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, 1999 [ ] 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 July 21, 1999, 14,355,215 Class A Common Shares and 14,690,676 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 July 21, 1999, was $290,135,473. Certain sections of the Registrant's definitive Proxy Statement, dated July 15, 1999, for the August 17, 1999 Annual Meeting of Shareholders, and of the 1999 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 established 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 operating lease agreements, which include the exclusive right and option to purchase such assets during the term of the leases. 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. In its domestic segment, the Company's products are primarily sold through brokers to chain, wholesale, cooperative, independent grocery accounts and other consumer markets, to foodservice distributors and chains including hotels, restaurants, and institutions, and to other food manufacturers. The Company's distribution outside the United States is principally in Canada, Australia, Mexico, Latin America, the Pacific Rim, and Greater Europe, although products are exported to other countries as well. International sales represent approximately 12% of total consolidated Company sales for fiscal 1999. 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, through a joint venture, 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. TRADEMARKS. The Company's products are marketed under numerous trademarks owned by the Company. Major trademarks include: "Smucker's"," The R. W. Knudsen Family", "After The Fall", "Simply Nutritious", "Mary Ellen", "Dickinson's", "Lost Acres", "IXL", "Adams", "Laura Scudder's", "Simply Fruit", "Good Morning", "Double Fruit", "Goober", "Magic Shell", "Sundae Syrup", "Recharge", "Santa Cruz Organic", "Sunberry Farms", "Spritzer", "Smucker's Snackers" and "Smucker's Baking Healthy". In addition, the Company licenses the use of several other trademarks, none of which individually is material to the Company's business.
3 Other slogans or designs considered to be important Company trademarks include (without limitation) the slogan, "With a name like `Smucker's', it has to be good", "Over 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. 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. No material portion of the Company's business is 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, dessert topping, health and natural foods beverages, natural peanut butter, and peanut butter combination 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 resources to both develop new products and improve existing products in each of its business areas. In relation to consolidated assets and operating expenses, amounts expensed for research and development in each of the areas and 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, 1999, the Company had approximately 2,100 full-time employees, worldwide. SEGMENT AND GEOGRAPHIC INFORMATION. Information concerning international operations for the years 1999, 1998, and 1997 is hereby incorporated by reference from the 1999 Annual Report to Shareholders, on pages 22 and 23 under Note B: "Operating Segments".
4 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. The properties listed below are owned, except for the West Fargo, North Dakota location which is leased. 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, "Smucker's Snackers" 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 West Fargo, North Dakota Frozen peanut butter and jelly sandwiches 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, apples 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, fruit bars Livingston, Scotland Industrial fruit products </TABLE> ITEM 3. LEGAL PROCEEDINGS The Company is not a party to any pending legal proceeding that would be considered material. ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable.
5 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 1999 Annual Report to Shareholders under the caption "Stock Price Data" on page 9. 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 1999 Annual Report to Shareholders under the following captions and page numbers: "Five-Year Summary of Selected Financial Data" on page 8, Note A: "Accounting Policies" on pages 20 through 22, and Note D: "Acquisitions and Divestiture" 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 1999 Annual Report to Shareholders, on pages 10 through 13. ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Quantitative and qualitative disclosures about market risk is hereby incorporated by reference from the Company's 1999 Annual Report to Shareholders on pages 12 and 13. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated financial statements of the Company at April 30, 1999, 1998, and 1997, and for each of the three years in the period ended April 30, 1999, with the report of independent auditors and selected unaudited quarterly financial data, are hereby incorporated by reference from the Company's 1999 Annual Report to Shareholders on page 9 and pages 14 through 31. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
