The J. M. Smucker Company Annual Report 2001

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FY2001 Annual Report · The J. M. Smucker Company

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ANNUAL REPORT
2001

ON OUR COVER
v

Reproduced on this year’s cover is a painting in acrylics by California artist

Barbara Purcell, who signs her work “Prunella.” This whimsical country

scene is rendered in the primitive style that is the artist’s favored means of

conveying the happiness of life’s simple moments. It is the newest addition

to our corporate art collection, which features still life studies of fruit and

scenes of rural and small-town America.

FINANCIAL HIGHLIGHTS

The J. M. Smucker Company

(Dollars in thousands, except per share data)

Net sales(1)

Year Ended April 30,

2001

2000

$651,242

$641,885

Income before nonrecurring charge and cumulative effect

of change in accounting method

$ 32,972

$ 35,983

Income per Common Share before nonrecurring charge

and cumulative effect of change in accounting method

$ 1.30

$ 1.26

Net income

Income per Common Share

$ 30,667

$ 26,357

$ 1.21

$ 0.92

Common Shares outstanding at year end

24,359,281

28,325,280

Number of employees

2,250

(1) Net sales for 2000 reflect accounting reclassifications.

CONTENTS
v

Letter to Shareholders.......................................................................... 2

Five-Year Summary of Selected Financial Data ................................. 8

Summary of Quarterly Results of Operations ..................................... 9

Stock Price Data ................................................................................... 9

Management’s Discussion and Analysis ............................................ 10

Management’s Report on Responsibility for Financial Reporting ..... 14

Report of Independent Auditors .......................................................... 14

Consolidated Financial Statements .................................................... 15

Notes to Consolidated Financial Statements ..................................... 20

Directors, Officers, and General Managers......................................... 32

Properties .............................................................................................. 32

Shareholder Information...................................................................... 33

SHAREHOLDERS, EMPLOYEES AND FRIENDS:

at The J. M. Smucker Company are ever alert to the changing dynamics of the food

industry, and we continually strive to understand the needs and wants of our customers

and consumers. We recognize that consumers of each generation live somewhat differently

from their predecessors. They have different thoughts about what is important in life;

consequently, they have different purchasing behaviors. We intend to stay in lockstep with

our consumers and customers. As they grow and change, we want to be there with them,

providing a trusted brand, value-added products, and highly responsive service.

THE YEAR IN REVIEW
v

Last year at this time we were just embarking

on a shareholder enhancement plan designed to:

At the close of fiscal 2001, we welcome the

u simplify our capital structure;

opportunity to once again inform our shareholders

u provide for greater liquidity in the stock;

and friends about our Company’s performance

and offer perspective on our strategies for further

growth. As always, our mission is to provide high-

u repurchase up to $100 million of the equity

from shareholders who wished to sell; and

quality, appropriately priced products that taste

u enhance the overall value of our shares.

good, make life easier, and add a little smile to

your day.

COMMENTS FROM OUR CONSUMERS

(cid:210)I felt compelled to tell you about the

comment my five-year-old son made

the other day. I recently took advan-

tage of a sale at my supermarket and

bought Smucker’s Concord Grape

Jelly. When eating his peanut butter

and jelly sandwich (his daily

The results of these efforts are most gratifying.

We repurchased over 4 million shares, and we

now trade one class of common shares with more

than 24 million shares outstanding instead of two

smaller classes. Most important, from the end of

last fiscal year—shortly before we announced the

plan—to the end of this year, the market value of

a common share increased by more than 60 percent.

Overall Results

A review of our overall results for fiscal 2001

reveals that sales were $651,242,000, up just over

1 percent, and earnings per share were $1.30

favorite), my son said, (cid:212)Wow(cid:209)

(before nonrecurring charges and an accounting

this jelly tastes so good!(cid:213) Ever

since, he has been asking for jelly

sandwiches (no peanut butter)!!!!

I was amazed that such a small

change), an increase of 3 percent over last year’s

$1.26. It was a year in which we made invest-

ments to support future growth and faced several

challenges—particularly from adverse exchange

rates in our major international markets and from

child could tell the difference.

escalating fuel and energy costs. Fourth-quarter

No more bargain brands for me(cid:209)

Smucker’s is our new jelly!!!(cid:211)

results were strong, and we look forward to con-

tinuing that momentum into the new fiscal year.

Performance by Market

COMMENTS FROM OUR CONSUMERS

Consumer. We are pleased with the very posi-

tive sales results in our Consumer area, which is

(cid:210)I have never written to tell

the largest business in our domestic segment.

a company how much I enjoy a

Growth in this area was largely due to initiatives

aimed at capitalizing on our brand loyalty and

strengthening our product distribution through all

market channels. The Consumer area posted good

results across product lines and achieved record

share-of-market in the fruit spreads category.

Sugar-free fruit spreads and natural peanut butters

were the strongest contributors to sales growth.

Increased fruit spreads sales through the club

stores channel also contributed.

product, but you have

something wonderful

on your hands.

A few months ago

we bought some

Uncrustables.

They were fantastic.

My three-year-old loved

Foodservice. The Foodservice area of the

them, and my husband and I couldn(cid:213)t

domestic segment experienced another year of

growth, thanks mainly to increased sales and

distribution of our Uncrustables product, which

we discuss in greater detail elsewhere in this

letter. Our core portion control business was soft,

however, as a result of the slowing economy and

the resulting impact on certain segments of the

restaurant industry.

Beverage. Although Beverage sales were

get enough of them.(cid:211)
v

(cid:210)I think these are the greatest things

since peanut butter and jelly was

first invented!(cid:211)

essentially flat compared to the previous year,

Specialty. Our Specialty business sustained

margins in this area remained strong. Beverage

steady growth in its top line, and its margins

introduced a number of new items in fiscal 2001,

remained strong. A key goal for Specialty is to

and we are looking to these and other initiatives

continue to grow sales of the Dickinson’s brand

to spur top-line growth in the coming year.

by expanding the distribution of products such

Industrial. Sales in our Industrial business were

as fruit curds, relishes, and a new line of organic

up 1 percent overall with the Brazil and Scotland

fruit spreads.

operations included, but domestic sales alone

International. International segment sales

were down approximately 7 percent from last

grew 3 percent as a result of the new industrial

year. The domestic sales decline was due primar-

businesses in Brazil and Scotland and a strong

ily to two factors. First, the formulated ingredient

performance by our Canadian subsidiary. Sales in

industry remains under price pressure in the U.S.,

the rest of the world were off from the prior year,

which led to price reductions on certain of our

especially in Australia where competitive pres-

product lines. Second, we have chosen to discon-

sures and an adverse exchange rate posed chal-

tinue some business that in the current pricing

lenges. In fact, International sales would have

environment is not sufficiently profitable.

been 10 percent greater overall if exchange rates

Industrial has made progress in diversifying its

had remained what they were last year.

customer base, however, which is one of this

business area’s highest priorities.

