The J. M. Smucker Company (SJM) Q4 2014 earnings summary

Executive summary

• FY14 net sales fell 5% to $5.61B, reflecting lower net price realization and planned foodservice exits; GAAP diluted EPS rose 8% to $5.42, and adjusted EPS increased 5% to $5.64.

• Strong coffee performance and cost control supported earnings; operating cash flow was $856M, while more than $730M was returned to shareholders through dividends and repurchases.

Financial highlights

• Net sales were $5,610.6M versus $5,897.7M; net income rose to $565.2M from $544.2M, and diluted EPS rose to $5.42 from $5.00.

• Operating income increased 1% to $919.0M; excluding special project costs, it declined 2% to $954.0M. Adjusted income was $588.5M versus $584.8M.

• Gross profit was $2,031.0M, flat YoY; gross margin increased to 36.2% from 34.4%, or 36.4% versus 34.6% excluding special project costs.

• Operating cash flow was $856.0M; capital expenditures were $279.5M, free cash flow $576.5M, and cash at year-end $153.5M.

Outlook and guidance

• Long-term objectives: average annual net sales growth of 6% and non-GAAP EPS growth above 8%; organic growth is expected to contribute 3–4% annually, with acquisitions supplying the remainder.

• FY15 capital expenditures are expected at ~$240M; expected cash needs also include ~$235M of dividends, $100M of debt principal, and ~$70M of interest payments.

• A 9% price increase on most U.S. packaged coffee products was announced in June 2014 after sustained green coffee cost increases; FY15 coffee launches include three new K-Cup products, two Café Bustelo items.

• Foodservice transition is expected to reduce FY15 segment sales by a further $40M versus FY14, with no material segment-profit impact expected; most remaining restructuring costs are expected through 2015.