2016 ANNUAL REPORT
One Strawberry Lane • Orrville, Ohio 44667 • 330.682.3000
jmsmucker.com
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2016 FINANCIAL HIGHLIGHTS
The J. M. Smucker Company
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
2016
2015
Net sales
$7,811.2
$5,692.7
YEAR ENDED APRIL 30,
NET INCOME AND NET INCOME PER COMMON SHARE
Net income
$ 688.7
$ 344.9
Net income per common share – assuming dilution
$
5.76
$
3.33
NON-GAAP INCOME AND INCOME PER COMMON SHARE (A)
Non-GAAP income
$ 784.6
$ 402.5
Non-GAAP income per common share –
assuming dilution
$
6.57
$
3.88
COMMON SHARES OUTSTANDING AT YEAR END
116,306,894
119,577,333
NUMBER OF EMPLOYEES
6,910
7,370
(A) Refer to “Non-GAAP Measures” in the “Management’s Discussion and Analysis” section for a
reconciliation to the comparable GAAP financial measure.
CONTENT
U.S. RETAIL COFFEE
U.S. RETAIL CONSUMER FOODS
U.S. RETAIL PET FOODS
INTERNATIONAL AND FOODSERVICE
SUSTAINABILITY AT SMUCKER
4
8
12
16
20
Why We Are, Who We Are...Our Culture – Our Purpose
Please Open ▸
2016 FINANCIAL HIGHLIGHTS
The J. M. Smucker Company
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
2016
2015
Net sales
$7,811.2
$5,692.7
YEAR ENDED APRIL 30,
NET INCOME AND NET INCOME PER COMMON SHARE
Net income
$ 688.7
$ 344.9
Net income per common share – assuming dilution
$
5.76
$
3.33
NON-GAAP INCOME AND INCOME PER COMMON SHARE (A)
Non-GAAP income
$ 784.6
$ 402.5
Non-GAAP income per common share –
assuming dilution
$
6.57
$
3.88
COMMON SHARES OUTSTANDING AT YEAR END
116,306,894
119,577,333
NUMBER OF EMPLOYEES
6,910
7,370
(A) Refer to “Non-GAAP Measures” in the “Management’s Discussion and Analysis” section for a
reconciliation to the comparable GAAP financial measure.
CONTENT
U.S. RETAIL COFFEE
U.S. RETAIL CONSUMER FOODS
U.S. RETAIL PET FOODS
INTERNATIONAL AND FOODSERVICE
SUSTAINABILITY AT SMUCKER
4
8
12
16
20
Why We Are, Who We Are...Our Culture – Our Purpose
Please Open ▸
OUR BRANDS
For nearly 120 years, The J. M. Smucker Company has been committed to offering consumers quality
products that help bring families together to share memorable meals and moments.
TM
®
™
WHY WE ARE, WHO WE ARE...
OUR CULTURE
A culture of dotting the i’s and crossing the t’s…
Of doing the right things and doing things right…
A culture of growth – individual and as a company.
It’s who we are. It’s because of who we are.
It’s a result of living our Basic Beliefs…
Our Commitment to Each Other. To our consumers
and to our customers.
As we look to the future of unlimited possibilities,
we recognize the principles that are
instrumental to our success…
A culture deeply rooted in our Basic Beliefs…
Guideposts for decisions at every level…
Why we are who we are.
A culture that encourages commitment to each other…
Clear communication and collaboration…
Vision…A culture of appreciation.
A family-sense of sharing in a job well done…
Where every person makes a difference.
OUR PURPOSE
Helping to bring families
together to share memorable
meals and moments.
Being together with the ones we love
isn’t just a pleasant way to spend time —
it’s vital to a healthy, happy, fulfilling life.
In fact, the more family and friends
spend time with each other,
the richer their lives become.
We believe we can help strengthen
families through the memorable meals and
moments they share, and we can help
make every day a little more special
by nurturing the bonds that bring
people together, as well as people
and their pets closer together.
And the stronger families are today,
the stronger our society will be tomorrow.
Quite simply, life tastes better together.
DEAR SHAREHOLDERS AND FRIENDS,
It has been an extraordinary year of growth, innovation, and transformation for
The J.M. Smucker Company as we strengthened our portfolio of brands, connected
with customers and consumers in new ways, and invested in new capabilities –
all while integrating the largest acquisition in our Company’s history.
With the addition of Big Heart Pet Brands (“Big Heart”),
we now have three platforms for growth fueled by a
strong portfolio of leading and iconic brands to deliver products
that engage, delight, and inspire today’s consumers as we fulfill
Our Purpose of helping to bring families together to share
memorable meals and moments.
As we continue to evolve and transform our Company for
the future, we were pleased to announce in fiscal 2016 the
election of Mark Smucker as President and Chief Executive
Officer. Mark represents the fifth generation of the Company’s
founding family and is the sixth Chief Executive Officer in
our Company’s 119-year history. Mark’s appointment reflects
our Board of Directors’ thoughtful approach to succession
planning and underscores our focus on the long term. Mark has
consistently demonstrated a passion for our culture, visionary
leadership, and commitment to growth that will help our
Company continue to flourish in the years to come.
Richard Smucker transitioned to the role of Executive
Chairman, serving as Chairman of the Board of Directors
and providing counsel on major strategic decisions to the
Executive Leadership Team. Richard will continue to be
a cultural steward, enhancing our Company reputation
and visibility with key customers and the community, in
addition to advancing our government affairs and industry
leadership efforts.
This leadership transition comes at an exciting time for
Smucker as we continue to deliver record results and with
our brands leading in key market categories. Our fiscal 2016
performance reflects the contributions of several key growth
initiatives, including launching on-trend products and
delivering against our synergy and working capital targets.
Highlights for fiscal 2016 include:
• A 37 percent increase in net sales to $7.8 billion, reflecting
a full-year contribution from Big Heart;
• Cash provided by operating activities of $1.5 billion; and
• More than $750 million in cash returned to shareholders in
the form of share repurchases and dividends.
One year after the acquisition of Big Heart, we have executed
a seamless integration of the pet food and pet snacks business
and evolved our organizational structure to sustain long-term
growth. We remain committed to achieving $200 million in
annual synergies by the end of fiscal 2018, with $37 million
in realized savings in fiscal 2016.
LEADING AND ON-TREND BRANDS
We operate with a consumer-first mentality by bringing new
products to market that address consumers’ ever-changing
preferences. Our evolved Vision emphasizes #1 and leading
brands while acknowledging the importance of emerging,
on-trend brands to our portfolio. This approach contributed
positive results in fiscal 2016, with net sales from products
launched in the past three years representing 10 percent of
total net sales. In order to maintain this pace, we are focused
on launching the right products with a go-to-market strategy
that allows us to engage with consumers wherever they shop.
• In our coffee business, we fortified Folgers® leadership in
roast and ground coffee and earned positive consumer and
retailer response with the introduction of Dunkin’ Donuts®
K-Cup® pods. In addition, the smaller but fast-growing
Café Bustelo® brand posted double-digit sales increases for
the second consecutive year as we focused on broadening
the brand’s appeal to millennial consumers.
• Within consumer foods, we launched new products
that address consumers’ desire for authenticity, simple
ingredients, and convenience with Smucker’s® Fruit & Honey™
fruit spreads, Jif™ Peanut Powder, and snack bar offerings
from Jif® and Sahale Snacks® as a few examples of new, on-
trend products.
• An operating income increase of 48 percent to $1.1 billion,
with the contribution of U.S. Retail Pet Foods and U.S. Retail
Coffee segment profit as key growth drivers;
• In pet foods, expanding distribution of the Natural Balance®
brand in the pet specialty channel helped drive growth in
our premium segment. We also broadened our portfolio in
pet snacks through the launch of products such as
Meow Mix® Irresistibles® cat treats, which have rapidly
gained market share.
ENGAGING WITH CONSUMERS
We believe the ability to develop and nurture emotional
bonds between our brands and consumers is one of our core
competencies, with digital marketing as a key component
of these efforts. Social media continues to provide an ideal
platform through which to engage and communicate with
consumers, who often view food as an experience to be
shared. Today, we manage more than 100 digital and social
media properties supporting our holistic view of consumer
engagement and providing valuable insights that can directly
influence future innovations.
Our sponsorship of the 2016 U.S. Olympic and Paralympic
Teams provides a unique opportunity to reach multiple
generations of consumers as we prepare to share the
excitement of the 2016 Rio Olympic Games with our
consumers and customers through exclusive retailer
activation, packaging, advertising, digital, and public
relations activities for four leading brands – Smucker’s,
Folgers, Jif, and Smucker’s Uncrustables®.
PRIORITIZING FOR THE FUTURE
Looking ahead to fiscal 2017, we are confident in continuing
our history of long-term growth and remain committed to
increasing shareholder value as we fulfill Our Purpose. With a
strong foundation, clear strategy, and the right team in place
to execute our strategy, we look to accelerate our growth and
build on our momentum by focusing on four key priorities:
• Nurturing our culture: Guided by our Basic Beliefs of
Quality, People, Ethics, Growth, and Independence, our
employees are committed to preserving our unique
culture, which fosters an environment in which every
employee understands our Strategy and collaborates
to achieve more for our Company.
• Delivering the business: The strong performance of our
core business is the engine that drives our success, and our
overall growth will continue to come from an optimal blend
of core performance, innovation, and new ventures.
• Building new capabilities and enhancing existing capabilities:
We have a long tradition of industry leadership built upon
meaningful partnerships and best-in-class capabilities. Having
the right systems, processes, and organizations in place
allows us to better serve our constituents.
• Prioritizing our resources for our big ideas: We will ensure
we have appropriate resources to support building both our
Smucker’s and Jif brands to $1 billion, growing our total pet
snacks portfolio to $1 billion, and driving growth in coffee.
With these priorities in place, we are well-positioned to
leverage our portfolio of leading and emerging brands
while investing in new capabilities and innovations to
fuel meaningful top-line growth.
We extend our deep appreciation to our shareholders for your
continued support of our Company and to our nearly 7,000
talented employees, whose diligence and teamwork have
helped deliver another successful year. We continue to be
humbled by their efforts, as well as by their commitment to our
Company and each other, as we work together to ensure the
“best is yet to come”.
Sincerely,
Tim Smucker
Richard Smucker
Mark Smucker
June 21, 2016
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THE J. M. SMUCKER COMPANY | 2016 ANNUAL REPORT 3
U.S. Retail
COFFEE
The U.S. at-home retail coffee category continues to grow,
with a compound annual growth rate of 10 percent
during the past five years. Smucker remains the clear
market leader in the category, led by Folgers and
Dunkin’ Donuts and enhanced by our fast-growing Café
Bustelo brand. We participate in all key segments of
at-home coffee – mainstream roast and ground, one-
cup, premium, instant, and the growing ready-to-drink
category – at a variety of price points, providing
consumers with quality, convenience, value, and choice.
4 THE J. M. SMUCKER COMPANY | 2016 ANNUAL REPORT
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CAPITALIZING ON STRONG
AT-HOME COFFEE DEMAND
A daily ritual, an indulgence, a shared experience, an opportunity for flavorful variety – coffee is all this and more to millions of
consumers. Our coffee business is growing along with consumer demand – we lead the $9.4 billion at-home coffee category with a
27 percent dollar share. In fiscal 2016, our U.S. Retail Coffee segment net sales totaled $2.2 billion as we drove growth through
initiatives that delivered value, convenience, and innovation to consumers. For the year, we achieved record segment profit,
which increased 18 percent to $646 million. Consumers embrace at-home coffee across all types and forms. Nearly 80 percent
of Americans drink coffee, with four out of five cups consumed in the home. While the one-cup revolution has been a significant
growth driver, there is also strong demand across all platforms – from automatic drip to espresso, French press, and instant.
GROW T H F OR AMER IC A’S M AI NS T R E AM
COF FEE LE ADER
The largest coffee segment by retail sales volume,
mainstream roast and ground remains the preferred
form of coffee in a majority of households, and Folgers
is the leader in mainstream coffee. To further solidify the
brand’s leadership position, in fiscal 2016 we transitioned
several of our Folgers offerings to a reduced canister size
to offer lower price points. This initiative, coupled with an
additional price decline that reflected lower green coffee
costs, had a positive effect on sales volume and contributed
to meaningful growth in our mainstream roast and ground
unit sales and market position.
The overall premium segment of at-home coffee represents
$2.2 billion in annual retail sales, and we are well-positioned
in the segment, with our Dunkin’ Donuts retail bagged
coffee. In fact, Dunkin’ Donuts Original Blend is the #1
item in the premium category. While we discontinued our
smaller Millstone® brand, we are adding new varieties and
flavors to the Dunkin’ Donuts line in fiscal 2017, including
Dunkin’ Donuts Dunkin’ Dark® coffee, which will contain
30 percent Rainforest Alliance Certified™ coffee. The Dunkin’
Donuts brand portfolio is characterized by a wide array of
varieties and flavors, including the Dunkin’ Donuts Bakery
Series® coffee, and we will continue to offer seasonal flavors
to help satisfy consumers seeking variety.
P O SI T IONING OU R COF FEE P ORT F OLIO
FO R T HE LO NG T ER M
Millions of U.S. households enjoy the convenience and
personalization of a one-cup serving. In fiscal 2016, we
significantly expanded our offerings with the launch
of Dunkin’ Donuts K-Cup® pods. Consumers responded
positively, as our five Dunkin’ Donuts varieties quickly
gained a solid following in the competitive one-cup market,
achieving nearly $220 million in retail sales in its first year
on the market. The success of our Dunkin’ Donuts offerings
strengthened our total K-Cup® pod market position to nearly
15 percent across all our brands. We anticipate continued
growth, as consumer repeat rates remain strong and as we
anticipate introducing new varieties and seasonal offerings
to the Dunkin’ Donuts K-Cup® pod line.
For many consumers, coffee is more than a beverage – it’s
a way to connect with family and friends, and Café Bustelo
is uniquely positioned to help foster those connections.
Our strategy to grow the brand focuses on both the Café
Bustelo core Hispanic consumer base as well as millennial
consumers. In fiscal 2016, we took an experiential marketing
approach to help build awareness of Café Bustelo with
millennial consumers through participation in music
festivals, campus initiatives, and pop-up cafés staged in
major cities. This proved highly effective in core markets
and contributed to double-digit sales growth last year
based on the strong performance of roast and ground as well
as K-Cup® pod offerings.
SEGMENT AS A PERCENTAGE OF NET SALES
29%
THE J. M. SMUCKER COMPANY | 2016 ANNUAL REPORT 7
Our coffee business is growing along
with consumer demand – we lead the
$9.4 billion at-home coffee category
with a 27 percent dollar share.
U.S. Retail
CONSUMER FOODS
From breakfast to lunch and dinner, and snack times in
between, our iconic brands, such as Jif, Smucker’s, and
Pillsbury™, coupled with emerging, on-trend brands like
Santa Cruz Organic®, Sahale Snacks, and truRoots®, help
address the unique preferences of today’s consumers. We
participate in multiple center-of-the-store categories with
respected brands of fruit spreads, nut butters, baking mixes
and frostings, shortening and oils, natural and organic
beverages, organic grains, and fruit and snack mixes.
8 THE J. M. SMUCKER COMPANY | 2016 ANNUAL REPORT
9
LEVERAGING THE POWER OF
ICONIC BRANDS
In fiscal 2016, we made continued progress toward elevating Jif and Smucker’s into $1 billion brands.
Leading with innovation, we created new products and usage occasions for Jif peanut butter and Smucker’s fruit
spreads and leveraged the continued growth of Smucker’s Uncrustables sandwiches. While strong brands are
important, it’s also critical to have the right brand portfolio, and in fiscal 2016, we made the decision to divest
our U.S. canned milk business. Net sales for U.S. Retail Consumer Foods totaled $2.3 billion, while segment
profit remained steady at $460 million, supported by a one-time gain related to the divestiture.
GROW ING JIF AND SMUCKER’S
T HRO UGH INNOVAT ION
We are pleased with our overall spreads business, as both
Jif peanut butter and Smucker’s fruit spreads grew
volume share over the past year. This is supported by a focus
on innovation that is on-trend. Since acquiring the Jif brand
nearly 15 years ago, we have leveraged its strong brand equity
to vastly expand the portfolio with value-added items –
introducing convenience offerings with Jif To Go® and Jif To
Go Dippers®; providing a no-stir natural offering with Jif
Natural peanut butter spread; launching snack items such
as Jif Whips® spreads; and entering the specialty spreads
category with Jif Almond butter, Jif Cashew butter, and Jif
Hazelnut offerings.
Our emphasis on format and flavor innovation was at the
forefront in fiscal 2016, as we continued to expand the
portfolio with the introduction of Jif™ Bars, which combine
peanut butter and granola for a delicious, easy-to-eat, on-
the-go snack. We also launched new Jif Flavored spreads.
Meanwhile, Jif Peanut Powder meets the growing consumer
demand for plant-based protein and helps expand brand
usage as an easy addition to smoothies and baked goods.
Growth of our Smucker’s brand was led by Smucker’s
Uncrustables sandwiches, which realized its 17th consecutive
quarter of double-digit growth, with volume increasing
26 percent for the full year. With 7 percent household
penetration, Smucker’s Uncrustables sandwiches have
significant room for growth, as we position the brand as
an on-the-go lunchtime and snacking option for consumers
of all ages. For our Smucker’s fruit spreads, we look to
inspire new usage occasions and drive relevancy through
authentic innovation. For example, our Smucker’s Fruit
& Honey fruit spreads feature simple ingredients and are
sweetened with honey, attributes that resonate with today’s
consumers. We also see more opportunities to evolve our
Smucker’s portfolio in line with mindful snacking trends in
the years ahead.
The Sahale Snacks brand also aligns well with the mindful
snacking trend by offering a unique portfolio of fruit and
snack mixes and layered nut bars made with a combination
of premium nuts, dried fruits, and spices that are Non-GMO
Project® Verified, with no artificial preservatives or flavors.
FINDI NG OPP O RT UNI T IE S FOR B AK ING
BR AND S AND NAT UR AL FOODS
Despite strong market positions and iconic brands like
Crisco® and Pillsbury, the overall baking category remains
challenged, reflecting shifts in consumer preferences and
aggressive competitive pricing. As a result, we are focused
on value-added innovation across our portfolio, including
specialty oils such as Crisco Organic Coconut Oil, gluten-free
baking mix varieties, and products with simple ingredients
such as the Pillsbury Purely Simple™ line of baking mixes
and frostings.
In the natural foods business, we have traditionally enjoyed
a strong position in the natural grocery channel, and today
we are benefiting from the growth in natural and organic
products at conventional grocery retailers. Our R.W. Knudsen
Family® and Santa Cruz Organic brands together represent
a dominant leadership position in the natural beverages
category. We are also pleased by the further potential of our
truRoots brand in the growing natural grains, rice, and pasta
categories. As we look to increase our exposure to emerging,
on-trend brands, we have acquired a minority interest in
Numi, Inc., a manufacturer and marketer of premium, fair
trade, organic teas, and are excited about the opportunities
this investment provides in the organic tea category.
SEGMENT AS A PERCENTAGE OF NET SALES
29%
Since acquiring the Jif
brand nearly 15 years
ago, we have leveraged
its strong brand equity
to vastly expand the
portfolio with value-
added items.
10 THE J. M. SMUCKER COMPANY | 2016 ANNUAL REPORT
THE J. M. SMUCKER COMPANY | 2016 ANNUAL REPORT 11
U.S. Retail
PET FOODS
Meow Mix, Milk-Bone®, Natural Balance, and Kibbles ’n Bits®
are among the staple brands for pet parents, and we
are strengthening these brands through expanded
distribution and product innovation. We hold the
#1 market share position in dog snacks and #2 position in
dry cat food, and enjoy a strong presence in premium pet
food and pet snacks. In fiscal 2016, we reached several
milestones toward the full integration of Big Heart,
the largest acquisition in Smucker history.
13
EXPANDING OUR REACH TO
INCLUDE THE ENTIRE FAMILY
THROUGH QUALITY AND INNOVATION
Pet snacks and our premium dog food portfolio are the two foremost growth drivers in U.S. Retail Pet Foods
and both delivered strong performances in fiscal 2016. Mainstream dog food faced challenges during the year,
which impacted overall segment results. For the year, segment net sales totaled $2.3 billion, while segment
profit was $392 million.
Pet food and pet snacks is the largest and one of the
fastest-growing categories in which we participate,
representing $29 billion in annual retail sales. It’s easy to
see why – more than two-thirds of U.S. households have at
least one family pet. Moreover, pet ownership has grown
among nearly every demographic segment, most notably
millennials and empty nesters. As is true with other
Smucker businesses, consumer insights drive and guide
our pet food and pet snacks business to deliver industry-
leading innovation. Many of the same consumer food trends
are equally important within the pet food and pet snacks
category, including migration toward premium options,
protein, simple ingredients, and the growth of snacking.
Snacks are fast-growing within pet food and our brands are
driving the growth of the category. Led by the Milk-Bone
brand, we enjoy a 40 percent dollar share in the $2.1 billion
dog snacks category. New product innovation has been a
strong contributor to growth. Milk-Bone Brushing Chews®
Daily Dental Treats are a transformative product in pet oral
care. More innovation can be found in Milk-Bone Good
Morning® Daily Vitamin Treats, which come in Healthy
Joints, Healthy Aging, and Total Wellness varieties and offer
a specially formulated blend of nutrients not found in most
dog food.
Natural Balance premium pet food for dogs and cats
enjoys a strong consumer loyalty rate in the pet specialty
channel. Natural Balance products are made from carefully
selected ingredients that include high-quality fruits and
vegetables and unique protein sources. In fiscal 2016,
we further expanded the brand’s distribution in the pet
specialty channel, which contributed significantly to sales
growth during the year. We look to continue to strengthen
relationships with our retail partners in 2017.
Last year, we introduced a new line of cat treats, Meow Mix
Irresistibles, as a significant enhancement to our Meow
Mix portfolio. Available in crunchy or soft varieties, these
snacks are made with real salmon, chicken, or tuna, and
no artificial flavors. Within just a few months of its launch,
Meow Mix Irresistibles has earned a 4 percent dollar share in
the cat treats category.
We are especially excited about the in-store activities we
have planned across our brand portfolio reflecting our
partnership with the animated film “The Secret Life of Pets,”
which will be released this summer.
While the more traditional and mainstream pet brands
faced competitive and deflationary pressures, we will
continue to focus on opportunities to leverage our research
and development experience, production capabilities, and
portfolio of brands to ensure we are offering consumers the
right products to meet their pets’ needs.
SEGMENT AS A PERCENTAGE OF NET SALES
29%
THE J. M. SMUCKER COMPANY | 2016 ANNUAL REPORT 15
Pet food and pet snacks is the
largest and one of the fastest-
growing categories in which we
participate, representing $29 billion
in annual retail sales.
INTERNATIONAL and
FOODSERVICE
Our International and Foodservice businesses include
foreign sales and domestic sales outside U.S. retail
channels. Our international operations are focused
primarily on Canada, Mexico, and China. We are also a
preferred supplier of food and beverages to North
American foodservice operators, including casual and
fine dining establishments, schools and universities,
hospitals, and business and industry customers.
STRENGTHENING OUR
POSITION IN FOODSERVICE
AND INTERNATIONAL MARKETS
International and Foodservice operations demonstrated positive momentum in several respects in fiscal
2016, including the performance of our coffee and baking portfolio of brands in Canada and the benefits of
Smucker’s Uncrustables sandwiches’ re-entry into the United States Department of Agriculture (USDA) school
foodservice program. However, the effect of foreign currency from a weak Canadian dollar had a significant
impact on reported results, creating an approximate $60 million sales headwind for the year. Net sales totaled
$1.1 billion, and segment profit increased 12 percent to $157 million.
Canada is by far our largest International business and
accounts for more than 80 percent of our International
revenues. In fiscal 2016, and in constant currency, our
Canadian net sales realized a year-over-year increase,
including a full-year contribution from the pet food and
pet snacks business. In grocery, we enjoy strong positions
in several areas, with the #1 branded position in six center-
of-the-store categories. These include strong brands within
the baking aisle, a strategically important and profitable
category. Robin Hood® has been voted most trusted
baking brand by Canadian shoppers based on the 2015
BrandSpark Canadian Shopper Study, and Carnation®
evaporated milk and Eagle Brand® sweetened condensed
milk are also consumer favorites. In the condiments aisle,
our Bick’s® brand commands an impressive 58 percent
dollar share in pickles. In coffee, Folgers has grown to
become a more than $100 million brand in Canada,
increasing our market position in mainstream coffee. We
support these and other leading brands through a robust
innovation pipeline and marketing efforts.
to strengthen our distribution and retail relationships.
In China, our minority ownership in Seamild, a leader
in China’s growing oat category, continues to provide a
valuable opportunity to expand our knowledge of Chinese
consumers, as we continue to build our team and further
invest in this market.
Our foodservice business had a strong performance in fiscal
2016, driven in part by Smucker’s Uncrustables sandwiches,
as we realized the benefits of the brand’s re-entry into the
USDA school foodservice program. Foodservice is evenly
divided between beverages and food, with a strategy to
focus on segments within the industry where brands
matter and where we see opportunity for sustained growth.
We target segments in which our brands are highly visible to
consumers, such as restaurant tabletops, tray lines in health
care, and hotel lobbies. In beverage, we provide pre-packaged
coffee as well as a complete system of on-demand liquid
coffee, including equipment and service.
With the addition of our pet food and pet snacks brands, we
are realizing promising opportunities for growth in Canada.
We expect pet food and pet snacks to be a significant driver
of our Canadian business for the long term, as we continue
Canadian net sales realized a year-
over-year increase, including a full-
year contribution from the pet food
and pet snacks business.
SEGMENT AS A PERCENTAGE OF NET SALES
13%
THE J. M. SMUCKER COMPANY | 2016 ANNUAL REPORT 19
SUSTAINABILITY AT SMUCKER
Create a better tomorrow by focusing on preserving our culture,
ensuring our long-term Economic viability, driving positive
Environmental impact, and being Socially responsible.
Respect for the environment and a strong commitment to actively supporting the communities we
serve have been defining attributes of our Company since our founding nearly 120 years ago. As
always, Our Purpose of helping to bring families together to share memorable meals and moments
drives our commitment to doing the right things and doing things right for the environment and the
communities we serve.
We continue to execute our Sustainability Strategy and have reached ambitious goals, including
purchasing 10 percent of our total retail coffee from certified sources and sourcing 100 percent of our
direct palm oil purchases from responsible and certified sustainable sources. Additionally, we continue
to make progress toward our 2020 environmental goals and are pleased that eight of our plants
(including legacy Smucker and pet facilities) diverted 97 percent or more of their waste from landfill
to alternative use.
Read about these accomplishments and more in our 2016 Corporate Responsibility Report, available
on our website, jmsmucker.com.
2020 ENVIRONMENTAL GOALS
95PERCENT
Divert 95 percent of waste
from landfill to alternative use.
15PERCENT
Reduce water usage by
15 percent.
10PERCENT
Reduce greenhouse gas
emissions by 10 percent.
WASTE DIVERTED FROM LANDFILL*
WATER INTENSITY*
(gallons per EU)
EMISSIONS INTENSITY*
(tonnes CO2 per 1,000 EU)
2015
2014
2013
2012
2011
2010
2009
88.8%
86.2%
87.9%
85.4%
76.5%
73.9%
79.8%
2015
2014
2013
2012
2011
2010
2009
2.97
3.16
3.19
4.00
4.06
4.24
4.22
2015
2014
2013
2012
2011
2010
2009
1.30
1.25
1.25
1.22
1.19
1.27
1.27
• Equivalent unit (EU) is an internal measure of volume
• Equivalent unit (EU) is an internal measure of volume
based on tonnage.
based on tonnage.
• Baseline 2014 intensity based per equivalent unit
• Baseline 2014 intensity based per equivalent unit
of production.
of production.
*All metrics recalculated to reflect divestiture of U.S. canned milk facilities in December 2015. Metrics do not yet include facilities from the Big Heart acquisition that occurred on March 23, 2015.
20 THE J. M. SMUCKER COMPANY | 2016 ANNUAL REPORT
GLUTEN FREE* PILLSBURY™
FUNFETTI® FRUIT PIZZA
_____________________
CHOCOLATE OATMEAL
PEANUT BUTTER BANANA SMOOTHIE
_____________________
* Ensure all recipe ingredients are gluten free by referencing
the ingredient labels, as products may vary. If uncertain,
contact the ingredient manufacturer.
GRILLED SESAME CHICKEN WITH
ORANGE CARROT COUSCOUS
_____________________
PENNE PASTA WITH BASIL
AND FETA CHEESE
_____________________
BERRY BREAKFAST SMOOTHIE
_____________________
PILLSBURY ™ FUNFETTI®
CELEBRATION COOKIE CUPS
_____________________
CHOCOLATE OATMEAL
PEANUT BUTTER BANANA SMOOTHIE
GLUTEN FREE* PILLSBURY™
FUNFETTI® FRUIT PIZZA
INGREDIENTS
1¼ cups apple juice, chilled
½ cup old-fashioned
rolled oats
⅓ cup Smucker’s® Natural
Creamy Peanut Butter,
stirred
1 large banana (6 oz.),
peeled and sliced
2 tbsp. pure maple syrup
⅛ tsp. cinnamon
½ cup ice cubes
Smucker’s® Sundae
Syrup™ Chocolate
Flavored Syrup
PREP TIME: 10 min.
YIELD: 2 (8 oz.) servings
INGREDIENTS
Crisco® Original No-Stick
PREP TIME: 20 min.
COOK TIME: 15 min.
READY TIME: 90 min.
YIELD: 16 servings
DIRECTIONS
1. PLACE apple juice and oats in blender
container. Allow to soften for 3 minutes.