INVESTMENTS IN THE FUTURE
v

Strategic Direction

Another response to the competitive environ-

ment is the marked increase in mergers and

acquisitions. The trend toward consolidation is

evident among manufacturers, brokers that repre-

Each year, the food industry becomes increas-

sent manufacturers, and of course, retail and

ingly competitive. Slowed growth in a number of

foodservice enterprises. Although consolidations

market categories has prompted a wide variety

present challenges, these transactions can offer

of responses from industry players.

opportunities for financially strong companies

A frequently seen reaction is to cut back on

like ours. As larger companies review their busi-

investments and sacrifice long-term growth initia-

nesses, attractive brands often become available.

tives to boost short-term financial results. To us,

We continue to seek fairly priced acquisition can-

that kind of thinking just doesn’t make sense.

didates that fit our strategies and complement

Time and again, good companies have proven

our existing brands and product lines.

that investing in the future and maintaining long-

term focus—even when it causes some short-

term pain—provide a solid foundation for growth.

New Products and Ventures

Our reply to slower-growth markets has been to

expand our brand name, launch new products,

and stretch into new categories. This continues

to be our strategy.

COMMENTS FROM OUR CONSUMERS

(cid:210)I just wanted to say how happy I am

with your Snackers product. My son

is in kindergarten, and he needs a

Smucker’s Uncrustables. We continue to

focus on Uncrustables, our line of crustless, thaw-

and-serve peanut butter and jelly sandwiches.

Within the school foodservice market, sales of

Uncrustables have increased substantially over

last year, yet to date we are in fewer than 20 per-

cent of school districts nationally. Reaching a

large percentage of children with a branded food

item, served as a meal or nutritious snack, is a

most exciting prospect for our Company. The

Uncrustables line was also successful this year in

snack every day. I was starting to run

traditional foodservice outlets, especially in the

out of ideas that were good for him

while he was being

confronted with snacks

brought in by other

recreation category, where initial placements

have included Walt Disney World and several

major league baseball parks. After a year of test-

ing Uncrustables in select retail markets, we are

beginning to expand distribution to additional

kids that weren(cid:213)t very

geographic areas. The initial response from

nutritious. Snackers

solved that problem.

He is happy because he has a snack

that is neat to eat, and I am happy

consumers has been very encouraging, and

we believe that the product offers our Company

a sizeable growth platform for the future.

Smucker’s Snackers. Our Snackers line

continues to expand. In addition to our original

because I know he is getting one that

strawberry and grape peanut butter and jelly

is nutritious and delicious.

Thanks so much!!!(cid:211)

combinations, we are now testing several new

varieties, including red raspberry jelly and peanut

butter with crackers; peanut butter and icing with

oatmeal cookies; peanut butter and chocolate dip

Just Blueberry, Just Boysenberry, and Just Concord

with oatmeal cookies; and “s’mores” chocolate

Grape. We remain the leader in organically

and marshmallow dips with graham crackers.

produced juices and continue to offer new flavors

Snackers are a convenient snack choice that

and sizes. Especially exciting this coming year

meets the changing lifestyle needs of busy

will be a line of 16-ounce, single-serve organic

consumers of all ages.

lemonade beverages, including traditional

Smucker’s Toppings. In the coming year, we

lemonade, strawberry lemonade, and raspberry

look for continued growth in our toppings busi-

lemonade.

ness with the introduction of two exciting prod-

International. In the International area, our

ucts. The first is Smucker’s & 3Musketeers Sundae

Henry Jones Foods subsidiary in Australia will

Syrup, which is an expansion of our cobranding

continue to focus on building its fruit spreads

relationship with M&M/Mars that began with the

share-of-market and on expanding distribution of

Dove topping line. The second is our Dulce de Leche

its Taylor’s marinades and sauces and its IXL fruit

topping. This milk caramel flavor is a traditional

bars and fruit snacks. Our Canadian business

South American favorite that continues to gain

launched an extension of its popular Grenache

popularity in the United States.

sweet spreads line into the Quebec market,

Beverages. Our beverage business continues

where it has achieved excellent distribution

to develop products that capitalize on consumers’

and is selling well.

interest in healthy living and eating. With this

Direct to Consumer. We continue to refine

in mind, we have expanded our R. W. Knudsen

our efforts to expand our product distribution and

Family Just Juice line to provide a complete selec-

simplify our consumers’ lives by means of direct-

tion of juices that offer the benefits associated

to-consumer selling. In fiscal 2001, we redesigned

with a particular fruit. Included are Just Cranberry,

our website, www.smucker.com, to make it more

COMMENTS FROM OUR CONSUMERS

(cid:210)I want to let you know how

much I enjoy your creamy

Natural Peanut Butter. It is the best

I have ever eaten, especially

because it doesn(cid:213)t have all

kinds of oils and other

engaging and user-friendly. The site features new

graphics and added help functions, including a

wide selection of appealing, easy-to-prepare

recipes. To Simply Smucker’s, our Orrville retail

store, we added a test kitchen for in-store recipe

development and demonstrations.

Technology and Facilities

Over the past four years, we have made signifi-

cant investments of financial and human resources

in revamping our business processes and in

additives. I have been using it for

acquiring the information technology systems we

about a year now and have no

intention of ever changing to

anything else. My request is that

you never quit making it.

It is wonderful!(cid:211)

need to remain competitive and, where possible,

gain an edge. Although the process has been

lengthy and challenging, we are beginning to

reap some of the benefits of these investments.

In fiscal 2001, our new systems helped us

improve control of our inventory and working

COMMENTS FROM OUR CONSUMERS

(cid:210)I recently tried your Sugar Free

have concrete evidence that our hard work and

sizeable dollar investment are worthwhile.

We also continue to make capital improvements

at all of our facilities. Quality improvements and

jams. Thank your company for

energy conservation projects were important in

providing a terrific alternative

spread. I use them liberally on my

pancakes, waffles and toast.(cid:211)

(cid:210)Thank you! Thank you! I just

found the Sugar Free jam.

It satisfies my hunger for sugar

without the sugar. I just can(cid:213)t

thank you enough. I will eat this

as long as you make it.(cid:211)

fiscal 2001 and will be a focus in 2002 as well.

Other key projects this past year included several

investments to increase capacity. We completed

the installation of a new roaster and are expand-

ing the warehouse at our New Bethlehem peanut

butter plant; we made equipment and facilities

additions at our Fargo and Watsonville plants to

support increased Uncrustables sales; and we

added a new portion control line in Orrville.

THE VALUE OF PEOPLE
v

Fulfilling our growth vision depends on a solid

plan, deep commitment, and most important, a

great team working in a truly collaborative fashion.

capital needs. As a result, we decreased our

Because we have all of these elements, the future

working capital in 2001 (not including cash) by

is promising indeed.

more than $25 million, or 19 percent. Our new

For the fourth consecutive year, we are honored

systems and processes have also enabled us to

to report that our Company has earned a place on

communicate more effectively with our customers

Fortune magazine’s list of “The 100 Best Companies

and brokers, reduce the average number of days it

to Work For.” We are very proud that more than

takes to collect on our receivables, increase our

40 percent of our employees have been with us

inventory turns, and improve our order accuracy

10 years or more, and we are deeply gratified that

and on-time deliveries.

they cite a “close-knit, family feeling,” as the best

Our efforts to reengineer our business

part about working for our Company.

processes with the help of technology are not

To our dedicated family of employees and to

complete. We will be making additional invest-

our loyal consumers, customers, suppliers, and

ments over the next two years or so, but we now

shareholders, we extend our deepest thanks.

