnings. |
| |
| |
|
|
A significant interruption in the operation of any of the Company’s facilities, third-party
distribution centers, or supplier’s facilities, whether as a result of a natural disaster,
flu pandemic, or other causes, could significantly impair the Company’s ability to operate
its business. Notably, after completion of the Company’s current restructuring project,
substantially all of the Company’s coffee production will be in New Orleans which is subject
to risks associated with hurricane and other weather-related events. Following Hurricane
Katrina in August 2005, production at the New Orleans facility was interrupted for
approximately two months, resulting in a significant decline in coffee revenues for several
months. A similar significant interruption in the operation of one of the Company’s
facilities, third-party distribution centers, or supplier’s facilities may affect its ability
to service all of its customers, and business may be lost to its competitors, resulting in a
material adverse effect to the Company’s revenues, earnings, and financial position. |
| |
| |
• |
|
The Company’s business could be harmed by strikes or work stoppages. |
| |
| |
|
|
As of April 30, 2011, approximately 32 percent of the Company’s employees, located at 10
facilities, are covered by collective bargaining agreements. These contracts vary in term
depending on location. The Company cannot assure that it will be able to renew these
collective bargaining agreements on the same or more favorable terms as the current
agreements, or at all, without production interruptions caused by labor stoppages. If a
strike or work stoppage were to occur in connection with negotiations of new collective
bargaining agreements, or as a result of disputes under collective bargaining agreements with
labor unions, the Company’s business, financial condition, and results of operations could be
materially adversely affected. |
| |
| |
• |
|
Increases in logistics and other transportation-related costs could adversely impact the
Company’s results of operations. The Company’s ability to competitively serve customers
depends on the availability of reliable transportation. |
| |
| |
|
|
Logistics and other transportation-related costs have a significant impact on the Company’s
earnings and results of operations. The Company uses multiple forms of transportation to
bring the Company’s products to market. They include ships, trucks, intermodals, and
railcars. Disruption to the timely supply of these services or increases in the cost of
these services for any reason, including availability or cost of fuel, regulations affecting
the industry, labor shortages in the transportation industry, service failures by third-party
service providers, accidents or natural disasters (which may impact the transportation
infrastructure or demand for transportation services), could have an adverse effect on the
Company’s ability to serve its customers, and could have a material adverse effect on
financial performance. |
| |
| |
• |
|
The Company may not achieve cost savings anticipated as a result of its restructuring
initiatives. |
| |
| |
|
|
The Company has periodically commenced restructuring initiatives with the expectation of
realizing future benefits including operational efficiencies or cost savings. The future
benefits the Company expects from restructuring initiatives may not be realized during the
time period expected, or at all, due to unforeseen or changing business conditions. In
addition, costs incurred to realize the future benefits may be higher than anticipated and
the Company’s results of operations could be adversely affected. |
| |
| |
• |
|
The Company’s operations are subject to the general risks associated with acquisitions. |
| |
| |
|
|
The Company’s stated long-term strategy is to own and market leading North American food
brands sold in the center of the store. The Company has historically made strategic
acquisitions of brands and businesses and intends to do so in the future in support of this strategy. The |
| |
|
|
success of past and future acquisitions depends on the Company’s ability to successfully
integrate acquired and existing operations. If the Company is unable to integrate
acquisitions successfully, its financial results could suffer. Additional potential risks
associated with acquisitions are the diversion of management’s attention from other business
concerns, additional debt leverage, the loss of key employees and customers of the acquired
business, the assumption of unknown liabilities, disputes with sellers, and the inherent risk
associated with the Company entering a line of business in which it has no or limited prior
experience. |
| |
| |
• |
|
A material impairment in the carrying value of acquired goodwill or other
intangible assets could negatively affect the Company’s consolidated operating results and
net worth. |
| |
| |
|
|
