1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended April 30, 1997 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-5111 THE J. M. SMUCKER COMPANY Ohio 34-0538550 State of Incorporation I.R.S. Employer Identification No. One Strawberry Lane Orrville, Ohio 44667-0280 Principal executive offices Telephone number: (330) 682-3000 Securities registered pursuant to Section 12(b) of the Act: Class A Common Shares, no par value Registered on the Class B Common Shares, no par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None The Registrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and has been subject to such filing requirements for at least the past 90 days. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] As of June 30, 1997, 14,398,467 Class A Common Shares and 14,769,703 Class B Common Shares of The J. M. Smucker Company were issued and outstanding. The aggregate market value of the voting Common Shares (Class A) held by non-affiliates of the Registrant at June 30, 1997, was $238,548,954. Certain sections of the Registrant's definitive Proxy Statement, dated July 9, 1997, for the August 12, 1997 Annual Meeting of Shareholders and of the 1997 Annual Report to Shareholders are incorporated by reference into Parts I, II, III and IV of this Report.
2 PART I ITEM 1. BUSINESS THE COMPANY. The J. M. Smucker Company was begun in 1897 and was incorporated in Ohio in 1921. The Company, often referred to as Smucker's (a registered trademark), operates in one industry, the manufacturing and marketing of food products on a worldwide basis. Unless otherwise indicated by the context, the term "Company" as used in this report means the continuing operations of The J. M. Smucker Company and its subsidiaries. DISCONTINUED OPERATIONS. On May 31, 1996, the Company completed the sale of its Mrs. Smith's frozen pie business to a subsidiary of Flowers Industries, Inc. for a combination of cash and notes receivable. In connection with this divestiture, the Company also has entered into agreements to lease property, plant, and equipment of the Mrs. Smith's frozen pie business to Flowers Industries, Inc. under 10-year operating lease agreements, which include the exclusive right and option to purchase such assets during the term of the leases. The future minimum rental revenue from these leases is approximately $28,935,000. PRINCIPAL PRODUCTS. The principal products of the Company are fruit spreads, dessert toppings, peanut butter, industrial fruit products (such as bakery and yogurt fillings), fruit and vegetable juices, juice beverages, syrups, condiments, and gift packages. The Company is structured around six strategic business areas: Consumer, Beverage, International, Foodservice, Industrial, and Specialty Foods. Within the domestic markets, the Company's products are primarily sold through brokers to chain, wholesale, cooperative, and independent grocery accounts and other consumer markets, and to foodservice distributors and chains including hotels, restaurants, and institutions. Industrial products such as bakery and fruit fillings are typically sold directly to other food manufacturers and marketers for inclusion in their products. The Company's distribution outside the United States is principally in Canada, Australia and the Pacific Rim, and Latin America, although products are exported to other countries as well. International sales represent approximately 12.2% of total consolidated Company sales. SOURCES AND AVAILABILITY OF RAW MATERIALS. The fruit raw materials used by the Company in the production of its food products are generally purchased from independent growers and suppliers, although the Company grows some strawberries for its own use. Because of the seasonal nature and volatility of quantities of most of the crops on which the Company depends, it is necessary to prepare and freeze stocks of fruit, fruit juices, berries, and other food products and to maintain them in cold storage warehouses. Sweeteners, peanuts, and other ingredients are obtained from various other sources.