Tim Smucker

Richard Smucker

FIVE -YEAR SUMMARY OF SELECTED FINANCIAL DATA

(Dollars in thousands, except per share data)

2001

2000

1999

1998

1997

Year Ended April 30,

Statement of Income:

Net sales(1)(2)
Income before cumulative effect

$651,242

$641,885

$612,662

$574,855

$534,723

of change in accounting method(1)(3)

31,659

26,357

37,763

36,348

30,935

Cumulative effect of change in

accounting method(1)(4)

Net income

Financial Position:
Long - term debt
Total assets

(992)
30,667

—
26,357

—
37,763

(2,958)
33,390

—
30,935

135,000
470,469

75,000
466,054

—
425,881

—
399,690

—
381,502

Other Data:
Earnings per Common Share:

Income before cumulative effect of change

in accounting method(1)(3)

Cumulative effect of change in

accounting method(1)(4)

Net income

1.25

(0.04)
1.21

Income before cumulative effect of change

in accounting method – assuming dilution(1)(3)

1.23

Cumulative effect of change in

accounting method – assuming dilution(1)(4)

Net income – assuming dilution

(0.04)
1.19

Dividends declared per Common Share

0.64

0.92

—
0.92

0.92

—
0.92

0.61

1.30

—
1.30

1.29

—
1.29

0.57

1.25

(0.10)
1.15

1.24

(0.10)
1.14

0.53

1.06

—
1.06

1.06

—
1.06

0.52

(1) Reflects, in 2001, the impact of adopting the provisions of the Securities and Exchange Commission’s Staff Accounting
Bulletin No. 101, Revenue Recognition in Financial Statements (SAB 101), as discussed in Note A to the consolidated financial
statements. Had SAB 101 been retroactively applied to all periods presented, earnings per Common Share would have been
$0.01 lower in 1999.

(2) Net sales reflect accounting reclassifications in accordance with adopting the provisions of the Emerging Issues Task
Force of the Financial Accounting Standards Board Issue No. 00-10, Accounting for Shipping and Handling Fees and Costs
(EITF 00-10), and Issue No. 00-14, Accounting for Certain Sales Incentives (EITF 00-14), as discussed in Note A to the consol-
idated financial statements.

(3) Includes, in 2001, a nonrecurring charge of $2,152 ($1,313 after tax) or $0.05 per share relating to the sale of the former
Mrs. Smith’s real estate, and in 2000, nonrecurring charges of $14,492 ($9,626 after tax) or $0.34 per share relating to the
impairment of certain long-lived assets, as discussed in Note C to the consolidated financial statements.

(4) Reflects, in 1998, the cumulative effect of adopting the provisions of the Emerging Issues Task Force of the Financial
Accounting Standards Board Issue No. 97-13, Accounting for Costs Incurred in Connection with a Consulting Contract that
Combines Business Process Reengineering and Information Technology Transformation (EITF 97-13).

SUMMARY OF QUARTERLY RESULTS OF OPERATIONS

The following is a summary of unaudited quarterly results of operations for the years ended April 30, 2001 and 2000.

(Dollars in thousands, except per share data)

Quarter
Ended

Net
Sales(2)

Gross
Profit(2)

2001(1)

2000

July 31
October 31
January 31
April 30

$166,328
169,837
153,628
161,449

$163,724
166,444
152,630
159,087

$55,924
54,372
52,443
50,023

$55,804
52,718
52,367
48,135

Net Income per
Common Share

Net Income per Common
Share – Assuming
Dilution

Income
Before
Cumulative
Effect of
Change in
Accounting

Method(3)(4)

$ 9,558
6,209
7,039
8,853

$11,037
9,389
4,963
968

Net
Income

$ 8,566
6,209
7,039
8,853

$11,037
9,389
4,963
968

Income
Before
Cumulative
Effect of
Change in
Accounting

Method(3)(4)

$0.34
0.25
0.29
0.37

$0.38
0.33
0.17
0.03

Income
Before
Cumulative
Effect of
Change in
Accounting

Net

Method(3)(4)

Income

$0.34
0.24
0.29
0.36

$0.38
0.32
0.17
0.03

$0.30
0.24
0.29
0.36

$0.38
0.32
0.17
0.03

Net
Income

$0.30
0.25
0.29
0.37

$0.38
0.33
0.17
0.03

(1) Reflects, in 2001, restatements of previously reported quarterly information in accordance with adopting the provisions of the
Securities and Exchange Commission’s Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB 101),
accounted for as a cumulative effect of change in accounting method as discussed in Note A to the consolidated financial statements.

(2) Reflects reclassifications in accordance with adopting the provisions of the Emerging Issues Task Force of the Financial Accounting
Standards Board Issue No. 00-10, Accounting for Shipping and Handling Fees and Costs (EITF 00-10), and Issue No. 00-14, Accounting for
Certain Sales Incentives (EITF 00-14), as discussed in Note A to the consolidated financial statements.

(3) Includes nonrecurring charges during fiscal 2001 second quarter of $1,313 ($0.05 per share) relating to the sale of the former Mrs.
Smith’s real estate, and fiscal 2000 third and fourth quarters of $3,192 ($0.11 per share) and $6,434 ($0.23 per share), respectively, relat-
ing to the impairment of certain long-lived assets as discussed in Note C to the consolidated financial statements.

(4) Fiscal 2001 fourth quarter income was increased by $1,100 ($0.05 per share) resulting from adjustments to the effective income tax rate.

Annual earnings per share may not equal the sum of the individual quarters due to differences in the average number of shares out-
standing during the respective periods.

STOCK PRICE DATA

The Company’s Common Shares are listed on the New York Stock Exchange – ticker symbol SJM. The table below presents
the high and low market prices for the shares and the quarterly dividends declared. There were 8,117 shareholders of
record as of June 15, 2001.

2001

2000

Quarter Ended

July 31
October 31
January 31
April 30

High

$19.50
25.00
29.00
29.00

$25.75
24.19
21.38
18.50

Low

Dividends

$15.75
17.88
21.63
23.95

$20.06
19.50
17.00
15.00

$0.16
0.16
0.16
0.16

$0.15
0.15
0.15
0.16

On August 29, 2000, the Company combined its Class A and Class B Common Shares into a single class of common shares with terms
similar to the former Class A Common Shares. The 2001 first quarter information and all 2000 information listed above indicates the high
and low reported sales price per share for the former Class A Common Shares. See Note K to the consolidated financial statements.

MANAGEMENT(cid:213)S DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS
v

Comparison of 2001 with 2000

Sales in fiscal 2001 were $651,242,000, up from

$641,885,000 in the prior year. Domestic sales were

$557,921,000, up 1% over fiscal 2000, while the inter-

national segment realized an increase of $2,760,000

or 3%. Excluding the impact of nonrecurring charges

in both years and the cumulative effect of an

accounting change in fiscal 2001, earnings for the

year were $32,972,000 or $1.30 per share compared

to $35,983,000 or $1.26 last year. Including the impact

of nonrecurring charges and change in accounting

method, earnings were $30,667,000 or $1.21 per share

compared to $26,357,000 or $0.92 last year.