A significant portion of the Company’s assets is goodwill and other intangible assets, the
majority of which are not amortized but are reviewed at least annually for impairment. If
the carrying value of these assets exceeds the current estimated fair value, the asset is
considered impaired and could result in a noncash charge to earnings. Events and conditions
that could result in impairment include a sustained drop in the market price of the Company’s
common shares, increased competition or loss of market share, product innovation or
obsolescence, or product claims that result in a significant loss of sales or profitability
over the product life. At April 30, 2011, the carrying value of goodwill and other
intangible assets totaled approximately $5.8 billion, compared to total assets of
approximately $8.3 billion and total shareholders’ equity of approximately $5.3 billion. |
| |
| |
|
|
The results of the U.S. Retail Oils and Baking Market segment have been impacted by a highly
competitive and promotional environment over the last fiscal year. Should competitive
pressure in these categories be sustained, long-term assumptions relative to growth rates and
profitability of certain brands within the segment may not be attained which could result in
a material impairment. As of April 30, 2011, approximately 16 percent of the Company’s total
goodwill and 11 percent of the Company’s total other intangible assets are assigned to the
U.S. Retail Oils and Baking Market segment. |
| |
| |
• |
|
The results of the Company may be adversely impacted as a result of changes in defined
benefit pension and other postretirement plan factors or regulations. |
| |
| |
|
|
The Company has defined benefit pension plans covering certain of its U.S. and Canadian
employees. In addition to the defined benefit pension plans, the Company sponsors several
unfunded, defined postretirement plans. The Company’s obligations and expense associated
with these plans are recorded in the Company’s financial statements based on assumptions
related to inflation, investment returns, mortality, employee turnover, rate of compensation
increases, medical costs, and discount rates. Changes in regulations governing these plans,
changes in plan assumptions, and differences between assumed and actual investment returns
and interest rates can cause volatility in recorded assets, liabilities, expenses, and future
funding requirements. |
| |
| |
• |
|
The effects of a potential pandemic illness could adversely affect the Company’s
businesses. |
| |
| |
|
|
An outbreak of pandemic illness in a given location could severely interfere with and
substantially disrupt the Company’s supply chain impacting the manufacture and/or shipment of
the Company’s products, which could have a material adverse effect on its operations. A
prolonged recurrence of a pandemic illness could also adversely affect the Company’s
customers and cause an immediate and prolonged drop in consumer demand for the Company’s
products. Any of these events could adversely affect the Company’s financial condition and
results of operations. The general impact, if any, of a pandemic illness on the Company’s
operations, its results of operations and financial condition is highly speculative, cannot
be accurately predicted or quantified, and would depend on numerous factors, including the
rate of contagion, the regions most affected, the effectiveness of treatment for the infected
population and the rates of mortality and morbidity. |
| |
• |
|
Changes in tax, environmental, or other regulations and laws, or their application, or
failure to comply with existing licensing, trade, and other regulations and laws could have
a material adverse effect on the Company’s financial condition. |
| |
| |
|
|
The Company’s operations are subject to regulation by the U.S. Departments of Agriculture,
Commerce, and Labor, the U.S. Food and Drug Administration, the U.S. Federal Trade
Commission, the U.S. Securities and Exchange Commission, and the U.S. Internal Revenue
Service, as well as similar and other authorities of Canada, various state, provincial and
local governments, and voluntary regulatory and trade associations. |
| |
| |
|
|
The manufacturing, marketing, packaging, labeling, and distribution of food products are each
subject to governmental regulation that is increasingly extensive, encompassing such matters
as ingredients, advertising, relations with distributors and retailers, health, safety, and
the environment. Additionally, the Company is routinely subject to new or modified tax and
securities regulations, other laws and regulation, and accounting and reporting standards. |
| |
| |
|
|
In the U.S., the Company is required to comply with federal laws, such as the Food, Drug and
Cosmetic Act, the Occupational Safety and Health Act, the Clean Air Act, the Clean Water Act,
the Resource Conservation and Recovery Act, laws governing equal employment opportunity, and