3 PATENTS AND TRADEMARKS. The Company's products are marketed under numerous trademarks owned by the Company. The principal trademarks are the Company's names and certain designs of products. Major trademarks include: Smucker's, The R. W. Knudsen Family, After The Fall, Simply Nutritious, Mary Ellen, Dickinson's, Lost Acres, IXL, Laura Scudder's, Simply Fruit, Good Morning, Double Fruit, Low Sugar, Goober, Magic Shell, Sundae Syrup, Recharge, Santa Cruz Original, Spritzer, and Heinke. In addition, the Company licenses the use of several other trademarks, none of which individually is material to the Company's business. Other slogans or designs considered to be important trademarks to the Company include the slogan, "With a name like Smucker's, it has to be good," " 100 Years of Family-Made Goodness," the Smucker's banner, the Crock Jar shape, the Gingham design, and the strawberry logo. SEASONALITY. Historically, the Company's business has not been highly seasonal. WORKING CAPITAL. Working capital requirements are greatest during the late spring and summer months due to seasonal procurement of fruits, berries, and peanuts. During this period, short-term borrowings may be used to augment working capital generated by sales. CUSTOMERS. The Company is not dependent either on a single customer or on a very few customers for a major part of its sales. No single domestic or foreign customer accounts for more than 10% of consolidated sales. ORDERS. Generally, orders are filled within a few days of receipt and the backlog of unfilled orders at any particular time is not material. GOVERNMENT BUSINESS. The Company has no material portion of its business which may be subject to negotiation of profits or termination of contracts at the election of the government. COMPETITION. The Company is the U.S. market leader in the fruit spreads, ice cream topping, and natural peanut butter categories. The Company's business is highly competitive as all its brands compete for retail shelf space with other advertised and branded products as well as unadvertised and private label products. The growth of alternative store formats (i.e. warehouse club and mass merchandise stores) and changes in business practices, resulting from both technological advances and new industry techniques, have added additional variables for companies in the food industry to consider in order to remain competitive. The principal methods of and factors in competition are product quality, price, advertising, and promotion. RESEARCH AND DEVELOPMENT. The Company predominantly utilizes in-house programs to both develop new products and improve existing products in each of its strategic business areas. In relation to consolidated assets and operating expenses, amounts expensed in each of the areas or in the aggregate were not material in any of the last three years. ENVIRONMENTAL MATTERS. Compliance with the provisions of 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 capital expenditures, earnings, or competitive position of the Company. EMPLOYEES. At April 30, 1997, the Company had approximately 1,950 full-time employees, worldwide.
4 SEGMENT AND GEOGRAPHIC INFORMATION. Information concerning international operations for the years 1997, 1996, and 1995 is hereby incorporated by reference from the 1997 Annual Report to Shareholders, on page 24 under Note B: "Operating Segments." ITEM 2. PROPERTIES The table below lists all the Company's manufacturing and fruit processing facilities. All of the Company's properties are maintained and updated on a regular basis, and the Company continues to make investment for expansion and technological improvements. All production properties listed below are owned except the facility in Oxnard, California, which is leased. In addition to the locations listed below, acreage is leased in California for the growing of strawberries. The Company also leases property in Pottstown, Pennsylvania to a subsidiary of Flowers Industries, Inc. The corporate headquarters are located in Orrville, Ohio. <TABLE> <CAPTION> DOMESTIC MANUFACTURING LOCATIONS PRODUCTS PRODUCED - ---------------------------------------------------------------------------------------- <S> <C> Orrville, Ohio Fruit spreads, toppings, industrial fruit products Salinas, California Fruit spreads, toppings Memphis, Tennessee Fruit spreads, toppings Ripon, Wisconsin Fruit spreads, toppings, condiments New Bethlehem, Pennsylvania Peanut butter and Goober products Chico, California Fruit and vegetable juices, beverages Havre de Grace, Maryland Fruit and vegetable juices, beverages FRUIT PROCESSING LOCATIONS FRUIT PROCESSED - ---------------------------------------------------------------------------------------- Watsonville, California Strawberries, oranges, apples, peaches, apricots. Also, produces industrial fruit products. Woodburn, Oregon Strawberries, raspberries, blackberries, blueberries. Also produces industrial fruit products. Grandview, Washington Grapes, cherries, strawberries, cranberries Oxnard, California Strawberries INTERNATIONAL MANUFACTURING LOCATIONS PRODUCTS PRODUCED - ---------------------------------------------------------------------------------------- Ste-Marie, Quebec, Canada Fruit spreads, pie fillings, sweet spreads Kyabram, Victoria, Australia Fruit spreads, toppings, fruit pulps </TABLE>
5 ITEM 3. LEGAL PROCEEDINGS The Company is not a party to any pending legal proceeding which would be considered material. ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. EXECUTIVE OFFICERS OF THE COMPANY The names, ages as of July 1, 1997, and 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. Paul H. Smucker is the father of Tim and Richard K. Smucker and the father-in-law of H. Reid Wagstaff. All of the officers have held various positions with the Company for more than five years. <TABLE> <CAPTION> Years with Served as an Name Age Company Position Officer Since - ---------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Paul H. Smucker 80 58 Chairman of the Executive Committee 1946 Tim Smucker 53 28 Chairman 1973 Richard K. Smucker 49 24 President 1974 Vincent C. Byrd 42 20 Vice President and General Manager, 1988 Consumer Market K. Edwin Dountz 55 21 Vice President - Sales 1982 Fred A. Duncan 51 19 Vice President and General Manager, 1984 Industrial Market Steven J. Ellcessor 45 11 Vice President - Administration, 1986 Secretary, and General Counsel Robert E. Ellis 50 19 Vice President - Human Resources 1996 Richard G. Jirsa 51 22 Corporate Controller 1978 Charles A. Laine 61 32 Vice President and General Manager, 1984 International and Beverage Markets R. Alan McFalls 52 20 Vice President - Corporate Development and 1984 Planning John D. Milliken 52 23 Vice President - Logistics and Business Process 1981 Reengineering Robert R. Morrison 62 36 Vice President - Operations 1967 H. Reid Wagstaff 62 21 Vice President - Government and Environmental 1994 Affairs Philip P. Yuschak 58 21 Treasurer 1989 </TABLE>