In the domestic segment, the Company’s consumer

business grew 4%, due primarily to an increase in

sales of sugar-free fruit spreads and natural peanut

butters, along with growth in the warehouse club

channel. The Company also saw 4% growth in its

foodservice business, driven in large part by the con-

tinued success of the Smucker’s Uncrustables line of

thaw-and-serve peanut butter and jelly sandwiches

in its schools market. Sales of traditional portion

control items were flat compared to last year. The

specialty business was up for the year due primarily

to new product sales. In the beverage area, sales of

tively impacted by exchange rates and increased

competitive activity in the Company’s Australian

market. Sales

in Mexico and the Company’s

European and Middle East markets were also down.

The impact of a strong U.S. dollar, primarily in com-

parison to the Australian and Canadian dollars,

resulted in fiscal 2001 sales being approximately

$6,585,000 less than they would have been had

exchange rates been equal to prior year levels. Had

exchange rates remained constant, international

sales would have been up 10%.

The cost of products sold as a percentage of net sales

remained constant with last year at 67.3% versus

67.4%. During the year, the Company benefited from

the lower cost of fruit packed during the summer

months. However, these savings were partially offset

by the impact of revaluing carryover fruit inventories

(i.e., fruit packed in the prior fiscal year) to reflect the

current lower cost. The savings were also offset by

increased energy costs, which were up 20% over

fiscal 2000, and higher freight costs. Selling, distribu-

tion, and administrative (SD&A) expenses increased

at approximately the same rate as sales. Marketing

expenses were up 7% over the prior year related to

the introduction of new products. This was some-

what offset by a 2% decrease in selling expenses and

a less than 1% increase in administrative costs.

The R. W. Knudsen Family and Santa Cruz Organic

During the second quarter, the Company finalized

products continue to grow. However, overall bever-

the sale of the former Mrs. Smith’s real estate in

age sales were flat compared to last year due to soft-

Pottstown, Pennsylvania, resulting in a pretax loss of

ness in After The Fall brand sales. In the industrial

approximately $2,152,000 or $0.05 per share. This

area, domestic sales were below last year, as sales

transaction represents the final nonrecurring charge

with new customers did not fully offset declines in

relating to the previously announced financial

sales with certain existing customers. The Company

review of certain businesses and assets by the

continues to place emphasis on diversifying its cus-

Company, initiated in fiscal 2000. The total amount

tomer base in this area to minimize the impact of any

of nonrecurring charges taken in connection with

further decline in sales resulting from ongoing com-

the review was $16,644,000, with $14,492,000 of that

petitive pricing pressures.

amount taken in fiscal 2000 and the remainder in the

In the international segment, the increase came from

current fiscal year.

a full year inclusion of the Company’s Brazilian oper-

Interest expense increased over the prior year due to

ation. The Company’s Canadian business performed

the long-term debt placement completed during the

well, contributing to overall segment performance

second quarter of the fiscal year (see Capital

for the second consecutive year. Sales were nega-

Resources and Liquidity). During the year, the

Company capitalized approximately $891,000 of

nesses and the addition of production facilities in

interest, primarily associated with the Company’s

new geographical regions. The Canadian business

information technology reengineering (ITR) project.

contributed significantly to both international sales

The effective income tax rate for the year was 36.6%

compared to 36.5% in fiscal 2000.

and profits as sales increased approximately 11%

over fiscal 1999. Sales also increased in the Australian

market and the export business in Europe. The

Company’s acquisition in December 1999 of a fruit

Comparison of 2000 with 1999

ingredient business in Brazil and sales from the new

Consolidated sales in fiscal 2000 were $641,885,000,

up 5% from $612,662,000 in fiscal 1999. Domestic

segment sales increased $14,170,000 or 3%, while

the international segment was up $15,053,000 or

20%. Excluding the impact of nonrecurring charges,

earnings for the year decreased from $37,763,000, or

$1.30 per share in fiscal 1999 to $35,983,000, or

$1.26 per share. Including the impact of the nonre-

curring charges, which is explained below, fiscal

2000 earnings were $26,357,000 or $0.92 per share.

production facility in Scotland contributed approxi-

mately $6,300,000 in sales. For the second consecu-

tive year, sales in Mexico increased in excess of 40%.

The Mexican business also earned a profit for the

first time. In addition, the impact of favorable exchange

rates contributed $1,953,000 to the increase in inter-

national sales.

Gross margin was consistent with fiscal 1999 at

32.6%, as increases in certain fruit costs and manu-

facturing overhead were offset by improved manu-

In the domestic segment, the majority of the sales

facturing efficiencies and lower costs on certain raw

increase came from the foodservice market, primar-

materials. SD&A costs increased at a greater rate

ily as a result of three factors: (i) volume growth in

than sales due to increased selling expenses in the

the portion control category; (ii) the addition of Lea &

grocery channel and selling costs associated with

Perrins products to the foodservice product line, as a

expanded distribution of Uncrustables into school

result of a distribution agreement with Lea & Perrins,

lunch programs. Distribution costs also were up due

Inc.; and (iii) sales of the new Smucker’s Uncrustables

to higher operating costs at certain distribution cen-

peanut butter and jelly sandwich. In the consumer

ters and higher fuel costs in the latter part of the year.

market, overall sales were even with last year, as

Marketing expenditures were up approximately 5%

stronger sales in the warehouse club channel offset

due to investments in support of new products and

a slight decrease in the grocery channel. Despite the

businesses, primarily in the consumer, consumer

slight decline

in grocery channel sales, the

direct, and international markets. Corporate admin-

Company’s share of the domestic fruit spreads

istrative overhead also contributed to the increase in

market hit record levels, passing the 40% share level.

SD&A, as these expenses increased 11%, primarily

The specialty foods business also contributed to

due to planned costs associated with the Company’s

overall sales growth, as sales increased 8% over

ITR project.

fiscal 1999. Finally, the inclusion of sales from the

Company’s new retail store, along with an increase

in catalog and on-line sales, resulted in an overall

increase in the consumer direct market. While sales

in the industrial market increased modestly overall,

industrial sales in the domestic segment declined

approximately 3% from fiscal 1999 due to softness in

sales with two large customers.

Interest expense increased significantly over fiscal

1999 due to the long-term debt placement completed

during the first quarter of the fiscal year. During fiscal

2000, the Company capitalized approximately

$1,069,000 of interest associated with the ITR project.

The Company’s effective income tax rate for the year

was 36.5%, down from 38.7% in fiscal 1999, reflect-

In the international segment, the increase in sales

ing increased benefits from tax credits on a lower

came from a combination of growth in existing busi-

base of taxable income.

During fiscal 2000, the Company initiated a financial

$18.50 per share during the year in conjunction with

review of its businesses and assets, with a focus on

the Company’s shareholder value enhancement

those assets considered nonstrategic or underper-

plan. The Company funded these repurchases with a

forming. This review resulted in a nonrecurring,

combination of proceeds from the debt noted above

noncash charge of $14,492,000 ($9,626,000 net of

and available cash. The weighted average interest

tax) or $0.34 per share. Approximately $10,700,000

rate on the notes is 7.83% and is payable each

of the charge resulted from the write-down of the

March 1st and September 1st. The notes mature over

carrying value of certain intangible assets, primarily

terms of five to ten years.

goodwill relating to previous acquisitions. In addi-

tion, certain capitalized costs associated with

unused or abandoned software acquired as part of

the Company’s ITR project and other abandoned

fixed assets were written off.