various other federal statutes and regulations. The Company is also subject to various state
and local statutes and regulations. For instance, the California Safe Drinking Water and
Toxic Enforcement Act of 1986 (commonly referred to as “Proposition 65”) requires that a
specific warning appear on any product sold in the State of California that contains a
substance listed by that state as having been found to cause cancer or birth defects. This
law exposes all food and beverage producers to the possibility of having to provide warnings
on their products. The detection of even a trace amount of a listed substance can subject an
affected product to the requirement of a warning label. Products containing listed
substances that occur naturally or that are contributed to such products solely by a
municipal water supply are generally exempt from the warning requirement. If the Company is
required to add warning labels to any of its products or place warnings in certain locations
where its products are sold as a result of Proposition 65, sales of those products could
suffer not only in those locations but elsewhere. |
| |
| |
|
|
Complying with new regulations and laws, or changes to existing regulations and laws, or
their application could increase the Company’s production costs or adversely affect the
Company’s sales of certain products. In addition, the Company’s failure or inability to
comply with applicable regulations and laws could subject the Company to civil remedies,
including fines, injunctions, recalls or seizures, as well as potential criminal sanctions,
which could have a material adverse effect on the Company’s business and financial condition. |
| |
| |
• |
|
Changes in climate or legal, regulatory or market measures to address climate change may
negatively affect the Company’s business and operations. |
| |
| |
|
|
While scientific consensus on the existence, potential causes, or likely outcomes of global
climate change has not yet been reached, researchers continue to aggressively explore this
issue. However, there already exists significant political and scientific concern that emissions of
carbon dioxide and other greenhouse gases may alter the composition of the global atmosphere
in ways that are affecting and are expected to continue affecting the global climate. The
emission of such greenhouse gases may have an adverse impact on global temperatures, weather
patterns, and the frequency and severity of extreme weather and natural disasters. In the
event that climate change may have a negative effect on agricultural productivity, the
Company may be subject to decreased availability or less favorable pricing for certain
commodities that are necessary for its products, such as green coffee, peanuts, corn
sweeteners, edible oils, sugar, wheat, milk, cocoa, and various fruits and vegetables. The
Company may also be subjected to decreased availability or less favorable pricing for water
as a result of such change, which could impact its manufacturing and distribution operations. In addition, natural disasters and extreme
weather conditions may disrupt the productivity of facilities or the operation of the
Company’s supply chain. |
| |
|
|
Increasing concern over climate change also may result in more regulatory requirements
related to greenhouse gases. Many states have announced or adopted programs to stabilize and
reduce greenhouse gas emissions, and federal legislation has been proposed in Congress. It
is possible that federal legislation limiting greenhouse gas emissions may be imposed in the
U.S. in the future. In the event that regulations are enacted and are more rigorous than
existing regulations, the Company may experience significant increases in costs of operation
and delivery. In particular, increased regulation of utility providers, fuel emissions, or
suppliers could substantially increase the Company’s operating, distribution, or supply chain
costs. The Company could also face increased costs related to defending and resolving legal
claims and other litigation related to climate change. As a result, climate change could
negatively affect the Company’s results of operations, cash flows, or financial position. |
| |
| |
• |
|
If the Company’s information technology systems fail to perform adequately or the
Company is unable to protect such information technology systems against data corruption,
cyber-based attacks or network security breaches, the Company’s operations could be
disrupted. |
| |
| |
|
|
The Company relies on information technology networks and systems, including the Internet, to
process, transmit and store electronic information. In particular, the Company depends on
its information technology infrastructure to effectively manage its business data, supply
chain, logistics, accounting and other business processes and for digital marketing
activities and electronic communications between Company personnel and its customers and