2. ADD peanut butter, banana, maple syrup,
cinnamon and ice cubes to apple juice
mixture. Process for 45 seconds or until
thick and smooth.
3. SQUEEZE chocolate syrup, making a
drizzle on inside of glass to decorate. Fill
glass with ½ cup of smoothie, squeeze the
equivalent of 2 teaspoons chocolate syrup
over smoothie. Add another ½ cup of
smoothie to within ½-inch from top of
glass. Drizzle with additional chocolate
and cinnamon, if desired.
Cooking Spray
1 package Pillsbury™
Funfetti® Gluten Free
Sugar Cookie Mix
⅓ cup Crisco® Pure
Vegetable Oil
2 tbsp. water
1 egg
1 (8 oz.) package cream
cheese, softened
¼ cup Smucker’s® Natural
Orange Marmalade Fruit
Spread
4-5 cups fresh fruit
combination, such as
sliced strawberries, sliced
kiwi, whole small berries,
cubed pineapple, etc.
DIRECTIONS
1. HEAT oven to 375°F. Coat 12-inch pizza
pan with no-stick cooking spray.
2. COMBINE cookie mix, oil, water and egg in
medium bowl. Mix with spoon until evenly
moistened. Press evenly onto prepared
pan, just to the edge, to form a crust. Bake
12 to 15 minutes or until light golden
brown. Cool completely on wire rack.
3. BEAT cream cheese and marmalade in
medium bowl with electric mixer on
medium speed until smooth. Spread on
cooled crust. Arrange fruit on top of pizza
just before serving. Serve immediately.
©/® The J. M. Smucker Company
©/® The J. M. Smucker Company
PENNE PASTA WITH BASIL
AND FETA CHEESE
GRILLED SESAME CHICKEN WITH
ORANGE CARROT COUSCOUS
INGREDIENTS
1 (8 oz.) package truRoots®
Ancient Grain Organic Penne
3 tbsp. extra virgin olive oil,
plus additional for drizzling
1 medium green bell pepper
cut into ¼-inch strips
1 medium yellow bell pepper
cut into ¼-inch strips
1¼ cups grape tomatoes, halved
⅔ cup pitted Kalamata olives,
halved
1 tbsp. minced garlic
1 (6 oz.) package crumbled
feta or goat cheese
2 tbsp. fresh chopped basil
Sea salt and cracked fresh
pepper to taste
Fresh basil sprigs for garnish
PREP TIME: 10 min.
COOK TIME: 10 min.
YIELD: 4 servings
INGREDIENTS
4 boneless, skinless chicken
PREP TIME: 20 min.
COOK TIME: 10 min.
YIELD: 4 servings
DIRECTIONS
1. COOK pasta in large pot of salted
boiling water, just until al dente,
about 5 to 7 minutes. Drain.
2. HEAT olive oil in large skillet over
medium-high heat. Sauté peppers
until soft. Reduce heat to medium.
Add drained pasta, tomatoes, olives,
garlic and cheese, stirring frequently,
until cheese begins to melt. Remove
skillet from heat. Stir in basil. Season
to taste with salt and pepper.
3. DIVIDE pasta evenly onto 4 serving
plates. Drizzle pasta with additional
olive oil, and garnish with basil sprigs.
©/® The J. M. Smucker Company
breast halves
½ cup sesame vinaigrette,
plus additional for serving
1 cup couscous
¼ tsp. salt
1 cup R.W. Knudsen Family®
Organic Orange Carrot
Juice Blend
1 tbsp. extra virgin olive oil
1 tbsp. Santa Cruz Organic®
Pure Lemon Juice
½ cup diced red onion
1 cup peeled, seeded and
diced cucumber
3 tbsp. fresh basil leaves,
thinly sliced
2 tbsp. chopped fresh parsley
½ tsp. cardamom
1 tsp. salt
¼ tsp. pepper
DIRECTIONS
1. PLACE chicken in a medium bowl and coat
completely with vinaigrette. Cover and
refrigerate at least 2 hours or overnight.
2. PLACE couscous in small bowl. Bring salt and
orange carrot juice to boil in small saucepan.
3. POUR hot juice over couscous. Cover with
plastic wrap. Uncover bowl after 5 minutes.
Use a fork to “fluff” and separate the couscous.
Add remaining ingredients and mix well.
Adjust seasoning.
4. HEAT grill to medium heat. Remove chicken
from marinade. Season with salt and pepper.
Discard marinade. Grill chicken about 6
minutes per side or until internal
temperature reaches 165°F. Serve over
couscous with drizzle of sesame vinaigrette.
©/® The J. M. Smucker Company
PILLSBURY™ FUNFETTI®
CELEBRATION COOKIE CUPS
BERRY BREAKFAST
SMOOTHIE
INGREDIENTS
Crisco® Original
No-Stick Cooking
Spray
1 package Pillsbury™
Funfetti® Sugar
Cookie Mix
3 tbsp. Pillsbury™ BEST™
All Purpose Flour
½ cup butter, softened
1 egg
¾ cup Pillsbury™
Confetti™ Funfetti®
Vanilla Flavored
Frosting
1 (8 oz.) package cream
cheese, softened
PREP TIME: 60 min.
COOK TIME: 15 min.
READY TIME: 75 min.
YIELD: 3 dozen
DIRECTIONS
1. HEAT oven to 350°F. Coat 36 mini muffin cups
generously with no-stick cooking spray. Blend
cookie mix, flour, butter and egg in medium
bowl with electric mixer on medium speed until
dough forms. Press 1½ teaspoons dough onto
bottom and sides of each mini muffin cup.
2. BAKE 10 to 12 minutes or until light golden
brown. Let cool 15 minutes. Using tip of
sharp knife, remove from pans to wire rack to
cool completely.
3. BEAT frosting and cream cheese in medium
bowl with electric mixer on medium speed until
smooth. Place in decorator bag fitted with star
tip. Fill cookie cups with frosting mixture.
Sprinkle with candy bits from frosting just
before serving.
©/® The J. M. Smucker Company
INGREDIENTS
½ cup milk
½ cup blueberries or
raspberries
⅓ cup prepared granola
1-2 tbsp. honey
3-4 tbsp. Jif® Peanut Powder
3-4 ice cubes
PREP TIME: 5 min.
YIELD: 1 serving
DIRECTIONS
PLACE milk, berries, granola, honey,
peanut powder and ice cubes in
blender container. Cover and process
until smooth.
©/® The J. M. Smucker Company
2016 FINANCIAL REVIEW
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
The following table presents selected financial data for each of the five years in the period ended April 30, 2016. The selected financial data should
be read in conjunction with the “Results of Operations” and “Financial Condition” sections of “Management’s Discussion and Analysis” and the
consolidated financial statements and notes thereto.
The J.M. Smucker Company
(Dollars in millions, except per share data)
2016
2015
2014
2013
2012
Year Ended April 30,
Statements of Income:
Net sales
Gross profit
% of net sales
Operating income
% of net sales
Net income
Financial Position:
Cash and cash equivalents
Total assets
Total debt
Shareholders’ equity
Liquidity:
Net cash provided by operating activities
Capital expenditures
Free cash flow (A)
Quarterly dividends paid
Purchase of treasury shares
Earnings before interest, taxes, depreciation, and
amortization (A)
Share Data:
$ 7,811.2
$ 2,967.8
$ 5,692.7
$ 1,968.7
$ 5,610.6
$ 2,031.0
$ 5,897.7
$ 2,027.6
$ 5,525.8
$ 1,845.2
38.0%
34.6%
36.2%
34.4%
33.4%
$ 1,145.3
$ 772.0
$ 919.0
$ 910.4
$ 778.3
14.7%
13.6%
16.4%
15.4%
14.1%
$ 688.7
$ 344.9
$ 565.2
$ 544.2
$ 459.7
$ 109.8
15,984.1
5,430.0
7,008.5
$ 1,458.3
201.4
1,256.9
316.6
441.1
1,579.1
$ 125.6
16,806.3
6,170.9
7,086.9
$ 733.2
247.7
485.5
254.0
24.3
$ 153.5
9,041.4
2,216.3
5,029.6
$ 856.0
279.5
576.5
238.0
508.5
$ 256.4
9,010.7
2,010.1
5,148.8
$ 855.8
206.5
649.3
222.8
364.2
$ 229.7
9,095.4
2,061.8
5,163.4
$ 730.9
274.2
456.7
213.7
315.8
871.3
1,185.5
1,161.6
1,028.0
Weighted-average shares outstanding
Weighted-average shares outstanding – assuming dilution
Dividends declared per common share
119,436,199
119,477,312
2.68
$
103,691,978
103,697,261
2.56
$
104,332,241
104,346,587
2.32
$
108,827,897
108,851,153
2.08
$
113,263,951
113,313,567
1.92
$
Earnings per Common Share:
Net income
Net income – assuming dilution
Other Non-GAAP Measures: (A)
Non-GAAP gross profit
% of net sales
Non-GAAP operating income
% of net sales
Non-GAAP income and income per common share:
Non-GAAP income
Non-GAAP income per common share – assuming
dilution
$
5.77
5.76
$
3.33
3.33
$
5.42
5.42
$
5.00
5.00
$
4.06
4.06
$ 2,968.0
$ 1,999.4
$ 2,035.1
$ 2,032.5
$ 1,896.9
38.0%
35.1%
36.3%
34.5%
34.3%
$ 1,281.4
$ 859.3
$ 948.7
$ 964.8
$ 902.5
16.4%
15.1%
16.9%
16.4%
16.3%
$ 784.6
$ 402.5
$ 584.9
$ 580.4
$ 541.2
$
6.57
$
3.88
$
5.61
$
5.33
$
4.78
(A) Refer to “Non-GAAP Measures” in the “Management’s Discussion and Analysis” section for a reconciliation to the comparable GAAP financial measure.
2016 ANNUAL REPORT 21
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS
The J. M. Smucker Company
The following is a summary of unaudited quarterly results of operations for the years ended April 30, 2016 and 2015.
(Dollars in millions, except per share data)
Quarter Ended
Net Sales Gross Profit
Net Income
(Loss)
Net Income
(Loss) per
Common Share
Net Income (Loss)
per Common Share –
Assuming Dilution
2016
2015
July 31, 2015
October 31, 2015
January 31, 2016
April 30, 2016
July 31, 2014
October 31, 2014
January 31, 2015
April 30, 2015
$1,952.0
2,077.7
1,973.9
1,807.6
$1,323.8
1,481.8
1,440.0
1,447.1
$ 728.7
787.3
763.8
688.0
$ 478.7
536.5
522.9
430.6
$ 136.4
176.0
185.3
191.0
$ 116.0
158.3
160.9
(90.3)
$ 1.14
1.47
1.55
1.61
$ 1.14
1.55
1.58
(0.82)
$ 1.14
1.47
1.55
1.61
$ 1.14
1.55
1.58
(0.82)
Annual net income (loss) per common share may not equal the sum of the individual quarters due to differences in the average number of
shares outstanding during the respective periods, primarily due to share repurchases in 2016 and the issuance of shares related to the Big
Heart Pet Brands acquisition in 2015.
STOCK PRICE DATA
Our 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 approximately 306,800 shareholders of record as of June 14, 2016, of
which approximately 43,300 were registered holders of common shares.
2016
2015
Quarter Ended
July 31, 2015
October 31, 2015
January 31, 2016
April 30, 2016
July 31, 2014
October 31, 2014
January 31, 2015
April 30, 2015
High
$120.65
120.44
128.43
132.64
$107.74
104.51
107.21
118.64
Low
Dividends
$104.81
104.30
111.01
121.79
$ 95.89
95.60
97.28
101.88
$0.67
0.67
0.67
0.67
$0.64
0.64
0.64
0.64
22 THE J. M. SMUCKER COMPANY
$300
$250
$200
$150
$100
$50
$0
Among The J. M. Smucker Company, the S&P Packaged Foods & Meats Index, and the S&P 500 Index
4/11
4/12
4/13
4/14
4/15
4/16
The J. M. Smucker Company
S&P Packaged Foods & Meats
S&P 500
COMPARISON OF FIVE-YEAR CUMULATIVE
TOTAL SHAREHOLDER RETURN
The J. M. Smucker Company
Among The J. M. Smucker Company, the S&P Packaged Foods & Meats Index, and the S&P 500 Index
$300
$250
$200
$150
$100
$50
$0
4/11
4/12
4/13
4/14
4/15
4/16
The J. M. Smucker Company
S&P Packaged Foods & Meats
S&P 500
The J. M. Smucker Company
S&P Packaged Foods & Meats
S&P 500
2011
$100.00
100.00
100.00
2012
$108.73
113.07
104.76
2013
$144.50
144.77
122.45
2014
$138.29
159.30
147.48
2015
$169.87
183.17
166.62
2016
$190.34
213.44
168.63
April 30,
The above graph compares the cumulative total shareholder return for the five years ended April 30, 2016, for our common shares, the S&P
Packaged Foods & Meats Index, and the S&P 500 Index. These figures assume all dividends are reinvested when received and are based on
$100 invested in our common shares and the referenced index funds on April 30, 2011.
Copyright © 2016 Standard & Poor’s, a division of The McGraw-Hill Companies Inc. All rights reserved.
www.researchdatagroup.com/S&P.htm
2016 ANNUAL REPORT 23
MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company
(Dollars in millions, unless otherwise noted, except per share data)
DESCRIPTION OF THE COMPANY
For nearly 120 years, The J. M. Smucker Company (“Company,”
“we,” “us,” or “our”) headquartered in Orrville, Ohio, has been
committed to offering consumers quality products that bring
families together to share memorable meals and moments. Today,
we are a leading marketer and manufacturer of consumer food and
beverage products and pet food and pet snacks in North America.
In consumer foods and beverages, our brands include Smucker’s®,
Folgers®, Jif®, Dunkin’ Donuts®, Crisco®, Pillsbury®, R.W.
Knudsen Family®, Hungry Jack®, Café Bustelo®, Martha White®,
truRoots®, Sahale Snacks®, Robin Hood®, and Bick’s®. In pet food
and pet snacks, our brands include Meow Mix®, Milk-Bone®,
Kibbles ’n Bits®, Natural Balance®, and 9Lives®.
We have three reportable segments: U.S. Retail Coffee, U.S. Retail
Consumer Foods, and U.S. Retail Pet Foods. The U.S. retail
market segments in total comprised over 85 percent of net sales in
2016 and represent a major portion of our strategic focus – the sale
of branded food and beverage products with leadership positions to
consumers through retail outlets in North America. In the U.S.
retail market segments, our products are sold primarily to food
retailers, food wholesalers, drug stores, club stores, mass
merchandisers, discount and dollar stores, military commissaries,
natural foods stores and distributors, and pet specialty stores.
Within our segment results, International and Foodservice
represents a combination of the strategic business areas not
included in the U.S. retail market segments. The products included
in International and Foodservice are distributed domestically and
in foreign countries through retail channels and foodservice
distributors and operators (e.g., restaurants, lodging, schools and
universities, health care operators).
STRATEGIC OVERVIEW
We remain rooted in our Basic Beliefs of Quality, People, Ethics,
Growth, and Independence established by our founder and
namesake, Jerome Smucker, more than a century ago. Today, these
Basic Beliefs are the core of our unique corporate culture and serve
as a foundation for decision-making and actions. During 2016, our
Board of Directors elected our sixth chief executive officer, who
represents the fifth generation of family leadership in 119 years.
This continuity of management and thought extends to the broader
leadership team that embodies the values and embraces the
business practices that have contributed to our consistent growth.
Our strategic vision is to own and market a portfolio of food
brands that combines number one and leading brands with
emerging, on-trend brands to drive balanced growth.
Our strategic long-term growth objectives are to increase net sales
by 3 percent and earnings per share, measured on a non-GAAP
basis, by 8 percent annually on average. We expect organic growth,
including new products, to drive much of our top-line growth,
while the contribution from acquisitions will vary from year to
year.
Net sales has increased at a compound annual growth rate of
10 percent over the past five years, largely driven by the recent
acquisition of Big Heart Pet Brands (“Big Heart”), while income
24 THE J. M. SMUCKER COMPANY
per diluted share excluding certain items affecting comparability
(“non-GAAP income per diluted share”) has increased at a rate of
7 percent over the same period. Certain items affecting
comparability include merger and integration and restructuring
costs and unallocated gains and losses on commodity and foreign
currency exchange derivatives, which reflect the changes in fair
value of these derivative contracts.
During 2015, we acquired Big Heart, a leading producer,
distributor, and marketer of premium-quality, branded pet food and
pet snacks in the U.S. This transformational acquisition provided
an immediate and significant presence in the large and growing pet
food and pet snacks categories, and increased our center-of-the-
store presence with consumers and retailers.
Net cash provided by operating activities has increased at a
compound annual growth rate of 30 percent over the past five
years. Our current cash deployment strategy includes a significant
focus on debt repayment, the continuation of our dividend policy,
and investment in the business through capital expenditures. We
will also consider acquisition opportunities and share repurchases.
RESULTS OF OPERATIONS
All comparisons presented in this discussion and analysis are to the
corresponding period of the prior year, unless otherwise noted. On
March 23, 2015, we completed the acquisition of Big Heart, and on
September 2, 2014, we completed the acquisition of Sahale
Snacks, Inc. (“Sahale”). We completed the acquisition of Enray
Inc. (“Enray”) on August 20, 2013. All of these transactions were
accounted for as purchase business combinations, and the
operations of each business are included in our consolidated
financial statements from the date of acquisition. Due to the timing
of the closing of the Big Heart transaction during the fourth quarter
of 2015, approximately 11 months of incremental Big Heart
operations are included in 2016 results. Our results also include the
impact of our licensing and distribution agreement with
Cumberland Packing Corp. (“Cumberland”), which commenced on
July 1, 2013.
On December 31, 2015, we sold our U.S. canned milk brands and
operations to Eagle Family Foods Group LLC, a subsidiary of
funds affiliated with Kelso & Company. The transaction included
canned milk products that were primarily sold in U.S. retail and
foodservice channels under the Eagle Brand® and
Magnolia® brands, along with other branded and private label trade
names, with annual net sales of approximately $200.0. Our
manufacturing facilities in El Paso, Texas, and Seneca, Missouri,
were included in the transaction, but our canned milk business in
Canada was not included. The operating results for this business
were primarily included in the U.S. Retail Consumer Foods
segment prior to the sale. We received proceeds from the
divestiture of $193.7, which were net of transaction costs and a
working capital adjustment, and recognized a pre-tax gain
of $25.3.
The acquisition of Big Heart was a cash and stock transaction
valued at $5.9 billion, which included the issuance of 17.9 million
shares of our common stock to the shareholders of Blue
Acquisition Group, Inc., Big Heart’s parent company. After the
MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company
closing of the transaction, we had approximately 120.0 million
common shares outstanding. We assumed $2.6 billion in debt that
we repaid at closing and paid an additional $1.2 billion in cash, net
of a working capital adjustment. As part of the transaction, new
debt of $5.5 billion was borrowed, as discussed in Note 8: Debt
and Financing Arrangements.
Total one-time costs related to the Big Heart acquisition are
anticipated to be approximately $275.0 and are expected to be
incurred through 2018. These costs primarily consist of employee-
related costs, outside service and consulting costs, and other costs
related to the acquisition. We have incurred total costs of $181.2
related to the integration of Big Heart, including $145.2 in 2016.
We anticipate synergies related to the Big Heart acquisition, as
well as our organization optimization program discussed in the
“Restructuring” section of this discussion and analysis, to result in
net realized savings of approximately $200.0 annually by the end
of 2018. We realized $37.0 of these savings in 2016 and expect to
realize $100.0 of incremental savings in 2017.
Net sales
Gross profit
% of net sales
Operating income
% of net sales
Net income:
Net income
Net income per common share – assuming dilution
Non-GAAP gross profit (A)
% of net sales
Non-GAAP operating income (A)
% of net sales
Non-GAAP income: (A)
Year Ended April 30,
2016
$7,811.2
$2,967.8
38.0%
$1,145.3
14.7%
$ 688.7
$
5.76
$2,968.0
2015
$5,692.7
$1,968.7
2014
$5,610.6
$2,031.0
34.6%
36.2%
$ 772.0
$ 919.0
13.6%
16.4%
$ 344.9
$
3.33
$1,999.4
$ 565.2
$
5.42
$2,035.1
2016
% Increase
2015
% Increase
(Decrease)
37%
51%
48%
100%
73%
48%
1 %
(3)%
(16)%
(39)%
(39)%
(2)%
38.0%
35.1%
36.3%
$1,281.4
$ 859.3
$ 948.7
49%
(9)%
16.4%
15.1%
16.9%
Income
Income per common share – assuming dilution
$ 784.6
6.57
$
$ 402.5
3.88
$
$ 584.9
5.61
$
95%
69%
(31)%
(31)%
(A) Refer to “Non-GAAP Measures” in this discussion and analysis for a reconciliation to the comparable GAAP financial measure.
Summary of 2016
Net sales in 2016 increased 37 percent, driven by the Big Heart
acquisition. Approximately 11 months of incremental Big Heart net
sales, totaling $2.1 billion, was realized in 2016. Operating income
increased 48 percent, driven by the incremental Big Heart
business, partially offset by an increase in merger and integration
costs. Operating income excluding certain items affecting
comparability (“non-GAAP operating income”) increased 49
percent. Net income per diluted share increased 73 percent in 2016,
while non-GAAP income per diluted share increased 69 percent. In
comparison to the prior year, both 2016 per share measures reflect
a benefit from the one-time recognition in 2015 of $173.3 of other
debt costs incurred in connection with the Big Heart acquisition
and the related refinancing activities, a decrease in our effective tax
rate in 2016, and the gain on the divestiture of the U.S. canned
milk business. These items were mostly offset by the impact of the
issuance of 17.9 million shares of our common stock and an
increase in interest expense due to new borrowings in the fourth
quarter of 2015 to finance the Big Heart acquisition. For additional
information on the change in our effective tax rate, see the
“Income Taxes” section of this discussion and analysis.
Summary of 2015
Net sales in 2015 increased 1 percent, reflecting the contribution
from acquisitions, partially offset by unfavorable volume/mix in
the U.S. Retail Coffee segment. Operating income decreased
16 percent, reflecting the impact of a $47.0 fair value purchase
accounting adjustment to acquired Big Heart inventory and Big
Heart integration costs of $36.0. Non-GAAP operating income
decreased 9 percent over the same period. Net income per diluted
share decreased 39 percent in 2015, while non-GAAP income per
diluted share decreased 31 percent. The significant decreases from
the prior year resulted from the recognition of $173.3 of other debt
costs incurred in 2015 in connection with the Big Heart acquisition
and the related refinancing activities, as well as the decrease in
operating income.
2016 ANNUAL REPORT 25
MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company
Net Sales
2016 Compared to 2015
Year Ended April 30,
Net sales
Acquisitions
Divestiture
Foreign currency
exchange
Net sales excluding
acquisitions,
divestiture, and
foreign currency
exchange (A)
2016
$ 7,811.2
(2,067.2)
—
2015
$5,692.7
Increase
(Decrease)
$ 2,118.5
— (2,067.2)
47.6
(47.6)
%
37%
(36)
1
59.8
—
59.8
1
$ 5,803.8
$5,645.1
$
158.7
3%
Amounts may not add due to rounding.
(A) Net sales excluding acquisitions, divestiture, and foreign currency
exchange is a non-GAAP measure used in evaluating performance
internally. This measure provides useful information to investors
because it enables comparison of results on a year-over-year basis. Net
sales excluding acquisitions, divestiture, and foreign currency
exchange in the table above excludes the incremental impact of the Big
Heart and Sahale acquisitions, the U.S. canned milk divestiture, and
foreign currency exchange.
The net sales increase in 2016 was driven by incremental Big
Heart net sales of $2.1 billion in the current year. Net sales
excluding acquisitions, divestiture, and foreign currency exchange
increased 3 percent, primarily due to favorable volume/mix, which
contributed 4 percentage points to the net sales increase. The
favorable volume/mix was driven by Dunkin’ Donuts K-Cup®
pods, which were introduced at the beginning of 2016. Net price
realization was lower, contributing a 1 percentage point decline to
the net sales change, driven mainly by Folgers, Jif, Crisco, and
Pillsbury.
foreign currency exchange in the table above excludes the impact of
the Big Heart and Sahale acquisitions, the incremental impact of the
Enray acquisition and the Cumberland distribution agreement, and
foreign currency exchange.
The net sales increase in 2015 reflected a $295.0 contribution from
acquisitions, primarily the Big Heart contribution of $244.5.
Excluding the impact of acquisitions, the distribution agreement,
and foreign currency exchange, net sales decreased 3 percent,
primarily due to unfavorable volume/mix in the U.S. Retail Coffee
segment driven by the Folgers brand and the impact of the private-
label foodservice hot beverage business exits. The impact of net
price realization was essentially neutral as lower net price
realization on the Jif and Crisco brands mostly offset higher net
price realization on the Folgers brand.
Operating Income
The following table presents the components of operating income
as a percentage of net sales.
Gross profit
Selling, distribution, and
administrative expenses:
Marketing
Advertising
Selling
Distribution
General and administrative
Total selling, distribution, and
administrative expenses
Amortization
Other special project costs
Other operating income – net
Operating income
Year Ended April 30,
2016
38.0%
2015
34.6%
2014
36.2%
3.5%
2.2
4.0
2.9
6.7
19.3%
2.7
1.7
(0.4)
14.7%
3.1%
1.9
3.7
2.9
6.6
18.1%
1.9
1.0
—
13.6%
3.0%
2.2
3.6
2.8
6.0
17.6%
1.8
0.5
—
16.4%
2015 Compared to 2014
Amounts may not add due to rounding.
Year Ended April 30,
2015
$5,692.7
(295.0)
2014
$5,610.6
—
Increase
(Decrease)
$ 82.1
(295.0)
%
1 %
(5)
(6.1)
35.0
—
—
(6.1) —
35.0
1
$5,426.6
$5,610.6
$ (184.0)
(3)%
Net sales
Acquisitions
Distribution
agreement
Foreign currency
exchange
Net sales excluding
acquisitions,
distribution
agreement, and
foreign currency
exchange (A)
Amounts may not add due to rounding.
(A) Net sales excluding acquisitions, distribution agreement, and foreign
currency exchange is a non-GAAP measure used in evaluating
performance internally. This measure provides useful information to
investors because it enables comparison of results on a year-over-year
basis. Net sales excluding acquisitions, distribution agreement, and
26 THE J. M. SMUCKER COMPANY
2016 Compared to 2015
Gross profit increased $999.1, or 51 percent, in 2016, primarily
due to the incremental Big Heart business. Excluding the
incremental Big Heart business, gross profit was still higher, driven
by Dunkin’ Donuts K-Cup® pods and the net benefit of a reduction
in commodity costs, primarily attributed to green coffee, which
was partially offset by lower net pricing. Non-GAAP gross profit
increased $968.6, or 48 percent, over the same period and excluded
a $36.5 favorable change in the impact of unallocated derivative
gains and losses as compared to the prior year.
Selling, distribution, and administrative (“SD&A”) expenses
increased $479.0, or 46 percent, in 2016, primarily driven by the
incremental Big Heart business and higher selling expense due to
royalties related to Dunkin’ Donuts K-Cup® pods. Big Heart SD&A
expenses represented a higher percentage of net sales in 2016 than
the remainder of the business.
Amortization expense increased $97.5 in 2016, primarily due to
the addition of Big Heart finite-lived intangible assets.
MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company
Operating income increased $373.3, or 48 percent, in 2016,
reflecting the incremental Big Heart business and the $25.3 gain on
the divestiture of the U.S. canned milk business, partially offset by
an increase in Big Heart integration costs of $109.2. Non-GAAP
operating income increased $422.1, or 49 percent, over the same
period, and excluded the impact of merger and integration costs
and the $36.5 favorable change in the impact of unallocated
derivative gains and losses as compared to the prior year.
2015 Compared to 2014
Gross profit decreased $62.3, or 3 percent, in 2015, driven by
unfavorable volume/mix and the impact of higher costs, which
were not fully offset by higher net price realization. Higher green
coffee costs in 2015 were not fully recovered by higher net price
realization. This unfavorable net impact was partially offset by
lower peanut costs in 2015, which were not fully offset by lower
net prices. The Big Heart business contributed $46.1 to gross profit
in 2015, which included the one-time unfavorable impact of a fair
value purchase accounting adjustment to acquired inventory that
increased costs of products sold by $47.0. Non-GAAP gross profit
decreased $35.7, or 2 percent, over the same period and excluded a
$29.8 unfavorable change in the impact of unallocated derivative
gains and losses as compared to the prior year.
SD&A expenses increased $42.5, or 4 percent, in 2015, driven by
the addition of Big Heart, partially offset by a decrease in
marketing expense, mainly in the U.S. Retail Coffee segment.
Amortization expense increased $12.0, or 12 percent, in 2015,
primarily due to the addition of Big Heart finite-lived intangible
assets during the fourth quarter.
Operating income decreased $147.0, or 16 percent, in 2015,
reflecting Big Heart integration costs of $36.0 in 2015. Non-GAAP
operating income decreased $89.4, or 9 percent.
Interest Expense and Other Debt Costs
Net interest expense increased $91.2 in 2016, primarily due to the
impact of the incremental interest related to the debt issued to
partially finance the Big Heart acquisition.
Net interest expense was essentially flat in 2015, as the impact of
incremental interest related to the debt issued to partially finance
the Big Heart acquisition was offset by the impact of long-term
debt repayments made during 2015. In addition to interest expense,
we incurred $173.3 of other debt costs during 2015 related to the
Big Heart acquisition. The majority of these costs were make-
whole payments incurred when we prepaid our outstanding
privately placed Senior Notes of $1.1 billion.