Capital expenditures for fiscal 2002 are budgeted at

$20,000,000. Assuming there are no material acqui-

sitions or other significant investments, the Company

believes that cash on hand, together with cash gen-

erated by operations and existing lines of credit, will

The write-down of the intangible assets was based

be sufficient to meet its fiscal 2002 requirements,

on the Company’s estimate of fair market value

including the payment of dividends.

using future discounted cash flows projected to be

generated by the respective assets under review,

over their estimated useful lives. Based upon the

results of this analysis, the expected useful lives of

the assets were reduced from periods ranging from

five to forty years, to a range of two to ten years.

CAPITAL RESOURCES AND LIQUIDITY
v

The financial position of the Company remains

strong with an increase in cash and cash equivalents

of $27,352,000 during the year. The increase in cash

and cash equivalents reflects cash generated by

operations of $88,196,000 together with proceeds

from the Company’s $60,000,000, senior, unsecured

fixed-rate notes, issued in August 2000. The increase

in cash generated from operations is partially the

result of active management of inventory and

RECENTLY ISSUED ACCOUNTING
STANDARDS
v

In 1998, the Financial Accounting Standards Board

issued Statement of Financial Accounting Standards

No. 133, Accounting for Derivative Instruments and

Hedging Activities (SFAS 133), which as amended, is

effective for the Company in fiscal 2002. Because of

the Company’s minimal use of derivative financial

instruments, the adoption of this statement will not

have a material impact on the earnings or financial

position of the Company.

MARKET RISK DISCLOSURES
v

accounts receivable levels, down $13,516,000 and

The following discussions about the Company’s

$6,532,000, respectively, compared to April 30, 2000.

market risk disclosures involve forward-looking

Fiscal 2001 capital expenditures totaled $29,385,000,

including capitalized software and consulting costs

in connection with the Company’s ongoing ITR

project. In addition to capital expenditures, other

statements. Actual results could differ from those

projected in the forward-looking statements. The

Company is exposed to market risk related to changes

in interest rates and foreign currency exchange rates.

significant uses of cash during the year included

Interest Rate Risk. The fair value of the Company’s

the payment of dividends and the repurchase of

cash and short-term investment portfolio, and the fair

Common Shares. Dividends paid on Common Shares

value of notes receivable and payable at April 30, 2001,

increased to $0.64 per share or $16,686,000, while

approximated carrying value. Exposure to interest

4,272,524 Common Shares were repurchased at

rate risk on the Company’s long-term debt is mitigated

since it is at a fixed rate until maturity. Market risk,

fiscal 2001. As the Company has expanded its inter-

as measured by the change in fair value resulting

national operations, its sales and expenses denomi-

from a hypothetical 10% change in interest rates, is

nated in foreign currencies have increased. Thus,

not material. Based on the Company’s overall inter-

certain sales and expenses have been, and are

est rate exposure as of and during the year ended

expected to be, subject to the effect of foreign cur-

April 30, 2001, a hypothetical 10% movement in

rency fluctuations and these fluctuations may have

interest rates relating to the Company’s variable rate

an impact on operating results.

borrowings would not materially affect the Company’s

results of operations.

Foreign Currency Exchange Risk. After analyzing

the risk, the Company has determined its foreign cur-

rency exposure on future earnings or cash flows is

not significant, and has chosen at this time not to

CERTAIN FORWARD-LOOKING
STATEMENTS
v

hedge its foreign currency exposure. Therefore, it has

This annual report includes certain forward-looking

not entered into any forward foreign exchange con-

statements that are based on current expectations

tracts to hedge foreign currency transactions.

and are subject to a number of risks and uncertainties

The Company has operations outside the United

States with foreign currency denominated assets and

liabilities, primarily denominated in Australian and

Canadian dollars. Because the Company has foreign

currency denominated assets and liabilities, financial

exposure may result, primarily from the timing of

transactions and the movement of exchange rates.

The unhedged foreign currency balance sheet expo-

sures as of April 30, 2001, are not expected to result in

a significant impact on future earnings or cash flows.

that could cause actual results to differ materially.

These risks and uncertainties include, but are not lim-

ited to, the success and cost of introducing new prod-

ucts, general competitive activity in the market, the

ability of business areas to achieve sales targets and

the costs associated with attempting to do so, the

ability of the Company to successfully effect price

increases, the ability to improve sales and earnings

performance in the Company’s formulated ingredient

business, costs associated with the implementation

of new business and information systems, raw mate-

Revenues from customers outside the United States

rial and ingredient cost trends, and foreign currency

represented approximately 14% of net sales during

exchange and interest rate fluctuations.

MANAGEMENT(cid:213)S REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING

Management of The J. M. Smucker Company is responsible for the preparation, integrity, accuracy, and con-
sistency of the consolidated financial statements and the related financial information in this report. Such
information has been prepared in accordance with accounting principles generally accepted in the United
States and is based on our best estimates and judgments.

The Company maintains systems of internal accounting controls supported by formal policies and procedures
which are communicated throughout the Company. There is an extensive program of audits performed by the
Company’s internal audit staff and independent auditors designed to evaluate the adequacy of and adherence
to these controls, policies, and procedures.

Ernst & Young LLP, independent auditors, has audited the Company’s financial statements. Management has
made all financial records and related data available to Ernst & Young LLP during its audit.

The Company’s Audit Committee, comprising three nonemployee members of the Board, meets regularly with
the independent auditors and management to review the work of the internal audit staff and the work, audit
scope, timing arrangements, and fees of the independent auditors. The Audit Committee also regularly satis-
fies itself as to the adequacy of controls, systems, and financial records. The manager of the internal audit
department is required to report directly to the Chair of the Audit Committee as to internal audit matters.

It is the Company’s best judgment that its policies and procedures, its program of internal and independent
audits, and the oversight activity of the Audit Committee work together to provide reasonable assurance that
the operations of the Company are conducted according to law and in compliance with the high standards of
business ethics and conduct to which the Company subscribes.

Timothy P. Smucker

Chairman and Co-Chief

Executive Officer

Steven J. Ellcessor

Vice President — Finance and

Administration, Secretary, and

General Counsel

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
The J. M. Smucker Company

We have audited the accompanying consolidated balance sheets of The J. M. Smucker Company as of April 30,
2001 and 2000, and the related statements of consolidated income, shareholders’ equity, and cash flows for
each of the three years in the period ended April 30, 2001. These financial statements are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the finan-
cial statements are free of material misstatement. An audit includes examining, on a test basis, evidence sup-
porting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consoli-
dated financial position of The J. M. Smucker Company at April 30, 2001 and 2000, and the consolidated results
of its operations and its cash flows for each of the three years in the period ended April 30, 2001, in conform-
ity with accounting principles generally accepted in the United States.