suppliers. If the Company does not allocate and effectively manage the resources necessary to
build and sustain an appropriate technology infrastructure, the Company’s business or
financial results could be negatively impacted. In addition, security breaches or system
failures of this infrastructure can create system disruptions, shutdowns or unauthorized
disclosure of confidential information. If the Company is unable to prevent such breaches or
failures, its operations could be disrupted, or it may suffer financial damage or loss
because of lost or misappropriated information. |
| |
| |
|
|
In addition, the Company has outsourced certain information technology support services and
administrative functions, such as accounts payable processing and benefit plan
administration, to third-party service providers, and may outsource other functions in the
future to achieve cost savings and efficiencies. If the service providers that the Company
outsources these functions to do not perform effectively, the Company may not be able to
achieve the expected cost savings and may have to incur additional costs in connection with
such failure to perform. Depending on the function involved, such failures may also lead to
business disruption, processing inefficiencies, the loss of or damage to intellectual
property through security breach, the loss of sensitive data through security breach or
otherwise. |
| |
| |
• |
|
Disruptions in the financial markets may adversely affect the Company’s ability to
access capital in the future. |
| |
| |
|
|
The Company may need new or additional financing in the future to conduct its operations,
expand its business or refinance existing indebtedness. Disruptions in global financial
markets and banking systems may make credit and capital markets more difficult for companies
to access, even for some companies with established revolving or other credit facilities.
Any sustained weakness in the general economic conditions and/or financial markets in the
U.S. or globally could adversely affect the Company’s ability to raise capital on favorable
terms or at all. From time to time, the Company has relied, and also may rely in the future,
on access to financial markets as a source of liquidity for working capital requirements,
acquisitions, and general corporate purposes. The Company’s access to funds under its
revolving credit facility is dependent on the ability of the financial institutions that are
parties to that facility to meet their funding commitments. The obligations of the financial
institutions under the Company’s revolving credit facility are several and not joint and, as a result, a funding default by one or more institutions does not need to be
made up by the others. Long-term volatility and disruptions in the capital and credit
markets as a result of uncertainty, changing or increased regulation of financial
institutions, reduced alternatives, or
|
| |
|
|
failure of significant financial institutions could
adversely affect the Company’s access to the liquidity needed for its businesses in the
longer term. Such disruptions could require the Company to take measures to conserve cash
until the markets stabilize or until alternative credit arrangements or other funding for its
business needs can be arranged. Disruptions in the capital and credit markets could result in
higher interest rates on publicly issued debt securities and increased costs under credit
facilities. Continuation of these disruptions would increase the Company’s interest expense
and capital costs and could adversely affect its results of operations and financial
position. |
Item 1B. Unresolved Staff Comments.
Item 2. Properties.
The table below lists all of the Company’s manufacturing and processing facilities at
April 30, 2011. All of the Company’s properties are maintained and updated on a regular basis, and
the Company continues to make investments for expansion, and safety and technological improvements.
The Company believes that existing capacity at these facilities is sufficient to sustain current
operations and anticipated near-term growth.
The Company owns all of the properties listed below, except for one of the properties in New
Orleans, Louisiana,(A) which is leased. The Company also leases four sales and
administrative offices in the U.S., and one each in Canada, Mexico, and China. The Company’s
corporate headquarters are located in Orrville, Ohio, and the Company’s Canadian headquarters are
located in Markham, Ontario.
Chico, California
Cincinnati, Ohio
El Paso, Texas
Grandview, Washington
Havre de Grace, Maryland
Kansas City, Missouri (B)
Lexington, Kentucky
Memphis, Tennessee (B)
New Bethlehem, Pennsylvania
New Orleans, Louisiana (two facilities)
Orrville, Ohio
Oxnard, California
Ripon, Wisconsin
Scottsville, Kentucky
Seneca, Missouri
Toledo, Ohio
Delhi Township, Ontario (B)
Dunnville, Ontario (B)
Sherbrooke, Quebec
Ste. Marie, Quebec (B)
Item 3. Legal Proceedings.