6 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 15, 1999, for the 1999 Annual Meeting of Shareholders on August 17, 1999, on pages 2 through 4, under the caption "Election of Directors". 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 15, 1999, for the 1999 Annual Meeting of Shareholders on August 17, 1999, on pages 13 through 15, under the caption "Ownership of Common Shares". EXECUTIVE OFFICERS OF THE COMPANY The names, ages as of July 1, 1999, 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. 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> Timothy P. Smucker 55 30 Chairman 1973 Richard K. Smucker 51 26 President 1974 Mark R. Belgya 38 14 Corporate Controller 1997 Vincent C. Byrd 44 22 Vice President and General Manager, Consumer 1988 Market K. Edwin Dountz 57 23 Vice President-Sales 1982 Fred A. Duncan 53 21 Vice President and General Manager, Industrial 1984 Market Steven J. Ellcessor 47 13 Vice President-Administration, Secretary, and 1986 General Counsel Robert E. Ellis 52 21 Vice President-Human Resources 1996 Richard G. Jirsa 53 24 Vice President-Information Services 1978 Eloise L. Mackus 49 5 Vice President and General Manager, 1999 International Market R. Alan McFalls 54 22 Vice President-Corporate Development and 1984 Planning John D. Milliken 54 25 Vice President-Logistics 1981 Steven T. Oakland 38 16 Vice President and General Manager, Foodservice 1999 Market Richard F. Troyak 51 20 Vice President-Operations 1998 H. Reid Wagstaff 64 23 Vice President-Government and Environmental 1994 Affairs Philip P. Yuschak 60 23 Treasurer 1989 </TABLE>
7 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 15, 1999, for the 1999 Annual Meeting of Shareholders on August 17, 1999, beginning with "Additional Information Concerning the Board of Directors of the Company" on page 4 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 15, 1999, for the 1999 Annual Meeting of Shareholders on August 17, 1999, on pages 13 through 15 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 15, 1999, for the 1999 Annual Meeting of Shareholders on August 17, 1999, 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 SCHEDULE AND REPORTS ON FORM 8-K (a) 1, 2. Financial Statements and Financial Statement Schedule The index to Consolidated Financial Statements and Financial Statement Schedule 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 incorporated by reference to the 1997 Annual Report on Form 10-K. 10(f) 1998 Equity and Performance Incentive Plan incorporated by reference to Form 10-Q for the quarterly period ended October 31, 1998. 10(g) Rights Agreement (including a Form of Certificate of Adoption of Amendment to Amended Articles of Incorporation as Exhibit A thereto, a Form of Right Certificate as Exhibit B thereto, and a Summary of Rights to Purchase Preferred Stock as Exhibit C thereto) incorporated by reference to Form 8-K filed April 23, 1999. 13 Excerpts from 1999 Annual Report to Shareholders 21 Subsidiaries of the Registrant 23 Consent of Independent Auditors 24 Powers of Attorney 27 Financial Data Schedules
9 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. (b) Reports on Form 8-K filed in the Fourth Quarter of 1999. On April 23, 1999, 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 declared a dividend distribution of one Class A right for each share of Class A Common Stock, and one Class B right for each share of Class B Common Stock, of the Company outstanding as of May 14, 1999. The dividend was declared pursuant to the terms of a Rights Agreement dated as of April 22, 1999 by and between the Company and Harris Trust and Savings Bank, as Rights Agent. (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, 1999 The J. M. Smucker Company /s/ Steven J. Ellcessor ------------------------- By: Steven J. Ellcessor Vice President--Administration, Secretary, and General Counsel 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> - ---------------------------------------- Timothy P. Smucker Chairman and Director (Principal Executive Officer) - ---------------------------------------- Richard K. Smucker President and Director (Principal Executive Officer) (Principal Financial Officer) - ---------------------------------------- Mark R. Belgya Corporate Controller (Principal Accounting Officer) - ---------------------------------------- Vincent C. Byrd Director - ---------------------------------------- Kathryn W. Dindo Director - ---------------------------------------- Fred A. Duncan Director - ---------------------------------------- Elizabeth Valk Long Director /s/ Steven J. Ellcessor - ---------------------------------------- ----------------------------- Russell G. Mawby Director By: Steven J. Ellcessor Attorney-in-Fact - ---------------------------------------- Charles S. Mechem, Jr. Director Date: July 23, 1999 - ---------------------------------------- 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 SCHEDULE CERTAIN EXHIBITS FINANCIAL STATEMENT SCHEDULE <TABLE> <CAPTION> Form Annual 10-K Report To Report Shareholder ------ ----------- <S> <C> <C> Data incorporated by reference from the 1999 Annual Report to Shareholders of The J. M. Smucker Company: Consolidated Balance Sheets at April 30, 1999 and 1998 . . . . . . . . 16 - 17 For the years ended April 30, 1999, 1998, and 1997: Statements of Consolidated Income . . . . . . . . . . . . . . . . . 15 Statements of Consolidated Cash Flows . . . . . . . . . . . . . . . 18 Statements of Consolidated Shareholders' Equity . . . . . . . . . . 19 Notes to Consolidated Financial Statements . . . . . . . . . . . . . 20 - 31 Consolidated financial statement schedule at April 30, 1999, or for the years ended April 30, 1999, 1998, and 1997: 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, 1999, 1998 AND 1997 (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) Year - --------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> 1999: Valuation allowance for deferred tax assets $1,731 $ (36) $ --- $ --- $1,695 Allowance for doubtful accounts 428 343 --- 38 733 ========================================================================== $2,159 $ 307 $ --- $ 38 $2,428 ========================================================================== 1998: Valuation allowance for deferred tax assets $2,094 $ (363) $ --- $ --- $1,731 Allowance for doubtful accounts 353 163 --- 88 428 ========================================================================== $2,447 $ (200) $ --- $ 88 $2,159 ========================================================================== 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 ========================================================================== </TABLE> (A) Uncollectible accounts written off, net of recoveries. F - 2