Akron, Ohio
June 6, 2001

STATEMENTS OF CONSOLIDATED INCOME

The J. M. Smucker Company

(Dollars in thousands, except per share data)

2001

2000

1999

Year Ended April 30,

Net sales

Cost of products sold

Gross Profit

Selling, distribution, and administrative expenses

Nonrecurring charge

Operating Income

Interest income

Interest expense

Other income–net

Income Before Income Taxes and Cumulative Effect

of Change in Accounting Method

Income taxes

Income Before Cumulative Effect of Change in

$651,242

$641,885

$612,662

438,480

432,861

412,658

212,762

155,973

2,152

54,637

2,918

(7,787)

192

209,024

153,297

14,492

41,235

2,706

(3,111)

701

200,004

141,029

—

58,975

1,948

(179)

887

49,960

18,301

41,531

15,174

61,631

23,868

Accounting Method

31,659

26,357

37,763

Cumulative effect of change in accounting method,

net of tax benefit of $572

Net Income

(992)

—

$ 30,667

$ 26,357

$ 37,763

Earnings per Common Share:

Income Before Cumulative Effect of Change in

Accounting Method

$ 1.25

$ 0.92

$ 1.30

Cumulative effect of change in accounting method

(0.04)

—

Net Income per Common Share

$ 1.21

$ 0.92

$ 1.30

Earnings per Common Share –Assuming Dilution:

Income Before Cumulative Effect of Change in

Accounting Method

Cumulative effect of change in accounting method

$ 1.23

$ 0.92

$ 1.29

(0.04)

—

Net Income per Common Share –Assuming Dilution

$ 1.19

$ 0.92

$ 1.29

See notes to consolidated financial statements

CONSOLIDATED BALANCE SHEETS

The J. M. Smucker Company

ASSETS

(Dollars in thousands)

Current Assets

Cash and cash equivalents

Trade receivables, less allowance for doubtful accounts

Inventories:

Finished products

Raw materials, containers, and supplies

Other current assets

Total Current Assets

Property, Plant, and Equipment

Land and land improvements

Buildings and fixtures

Machinery and equipment

Construction in progress

Accumulated depreciation

Total Property, Plant, and Equipment

Other Noncurrent Assets

Goodwill

Trademarks and patents

Other assets

Total Other Noncurrent Assets

April 30,

2001

2000

$ 51,125

$ 23,773

55,986

62,518

52,034

55,965

52,653

68,862

107,999

121,515

13,956

11,996

229,066

219,802

17,684

79,862

18,479

87,803

247,235

214,012

17,072

29,507

361,853

349,801

(190,283)

(175,153)

171,570

174,648

33,788

11,848

24,197

36,795

13,490

21,319

69,833

71,604

$470,469

$466,054

LIABILITIES AND SHAREHOLDERS(cid:213) EQUITY

(Dollars in thousands)

Current Liabilities

Accounts payable

Salaries, wages, and additional compensation

Accrued marketing and merchandising

Income taxes

Dividends payable

Other current liabilities

Total Current Liabilities

Noncurrent Liabilities

Long-term debt

Postretirement benefits other than pensions

Deferred income taxes

Other noncurrent liabilities

Total Noncurrent Liabilities

Shareholders’ Equity

Serial Preferred Shares – no par value:

April 30,

2001

2000

$ 29,967

$ 23,190

15,250

13,772

8,559

414

3,897

9,016

8,718

1,687

4,488

7,004

67,103

58,859

135,000

14,224

4,981

2,050

75,000

13,593

3,221

1,908

156,255

93,722

Authorized–3,000,000 shares; outstanding – none

—

Common Shares – no par value:

Authorized –70,000,000 shares; outstanding –24,359,281 in 2001

and 28,325,280 in 2000 (net of 8,065,295 and 4,099,296 treasury

shares, respectively), at stated value

Additional capital

Retained income

Less:

Deferred compensation

Amount due from ESOP Trust

Accumulated other comprehensive loss

Total Shareholders’ Equity

6,090

19,278

7,081

17,190

249,552

310,843

(2,248)

(8,926)

(16,635)

(3,091)

(9,223)

(9,327)

247,111

313,473

$470,469

$466,054

See notes to consolidated financial statements

STATEMENTS OF CONSOLIDATED CASH FLOWS

The J. M. Smucker Company

(Dollars in thousands)

Operating Activities

Net income

Adjustments to reconcile net income to net cash

provided by operating activities:

Depreciation

Amortization

Nonrecurring charge, net of tax benefit

Cumulative effect of change in accounting method,

net of tax benefit

Deferred income tax expense (benefit)

Changes in assets and liabilities, net of effect

from business acquisitions:

Trade receivables

Inventories

Other current assets

Accounts payable and accrued items

Income taxes

Other – net

Year Ended April 30,

2001

2000

1999

$30,667

$26,357

$37,763

22,521

4,400

1,313

21,674

4,524

9,626

992

2,040

—

(3,872)

5,196

11,858

3,830

10,216

923

(5,760)

(11,678)

(6,924)

(733)

(8,600)

2,628

(731)

19,660

3,734

—

120

(2,627)

(9,332)

1,587

(4,842)

(1,292)

(965)

Net Cash Provided by Operating Activities

88,196

32,271

43,806

Investing Activities

Additions to property, plant, and equipment

Businesses acquired – net of cash acquired

Disposal of property, plant, and equipment

Other – net

(29,385)

(32,240)

—

278

1,495

(9,056)

1,387

(38,693)

(26,590)

747

1,288

Net Cash Used for Investing Activities

(27,612)

(39,818)

(63,248)

Financing Activities

Proceeds from long-term debt

Proceeds from (repayment of ) short-term debt – net

Purchase of treasury shares

Dividends paid

Net amount received from ESOP Trust

Other – net

60,000

—

(80,964)

(16,686)

297

5,028

75,000

(8,966)

(17,654)

(17,212)

303

(217)

Net Cash (Used for) Provided by Financing Activities

Effect of exchange rate changes on cash

(32,325)

31,254

(907)

(615)

—

8,966

(811)

(16,246)

261

101

(7,729)

(349)

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

27,352

23,773

23,092

(27,520)

681

28,201

Cash and Cash Equivalents at End of Year

$51,125

$23,773

$ 681

( ) Denotes use of cash

See notes to consolidated financial statements

Net income

Foreign currency

translation adjustment

Comprehensive Income

Net income

Foreign currency

translation adjustment

Comprehensive Income

Net income

Foreign currency

translation adjustment

Comprehensive Income

STATEMENTS OF CONSOLIDATED SHAREHOLDERS(cid:213) EQUITY

The J. M. Smucker Company

(Dollars in thousands)

Common
Shares

Additional
Capital

Retained
Income

Deferred
Compen-
sation

Amount
Due From
ESOP Trust

Accumulated
Other
Compre-
hensive
Loss

Total
Shareholders’
Equity

Balance at May 1,1998

$7,286

$14,608

$298,316

$(2,255)

$(9,787)

$ (5,991)

$302,177

37,763

Purchase of treasury shares

Stock plans

Cash dividends declared–

(8)

$0.57 a share

Other

(786)

(92)

254

(16,541)

(17)

360

653

261

Balance at April 30, 1999

7,290

15,604

318,660

(2,001)

(9,526)

(5,698)

324,329

26,357

Purchase of treasury shares

(237)

(566)

(16,851)

Stock plans

1,570

(1,090)

Cash dividends declared –

$0.61 a share

Other

(17,323)

582

303

Balance at April 30, 2000

7,081

17,190

310,843

(3,091)

(9,223)

(9,327)

313,473

30,667

Purchase of treasury shares

(1,074)

(4,027)

(75,863)

Stock plans

4,820

843

Cash dividends declared –

$0.64 a share

Other

(16,095)

1,295

297

Balance at April 30, 2001

$6,090

$19,278

$249,552

$(2,248)

$(8,926)

$(16,635)

$247,111

See notes to consolidated financial statements

293

38,056

(811)

534

(16,541)

914

(3,629)

22,728

(17,654)

508

(17,323)

885

(7,308)

23,359

(80,964)

5,746

(16,095)

1,592

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The J. M. Smucker Company

NOTE A: ACCOUNTING POLICIES
v

Principles of Consolidation: The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly owned. All significant intercompany transactions and accounts are
eliminated in consolidation.