The Company is a defendant in a variety of legal proceedings. While the Company cannot
predict with certainty the results of these proceedings, the Company does not believe that the
final outcome of these proceedings will have a material adverse affect on the Company’s financial
position, results of
operations, or cash flows.
Item 4. [Removed and Reserved]
Executive Officers of the Registrant.
The names, ages as of July 1, 2011, and current positions of the executive officers of
the Company are listed below. All executive officers serve at the pleasure of the Board of
Directors, with no fixed term of office. Unless otherwise indicated, each individual has served as
an executive officer of the Company for more than five years.
Timothy P. Smucker
Richard K. Smucker
Dennis J. Armstrong
Mark R. Belgya
James A. Brown
Vincent C. Byrd
John W. Denman
Barry C. Dunaway
Jeannette L. Knudsen
John F. Mayer
Kenneth A. Miller
Steven Oakland
Andrew G. Platt
Christopher P.
Resweber
Julia L. Sabin
Mark T. Smucker
Paul Smucker Wagstaff
Albert W. Yeagley
|
|
|
| (5) |
|
Mr. Brown was elected to his present position in April 2009, effective as of June
30, 2009, having served as Director, National Sales, Grocery Market since February 2002. |
| |
| (6) |
|
Mr. Byrd was elected to his present position in March 2011, effective as of May 1,
2011, having served as President, U.S. Retail Coffee since August 2008. Prior to that time,
he served as Senior Vice President, Consumer Market since February 2004. |
| |
| (7) |
|
Mr. Denman was elected to his present position in August 2005, having served as
Assistant Controller since May 2005. |
| |
| (8) |
|
Mr. Dunaway was elected to his present position in March 2011, effective as of May
1, 2011, having served as Senior Vice President, Corporate and Organizational Development
since August 2008. Prior to that time, he served as Vice President, Corporate Development
since November 2001. |
| |
| (9) |
|
Ms. Knudsen was elected to her present position in August 2010, having served as
Vice President, Deputy General Counsel and Corporate Secretary since April 2010, and as
Corporate Secretary since April 2009. Prior to that time, she served as Securities and
Acquisition Counsel and Assistant Secretary since November 2007 and Corporate Attorney since
August 2002. |
| |
| (10) |
|
Mr. Mayer was elected to his present position in April 2009, effective as of June
30, 2009, having served as Vice President, Customer Development since August 2004. |
| |
| (11) |
|
Mr. Miller was elected to his present position in February 2007, having served as
General Manager, Alternate Channels since September 2005. |
| |
| (12) |
|
Mr. Oakland was elected to his present position in March 2011, effective as of May
1, 2011, having served as President, U.S. Retail — Smucker’s, Jif and Hungry Jack since
August 2008. Prior to that time, he served as Vice President and General Manager, Consumer
Oils and Baking since November 2001. |
| |
| (13) |
|
Mr. Resweber was elected to his present position in July 2009, having served as
Vice President, Marketing Services since August 2004. |
| |
| (14) |
|
Ms. Sabin was elected to her present position in February 2009, having served as
Vice President and General Manager, Smucker Quality Beverages, Inc. since February 2007.
Prior to that time, she served as General Manager, Smucker Quality Beverages, Inc. since
February 1998. |
| |
| (15) |
|
Mr. Mark Smucker was elected to his present position in March 2011, effective as of
May 1, 2011, having served as President, Special Markets since August 2008. Prior to that
time, he served as Vice President, International since July 2007 and Vice President,
International and Managing Director, Canada since May 2006. |
| |
| (16) |
|
Mr. Wagstaff was elected to his present position in March 2011, effective as of May
1, 2011, having served as President, U.S. Retail — Oils and Baking since August 2008. Prior
to that time, he served as Vice President, Foodservice and Beverage Markets since May 2006. |
| |
| (17) |
|
Mr. Yeagley was elected to his present position in January 2009, having served as
Vice President, Quality Assurance since February 2007. Prior to that time, he served as
Director, Corporate Quality Assurance since July 2001. |
18
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
(a) The information pertaining to the market for the Company’s common shares and other
related shareholder information is incorporated herein by reference to the information set forth in
the Company’s 2011 Annual Report to Shareholders under the caption “Stock Price Data” on page 18
and the caption “Comparison of Five-Year Cumulative Total Shareholder Return” on page 19.