Income Taxes
Income taxes increased 62 percent in 2016, due to an 87 percent
increase in income before income taxes, partially offset by a lower
effective tax rate in 2016. The effective tax rate of 29.6 percent in
2016 was significantly lower than the rate of 34.1 percent in 2015,
mainly due to the recognition in the fourth quarter of a $50.5
noncash deferred tax benefit related to the integration of Big Heart
into the Company.
Income taxes decreased 37 percent in 2015, primarily as a result of
a 38 percent reduction in income before income taxes. The
effective tax rate of 34.1 percent in 2015 was slightly higher than
the rate in 2014.
Commodities Overview
The raw materials we use are primarily commodities, agricultural-
based products, and packaging materials. The most significant of
these materials, based on annual spend, are green coffee, grains,
plastic, peanuts, and edible oils. Green coffee, certain grains, and
certain edible oils are traded on active regulated exchanges, and
the price of these commodities fluctuates based on market
conditions. Derivative instruments, including futures and options,
are used to minimize the impact of price volatility for these
commodities.
We source green coffee from more than 20 coffee-producing
countries. Its price is subject to high volatility due to factors such
as weather, global supply and demand, pest damage, investor
speculation, and political and economic conditions in the source
countries.
We source grains, peanuts, and edible oils mainly from North
America. The grains we purchase are mainly wheat and corn. We
are one of the largest procurers of peanuts in the U.S. and
frequently enter into long-term purchase contracts for various
periods of time to mitigate the risk of a shortage of this
commodity. The edible oils we purchase are mainly soybean and
canola. The price of grains, peanuts, and edible oils are driven
primarily by weather, which impacts crop sizes and yield, as well
as global demand, especially from large importing countries such
as China and India. In addition, the prices of edible oils and certain
grains, such as corn, have been impacted by the biofuels industry’s
demand for these commodities.
We frequently enter into long-term contracts to purchase plastic
packaging, which is sourced mainly from within the U.S. Plastic
resin is made from petrochemical feedstock and natural gas
feedstock, and the price can be influenced by feedstock, energy,
and crude oil prices, as well as global economic conditions.
In 2016, our overall commodity costs were lower than in 2015,
primarily due to lower costs for green coffee, milk, oils, and
peanuts.
Restructuring
During the fourth quarter of 2016, an organization optimization
program was approved as part of our ongoing efforts to reduce
costs, integrate, and optimize the combined organization
subsequent to the Big Heart acquisition. As previously noted, we
anticipate synergies related to the Big Heart acquisition to result in
net realized savings of approximately $200.0 annually by the end
of 2018. In addition, we anticipate approximately $50.0 of
incremental cost savings to be recognized over the next few years.
Total restructuring costs related to the organization optimization
program are anticipated to be approximately $40.0, primarily
consisting of employee-related, site preparation, equipment
relocation, and production start-up costs. In addition, we expect to
2016 ANNUAL REPORT 27
MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company
invest approximately $15.0 to $17.0 in capital expenditures. The
expense incurred in 2016 was not material. The remaining costs
are anticipated to be recognized through 2018, with the majority of
the costs expected to be recognized in 2017. Upon completion, the
restructuring plan will result in a reduction of approximately
125 full-time positions.
As part of this program, we will discontinue the production of
coffee at our Harahan, Louisiana, facility and consolidate all roast
and ground coffee production into one of our facilities in New
Orleans, Louisiana, which we expect to complete by December
2017. Additionally, we will exit two leased facilities in Livermore,
California, and consolidate all ancient grains and pasta production
into our facility in Chico, California, which we expect to complete
by January 2017.
Segment Results
Effective May 1, 2015, our reportable segments were modified to
align with the way performance is currently evaluated by our
segment management and chief operating decision maker, our
Chief Executive Officer, and the way in which we currently report
information internally. We now have three reportable segments:
U.S. Retail Coffee, U.S. Retail Consumer Foods, and U.S. Retail
Pet Foods. Within our segment results, International and
Foodservice represents a combination of the strategic business
areas not included in the U.S. retail market segments. The U.S.
Retail Consumer Foods segment is a combination of the former
U.S. Retail Consumer Foods segment and the Natural Foods
strategic business area, previously included in the former
International, Foodservice, and Natural Foods segment. Prior year
segment results have been modified to reflect the realignment of
our segments.
The U.S. Retail Coffee segment primarily includes the domestic
sales of Folgers, Dunkin’ Donuts, and Café Bustelo branded coffee;
the U.S. Retail Consumer Foods segment primarily includes
domestic sales of Jif, Smucker’s, Crisco, and Pillsbury branded
products; and the U.S. Retail Pet Foods segment primarily includes
domestic sales of Meow Mix, Milk-Bone, Natural Balance,
Kibbles ’n Bits, 9Lives, Pup-Peroni®, Nature’s Recipe®, and Gravy
Train® branded products. International and Foodservice is
comprised of products distributed domestically and in foreign
countries through retail channels and foodservice distributors and
operators (e.g., restaurants, lodging, schools and universities,
health care operators).
Year Ended April 30,
2016
2015
2014
2016
% Increase
(Decrease)
2015
% Increase
(Decrease)
Net sales:
U.S. Retail Coffee
U.S. Retail Consumer Foods
U.S. Retail Pet Foods
International and Foodservice
Segment profit (loss):
U.S. Retail Coffee
U.S. Retail Consumer Foods
U.S. Retail Pet Foods
International and Foodservice
Segment profit (loss) margin:
U.S. Retail Coffee
U.S. Retail Consumer Foods
U.S. Retail Pet Foods
International and Foodservice
$ 2,239.2
2,269.7
2,250.4
1,051.9
$ 645.9
459.9
392.0
156.8
28.8%
20.3
17.4
14.9
$2,076.1
2,330.8
239.1
1,046.7
$ 549.2
459.2
(15.3)
140.4
26.5%
19.7
(6.4)
13.4
$2,161.7
2,379.9
—
1,069.0
$ 639.8
420.1
—
140.7
29.6%
17.7
—
13.2
8%
(3)
n/m
—
18%
—
n/m
12
(4)%
(2)
n/a
(2)
(14)%
9
n/a
—
U.S. Retail Coffee
The U.S. Retail Coffee segment net sales increased 8 percent in
2016, reflecting favorable volume/mix, which contributed
9 percentage points of growth, driven by Dunkin’ Donuts K-Cup®
pods. Within the Folgers brand, growth in mainstream roast and
ground offerings was offset by a decline in Folgers K-Cup® pods.
Segment profit increased $96.7, reflecting the benefit of lower
green coffee costs, which was partially offset by lower net price
realization, and the contribution from Dunkin’ Donuts K-Cup®
pods.
In May 2016, in response to sustained declines in green coffee
costs, we announced a 6 percent list price decrease for the majority
of our packaged coffee products sold in the U.S., excluding
K-Cup® pods.
28 THE J. M. SMUCKER COMPANY
The U.S. Retail Coffee segment net sales decreased 4 percent in
2015, driven by unfavorable volume/mix, which contributed
7 percentage points to the net sales decline, primarily due to an
11 percent volume decrease in the Folgers brand. The impact of
the unfavorable volume/mix was partially offset by favorable net
price realization. The benefit of list price increases taken in 2015
was partially offset by the impact of an increase in promotional
spending during the year. Segment profit decreased $90.6 in 2015,
primarily due to the impact of the unfavorable volume/mix and the
unfavorable impact of higher costs, which were not fully recovered
by higher net price realization, driven by K-Cup® pods
profitability. A decrease in marketing expense contributed
favorably to segment profit in 2015.
MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company
U.S. Retail Consumer Foods
The U.S. Retail Consumer Foods segment net sales decreased
3 percent in 2016, primarily due to lower net price realization and
the impact of $41.0 of noncomparable net sales in the prior year
related to the divested U.S. canned milk business, slightly offset by
favorable volume/mix. The lower net price realization was
primarily related to the Jif, Crisco, and Pillsbury brands. The
favorable volume/mix, which contributed 1 percentage point of
growth to segment net sales, was led by Smucker’s Uncrustables®
frozen sandwiches and Jif peanut butter, slightly offset by Pillsbury
baking mixes and frosting. Volume for Smucker’s Uncrustables
increased 26 percent. Segment profit was flat in 2016, compared to
2015, as overall lower commodity costs, primarily for milk, oils,
and peanuts, and the $25.3 gain on the divestiture of the U.S.
canned milk business were offset by lower net price realization and
higher manufacturing overhead costs.
Net sales for the U.S. Retail Consumer Foods segment decreased
2 percent in 2015, reflecting lower net price realization, primarily
for the Jif and Crisco brands, and unfavorable volume/mix, which
contributed 1 percentage point to the net sales decline, partially
offset by a $49.7 combined contribution from the Sahale business
and the incremental impact of the Enray acquisition. Smucker’s
Uncrustables frozen sandwiches volume increased 17 percent,
while volume for the Pillsbury brand decreased 5 percent, and was
the primary contributor to the unfavorable volume/mix for the
segment. Segment profit increased $39.1 in 2015, driven by lower
commodity costs, primarily for peanuts and oils, which were not
entirely offset by lower net price realization.
U.S. Retail Pet Foods
The U.S. Retail Pet Foods segment contributed net sales of
$2.3 billion in 2016, representing low single-digit percent growth
compared to the results of the business for the prior year, the
majority of which were reported under previous ownership. The
net sales increase was driven by distribution gains for the Natural
Balance brand and growth in Milk-Bone dog snacks, which more
than offset declines in Kibbles’n Bits dry dog food and Meow Mix
cat food. The segment contributed profit of $392.0 in 2016,
impacted by lower commodity costs and favorable volume/mix as
compared to the prior year, partially offset by lower net price
realization, reflecting incremental promotional activities.
The U.S. Retail Pet Foods segment had net sales of $239.1 and a
segment loss of $15.3 for 2015, representing the six weeks of
operations following the close of the acquisition. The segment loss
reflected the one-time unfavorable impact of a fair value purchase
accounting adjustment to acquired inventory, which increased cost
of products sold for the segment. Incremental promotional
spending and marketing expense to support new product
introductions and certain other initiatives also reduced segment
profit.
International and Foodservice
International and Foodservice net sales were flat in 2016,
compared to 2015, as incremental Big Heart net sales of $36.9 and
favorable volume/mix, which contributed 3 percentage points of
growth to net sales, were mostly offset by the $59.8 unfavorable
impact of foreign currency exchange. Segment profit increased
$16.4, reflecting favorable volume/mix in Foodservice, which was
partially offset by the unfavorable net impact of lower prices and
lower costs. In Canada, the benefit of higher net price realization,
decreased marketing expense, and favorable volume/mix offset the
impact of a weaker Canadian dollar compared to a year ago. We
expect the impact of foreign currency exchange to remain
unfavorable into next fiscal year.
Net sales for International and Foodservice decreased 2 percent in
2015. Excluding the impact of acquisitions, the incremental impact
of Cumberland, and foreign currency exchange, net sales was flat,
compared to 2014. Unfavorable volume/mix, which contributed
1 percentage point to the net sales change, reflected the impact of
the planned exit of our private label foodservice hot beverage
business and decreases in the Robin Hood and Five Roses® brands.
Segment profit was flat in 2015, compared to 2014, impacted by
the realization of higher costs in Canada, which were attributed to
sourcing certain products from the U.S., reflecting the impact of a
weaker Canadian dollar compared to 2014, and an increase in
green coffee costs. The impact of higher costs and the volume
decline were mostly offset by favorable mix in the foodservice
business.
FINANCIAL CONDITION
Liquidity
Our principal source of funds is cash generated from operations,
supplemented by borrowings against our commercial paper
program and revolving credit facility. Total cash and cash
equivalents decreased to $109.8 at April 30, 2016, compared to
$125.6 at April 30, 2015.
We have historically expected a significant use of cash to fund
working capital requirements during the first half of each fiscal
year, primarily due to the buildup of inventories to support the Fall
Bake and Holiday period, the additional increase of coffee
inventory in advance of the Atlantic hurricane season, and seasonal
fruit procurement. We expected cash provided by operations in the
second half of the fiscal year to significantly exceed the amount in
the first half of the year, upon completion of the Fall Bake and
Holiday period. Although we still expect an inventory buildup
during the first half of the fiscal year within the U.S. Retail Coffee
and U.S. Retail Consumer Foods businesses for the reasons noted
above, our working capital requirements have become less
seasonal overall with the addition of the pet food business. Total
cash provided by operating activities in the second half of 2016
was $877.8, as compared to $580.5 provided through the first half
of the year.
2016 ANNUAL REPORT 29
MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company
The following table presents selected cash flow information.
Year Ended April 30,
2016
2015
2014
Net cash provided by operating
activities
Net cash provided by (used for)
investing activities
Net cash (used for) provided by
financing activities
Net cash provided by operating
activities
Additions to property, plant, and
equipment
Free cash flow (A)
$ 1,458.3
$ 733.2
$ 856.0
21.7
(1,595.7)
(370.3)
(1,496.2)
863.2
(575.5)
$ 1,458.3
$ 733.2
$ 856.0
(201.4)
(247.7)
(279.5)
$ 1,256.9
$ 485.5
$ 576.5
(A) Free cash flow is a non-GAAP measure used by management to
evaluate the amount of cash available for debt repayment, dividend
distribution, acquisition opportunities, share repurchases, and other
corporate purposes.
Cash provided by operating activities increased $725.1 in 2016,
mainly due to an increase in net income adjusted for noncash
items, notably depreciation and amortization, and a decrease in
working capital, driven by a decrease in inventory and the timing
of certain accrued liabilities. During 2016, we established a
working capital reduction target of $200.0, the majority of which
was achieved in 2016. The remainder is expected to be achieved by
the end of 2017. This initiative, as well as the impact of lower
green coffee costs, drove the reduction in inventory during 2016.
Cash provided by operating activities decreased $122.8 in 2015,
primarily due to reduced net income in 2015, as well as a greater
amount of cash required to fund working capital, driven by the
payment in the fourth quarter of 2015 of liabilities assumed as part
of the Big Heart acquisition.
Cash provided by investing activities in 2016 consisted primarily
of $193.7 in proceeds from the divestiture of the U.S. canned milk
business and a $34.8 reduction in our derivative cash margin
account balances during 2016, mostly offset by $201.4 in capital
expenditures. In 2015, cash used for investing activities consisted
primarily of $1.3 billion related to the acquisitions of Big Heart
and Sahale and $247.7 in capital expenditures. In 2014, cash used
for investing activities consisted primarily of $279.5 in capital
expenditures and $101.8 related to the acquisitions of Enray and
Silocaf of New Orleans, Inc.
Cash used for financing activities in 2016 consisted primarily of
$800.0 in repayments on our $1.8 billion Term Loan (as hereinafter
defined), the purchase of treasury shares for $441.1, mainly
representing the repurchase of 3.4 million common shares
available under Board of Directors’ authorizations, and dividend
payments of $316.6. Cash provided by financing activities during
2015 consisted primarily of $5.4 billion in long-term debt
proceeds, which were partially offset by $4.2 billion in long-term
debt repayments and dividend payments of $254.0. New
borrowings in 2015 were comprised of the $1.8 billion Term Loan
and $3.7 billion in Senior Notes. Long-term debt repayments in
2015 were comprised of the $2.6 billion repayment of the Big
30 THE J. M. SMUCKER COMPANY
Heart debt assumed, the $1.1 billion prepayment of our
outstanding privately placed Senior Notes and the related make-
whole payments, the $200.0 prepayment on the $1.8 billion Term
Loan, and the $100.0 scheduled repayment of certain Senior Notes.
Cash used for financing activities during 2014 consisted primarily
of the purchase of treasury shares for $508.5, mainly representing
the repurchase of 4.9 million common shares available under a
Board of Directors’ authorization, dividend payments of $238.0,
and a Senior Notes principal payment of $50.0, partially offset by
$248.4 of borrowings under our revolving credit facility.
Capital Resources
The following table presents our capital structure.
Short-term borrowings
Long-term debt, less current portion
Total debt
Shareholders’ equity
Total capital
April 30,
2016
2015
$
284.0
5,146.0
$ 5,430.0
7,008.5
$12,438.5
$
226.0
5,944.9
$ 6,170.9
7,086.9
$13,257.8
In March 2015, we entered into a senior unsecured delayed-draw
Term Loan Credit Agreement (“Term Loan”) with a syndicate of
banks and an available commitment amount of $1.8 billion. The
weighted-average interest rate on the Term Loan at April 30, 2016,
was 1.69 percent. The Term Loan requires quarterly amortization
payments of 2.50 percent of the original principal amount starting
in the third quarter of 2016. Voluntary prepayments are permitted
without premium or penalty and are applied to the schedule of
required quarterly minimum payment obligations in direct order of
maturity. As of April 30, 2016, we have prepaid $1.0 billion on the
Term Loan to date, including $800.0 in 2016, and therefore no
additional payments are required until final maturity of the loan
agreement on March 23, 2020.
Also in March 2015, we completed an offering of $3.7 billion in
Senior Notes due beginning March 15, 2018 through March 15,
2045. The proceeds from the offering, along with the Term Loan,
were used to partially finance the Big Heart acquisition, pay off the
debt assumed as part of the Big Heart acquisition, and prepay our
privately placed Senior Notes.
We have available a $1.5 billion revolving credit facility with a
group of 11 banks that matures in September 2018. Additionally,
under our commercial paper program, we can issue short-term,
unsecured commercial paper not to exceed $1.0 billion at any time.
The commercial paper program is backed by our revolving credit
facility and reduces what we can borrow under the revolving credit
facility by the amount of commercial paper outstanding. Along
with the revolving credit facility, commercial paper is used as a
continuing source of short-term financing for general corporate
purposes. As of April 30, 2016, we had $284.0 of short-term
borrowings outstanding, all of which were issued under our
commercial paper program, at a weighted-average interest rate of
0.65 percent.
During 2016, we reduced total debt by $740.9, driven by the
$800.0 prepayment on the Term Loan, partially offset by an
MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company
NON-GAAP MEASURES
We use non-GAAP financial measures including: net sales
excluding acquisitions, divestiture, distribution agreement, and
foreign currency exchange; non-GAAP gross profit, operating
income, income, income per diluted share; earnings before interest,
taxes, depreciation, and amortization; and free cash flow, as key
measures for purposes of evaluating performance internally. In
addition, non-GAAP income per diluted share and free cash flow
are used as components of the Board of Directors’ measurement of
performance for incentive compensation purposes. We believe that
these measures provide useful information to investors because
they are the measures we use to evaluate performance on a
comparable year-over-year basis. Non-GAAP measures exclude
certain items affecting comparability, which include merger and
integration and restructuring costs (“special project costs”) and
unallocated gains and losses on commodity and foreign currency
exchange derivatives (“unallocated derivative gains and losses”).
The special project costs relate to specific merger and integration
and restructuring projects that are each nonrecurring in nature and
can significantly affect the year-over-year assessment of operating
results. Unallocated derivative gains and losses reflect the changes
in fair value of our commodity and foreign currency exchange
contracts and affect comparability on a year-over-year basis. These
non-GAAP financial measures are not intended to replace the
presentation of financial results in accordance with U.S. generally
accepted accounting principles (“GAAP”). Rather, the presentation
of these non-GAAP financial measures supplements other metrics
we use to internally evaluate our businesses and facilitate the
comparison of past and present operations and liquidity. These
non-GAAP financial measures may not be comparable to similar
measures used by other companies and may exclude certain
nondiscretionary expenses and cash payments.
increase in short-term borrowings outstanding. We intend to
continue our focus on debt repayment in the near term. Reducing
our leverage will provide the flexibility to consider other strategic
uses of cash, including acquisition opportunities and share
repurchases.
We are in compliance with all of our debt covenants. For additional
information on our new borrowings, sources of liquidity, and debt
covenants, see Note 8: Debt and Financing Arrangements.
On March 31, 2016, we entered into a 10b5-1 trading plan (“the
Plan”) to facilitate the repurchase of 2.0 million common shares
under the Board of Directors’ authorizations. Purchases under the
Plan commenced on April 1, 2016, and concluded on April 30,
2016, and were transacted by a broker based upon the guidelines
and parameters of the Plan. During 2016, we repurchased a total of
3.4 million shares, including 2.0 million shares under the Plan, for
$437.8. At April 30, 2016, approximately 6.6 million common
shares were available for repurchase under the Board of Directors’
authorizations. There is no guarantee as to the exact number of
shares that may be repurchased or when such purchases may occur.
The following table presents certain cash requirements related to
2017 financing and investing activities. Although no principal
payments are required on our debt obligations in 2017 due to the
$1.0 billion prepayment to date on the $1.8 billion Term Loan, we
intend to utilize a portion of cash provided by operations for
further debt repayment as noted above. Additionally, in 2018, a
portion of our Senior Notes will mature and a $500.0 principal
payment will be required at that time.
Dividend payments – based on current rates and
common shares outstanding
Capital expenditures
Interest payments – based on current interest rate
outlook
Projection
Year Ending
April 30, 2017
$310.0
240.0
160.0
Absent any further acquisitions or other significant investments,
we believe that cash on hand, combined with cash provided by
operations and borrowings available under our commercial paper
program and revolving credit facility, will be sufficient to meet
cash requirements for the next 12 months. As of April 30, 2016,
total cash and cash equivalents of $99.4 was held by our
international subsidiaries. We do not intend to repatriate these
funds to meet these cash requirements. Should we repatriate these
funds, we will be required to provide taxes based on the applicable
U.S. tax rates, net of any foreign tax credit consideration.
2016 ANNUAL REPORT 31
MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company
The following table reconciles certain non-GAAP financial measures to the comparable GAAP financial measure. See page 26 for a
reconciliation of net sales adjusted for certain noncomparable items to the comparable GAAP financial measure.
Gross profit reconciliation:
Gross profit
Unallocated derivative (gains) losses
Cost of products sold – special project costs
Non-GAAP gross profit
Operating income reconciliation:
Operating income
Unallocated derivative (gains) losses
Cost of products sold – special project costs
Other special project costs
Non-GAAP operating income
Net income reconciliation:
2016
2015
2014
2013
2012
Year Ended April 30,
$ 2,967.8
(12.0)
12.2
$ 2,968.0
$ 1,145.3
(12.0)
12.2
135.9
$ 1,281.4
$ 1,968.7
24.5
6.2
$ 1,999.4
$ 772.0
24.5
6.2
56.6
$ 859.3
$ 2,031.0
(5.3)
9.4
$ 2,035.1
$ 919.0
(5.3)
9.4
25.6
$ 948.7
$ 2,027.6
(6.6)
11.5
$ 2,032.5
$ 910.4
(6.6)
11.5
49.5
$ 964.8
$ 1,845.2
8.5
43.2
$ 1,896.9
$ 778.3
8.5
43.2
72.5
$ 902.5
Net income
Income taxes
Unallocated derivative (gains) losses
Cost of products sold – special project costs
Other special project costs
Non-GAAP income before income taxes
Income taxes, as adjusted (A)
Non-GAAP income
Weighted-average shares – assuming dilution
Non-GAAP income per common share – assuming dilution
$ 688.7
289.2
(12.0)
12.2
135.9
$ 1,114.0
329.4
$ 784.6
119,477,312
6.57
$
$ 344.9
178.1
24.5
6.2
56.6
$ 610.3
207.8
$ 402.5
103,697,261
3.88
$
$ 565.2
284.5
(5.3)
9.4
25.6
$ 879.4
294.5
$ 584.9
104,346,587
5.61
$
$ 544.2
273.1
(6.6)
11.5
49.5
$ 871.7
291.3
$ 580.4
108,851,153
5.33
$
$ 459.7
241.5
8.5
43.2
72.5
$ 825.4
284.2
$ 541.2
113,313,567
4.78
$
Reconciliation to net income:
Net income
Income taxes
Interest expense – net
Depreciation
Amortization
Earnings before interest, taxes, depreciation, and
amortization
Free cash flow:
Net cash provided by operating activities
Additions to property, plant, and equipment
Free cash flow
$ 688.7
289.2
171.1
221.7
208.4
$ 344.9
178.1
79.9
157.5
110.9
$ 565.2
284.5
79.4
157.5
98.9
$ 544.2
273.1
93.4
154.1
96.8
$ 459.7
241.5
79.8
158.9
88.1
$ 1,579.1
$ 871.3
$ 1,185.5
$ 1,161.6
$ 1,028.0
$ 1,458.3
(201.4)
$ 1,256.9
$ 733.2
(247.7)
$ 485.5
$ 856.0
(279.5)
$ 576.5
$ 855.8
(206.5)
$ 649.3
$ 730.9
(274.2)
$ 456.7
(A) Income taxes, as adjusted is based upon our GAAP effective tax rate and reflects the impact of items excluded from GAAP net income to derive
non-GAAP income.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have material off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons,
also known as variable interest entities. Transactions with related parties are in the ordinary course of business, and are not material to our
results of operations, financial condition, or cash flows.
32 THE J. M. SMUCKER COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company
CONTRACTUAL OBLIGATIONS
The following table summarizes our contractual obligations by fiscal year at April 30, 2016.
Long-term debt obligations, including current portion (A)
Interest payments (B)
Operating lease obligations (C)
Purchase obligations (D)
Other liabilities (E)
Total
1,956.2
200.7
1,223.2
346.5
$8,876.6
Total
$5,150.0
$
2017
—
163.9
39.4
940.8
31.6
$1,175.7
2018–2019
2020–2021
$ 500.0
$1,250.0
325.4
68.0
282.1
35.1
$1,210.6
285.0
46.4
0.3
15.6
$1,597.3
2022 and
beyond
$ 3,400.0
1,181.9
46.9
—
264.2
$ 4,893.0
(A) Excludes the impact of offering discounts, make-whole payments, and debt issuance costs.
(B) Includes interest payments on our long-term debt, which reflects estimated payments for our variable-rate debt based on the current interest rate
outlook.
(C) Includes the minimum rental commitments under non-cancelable operating leases.
(D) Includes agreements that are enforceable and legally bind us to purchase goods or services, including certain obligations related to normal, ongoing
purchase obligations in which we have guaranteed payment to ensure availability of raw materials, packaging supplies, and co-pack arrangements. We
expect to receive consideration for these purchase obligations in the form of materials and services. These purchase obligations do not represent the
entire anticipated purchases in the future, but represent only those items for which we are contractually obligated.
(E) Mainly consists of projected commitments associated with our defined benefit pension and other postretirement benefit plans. The liability for
unrecognized tax benefits and tax-related net interest of $44.4 under Financial Accounting Standards Board Accounting Standards Codification 740,
Income Taxes, is excluded, since we are unable to reasonably estimate the timing of cash settlements with the respective taxing authorities.
CRITICAL ACCOUNTING ESTIMATES AND POLICIES
The preparation of financial statements in conformity with U.S.
GAAP requires that we make estimates and assumptions that in
certain circumstances affect amounts reported in the accompanying
consolidated financial statements. In preparing these financial
statements, we have made our best estimates and judgments of
certain amounts included in the financial statements, giving due
consideration to materiality. We do not believe there is a great
likelihood that materially different amounts would be reported
under different conditions or using different assumptions related to
the accounting policies described below. However, application of
these accounting policies involves the exercise of judgment and
use of assumptions as to future uncertainties and, as a result, actual
results could differ from these estimates.
Revenue Recognition: We recognize revenue, net of estimated
returns and allowances, when all of the following criteria have
been met: a valid customer order with a determinable price has
been received; title and risk of loss have transferred to the
customer; there is no further significant obligation to assist in the
resale of the product; and collectibility is reasonably assured.
In connection with the integration of the Big Heart business and to
achieve consistency across the majority of our customer base, we
modified our standard shipping terms during the fourth quarter of
2016. Our products are shipped with FOB destination terms, with
the exception of certain export customers and those customers that
elect to pick up. The change to our terms did not have a material
impact on the year ended April 30, 2016.
Trade Marketing and Merchandising Programs: In order to
support our products, various promotional activities are conducted
through retail trade, distributors, or directly with consumers,
including in-store display and product placement programs, feature
price discounts, coupons, and other similar activities. We regularly
review and revise, when we deem necessary, estimates of costs for
these promotional programs based on estimates of what will be
redeemed by retail trade, distributors, or consumers. These
estimates are made using various techniques, including historical
data on performance of similar promotional programs. Differences
between estimated expenditures and actual performance are
recognized as a change in estimate in a subsequent period.
Subsequent period adjustments have approximated 1 percent of
both consolidated pretax income and cash provided by operating
activities in 2016, 2015, and 2014. However, as total promotional
expenditures, including amounts classified as a reduction of sales,
represented 31 percent of net sales in 2016, the possibility exists
that reported results could be different if factors such as the level
and success of the promotional programs or other conditions differ
from expectations.
Income Taxes: We account for income taxes using the liability
method. In the ordinary course of business, we are exposed to
uncertainties related to tax filing positions and periodically assess
the technical merits of these tax positions for all tax years that
remain subject to examination, based upon the latest information
available. For uncertain tax positions, we have recognized a
liability for unrecognized tax benefits, including any applicable
interest and penalty charges.
Trade marketing and merchandising programs are classified as a
reduction of sales. A provision for estimated returns and
allowances is recognized as a reduction of sales at the time revenue
is recognized.
In assessing the need for a valuation allowance, we estimate future
taxable income, considering the viability of ongoing tax planning
strategies and the probable recognition of future tax deductions and
loss carryforwards. Valuation allowances related to deferred tax
assets can be affected by changes in tax laws, statutory tax rates,
2016 ANNUAL REPORT 33
MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company
and projected future taxable income levels. Changes in estimated
realization of deferred tax assets would result in an adjustment to
income in the period in which that determination is made, unless
such changes are determined to be an adjustment to goodwill
within the allowable measurement period under the acquisition
method of accounting.
The future tax benefit arising from the net deductible temporary
differences and tax carryforwards is $252.9 and $270.0 at April 30,
2016 and 2015, respectively. We believe that the earnings during
the periods when the temporary differences become deductible will
be sufficient to realize the related future income tax benefits. For
those jurisdictions where the expiration date of tax carryforwards
or the projected operating results indicate that realization is not
likely, a valuation allowance would have been provided.