Financial Instruments: Financial instruments that potentially subject the Company to significant concentra-
tions of credit risk consist principally of cash investments and accounts receivable. The Company places its
cash investments with high quality financial institutions and limits the amount of credit exposure to any one
institution. The Company considers all short-term investments with a maturity of three months or less when
purchased to be cash equivalents. With respect to accounts receivable, concentration of credit risk is limited
due to the large number of customers. The Company does not require collateral from its customers. The fair
value of the Company’s financial instruments, including long-term debt, approximates the carrying amounts.

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue Recognition: In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, Revenue Recognition in Financial Statements (SAB 101), which among other guidance clarified
the Staff’s view on various revenue recognition and reporting matters. As a result, effective May 1, 2000, the
Company adopted a change in the method of accounting for shipments to customers. Under the new account-
ing method, the Company recognizes revenue on shipments on the date the merchandise is received by the
customer and title transfers.

The implementation of the change has been accounted for as a change in accounting method and applied
cumulatively as if the change occurred at May 1, 2000. The effect of the change was a one-time, noncash reduc-
tion to the Company’s earnings of $992,000 (net of tax of $572,000) or approximately $0.04 per share, which
is included in operations for the year ended April 30, 2001. The impact of the accounting change on a pro
forma basis, assuming the accounting change was made retroactively to prior periods, is not significant in any
year presented.

Shipping and Handling Costs: During fiscal 2001, the Company adopted the provisions of the Emerging Issues
Task Force of the Financial Accounting Standards Board Issue No. 00-10, Accounting for Shipping and Handling
Fees and Costs (EITF 00-10). EITF 00-10 addresses the accounting for shipping and handling costs billed to cus-
tomers and prohibits the netting of such costs against related revenue. The adoption of EITF 00-10 had no
impact on the Company’s net income. Net sales have been reclassified to conform to the requirements of EITF
00 -10. Shipping and handling costs are included in cost of products sold.

Sales Incentives: During fiscal 2001, the Company adopted the provisions of the Emerging Issues Task Force
of the Financial Accounting Standards Board Issue No. 00-14, Accounting for Certain Sales Incentives (EITF 00-14).
EITF 00-14 addresses the classification of sales incentives offered to consumers and requires reporting of cash
incentives as a reduction of revenue rather than as a selling expense. The adoption of EITF 00-14 had no
impact on the Company’s net income. These costs have been reclassified to net sales to conform to the
requirements of EITF 00-14.

Stock Compensation: The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25), and related interpretations in accounting for its employee
stock options. Under APB 25, because the exercise price of the Company’s employee stock options equals the
market price of the underlying stock on the date of grant, no compensation expense is recognized (see Note H).

Inventories: The Company values its inventories at the lower of cost or market, with market defined as
replacement value. Cost is determined on the last-in, first-out (LIFO) method for the majority of domestic
inventories. Inventories not on the LIFO method are valued principally by the first-in, first-out (FIFO) method.
If the FIFO method (which approximates current cost) had been used for all inventories, the balances would
have been $6,176,000 and $11,644,000 higher at April 30, 2001 and 2000, respectively.

Goodwill and Other Intangible Assets: Goodwill and other intangible assets, principally trademarks and
patents, are being amortized using the straight-line method over periods ranging from 5 to 40 years. The
Company continually evaluates whether events or circumstances have occurred which would indicate that the
carrying value may not be recoverable or that the useful life warrants revision. When trended downturns in
business indicate that goodwill and other intangible assets should be evaluated for possible impairment, the
Company analyzes the future recoverability of the asset using an estimate of the related undiscounted future
cash flows of the related business, and recognizes any adjustment to the asset’s carrying value on a current
basis (see Note C). Accumulated amortization of goodwill and other intangible assets at April 30, 2001 and
2000, was $30,300,000 and $26,879,000, respectively.

Property, Plant, and Equipment: Property, plant, and equipment are recorded at cost and are depreciated on
a straight-line basis over the estimated useful lives of the assets (3 to 15 years for machinery and equipment,
and 10 to 40 years for buildings, fixtures, and improvements).

The Company leases certain land, buildings, and equipment for varying periods of time, with renewal options.
Leases of cold storage facilities are continually renewed. Total rental expense in 2001, 2000, and 1999 totaled
$14,022,000, $14,042,000, and $12,762,000, respectively. Rental expense for cold storage facilities, that are
based on quantities stored, amounted to $5,514,000, $5,283,000, and $4,999,000 in 2001, 2000, and 1999,
respectively.

Software Costs: The Company capitalizes significant costs associated with the development and installation
of internal use software. Amounts deferred are amortized over the estimated useful lives of the software, rang-
ing from 3 to 7 years, beginning with the project’s completion. Net deferred internal use software costs as of
April 30, 2001 and 2000, were $29,805,000 and $24,321,000, respectively, of which $7,382,000 and $17,468,000
were included in construction in progress. Interest costs of $891,000, $1,069,000, and $528,000 were capital-
ized during fiscal 2001, 2000, and 1999, respectively.

Foreign Currency Translation: Assets and liabilities of the Company’s foreign subsidiaries are translated
using the exchange rates in effect at the balance sheet date, while income and expenses are translated using
average rates. Translation adjustments are reported as a component of shareholders’ equity in accumulated
other comprehensive loss.

Advertising Expense: Advertising costs are expensed as incurred. Advertising expense was $14,178,000,
$12,855,000, and $12,685,000 in fiscal 2001, 2000, and 1999, respectively.

Recently Issued Accounting Standards: In 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133),
which as amended, is effective for the Company in fiscal 2002. Because of the Company’s minimal use of deriv-
ative financial instruments, the adoption of this statement will not have a material impact on the earnings or
financial position of the Company.

Reclassifications: Certain prior year amounts have been reclassified to conform to current year classifications.

Risks and Uncertainties: In the domestic markets, the Company’s products are primarily sold through bro-
kers to chain, wholesale, cooperative, independent grocery accounts and other consumer markets, to food-
service distributors and chains including hotels, restaurants, schools and other institutions, and to other food
manufacturers. The Company’s distribution outside the United States is principally in Canada, Australia, Brazil,
Mexico, the Pacific Rim, and Greater Europe. The fruit raw materials used by the Company are generally pur-
chased from independent growers and suppliers. 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 and fruit
juices and to maintain them in cold storage warehouses. The Company believes there is no concentration of
risk with any single customer or supplier whose failure or nonperformance would materially affect the
Company’s results. In addition, the Company insures its business and assets in each country against insurable
risks, as and to the extent that it deems appropriate, based upon an analysis of the relative risks and costs. The
Company believes that the risk of loss from noninsurable events would not have a material adverse effect on
the Company’s operations as a whole.