6 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The information pertaining to the market for the Company's Common Shares and other related shareholder information is hereby incorporated by reference from the Company's 1997 Annual Report to Shareholders under the caption "Stock Price Data" on page 13. ITEM 6. SELECTED FINANCIAL DATA Five year summaries of selected financial data for the Company and discussions of accounting changes which materially affect the comparability of the selected financial data are hereby incorporated by reference from the Company's 1997 Annual Report to Shareholders under the following captions and page numbers: "Five Year Summary of Selected Financial Data" on page 12 and Note C: "Acquisitions and Divestitures" on page 25. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS Management's discussion and analysis of results of operations and financial condition, including a discussion of liquidity and capital resources, is hereby incorporated by reference from the Company's 1997 Annual Report to Shareholders, on pages 14 and 15. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated financial statements of the Company at April 30, 1997, 1996, and 1995, and for each of the three years in the period ended April 30, 1997, with the report of independent auditors and selected unaudited quarterly financial data, are hereby incorporated by reference from the Company's 1997 Annual Report to Shareholders on page 13 and pages 16 through 31. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
7 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding directors and nominees for directorship is incorporated herein by reference from the Company's definitive Proxy Statement, dated July 9, 1997, for the 1997 Annual Meeting of Shareholders on August 12, 1997, on pages 2 through 4, under the caption "Election of Directors." For information concerning the Company's executive officers, see "Executive Officers of the Company" set forth in Part I hereof. Information regarding disclosure of late filers pursuant to Item 405 of Regulation S-K is incorporated herein by reference from the Company's definitive Proxy Statement, dated July 9, 1997, for the 1997 Annual Meeting of Shareholders on August 12, 1997, on pages 13 and 14 under the caption "Ownership of Common Shares." ITEM 11. EXECUTIVE COMPENSATION Information regarding the compensation of directors and executive officers is incorporated by reference from the Company's definitive Proxy Statement, dated July 9, 1997, for the 1997 Annual Meeting of Shareholders on August 12, 1997, under the following captions and page numbers: "Additional Information Concerning the Board of Directors of the Company" on pages 4 and 5, and beginning with "Report of the Executive Compensation Committee of the Board of Directors" on page 5 and continuing through "Pension Plan" on page 11. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information regarding security ownership of certain beneficial owners of the named executive officers, and of directors and executive officers as a group, is hereby incorporated by reference from the Company's definitive Proxy Statement, dated July 9, 1997, for the 1997 Annual Meeting of Shareholders on August 12, 1997, on pages 13 and 14 under the caption "Ownership of Common Shares." ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information regarding certain relationships and related transactions is hereby incorporated by reference from the Company's definitive Proxy Statement dated July 9, 1997, for the 1997 Annual Meeting of Shareholders on August 12, 1997, under the captions "Election of Directors" and "Additional Information Concerning the Board of Directors of the Company" on pages 2 through 5.
8 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1, 2. Financial Statements and Financial Statement Schedules The index to Consolidated Financial Statements and Financial Statement Schedules is included on page F-1 of this Report. 3. Exhibits Exhibit No. Description - -------------------------------------------------------------------------------- 3(a) 1991 Amended Articles of Incorporation incorporated by reference to the 1992 Annual Report on Form 10-K. 3(b) Amended Regulations incorporated by reference to the 1988 Annual Report on Form 10-K. 10(a) Amended Restricted Stock Bonus Plan incorporated by reference to the 1994 Annual Report on Form 10-K. 10(b) Top Management Supplemental Retirement Benefit Plan incorporated by reference to the 1994 Annual Report on Form 10-K. 10(c) 1987 Stock Option Plan incorporated by reference to the 1994 Annual Report on Form 10-K. 10(d) Management Incentive Plan incorporated by reference to the 1996 Annual Report on Form 10-K. 10(e) Nonemployee Director Stock Plan dated January 1, 1997 13 Excerpts from 1997 Annual Report to Shareholders 21 Subsidiaries of the Registrant 23 Consent of Independent Auditors 24 Powers of Attorney 27 Financial Data Schedules All other required exhibits are either inapplicable to the Company or require no answer. Copies of exhibits are not attached hereto, but the Company will furnish any of the foregoing exhibits to any shareholder upon written request. Please address inquiries to: The J. M. Smucker Company, Strawberry Lane, Orrville, Ohio 44667, Attention: Steven J. Ellcessor, Secretary. A fee of $1 per page will be charged to help defray the cost of handling, copying, and return postage.