Long-Lived Assets: Long-lived assets, other than goodwill and
other indefinite-lived intangible assets, are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the assets to future net
undiscounted cash flows estimated to be generated by such assets.
If such assets are considered to be impaired, the impairment to be
recognized is the amount by which the carrying amount of the
assets exceeds the estimated fair value of the assets. However,
determining fair value is subject to estimates of both cash flows
and discount rates, and different estimates could yield different
results. There are no events or changes in circumstances of which
we are aware that indicate the carrying value of our long-lived
assets may not be recoverable at April 30, 2016.
Goodwill and Other Indefinite-Lived Intangible Assets:
A significant portion of our assets is goodwill and other intangible
assets, the majority of which are not amortized but are reviewed at
least annually for impairment. At April 30, 2016, the carrying
value of goodwill and other intangible assets totaled $12.6 billion,
compared to total assets of $16.0 billion and total shareholders’
equity of $7.0 billion. If the carrying value of these assets exceeds
the current estimated fair value, the asset is considered impaired
and this would result in a noncash charge to earnings. Any such
impairment charge would reduce earnings and could be material.
Events and conditions that could result in impairment include a
sustained drop in the market price of our common shares,
increased competition or loss of market share, obsolescence, or
product claims that result in a significant loss of sales or
profitability over the product life.
We are required to test goodwill for impairment annually and more
often if indicators of impairment exist. To test for goodwill
impairment, we estimate the fair value of each of our reporting
units using both a discounted cash flow valuation technique and a
market-based approach. The impairment test incorporates estimates
of future cash flows; allocations of certain assets, liabilities, and
cash flows among reporting units; future growth rates; terminal
value amounts; and the applicable weighted-average cost of capital
used to discount those estimated cash flows. The estimates and
projections used in the calculation of fair value are consistent with
our current and long-range plans, including anticipated changes in
market conditions, industry trends, growth rates, and planned
34 THE J. M. SMUCKER COMPANY
capital expenditures. Changes in forecasted operations and other
estimates and assumptions could impact the assessment of
impairment in the future.
At April 30, 2016, goodwill totaled $6.1 billion. Goodwill is
substantially concentrated within the U.S. Retail Pet Foods, U.S.
Retail Coffee, and U.S. Retail Consumer Foods segments. No
goodwill impairment was recognized as a result of the annual
evaluation performed as of February 1, 2016. The estimated fair
value of each of our seven reporting units was substantially in
excess of its carrying value as of the annual test date, with the
exception of the Pet Foods reporting unit, for which its fair value
exceeded its carrying value by $198.0, or 4 percent. A sensitivity
analysis was performed for the Pet Foods reporting unit, assuming
a hypothetical 50-basis-point decrease in the expected long-term
growth rate and yielded an estimated fair value slightly below
carrying value. The goodwill related to the U.S. Retail Pet Foods
segment is a result of the Big Heart acquisition in the fourth
quarter of 2015 and remains susceptible to future impairment as
the current estimated fair value is close to the carrying value at the
date of the acquisition. A change to the assumptions regarding the
future performance of the U.S. Retail Pet Foods segment, or a
portion of it, or a change to other assumptions, could result in
impairment losses in the future.
Other indefinite-lived intangible assets, consisting entirely of
trademarks, are also tested for impairment annually and whenever
events or changes in circumstances indicate their carrying value
may not be recoverable. To test these assets for impairment, we
estimate the fair value of each asset based on a discounted cash
flow model using various inputs, including projected revenues, an
assumed royalty rate, and a discount rate. Changes in these
estimates and assumptions could impact the assessment of
impairment in the future.
At April 30, 2016, other indefinite-lived intangible assets totaled
$3.1 billion. Trademarks that represent our leading brands
comprise more than 90 percent of the total carrying value of other
indefinite-lived intangible assets. Each of these leading brand
trademarks had an estimated fair value substantially in excess of its
carrying value as of the annual test date, with the exception of the
trademarks acquired in the fourth quarter of 2015 as part of the Big
Heart acquisition, which are equally as sensitive to a hypothetical
50-basis-point decrease in the expected long-term growth rate as
noted above for the Pet Foods reporting unit. A change to the
assumptions regarding future performance of the U.S. Retail Pet
Foods segment or its brands, or a change to other assumptions,
could result in impairment losses in the future.
Pension and Other Postretirement Benefit Plans: To determine
the ultimate obligation under our defined benefit pension and other
postretirement benefit plans, we must estimate the future cost of
benefits and attribute that cost to the time period during which
each covered employee works. Various actuarial assumptions must
be made in order to predict and measure costs and obligations
many years prior to the settlement date, the most significant being
the interest rates used to discount the obligations of the plans, the
long-term rates of return on the plans’ assets, mortality
assumptions, assumed pay increases, and the health care cost trend
rates. We, along with third-party actuaries and investment
MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company
managers, review all of these assumptions on an ongoing basis to
ensure that the most reasonable information available is being
considered. For 2017 expense recognition, we will use a weighted-
average discount rate of 3.76 percent and 3.60 percent for the U.S.
and Canadian plans, respectively, and a rate of compensation
increase of 3.96 percent for the U.S. plans. We anticipate using an
expected rate of return on plan assets of 6.27 percent for U.S.
plans. For the Canadian plans, we anticipate using an expected rate
of return on plan assets of 5.25 percent for the hourly plan and
5.90 percent for all other plans.
As part of the Big Heart acquisition, we assumed the obligation for
pension and other postretirement plans and now participate in one
multi-employer pension plan. For additional information, see
Note 9: Pensions and Other Postretirement Benefits.
DERIVATIVE FINANCIAL INSTRUMENTS AND
MARKET RISK
The following discussions about our market risk disclosures
involve forward-looking statements. Actual results could differ
from those projected in the forward-looking statements. We are
exposed to market risk related to changes in interest rates, foreign
currency exchange rates, and commodity prices.
Interest Rate Risk: The fair value of our cash and cash
equivalents at April 30, 2016, approximates carrying value. We are
exposed to interest rate risk with regard to existing debt consisting
of fixed- and variable-rate maturities. Our interest rate exposure
primarily includes U.S. Treasury rates, London Interbank Offered
Rate, and commercial paper rates in the U.S.
We utilize derivative instruments to manage changes in the fair
value of our debt. Interest rate swaps mitigate the risk associated
with the underlying hedged item. At the inception of the contract,
the instrument is evaluated and documented for hedge accounting
treatment. If the contract is designated as a cash flow hedge, the
swap would be recognized at fair value on the balance sheets and
the mark-to-market gains or losses on the swap would be deferred
and included as a component of accumulated other comprehensive
loss to the extent effective, and reclassified to interest expense in
the period during which the hedged transaction affects earnings. If
the contract is designated as a fair value hedge, the swap would be
recognized at fair value on the balance sheet, and changes in the
fair value would be recognized in interest expense. Generally,
changes in the fair value of the derivative are equal to changes in
the fair value of the underlying debt and have no net impact on
earnings.
In 2015, we entered into a series of forward-starting interest rate
swaps to partially hedge the risk of an increase in the benchmark
interest rate during the period leading up to the anticipated
issuance of our long-term Senior Notes. The interest rate swaps
were designated as cash flow hedges with an aggregate notional
amount of $1.1 billion. In March 2015, in conjunction with the
pricing of the series of Senior Notes, we terminated the interest
rate swaps prior to maturity. The termination resulted in a net loss
of $4.0, which is being amortized over the life of the remaining
debt.
During 2014, we entered into an interest rate swap, designated as a
fair value hedge, on a portion of fixed-rate Senior Notes in an
effort to achieve a mix of variable-rate versus fixed-rate debt under
favorable market conditions. In January 2015, we terminated this
interest rate swap agreement prior to maturity. As a result of the
early termination, we received $58.1 in cash, which included $4.6
of accrued and prepaid interest and a $53.5 benefit that is deferred
as a component of the carrying value of the long-term debt and will
be recognized ratably as a reduction to future interest expense over
the remaining life of the related debt. At April 30, 2016, the
remaining benefit of $43.9 was recorded as an increase in the long-
term debt balance.
Based on our overall interest rate exposure as of and during the
year ended April 30, 2016, including derivatives and other
instruments sensitive to interest rates, a hypothetical 10 percent
movement in interest rates would not materially affect our results
of operations. In measuring interest rate risk by the amount of net
change in the fair value of our financial liabilities, a hypothetical
100-basis-point decrease in interest rates at April 30, 2016, would
increase the fair value of our long-term debt by $387.4.
Foreign Currency Exchange Risk: We have operations outside
the U.S. with foreign currency denominated assets and liabilities,
primarily denominated in Canadian currency. Because we have
foreign currency denominated assets and liabilities, financial
exposure may result, primarily from the timing of transactions and
the movement of exchange rates. The foreign currency balance
sheet exposures as of April 30, 2016, are not expected to result in a
significant impact on future earnings or cash flows.
We utilize foreign currency exchange forwards and options
contracts to manage the price volatility of foreign currency
exchange fluctuations on future cash payments in Canada,
primarily related to purchases of certain raw materials and finished
goods. The contracts generally have maturities of less than one
year. We do not qualify instruments used to manage foreign
currency exchange exposures for hedge accounting treatment.
Therefore, the change in value of these instruments is immediately
recognized in the cost of products sold. Based on our hedged
foreign currency positions as of April 30, 2016, a hypothetical
10 percent change in exchange rates would result in a $17.5 loss of
fair value.
Revenues from customers outside the U.S., subject to foreign
currency translation, represented 6 percent of net sales during
2016. Thus, certain revenues and expenses have been, and are
expected to be, subject to the effect of foreign currency
fluctuations, and these fluctuations may have an impact on
operating results.
Commodity Price Risk: We use certain raw materials and other
commodities that are subject to price volatility caused by supply
and demand conditions, political and economic variables, weather,
investor speculation, and other unpredictable factors. To manage
the volatility related to anticipated commodity purchases, we use
derivatives with maturities of generally less than one year. We do
not qualify commodity derivatives for hedge accounting treatment.
As a result, the gains and losses on all commodity derivatives are
immediately recognized in cost of products sold.
2016 ANNUAL REPORT 35
MANAGEMENT’S DISCUSSION AND ANALYSIS
The J. M. Smucker Company
• our ability to implement and realize the full benefit of price
changes, and the impact of the timing of the price changes to
profits and cash flow in a particular period;
• the success and cost of marketing and sales programs and
strategies intended to promote growth in our businesses,
including the introduction of new products;
• general competitive activity in the market, including
competitors’ pricing practices and promotional spending levels;
• the impact of food security concerns involving either our
products or our competitors’ products;
• the impact of accidents, extreme weather, and natural disasters;
• the concentration of certain of our businesses with key
customers and suppliers, including single-source suppliers of
certain key raw materials and finished goods, and our ability to
manage and maintain key relationships;
• the timing and amount of capital expenditures and share
repurchases;
• impairments in the carrying value of goodwill, other intangible
assets, or other long-lived assets or changes in useful lives of
other intangible assets;
• the impact of new or changes to existing governmental laws and
regulations and their application;
• the outcome of tax examinations, changes in tax laws, and other
tax matters;
• foreign currency and interest rate fluctuations; and
• risks related to other factors described under “Risk Factors” in
other reports and statements we have filed with the Securities
and Exchange Commission.
Readers are cautioned not to unduly rely on such forward-looking
statements, which speak only as of the date made, when evaluating
the information presented in this Annual Report. We do not
undertake any obligation to update or revise these forward-looking
statements to reflect new events or circumstances subsequent to the
filing of this Annual Report.
The following sensitivity analysis presents our potential loss of fair
value resulting from a hypothetical 10 percent change in market
prices related to commodities.
High
Low
Average
Year Ended April 30,
2016
$40.0
16.5
32.9
2015
$39.6
19.3
28.6
The estimated fair value was determined using quoted market
prices and was based on our net derivative position by commodity
at each quarter end during the fiscal year. The calculations are not
intended to represent actual losses in fair value that we expect to
incur. In practice, as markets move, we actively manage our risk
and adjust hedging strategies as appropriate. The commodities
hedged have a high inverse correlation to price changes of the
derivative commodity instrument; thus, we would expect that any
gain or loss in the estimated fair value of its derivatives would
generally be offset by an increase or decrease in the estimated fair
value of the underlying exposures.
FORWARD-LOOKING STATEMENTS
Certain statements included in this Annual Report contain forward-
looking statements within the meaning of federal securities laws.
The forward-looking statements may include statements
concerning our current expectations, estimates, assumptions, and
beliefs concerning future events, conditions, plans, and strategies
that are not historical fact. Any statement that is not historical in
nature is a forward-looking statement and may be identified by the
use of words and phrases such as “expect,” “anticipate,” “believe,”
“intend,” “will,” “plan,” and similar phrases.
Federal securities laws provide a safe harbor for forward-looking
statements to encourage companies to provide prospective
information. We are providing this cautionary statement in
connection with the safe harbor provisions. Readers are cautioned
not to place undue reliance on any forward-looking statements, as
such statements are by nature subject to risks, uncertainties, and
other factors, many of which are outside of our control and could
cause actual results to differ materially from such statements and
from our historical results and experience. These risks and
uncertainties include, but are not limited to, those set forth under
the caption “Risk Factors” in our Annual Report on Form 10-K, as
well as the following:
• our ability to achieve synergies and cost savings related to the
Big Heart acquisition in the amounts and within the time frames
currently anticipated and to effectively manage the related
integration costs;
• our ability to generate sufficient cash flow to meet our
deleveraging objectives;
• volatility of commodity, energy, and other input costs;
• risks associated with derivative and purchasing strategies we
employ to manage commodity pricing risks;
• the availability of reliable transportation on acceptable terms;
36 THE J. M. SMUCKER COMPANY
REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING
The J. M. Smucker Company
Shareholders
The J. M. Smucker Company
Management is responsible for establishing and maintaining adequate accounting and internal control systems over financial
reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934, as
amended. Our internal control system is designed to provide reasonable assurance that we have the ability to record, process,
summarize, and report reliable financial information on a timely basis.
Our management, with the participation of the principal financial and executive officers, assessed the effectiveness of the
internal control over financial reporting as of April 30, 2016. In making this assessment, we used the criteria established in
Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 Framework) (“the COSO criteria”).
Based on our assessment of internal control over financial reporting under the COSO criteria, we concluded the internal
control over financial reporting was effective as of April 30, 2016.
Ernst & Young LLP, an independent registered public accounting firm, audited the effectiveness of our internal control over
financial reporting as of April 30, 2016, and their report thereon is included on page 38 of this report.
Mark T. Smucker
President and
Chief Executive Officer
Mark R. Belgya
Vice Chair and
Chief Financial Officer
2016 ANNUAL REPORT 37
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The J. M. Smucker Company
Board of Directors and Shareholders
The J. M. Smucker Company
We have audited The J. M. Smucker Company’s internal control over financial reporting as of April 30, 2016, based on
criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (“the COSO criteria”). The J. M. Smucker Company’s management is responsible
for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting included in the accompanying Report of Management on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on
our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, The J. M. Smucker Company maintained, in all material respects, effective internal control over financial
reporting as of April 30, 2016, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of The J. M. Smucker Company as of April 30, 2016 and 2015, and the related statements of
consolidated income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period
ended April 30, 2016, and our report dated June 21, 2016, expressed an unqualified opinion thereon.
Akron, Ohio
June 21, 2016
38 THE J. M. SMUCKER COMPANY
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM ON THE CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
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, 2016 and
2015, and the related statements of consolidated income, comprehensive income, shareholders’ equity, and cash flows for
each of the three years in the period ended April 30, 2016. 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 the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated
financial position of The J. M. Smucker Company at April 30, 2016 and 2015, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended April 30, 2016, in conformity with U.S. generally accepted
accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
The J. M. Smucker Company’s internal control over financial reporting as of April 30, 2016, based on criteria established in
Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) and our report dated June 21, 2016, expressed an unqualified opinion thereon.
Akron, Ohio
June 21, 2016
2016 ANNUAL REPORT 39
REPORT OF MANAGEMENT ON RESPONSIBILITY
FOR FINANCIAL REPORTING
The J. M. Smucker Company
Shareholders
The J. M. Smucker Company
Management of The J. M. Smucker Company is responsible for the preparation, integrity, accuracy, and consistency of the
consolidated financial statements and the related financial information in this report. Such information has been prepared in
accordance with U.S. generally accepted accounting principles and is based on our best estimates and judgments.
We maintain systems of internal accounting controls supported by formal policies and procedures that are communicated
throughout the Company. There is a program of audits performed by our internal audit staff designed to evaluate the
adequacy of and adherence to these controls, policies, and procedures.
Ernst & Young LLP, an independent registered public accounting firm, has audited our financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Management has made all financial
records and related data available to Ernst & Young LLP during its audit.
Our audit committee, comprised of four non-employee members of the Board of Directors, meets regularly with the
independent registered public accounting firm and management to review the work of the internal audit staff and the work,
audit scope, timing arrangements, and fees of the independent registered public accounting firm. The audit committee also
regularly satisfies itself as to the adequacy of controls, systems, and financial records. The director of the internal audit
department is required to report directly to the chair of the audit committee as to internal audit matters.
It is our best judgment that our policies and procedures, our program of internal and independent audits, and the oversight
activity of the audit committee work together to provide reasonable assurance that our operations are conducted according to
law and in compliance with the high standards of business ethics and conduct to which we subscribe.
Mark T. Smucker
President and
Chief Executive Officer
Mark R. Belgya
Vice Chair and
Chief Financial Officer
40 THE J. M. SMUCKER COMPANY
STATEMENTS OF CONSOLIDATED INCOME
The J. M. Smucker Company
(Dollars in millions, except per share data)
Net sales
Cost of products sold
Gross Profit
Selling, distribution, and administrative expenses
Amortization
Other special project costs (A)
Other operating income – net
Operating Income
Interest expense – net
Other debt costs
Other income – net
Income Before Income Taxes
Income taxes
Net Income
Earnings per common share:
Net Income
Net Income – Assuming Dilution
Dividends Declared per Common Share
2016
$ 7,811.2
4,843.4
2,967.8
1,510.3
208.4
135.9
(32.1)
1,145.3
(171.1)
—
3.7
977.9
289.2
$ 688.7
$
$
$
5.77
5.76
2.68
Year Ended April 30,
2015
$ 5,692.7
3,724.0
1,968.7
1,031.3
110.9
56.6
(2.1)
772.0
(79.9)
(173.3)
4.2
523.0
178.1
$ 344.9
$
$
$
3.33
3.33
2.56
2014
$ 5,610.6
3,579.6
2,031.0
988.8
98.9
25.6
(1.3)
919.0
(79.4)
—
10.1
849.7
284.5
$ 565.2
$
$
$
5.42
5.42
2.32
(A) Other special project costs includes merger and integration and restructuring costs. For more information, see Note 3: Integration and Restructuring
Costs.
See notes to consolidated financial statements.
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
The J. M. Smucker Company
(Dollars in millions)
Net income
Other comprehensive (loss) income:
Foreign currency translation adjustments
Cash flow hedging derivative activity, net of tax
Pension and other postretirement benefit plans activity, net of tax
Available-for-sale securities activity, net of tax
Total Other Comprehensive (Loss) Income
Comprehensive Income
See notes to consolidated financial statements.
Year Ended April 30,
2015
$344.9
(34.0)
(20.5)
(3.6)
(0.1)
(58.2)
2014
$565.2
(29.8)
26.5
29.4
(1.1)
25.0
2016
$688.7
(10.8)
0.4
(28.5)
0.3
(38.6)
$650.1
$286.7
$590.2
2016 ANNUAL REPORT 41
CONSOLIDATED BALANCE SHEETS
The J. M. Smucker Company
ASSETS
(Dollars in millions)
Current Assets
Cash and cash equivalents
Trade receivables, less allowance for doubtful accounts
Inventories:
Finished products
Raw materials
Total Inventory
Other current assets
Total Current Assets
Property, Plant, and Equipment
Land and land improvements
Buildings and fixtures
Machinery and equipment
Construction in progress
Gross Property, Plant, and Equipment
Accumulated depreciation
Total Property, Plant, and Equipment
Other Noncurrent Assets
Goodwill
Other intangible assets – net
Other noncurrent assets
Total Other Noncurrent Assets
Total Assets
See notes to consolidated financial statements.
April 30,
2016
2015
$
109.8
450.1
$
125.6
430.1
560.0
339.4
899.4
114.1
1,573.4
114.6
727.7
1,870.7
91.3
2,804.3
(1,176.6)
1,627.7
6,091.1
6,494.4
197.5
12,783.0
$15,984.1
815.0
348.6
1,163.6
264.6
1,983.9
113.7
666.3
1,783.8
135.3
2,699.1
(1,020.8)
1,678.3
6,011.6
6,950.3
182.2
13,144.1
$16,806.3
42 THE J. M. SMUCKER COMPANY
CONSOLIDATED BALANCE SHEETS
The J. M. Smucker Company
LIABILITIES AND SHAREHOLDERS’ EQUITY
(Dollars in millions)
Current Liabilities
Accounts payable
Accrued compensation
Accrued trade marketing and merchandising
Dividends payable
Short-term borrowings
Other current liabilities
Total Current Liabilities
Noncurrent Liabilities
Long-term debt
Defined benefit pensions
Other postretirement benefits
Deferred income taxes
Other noncurrent liabilities
Total Noncurrent Liabilities
Total Liabilities
Shareholders’ Equity
Serial preferred shares – no par value:
Authorized – 6,000,000 shares; outstanding – none
Common shares – no par value:
Authorized – 300,000,000 shares; outstanding – 116,306,894 at April 30, 2016, and 119,577,333 at
April 30, 2015 (net of 30,190,836 and 26,920,397 treasury shares, respectively), at stated value
Additional capital
Retained income
Amount due from ESOP Trust
Accumulated other comprehensive loss
Total Shareholders’ Equity
April 30,
$
2016
459.4
139.6
112.3
77.9
284.0
139.8
1,213.0
5,146.0
222.3
75.9
2,230.3
88.1
7,762.6
8,975.6
$
2015
402.8
100.4
104.9
76.5
226.0
112.0
1,022.6
5,944.9
188.9
74.6
2,397.0
91.4
8,696.8
9,719.4
—
—
29.1
5,860.1
1,267.7
—
(148.4)
7,008.5
29.9
6,007.7
1,159.2
(0.1)
(109.8)
7,086.9
Total Liabilities and Shareholders’ Equity
$15,984.1
$16,806.3
See notes to consolidated financial statements.
2016 ANNUAL REPORT 43
STATEMENTS OF CONSOLIDATED CASH FLOWS
The J. M. Smucker Company
Year Ended April 30,
2016
2015
2014
$ 688.7
$ 344.9
$ 565.2
221.7
208.4
34.6
(25.3)
5.6
—
(95.2)
(2.2)
—
(8.6)
(21.9)
240.1
14.6
46.1
2.4
—
144.2
5.1
1,458.3
7.9
(16.0)
(201.4)
—
193.7
4.0
33.5
21.7
58.0
—
(800.0)
(316.6)
(441.1)
3.5
(1,496.2)
0.4
(15.8)
125.6
$ 109.8
157.5
110.9
23.5
—
6.0
—
7.7
(12.0)
163.3
(15.7)
21.8
25.3
74.1
(25.4)
(140.3)
53.5
(41.6)
(20.3)
733.2
(1,320.5)
—
(247.7)
—
—
2.6
(30.1)
(1,595.7)
(22.4)
5,382.5
(4,193.9)
(254.0)
(24.3)
(24.7)
863.2
(28.6)
(27.9)
153.5
$ 125.6
157.5
98.9
22.9
—
3.0
(3.7)
(8.0)
(0.2)
—
(9.4)
6.1
15.4
(26.9)
3.3
9.1
—
(9.5)
32.3
856.0
(101.8)
—
(279.5)
10.0
—
10.7
(9.7)
(370.3)
248.4
—
(50.0)
(238.0)
(508.5)
(27.4)
(575.5)
(13.1)
(102.9)
256.4
$ 153.5
(Dollars in millions)
Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operations:
Depreciation
Amortization
Share-based compensation expense
Gain on divestiture
Loss on disposal of assets – net
Gain on sale of marketable securities
Deferred income tax (benefit) expense
Other noncash adjustments
Make-whole payments included in financing activities
Defined benefit pension contributions
Changes in assets and liabilities, net of effect from businesses acquired:
Trade receivables
Inventories
Other current assets
Accounts payable
Accrued liabilities
Proceeds from settlement of interest rate swaps – net
Income and other taxes
Other – net
Net Cash Provided by Operating Activities
Investing Activities
Businesses acquired, net of cash acquired
Equity investment in affiliate
Additions to property, plant, and equipment
Sales and maturities of marketable securities
Proceeds from divestiture
Proceeds from disposal of property, plant, and equipment
Other – net
Net Cash Provided by (Used for) Investing Activities
Financing Activities
Short-term borrowings (repayments) – net
Proceeds from long-term debt
Repayments of long-term debt, including make-whole payments
Quarterly dividends paid
Purchase of treasury shares
Other – net
Net Cash (Used for) Provided by Financing Activities
Effect of exchange rate changes on cash
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and Cash Equivalents at End of Year
( ) Denotes use of cash
See notes to consolidated financial statements.
44 THE J. M. SMUCKER COMPANY
STATEMENTS OF CONSOLIDATED SHAREHOLDERS’ EQUITY
The J. M. Smucker Company
(Dollars in millions)
Balance at May 1, 2013
Net income
Other comprehensive income
Comprehensive Income
Purchase of treasury shares
Stock plans (includes tax
benefit of $7.3)
Cash dividends declared
Other
Balance at April 30, 2014
Net income
Other comprehensive loss
Comprehensive Income
Purchase of treasury shares
Issuance of shares for acquisition
Stock plans (includes tax
benefit of $5.9)
Cash dividends declared
Other
Balance at April 30, 2015
Net income
Other comprehensive loss
Comprehensive Income
Purchase of treasury shares
Stock plans (includes tax
benefit of $2.7)
Cash dividends declared
Other
Balance at April 30, 2016
Common
Shares
Outstanding
106,486,935
Common
Shares
$26.6
Additional
Capital
$4,125.1
Amount
Due from
ESOP
Trust
$ (1.8)
Accumulated
Other
Comprehensive
Loss
$ (76.6)
Retained
Income
$1,075.5
565.2
(5,072,158)
(1.3)
(199.0)
(308.2)
282,623
0.1
39.7
101,697,400
25.4
3,965.8
(225,262)
17,892,565
212,630
(0.1)
4.5
0.1
(19.2)
2,031.0
30.1
119,577,333
29.9
6,007.7
(241.6)
0.1
1,091.0
344.9
(5.0)
(271.5)
(0.2)
1,159.2
688.7
0.8
(1.0)
0.9
(0.1)
25.0
(51.6)
(58.2)
(109.8)
(38.6)
(3,451,591)
(0.9)
(177.9)
(262.3)
181,152
0.1
30.7
116,306,894
$29.1
(0.4)
$5,860.1
(317.9)
$1,267.7
0.1
$ —
$(148.4)
Total
Shareholders'
Equity
$5,148.8
565.2
25.0
590.2
(508.5)
39.8
(241.6)
0.9
5,029.6
344.9
(58.2)
286.7
(24.3)
2,035.5
30.2
(271.5)
0.7
7,086.9
688.7
(38.6)
650.1
(441.1)
30.8
(317.9)
(0.3)
$7,008.5
See notes to consolidated financial statements.
2016 ANNUAL REPORT 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
(Dollars in millions, unless otherwise noted, except per share data)
NOTE 1
ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries,
and its majority-owned investments, if any. Intercompany transactions and accounts are eliminated in consolidation.
Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles
(“GAAP”) requires that we make certain estimates and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Significant estimates in these consolidated financial statements include: allowances for doubtful trade
receivables, estimates of future cash flows associated with assets, potential asset impairments, useful lives and residual values of long-lived
assets used in determining depreciation and amortization, net realizable value of inventories, accruals for trade marketing and
merchandising programs, income taxes, and the determination of discount and other assumptions for defined benefit pension and other
postretirement benefit expenses. Actual results could differ from these estimates.
Cash and Cash Equivalents: We consider all short-term, highly-liquid investments with a maturity of three months or less when
purchased to be cash equivalents.
Revenue Recognition: We recognize revenue, net of estimated returns and allowances, when all of the following criteria have been met: a
valid customer order with a determinable price has been received; title and risk of loss have transferred to the customer; there is no further
significant obligation to assist in the resale of the product; and collectibility is reasonably assured.
In connection with the integration of the Big Heart business and to achieve consistency across the majority of our customer base, we
modified our standard shipping terms during the fourth quarter of 2016. Our products are shipped with FOB destination terms, with the
exception of certain export customers and those customers that elect to pick up. The change to our terms did not have a material impact on
the year ended April 30, 2016.
Trade marketing and merchandising programs are classified as a reduction of sales. A provision for estimated returns and allowances is
recognized as a reduction of sales at the time revenue is recognized.
Trade Marketing and Merchandising Programs: In order to support our products, various promotional activities are conducted through
retail trade, distributors, or directly with consumers, including in-store display and product placement programs, feature price discounts,
coupons, and other similar activities. We regularly review and revise, when we deem necessary, estimates of costs for these promotional
programs based on estimates of what will be redeemed by retail trade, distributors, or consumers. These estimates are made using various
techniques, including historical data on performance of similar promotional programs. Differences between estimated expenditures and
actual performance are recognized as a change in estimate in a subsequent period. Subsequent period adjustments have approximated
1 percent of both consolidated pretax income and cash provided by operating activities in 2016, 2015, and 2014. However, as total
promotional expenditures, including amounts classified as a reduction of sales, represented 31 percent, 29 percent, and 27 percent of net
sales in 2016, 2015, and 2014, respectively, the possibility exists that reported results could be different if factors such as the level and
success of the promotional programs or other conditions differ from expectations.