(b) Not applicable.
(c) Issuer Purchases of Equity Securities
February 1, 2011 - February
28, 2011
March 1, 2011 - March 31, 2011
April 1, 2011 - April 30, 2011
Total
Item 6. Selected Financial Data.
Five-year summaries of selected financial data for the Company and discussions of
items which materially affect the comparability of the selected financial data are incorporated
herein by reference to the information set forth in the Company’s 2011 Annual Report to
Shareholders under the following captions and page numbers: “Five-Year Summary of Selected
Financial Data” on page 17, “Note A:
Accounting Policies” on pages 42 through 45, “Note C: Folgers Merger” on pages 46 and 47, and “Note
D: Restructuring” on pages 47 and 48.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
Management’s discussion and analysis of financial condition and results of operations,
including a discussion of liquidity and capital resources, and critical accounting estimates and policies, is
incorporated herein by reference to the information set forth in the Company’s 2011
Annual Report to Shareholders under the caption “Management’s Discussion and Analysis,” on pages 20
through 32.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Quantitative and qualitative disclosures about market risk are incorporated herein by
reference to the information set forth in the Company’s 2011 Annual Report to Shareholders under
the caption “Derivative Financial Instruments and Market Risk” on page 31.
Item 8. Financial Statements and Supplementary Data.
Consolidated financial statements of the Company at April 30, 2011 and 2010, and for each
of the years in the three-year period ended April 30, 2011, with the report of independent
registered public accounting firm and selected unaudited quarterly financial data, are incorporated
herein by reference to the information set forth in the Company’s 2011 Annual Report to
Shareholders under the caption “Summary of Quarterly Results of Operations” on page 18 and
beginning with “Report of Management on Internal Control Over Financial Reporting” on page 33
through “Note Q: Common Shares” on page 67.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures. The Company’s management,
including the Company’s principal executive officers and principal financial officer, evaluated the
effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or
15d-15(e) under the Exchange Act), as of April 30, 2011 (the “Evaluation Date”). Based on that
evaluation, the Company’s principal executive officers and principal financial officer have
concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were
effective in ensuring that information required to be disclosed by the Company in reports that it
files or submits under the Exchange Act is (1) recorded, processed, summarized, and reported within
the time periods specified in Securities and Exchange Commission rules and forms, and (2)
accumulated and communicated to the Company’s management, including the chief executive officers
and chief financial officer, as appropriate to allow timely decisions regarding required
disclosure.
Changes in Internal Controls. There were no changes in the Company’s internal
controls over financial reporting that occurred during the fourth quarter ended April 30, 2011,
that have materially affected, or are reasonably likely to materially affect, the Company’s
internal control over financial reporting.
Management’s report on internal control over financial reporting and the attestation report of
the Company’s independent registered public accounting firm are set forth in the Company’s 2011
Annual Report to Shareholders under the heading “Report of Management on Internal Control Over
Financial
Reporting” on page 33, and under the heading “Report of Independent Registered Public
Accounting Firm on Internal Control Over Financial Reporting” on page 34, which reports are
incorporated herein by reference.
Item 9B. Other Information.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this Item as to the directors of the Company, the Audit
Committee, the Audit Committee financial experts, and compliance with Section 16(a) of the Exchange
Act is incorporated herein by reference to the information set forth under the captions “Election
of Directors,” “Corporate Governance,” “Board and Committee Meetings,” and “Ownership of Common
Shares” in the Company’s definitive Proxy Statement for the Annual Meeting of Shareholders to be
held on August 17, 2011. Information required by Item 10 as to the executive officers of the
Company is included in Part I of this Annual Report on Form 10-K as permitted by Instruction 3 to
Item 401(b) of Regulation S-K.