9 (b) Reports on Form 8-K filed in the Fourth Quarter of 1997. On April 23, 1997, the Company filed a Current Report on Form 8-K with the Securities and Exchange Commission reporting that it issued a press release announcing the Company's Board of Directors had authorized the purchase, from time to time, of up to 1,000,000 Class A and/or Class B Common Shares in total. (c) The response to this portion of Item 14 is submitted as a separate section of this report. (d) The response to this portion of Item 14 is submitted as a separate section of this report.
10 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 on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. Date: July 23, 1997 The J. M. Smucker Company By: Steven J. Ellcessor Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. <TABLE> <S> <C> - ---------------------------------------- Paul H. Smucker Chairman of the Executive Committee and Director (Principal Executive Officer) - ---------------------------------------- Tim Smucker Chairman and Director (Principal Executive Officer) - ---------------------------------------- Richard K. Smucker President and Director (Principal Executive Officer) (Principal Financial Officer) - ---------------------------------------- Richard G. Jirsa Corporate Controller (Principal Accounting Officer) - ---------------------------------------- Kathryn W. Dindo Director - ---------------------------------------- Elizabeth Valk Long Director - ---------------------------------------- Russell G. Mawby Director By: Steven J. Ellcessor Attorney-in-Fact - ---------------------------------------- Charles S. Mechem, Jr. Director Date: July 23, 1997 - ---------------------------------------- Robert R. Morrison Director - ---------------------------------------- William H. Steinbrink Director - ---------------------------------------- Benjamin B. Tregoe, Jr. Director - ---------------------------------------- William Wrigley, Jr. Director </TABLE>
11 THE J. M. SMUCKER COMPANY ANNUAL REPORT ON FORM 10-K ITEMS 14(a) (1) AND (2), (c) AND (d) INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES CERTAIN EXHIBITS FINANCIAL STATEMENT SCHEDULES <TABLE> <CAPTION> Form Annual 10-K Report To Report Shareholder ------ ----------- <S> <C> <C> Data incorporated by reference from the 1997 Annual Report to Shareholders of The J. M. Smucker Company: Consolidated Balance Sheets at April 30, 1997 and 1996........................ 18-19 For the years ended April 30, 1997, 1996, and 1995: Statements of Consolidated Income ......................................... 17 Statements of Consolidated Cash Flows ..................................... 20 Statements of Consolidated Shareholders' Equity ........................... 21 Notes to Consolidated Financial Statements ................................ 22-31 Consolidated financial statement schedules at April 30, 1997, or for the years ended April 30, 1997, 1996, and 1995: II. Valuation and qualifying accounts .................................... F-2 </TABLE> All other schedules are omitted because they are not applicable or because the information required is included in the Consolidated Financial Statements or the notes thereto. F-1
12 THE J. M. SMUCKER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED APRIL 30, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS) <TABLE> <CAPTION> Balance at Charged to Charged to Deduc- Balance at Beginning Costs and Other tions End of Classification of Year Expenses Accounts (A) Period - -------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> 1997: Valuation allowance for deferred tax assets $2,009 $ 85 $ --- $ --- $2,094 Allowance for doubtful accounts 687 93 --- 427 353 ------------------------------------------------------------------------- $2,696 $ 178 $ --- $ 427 $2,447 ========================================================================= 1996: Valuation allowance for deferred tax assets $2,660 $ (651) $ --- $ --- $2,009 Allowance for doubtful accounts 475 385 --- 173 687 ------------------------------------------------------------------------- $3,135 $ (266) $ --- $ 173 $2,696 ========================================================================= 1995: Valuation allowance for deferred tax assets $2,265 $ 395 $ --- $ --- $2,660 Allowance for doubtful accounts 419 195 --- 139 475 ------------------------------------------------------------------------- $2,684 $ 590 $ --- $ 139 $3,135 ========================================================================= </TABLE> (A) Uncollectible accounts written off, net of recoveries. F-2