Shipping and Handling Costs: Transportation costs included in cost of products sold relate to the costs incurred to ship our products.
Distribution costs are included in selling, distribution, and administrative expenses (“SD&A”) and relate to the warehousing costs incurred
to store our products. Total shipping and handling costs recorded within SD&A were $236.1, $168.5, and $164.8 in 2016, 2015, and 2014,
respectively.
Advertising Expense: Advertising costs are expensed as incurred. Advertising expense was $170.3, $107.0, and $124.7 in 2016, 2015, and
2014, respectively.
Research and Development Costs: Research and development (“R&D”) costs are expensed as incurred and are included in SD&A in the
Statements of Consolidated Income. R&D costs include expenditures for new product and manufacturing process innovation, which are
comprised primarily of internal salaries and wages, consulting, and other supplies attributable to time spent on R&D activities. Other costs
include the depreciation and maintenance of research facilities. Total R&D expense was $58.8, $32.5, and $24.3 in 2016, 2015, and 2014,
respectively.
Share-Based Payments: Share-based compensation expense, excluding stock options, is recognized on a straight-line basis over the
requisite service period, which includes a one-year performance period plus the defined forfeiture period, which is typically 4 years of
service or the attainment of a defined age and years of service. Compensation expense related to stock options is recognized ratably over
46 THE J. M. SMUCKER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
the service period for each vesting tranche from the grant date through the end of the requisite service period if it is probable that the
performance criteria will be met. The options vest over a period of 1 to 3 years, dependent on continued service of the option holder, as
well as the achievement of the performance objectives established on the grant date.
The following table summarizes amounts related to share-based payments.
Share-based compensation expense included in SD&A
Share-based compensation expense included in other special project costs
Total share-based compensation expense
Related income tax benefit
Year Ended April 30,
2016
$26.3
8.3
$34.6
$10.2
2015
$22.3
1.2
$23.5
$ 8.0
2014
$22.1
0.8
$22.9
$ 7.7
As of April 30, 2016, total unrecognized share-based compensation cost related to nonvested share-based awards was $54.1. The weighted-
average period over which this amount is expected to be recognized is 2.7 years.
Corporate income tax benefits realized upon exercise or vesting of an award in excess of that previously recognized in earnings, referred to
as excess tax benefits, are presented in the Statements of Consolidated Cash Flows as a financing activity. Realized excess tax benefits are
credited to additional capital in the Consolidated Balance Sheets. Realized shortfall tax benefits, amounts which are less than those
previously recognized in earnings, are first offset against the cumulative balance of excess tax benefits, if any, and then charged directly to
income tax expense. For 2016, 2015, and 2014, the excess tax benefits realized upon exercise or vesting of share-based compensation were
$2.7, $5.9, and $7.3, respectively. For further discussion on share-based compensation expense, see Note 12: Share-Based Payments.
Defined Contribution Plans: We offer employee savings plans for domestic and Canadian employees. Our contributions under these plans
are based on a specified percentage of employee contributions. Charges to operations for these plans in 2016, 2015, and 2014 were $25.9,
$21.1, and $20.1, respectively. For information on our defined benefit plans, see Note 9: Pensions and Other Postretirement Benefits.
Income Taxes: We account for income taxes using the liability method. Accordingly, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a
change in the applicable tax rate is recognized in income or expense in the period that the change is enacted. A valuation allowance is
established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. A tax benefit is recognized when
it is more likely than not to be sustained.
We account for the financial statement recognition and measurement criteria of a tax position taken or expected to be taken in a tax return
under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes. ASC 740 also
provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosure.
In accordance with the requirements of ASC 740, uncertain tax positions have been classified in the Consolidated Balance Sheets as
noncurrent, except to the extent payment is expected within 1 year. We recognize net interest and penalties related to unrecognized tax
benefits in income tax expense.
Trade Receivables: In the normal course of business, we extend credit to customers. Trade receivables, less allowances, reflects the net
realizable value of receivables and approximates fair value. We evaluate our trade receivables and establish an allowance for doubtful
accounts based on a combination of factors. When aware that a specific customer has been impacted by circumstances such as bankruptcy
filings or deterioration in the customer’s operating results or financial position, potentially making it unable to meet its financial
obligations, we record a specific reserve for bad debt to reduce the related receivable to the amount we reasonably believe is collectible. We
also record reserves for bad debt for all other customers based on a variety of factors, including the length of time the receivables are past
due, historical collection experience, and an evaluation of current and projected economic conditions at the balance sheet date. Trade
receivables are charged off against the allowance after we determine that the potential for recovery is remote. At April 30, 2016 and 2015,
the allowance for doubtful accounts was $1.1 and $1.0, respectively. We believe there is no concentration of risk with any single customer
whose failure or nonperformance would materially affect results other than as discussed in Note 5: Reportable Segments.
Inventories: Inventories are stated at the lower of cost or market, with market being defined as net realizable value, less costs to sell. Cost
for all inventories is determined using the first-in, first-out method applied on a consistent basis.
2016 ANNUAL REPORT 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
The cost of finished products and work-in-process inventory includes materials, direct labor, and overhead. Work-in-process is included in
finished products in the Consolidated Balance Sheets and was $67.6 and $81.5 at April 30, 2016 and 2015, respectively.
Derivative Financial Instruments: We account for derivative instruments in accordance with FASB ASC 815, Derivatives and Hedging,
which requires all derivative instruments to be recognized in the financial statements and measured at fair value, regardless of the purpose
or intent for holding them.
We do not qualify commodity derivatives or instruments used to manage foreign currency exchange exposures for hedge accounting
treatment and, as a result, the derivative gains and losses are immediately recognized in earnings. Although we do not perform the
assessments required to achieve hedge accounting for commodity derivatives or instruments used to manage foreign currency exchange
exposures, we believe all of our derivatives are economic hedges of our risk exposure. The exposures hedged have a high inverse
correlation to price changes of the derivative instrument; thus, we expect that any gain or loss in the estimated fair value of our derivatives
would generally be offset by an increase or decrease in the estimated fair value of the underlying exposures.
We utilize derivative instruments to manage changes in the fair value and cash flows of our debt. Interest rate swaps mitigate the risk
associated with the underlying hedged item. At the inception of the contract, the instrument is evaluated and documented for hedge
accounting treatment. If the contract is designated as a cash flow hedge, the mark-to-market gains or losses on the swap are deferred and
included as a component of accumulated other comprehensive loss to the extent effective, and reclassified to interest expense in the period
during which the hedged transaction affects earnings. If the contract is designated as a fair value hedge, the swap is recognized at fair value
on the balance sheet, and changes in the fair value are recognized in interest expense. Generally, changes in the fair value of the derivative
are equal to changes in the fair value of the underlying debt and have no net impact on earnings.
Property, Plant, and Equipment: Property, plant, and equipment is recognized at cost and is depreciated on a straight-line basis over the
estimated useful life of the asset (3 to 20 years for machinery and equipment, 1 to 7 years for capitalized software costs, and 5 to 40 years
for buildings, fixtures, and improvements).
We lease certain land, buildings, and equipment for varying periods of time, with renewal options. Rent expense in 2016, 2015, and 2014
totaled $92.5, $67.1, and $60.6, respectively. As of April 30, 2016, our minimum operating lease obligations were as follows: $39.4 in
2017, $37.4 in 2018, $30.6 in 2019, $24.8 in 2020, and $21.6 in 2021.
In accordance with FASB ASC 360, Property, Plant, and Equipment, long-lived assets, other than goodwill and other indefinite-lived
intangible assets, are reviewed for impairment when circumstances indicate the carrying value of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net undiscounted
cash flows we estimate to be generated by such assets. If such assets are considered to be impaired, the impairment to be recognized is the
amount by which the carrying amount of the assets exceeds their estimated fair value. Assets to be disposed of by sale are recognized as
held for sale at the lower of carrying value or fair value less costs to sell.
Goodwill and Other Intangible Assets: Goodwill is the excess of the purchase price paid over the estimated fair value of the net assets of
a business acquired. In accordance with FASB ASC 350, Intangibles – Goodwill and Other, goodwill and other indefinite-lived intangible
assets are not amortized but are reviewed at least annually for impairment. We conduct our annual test for impairment of goodwill and
other indefinite-lived intangible assets as of February 1 of each year. As of the annual impairment test, we had seven reporting units. A
discounted cash flow valuation technique was utilized to estimate the fair value of our reporting units and indefinite-lived intangible assets.
We also used a market-based approach to estimate the fair value of our reporting units. The discount rates utilized in the cash flow analyses
were developed using a weighted-average cost of capital methodology. In addition to the annual test, we test for impairment if events or
circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Finite-lived
intangible assets are amortized on a straight-line basis over their estimated useful lives, which are evaluated on an annual basis. For
additional information, see Note 7: Goodwill and Other Intangible Assets.
Marketable Securities and Other Investments: We maintain funds for the payment of benefits associated with nonqualified retirement
plans. These funds include investments considered to be available-for-sale marketable securities. At April 30, 2016 and 2015, the fair value
of these investments was $48.8 and $48.4, respectively, and was included in other noncurrent assets in the Consolidated Balance Sheets.
Included in accumulated other comprehensive loss at April 30, 2016 and 2015, were unrealized pre-tax gains of $5.7 and $5.2, respectively.
Equity Method Investments: Investments in common stock of entities other than our subsidiaries are accounted for under the equity
method in accordance with FASB ASC 323, Investments – Equity Method and Joint Ventures. Under the equity method, the initial
investment is recorded at cost and the investment is subsequently adjusted for its proportionate share of earnings or losses, including
consideration of basis differences resulting from the difference between the initial carrying amount of the investment and the underlying
equity in net assets. The difference between the carrying amount of the investment and the underlying equity in net assets is primarily
attributable to goodwill and other intangible assets.
48 THE J. M. SMUCKER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
We have a 25 percent equity interest in Guilin Seamild Biologic Technology Development Co., Ltd. (“Seamild”), a privately-owned
manufacturer and marketer of oats products in China. The initial investment in Seamild in 2013 was $35.9 and is included in other
noncurrent assets in the Consolidated Balance Sheets. The value of our investment in Seamild did not change significantly and did not have
a material impact on International and Foodservice or the consolidated financial statements for the years ended April 30, 2016 and 2015.
As part of the Big Heart Pet Brands (“Big Heart”) acquisition, we acquired a 50 percent equity interest in Natural Blend Vegetable
Dehydration, LLC; however, we exited the relationship in 2016. The investment did not have a material impact on the U.S. Retail Pet
Foods segment or the consolidated financial statements for the years ended April 30, 2016 and 2015.
Additionally, we acquired a 20 percent equity interest in Mountain Country Foods, LLC (“Mountain Country Foods”) as part of the Big
Heart acquisition. Mountain Country Foods is a privately-owned contract manufacturer of Big Heart pet products. The carrying amount of
the Mountain Country Foods interest of $19.1 was included in other noncurrent assets in the Consolidated Balance Sheets. The investment
in Mountain Country Foods did not have a material impact on the U.S. Retail Pet Foods segment or the consolidated financial statements
for the years ended April 30, 2016 and 2015. For additional information related to the acquisition, see Note 2: Acquisitions.
We have a 44 percent equity interest in Numi, Inc. (“Numi”), the manufacturer and marketer of Numi® brand premium organic teas located
in Oakland, California. During 2016, we invested $16.0 in Numi, and the investment is included in other noncurrent assets in the
Consolidated Balance Sheets. Our investment in Numi did not have a material impact on the U.S. Retail Consumer Foods segment or the
consolidated financial statements for the year ended April 30, 2016.
Foreign Currency Translation: Assets and liabilities of foreign subsidiaries are translated using the exchange rates in effect at the balance
sheet dates, while income and expenses are translated using average rates throughout the periods. Translation adjustments are reported as a
component of shareholders’ equity in accumulated other comprehensive loss. Included in accumulated other comprehensive loss at
April 30, 2016 and 2015, were foreign currency losses of $13.1 and $2.3, respectively.
Recently Issued Accounting Standards: In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-09, Stock
Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 includes provisions intended to
simplify various aspects related to how share-based payments are accounted for and presented in the financial statements, including the
income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.
ASU 2016-09 will be effective for us on May 1, 2017. Certain amendments will require a prospective approach, while others will require a
retrospective approach. We are currently evaluating the impact the application of ASU 2016-09 will have on our financial statements and
disclosures and will consider early adoption in 2017, as permitted.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 will be effective for us on May 1, 2019, and will
require a modified retrospective approach for leases existing at, or entered into after, the beginning of the earliest comparative period
presented and excludes any leases that expired before the date of initial application. We are currently evaluating the impact the application
of ASU 2016-02 will have on our financial statements and disclosures.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 requires either
retrospective application to each prior reporting period presented or retrospective application with the cumulative effect of initially
applying the standard recognized at the date of adoption. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with
Customers (Topic 606) Deferral of the Effective Date, which extends the standard effective date by one year. As a result of this issuance, the
standard will be effective for us on May 1, 2018, with the option to early adopt at the original effective date of May 1, 2017. We have
performed a preliminary review of the new guidance as compared to our current accounting policies, and a contract review is in process.
Based on our findings to date, we do not expect the standard to have a material impact on our results of operations or financial position. In
2017, we plan to finalize our review and determine our date of adoption.
Risks and Uncertainties: The raw materials we use are primarily commodities, agricultural-based products, and packaging materials. The
principal packaging materials we use are plastic, glass, metal cans, caps, carton board, and corrugate. Green coffee, grains, peanuts, edible
oils, sweeteners, fruit, and other ingredients are obtained from various suppliers. The availability, quality, and cost of many of these
commodities have fluctuated, and may continue to fluctuate over time. Green coffee is sourced solely from foreign countries and its supply
and price are subject to high volatility due to factors such as weather, global supply and demand, pest damage, speculative influences, and
political and economic conditions in the source countries. Raw materials are generally available from numerous sources, although we have
elected to source certain plastic packaging materials and finished goods, such as our Pup-Peroni® dog snacks, from single sources of supply
pursuant to long-term contracts. While availability may vary from year to year, we believe that we will continue to be able to obtain
adequate supplies and that alternatives to single-sourced materials are available. We have not historically encountered significant shortages
of key raw materials. We consider our relationships with key material suppliers to be in good standing.
2016 ANNUAL REPORT 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
We have consolidated our production capacity for certain products, including substantially all of our coffee, Milk-Bone® dog snacks, and
fruit spreads, syrups, and toppings production, into single manufacturing sites. Although steps are taken at all of our manufacturing sites to
reduce the likelihood of a production disruption, an interruption at a single manufacturing site would result in a reduction or elimination of
the availability of some of our products for a period of time.
Of our total employees, 30 percent are covered by union contracts at 11 manufacturing locations. The contracts vary in term, with one
contract expiring in 2017, representing 8 percent of our total employees.
We insure our business and assets in each country against insurable risks, to the extent that we deem appropriate, based upon an analysis of
the relative risks and costs.
NOTE 2
ACQUISITIONS
On March 23, 2015, we completed the acquisition of Big Heart, a leading producer, distributor, and marketer of premium-quality, branded
pet food and pet snacks in the U.S., through the acquisition of Blue Acquisition Group, Inc. (“BAG”), Big Heart’s parent company. As a
result of the acquisition, the assets and liabilities of BAG are now held by the Company.
The total consideration paid in connection with the acquisition was $5.9 billion, as set forth below, which included the issuance of
17.9 million of our common shares to BAG’s former shareholders, valued at $2.0 billion based on the average stock price of our common
shares on March 23, 2015. After the closing of the transaction, we had approximately 120.0 million common shares outstanding. We
assumed $2.6 billion in debt, including Big Heart’s senior secured term loan and senior notes, and we paid an additional $1.2 billion in
cash, net of a working capital adjustment. As part of the transaction, new debt of $5.5 billion was borrowed, as discussed in Note 8: Debt
and Financing Arrangements.
Shares issued
Assumed debt from Big Heart
Cash consideration, net of cash acquired
Total purchase price
$2,035.5
2,630.2
1,232.1
$5,897.8
The final Big Heart purchase price was allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair
values at the date of acquisition. We determined the estimated fair values based on independent appraisals, discounted cash flow analyses,
quoted market prices, and estimates made by management. The purchase price exceeded the estimated fair value of the net identifiable
tangible and intangible assets acquired and, as such, the excess was allocated to goodwill.
In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805) Simplifying the Accounting for Measurement-
Period Adjustments. ASU 2015-16 requires that adjustments identified during the measurement period be made to provisional amounts
recognized in a business combination in the reporting period in which the acquirer determines the adjustments, including the effect on
earnings of any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition date.
ASU 2015-16 is effective for us on May 1, 2016, but we elected early adoption in the second quarter of 2016, as permitted. Based on early
adoption of this ASU, effective with the reporting period beginning August 1, 2015, we no longer revise prior period results for adjustments
to provisional amounts. Prior to our adoption of ASU 2015-16, changes to the preliminary fair values were retrospectively applied to the
Consolidated Balance Sheet as of April 30, 2015, which included a net adjustment to goodwill of $1.8, as a result of a favorable working
capital adjustment and other fair value adjustments. After our adoption of ASU 2015-16, changes to these preliminary fair values during
2016 resulted in a net adjustment to goodwill of $131.7, which is attributable to the finalization of the acquisition date fair value of
goodwill and intangibles, certain liabilities, and the related impact on deferred taxes.
50 THE J. M. SMUCKER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date.
Assets acquired:
Trade receivables
Inventories
Other current assets
Property, plant, and equipment
Other intangible assets – net
Goodwill
Other noncurrent assets
Total assets acquired
Liabilities assumed:
Current liabilities
Deferred income taxes
Other noncurrent liabilities
Total liabilities assumed
Net assets acquired
$ 142.0
254.5
191.3
324.0
3,831.8
3,004.7
28.0
$7,776.3
$ 446.8
1,349.6
82.1
$1,878.5
$5,897.8
As a result of the acquisition, we recognized a total of $3.0 billion of goodwill, representing the value we expect to achieve through the
implementation of operational synergies and growth opportunities across our segments. Goodwill was allocated across all reportable
segments based on the synergies anticipated to be achieved by each individual reporting unit as a result of the acquisition. Of the total
goodwill, $70.4 was deductible for tax purposes. For additional information related to goodwill, refer to Note 7: Goodwill and Other
Intangibles.
The purchase price was allocated to the identifiable intangible assets acquired as follows:
Intangible assets with finite lives:
Customer relationships (25-year useful life)
Trademarks (15-year useful life)
Intangible assets with indefinite lives:
Trademarks
Total intangible assets
$2,111.8
257.0
1,463.0
$3,831.8
Big Heart’s results of operations are included in our consolidated financial statements from the date of the transaction. Had the transaction
occurred at the beginning of the full comparable prior year period, the unaudited pro forma consolidated results would have been as
follows:
Net sales
Net income
Net income per common share – assuming dilution
Year Ended
April 30, 2015
$7,732.5
541.8
4.53
The unaudited pro forma consolidated results are based on our historical financial statements and those of Big Heart, and do not necessarily
indicate the results of operations that would have resulted had the acquisition been completed at the beginning of the full comparable prior
year period. The most significant pro forma adjustments relate to amortization of intangible assets, higher interest expense associated with
the new debt borrowed, and the impact of additional common shares issued as a result of the acquisition. The unaudited pro forma
consolidated results do not give effect to the synergies of the acquisition and are not indicative of the results of operations in future periods.
2016 ANNUAL REPORT 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
In addition to the Big Heart acquisition, on September 2, 2014, we completed the acquisition of Sahale Snacks, Inc. (“Sahale”), a privately-
held manufacturer and marketer of premium, branded nut and fruit snacks for $80.5 in cash, net of a working capital adjustment. As a
result, Sahale became a wholly-owned subsidiary of the Company. The final Sahale purchase price was allocated to the underlying assets
acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. The purchase price allocation included
total intangible assets of $30.4. The purchase price exceeded the estimated fair value of the net identifiable tangible and intangible assets
acquired and, as a result, the excess was allocated to goodwill. Valuations resulted in Sahale goodwill of $47.0, and the entire amount was
assigned to the U.S. Retail Consumer Foods segment. The results of operations of Sahale are included in the consolidated financial
statements from the date of the transaction and did not have a material impact on the years ended April 30, 2016 and 2015.
NOTE 3
INTEGRATION AND RESTRUCTURING COSTS
Integration Costs: Total one-time costs related to the Big Heart acquisition are anticipated to be approximately $275.0, of which
approximately $50.0 are expected to be noncash charges. These costs are anticipated to be incurred through 2018 and primarily consist of
employee-related costs, outside service and consulting costs, and other costs related to the acquisition. Employee separation costs include
severance, retention bonuses, and relocation costs. Severance costs and retention bonuses are recognized over the estimated future service
period of the affected employees and the remainder are expensed as incurred. The obligation related to employee separation costs is
included in other current liabilities in the Consolidated Balance Sheets. Other costs include professional fees, information systems costs,
and other miscellaneous expenditures associated with the integration, which are expensed as incurred. Of the total anticipated one-time
costs, we expect to incur $120.0, $100.0, and $55.0 in employee-related costs, outside service and consulting costs, and other costs,
respectively.
We incurred costs of $145.2 in 2016 related to the integration of Big Heart, resulting in total costs of $181.2 from the date of acquisition.
The majority of these charges were reported in other special project costs in the Statements of Consolidated Income and are not allocated to
segment profit. Total one-time costs related to the acquisition include $65.8, $72.1, and $43.3 of employee-related costs, outside service
and consulting costs, and other costs, respectively, including noncash charges of $24.6, primarily consisting of share-based compensation
and accelerated depreciation. In 2016, we incurred $52.4, $56.0, and $36.8 of employee-related costs, outside service and consulting costs,
and other costs, respectively, including noncash charges of $18.9. The obligation related to severance costs and retention bonuses was $13.4
and $6.0 at April 30, 2016 and 2015, respectively.
Restructuring Costs: In addition to the integration costs discussed above, an organization optimization program was approved as part of
our ongoing efforts to reduce costs, integrate, and optimize the combined organization, during the fourth quarter of 2016. Total
restructuring costs are expected to be approximately $40.0, of which approximately half represents employee-related costs, with the
remaining consisting of costs related to site preparation, equipment relocation, and production start-up. Included in the total restructuring
costs are approximately $8.0 of noncash charges related to accelerated depreciation. In addition, we expect to invest approximately $15.0 to
$17.0 in capital expenditures. We have incurred employee-related costs of $1.3 through April 30, 2016. The remaining costs are anticipated
to be recognized through 2018, with the majority of the costs expected to be recognized in 2017. Upon completion, the restructuring plan
will result in a reduction of approximately 125 full-time positions.
As part of this program, we will discontinue the production of coffee at our Harahan, Louisiana, facility and consolidate all roast and
ground coffee production into one of our facilities in New Orleans, Louisiana, which we expect to complete by December 2017.
Additionally, we will exit two leased facilities in Livermore, California, and consolidate all ancient grains and pasta production into our
facility in Chico, California, which we expect to complete by January 2017.
During 2015, we completed a multi-year restructuring initiative that was focused on the coffee, fruit spreads, and Canadian pickle and
condiment operations in an effort to achieve enhanced long-term strength and profitability of our leading brands. We incurred total
restructuring costs of $263.6 through April 30, 2015. During the years ended April 30, 2015 and 2014, total restructuring charges of $15.4
and $20.8, respectively, were reported in the Statements of Consolidated Income, and there were no charges incurred in 2016. Of the total
restructuring charges, $1.1 and $5.1 were reported in cost of products sold in the years ended April 30, 2015 and 2014, respectively. The
remaining charges were reported in other special project costs. The restructuring costs classified as cost of products sold primarily include
long-lived asset charges for accelerated depreciation related to property, plant, and equipment that had been used at the affected production
facilities prior to closure.
52 THE J. M. SMUCKER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
NOTE 4
DIVESTITURE
On December 31, 2015, we sold our U.S. canned milk brands and operations to Eagle Family Foods Group LLC, a subsidiary of funds
affiliated with Kelso & Company. The transaction included canned milk products that were primarily sold in U.S. retail and foodservice
channels under the Eagle Brand® and Magnolia® brands, along with other branded and private label trade names, with annual net sales of
approximately $200.0. Our manufacturing facilities in El Paso, Texas, and Seneca, Missouri, were included in the transaction, but our
canned milk business in Canada was not included.
The operating results for this business were primarily included in the U.S. Retail Consumer Foods segment prior to the sale on December
31, 2015. We received proceeds from the divestiture of $193.7, which were net of transaction costs and a working capital adjustment. Upon
completion of the transaction, we recognized a pre-tax gain of $25.3 in 2016, which is included in other operating income – net within the
Statement of Consolidated Income.
NOTE 5
REPORTABLE SEGMENTS
We operate in one industry: the manufacturing and marketing of food and beverage products. Effective May 1, 2015, our reportable
segments were modified to align with the way performance is currently evaluated by our segment management and chief operating decision
maker, our Chief Executive Officer, and the way in which we currently report information internally. We now have three reportable
segments: U.S. Retail Coffee, U.S. Retail Consumer Foods, and U.S. Retail Pet Foods. Within our segment results, International and
Foodservice represents a combination of the strategic business areas not included in the U.S. retail market segments. The U.S. Retail
Consumer Foods segment is a combination of the former U.S. Retail Consumer Foods segment and the Natural Foods strategic business
area, previously included in the former International, Foodservice, and Natural Foods segment. Prior year segment results have been
modified to reflect the realignment of our segments.
The U.S. Retail Coffee segment primarily includes the domestic sales of Folgers®, Dunkin’ Donuts®, and Café Bustelo® branded coffee; the
U.S. Retail Consumer Foods segment primarily includes domestic sales of Jif®, Smucker’s®, Crisco®, and Pillsbury® branded products; and
the U.S. Retail Pet Foods segment primarily includes domestic sales of Meow Mix®, Milk-Bone, Natural Balance®, Kibbles ’n Bits®,
9Lives®, Pup-Peroni, Nature’s Recipe®, and Gravy Train® branded products. International and Foodservice is comprised of products
distributed domestically and in foreign countries through retail channels and foodservice distributors and operators (e.g., restaurants,
lodging, schools and universities, health care operators).
Segment profit represents net sales, less direct and allocable operating expenses, and is consistent with the way in which we manage our
segments. However, we do not represent that the segments, if operated independently, would report operating profit equal to the segment
profit set forth below, as segment profit excludes certain operating expenses such as corporate administrative expenses and unallocated
gains and losses on commodity and foreign currency exchange derivative activities. Commodity and foreign currency exchange derivative
gains and losses are reported in unallocated derivative gains and losses outside of segment operating results until the related inventory is
sold. At that time, we reclassify the hedge gains and losses from unallocated derivative gains and losses to segment profit, allowing our
segments to realize the economic effect of the hedge without experiencing any mark-to-market volatility. We would expect that any gain or
loss in the estimated fair value of the derivatives would generally be offset by a change in the estimated fair value of the underlying
exposures.
2016 ANNUAL REPORT 53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
Net sales:
U.S. Retail Coffee
U.S. Retail Consumer Foods
U.S. Retail Pet Foods
International and Foodservice
Total net sales
Segment profit (loss):
U.S. Retail Coffee
U.S. Retail Consumer Foods
U.S. Retail Pet Foods
International and Foodservice
Total segment profit
Interest expense – net
Other debt costs
Unallocated derivative gains (losses)
Cost of products sold – special project costs
Other special project costs
Corporate administrative expenses
Other income – net
Income before income taxes
Assets:
U.S. Retail Coffee
U.S. Retail Consumer Foods
U.S. Retail Pet Foods
International and Foodservice
Unallocated (A)
Total assets
Depreciation, amortization, and impairment charges:
U.S. Retail Coffee
U.S. Retail Consumer Foods
U.S. Retail Pet Foods
International and Foodservice
Unallocated (B)
Total depreciation, amortization, and impairment charges
Additions to property, plant, and equipment:
U.S. Retail Coffee
U.S. Retail Consumer Foods
U.S. Retail Pet Foods
International and Foodservice
Total additions to property, plant, and equipment
Year Ended April 30,
2016
2015
2014
$ 2,239.2
2,269.7
2,250.4
1,051.9
$ 7,811.2
$
645.9
459.9
392.0
156.8
$ 1,654.6
(171.1)
—
12.0
(12.2)
(135.9)
(373.2)
3.7
977.9
$
$ 5,002.0
3,288.5
6,321.6
1,168.6
203.4
$15,984.1
$
$
$
$
104.0
60.7
164.9
66.2
34.3
430.1
51.4
90.3
11.9
47.8
201.4
$ 2,076.1
2,330.8
239.1
1,046.7
$ 5,692.7
$
549.2
459.2
(15.3)
140.4
$ 1,133.5
(79.9)
(173.3)
(24.5)
(6.2)
(56.6)
(274.2)
4.2
523.0
$
$ 4,852.4
3,063.1
7,556.4
1,105.1
229.3
$16,806.3
$
$
$
$
102.7
59.4
14.3
60.7
31.3
268.4
56.7
117.7
19.4
53.9
247.7
$2,161.7
2,379.9
—
1,069.0
$5,610.6
$ 639.8
420.1
—
140.7
$1,200.6
(79.4)
—
5.3
(9.4)
(25.6)
(251.9)
10.1
$ 849.7
$4,884.0
2,908.8
—
1,018.2
230.4
$9,041.4
$
99.9
57.6
—
62.7
36.2
$ 256.4
$
50.7
145.3
—
83.5
$ 279.5
(A) Primarily represents unallocated cash and cash equivalents and corporate-held investments.
(B) Primarily represents unallocated corporate administrative expense, mainly depreciation and software amortization.