NOTE B: OPERATING SEGMENTS
v

The Company operates in one industry: the manufacturing and marketing of food products. The Company has

two reportable segments: domestic and international. The domestic segment represents the aggregation of the

consumer, foodservice, beverage, specialty foods, and industrial business areas. Food products are distributed

through various retail channels including grocery, mass retail, military, warehouse club, health food, and spe-

cialty food markets along with restaurants, health care facilities, schools, and other institutions throughout the

United States. These products include a variety of fruit spreads, dessert toppings, peanut butters, frozen peanut

butter and jelly sandwiches, industrial fruit products, fruit and vegetable juices, beverages, syrups, condiments,

and gift packages. The international segment consists of products that are similar in nature to those in the

domestic segment but are distributed to geographical markets outside of the United States.

The following table sets forth operating segments information:

(Dollars in thousands)

Net sales:

Domestic

International

Total net sales

Depreciation:
Domestic

International

Total depreciation

Segment profit:

Domestic

International

Total segment profit

Interest income

Interest expense

Amortization expense

Nonrecurring charge

Corporate administrative expenses
Other unallocated income (expenses)

Income before income taxes and cumulative effect of

Year Ended April 30,

2001

2000

1999

$557,921

$551,324

$537,154

93,321

90,561

75,508

$651,242

$641,885

$612,662

$ 20,484

$ 19,789

$ 18,296

2,037

1,885

1,364

$ 22,521

$ 21,674

$ 19,660

$ 87,276

$ 89,570

$ 94,489

8,415

10,387

7,134

95,691

99,957

101,623

2,918

(7,787)

(4,400)

(2,152)

(39,443)
5,133

2,706

(3,111)

(4,524)

(14,492)

(39,371)
366

1,948

(179)

(3,734)

—

(37,912)
(115)

change in accounting method

$ 49,960

$ 41,531

$ 61,631

Assets:

Domestic

International

Total assets

Expenditures for additions to long-lived assets, including acquisitions:

Domestic

International

Total expenditures for additions to long-lived

assets, including acquisitions

$393,386

$387,593

$363,401

77,083

78,461

62,480

$470,469

$466,054

$425,881

$ 27,714

$ 26,012

$ 53,737

1,671

13,824

10,538

$ 29,385

$ 39,836

$ 64,275

Segment profit represents revenue less direct and allocable operating expenses and excludes pretax nonre-

curring charges of $2,152,000, relating to the domestic segment in fiscal 2001 and $13,536,000 and $956,000,

relating to the domestic and international segments, respectively in 2000 (see Note C).

The following table presents product sales information:

Fruit spreads

Industrial ingredients

Portion control

Juices and beverages

Toppings and syrups

Peanut butter

Other

Total

Year Ended April 30,

2001

2000

1999

38%

39%

41%

100%

NOTE C: NONRECURRING CHARGE
v

During fiscal 2001, the Company finalized the sale of the former Mrs. Smith’s real estate in Pottstown,

Pennsylvania. In connection with this sale, the Company recorded a nonrecurring, noncash charge of $2,152,000

($1,313,000 net of tax) or $0.05 per share. This transaction represents the final nonrecurring charge relating to

the review of certain businesses and assets as discussed below.

During fiscal 2000, the Company recorded a nonrecurring, noncash charge of $14,492,000 ($9,626,000 net of

tax) or $0.34 per share. This charge was the result of a financial review by the Company of its businesses and

assets, with a focus on those assets considered nonstrategic or underperforming. Approximately $10,700,000

of the charge resulted from the write-down of the carrying value of certain intangible assets, primarily good-

will, resulting from previous acquisitions principally in the domestic segment. In addition, certain capitalized

costs associated with unused or abandoned software acquired as part of the Company’s information technol-

ogy reengineering project and other abandoned fixed assets were written off.

The write-down of the intangible assets was based on the Company’s estimate of fair market value using future

discounted cash flows projected to be generated by the respective assets under review, over their estimated

useful lives. Based upon the results of this analysis, the expected useful lives of the assets were reduced from

periods ranging from five to forty years, to a range of two to ten years.

NOTE D: EARNINGS PER SHARE
v

The following table sets forth the computation of earnings per Common Share and earnings per Common
Share – assuming dilution:

Year Ended April 30,

(Dollars in thousands, except per share data)

2001

2000

1999

Numerator:

Income before cumulative effect of change in

accounting method for earnings per Common Share

and earnings per Common Share – assuming dilution

$31,659

$26,357

$37,763

Denominator:

Denominator for earnings per Common Share –

weighted-average shares

Effect of dilutive securities:

Stock options
Restricted stock

25,428,117

28,670,770

29,057,593

148,698
81,442

56,380
23,205

179,679
37,447

Denominator for earnings per Common Share –

assuming dilution

25,658,257

28,750,355

29,274,719

Earnings per Common Share before cumulative effect

of change in accounting method

$ 1.25

$ 0.92

$ 1.30

Earnings per Common Share before cumulative effect

of change in accounting method – assuming dilution

$ 1.23

$ 0.92

$ 1.29

Options to purchase 245,800 Common Shares at prices ranging from $27.25 to $31.50 per share were

outstanding during fiscal 2001 but were not included in the computation of earnings per Common Share –

assuming dilution, as the options’ exercise prices were greater than the average market price of the Common

Shares and, therefore, the effect would be antidilutive.

NOTE E: ACQUISITIONS
v

During fiscal 2000, the Company utilized cash on hand to complete two acquisitions for a total of $9,056,000.

During fiscal 1999, the Company completed five acquisitions for an aggregate of $26,590,000, utilizing cash on

hand as well as borrowings under the Company’s uncommitted lines of credit.

Each of the acquisitions was accounted for as a purchase and the results of operations of the acquired com-

panies were included in the consolidated results of the Company from their respective acquisition dates. As a

result of the acquisitions, approximately $2,869,000 and $15,054,000 in goodwill and $2,213,000 and

$6,393,000 in trademarks were recorded in 2000 and 1999, respectively, and are being amortized using the

straight-line method over periods of 10 to 20 years.

NOTE F: PENSIONS AND OTHER POSTRETIREMENT BENEFITS
v

The Company has pension plans covering substantially all of its employees. Benefits are based on the

employee’s years of service and compensation. The Company’s plans are funded in conformity with the fund-

ing requirements of applicable government regulations.

In addition to providing pension benefits, the Company sponsors several unfunded defined postretirement

plans that provide health care and life insurance benefits to substantially all active and retired domestic

employees not covered by certain collective bargaining agreements, and their covered dependents and bene-

ficiaries. These plans are contributory, with retiree contributions adjusted periodically, and contain other cost-

sharing features, such as deductibles and coinsurance. Covered employees generally are eligible for these

benefits when they reach age 55 and attain 10 years of credited service.

Net periodic benefit cost included the following components:

(Dollars in thousands)

Year Ended April 30,

Service cost

Interest cost

Expected return on plan assets

Amortization of prior service cost (credit)

Amortization of initial net asset

Recognized net actuarial gain

Defined Benefit Pension Plans