The Board of Directors has adopted a Policy on Ethics and Conduct, last revised April 2005,
which applies to the Company’s directors, principal executive officers, principal financial
officer, and principal accounting officer. The Board of Directors has adopted charters for each of
the Audit, Executive Compensation, and Nominating and Corporate Governance committees and has also
adopted Corporate Governance Guidelines. Copies of these documents are available on the Company’s
Web site (www.smuckers.com).
Item 11. Executive Compensation.
The information required by this Item is incorporated by reference to the information set
forth under the captions “Executive Compensation,” “Board and Committee Meetings,” and
“Compensation Committee Interlocks and Insider Participation” in the Company’s definitive Proxy
Statement for the Annual Meeting of Shareholders to be held on August 17, 2011.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
The information required by this Item is incorporated by reference to the information set
forth under the captions “Ownership of Common Shares” and “Equity Compensation Plan Information” in
the Company’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held on
August 17, 2011.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item is incorporated by reference to the information set
forth under the caption “Related Party Transactions” in the Company’s definitive Proxy Statement
for the Annual Meeting of Shareholders to be held on August 17, 2011.
Item 14. Principal Accountant Fees and Services.
The information required by this Item is incorporated by reference to the information set
forth under the captions “Service Fees Paid to the Independent Registered Public Accounting Firm,”
and “Audit Committee Pre-approval Policies and Procedures” in the Company’s definitive Proxy
Statement for the Annual Meeting of Shareholders to be held on August 17, 2011.
PART IV
Item 15. Exhibits and Financial Statement Schedules.
| (a)(1) |
|
Financial Statements |
| |
| |
|
See the Index to Financial Statements, which is included on page F-1 of this Report. |
| |
| (a)(2) |
|
Financial Statement Schedules |
| |
| |
|
Financial statement schedules are omitted because they are not applicable or because the
information required is set forth in the Consolidated Financial Statements or notes thereto. |
| |
| (a)(3) |
|
Exhibits |
| |
| |
|
See the Index of Exhibits at page number 25 of this Report. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
R. Douglas Cowan
Kathryn W. Dindo
Paul J. Dolan
Nancy Lopez Knight
Elizabeth Valk Long
Gary A. Oatey
Alex Shumate
William H. Steinbrink
Paul Smucker Wagstaff
|
|
|
| |
|
the Securities and Exchange Commission on behalf of such
officers and directors. |
| |
|
|
|
|
| |
|
|
| Date: June 28, 2011 |
/s/ Jeannette L. Knudsen
|
|
| |
By: Jeannette L. Knudsen |
|
| |
Attorney-in-Fact |
|
24
INDEX OF EXHIBITS
2.1
2.2
3.1
3.2
4
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
10.46
10.47
10.48
10.49
10.50
10.51
10.52
10.53
10.54
10.55
10.56
10.57
10.58
10.59
10.60
10.61
10.62
13
21
23
24
31.1
31.2
31.3
32
101.INS
101.SCH
101.PRE
101.DEF
101.CAL
101.LAB
* Management contract or compensatory plan or arrangement.
THE J. M. SMUCKER COMPANY
ANNUAL REPORT ON FORM 10-K
INDEX TO FINANCIAL STATEMENTS
Data incorporated by reference to the 2011 Annual Report to Shareholders of The J. M.
Smucker Company:
Report of Management on Internal Control Over Financial Reporting
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
Consolidated Balance Sheets at April 30, 2011 and 2010
For the years ended April 30, 2011, 2010, and 2009:
Statements of Consolidated Income
Statements of Consolidated Cash Flows
Statements of Consolidated Shareholders’ Equity
Notes to Consolidated Financial Statements
Financial statement schedules are omitted because they are not applicable or because the
information required is set forth in the Consolidated Financial Statements or the notes thereto.