54 THE J. M. SMUCKER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
The following table presents certain geographical information.
Net sales:
United States
International:
Canada
All other international
Total international
Total net sales
Assets:
United States
International:
Canada
All other international
Total international
Total assets
Long-lived assets (excluding goodwill and other intangible assets):
United States
International:
Canada
All other international
Total international
Total long-lived assets (excluding goodwill and other intangible assets)
Year Ended April 30,
2016
2015
2014
$ 7,300.8
$ 5,188.5
$5,092.0
$
416.0
94.4
$
510.4
$ 7,811.2
$
413.8
90.4
$
504.2
$ 5,692.7
$ 437.2
81.4
$ 518.6
$5,610.6
$15,501.1
$16,332.0
$8,621.4
$
396.2
86.8
483.0
$
$15,984.1
$
360.8
113.5
474.3
$
$16,806.3
$ 256.1
163.9
$ 420.0
$9,041.4
$ 1,773.9
$ 1,805.3
$1,343.2
$
10.7
40.6
$
51.3
$ 1,825.2
$
14.3
40.9
$
55.2
$ 1,860.5
$
16.5
38.9
$
55.4
$1,398.6
The following table presents product category sales as a percentage of consolidated net sales.
Coffee
Pet food
Pet snacks
Peanut butter
Fruit spreads
Shortening and oils
Baking mixes and frostings
Frozen handheld
Canned milk
Flour and baking ingredients
Juices and beverages
Portion control
Other
Total product sales
Year Ended April 30,
2016
2015
2014
34%
19
10
9
4
4
3
3
3
2
2
2
5
100%
44%
3
1
13
6
6
5
3
4
4
3
2
6
100%
46%
—
—
13
6
6
6
3
5
4
3
2
6
100%
Sales to Wal-Mart Stores, Inc. and subsidiaries amounted to 30 percent, 28 percent, and 27 percent of net sales in 2016, 2015, and 2014,
respectively. These sales are primarily included in our U.S. retail market segments. No other customer exceeded 10 percent of net sales for
any year. Trade receivables at April 30, 2016 and 2015, included amounts due from Wal-Mart Stores, Inc. and subsidiaries of $118.1 and
$122.6, respectively.
2016 ANNUAL REPORT 55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
NOTE 6
EARNINGS PER SHARE
The following table sets forth the computation of net income per common share and net income per common share – assuming dilution
under the two-class method.
Net income
Less: Net income allocated to participating securities
Net income allocated to common stockholders
Weighted-average common shares outstanding
Add: Dilutive effect of stock options
Weighted-average common shares outstanding – assuming dilution
Net income per common share
Net income per common share – assuming dilution
Year Ended April 30,
2016
$ 688.7
3.0
$ 685.7
118,918,701
41,113
118,959,814
$ 5.77
$ 5.76
2015
$ 344.9
2.2
$ 342.7
103,038,271
5,283
103,043,554
$ 3.33
$ 3.33
2014
$ 565.2
4.5
$ 560.7
103,504,121
14,346
103,518,467
$ 5.42
$ 5.42
NOTE 7
GOODWILL AND OTHER INTANGIBLE ASSETS
A summary of changes in goodwill during the years ended April 30, 2016 and 2015, by reportable segment is as follows:
Balance at May 1, 2014
Acquisitions
Other (A)
Balance at April 30, 2015
Acquisitions (B)
Divestiture
Other (A)
Balance at April 30, 2016
U.S. Retail
Coffee
$1,743.1
(0.3)
0.1
$1,742.9
348.0
—
—
U.S. Retail
Consumer
Foods
$1,095.5
47.9
(2.6)
$1,140.8
494.7
(33.6)
(1.0)
U.S. Retail
Pet Foods
—
$
2,812.1
—
$2,812.1
(842.6)
—
—
International
and
Foodservice
$ 259.6
60.9
(4.7)
$ 315.8
130.7
(14.2)
(2.5)
Total
$3,098.2
2,920.6
(7.2)
$6,011.6
130.8
(47.8)
(3.5)
$2,090.9
$1,600.9
$1,969.5
$ 429.8
$6,091.1
(A) The amounts classified as other represent foreign currency exchange for the years ended April 30, 2016 and 2015.
(B) As a result of the Big Heart acquisition, we recognized a total of $3.0 billion of goodwill, representing the value we expect to achieve through the
implementation of operational synergies and growth opportunities across our segments, which includes finalization of the fair value adjustments, as
discussed in Note 2: Acquisitions. In addition, the goodwill related to the 2015 acquisition was allocated across all reportable segments based on the
synergies anticipated to be achieved by each individual reporting unit, which were finalized in 2016. The purchase price allocation was finalized for the
Sahale acquisition in 2016, resulting in an immaterial adjustment to goodwill.
56 THE J. M. SMUCKER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
The following table summarizes our other intangible assets and related accumulated amortization and impairment charges, including
foreign currency exchange.
April 30, 2016
Accumulated
Amortization/
Impairment
Charges/
Foreign
Currency
Exchange
April 30, 2015
Accumulated
Amortization/
Impairment
Charges/
Foreign
Currency
Exchange
Net
Acquisition
Cost
Net
$ 639.9
88.4
78.7
$ 807.0
$2,880.2
80.1
446.7
$3,407.0
$3,733.9
169.0
328.0
$4,230.9
$ 477.9
74.8
47.6
$ 600.3
$3,256.0
94.2
280.4
$3,630.6
Acquisition
Cost
$3,520.1
168.5
525.4
$4,214.0
$3,109.1
$7,323.1
$ 21.7
$ 828.7
$3,087.4
$6,494.4
$3,338.0
$7,568.9
$ 18.3
$ 618.6
$3,319.7
$6,950.3
Finite-lived intangible assets subject to amortization:
Customer and contractual relationships
Patents and technology
Trademarks
Total intangible assets subject to amortization
Indefinite-lived intangible assets not subject to
amortization:
Trademarks
Total other intangible assets
Amortization expense for finite-lived intangible assets was $204.7, $110.3, and $98.7 in 2016, 2015, and 2014, respectively. The weighted-
average useful lives of the customer and contractual relationships, patents and technology, and trademarks are 23, 13, and 16 years,
respectively. The weighted-average useful life of total finite-lived intangible assets is 22 years. Based on the carrying amount of intangible
assets subject to amortization at April 30, 2016, the estimated amortization expense is $206.9 for 2017, $204.4 for 2018, $202.7 for 2019,
$198.3 for 2020, and $196.7 for 2021. During 2016, we began amortizing the Crisco trademark that was previously an indefinite-lived
intangible. The trademark was included in the annual impairment review performed as of February 1, 2016, and was not impaired. The
annual amortization expense related to the Crisco trademark is approximately $8.0.
We review goodwill and other indefinite-lived intangible assets at least annually for impairment. The annual impairment review was
performed as of February 1, 2016. Goodwill impairment is tested at the reporting unit level. At February 1, 2016, we had seven reporting
units. No goodwill impairment was recognized as a result of the annual evaluation performed as of February 1, 2016. The estimated fair
value of each reporting unit and material other indefinite-lived intangible asset was substantially in excess of its carrying value as of the
annual test date, with the exception of the Pet Food reporting unit and all trademarks within the U.S. Retail Pet Foods segment. The fair
value of the Pet Foods reporting unit exceeded the carrying value by $198.0, or 4 percent. A sensitivity analysis was performed for the Pet
Foods reporting unit, assuming a hypothetical 50-basis-point decrease in the expected long-term growth rate and yielded an estimated fair
value slightly below carrying value. The trademarks acquired with Big Heart are also equally as sensitive to a hypothetical 50-basis-point
decrease in the expected long-term growth rate for the Pet Foods reporting unit. The goodwill and intangibles related to the U.S. Retail Pet
Food segment resulting from the Big Heart acquisition remain susceptible to future impairment as the current fair values are close to the
carrying values at date of the acquisition. A change to the assumptions regarding future performance of the U.S. Retail Pet Foods segment,
or a portion of it, or a change to other assumptions, could result in impairment losses in the future.
2016 ANNUAL REPORT 57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
NOTE 8
DEBT AND FINANCING ARRANGEMENTS
Long-term debt consists of the following:
1.75% Senior Notes due March 15, 2018
2.50% Senior Notes due March 15, 2020
3.50% Senior Notes due October 15, 2021
3.00% Senior Notes due March 15, 2022
3.50% Senior Notes due March 15, 2025
4.25% Senior Notes due March 15, 2035
4.38% Senior Notes due March 15, 2045
Term Loan Credit Agreement due March 23, 2020
Total long-term debt
April 30, 2016
April 30, 2015
Principal
Outstanding
$ 500.0
500.0
750.0
400.0
1,000.0
650.0
600.0
750.0
$ 5,150.0
Carrying
Amount (A)
$ 498.0
495.5
789.4
395.9
992.7
642.2
584.4
747.9
$ 5,146.0
Principal
Outstanding
$ 500.0
500.0
750.0
400.0
1,000.0
650.0
600.0
1,550.0
$ 5,950.0
Carrying
Amount (A)
$ 496.9
494.3
796.0
395.3
991.9
641.8
583.8
1,544.9
$ 5,944.9
(A) Represents the carrying amount included in the Consolidated Balance Sheets, which includes the impact of interest rate swaps, offering discounts, and
capitalized debt issuance costs.
In March 2015, we entered into a senior unsecured delayed-draw Term Loan Credit Agreement (“Term Loan”) with a syndicate of banks
and an available commitment amount of $1.8 billion. Borrowings under the Term Loan bear interest on the prevailing U.S. Prime Rate or
London Interbank Offered Rate (“LIBOR”), based on our election, and is payable either on a quarterly basis or at the end of the borrowing
term. The weighted-average interest rate on the Term Loan at April 30, 2016, was 1.69 percent. The Term Loan requires quarterly
amortization payments of 2.50 percent of the original principal amount starting in the third quarter of 2016. Voluntary prepayments are
permitted without premium or penalty and are applied to the schedule of required quarterly minimum payment obligations in direct order of
maturity. As of April 30, 2016, we have prepaid $1.0 billion on the Term Loan to date, including $800.0 in 2016, and therefore no
additional payments are required until final maturity of the loan agreement on March 23, 2020.
Also in March 2015, we completed an offering of $3.7 billion in Senior Notes due beginning March 15, 2018 through March 15, 2045. The
proceeds from the offering, along with the Term Loan, were used to partially finance the Big Heart acquisition, pay off the debt assumed as
part of the acquisition, and prepay our privately placed Senior Notes. The prepayment of our Senior Notes resulted in a principal
prepayment of $1.1 billion and $163.3 of related make-whole payments. Other debt costs of $173.3 in the Statement of Consolidated
Income consist primarily of make-whole payments and Bridge Loan financing fees, offset by the write-off of the remaining fair value
interest rate swap gain.
All of our Senior Notes outstanding at April 30, 2016, are unsecured and interest is paid semiannually. There are no required scheduled
principal payments on our Senior Notes. We may prepay at any time all or part of the Senior Notes at 100 percent of the principal amount
thereof, together with the accrued and unpaid interest, and any applicable make-whole amount.
During 2015, we entered into a series of forward-starting interest rate swaps that were designated as cash flow hedges. In conjunction with
the pricing of the series of Senior Notes, we terminated the interest rate swaps prior to maturity, resulting in a net loss of $4.0, which will
be amortized over the life of the remaining debt. During 2014, we entered into an interest rate swap designated as a fair value hedge of the
3.50 percent Senior Notes due October 15, 2021. In 2015, we terminated the interest rate swap agreement and we received $58.1 in cash. At
April 30, 2016, the remaining benefit of $43.9 was recorded as an increase in the long-term debt balance and will be recognized ratably as a
reduction to future interest expense over the remaining life of the related debt. For additional information, see Note 10: Derivative
Financial Instruments.
We have available a $1.5 billion revolving credit facility with a group of 11 banks that matures in September 2018. Borrowings under the
revolving credit facility bear interest based on the prevailing U.S. Prime Rate, Canadian Base Rate, LIBOR, or Canadian Dealer Offered
Rate, based on our election. Interest is payable either on a quarterly basis or at the end of the borrowing term. At April 30, 2016 and 2015,
we did not have a balance outstanding under the revolving credit facility.
During 2015, we entered into a commercial paper program under which we can issue short-term, unsecured commercial paper not to
exceed $1.0 billion at any time. The commercial paper program is backed by our revolving credit facility and reduces what we can borrow
under the revolving credit facility by the amount of commercial paper outstanding. Commercial paper will be used as a continuing source
of short-term financing for general corporate purposes. As of April 30, 2016 and 2015, we had $284.0 and $226.0 of short-term borrowings
outstanding, all of which were issued under our commercial paper program at a weighted-average interest rate of 0.65 percent and 0.45
percent, respectively.
58 THE J. M. SMUCKER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
Interest paid totaled $167.3, $92.3, and $83.3 in 2016, 2015, and 2014, respectively. This differs from interest expense due to the timing of
payments, amortization of fair value swap adjustments, effect of the interest rate swap, amortization of debt issuance costs, and capitalized
interest.
Our debt instruments contain certain financial covenant restrictions, including a leverage ratio and an interest coverage ratio. We are in
compliance with all covenants.
NOTE 9
PENSIONS AND OTHER POSTRETIREMENT BENEFITS
We have defined benefit pension plans covering certain U.S. and Canadian employees, including the acquired pension and other
postretirement plans of Big Heart. Pension benefits are based on the employee’s years of service and compensation levels. Our plans are
funded in conformity with the funding requirements of applicable government regulations.
In addition to providing pension benefits, we sponsor several unfunded postretirement plans that provide health care and life insurance
benefits to certain retired U.S. and Canadian employees. 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 have attained 10 years of credited service.
The following table summarizes the components of net periodic benefit cost and the change in accumulated other comprehensive loss
related to the defined benefit pension and other postretirement plans.
Year Ended April 30,
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost (credit)
Amortization of net actuarial loss (gain)
Curtailment gain
Settlement loss
Net periodic benefit cost
Other changes in plan assets and benefit liabilities recognized in
accumulated other comprehensive loss before income taxes:
Prior service (cost) credit arising during the year
Net actuarial (loss) gain arising during the year
Amortization of prior service cost (credit)
Amortization of net actuarial loss (gain)
Curtailment gain
Settlement loss
Foreign currency translation
Net change for year
Weighted-average assumptions used in determining net periodic
benefit costs:
U.S. plans:
Discount rate
Expected return on plan assets
Rate of compensation increase
Canadian plans:
Discount rate
Expected return on plan assets
Rate of compensation increase
Defined Benefit Pension Plans
Other Postretirement Benefits
2016
$ 17.8
27.7
(32.9)
0.7
10.9
(6.5)
—
$ 17.7
$ (5.3)
(43.3)
0.7
10.9
(6.5)
—
0.8
$(42.7)
2015
$ 9.0
23.2
(25.6)
1.0
10.0
—
3.5
$ 21.1
$ (0.3)
(23.7)
1.0
10.0
—
3.5
2.7
$ (6.8)
2014
$ 8.7
21.8
(25.4)
1.2
13.2
—
—
$ 19.5
$ —
19.3
1.2
13.2
—
—
2.9
$ 36.6
2016
$ 2.3
2.8
—
(1.1)
(0.3)
(0.3)
—
$ 3.4
$ —
—
(1.1)
(0.3)
(0.3)
—
—
$ (1.7)
2015
$ 2.3
2.4
—
(1.1)
(0.1)
—
—
$ 3.5
$ —
1.6
(1.1)
(0.1)
—
—
—
$ 0.4
2014
$ 2.3
2.3
—
(1.1)
—
—
—
$ 3.5
$ 1.7
7.5
(1.1)
—
—
—
—
$ 8.1
4.06%
6.58
4.06
3.51%
5.65
3.00
4.42%
6.72
4.13
4.11%
5.64
3.00
3.99%
6.75
4.13
3.65%
5.78
3.00
4.04%
—
—
3.50%
—
—
4.27%
—
—
4.10%
—
—
3.80%
—
—
3.70%
—
—
2016 ANNUAL REPORT 59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
We amortize gains and losses for our postretirement plans over the average expected future period of vested service. For plans that consist
of less than 5 percent of participants that are active, average life expectancy is used instead of the average expected useful service period.
We use a measurement date of April 30 to determine defined benefit pension and other postretirement benefit plans’ assets and benefit
obligations. The following table sets forth the combined status of the plans as recognized in the Consolidated Balance Sheets.
April 30,
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Amendments
Actuarial loss (gain)
Participant contributions
Benefits paid
Foreign currency translation adjustments
Curtailment
Settlement
Acquisition
Other adjustments
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Company contributions
Participant contributions
Benefits paid
Settlement
Acquisition
Foreign currency translation adjustments
Fair value of plan assets at end of year
Funded status of the plans
Defined benefit pensions
Other noncurrent assets
Accrued compensation
Postretirement benefits other than pensions
Net benefit liability
Defined Benefit Pension Plans
Other Postretirement Benefits
2016
2015
2016
2015
$ 740.4
17.8
27.7
5.3
20.3
0.1
(45.7)
(4.1)
(10.1)
(3.0)
(2.8)
—
$ 745.9
$ 550.0
(0.2)
8.6
0.1
(45.7)
(3.0)
—
(4.2)
$ 505.6
$ (240.3)
$ (222.3)
—
(18.0)
—
$ (240.3)
$ 542.3
9.0
23.2
0.3
39.8
0.1
(31.8)
(10.6)
—
(8.6)
176.7
—
$ 740.4
$ 402.1
41.7
15.7
0.1
(31.8)
(8.6)
141.1
(10.3)
$ 550.0
$ (190.4)
$ (188.9)
2.0
(3.5)
—
$ (190.4)
$ 75.8
2.3
2.8
—
0.3
0.6
(5.2)
(0.4)
(0.3)
—
—
—
$ 75.9
$ —
—
4.6
0.6
(5.2)
—
—
—
$ —
$(75.9)
$ —
—
—
(75.9)
$(75.9)
$ 58.5
2.3
2.4
—
(1.6)
0.7
(4.4)
(1.1)
—
—
18.9
0.1
$ 75.8
$ —
—
3.7
0.7
(4.4)
—
—
—
$ —
$(75.8)
$ —
—
(1.2)
(74.6)
$(75.8)
The following table summarizes amounts recognized in accumulated other comprehensive loss in the Consolidated Balance Sheets, before
income taxes.
April 30,
Net actuarial (loss) gain
Prior service (cost) credit
Total recognized in accumulated other comprehensive loss
2016
$ (212.3)
(8.8)
$ (221.1)
2015
$ (174.2)
(4.2)
$ (178.4)
2016
$ 6.3
9.2
$ 15.5
2015
$ 6.9
10.3
$ 17.2
Defined Benefit Pension Plans
Other Postretirement Benefits
During 2017, we expect to recognize amortization of net actuarial losses and prior service cost of $14.8 and $0.2, respectively, in net
periodic benefit cost.
60 THE J. M. SMUCKER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
The following table sets forth the weighted-average assumptions used in determining the benefit obligations.
April 30,
U.S. plans:
Discount rate
Rate of compensation increase
Canadian plans:
Discount rate
Rate of compensation increase
Defined Benefit Pension Plans
2016
2015
Other Postretirement Benefits
2016
2015
3.76%
3.96
3.60%
3.00
4.01%
4.06
3.51%
3.00
3.80%
—
3.50%
—
3.97%
—
3.50%
—
For 2017, the assumed health care trend rates are 7.3 percent and 4.5 percent for the U.S. and Canadian plans, respectively. The rate for
participants under age 65 is assumed to decrease to 5.0 percent in 2026 for U.S. plans and stay consistent at 4.5 percent in 2017 for
Canadian plans. The health care cost trend rate assumption impacts the amount of the other postretirement benefits obligation and periodic
other postretirement benefits cost reported. A one percentage point annual change in the assumed health care cost trend rate would have the
following effect as of April 30, 2016:
Effect on total service and interest cost components
Effect on benefit obligation
One Percentage Point
Increase
$ 0.1
2.2
Decrease
$ 0.1
2.1
The following table sets forth selective information pertaining to our Canadian pension and other postretirement benefit plans, which is
included in the consolidated information presented on pages 59 and 60.
Year Ended April 30,
Benefit obligation at end of year
Fair value of plan assets at end of year
Funded status of the plans
Components of net periodic benefit cost:
Service cost
Interest cost
Expected return on plan assets
Amortization of net actuarial loss
Net periodic benefit cost
Changes in plan assets:
Company contributions
Participant contributions
Benefits paid
Actual return on plan assets
Foreign currency translation
Defined Benefit Pension Plans
2016
$97.3
96.0
$ (1.3)
2015
$104.4
104.1
$ (0.3)
$ 0.3
3.3
(5.4)
0.8
$ (1.0)
$ 3.3
0.1
(6.7)
(0.6)
(4.2)
$
0.4
4.3
(5.6)
0.9
$ —
$
5.1
0.1
(8.4)
11.9
(10.3)
The following table sets forth additional information related to our defined benefit pension plans.
Accumulated benefit obligation for all pension plans
Plans with an accumulated benefit obligation in excess of plan assets:
Accumulated benefit obligation
Fair value of plan assets
Plans with a projected benefit obligation in excess of plan assets:
Projected benefit obligation
Fair value of plan assets
Other Postretirement Benefits
2016
$ 10.2
—
$(10.2)
$ —
0.3
—
—
$ 0.3
$ 0.6
—
(0.6)
—
—
April 30,
2016
$ 697.5
$ 697.5
505.6
$ 745.9
505.6
2015
$ 10.9
—
$(10.9)
$ —
0.4
—
—
$ 0.4
$ 0.7
—
(0.7)
—
—
2015
$ 691.8
$ 481.6
337.8
$ 669.3
477.3
2016 ANNUAL REPORT 61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
We employ a total return on investment approach for the defined benefit pension plans’ assets. A mix of equity, fixed-income, and
alternative investments is used to maximize the long-term rate of return on assets for the level of risk. In determining the expected long-
term rate of return on the defined benefit pension plans’ assets, we consider the historical rates of return, the nature of investments, the asset
allocation, and expectations of future investment strategies. The actual rate of return was 1.7 percent and 11.6 percent for the years ended
April 30, 2016 and 2015, respectively, which excludes administrative and investment expenses.
In May 2015, the FASB issued ASU 2015-07, Fair Value Measurement (Topic 820) Disclosure for Investments in Certain Entities That
Calculate Net Asset Value per Share (or Its Equivalent). ASU 2015-07 requires that investments measured using the net asset value
(“NAV”) per share, or its equivalent practical expedient, be disclosed as a reconciling item between the balance sheet amounts and the
amounts reported in the fair value hierarchy. Although ASU 2015-07 is not effective for us until May 1, 2016, we elected early adoption, as
permitted, and presented the impacted investments as of April 30, 2016, in accordance with ASU 2015-07. In addition, the prior year
presentation of Level 3 assets valued using NAV have been modified to conform to the current year presentation in accordance with
ASU 2015-07.
The following tables summarize the major asset classes for the U.S. and Canadian defined benefit pension plans and the levels within the
fair value hierarchy for those assets measured at fair value.
Cash and cash equivalents (A)
Equity securities:
U.S. (B)
International (C)
Fixed-income securities:
Bonds (D)
Fixed income (E)
Other types of investments (F)
Total financial assets measured at fair value
Total financial assets measured at NAV (G)
Total plan assets
Cash and cash equivalents (A)
Equity securities:
U.S. (B)
International (C)
Fixed-income securities:
Bonds (D)
Fixed income (E)
Other types of investments (F)
Total financial assets measured at fair value
Total financial assets measured at NAV (G)
Total plan assets
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
$
2.5
122.0
83.7
188.1
62.4
6.2
$ 464.9
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
$
4.6
105.0
81.0
151.3
44.1
—
$ 386.0
Significant
Observable
Inputs
(Level 2)
$ —
Significant
Unobservable
Inputs
(Level 3)
Plan Assets at
April 30, 2016
$ —
$
2.5
13.5
11.0
—
—
—
$ 24.5
—
—
—
—
3.2
$ 3.2
135.5
94.7
188.1
62.4
9.4
$ 492.6
$ 13.0
$ 505.6
Significant
Observable
Inputs
(Level 2)
$ —
Significant
Unobservable
Inputs
(Level 3)
Plan Assets at
April 30, 2015
$ —
$
4.6
45.5
24.5
—
68.5
7.0
$145.5
—
—
—
—
2.8
$ 2.8
150.5
105.5
151.3
112.6
9.8
$ 534.3
$ 15.7
$ 550.0
(A) This category includes money market holdings with maturities of three months or less and are classified as Level 1 assets. Based on the short-term nature
of these assets, carrying value approximates fair value.
(B) This category is invested primarily in a diversified portfolio of common stocks and index funds that invest in U.S. stocks with market capitalization
ranges similar to those found in the S&P 500 Index and/or the various Russell Indexes and are traded on active exchanges. The Level 1 assets are valued
using quoted market prices for identical securities in active markets. In 2016, the Level 2 assets are comprised of pooled funds only, and in 2015, the
Level 2 assets are comprised of pooled and common collective trust funds that consist of equity securities traded on active exchanges.
(C) This category is invested primarily in common stocks and other equity securities traded on active exchanges whose issuers are located outside the U.S.
The fund invests primarily in developed countries, but may also invest in emerging markets. The Level 1 assets are valued using quoted market prices
62 THE J. M. SMUCKER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
for identical securities in active markets. In 2016, the Level 2 assets are comprised of pooled funds only, and in 2015, the Level 2 assets are comprised of
pooled and common collective trust funds that consist of equity securities traded on active exchanges.
(D) This category is comprised of bond funds, which seek to duplicate the return characteristics of high-quality corporate bonds with a duration range of
10 to 13 years. The Level 1 assets are valued using quoted market prices for identical securities in active markets.
(E) This category is comprised of fixed-income funds that invest primarily in government-related bonds of non-U.S. issuers and include investments in the
Canadian market as well as emerging markets. The Level 1 assets are valued using quoted market prices for identical securities in active markets. In
2015, contained within the Level 2 assets is a Core Plus pool of funds investing primarily in high-yield, emerging market debt and global bonds, as well
as an international bond fund which invests in fixed-income securities denominated in currencies other than U.S. dollars. These Level 2 assets are pooled
or common collective trust funds that consist of fixed-income securities traded on active exchanges.
(F) This category is comprised of a dynamic asset allocation mutual fund and a private limited investment partnership in 2016, and in 2015, the category also
included a global alpha collective trust fund. The dynamic asset allocation mutual fund and the global alpha collective trust fund are comprised of U.S.
and global equities and fixed-income securities inclusive of derivatives within the asset mix. The dynamic asset allocation mutual fund is classified as a
Level 1 asset, whereby the assets are valued using quoted market prices for identical securities in active markets. However, the collective trust fund is
classified as a Level 2 asset, whereby the underlying securities are valued utilizing quoted market prices for identical securities in active markets. The
private investment limited partnership is classified as a Level 3 asset. The investments in the partnership are valued at estimated fair value based on
audited financial statements received from the general partner. The private investment limited partnership cannot be redeemed, and the return of
principal is based on the liquidation of the underlying assets.
(G) This category is comprised of a private equity fund that consists primarily of limited partnership interests in corporate finance and venture capital funds.
The fair value estimate of the private equity fund is based on the underlying funds' net asset values further as a practical expedient equivalent to the
Company's defined benefit plan's ownership interest in partners' capital, whereby a proportionate share of the net assets are attributed and further
corroborated by our review. The private equity fund is non-redeemable and the return of principal is based on the liquidation of the underlying assets. In
accordance with ASU 2015-07, the private equity fund is removed from the total financial assets measured at fair value and disclosed separately.
The following table presents a rollforward of activity for Level 3 assets.
Balance at May 1,
Big Heart pension assets acquired
Actual return on plan assets still held at reporting date
Balance at April 30,
2016
$ 2.8
—
0.4
$ 3.2
2015
$ —
2.8
—
$ 2.8
Our current investment policy is to invest 50 percent of assets in both equity securities and fixed-income securities. Included in equity
securities were 317,552 of our common shares at April 30, 2016. The total market value of these shares was $40.3 at April 30, 2016. We
paid dividends of $0.9 on these shares during 2016.
We expect to contribute approximately $7.5 to the defined benefit pension plans in 2017. We expect the following payments to be made
from the defined benefit pension and other postretirement benefit plans: $77.0 in 2017, $50.1 in 2018, $50.6 in 2019, $53.3 in 2020, $54.4
in 2021, and $295.7 in 2022 through 2026.
As a result of the Big Heart acquisition, we now participate in one multi-employer pension plan, the Bakery and Confectionery Union and
Industry International Pension Fund (“Bakery and Confectionery Union Fund”) (52-6118572), which provides defined benefits to certain
union employees. During 2016 and 2015, a total of $1.8 and $1.7 was contributed to the plan, respectively, and we anticipate contributions
of $1.9 in 2017. During 2015, only $0.1 was contributed and recognized in the Statement of Consolidated Income following the acquisition
in the fourth quarter of 2015.
The risks of participating in multi-employer pension plans are different from the risks of participating in single-employer pension plans.
For instance, the assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other
participating employers and if a participating employer stops contributing to the plan, the unfunded obligations of the plan allocable to the
withdrawing employer may be the responsibility of the remaining participating employers. Additionally, if we stop participating in the
multi-employer pension plan, we may be required to pay the plan an amount based on our allocable share of the underfunded status of the
plan, referred to as a withdrawal liability.
The Pension Protection Act of 2006 ranks the funded status of multi-employer pension plans depending upon a plan’s current and projected
funding. A plan is in the Red Zone (Critical) if it has a current funded percentage less than 65 percent. A plan is in the Yellow Zone
(Endangered) if it has a current funded percentage of less than 80 percent or projects a credit balance deficit within seven years. A plan is in
the Green Zone (Healthy) if it has a current funded percentage greater than 80 percent and does not have a projected credit balance deficit
within seven years. The zone status is based on the plan’s year end, not our fiscal year end. The zone status is based on information that we
received from the plan and is certified by the plan’s actuary. During calendar year 2015, the Bakery and Confectionery Union Fund was in
Red Zone status, as the current funding status as of calendar year 2015 was 62.8 percent. A funding improvement plan or rehabilitation plan
has been implemented.
