The J. M. Smucker Co., owner of Folgers and other consumer products, announced results for the fourth quarter and fiscal year ended April 30, 2011.
Non-GAAP income per diluted share was $1.00 and $1.07 for the fourth quarters of 2011 and 2010, a decrease of 7 percent, and $4.69 and $4.37 for the years ended April 30, 2011 and 2010, an increase of 7 percent, respectively.
Non-GAAP income per diluted share excludes restructuring and merger and integration costs of $0.18 and $0.06 per diluted share, in the fourth quarters of 2011 and 2010, and $0.64 and $0.22 in the years ended April 30, 2011 and 2010, respectively.
Results for the fourth quarter of 2010 benefited from a $12.9 million gain on the company's March 2010 divestiture of potato products and a significantly lower effective tax rate.
"Our long-term focus and strategy of owning and marketing leading brands have allowed us to deliver another year of strong sales and earnings," said Tim Smucker, chairman of the board and co-chief executive officer in a prepared statement. "We are gratified to have achieved these results in a challenging operating environment. Our ongoing success provides opportunities to return value to our shareholders. During the year, we repurchased over four percent of our outstanding common shares and increased the dividends paid by 17 percent. Total shareholder return for 2011 exceeded 25 percent reflecting the impact of these actions."
"As we begin the new fiscal year, we remain focused on building our brands while navigating through this period of commodity cost volatility," added Richard Smucker, executive chairman and co-chief executive officer. "We continue to demonstrate our ability to effectively manage these challenges while providing value to our consumers. With a number of key initiatives and new products planned for 2012, along with contributions from the recently acquired Rowland Coffee Roasters brands, we are confident in providing full year earnings per share guidance that is consistent with our stated long-term growth objectives."
Net sales in the fourth quarter of 2011 increased $118.1 million, or 11 percent, compared to the fourth quarter of 2010, as the net impact of price realization contributed approximately 8 percent of the overall increase. Volume increased 2 percent as gains were realized in the majority of our brands including Pillsbury® baking mixes and frostings, Jif® peanut butter, Folgers® coffee, Crisco® oils, Bick's® pickles, and Smucker's® fruit spreads. The overall impact of sales mix and foreign exchange rates was favorable.
Gross profit decreased $9.1 million in the fourth quarter of 2011, compared to 2010, as the increase in net sales was offset by overall higher raw material and freight costs and an additional $11.8 million of special project costs included in cost of products sold. Excluding special project costs, gross profit increased $2.7 million, or 1 percent. Costs were significantly higher for green coffee and soybean oil. As expected, price increases taken throughout the year to offset higher commodity costs were realized and contributed to incremental gross profit, but did not generate margin expansion. Gross margin declined from 40.6 percent in the fourth quarter of 2010, to 36.8 percent in the fourth quarter of 2011, excluding special project costs. Gross margin was also impacted by price declines in effect on Crisco® oils during the first half of the quarter, despite higher costs.
Selling, distribution, and administrative expenses in the fourth quarter of 2011 decreased 3 percent, compared to 2010, and decreased as a percentage of net sales from 21.5 percent to 18.8 percent. Marketing expenses for the fourth quarter of 2011 decreased 14 percent, compared to the same period in 2010 that included significant levels of advertising investments. Selling, distribution, and general and administrative expenses all increased between 2 percent and 4 percent, significantly less than the percentage increase in net sales.
Operating income decreased $14.9 million, or 8 percent, in the fourth quarter of 2011, compared to 2010, including the overall increase in special project costs of approximately $21.6 million driven by the company's on-going progress on its restructuring project. Excluding the impact of special project costs in both periods, operating income increased $6.7 million, or 4 percent, and declined from 17.9 percent of net sales in 2010, to 16.7 percent in 2011.
The U.S. retail coffee market segment net sales increased 21 percent in the fourth quarter of 2011, compared to the fourth quarter of 2010, primarily reflecting the impact of three price increases taken during 2011 totaling 23 percent, partially offset by increased spending in support of the Easter promotional period. Volume increased 3 percent for the Folgers® brand in the fourth quarter of 2011, compared to the fourth quarter of 2010, and offset a low double-digit percent decline in Dunkin' Donuts® packaged coffee which realized a strong fourth quarter last year with volume up double-digits. Overall segment volume was flat in the fourth quarter of 2011, compared to 2010. The introduction of Folgers Gourmet Selections® and Millstone® K-Cups® offerings earlier in the fiscal year contributed approximately 5 percent of the U.S. retail coffee market segment net sales in the fourth quarter of 2011.
U.S. retail coffee market segment profit increased 8 percent in the fourth quarter of 2011, compared to the fourth quarter of 2010. Green coffee costs were significantly higher in the fourth quarter of 2011, compared to the fourth quarter of 2010, but were offset by the net realization of previously announced price increases. Marketing expenses decreased $8.5 million in the fourth quarter of 2011, compared to the fourth quarter of 2010, as advertising was at more typical levels in the current year, and record incremental investments were made in the prior year. Segment profit margin was 23.2 percent in 2011, compared to 25.9 percent in 2010. In May 2011, an 11 percent price increase was implemented on the majority of coffee products to offset further increases in green coffee costs.
The U.S. retail consumer market segment net sales were flat and volume increased 2 percent for the fourth quarter of 2011, compared to 2010, excluding the effect of potato products divested in the fourth quarter of 2010. Net sales include the impact of a peanut butter price reduction of 5 percent taken earlier in the fiscal year. Volume gains in peanut butter and fruit spreads were offset somewhat by declines in Smucker's® Uncrustables® sandwiches. Reported segment net sales decreased 2 percent and volume increased 1 percent for the fourth quarter of 2011, compared to the fourth quarter of 2010, including the divested potato products.
The U.S. retail consumer market segment profit decreased 7 percent for the fourth quarter of 2011, compared to the fourth quarter in 2010 which benefited from a $12.9 million gain on the divestiture of potato products. Segment marketing expense and supply chain costs decreased in the fourth quarter of 2011, compared to 2010. Segment profit margin was 28.9 percent in the fourth quarter of 2011, compared to 30.5 percent in 2010 that included a 4.8 percentage point impact of the gain on divestiture.