2016 ANNUAL REPORT 63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
NOTE 10
DERIVATIVE FINANCIAL INSTRUMENTS
We are exposed to market risks, such as changes in commodity prices, foreign currency exchange rates, and interest rates. To manage the
volatility related to these exposures, we enter into various derivative transactions. We have policies in place that define acceptable
instrument types we may enter into and establish controls to limit our market risk exposure.
Commodity Price Management: We enter into commodity derivatives to manage the price volatility and reduce the variability of future
cash flows related to anticipated inventory purchases of key raw materials, notably green coffee, corn, edible oils, soybean meal, and
wheat. We also enter into commodity derivatives to manage price risk for energy input costs, including diesel fuel and natural gas. Our
derivative instruments generally have maturities of less than one year.
We do not qualify commodity derivatives for hedge accounting treatment and, as a result, the derivative gains and losses are immediately
recognized in earnings. Although we do not perform the assessments required to achieve hedge accounting for derivative positions, we
believe all of our commodity derivatives are economic hedges of our risk exposure.
The commodities hedged have a high inverse correlation to price changes of the derivative commodity instrument. Thus, we would expect
that over time any gain or loss in the estimated fair value of the derivatives would generally be offset by an increase or decrease in the
estimated fair value of the underlying exposures.
Foreign Currency Exchange Rate Hedging: We utilize foreign currency derivatives to manage the effect of foreign currency exchange
fluctuations on future cash payments primarily related to purchases of certain raw materials and finished goods. The contracts generally
have maturities of less than one year. We do not qualify instruments used to manage foreign currency exchange exposures for hedge
accounting treatment.
Interest Rate Hedging: We utilize derivative instruments to manage changes in the fair value of our debt. Interest rate swaps mitigate the
risk associated with the underlying hedged item. At the inception of the contract, the instrument is evaluated and documented for hedge
accounting treatment. If the contract is designated as a cash flow hedge, the mark-to-market gains or losses on the swap are deferred and
included as a component of accumulated other comprehensive loss to the extent effective, and reclassified to interest expense in the period
during which the hedged transaction affects earnings. If the contract is designated as a fair value hedge, the swap would be recognized at
fair value on the balance sheet and changes in the fair value would be recognized in interest expense. Generally, changes in the fair value of
the derivative are equal to changes in the fair value of the underlying debt and have no impact on earnings.
During 2015, we entered into a series of forward-starting interest rate swaps to hedge a portion of the interest rate risk related to our
anticipated issuance of Senior Notes. The notional hedged amount was $1.1 billion, with expected maturity tenors of 10, 20, and 30 years.
The swap agreements were designated as cash flow hedges, where changes in fair value are recorded in other comprehensive loss. In March
2015, in conjunction with the pricing of the Senior Notes, we terminated the interest rate swaps prior to maturity. The termination resulted
in a net loss of $4.0, which will be amortized through 2045. For additional information, see Note 8: Debt and Financing Arrangements.
During 2014, we entered into an interest rate swap on the 3.50 percent Senior Notes due October 15, 2021, which was designated as a fair
value hedge and used to hedge against the changes in the fair value of the debt. We received cash flows from the counterparty at a fixed rate
and paid the counterparty variable rates based on LIBOR. In 2015, we terminated the interest rate swap on the 3.50 percent Senior Notes
prior to maturity. As a result of the early termination, we received $58.1 in cash, which included $4.6 of accrued and prepaid interest. The
gain on termination was deferred and will be recognized over the remaining life of the underlying debt as a reduction of future interest
expense. We recognized $7.4 and $2.2 in 2016 and 2015, respectively. The remaining will be recognized as follows: $7.6 in 2017, $7.8 in
2018, $8.0 in 2019, $8.1 in 2020, $8.4 in 2021, and $4.0 in 2022. For additional information, see Note 8: Debt and Financing
Arrangements.
64 THE J. M. SMUCKER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
The following tables set forth the gross fair value amounts of derivative instruments recognized in the Consolidated Balance Sheets.
Derivatives not designated as hedging instruments:
Commodity contracts
Foreign currency exchange contracts
Total derivative instruments
Derivatives not designated as hedging instruments:
Commodity contracts
Foreign currency exchange contracts
Total derivative instruments
Other
Current
Assets
$20.3
0.2
$20.5
Other
Current
Assets
$ 6.4
4.8
$11.2
April 30, 2016
Other
Current
Liabilities
Other
Noncurrent
Assets
Other
Noncurrent
Liabilities
$14.1
8.9
$23.0
$ 2.0
0.3
$ 2.3
$ 1.2
0.4
$ 1.6
April 30, 2015
Other
Current
Liabilities
Other
Noncurrent
Assets
Other
Noncurrent
Liabilities
$23.9
1.0
$24.9
$ 0.2
—
$ 0.2
$ 3.8
—
$ 3.8
We have elected to not offset fair value amounts recognized for our exchange-traded commodity derivative instruments and our cash
margin accounts executed with the same counterparty that are generally subject to enforceable netting agreements. We are required to
maintain cash margin accounts in connection with funding the settlement of our open positions. At April 30, 2016 and 2015, we maintained
cash margin account balances of $3.4 and $38.2, respectively, included in other current assets in the Consolidated Balance Sheets. The
change in the cash margin account balances is included in other – net, investing activities in the Statements of Consolidated Cash Flows. In
the event of default and immediate net settlement of all of our open positions with individual counterparties, all of our derivative liabilities
would be fully offset by either our derivative asset positions or margin accounts based on the net asset or liability position with our
individual counterparties.
The following table presents information on pre-tax commodity contract net gains recognized on derivatives designated as cash flow
hedges prior to May 1, 2014, and pre-tax losses related to the termination of interest rate swaps.
Losses recognized in other comprehensive loss (effective portion)
Gains reclassified from accumulated other comprehensive loss to cost of products sold (effective portion)
Losses reclassified from accumulated other comprehensive loss to interest expense (effective portion)
Change in accumulated other comprehensive loss
Losses recognized in interest expense (ineffective portion)
Year Ended April 30,
2016
$ —
—
(0.6)
$ 0.6
$ —
2015
$ (4.0)
29.1
(0.6)
$(32.5)
$ (0.1)
Included as a component of accumulated other comprehensive loss at April 30, 2016 and 2015, were deferred pre-tax losses of $7.6 and
$8.2, respectively, related to the termination of interest rate swaps. The related tax benefit recognized in accumulated other comprehensive
loss was $2.7 and $2.9 at April 30, 2016 and 2015, respectively. Approximately $0.6 of the pre-tax loss will be recognized over the next 12
months.
The following table presents the net gains and losses recognized in cost of products sold on derivatives not designated as hedging
instruments.
Losses on commodity contracts
Gains on foreign currency exchange contracts
Total losses recognized in costs of products sold
Year Ended April 30,
2016
$(31.6)
2.0
$(29.6)
2015
$(48.5)
8.8
$(39.7)
2016 ANNUAL REPORT 65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
Commodity and foreign currency exchange derivative gains and losses are reported in unallocated derivative gains and losses outside of
segment operating results until the related inventory is sold. At that time, we reclassify the hedge gains and losses from unallocated
derivative gains and losses to segment profit, allowing our segments to realize the economic effect of the hedge without experiencing any
mark-to-market volatility. The following table presents the activity in unallocated derivative gains and losses.
Net (losses) gains on mark-to-market valuation of unallocated derivative positions
Net losses (gains) on derivative positions reclassified to segment operating profit
Unallocated derivative gains (losses)
Year Ended April 30,
2016
$(29.6)
41.6
$ 12.0
2015
$(39.7)
15.2
$(24.5)
2014
$ 8.5
(3.2)
$ 5.3
The net cumulative unallocated derivative losses at April 30, 2016 and 2015 were $8.4 and $20.4, respectively. As of April 30, 2016, net
realized losses of $3.6 were included in cumulative unallocated derivative losses and will be reclassified to segment operating profit when
the related inventory is sold.
The following table presents the gross contract notional value of outstanding derivative contracts.
Commodity contracts
Foreign currency exchange contracts
Year Ended April 30,
2016
$ 545.7
212.5
2015
$ 640.6
136.4
NOTE 11
OTHER FINANCIAL INSTRUMENTS AND FAIR VALUE
MEASUREMENTS
Financial instruments, other than derivatives, that potentially subject us to significant concentrations of credit risk consist principally of
cash investments, short-term borrowings, and trade receivables. The carrying value of these financial instruments approximates fair value.
Our other financial instruments, with the exception of long-term debt, are recognized at estimated fair value in the Consolidated Balance
Sheets.
The following table provides information on the carrying amounts and fair values of our financial instruments.
Other investments
Derivative financial instruments – net
Long-term debt
April 30, 2016
April 30, 2015
$
Carrying
Amount
48.8
(1.8)
(5,146.0)
Fair Value
48.8
$
(1.8)
(5,319.9)
$
Carrying
Amount
48.4
(17.3)
(5,944.9)
Fair Value
48.4
$
(17.3)
(6,011.3)
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Valuation techniques are based on observable and unobservable inputs. Observable inputs
reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions.
66 THE J. M. SMUCKER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
The following tables summarize the fair values and the levels within the fair value hierarchy in which the fair value measurements fall for
our financial instruments.
Other investments: (A)
Equity mutual funds
Municipal obligations
Money market funds
Derivative financial instruments: (B)
Commodity contracts – net
Foreign currency exchange contracts – net
Long-term debt (C)
Total financial instruments measured at fair value
Other investments: (A)
Equity mutual funds
Municipal obligations
Money market funds
Derivative financial instruments: (B)
Commodity contracts – net
Foreign currency exchange contracts – net
Long-term debt (C)
Total financial instruments measured at fair value
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
$
9.8
—
1.4
15.0
(1.7)
(4,569.0)
$(4,544.5)
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
$
9.7
—
0.8
(12.4)
(0.2)
(4,459.0)
$(4,461.1)
Significant
Observable
Inputs
(Level 2)
$
—
37.6
—
(8.0)
(7.1)
(750.9)
Significant
Unobservable
Inputs
(Level 3)
Fair Value at
April 30, 2016
$ —
—
—
—
—
—
$
9.8
37.6
1.4
7.0
(8.8)
(5,319.9)
$ (5,272.9)
$ (728.4)
$ —
Significant
Observable
Inputs
(Level 2)
$
—
37.9
—
(8.7)
4.0
(1,552.3)
$(1,519.1)
Significant
Unobservable
Inputs
(Level 3)
Fair Value at
April 30, 2015
$ —
—
—
—
—
—
$ —
$
9.7
37.9
0.8
(21.1)
3.8
(6,011.3)
$ (5,980.2)
(A) Other investments consist of funds maintained for the payment of benefits associated with nonqualified retirement plans. The funds include equity
securities listed in active markets, municipal obligations valued by a third party using valuation techniques that utilize inputs that are derived principally
from or corroborated by observable market data, and money market funds with maturities of three months or less. Based on the short-term nature of
these money market funds, carrying value approximates fair value. As of April 30, 2016, our municipal obligations are scheduled to mature as follows:
$1.3 in 2017, $1.0 in 2018, $2.9 in 2019, $2.2 in 2020, and the remaining $30.2 in 2021 and beyond. For additional information, see Marketable
Securities and Other Investments in Note 1: Accounting Policies.
(B) Level 1 commodity and foreign currency exchange derivatives are valued using quoted market prices for identical instruments in active markets. Level 2
commodity and foreign currency exchange derivatives are valued using quoted prices for similar assets or liabilities in active markets.
(C) Long-term debt is comprised of public Senior Notes classified as Level 1 and the Term Loan classified as Level 2. The public Senior Notes are traded in
an active secondary market and valued using quoted prices. The value of the Term Loan is based on the net present value of each interest and principal
payment calculated, utilizing an interest rate derived from an estimated yield curve obtained from independent pricing sources for similar types of term
loan borrowing arrangements. For additional information, see Note 8: Debt and Financing Arrangements.
NOTE 12
SHARE-BASED PAYMENTS
We provide for equity-based incentives to be awarded to key employees and non-employee directors. Currently, these incentives consist of
restricted shares, restricted stock units (which may also be referred to as deferred stock units), performance units, and stock options. These
awards are administered primarily through the 2010 Equity and Incentive Compensation Plan initially approved by our shareholders in
August 2010 and re-approved in August 2015. Awards under this plan may be in the form of stock options, stock appreciation rights,
restricted shares, restricted stock units, performance shares, performance units, incentive awards, and other share-based awards. Awards
under this plan may be granted to our non-employee directors, consultants, officers, and other employees. Deferred stock units granted to
non-employee directors vest immediately and, along with dividends credited on those deferred stock units, are paid out in the form of
common shares upon termination of service as a non-employee director. At April 30, 2016, there were 5,436,296 shares available for future
issuance under this plan.
2016 ANNUAL REPORT 67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
Under the 2010 Equity and Incentive Compensation Plan, we have the option to settle share-based awards by issuing common shares from
treasury, issuing new Company common shares, or issuing a combination of common shares from treasury and new Company common
shares.
Stock Options: We granted 370,000 and 955,000 stock options during 2016 and 2015, respectively, under the 2010 Equity and Incentive
Compensation Plan. The options vest over a period of 1 to 3 years dependent on the continued service of the option holder, as well as the
achievement of performance objectives established on the grant date. The exercise price of all options granted is equal to the market value
of the shares on the date of grant. All options granted during 2016 and 2015 have a contractual term of 10 years.
The fair value of each option is estimated on the date of grant using a Black-Scholes option-pricing model with the following weighted-
average assumptions for stock options granted:
Expected volatility (%)
Dividend Yield (%)
Risk-free interest rate (%)
Expected life of stock option (years)
2016
20.7%
2.3%
1.9%
5.9
2015
25.0%
2.2%
1.5%
5.6
Expected volatility was calculated in accordance with the provisions of FASB ASC 718, Compensation – Stock Compensation, based on
consideration of both historical and implied volatilities. The expected life of a stock option represents the period from the grant date
through the expected exercise date of the option. This was calculated using a simplified method whereby the midpoint between the vesting
date and the end of the contractual term is utilized to compute the expected term.
The following table is a summary of our option activity.
Outstanding at May 1, 2015
Granted
Exercised
Cancelled
Outstanding at April 30, 2016
Exercisable at April 30, 2016
Number
of Options
957,000
370,000
2,000
80,000
1,245,000
—
Weighted-Average
Exercise Price
$112.45
114.71
47.78
111.52
$113.29
$ —
Options outstanding at April 30, 2016 have an aggregate intrinsic value of $17.0 with an average remaining contractual term of 9.0 years.
The options granted in 2016 and 2015 have a weighted-average grant date fair value of $18.67 and $21.68 per option, respectively. No
options were granted in 2014. The total intrinsic value of options exercised was $0.1, $1.9, and $0.8 for 2016, 2015, and 2014, respectively.
The closing market price of our common stock on the last trading day of 2016 was $126.98 per share.
For options granted during 2016 and 2015, compensation cost will be recognized ratably over the service period for each vesting tranche
from the grant date through the end of the requisite service period to the extent the performance objectives are likely to be achieved.
Compensation cost for stock option awards totaled $8.1 and $1.2 million for the years ended April 30, 2016 and 2015, respectively, and
was included in other special project costs in the Statements of Consolidated Income. No compensation cost was incurred during 2014
related to stock options. The tax benefit related to the stock option expense was $3.0 and $0.4 million for 2016 and 2015, respectively. At
April 30, 2016, we had $14.7 of total unrecognized compensation expense, net of estimated forfeitures, related to stock options that will be
recognized over a weighted-average period of 1.7 years.
Cash received from option exercises for the years ended April 30, 2016, 2015, and 2014 was $0.1, $0.8, and $0.5, respectively.
68 THE J. M. SMUCKER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
Other Equity Awards: The following table is a summary of our restricted shares, deferred stock units, and performance units.
Outstanding at May 1, 2015
Granted
Converted
Vested
Forfeited
Outstanding at April 30, 2016
Restricted Shares
and Deferred
Stock Units
596,889
97,922
75,848
(216,145)
(8,772)
545,742
Weighted-
Average
Grant Date
Fair Value
$ 91.21
113.57
111.41
86.55
105.24
$ 99.65
Performance
Units
75,848
121,936
(75,848)
—
—
121,936
Weighted-
Average
Conversion Date
Fair Value
$ 111.41
132.46
111.41
—
—
$ 132.46
The weighted-average grant date fair value of equity awards other than stock options that vested in 2016, 2015, and 2014 was $18.7, $28.6,
and $20.8, respectively. The vesting date fair value of equity awards other than stock options that vested in 2016, 2015, and 2014 was
$24.4, $43.4, and $40.2, respectively. The weighted-average grant date fair value of restricted shares and deferred stock units is the average
of the high and the low share price on the date of grant. The weighted-average conversion date fair value of performance units is the
average of the high and the low share price on the date of conversion to restricted shares. The following table summarizes the weighted-
average fair values of the equity awards granted in 2016, 2015, and 2014.
Year Ended April 30,
2016
2015
2014
Restricted Shares
and Deferred
Stock Units
97,922
109,091
167,134
Weighted-
Average
Grant Date
Fair Value
$ 113.57
104.82
101.08
Performance
Units
121,936
75,848
101,020
Weighted-
Average
Conversion Date
Fair Value
$ 132.46
111.41
104.91
The performance units column represents the number of restricted shares received by certain executive officers, subsequent to year end,
upon conversion of the performance units earned during the year. Restricted shares and deferred stock units generally vest 4 years from the
date of grant or upon the attainment of a defined age and years of service, subject to certain retention requirements.
NOTE 13
INCOME TAXES
Income before income taxes is as follows:
Domestic
Foreign
Income before income taxes
The components of the provision for income taxes are as follows:
Current:
Federal
Foreign
State and local
Deferred:
Federal
Foreign
State and local
Total income tax expense
2016
$959.3
18.6
$977.9
2016
$342.5
4.8
37.1
(32.1)
1.3
(64.4)
$289.2
Year Ended April 30,
2015
$500.7
22.3
$523.0
Year Ended April 30,
2015
$147.8
4.7
17.9
2.3
0.5
4.9
$178.1
2014
$827.4
22.3
$849.7
2014
$265.4
4.2
22.9
(13.9)
2.4
3.5
$284.5
2016 ANNUAL REPORT 69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
A reconciliation of the statutory federal income tax rate and the effective income tax rate is as follows:
Percent of Pretax Income
Statutory federal income tax rate
State and local income taxes
Domestic manufacturing deduction
Deferred tax benefit from integration
Other items – net
Effective income tax rate
Income taxes paid
2016
35.0%
2.5
(3.5)
(5.2)
0.8
29.6%
Year Ended April 30,
2015
35.0%
2.4
(2.9)
—
(0.4)
34.1%
2014
35.0%
1.9
(3.0)
—
(0.4)
33.5%
$ 290.5
$ 199.3
$ 294.4
The effective tax rate of 29.6 percent in 2016 includes the recognition in the fourth quarter of a $50.5 noncash deferred tax benefit related
to the integration of Big Heart into the Company.
We are a voluntary participant in the Compliance Assurance Process (“CAP”) program offered by the Internal Revenue Service (“IRS”) and
are currently under a CAP examination for the tax year ended April 30, 2016. Through the contemporaneous exchange of information with
the IRS, this program is designed to identify and resolve tax positions with the IRS prior to the filing of a tax return, which allows us to
remain current with our IRS examinations. The IRS has completed the CAP examinations for tax years ended April 30, 2013, 2014, and
2015. Tax years prior to 2013 are no longer subject to U.S. federal tax examination. With limited exceptions, we are no longer subject to
examination for state and local jurisdictions for tax years prior to 2012 and for tax years prior to 2009 for foreign jurisdictions. BAG, the
former parent company of Big Heart that was merged into one of our subsidiaries, is under IRS examination of its federal income tax
returns for the fiscal years ended April 29, 2013, April 27, 2014, and the period ended March 22, 2015.
In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.
ASU 2015-17 requires all deferred tax liabilities and assets to be classified as noncurrent on the balance sheet in order to simplify the
presentation of deferred income taxes. Although ASU 2015-17 is not effective for us until May 1, 2017, we have elected early adoption. As
of April 30, 2016, we have classified all deferred tax liabilities and assets as noncurrent on our Consolidated Balance Sheets. Prior year
amounts have been reclassified from current deferred tax assets to noncurrent deferred tax liabilities to conform to the current year in
accordance with ASU 2015-17, resulting in an adjustment to noncurrent deferred income taxes of $76.3 for the year ended April 30, 2015.
Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial-
reporting purposes and the amounts used for income tax reporting. Significant components of our deferred tax assets and liabilities are as
follows:
Deferred tax liabilities:
Intangible assets
Property, plant, and equipment
Other
Total deferred tax liabilities
Deferred tax assets:
Post-employment and other employee benefits
Tax credit and loss carryforwards
Intangible assets
Inventory
Property, plant, and equipment
Other
Total deferred tax assets
Valuation allowance
Total deferred tax assets, less allowance
Net deferred tax liability
70 THE J. M. SMUCKER COMPANY
April 30,
2016
2015
$2,330.8
140.5
11.9
$2,483.2
$ 171.8
3.7
23.2
8.0
5.1
47.3
$ 259.1
(6.2)
$ 252.9
$2,230.3
$2,499.4
158.0
9.6
$2,667.0
$ 143.4
44.8
22.1
11.6
19.4
32.9
$ 274.2
(4.2)
$ 270.0
$2,397.0
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
The following table summarizes domestic loss and credit carryforwards at April 30, 2016.
Tax carryforwards:
Federal loss carryforwards
State loss carryforwards
State tax credit carryforwards
Total tax carryforwards
Related Tax
Deduction
Deferred
Tax Asset
Valuation
Allowance
Expiration
Date
$ —
2.7
—
$ 2.7
$ 3.3
0.1
0.3
$ 3.7
$ 3.3
—
—
$ 3.3
2021
2021 to 2036
2022
We evaluate the realizability of deferred tax assets for each of the jurisdictions in which we operate. The total valuation allowance
increased by a net amount of $2.0 during the year. The 2015 valuation allowance of $4.2, related to a federal capital loss carryforward
recorded with the Big Heart acquisition, was reversed in 2016 as an adjustment to purchase accounting within the measurement period.
Furthermore, in 2016, an additional valuation allowance related to a separate federal capital loss carryforward was recorded with the Big
Heart acquisition in accordance with purchase accounting.
Deferred income taxes have not been provided on approximately $217.4 of undistributed earnings of foreign subsidiaries since these
amounts are considered to be permanently reinvested and we do not intend to repatriate any of the amounts. Any additional taxes payable
on the earnings of foreign subsidiaries, if remitted, would be partially offset by domestic tax deductions or tax credits for foreign taxes paid.
It is not practical to estimate the amount of additional taxes that might be payable on such undistributed earnings.
Our unrecognized tax benefits were $46.3, $45.0, and $29.1, of which $32.6, $32.2, and $19.5 would affect the effective tax rate, if
recognized, as of April 30, 2016, 2015, and 2014, respectively. Our accrual for tax-related net interest and penalties totaled $3.8, $3.4, and
$2.0 as of April 30, 2016, 2015, and 2014, respectively. Interest charged to earnings totaled $0.6, $0.7, and $0.1 during 2016, 2015, and
2014, respectively.
Within the next 12 months, it is reasonably possible that we could decrease our unrecognized tax benefits by an estimated $4.5, primarily as
a result of the expiration of statute of limitation periods.
A reconciliation of our unrecognized tax benefits is as follows:
Balance at May 1,
Increases:
Current year tax positions
Prior year tax positions
Acquired businesses
Decreases:
Prior year tax positions
Settlement with tax authorities
Expiration of statute of limitations periods
Balance at April 30,
2016
$45.0
3.3
0.2
3.3
0.9
2.5
2.1
$46.3
2015
$29.1
2.4
1.2
13.4
0.4
—
0.7
$45.0
2014
$29.7
5.1
0.1
—
1.6
1.5
2.7
$29.1
2016 ANNUAL REPORT 71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
NOTE 14
ACCUMULATED OTHER COMPREHENSIVE LOSS
The components of accumulated other comprehensive loss, including the reclassification adjustments for items that are reclassified from
accumulated other comprehensive loss to net income, are shown below.
Balance at May 1, 2013
Reclassification adjustments
Current period (charge) credit
Income tax (expense) benefit
Balance at April 30, 2014
Reclassification adjustments
Current period charge
Income tax benefit
Balance at April 30, 2015
Reclassification adjustments
Current period (charge) credit
Income tax expense
Balance at April 30, 2016
Foreign
Currency
Translation
Adjustment
$ 61.5
—
(29.8)
—
$ 31.7
—
(34.0)
—
$ (2.3)
—
(10.8)
—
$ (13.1)
Unrealized
(Loss) Gain on
Cash Flow Hedging
Derivatives (A)
$ (11.2)
20.9
21.0
(15.4)
$ 15.3
(28.5)
(4.0)
12.0
$ (5.2)
0.6
—
(0.2)
$ (4.8)
Pension
and Other
Postretirement
Liabilities (B)
$ (131.4)
13.3
31.4
(15.3)
$ (102.0)
9.8
(16.2)
2.8
$ (105.6)
10.2
(54.6)
15.9
$ (134.1)
Unrealized
Gain on
Available-for-Sale
Securities (C)
$ 4.5
(3.7)
1.9
0.7
$ 3.4
—
(0.1)
—
$ 3.3
—
0.4
(0.1)
$ 3.6
Accumulated
Other
Comprehensive
Loss
$ (76.6)
30.5
24.5
(30.0)
$ (51.6)
(18.7)
(54.3)
14.8
$(109.8)
10.8
(65.0)
15.6
$(148.4)
(A) Of the total losses reclassified from accumulated other comprehensive loss, $0.6 was reclassified to interest expense related to the interest rate swaps
during 2016, 2015, and 2014. An additional $29.1 of income and $20.3 of expense were reclassified to cost of products sold related to commodity
derivatives during 2015 and 2014, respectively. At April 30, 2016, the remaining balance in accumulated other comprehensive loss related entirely to the
interest rate swaps. For additional information, see Note 10: Derivative Financial Instruments.
(B) Amortization of net losses was reclassified from accumulated other comprehensive loss to SD&A.
(C) The gain on the sale of marketable securities was reclassified from accumulated other comprehensive loss to other income – net during 2014.
NOTE 15
CONTINGENCIES
We, like other food manufacturers, are from time to time subject to various administrative, regulatory, and other legal proceedings arising
in the ordinary course of business. We are currently a defendant in a variety of such legal proceedings. We cannot predict with certainty the
ultimate results of these proceedings or reasonably determine a range of potential loss. Our policy is to accrue costs for contingent
liabilities when such liabilities are probable and amounts can be reasonably estimated. Based on the information known to date, we do not
believe the final outcome of these proceedings will have a material adverse effect on our financial position, results of operations, or cash
flows.
On October 9, 2013, Big Heart entered into a Purchase Agreement with Del Monte Pacific Limited and its subsidiary, Del Monte Foods
Consumer Products, Inc. (which changed its name to Del Monte Foods, Inc.) (“DMFI”). Big Heart sold to DMFI the interests of certain
subsidiaries related to Big Heart’s consumer products business and generally all assets and liabilities primarily related to the business for a
purchase price of $1.7 billion, subject to a post-closing working capital adjustment. In connection with the closing of the transaction, Big
Heart received approximately $110.0 in incremental proceeds representing the preliminary working capital adjustment subject to a true-up
in accordance with the terms of the Purchase Agreement. In May 2014, Big Heart made a claim of an additional $16.3 for the final working
capital adjustment related to the sale of the consumer products business. In June 2014, Big Heart received a notice of disagreement from
DMFI disputing the $16.3 working capital adjustment, as well as the incremental preliminary working capital adjustment of approximately
$110.0 paid by DMFI at closing. Although we believed the working capital adjustment that was presented to DMFI was appropriate and
was in accordance with the terms of the Purchase Agreement, a mutually agreed upon independent certified public accounting firm ruled in
favor of DMFI with respect to certain aspects of the methodology by which the working capital adjustment should be calculated. In
connection with such ruling, during the third quarter of 2016, we resubmitted the original working capital adjustment. In the fourth quarter
of 2016, we settled the working capital adjustment and a liability of $38.0 was recorded to the opening balance sheet during the
measurement period, as discussed in Note 2: Acquisitions, and was subsequently paid as of April 30, 2016.
72 THE J. M. SMUCKER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
NOTE 16
GUARANTOR AND NON-GUARANTOR FINANCIAL
INFORMATION
Our Senior Notes are fully and unconditionally guaranteed, on a joint and several basis, by J.M. Smucker LLC and The Folgers Coffee
Company (the “subsidiary guarantors”), which are 100 percent wholly-owned subsidiaries of the Company. A subsidiary guarantor will be
released from its obligations under the indentures governing the notes (a) with respect to each series of notes, if we exercise our legal or
covenant defeasance option with respect to such series of notes or if our obligations under an indenture are discharged in accordance with
the terms of such indenture in respect of such series of notes; (b) with respect to all series of notes issued in March 2015, upon the issuance,
sale, exchange, transfer, or other disposition (including through merger, consolidation, amalgamation, or otherwise) of the capital stock of
the applicable subsidiary guarantor (including any issuance, sale, exchange, transfer, or other disposition following which the applicable
subsidiary guarantor is no longer a subsidiary) if such issuance, sale, exchange, transfer, or other disposition is made in a manner not in
violation of the indenture in respect of such series of notes; or (c) with respect to all series of notes, upon the substantially simultaneous
release or discharge of the guarantee by such subsidiary guarantor of all of our primary senior indebtedness other than through discharges
as a result of payment by such guarantor on such guarantees.
Condensed consolidating financial statements for the Company, the subsidiary guarantors, and the other subsidiaries of the Company that
are not guaranteeing the indebtedness under the Senior Notes (the “non-guarantor subsidiaries”) are provided below. The principal
elimination entries relate to investments in subsidiaries and intercompany balances and transactions, including transactions with our
100 percent wholly-owned subsidiary guarantors and non-guarantor subsidiaries. We have accounted for investments in subsidiaries using
the equity method.
2016 ANNUAL REPORT 73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
CONDENSED CONSOLIDATING STATEMENTS OF
COMPREHENSIVE INCOME
Year Ended April 30, 2016
Net sales
Cost of products sold
Gross Profit
Selling, distribution, and administrative
expenses and other special project costs
Amortization
Other operating (income) expense – net
Operating Income
Interest (expense) income – net
Other income (expense) – net
Equity in net earnings of subsidiaries
Income Before Income Taxes
Income taxes
Net Income
Other comprehensive loss, net of tax
Comprehensive Income
The J. M. Smucker
Company (Parent)
$3,155.3
2,468.0
687.3
Subsidiary
Guarantors
$1,184.5
1,083.3
101.2
Non-Guarantor
Subsidiaries
$8,724.9
6,549.6
2,175.3
Eliminations
$(5,253.5)
(5,257.5)
4.0
Consolidated
$7,811.2
4,843.4
2,967.8
290.9
4.2
(25.2)
417.4
(172.0)
9.6
513.1
768.1
79.4
$ 688.7
(38.6)
$ 650.1
40.5
—
1.1
59.6
1.2
1.2
138.3
200.3
0.4
$ 199.9
(1.7)
$ 198.2
1,314.8
204.2
(8.0)
664.3
(0.3)
(70.5)
60.8
654.3
209.4
$ 444.9
(20.7)
$ 424.2
—
—
—
4.0
—
63.4
(712.2)
(644.8)
—
$ (644.8)
22.4
$ (622.4)
1,646.2
208.4
(32.1)
1,145.3
(171.1)
3.7
—
977.9
289.2
$ 688.7
(38.6)
$ 650.1
CONDENSED CONSOLIDATING STATEMENTS OF
COMPREHENSIVE INCOME
Year Ended April 30, 2015
Net sales
Cost of products sold
Gross Profit
Selling, distribution, and administrative
expenses and other special project costs
Amortization
Other operating expense (income) – net
Operating Income
Interest (expense) income – net
Other debt costs
Other income – net
Equity in net earnings of subsidiaries
Income Before Income Taxes
Income taxes
Net Income
Other comprehensive loss, net of tax
Comprehensive Income
The J. M. Smucker
Company (Parent)
$2,998.0
2,457.8
540.2
Subsidiary
Guarantors
$1,184.0
1,080.0
104.0
Non-Guarantor
Subsidiaries
$6,622.4
5,301.6
1,320.8
Eliminations
$(5,111.7)
(5,115.4)
3.7
Consolidated
$5,692.7
3,724.0
1,968.7
234.9
4.2
0.3
300.8
(80.7)
(173.3)
0.6
312.6
360.0
15.1
$ 344.9
(58.2)
$ 286.7
53.8
—
(2.4)
52.6
1.2
—
0.1
131.4
185.3
0.4
$ 184.9
(18.5)
$ 166.4
799.2
106.7
—
414.9
(0.4)
—
3.5
52.7
470.7
162.6
$ 308.1
(43.3)
$ 264.8
—
—
—
3.7
—
—
—
(496.7)
(493.0)
—
$ (493.0)
61.8
$ (431.2)
1,087.9
110.9
(2.1)
772.0
(79.9)
(173.3)
4.2
—
523.0
178.1
$ 344.9
(58.2)
$ 286.7
74 THE J. M. SMUCKER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
CONDENSED CONSOLIDATING STATEMENTS OF
COMPREHENSIVE INCOME
Net sales
Cost of products sold
Gross Profit
Selling, distribution, and administrative
expenses and other special project costs
Amortization
Other operating (income) expense – net
Operating Income
Interest (expense) income – net
Other income (expense) – net
Equity in net earnings of subsidiaries
Income Before Income Taxes
Income taxes
Net Income
Other comprehensive income, net of tax
Comprehensive Income
The J. M. Smucker
Company (Parent)
$3,162.8
2,573.6
589.2
197.1
4.2
(1.3)
389.2
(80.8)
10.8
345.1
664.3
99.1
$ 565.2
25.0
$ 590.2
Subsidiary
Guarantors
$1,278.8
1,166.0
112.8
47.5
—
0.9
64.4
1.2
—
141.4
207.0
0.4
$ 206.6
27.4
$ 234.0
Year Ended April 30, 2014
Non-Guarantor
Subsidiaries
$6,601.3
5,268.5
1,332.8
Eliminations
$ (5,432.3)
(5,428.5)
(3.8)
Consolidated
$5,610.6
3,579.6
2,031.0
769.8
94.7
(0.9)
469.2
(1.5)
1.0
64.4
533.1
185.0
$ 348.1
6.0
$ 354.1
—
—
—
(3.8)
1.7
(1.7)
(550.9)
(554.7)
—
(554.7)
(33.4)
(588.1)
$
$
1,014.4
98.9
(1.3)
919.0
(79.4)
10.1
—
849.7
284.5
$ 565.2
25.0
$ 590.2
CONDENSED CONSOLIDATING BALANCE SHEETS
The J. M. Smucker
Company (Parent)
Subsidiary
Guarantors
April 30, 2016
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
ASSETS
Current Assets
Cash and cash equivalents
Inventories
Other current assets
Total Current Assets
Property, Plant, and Equipment – Net
Investments in Subsidiaries
Intercompany Receivable
Other Noncurrent Assets
Goodwill
Other intangible assets – net
Other noncurrent assets
Total Other Noncurrent Assets
Total Assets
$
7.0
—
497.3
504.3
296.3
15,092.2
—
1,494.8
428.3
57.4
1,980.5
$17,873.3
$
—
143.2
5.9
149.1
587.0
4,317.9
404.7
—
—
10.4
10.4
$ 5,469.1
$
102.8
752.0
71.9
926.7
744.4
331.6
1,543.9
4,596.3
6,066.1
129.7
10,792.1
$14,338.7
$
—
4.2
(10.9)
(6.7)
—
(19,741.7)
(1,948.6)
—
—
—
—
$(21,697.0)
$
109.8
899.4
564.2
1,573.4
1,627.7
—
—
6,091.1
6,494.4
197.5
12,783.0
$ 15,984.1
723.3
$
78.9
$
421.6
$
(10.8)
$ 1,213.0
$
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Noncurrent Liabilities
Long-term debt
Deferred income taxes
Intercompany payable
Other noncurrent liabilities
Total Noncurrent Liabilities
Total Liabilities
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
5,146.0
60.7
4,644.7
290.1
10,141.5
10,864.8
7,008.5
$17,873.3
—
—
—
17.9
17.9
96.8
5,372.3
$ 5,469.1
—
2,169.6
—
78.3
2,247.9
2,669.5
11,669.2
$14,338.7
—
—
(4,644.7)
—
(4,644.7)
(4,655.5)
(17,041.5)
$(21,697.0)
5,146.0
2,230.3
—
386.3
7,762.6
8,975.6
7,008.5
$ 15,984.1
2016 ANNUAL REPORT 75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
CONDENSED CONSOLIDATING BALANCE SHEETS
April 30, 2015
The J. M. Smucker
Company (Parent)
Subsidiary
Guarantors
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
ASSETS
Current Assets
Cash and cash equivalents
Inventories
Other current assets
Total Current Assets
Property, Plant, and Equipment – Net
Investments in Subsidiaries
Intercompany Receivable
Other Noncurrent Assets
Goodwill
Other intangible assets – net
Other noncurrent assets
Total Other Noncurrent Assets
Total Assets
$
7.1
—
413.8
420.9
258.0
14,610.4
—
1,082.0
501.1
55.6
1,638.7
$16,928.0
$
—
180.3
4.8
185.1
591.3
4,179.7
305.2
—
—
10.5
10.5
$5,271.8
$
118.5
979.6
288.7
1,386.8
829.0
272.4
133.1
4,929.6
6,449.2
116.1
11,494.9
$14,116.2
$
—
3.7
(12.6)
(8.9)
—
(19,062.5)
(438.3)
—
—
—
—
$ (19,509.7)
$
125.6
1,163.6
694.7
1,983.9
1,678.3
—
—
6,011.6
6,950.3
182.2
13,144.1
$16,806.3
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
$
Noncurrent Liabilities
Long-term debt
Deferred income taxes
Intercompany payable
Other noncurrent liabilities
Total Noncurrent Liabilities
Total Liabilities
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
5,944.9
93.3
3,080.2
238.7
9,357.1
9,841.1
7,086.9
$16,928.0
484.0
$
82.6
$
468.6
$
(12.6)
$ 1,022.6
—
—
—
15.2
15.2
97.8
5,174.0
$5,271.8
—
2,303.7
—
101.0
2,404.7
2,873.3
11,242.9
$14,116.2
—
—
(3,080.2)
—
(3,080.2)
(3,092.8)
(16,416.9)
$ (19,509.7)
5,944.9
2,397.0
—
354.9
8,696.8
9,719.4
7,086.9
$16,806.3
76 THE J. M. SMUCKER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended April 30, 2016
The J. M. Smucker
Company (Parent)
Subsidiary
Guarantors
Non-Guarantor
Subsidiaries Eliminations Consolidated
$ (192.8)
$ 151.4
$ 1,499.7
$
Net Cash (Used for) Provided by Operating Activities
Investing Activities
Businesses acquired, net of cash acquired
Equity investment in affiliate
Additions to property, plant, and equipment
Proceeds from divestiture
Proceeds from disposal of property, plant, and
equipment
(Disbursements of) repayments from intercompany loans
Other – net
Net Cash Provided by (Used for) Investing Activities
Financing Activities
Short-term borrowings– net
Repayments of long-term debt
Quarterly dividends paid
Purchase of treasury shares
Intercompany payable
Other – net
Net Cash Provided by (Used for) Financing Activities
Effect of exchange rate changes on cash
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and Cash Equivalents at End of Year
( ) Denotes use of cash
—
—
(71.8)
193.7
3.7
—
(1.2)
124.4
58.0
(800.0)
(316.6)
(441.1)
1,564.5
3.5
68.3
—
(0.1)
7.1
7.0
$
—
—
(53.7)
—
0.1
(99.4)
1.6
(151.4)
—
—
—
—
—
—
—
—
—
—
$ —
7.9
(16.0)
(75.9)
—
0.2
(1,465.1)
33.1
(1,515.8)
—
—
—
—
—
—
—
0.4
(15.7)
118.5
$ 102.8
—
—
—
—
—
—
1,564.5
—
1,564.5
—
—
—
—
(1,564.5)
—
(1,564.5)
—
—
—
—
$
$ 1,458.3
7.9
(16.0)
(201.4)
193.7
4.0
—
33.5
21.7
58.0
(800.0)
(316.6)
(441.1)
—
3.5
(1,496.2)
0.4
(15.8)
125.6
$ 109.8
2016 ANNUAL REPORT 77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended April 30, 2015
The J. M. Smucker
Company (Parent)
Subsidiary
Guarantors
Non-Guarantor
Subsidiaries Eliminations
$ 239.2
$ 87.8
$ 406.2
$
(1,240.0)
(56.3)
—
(2,715.3)
—
—
(4,011.6)
(5.3)
5,382.5
(1,580.8)
(254.0)
(24.3)
—
287.3
(32.7)
3,772.7
—
0.3
6.8
7.1
$
—
(93.3)
1.1
—
10.2
(5.8)
(87.8)
—
—
—
—
—
—
—
—
—
—
—
—
$ —
(80.5)
(98.1)
1.5
—
(297.5)
(24.3)
(498.9)
(17.1)
—
(2,613.1)
—
—
2,715.3
—
8.0
93.1
(28.6)
(28.2)
146.7
$ 118.5
—
—
—
—
2,715.3
287.3
—
3,002.6
—
—
—
—
—
(2,715.3)
(287.3)
—
(3,002.6)
—
—
—
—
$
Consolidated
$ 733.2
(1,320.5)
(247.7)
2.6
—
—
(30.1)
(1,595.7)
(22.4)
5,382.5
(4,193.9)
(254.0)
(24.3)
—
—
(24.7)
863.2
(28.6)
(27.9)
153.5
$ 125.6
Net Cash Provided by Operating Activities
Investing Activities
Businesses acquired, net of cash acquired
Additions to property, plant, and equipment
Proceeds from disposal of property, plant, and
equipment
Equity investments in subsidiaries
Repayments from (disbursements of) intercompany loans
Other – net
Net Cash (Used for) Provided by Investing Activities
Financing Activities
Short-term repayments – net
Proceeds from long-term debt
Repayments of long-term debt, including make-whole
payments
Quarterly dividends paid
Purchase of treasury shares
Investments in subsidiaries
Intercompany payable
Other – net
Net Cash Provided by (Used For) Financing Activities
Effect of exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and Cash Equivalents at End of Year
( ) Denotes use of cash
78 THE J. M. SMUCKER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended April 30, 2014
The J. M. Smucker
Company (Parent)
Subsidiary
Guarantors
Non-Guarantor
Subsidiaries Eliminations
Consolidated
$ 297.8
$ 168.5
$ 389.7
$ —
$ 856.0
—
(31.1)
10.0
—
(108.9)
—
(3.2)
(133.2)
248.4
(50.0)
(238.0)
(508.5)
—
273.7
8.6
(265.8)
—
(101.2)
108.0
6.8
$
—
(163.2)
—
0.6
(17.1)
9.3
0.2
(170.2)
—
—
—
—
—
—
1.7
1.7
—
—
—
$ —
(101.8)
(85.2)
—
10.1
—
(283.0)
(6.7)
(466.6)
—
—
—
—
126.0
—
(37.7)
88.3
(13.1)
(1.7)
148.4
$ 146.7
—
—
—
—
126.0
273.7
—
399.7
—
—
—
—
(126.0)
(273.7)
—
(399.7)
—
—
—
$ —
(101.8)
(279.5)
10.0
10.7
—
—
(9.7)
(370.3)
248.4
(50.0)
(238.0)
(508.5)
—
—
(27.4)
(575.5)
(13.1)
(102.9)
256.4
$ 153.5
Net Cash Provided by Operating Activities
Investing Activities
Businesses acquired, net of cash acquired
Additions to property, plant, and equipment
Sales and maturities of marketable securities
Proceeds from disposal of property, plant, and
equipment
Equity investments in subsidiaries
Repayments from (disbursements of) intercompany loans
Other – net
Net Cash (Used for) Provided by Investing Activities
Financing Activities
Short-term borrowing – net
Repayments of long-term debt
Quarterly dividends paid
Purchase of treasury shares
Investments in subsidiaries
Intercompany payable
Other – net
Net Cash (Used for) Provided by Financing Activities
Effect of exchange rate changes on cash
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and Cash Equivalents at End of Year
( ) Denotes use of cash
NOTE 17
COMMON SHARES
Voting: The Amended Articles of Incorporation (“Articles”) provide that each holder of a common share outstanding is entitled to one vote
on each matter submitted to a vote of the shareholders, except for the following specific matters:
• any matter that relates to or would result in the dissolution or liquidation of the Company;
• the adoption of any amendment to the Articles or Amended Regulations, or the adoption of amended Articles, other than the adoption
of any amendment or amended Articles that increases the number of votes to which holders of our common shares are entitled or
expands the matters to which time-phased voting applies;
• any proposal or other action to be taken by our shareholders relating to the Rights Agreement, dated as of May 20, 2009, between the
Company and Computershare Trust Company, N.A., or any successor plan;
• any matter relating to any stock option plan, stock purchase plan, executive compensation plan, executive benefit plan, or other
similar plan, arrangement, or agreement;
• the adoption of any agreement or plan of or for the merger, consolidation, or majority share acquisition of us or any of our
subsidiaries with or into any other person, whether domestic or foreign, corporate or noncorporate, or the authorization of the lease,
sale, exchange, transfer, or other disposition of all, or substantially all, of our assets;
• any matter submitted to our shareholders pursuant to Article Fifth (which relates to procedures applicable to certain business
combinations) or Article Seventh (which relates to procedures applicable to certain proposed acquisitions of specified percentages of
our outstanding common shares) of the Articles, as they may be further amended, or any issuance of our common shares for which
shareholder approval is required by applicable stock exchange rules; and
• any matter relating to the issuance of our common shares or the repurchase of our common shares that the Board of Directors
(“Board”) determines is required or appropriate to be submitted to our shareholders under the Ohio Revised Code or applicable stock
exchange rules.
2016 ANNUAL REPORT 79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The J. M. Smucker Company
On the matters listed above, common shares are entitled to 10 votes per share if they meet the requirements set forth in the Articles.
Common shares which would be entitled to 10 votes per share must meet one of the following criteria:
• common shares for which there has not been a change in beneficial ownership in the past 4 years; or
• common shares received through our various equity plans that have not been sold or otherwise transferred.
In the event of a change in beneficial ownership, the new owner of that common share will be entitled to only one vote with respect to that
share on all matters until four years pass without a further change in beneficial ownership of the share.
Shareholders’ Rights Plan: Pursuant to a Shareholders’ Rights Plan adopted by the Board on May 20, 2009, one share purchase right is
associated with each of our outstanding common shares.
Under the plan, the rights will initially trade together with our common shares and will not be exercisable. In the absence of further action
by the directors, the rights generally will become exercisable and allow the holder to acquire our common shares at a discounted price if a
person or group acquires 10 percent or more of our outstanding common shares. Rights held by persons who exceed the applicable
threshold will be void. Shares held by members of the Smucker family are not subject to the threshold. If exercisable, each right entitles the
shareholder to buy one common share at a discounted price. Under certain circumstances, the rights will entitle the holder to buy shares in
an acquiring entity at a discounted price.
The plan also includes an exchange option. In general, if the rights become exercisable, the directors may, at their option, effect an
exchange of part or all of the rights, other than rights that have become void, for common shares. Under this option, we would issue
one common share for each right, in each case subject to adjustment in certain circumstances.
The directors may, at their option, redeem all rights for $0.001 per right, generally at any time prior to the rights becoming exercisable. The
rights will expire June 3, 2019, unless earlier redeemed, exchanged, or amended by the directors.
In connection with the Big Heart acquisition, we and the rights agent entered into an amendment to the plan providing that neither the
approval, execution, delivery, or performance of the merger agreement or the shareholders’ agreement entered into in connection with the
transaction will in any way give rise to any provision of the plan becoming effective, and that none of Blue Holdings I, L.P., the controlling
stockholder of BAG, or any of its affiliates will be deemed to be an acquiring person for purposes of the plan.
Repurchase Programs: On March 31, 2016, we entered into a 10b5-1 trading plan (“the Plan”) to facilitate the repurchase of 2.0 million
common shares under the Board’s authorizations. Purchases under the Plan commenced on April 1, 2016, and concluded on April 30, 2016,
and were transacted by a broker based upon the guidelines and parameters of the Plan. During 2016, we repurchased a total of 3.4 million
shares, including 2.0 million shares under the Plan, for $437.8. We did not repurchase any shares in 2015.
At April 30, 2016, approximately 6.6 million common shares were available for repurchase pursuant to the Board’s authorizations.
80 THE J. M. SMUCKER COMPANY
DIRECTORS AND OFFICERS
The J. M. Smucker Company
DIRECTORS
Vincent C. Byrd
Retired Vice Chairman
The J. M. Smucker Company
Kathryn W. DindoA, E
Retired Vice President and
Chief Risk Officer
FirstEnergy Corp.
Akron, Ohio
Nancy Lopez KnightG
Founder
Nancy Lopez Golf Company
Auburn, Alabama
Elizabeth Valk LongA, E
Former Executive Vice President
Time Inc.
New York, New York
Paul J. DolanE
Chairman and Chief Executive Officer
Cleveland Indians
Cleveland, Ohio
Gary A. OateyG
Executive Chairman
Oatey Co.
Cleveland, Ohio
Robert B. Heisler, Jr.A
Retired Chairman of the Board
KeyBank
Cleveland, Ohio
Sandra PianaltoA
Retired President and
Chief Executive Officer
Federal Reserve Bank of Cleveland
Cleveland, Ohio
Alex ShumateG
Managing Partner, North America
Squire Patton Boggs (US) LLP
Columbus, Ohio
Mark T. Smucker
President and Chief Executive Officer
The J. M. Smucker Company
Richard K. Smucker
Executive Chairman
The J. M. Smucker Company
Timothy P. Smucker
Chairman Emeritus
The J. M. Smucker Company
David J. West
Retired President, Big Heart Pet Foods
and Snacks
The J. M. Smucker Company
A Audit Committee Member; E Executive Compensation Committee Member; G Nominating and Corporate Governance Committee
Member
2016 ANNUAL REPORT 81
DIRECTORS AND OFFICERS
The J. M. Smucker Company
EXECUTIVE OFFICERS
Richard K. Smucker
Executive Chairman
Robert D. Ferguson
Senior Vice President, Supply Chain
Mark T. Smucker
President and Chief Executive Officer
Tamara J. Fynan
Vice President, Marketing Services
Dennis J. Armstrong*
Senior Vice President, Logistics and
Operations Support
Kevin G. Jackson
Vice President, U.S. Retail Sales
and Market Development Organization
Mark R. Belgya
Vice Chair and Chief Financial Officer
James R. Day
Senior Vice President, Operations
John W. Denman
Vice President, Human Resource
Operations
Jeannette L. Knudsen
Senior Vice President, General Counsel
and Secretary
David J. Lemmon
President, Canada and International
John F. Mayer^
Corporate Vice President
Barry C. Dunaway
President, Pet Food and Pet Snacks
Steven Oakland
Vice Chair and President, U.S. Food and
Beverage
* Retiring September 30, 2016; ^ Retiring July 31, 2016
Jill R. Penrose
Senior Vice President, Human Resources
and Corporate Communications
Christopher P. Resweber
Senior Vice President, Industry Affairs
Julia L. Sabin
Vice President, Government Affairs
and Corporate Sustainability
Geoff E. Tanner
Senior Vice President, Growth
and Innovation
82 THE J. M. SMUCKER COMPANY
OUR LOCATIONS
The J. M. Smucker Company
CORPORATE OFFICE
Orrville, Ohio
DOMESTIC MANUFACTURING LOCATIONS
Bloomsburg, Pennsylvania
Buffalo, New York
Chico, California
Cincinnati, Ohio
Decatur, Alabama
Grandview, Washington
Harahan, Louisiana
Havre de Grace, Maryland
Lawrence, Kansas
Lexington, Kentucky
Livermore, California
Memphis, Tennessee
New Bethlehem, Pennsylvania
New Orleans, Louisiana (3)
Orrville, Ohio
Oxnard, California
INTERNATIONAL MANUFACTURING LOCATION
Sherbrooke, Quebec, Canada
Ripon, Wisconsin
Scottsville, Kentucky
Seattle, Washington
Suffolk, Virginia
Toledo, Ohio
Topeka, Kansas
2016 ANNUAL REPORT 83
SHAREHOLDER INFORMATION
The J. M. Smucker Company
CORPORATE OFFICE
The J. M. Smucker Company
One Strawberry Lane
Orrville, Ohio 44667
Telephone: (330) 682-3000
STOCK LISTING
Our common shares are listed on the New York Stock Exchange —
ticker symbol SJM.
CORPORATE WEBSITE
To learn more about The J. M. Smucker Company,
visit jmsmucker.com.
ANNUAL MEETING
The annual meeting will be held at 11:00 a.m. Eastern Time,
August 17, 2016, in the Fisher Auditorium at the Ohio
Agricultural Research and Development Center,
1680 Madison Avenue, Wooster, Ohio 44691.
CORPORATE NEWS AND REPORTS
Corporate news releases, annual reports, and Securities
and Exchange Commission filings, including Forms 10-K,
10-Q, and 8-K, are available free of charge on our website,
jmsmucker.com/investor-relations. They are also available
without cost to shareholders who submit a written request to:
The J. M. Smucker Company
Attention: Corporate Secretary
One Strawberry Lane
Orrville, Ohio 44667
CERTIFICATIONS
Our Chief Executive Officer has certified to the New York Stock
Exchange that he is not aware of any violation by the Company
of the New York Stock Exchange’s corporate governance listing
standards. We have also filed with the Securities and Exchange
Commission certain certifications relating to the quality of our public
disclosures. These certifications are filed as exhibits to our Annual
Report on Form 10-K.
FORWARD-LOOKING STATEMENTS
This Annual Report includes certain forward-looking statements that are
based on current expectations and are subject to a number of risks and
uncertainties. Please reference “Forward-Looking Statements” in the
“Management’s Discussion and Analysis” section.
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Ernst & Young LLP
Akron, Ohio
DIVIDENDS
Our Board of Directors typically declares a cash dividend each
quarter. Dividends are generally payable on the first business day
of March, June, September, and December. The record date is approxi-
mately two weeks before the payment date. Our dividend disbursement
agent is Computershare Investor Services, LLC.
SHAREHOLDER SERVICES
Our transfer agent and registrar, Computershare Investor
Services, LLC, is responsible for assisting registered
shareholders with a variety of matters, including:
• Shareholder investment program (CIPSM)
– Direct purchase of our common shares
– Dividend reinvestment
– Automatic monthly cash investments
• Book-entry share ownership
• Share transfer matters (including name changes, gifting,
and inheritances)
• Direct deposit of dividend payments
• Nonreceipt of dividend checks
• Lost share certificates
• Changes of address
• Online shareholder account access
• Form 1099 income inquiries (including requests for
duplicate copies)
Shareholders may contact Shareholder Services at the corporate
offices regarding other shareholder inquiries.
TRANSFER AGENT AND REGISTRAR
Computershare
P.O. Box 30170
College Station, TX 77842
Telephone: (800) 622-6757
Telephone outside U.S., Canada, and Puerto Rico:
(312) 360-5254
Website: computershare.com/investor
The J. M. Smucker Company is the owner of all trademarks, except for the following, which are used under license: PillsburyTM, the
Barrelhead logo, and the Doughboy character are trademarks of The Pillsbury Company, LLC; Carnation® is a trademark of Société des Produits
Nestlé S.A.; Dunkin’ Donuts®, Dunkin’ Dark®, and Bakery Series® are registered trademarks of DD IP Holder, LLC; Sweet’N Low®, NatraTaste®,
Sugar In The Raw®, and the other “In The Raw” trademarks are registered trademarks of Cumberland Packing Corp. and its affiliates; and Douwe
Egberts® and Pickwick® are registered trademarks of Jacobs Douwe Egberts. Borden® and Elsie are also trademarks used under license. K-Cup®
and Keurig® are trademarks of Keurig Green Mountain, Inc., used with permission. Non-GMO Project® Verified is a trademark of the
Non-GMO Project, Inc.
Painting on the front cover by James Neil Hollingsworth, Atlanta, GA.
Designed by Corporate Reports Inc. | Atlanta, GA | www.corporatereport.com
84 THE J. M. SMUCKER COMPANY
WHY WE ARE, WHO WE ARE...
OUR CULTURE
A culture of dotting the i’s and crossing the t’s…
Of doing the right things and doing things right…
A culture of growth – individual and as a company.
It’s who we are. It’s because of who we are.
It’s a result of living our Basic Beliefs…
Our Commitment to Each Other. To our consumers
and to our customers.
As we look to the future of unlimited possibilities,
we recognize the principles that are
instrumental to our success…
A culture deeply rooted in our Basic Beliefs…
Guideposts for decisions at every level…
Why we are who we are.
A culture that encourages commitment to each other…
Clear communication and collaboration…
Vision…A culture of appreciation.
A family-sense of sharing in a job well done…
Where every person makes a difference.
OUR PURPOSE
Helping to bring families
together to share memorable
meals and moments.
Being together with the ones we love
isn’t just a pleasant way to spend time —
it’s vital to a healthy, happy, fulfilling life.
In fact, the more family and friends
spend time with each other,
the richer their lives become.
We believe we can help strengthen
families through the memorable meals and
moments they share, and we can help
make every day a little more special
by nurturing the bonds that bring
people together, as well as people
and their pets closer together.
And the stronger families are today,
the stronger our society will be tomorrow.
Quite simply, life tastes better together.
2016 ANNUAL REPORT
One Strawberry Lane • Orrville, Ohio 44667 • 330.682.3000
jmsmucker.com
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1
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P
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2016 FINANCIAL HIGHLIGHTS
The J. M. Smucker Company
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
2016
2015
Net sales
$7,811.2
$5,692.7
YEAR ENDED APRIL 30,
NET INCOME AND NET INCOME PER COMMON SHARE
Net income
$ 688.7
$ 344.9
Net income per common share – assuming dilution
$
5.76
$
3.33
NON-GAAP INCOME AND INCOME PER COMMON SHARE (A)
Non-GAAP income
$ 784.6
$ 402.5
Non-GAAP income per common share –
assuming dilution
$
6.57
$
3.88
COMMON SHARES OUTSTANDING AT YEAR END
116,306,894
119,577,333
NUMBER OF EMPLOYEES
6,910
7,370
(A) Refer to “Non-GAAP Measures” in the “Management’s Discussion and Analysis” section for a
reconciliation to the comparable GAAP financial measure.
CONTENT
U.S. RETAIL COFFEE
U.S. RETAIL CONSUMER FOODS
U.S. RETAIL PET FOODS
INTERNATIONAL AND FOODSERVICE
SUSTAINABILITY AT SMUCKER
4
8
12
16
20
Why We Are, Who We Are...Our Culture – Our Purpose
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